<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 7, 1997
REGISTRATION NO. 333-20401
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
ASI SOLUTIONS INCORPORATED
(Exact name of registrant as specified in charter)
DELAWARE 8980 13-3903237
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
ASI SOLUTIONS INCORPORATED
780 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 319-8400
(Address including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------
BERNARD F. REYNOLDS, CHIEF EXECUTIVE OFFICER
ASI SOLUTIONS INCORPORATED
780 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 319-8400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------
Copies To:
CARL SELDIN KOERNER, ESQ. DAVID F. DIETZ, P.C.
KOERNER SILBERBERG & WEINER, LLP GOODWIN, PROCTER & HOAR LLP
112 MADISON AVENUE EXCHANGE PLACE
NEW YORK, NEW YORK 10016 BOSTON, MASSACHUSETTS 02109-2881
(212) 689-4400 (617) 570-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
-----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED MARCH 7, 1997
PROSPECTUS
2,200,000 SHARES
ASI SOLUTIONS INCORPORATED
[LOGO OF ASI SOLUTIONS
INCORPORATED]
COMMON STOCK
All of the 2,200,000 shares of common stock, par value $0.01 per share (the
"Common Stock"), of ASI Solutions Incorporated (the "Company") offered hereby
are being sold by the Company. Prior to this offering (the "Offering"), there
has been no public market for the Common Stock. It is currently anticipated
that the initial public offering price will be between $7.00 and $8.00 per
share. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. Application has been made for
listing the Common Stock on the Nasdaq National Market under the trading symbol
"ASIS", subject to official notice of issuance.
INVESTORS PURCHASING SHARES OF COMMON STOCK IN THE OFFERING WILL EXPERIENCE
IMMEDIATE AND SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE OF $4.99 PER
SHARE OF COMMON STOCK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
"RISK FACTORS" BEGINNING ON PAGE 6.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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- --------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share.................................. $ $ $
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Total (3).................................. $ $ $
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</TABLE>
(1) Excludes additional compensation to the Representatives of the Underwriters
in the form of warrants to purchase up to 220,000 shares of Common Stock
during the four year period commencing one year after the date of this
Prospectus at an exercise price equal to 150% of the initial public
offering price (the "Representatives' Warrants"). The Company and the
Selling Stockholders have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
to be $700,000.
(3) The principal stockholders of the Company (the "Selling Stockholders") have
granted the several Underwriters a 30-day option to purchase up to 330,000
additional shares of Common Stock on the same terms and conditions as set
forth above solely to cover over-allotments, if any. The Company will not
receive any of the proceeds from the sale of shares by the Selling
Stockholders if such option is exercised. If the Underwriters exercise such
option in full, the total Price to Public, Underwriting Discount, Proceeds
to Company and Proceeds to Selling Stockholders will be $ , $ ,
$ and $ respectively. See "Underwriting."
----------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to the approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made in Boston,
Massachusetts on or about , 1997.
----------
JANNEY MONTGOMERY SCOTT INC. H.C. WAINWRIGHT & CO., INC.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
The initial page of the Company's full-color gatefold which appears on the
inside front cover of the Prospectus depicts four icons which are displayed at
the Company's internet address. The icons are each identified as one of the
Company's four core areas of business; assessment and selection, training and
development, customer contact monitoring and employment process
administration. The remainder of this initial page of the gatefold illustrates
an enlarged telephone keypad in the background together with a group of four
professionals working at a conference room table. Overlaid in the foreground
against this background is the face of a customer service representative with
a telephone headset who is engaged in conversation with a customer, as well as
a second professional who is monitoring the telephone conversation. Also in
the foreground appear four additional working professionals. The text which
accompanies these photographs is as follows:
ASI Solutions Incorporated is a leading national provider of a
comprehensive range of human resources outsourcing services in support
of large organizations seeking to hire, train and develop a higher
quality, more effective workforce.
The name of the Company, the Company's logo and the Company's internet
address also appear on this page.
"ASI" and the related logo and ASI Solutions Incorporated are service marks
of the Company. Applications to register such service marks have been filed
with the United States Patent and Trademark Office by the Company. This
Prospectus also includes references to trademarks and tradenames of other
companies.
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY, INCLUDING INITIATING BIDS OR EFFECTING
PURCHASES ON THE NASDAQ NATIONAL MARKET FOR THE PURPOSE OF PREVENTING OR
RETARDING A DECLINE IN THE MARKET PRICE OF THE COMMON STOCK. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
The photograph of the four professionals working at a conference room table
which appears on the first page of the gatefold appears again on the second
page of the gatefold together with an additional photograph of a customer
service representative engaged in conversation with a customer. The text which
accompanies these photographs is as follows:
The wide variety of the Company's services, which include assessment
and selection services, training and development programs, customer
contact monitoring, and employment process administration, including
background reports, position the Company to be a single-source solution
for many organizations which outsource all or a portion of their human
resources functions.
The final page of the gatefold contains the aforementioned four icons which
appear on the first page of the gatefold together with two additional
photographs, one photograph depicting three business professionals in front of
a map of North America and a second photograph of two people shaking hands.
The text which accompanies these photographs is as follows:
. ASI provides services nationwide to a variety of clients, including
American Express Company, Citibank, N.A., Hewlett-Packard Company,
NYNEX Corporation and The Proctor & Gamble Company.
. During the twelve months ended December 31, 1996, ASI processed
approximately 325,000 employees and employee applicants of its
clients.
A box containing the Company's industry focus also appears on this page as
follows:
OUR INDUSTRY FOCUS:
. Financial Services . Telecommunications
. Healthcare . Information Technology
. Consumer Products
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. See "Risk
Factors" for information that should be considered by prospective investors.
References to the "Company" include ASI Solutions Incorporated and its
subsidiaries. Unless the context otherwise requires, this Prospectus assumes
(i) the effectiveness of the reorganization thereof (the "Reorganization"),
which is described more fully in "Certain Transactions," (ii) an approximately
1.06-for-1 stock split to be effected as a stock dividend on the date hereof,
and (iii) that the over-allotment option granted to the Underwriters by the
Selling Stockholders is not exercised.
THE COMPANY
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking
to hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into four core areas: (i) assessment and
selection; (ii) training and development; (iii) customer contact monitoring;
and (iv) employment process administration. The Company, which has been
providing human resources services for over 18 years, believes it is well
positioned to be a single-source solution for organizations which outsource all
or a portion of these human resources functions.
The Company's assessment and selection services entail designing and
implementing assessment processes for the selection of new hires and for the
evaluation of existing employees for advancement to positions of increased
responsibility. The Company's training and development services include live
simulations, competency surveys for job skill evaluation, and situational
exercises through which managers are introduced to techniques to improve their
performance. The Company's customer contact monitoring capability typically is
used by clients which utilize inbound and outbound call centers for their
customer contact service functions. The Company's employment process
administration services address recurring staffing needs resulting from regular
employee turnover, as well as large-scale, rapid hiring needs, for clients who
do not have the in-house capacity to fulfill their hiring requirements. In
fiscal 1996 and the nine months ended December 31, 1996, the Company processed
143,000 and 252,000 candidates, respectively.
The Company's clients are principally Fortune 500 companies in a variety of
industries, including telecommunications, financial services, information
technology, consumer products and healthcare, for which customer service, sales
and call center functions are critical components of their businesses. Current
customers include American Express Company, BellSouth Corporation, Citibank,
N.A., Dean Witter Reynolds, Inc., Georgia-Pacific Corporation, Hewlett-Packard
Company, NYNEX Corporation, Inc., Oxford Health Plans, Inc., Pepsi-Cola
Bottling Co., United Parcel Service of America, Inc. and Westinghouse Electric
Corporation. The Company provides its services primarily through its two
operations centers in Melville, New York, but also through its three regional
offices and at clients' locations. Services are provided by 242 employees,
approximately 41% of which have masters or doctoral degrees, primarily in
psychology.
The Company believes that its business has benefited from a number of
significant industry trends which have increased the demand for human resources
outsourcing services. As global markets have continued to become more
competitive, many businesses have begun to view the interface between customer
and company as an increasingly critical leverage point and have placed
heightened emphasis on recruiting, training and monitoring sales and customer
service staffs. Additionally, many businesses have engaged in corporate
downsizing in an effort to remain competitive, resulting in inadequate staffing
to meet future growth and peak period activity. Furthermore, in an attempt to
achieve a greater focus on their core businesses, many companies are
outsourcing non-revenue producing functions, such as human resources.
The Company's objective is to strengthen its position as a leading provider
of services in support of a range of human resources outsourcing functions. Key
elements of the Company's business strategy to achieve this objective include:
(i) Increase Penetration of Existing Clients by identifying additional
opportunities to address existing clients' human resources needs and by
promoting those Company services not currently being utilized by those
clients.
3
<PAGE>
(ii) Develop New Clients by targeting primarily Fortune 500 companies with
substantial human resources needs in industries such as
telecommunications and financial services, as well as other industries
that are likely to benefit from the Company's services, such as
information technology, consumer products and healthcare;
(iii) Expand Customer Contact Monitoring Services in order to capitalize on
both the Company's expertise in developing proprietary call
monitoring systems and the increasing demand for quality assurance in
the interaction between companies' sales and service representatives
and their customers; and,
(iv) Expand Existing Services Beyond the Sales and Customer Service
Functions to areas such as senior management, administration,
operations and manufacturing.
The Company was founded in 1978 as a New York corporation by Bernard F.
Reynolds, Eli Salig and Seymour Adler and was recently reorganized in March
1996 as a Delaware holding company. The Company maintains its principal
executive offices at 780 Third Avenue, New York, New York, 10017. The Company's
telephone number is (212) 319-8400 and its Internet address is
www.asisolutions.com.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock being offered by the Company....... 2,200,000 shares
Common Stock to be outstanding after the
Offering (1).................................... 6,825,158 shares
Use of proceeds................................. To repay indebtedness, to
expand and upgrade facilities
and systems, and for working
capital and general corporate
purposes, including possible
acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.......... ASIS
</TABLE>
- --------
(1) Excludes (i) 368,533 shares of Common Stock issuable upon exercise of
options outstanding on the date hereof, (ii) 431,467 shares of Common Stock
reserved for issuance under the Company's 1996 Stock Option and Grant Plan
and (iii) 50,000 shares of Common Stock reserved for issuance under the
Company's 1996 Directors' Stock Option Plan. See "Capitalization,"
"Management--Director Compensation," "Management--Stock Option and Grant
Plan" and "Principal Stockholders."
SUMMARY FINANCIAL AND OPERATING DATA (1)
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------ -----------------
1992 1993 1994 1995 1996 1995 1996
------ ------ ------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................ $4,268 $5,152 $6,028 $8,023 $10,558 $ 7,691 $ 12,859
------ ------ ------ ------ ------- -------- --------
Income (loss) from
operations............ (301) 477 232 777 1,412 1,114 2,650
Net income (loss)...... $ (363) $ 243 $ 166 $ 571 $ 732 $ 579 $ 1,192
====== ====== ====== ====== ======= ======== ========
Net income (loss) per
proforma common and
common equivalent
share................. $ (.08) $ 0.05 $ 0.04 $ 0.12 $ 0.16 $ 0.12 $ 0.26
Proforma weighted-
average number of
common and common
equivalent shares
outstanding (2)....... 4,667 4,667 4,667 4,667 4,667 4,667 4,667
OPERATING DATA:
Number of employees.... 61 75 116 123 145 130 242
Number of candidates
processed (3)......... 40,000 46,000 55,000 84,000 145,000 108,000 288,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
ACTUAL AS ADJUSTED (4)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 146 $13,652
Working capital......................................... 624 14,939
Total assets............................................ 7,077 20,583
Total liabilities....................................... 3,489 2,350
Stockholders' equity.................................... 3,588 18,233
</TABLE>
- --------
(1) The financial statements for all periods prior to March 31, 1996, have been
presented on a consolidated basis at the historical cost basis of the
entities involved in the Reorganization in a manner similar to a pooling of
interests. As of March 31, 1996, the date of the Reorganization, the
interests of the shareholders of such entities other than one controlling
shareholder have been accounted for as a purchase of minority interest. See
"Certain Transactions" and Note 1 to the Notes to Consolidated Financial
Statements.
(2) See Note 2 to Notes to Consolidated Financial Statements for a description
of proforma weighted-average number of common and common equivalent shares
outstanding.
(3) Represents total number of candidate interactions with one of the Company's
four service functions, such as number of candidates assessed, number of
candidates trained and developed, number of service representatives
monitored and number of employment applicants processed.
(4) Reflects the sale of the 2,200,000 shares of Common Stock offered by the
Company hereby after deduction of the underwriting discount and estimated
offering expenses payable by the Company and after application of
$1,139,000 of the net proceeds from the Offering to reduce outstanding
indebtedness at December 31, 1996. The Company estimates that it will apply
an additional $1,761,000 of the net proceeds from the Offering to reduce
indebtedness expected to be outstanding at the time of consummation of the
Offering. See "Use of Proceeds," "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
5
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the shares of Common Stock.
RELIANCE ON SMALL NUMBER OF LARGE CLIENTS
A significant portion of the Company's revenue is generated from a small
number of large clients. Accordingly, the loss of any of these clients could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's five largest clients accounted for
approximately 62%, 62% and 52% of the Company's total revenue for fiscal years
1994, 1995 and 1996, respectively. Customers accounting for more than 10% of
the Company's revenues were Ameritech Corporation and Hewlett-Packard Company
in fiscal 1996 and NYNEX Corporation for the nine month period ended December
31, 1996.
RELIANCE ON KEY INDUSTRIES
Approximately 74% of the Company's revenue in fiscal 1996 was generated from
clients in the telecommunications, financial services and information
technology industries. Accordingly, a trend in any of these industries not to
use, or to reduce the use of, human resources consulting and outsourcing
services, whether due to adverse business conditions in those industries or
otherwise, could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, due to competitive
conditions in certain relatively concentrated industries, the Company may,
from time to time, be subject to contractual or practical limitations on its
ability to perform services for competitors of existing clients. For example,
the Company recently entered into an agreement with a major customer that
contains a provision prohibiting the Company from providing certain services
to any credit card issuer until after September 30, 1997.
RELIANCE ON KEY PERSONNEL
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees, in
particular, Bernard F. Reynolds, Chairman of the Board and Chief Executive
Officer, Eli Salig, President and Chief Operating Officer, and Seymour Adler,
Executive Vice President. The loss of any of Messrs. Reynolds, Salig or Adler
or certain other key personnel could have a material adverse effect on the
Company's business. Although the Company has entered into employment
agreements with Messrs. Reynolds, Salig and Adler, such employment agreements
are terminable by the employee at any time, subject only to non-competition
provisions for three years following the date of termination. The Company does
not maintain key-man or similar insurance policies on its executive officers.
See "Management--Employment Agreements."
BENEFITS TO PRINCIPAL STOCKHOLDERS
The Company intends to use an estimated $2.9 million of the net proceeds
from the Offering to retire indebtedness under its bank credit facility. The
bank credit facility is personally guaranteed by the Company's principal
executive officers and stockholders Bernard F. Reynolds and Eli Salig. The
Company has obtained the agreement of its lender to release the personal
guarantees in connection with the Offering and to establish a new credit
facility following the Offering. In addition, Messrs. Reynolds, Salig and
Adler may sell up to an aggregate of 330,000 shares of Common Stock pursuant
to exercises, if any, of the Underwriters' over-allotment option. See "Use of
Proceeds" and "Principal and Selling Stockholders".
MANAGEMENT OF GROWTH
The Company has recently experienced a period of significant revenue growth,
and an expansion in the number of its employees and the scope of its operating
and financial systems. This growth has resulted in new and increased
responsibility for management personnel. To accommodate recent growth, compete
effectively and manage potential future growth, the Company must continue to
implement and improve information systems, procedures and controls and expand,
train, motivate and manage its work force. These demands will require
additional management personnel, and the Company's future success will depend
to a significant extent on the ability of its current and future management
personnel to operate effectively, both independently and as a group.
6
<PAGE>
There can be no assurance that the Company's personnel, systems, procedures
and controls will be adequate to support the Company's future operations. Any
failure to implement and improve the Company's operational, financial and
management systems or to hire, train, motivate or manage employees could have
a material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors--Need to Attract, Retain and Manage
Professional Staff."
NEED TO ATTRACT, RETAIN AND MANAGE PROFESSIONAL STAFF
The Company's business involves the delivery of professional services and is
labor-intensive. The Company's success depends in large part upon its ability
to attract, develop, motivate and retain highly skilled consultants and
personnel, including psychologists and other professionals. There is
significant competition for employees with the skills required to perform the
services offered by the Company from other similar firms. There can be no
assurance that the Company will be able to attract and retain a sufficient
number of such employees in the future or that it will continue to be
successful in training, retaining and motivating such employees. The loss of a
significant number of the Company's current consultants and professionals or
the Company's inability to hire a sufficient number of additional qualified
consultants and professionals could have a material adverse effect on the
Company's business, financial condition and results of operations, including
its ability to secure, service and complete client engagements.
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price will be substantially higher than the net
tangible book value per share of the Company which, at December 31, 1996, was
$0.53 per share. Investors purchasing shares of Common Stock in the Offering
will suffer immediate and substantial net tangible book value dilution of
$4.99 per share, assuming an initial public offering price of $7.50 per share.
In addition, this dilution will be increased to the extent that holders of
outstanding options to purchase Common Stock at prices below the net tangible
book value per share of the Company after the Offering exercise such options.
See "Dilution."
RISKS RELATED TO CONTRACTUAL ARRANGEMENTS
The Company's agreements with clients may generally be terminated by the
client on short notice, typically 30 days. Additionally, the Company's
arrangements with certain clients are based upon course of dealing
relationships which can be terminated immediately. No assurance can be given
that any of these clients will continue to use the Company's services and any
reduction in such use could have a material adverse effect on the Company's
business, financial condition and results of operations.
CONTROL BY EXECUTIVE OFFICERS AND CURRENT STOCKHOLDERS
Upon completion of the Offering, Messrs. Reynolds, Salig and Adler will own
or control approximately 63% of the Company's outstanding shares of Common
Stock (approximately 58% if the Underwriters' over-allotment option is
exercised in full). Accordingly, these persons will have the ability to elect
a majority of the Company's Board of Directors and take other corporate
actions requiring stockholder approval, as well as effectively control the
direction and policies of the Company. Moreover, the absence of cumulative
voting provisions in the Company's First Restated Certificate of Incorporation
(the "Certificate") will make it difficult for new stockholders to elect new
directors or remove existing directors and the Certificate and By-laws (the
"By-laws") require advance notice to the Board of Directors of Stockholder
proposals or stockholder nominees for directors to be considered at annual
meetings of stockholders and restrict the ability of stockholders to call
meetings. In addition, there can be no assurance that in any transfer of a
controlling interest in the Company any other holders of Common Stock will be
allowed to participate in any such transaction or will realize any premium
with respect to their shares of Common Stock. The foregoing may have the
effect of discouraging or preventing certain types of transactions involving
an actual or potential change of control of the Company. See "Principal and
Selling Stockholders."
7
<PAGE>
VARIABILITY OF QUARTERLY RESULTS AND UNCERTAINTY OF FUTURE OPERATING RESULTS
The Company's quarterly operating results have varied in the past and are
likely to vary in the future. This variability is due to a variety of factors
including, without limitation, demand for the Company's services; seasonal
trends; changes in the level of the Company's operating expenses; budgeting
cycles of the Company's clients; timing of personnel additions; and general
domestic economic conditions. Quarterly revenue and operating results depend,
in part, on the significance of client engagements commenced and completed
during a quarter, the number of working days in a quarter and employee
utilization rates. The timing of revenue is difficult to forecast because the
Company's sales cycle is relatively long in the case of new clients and may
depend on factors such as the size and scope of assignments and general
economic conditions. Because a high percentage of the Company's expenses are
relatively fixed, a variation in the timing of the initiation or an
unanticipated termination of a major project or the completion of client
assignments or a variation in the length of such assignments, particularly at
or near the end of any quarter, can cause variations in operating results from
quarter to quarter. In addition, the Company plans its operating expenditures
based on revenue forecasts and a revenue shortfall below such forecast in any
quarter could likely adversely affect the Company's operating results for that
quarter. Accordingly, the Company believes that period-to-period comparisons
of its operating results are not necessarily meaningful and should not be
relied upon as indications of future performance.
PROPRIETARY RIGHTS
The Company believes that factors such as the technical and creative skills
of its personnel, the Company's knowledge and expertise in behavioral
assessment and its name recognition are essential to establishing and
maintaining a competitive position in its industry. The Company relies
primarily on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its
proprietary rights. The Company generally enters into confidentiality
agreements with its employees, consultants, clients and potential clients and
limits access to and distribution of its proprietary information. There can be
no assurance, however, that such protections will effectively prevent
infringements of the Company's intellectual property. The Company is not aware
that it is infringing any proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim infringement by the
Company of their intellectual property rights.
COMPETITION
The human resources outsourcing industry is highly competitive. Although the
industry is highly fragmented, there are several participants in the industry
who have capabilities and resources such as operating experience, research,
development and marketing capabilities comparable to and in certain respects
greater than those of the Company. The Company also competes with the in-house
human resources, training and customer contact staffs of many clients and
potential clients. There can be no assurance that the Company will be able to
compete effectively with such staffs or other existing competitors. In
addition, there can be no assurance that, as the Company's industry continues
to evolve, additional competitors with greater resources than the Company will
not enter the industry, or that the Company's clients will not choose to
service more of their human resources needs internally. See "Business--
Competition."
NO PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and there can be no assurance that an active trading market
will develop or be sustained or that shares of Common Stock will be able to be
resold at or above the initial public offering price following the Offering.
POSSIBLE VOLATILITY OF STOCK PRICE
The initial public offering price of the Common Stock will be determined by
negotiations among the Company and the Representative of the Underwriters and
may not be indicative of the trading prices of the Common Stock after the
Offering. See "Underwriting" for a description of certain factors considered
in determining the initial public offering price for the Common Stock. The
trading price of the Common Stock
8
<PAGE>
following the Offering may be influenced by many factors, including the depth
of the market for the Common Stock, investor perception of the human resource
outsourcing industry or the industry of any of the Company's significant
clients, changes in any securities analysts' estimates of the Company's future
performance, or general market conditions. In addition, future sales of
substantial amounts of Common Stock by existing stockholders could also
adversely affect the prevailing market price of the Common Stock. See "Shares
Eligible for Future Sale."
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company's Certificate and By-laws contain, and certain sections of the
Delaware General Corporation Law also contain, certain provisions that could
discourage potential takeover attempts and make attempts by the Company's
stockholders to change management more difficult. The Certificate and By-laws
require approval of the Chairman of the Board of Directors or at least 51% of
the members of the Board of Directors in order for a special meeting of
stockholders to be called, require advance notice by stockholders of an
intention to nominate persons for election to the Board of Directors or to
make stockholder proposals and if at any time a class of stock of the Company
becomes registered pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and such stock is being traded on a nationally
recognized exchange, any action to be taken at any annual or special meeting
of the stockholders must be taken at a meeting. In addition, the Certificate
authorizes the Board of Directors to issue up to 2,000,000 shares of
undesignated preferred stock (the "Preferred Stock") in one or more classes or
series and to fix the rights, preferences, privileges and restrictions thereof
without stockholder approval and upon such terms as the Board of Directors may
determine. The rights of the holders of Common Stock would be subject to, and
could be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued by the Company in the future. While the Company has
no present intention to issue shares of Preferred Stock, any such issuance
could have the effect of making it more difficult for a third party to acquire
a majority of the outstanding voting stock of the Company. See "Description of
Capital Stock."
FUTURE SALES OF COMMON STOCK
Upon completion of the Offering, the Company will have a total of 6,825,158
shares of Common Stock outstanding. Of these shares, 4,625,158 (4,295,158
shares if the Underwriters' over-allotment option is exercised in full) will
be "restricted securities" as that term is defined by Rule 144 ("Rule 144") as
promulgated under the Securities Act of 1933, as amended (the "1933 Act").
These restricted securities (the "Restricted Securities") were issued and sold
by the Company in private transactions in reliance upon exemptions from
registration under the 1933 Act. In general, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated) who has beneficially
owned Restricted Securities for at least two years, including persons who may
be deemed "affiliates" of the Company, would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of one
percent of the number of shares of Common Stock then outstanding
(approximately 68,252 shares upon completion of the Offering) or the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements, and to the availability of current public information about the
Company. In addition, a person who is not deemed to have been an affiliate of
the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least three years,
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. The Securities and Exchange Commission (the
"SEC") recently adopted certain amendments to Rule 144 that will reduce by one
year the holding period required for shares subject to Rule 144 and Rule
144(k) to become eligible for resale in the public market. The amendments will
become effective April 29, 1997. One hundred eighty (180) days from the date
of this Prospectus, when lock-up agreements entered into between the
Underwriters and all holders of Restricted Securities expire, all of the
Restricted Securities will be eligible for sale in the public market, subject
to the provisions of Rule 144. The Restricted Securities also may be sold at
any time pursuant to an effective registration statement under the 1933 Act.
See "Shares Eligible for Future Sale."
9
<PAGE>
RISKS RELATED TO REGULATION
The Company is subject to federal and state laws in connection with its
investigative services and consultations regarding hiring potential employees.
The Company is also subject to federal and state laws, and in certain states,
licensing requirements, in connection with its customer contact monitoring
services and to licensing requirements in the State of New York in connection
with certain investigative services. The Company believes that its practices
and policies comply with all applicable laws. However, there can be no
assurance that a review of the Company's operations by regulatory authorities
will not result in a determination that could have a material adverse effect
on the Company.
SIGNIFICANT FLEXIBILITY IN APPLYING NET PROCEEDS OF OFFERING
The Company intends to use the net proceeds from the sale of the Common
Stock offered hereby for reduction of indebtedness, capital expenditures,
sales and marketing efforts, management staff additions, working capital and
possible future acquisitions. However, management will have significant
flexibility in applying the net proceeds of the Offering. Failure to utilize
the net proceeds within a reasonable period of time may result in a dilution
of the Company's earnings per share, which could have a material adverse
effect on the price of the Company's Common Stock. See "Use of Proceeds."
ABILITY TO IDENTIFY AND MANAGE ACQUISITIONS
The Company intends to use a material portion of the proceeds of the
Offering to make strategic acquisitions or enter into joint ventures. There
can be no assurance that such acquisitions or joint venture opportunities will
become available on terms acceptable to the Company within a reasonable period
of time. Moreover, if the Company is able to identify and consummate such
acquisitions or joint ventures, the Company's management has only limited
experience with acquisitions, which involve numerous risks, including
difficulties in the assimilation of acquired operations and products, the
diversion of management's attention from other business concerns and the
potential loss of key employees of the acquired companies. There can be no
assurance that management will be able to manage these issues successfully.
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain earnings, if any, for the development of its
business.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $7.50 per share, are estimated to be approximately
$14,645,000 after deducting the underwriting discount of approximately
$1,155,000 and estimated offering expenses payable by the Company of $700,000.
Such net proceeds are anticipated to be used as follows:
<TABLE>
<CAPTION>
PERCENTAGE
APPROXIMATE OF NET
AMOUNTS PROCEEDS
----------- ----------
<S> <C> <C>
Reduction of indebtedness (1):
Lines of credit (2)...................................... $ 2,000,000
Equipment leases (3)..................................... 900,000
-----------
$ 2,900,000 20%
-----------
Capital expenditures:
Expansion of facilities.................................. $ 1,500,000
Software development/enhancements........................ 500,000
-----------
$ 2,000,000 14%
-----------
Sales and marketing........................................ $ 1,500,000 10%
-----------
Management staff additions................................. $ 1,150,000 8%
-----------
Working capital and possible acquisitions (4).............. $ 7,095,000 48%
----------- ---
Total................................................ $14,645,000 100%
=========== ===
</TABLE>
- --------
(1) As of December 31, 1996, the Company had $1,138,785 outstanding under its
bank credit facility. The amounts shown in the table are amounts estimated
to be outstanding upon completion of the Offering. The amounts outstanding
on these lines of credit are guaranteed by the Company's principal
executive officers and stockholders, Bernard F. Reynolds and Eli Salig.
The Company's lender has agreed to release Messrs. Reynolds and Salig from
these guarantees in connection with the Offering. Subsequent to the
Offering, the Company intends to enter into a new bank credit facility
which would not be guaranteed.
(2) These lines of credit mature on September 30, 1997 and carry annual
interest at the lender's prime rate plus one percent. As of February 28,
1997, the interest rate was 9.25%.
(3) Approximately $393,000 of this amount matures on November 5, 2001 and
carries an annual rate of interest of 9.65%. The remaining $507,000 of
this amount will convert to a term loan which will mature on or about
February 7, 2002 and which will carry an interest rate of 9.25%.
(4) The Company evaluates potential acquisitions from time to time and
believes such transactions may offer an attractive method for the Company
to expand its business. However, the Company presently has no pending
commitments or understandings to enter into any such transactions.
Pending application of the net proceeds from the Offering for the foregoing
purposes, the Company intends to invest the net proceeds in investment grade,
short-term, interest-bearing securities and cash equivalents.
DIVIDEND POLICY
The Company has not paid any dividends with respect to the Common Stock. The
Company currently intends to retain future earnings to finance its growth and
development and therefore does not anticipate the payment of any cash
dividends in the foreseeable future. The declaration and payment of dividends
by the Company are subject to the discretion of its Board of Directors and to
compliance with applicable law. Any determination as to the payment of
dividends in the future will depend upon, among other things, general business
conditions, future earnings and capital requirements of the Company.
11
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1996: (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to reflect (a) the issuance and sale of the 2,200,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$7.50 per share, and (b) receipt of the net proceeds therefrom, after
deducting underwriting discounts and commissions and estimated offering
expenses and (c) the anticipated application of such proceeds to retire
certain indebtedness of the Company. This table should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Notes payable (1) ...................................... $1,138,785 $ --
---------- -----------
Stockholders' equity:
Preferred Stock, $.01 par value, none authorized,
actual; 2,000,000 shares authorized, none issued or
outstanding, as adjusted.............................. -- --
Common Stock, $.01 par value, 5,000,000 shares
authorized, 4,625,158 issued and outstanding, actual;
18,000,000 shares authorized, 6,825,158 issued and
outstanding, as adjusted (2).......................... 46,252 68,252
Additional paid in capital............................. 1,109,218 15,732,218
Retained earnings...................................... 2,432,570 2,432,570
---------- -----------
Total stockholders' equity........................... 3,588,040 18,233,040
---------- -----------
Total capitalization................................. $4,726,825 $18,233,040
========== ===========
</TABLE>
- --------
(1) The Company estimates that it will apply an additional $1,761,000 of the
net proceeds from the Offering to repay indebtedness expected to be
outstanding at the time of consummation of the Offering. The Company
intends to enter into a new bank credit facility following consummation of
the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
(2) Excludes an aggregate of 51,692 shares of Common Stock issuable upon
exercise of options outstanding as of December 31, 1996.
12
<PAGE>
DILUTION
As of December 31, 1996, the net tangible book value of the Company was
approximately $2,453,447 or $0.53 per share. Net tangible book value per share
represents the amount of tangible net assets of the Company, less total
liabilities, divided by the number of shares outstanding. After giving effect
to the sale by the Company of 2,200,000 shares of Common Stock (at an assumed
initial public offering price of $7.50 per share) and the application of the
net proceeds therefrom, the proforma net tangible book value of the Company at
December 31, 1996 would be $17,098,447, or $2.51 per share. This amount
represents an immediate increase in net tangible book value of $1.98 per share
to existing owners of the Company and an immediate dilution in net tangible
book value per share of $4.99 per share to purchasers of Common Stock in the
Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $7.50
Net tangible book value per share at December 31, 1996........ $0.53
Increase in net tangible book value per share attributable to
new investors................................................. $1.98
Pro forma net tangible book value per share after the
Offering....................................................... $2.51
-----
Dilution per share to new investors............................ $4.99
=====
</TABLE>
The following table summarizes, on a proforma basis, as of December 31,
1996, the differences between existing stockholders and purchasers of shares
in the Offering (at the assumed initial public offering price of $7.50 per
share) with regard to the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders
(1)....................... 4,625,158 67.8% $ 92,074 0.6% $0.02
New investors (1)......... 2,200,000 32.2% $16,500,000 99.4% $7.50
--------- ----- ----------- -----
Total................... 6,825,158 100.0% $16,592,074 100.0%
========= ===== =========== =====
</TABLE>
- --------
(1) If the Underwriters' overallotment option is exercised in full, the number
of shares held by existing stockholders will be reduced to 4,295,158 or
approximately 62.9% of the total outstanding shares, and the number of
shares held by new investors will increase to 2,530,000 or approximately
37.1% of the total outstanding shares, after the Offering.
The foregoing computations assume no exercise of stock options outstanding
as of December 31, 1996. As of February 28, 1997, 368,533 shares of Common
Stock were subject to outstanding options under the Company's 1996 Stock
Option and Grant Plan (the "Option Plan") at a weighted average exercise price
of approximately $5.70 per share. In the event that these options are
exercised, the proforma net tangible equity per share after the Offering will
be $2.67 and dilution per share to new investors in the Offering will be
$4.83. Upon consummation of the Offering, options for an additional 431,467
shares of Common Stock will be available for issuance under the Option Plan
and 25,000 shares of Common Stock will be available for issuance under the
Company's 1996 Directors' Stock Option Plan (the "Directors' Plan"). See
"Capitalization," "Management--Director Compensation," "Management--Stock
Option and Grant Plan," "Description of Capital Stock" and Note 11 of Notes to
Consolidated Financial Statements.
13
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data set forth below with respect to the Company's
consolidated statements of income for the three fiscal years ended March 31,
1994, 1995 and 1996 and consolidated balance sheets as of March 31, 1995 and
1996 are derived from audited financial statements of the Company included
elsewhere in this Prospectus. The Company's consolidated statements of
operations data for the years ended March 31, 1992 and 1993 and the
consolidated balance sheet data as of March 31, 1992, 1993 and 1994 are
derived from unaudited financial statements of the Company not included in
this Prospectus. The consolidated statements of operations data for the nine
months ended December 31, 1995 and 1996 and the consolidated balance sheet
data as of December 31, 1996 are derived from unaudited financial statements
included elsewhere in this Prospectus. The unaudited financial statements
include all adjustments, consisting only of normal recurring adjustments, that
the Company considers necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for
the nine months ended December 31, 1996 are not necessarily indicative of the
results that may be expected for the entire fiscal year ended March 31, 1997.
The data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
------ ------ ------ ------ ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA (1):
Revenue................. $4,268 $5,152 $6,028 $8,023 $10,558 $ 7,691 $ 12,859
Cost of services........ 2,741 2,852 3,207 4,179 5,207 3,739 5,905
------ ------ ------ ------ ------- -------- --------
Gross profit............ 1,527 2,300 2,821 3,844 5,351 3,952 6,954
Operating expenses:
General and
administrative........ 1,279 1,169 1,688 1,948 2,225 1,611 2,207
Sales and marketing.... 503 514 618 744 1,100 814 1,254
Research and
development........... 46 140 283 375 614 413 843
------ ------ ------ ------ ------- -------- --------
Income (loss) from
operations............. (301) 477 232 777 1,412 1,114 2,650
Other income............ -- -- -- 276 -- -- --
Interest (expense)
income, net............ (42) (36) (24) (14) 2 (10) (13)
------ ------ ------ ------ ------- -------- --------
Income before provision
for income taxes,
extraordinary item and
cumulative effect of
change in accounting
principle.............. (343) 441 208 1,039 1,414 1,104 2,637
Provision for income
taxes.................. (20) (270) (61) (468) (682) (525) (1,445)
------ ------ ------ ------ ------- -------- --------
Income before
extraordinary item and
cumulative effect of
change in accounting
principle.............. (363) 171 147 571 732 579 1,192
Extraordinary item for
utilization of net
operating loss
carryforwards.......... -- 72 -- -- -- -- --
Cumulative effect of
change in accounting
principle (2).......... -- -- 19 -- -- -- --
------ ------ ------ ------ ------- -------- --------
Net income (loss)....... $ (363) $ 243 $ 166 $ 571 $ 732 $ 579 $ 1,192
====== ====== ====== ====== ======= ======== ========
Net income (loss) per
proforma common and
common equivalent
share.................. $(0.08) $ 0.05 $ 0.04 $ 0.12 $ 0.16 $ 0.12 $ 0.26
Proforma weighted-
average number of
common and common
equivalent shares
outstanding (3)........ 4,667 4,667 4,667 4,667 4,667 4,667 4,667
OPERATING DATA:
Number of employees..... 61 75 116 123 145 130 242
Number of candidates
processed (4) ......... 40,000 46,000 55,000 84,000 145,000 108,000 288,000
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996
------ ------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (1):
Cash and cash $ 42 $ 72 $ 22 $ 228 $ 70 $ 146
equivalents.............
Working capital......... (408) (218) (172) 389 530 624
Total assets............ 1,482 1,776 1,823 2,470 4,243 7,077
Total liabilities....... 1,696 1,662 1,543 1,620 1,846 3,489
Total stockholders' (215) 114 280 850 2,397 3,588
equity..................
</TABLE>
- -------
(1) The financial statements for all periods prior to March 31, 1996, have
been presented on a consolidated basis at the historical cost basis of the
entities involved in the Reorganization in a manner similar to a pooling
of interests. As of March 31, 1996, the date of the Reorganization, the
interests of the shareholders of such entities other than one controlling
shareholder have been accounted for as a purchase of minority interest.
See "Certain Transactions" and Note 1 to the Notes to Consolidated
Financial Statements.
(2) Upon adoption of SFAS No. 109, the Company recorded a cumulative effect of
change in accounting principle of $19,091.
(3) See Note 2 to the Notes to Consolidated Financial Statements for a
description of proforma weighted-average number of common and common
equivalent shares outstanding.
(4) Represents total number of candidate interactions with one of the
Company's four service functions such as number of candidates assessed,
number of candidates trained and developed, number of service
representatives monitored and number of employment applicants processed.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's historical results of operations
and of its liquidity and capital resources should be read in conjunction with
the Selected Financial and Operating Data of the Company and the consolidated
financial statements of the Company and related notes thereto included
elsewhere in this Prospectus. This Prospectus also contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainty. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements. Factors that could cause
or contribute to such differences include those discussed in "Risk Factors" as
well as those discussed elsewhere in this Prospectus. See "Special Note
Regarding Forward-Looking Statements."
OVERVIEW
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking
to hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into four core areas; assessment and
selection, training and development, customer contact monitoring and
employment process administration. The Company believes these services
position the Company as a single-source solution for many organizations which
outsource all or a portion of their human resources functions. The Company
markets its services principally to Fortune 500 companies for which customer
service, sales and call center functions are critical components of their
businesses. Industries served by the Company include telecommunications,
financial services, information technology, consumer products and healthcare.
The Company was founded in 1978 to provide assessment services principally
to companies in the securities industry and later to several of the regional
telephone companies. In 1986, the Company acquired a background investigation
firm which provided pre-employment screening services. Prior to fiscal 1994,
the Company's revenue was primarily generated from assessment and selection
services and limited employment process administration services, such as
background checks.
In fiscal 1994, the Company introduced and began generating revenue from a
broader array of employment process administration services and training and
development services, which have favorably impacted the Company's results of
operations since that time. In October 1996, the Company introduced its
customer contact monitoring services and the Company expects that revenue from
such services will represent an increasing percentage of the Company's total
revenue in the future. From fiscal 1992 to fiscal 1996, the Company's revenue
has increased at a compounded annual growth rate of approximately 25.4%, from
$4.3 million in fiscal 1992 to $10.6 million in fiscal 1996. Revenue for the
nine month period ended December 31, 1996 was $12.9 million, an increase of
67.2% over revenue of $7.7 million for the nine month period ended December
31, 1995.
The Company charges for its services through contractual arrangements which
vary depending on the type of service and the nature of the Company's
relationship with the client and recognizes revenue upon completion of such
services. For assessment and selection, the Company generally charges a fixed
fee for the initial design of the assessment instruments and selection
process, and then delivers the service for a per applicant fee. For training
and development contracts, the Company generally charges a fixed fee per
person. For customer contact monitoring, the Company generally charges a fee
per-call monitored, determined by the duration of the call, aggregate number
of calls, and other relevant variables. For employment process administration
contracts, the Company charges a per-unit fee, which varies depending upon
whether the client only needs one type of service, such as employee background
checks, or an entire recruitment and hiring process. Individual services
generally are also provided on a per-unit fee basis, while more complete
services typically include a base fee component and a per-unit fee.
The Company's clients generally use its services on an as-needed basis,
requiring the Company to be able to respond quickly to changes in the volume
of services it must provide at a given time. The Company has taken
15
<PAGE>
a variety of steps in order to address the operational challenges this
situation presents and increase its ability to control its cost of services.
For example, the Company engages many professionals, including a number of its
psychologists, on a part-time basis, which enables it to have access to a large
number of staff on relatively short notice without incurring significant fixed
labor expenses. The Company also cross-trains its employees on multiple aspects
of the delivery of its services, giving the Company as much flexibility as
possible when staffing a particular client engagement. In addition, the Company
often provides its services at client facilities or other off-site locations,
limiting the Company's need to expand its own facilities in response to rapid
increases in clients' demands for services.
Cost of services includes payroll and other expenses directly attributable to
the services delivered by the Company, as well as facilities costs, including
telephone expenses, costs for third party data utilized in background reports
(e.g., credit bureau reports) and any necessary travel directly related to
providing such services. Costs of services as a percentage of revenue has
decreased in each of the last three years, from 53.2% in fiscal 1994 to 49.3%
in fiscal 1996 and from 48.6% for the nine month period ended December 31, 1995
to 45.9% for the nine month period ended December 31, 1996. No assurance can be
given that these trends will continue in the future.
The Company generally has experienced lower cost of services on its newer
offerings, particularly in the employment process administration and training
and development categories. Employment process administration services have
tended to have lower associated labor costs due to efficiencies achieved
through the use of various automation technologies which have reduced the
Company's staffing level requirements. Such technologies include interactive
voice response used to automate components of the Company's recruitment
process, and remote access to several of the Company's services through its
worldwide web site. In addition, the provision of employment process
administration services does not require as many professionals with advanced
degrees as are required in the Company's other services, resulting in lower
payroll rates. With respect to training and development, while these services
typically are provided by experienced staff who have masters or doctoral
degrees, the relatively high payroll expense associated with such personnel is
offset by higher pricing for the services they provide. In addition, provision
of training and development services has not generally required a significant
increase in the Company's facilities because off-site temporary locations and
client facilities typically are used to provide such services.
General and administrative expense includes payroll and related expenses
attributable to senior management, finance, information systems, human
resources and office administration personnel, facilities costs and general
office expenses pertaining to these functions, as well as outside professional
fees. General and administrative expense as a percentage of revenue has
decreased in each of the last three years, from 28.0% in fiscal 1994 to 21.1%
in fiscal 1996. General and administrative expense as a percentage of revenue
for the nine month period ended December 31, 1996 was 17.2%, down from 21.0%
for the nine month period ended December 31, 1995. No assurance can be given
that these trends will continue in the future. To date, the Company has been
able to leverage its existing management and administrative infrastructure to
support its expanded services. The Company believes, however, that additional
investment in management personnel, administrative staff and facilities will be
required to continue to support anticipated future growth.
Sales and marketing expense consists of salaries, commissions on a small
number of the Company's services, travel-related costs associated with the
solicitation of new business, the cost of designing, producing and distributing
marketing materials, and facilities and office-related expense pertaining to
these activities. Sales and marketing expense as a percentage of revenue has
averaged approximately 10.0% over the last three years, but decreased in the
nine month period ended December 31, 1996 to 9.8% versus 10.6% for the nine
month period ended December 31, 1995. Over the next two years, the Company
intends to substantially increase its sales and marketing efforts through
staffing additions and expenditures for marketing materials and advertising.
Research and development expense includes payroll and related expenses,
facilities costs and necessary travel expenses pertaining to the professional
staff which develop new programs used in the conduct of
16
<PAGE>
assessment and selection testing, training and development activities and
customer contact monitoring. Such research and development typically is only
conducted in connection with services being performed under existing client
contracts, and is expensed as incurred.
The Company's operations are subject to federal, New York State, New York
City and certain additional franchise taxes, resulting in an effective tax rate
typically in excess of 40%.
Because of the significant size and financial resources of the Company's
existing clients, write-offs for bad debts have historically not been material.
As of December 31, 1996, the following five customers represented 64% of the
Company's total accounts receivable: NYNEX Corporation, American Express
Company, Bell Atlantic Corporation, Southwestern Bell Telephone Company and
Dean Witter Reynolds, Inc.
In March 1996, the Company completed the Reorganization pursuant to which its
two predecessor companies, Assessment Solutions Incorporated and Proudfoot
Reports Incorporated, which were separately owned but commonly controlled,
became subsidiaries of the Company and substantially all of the stockholders of
the predecessors became stockholders of the Company. The Reorganization has
been accounted for as a reorganization of entities under common control to the
extent of the ownership of one stockholder who held an approximately 60%
interest in the entities both prior and subsequent to the Reorganization. The
remaining approximately 40% of the ownership interests have been treated as if
acquired and have been accounted for as a purchase, resulting in an increase in
goodwill of approximately $1,063,000. This goodwill is being amortized over ten
years.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------- --------------------
1994 1995 1996 1995 1996
------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services................. 53.2 52.1 49.3 48.6 45.9
------ ------ ------ --------- ---------
Gross profit..................... 46.8 47.9 50.7 51.4 54.1
Operating expenses:
General and administrative...... 28.0 24.3 21.1 21.0 17.2
Sales and marketing............. 10.3 9.3 10.4 10.6 9.8
Research and development........ 4.7 4.7 5.8 5.4 6.6
------ ------ ------ --------- ---------
Income from operations........... 3.8 9.6 13.4 14.4 20.5
Other income..................... -- 3.4 -- -- --
Interest (expense) income, net... (0.4) (0.1) -- (0.1) (0.1)
------ ------ ------ --------- ---------
Income before provision for
income taxes and cumulative
effect of change in accounting
principle....................... 3.4 12.9 13.4 14.3 20.5
Provision for income taxes....... (1.0) (5.8) (6.5) (6.8) (11.2)
Cumulative effect of change in
accounting principle............ 0.3 -- -- -- --
------ ------ ------ --------- ---------
Net income....................... 2.7% 7.1% 6.9% 7.5% 9.3%
====== ====== ====== ========= =========
</TABLE>
Nine Months Ended December 31, 1996 Compared With Nine Months Ended December
31, 1995
Revenue. Revenue increased $5.2 million or 67.2% from $7.7 million for the
nine month period ended December 31, 1995 to $12.9 million for the nine month
period ended December 31, 1996. This increase was primarily attributable to
increased revenue from the Company's employment processing administration
services and from assessment and selection services. Assessment and selection
revenue increased $1.4 million or 43.4% from $3.2 million for the nine month
period ended December 31, 1995 to $4.6 million for the nine month period
17
<PAGE>
ended December 31, 1996. Revenue gains from assessment and selection services
were attributable to a general increase in demand for the Company's services
from existing clients. Training and development revenue increased $472,000 or
56.1% from $842,000 for the nine month period ended December 31, 1995 to $1.3
million for the nine month period ended December 31, 1996. Revenue gains from
training and development services were principally due to expansion of
programs at two of the Company's existing clients. Customer contact monitoring
revenue increased $236,000 or 87.1% from $271,000 for the nine month period
ended December 31, 1995 to $507,000 for the nine month period ended December
31, 1996. Revenue gains from customer contact monitoring services were
attributable to the implementation of a new service offering. Employment
process administration revenue increased $3.0 million or 91.3% from $3.4
million for the nine month period ended December 31, 1995 to $6.4 million for
the nine month period ended December 31, 1996. Revenue gains from employment
process administration services were principally due to expansion of programs
at two of the Company's existing clients.
Cost of services. Cost of services increased $2.2 million or 57.9% from $3.7
million for the nine month period ended December 31, 1995 to $5.9 million for
the nine month period ended December 31, 1996. The increase was primarily
attributable to personnel additions of $1.6 million, as well as to increases
in facilities costs due to office expansion, travel expense associated with
training and development services and the cost of third party data used in the
Company's background reports offset, in part, by a decrease in personnel
expense necessary to generate such reports. As a percentage of revenue, cost
of services decreased from 48.6% for the nine months ended December 31, 1995
to 45.9% for the nine months ended December 31, 1996, principally due to the
fact that a significant portion of the Company's outsourcing services and
training and development services were performed off-site at temporary
locations and clients' offices which resulted in facilities costs increasing
at a slower rate than the rate of increase in revenue. This decrease was
offset in part by increases in revenue during the period from lower margin
services, particularly customer contact monitoring and employment background
reports.
General and administrative. General and administrative expense increased
$595,000 or 36.9% from $1.6 million for the nine month period ended December
31, 1995 to $2.2 million for the nine month period ended December 31, 1996.
This increase was primarily attributable to an increase in salary expense
relating to personnel additions, higher facilities costs due to office
expansion and amortization of goodwill associated with the Reorganization. As
a percentage of revenue, general and administrative expense decreased from
21.0% for the nine month period ended December 31, 1995 to 17.2% for the nine
month period ended December 31, 1996 due to the Company's ability to service a
portion of the additional business generated during the period with existing
personnel. In addition, the Company reduced its utilization of temporary
workers and reduced its costs for medical premiums by moving to a managed care
health plan. As the Company matures, it expects to employ additional personnel
necessary to service its growth.
Sales and marketing. Sales and marketing expense increased $440,000 or 54.1%
from $814,000 for the nine month period ended December 31, 1995 to $1.3
million for the nine month period ended December 31, 1996. This increase was
principally due to increases in expenditures for marketing materials and the
ongoing cost of maintaining the Company's internet website. As a percentage of
revenue, sales and marketing expense decreased from 10.6% for the nine month
period ended December 31, 1995 to 9.8% for the nine month period ended
December 31, 1996 due to the fact that a portion of the increase in revenue
during the period was not subject to commissions and to the fact that revenue
increased at a faster rate than increases in salary expense.
Research and development. Research and development expense increased
$430,000 or 104.1% from $413,000 for the nine month period ended December 31,
1995 to $843,000 for the nine month period ended December 31, 1996. This
increase was primarily attributable to the hiring of additional research and
development personnel and the resulting expenditures for payroll increases
which accompanied such hiring and to increases in travel-related expenses
attributable to new business development. Research and development expense
increased as a percentage of revenue from 5.4% for the nine month period ended
December 31, 1995 to 6.5% for the nine month period ended December 31, 1996
due to the expansion of the professional staff, principally senior level
industrial psychologists to support new business development efforts and
existing programs.
18
<PAGE>
Interest (expense) income, net. Net interest (expense) income represents
interest paid on bank borrowings offset by interest income accrued on notes
receivable due from shareholders. This net expense increased as a result of a
higher utilization of bank lines of credit during the period, the proceeds of
which were invested in equipment and office furnishings.
Provision for income taxes. The difference between the effective federal
income tax provision calculated using statutory rates and the actual provision
recorded is principally due to the effect of state and local taxes. Provision
for income taxes for fiscal 1996 also includes $96,000 relating to the
nondeductibility of certain expenses resulting from an Internal Revenue
Service examination of a prior period.
Fiscal 1996 Compared With Fiscal 1995
Revenue. Revenue increased $2.5 million or 31.6% from $8.0 million in fiscal
1995 to $10.6 million in fiscal 1996. The increase was primarily attributable
to increased revenue from the Company's employment processing administration
services and from training and development services. Assessment and selection
revenue decreased $251,000 or 5.2% from $4.8 million in fiscal 1995 to $4.6
million in fiscal 1996. Revenue decreases from assessment and selection
services were attributable to a general decrease in demand for the Company's
services from existing clients. Training and development revenue increased
$738,000 or 62.9% from $453,000 in fiscal 1995 to $1.2 million in fiscal 1996.
Revenue gains from training and development services were due to the expansion
of a training program by one of the Company's regular clients and the
retention by that client of the Company's services in implementing such
training program. In fiscal 1996, the Company commenced its customer contact
monitoring operations which contributed $284,000 in revenues during the year.
Employment process administration revenue increased $1.8 million or 64.2% from
$2.8 million in fiscal 1995 to $4.5 million in fiscal 1996. Revenue gains from
employment process administration services were due to an increase in the
Company's marketing efforts related to background reports during this period.
Cost of services. Cost of services increased $1.0 million or 24.6% from $4.2
million in fiscal 1995 to $5.2 million in fiscal 1996. The increase was
principally attributable to personnel additions of $2.4 million as well as to
fees paid for third party data used in the Company's background reports of
$495,931. As a percentage of revenue, cost of services decreased from 52.1% in
fiscal 1995 to 49.3% in fiscal 1996. This decrease was attributable to the
Company's ability to utilize personnel without advanced education on the
masters level to perform many of the Company's outsourcing services.
General and administrative. General and administrative expense increased
$277,000 or 14.3% from $1.9 million in fiscal 1995 to $2.2 million in fiscal
1996. This increase was primarily attributable to the hiring of additional
management personnel, as well as expenditures for information systems and
office support. As a percentage of revenue, general and administrative expense
decreased from 24.3% in fiscal 1995 to 21.1% in fiscal 1996 as these expenses
increased at a slower rate than the rate of increase in revenue. As the
Company matures and this growth necessitates the hiring of additional
personnel and an additional investment in office support for such personnel,
there can be no assurance that general and administrative expense will
continue to increase at a rate lower than that of revenue.
Sales and marketing. Sales and marketing expense increased $356,000 or 47.8%
from $744,000 in fiscal 1995 to $1.1 million in fiscal 1996. As a percentage
of revenue, sales and marketing expense increased from 9.3% in fiscal 1995 to
10.4% in fiscal 1996 due to an expansion of sales and marketing personnel,
increases in commissions earned from new business developed and increases in
marketing expenses to support ongoing marketing efforts, including maintaining
the Company's internet web site.
Research and development. Research and development expense increased
$239,000 or 63.7% from $375,000 in fiscal 1995 to $614,000 in fiscal 1996.
This increase was primarily attributable to the hiring of additional research
and development personnel and the resulting expenditures for payroll increases
which accompanied such hiring. As a percentage of revenue, research and
development expense increased from 4.7% in fiscal 1995 to 5.8% in fiscal 1996
due to an increase in the number of research personnel utilized during the
year to support business growth and the related costs of operating a larger
department.
19
<PAGE>
Other income. Other income represents income earned from the early
termination of a facility lease in fiscal 1995.
Interest (expense) income, net. Net interest (expense) income decreased
during fiscal 1996 principally due to the repayment of notes payable to a bank
and shareholder.
Provision for income taxes. The difference between the effective federal
income tax provision calculated using statutory rates and the actual provision
recorded is principally due to the effect of state and local taxes.
Fiscal 1995 Compared With Fiscal 1994
Revenue. Revenue increased $2.0 million or 33.1% from $6.0 million in fiscal
1994 to $8.0 million in fiscal 1995. The increase was primarily attributable to
increased revenue from the Company's assessment and selection services.
Assessment and selection revenue increased $1.6 million or 48.2% from $3.3
million in fiscal 1994 to $4.8 million in fiscal 1995. Revenue gains from
assessment and selection services were attributable to an increased usage of
the Company's services by existing clients. Training and development revenue
increased $255,000 or 128.8% from $198,000 in fiscal 1994 to $453,000 in fiscal
1995. Revenue gains from training and development services were due to the
implementation of new training and development services during the year.
Employment process administration revenue increased $172,000 or 6.7% from $2.6
million in fiscal 1994 to $2.8 million in fiscal 1995. Revenue gains from
employment process administration services were principally due to increased
provision of background reports.
Cost of services. Cost of services increased $972,000 or 30.3% from $3.2
million in fiscal 1994 to $4.2 million in fiscal 1995. As a percentage of
revenue, cost of services decreased from 53.2% to 52.1% as a result of payroll
increases of $563,000 which were less than overall revenue gains. This was due
in part to a larger reliance on temporary workers and to the ability of the
Company to utilize its existing staff to perform various services.
General and administrative. General and administrative expense increased
$260,000 or 15.4% from $1.7 million in fiscal 1994 to $1.9 million in fiscal
1995. As a percentage of revenue, this expense decreased from 28.0% in fiscal
1994 to 24.3% in fiscal 1995 due to salary expense increasing at a lesser rate
than revenue and facilities costs that remained consistent with such costs
incurred in fiscal 1994. This decrease was offset in part by increases in both
the use of temporary workers and by increases in telephone expense.
Sales and marketing. Sales and marketing expense increased $126,000 or 20.4%
from $618,000 in fiscal 1994 to $744,000 in fiscal 1995 while decreasing as a
percentage of revenue from 10.3% in fiscal 1994 to 9.3% in fiscal 1995. The
increase in sales and marketing expense was attributable to staffing increases
of 11% and increases in commissions earned of 16% from new business developed.
Research and development. Research and development expense increased $92,000
or 32.5% from $283,000 in fiscal 1994 to $375,000 in fiscal 1995. The increase
in payroll expense, office expense and travel expense related to research and
development was attributable to an expansion in the research and development
department which was required to support new business obtained by the Company
and is consistent with an overall increase in revenue of 33.1%.
Interest (expense) income, net. Net interest (expense) income decreased
during fiscal 1995 principally due to the repayment of notes payable to a bank.
Provision for income taxes. The difference between the effective federal
income tax provision calculated using statutory rates and the actual provision
recorded is principally due to the effect of state and local taxes.
Cumulative effect of a change in accounting principle. An adjustment of
$19,000 reflects the impact of the adoption by the Company of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," in
fiscal 1994.
20
<PAGE>
Quarterly results of operations
The following tables set forth unaudited financial data for each of the
eight consecutive fiscal quarters ended December 31, 1996, including such data
expressed as a percentage of the Company's revenue. When read in conjunction
with the Company's consolidated financial statements included elsewhere in
this Prospectus, the Company believes that this information includes all
adjustments, consisting of normal recurring adjustments, necessary for the
fair presentation of such quarterly information. The operating results of any
quarter are not necessarily indicative of the results of any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------
MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $2,055 $2,579 $2,814 $2,298 $2,867 $3,911 $4,142 $4,806
Cost of services........ 1,212 1,183 1,355 1,202 1,467 1,742 1,842 2,321
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 843 1,396 1,459 1,096 1,400 2,169 2,300 2,485
Operating expenses:
General and
administrative........ 512 396 602 613 615 760 719 728
Sales and marketing.... 183 219 305 290 286 372 368 514
Research and
development........... 97 148 170 95 201 231 227 385
------ ------ ------ ------ ------ ------ ------ ------
Income from operations.. 51 633 382 98 298 806 986 858
Other income............ -- -- -- -- -- -- -- --
Interest (expense)
income, net............ 5 (3) (4) (3) 10 (27) (7) 21
------ ------ ------ ------ ------ ------ ------ ------
Income before provision
for income taxes....... 56 630 378 95 308 779 979 879
Provision for income
taxes ................. 29 299 183 43 157 367 674 404
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. $ 27 $ 331 $ 195 $ 52 $ 151 $ 412 $ 305 $ 475
====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUE
THREE MONTHS ENDED
-------------------------------------------------------------------------
MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services........ 59.0 45.9 48.2 52.3 51.2 44.5 44.5 48.3
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 41.0 54.1 51.8 47.7 48.8 55.5 55.5 51.7
Operating expenses:
General and
administrative........ 24.9 15.4 21.4 26.7 21.4 19.4 17.3 15.1
Sales and marketing.... 8.9 8.5 10.8 12.6 10.0 9.5 8.9 10.7
Research and
development........... 4.7 5.7 6.0 4.1 7.0 5.9 5.5 8.0
------ ------ ------ ------ ------ ------ ------ ------
Income from operations.. 2.5 24.5 13.6 4.3 10.4 20.7 23.8 17.9
Other income............ -- -- -- -- -- -- -- --
Interest (expense)
income, net............ 0.2 (0.1) (0.1) (0.1) 0.3 (0.7) (0.1) 0.4
------ ------ ------ ------ ------ ------ ------ ------
Income before provision
for income taxes....... 2.7 24.4 13.5 4.2 10.7 20.0 23.7 18.3
Provision for income
taxes.................. 1.4 11.6 6.5 1.9 5.4 9.4 16.3 8.4
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. 1.3% 12.8% 7.0% 2.3% 5.3% 10.6% 7.4% 9.9%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
The Company's results of operations have been, and may in the future be,
subject to quarterly fluctuations due to a variety of factors, including the
commencement and implementation of new contracts and assignments and
fluctuations in general, administrative, sales and marketing expenses
commensurate with the Company's efforts in developing and supporting new
business. In addition, the Company does experience a certain level of
seasonality as recruiting and training efforts at the Company's clients are
usually slower in the first and last calendar quarters of the year, periods
which also contain fewer business days than other quarters. This has tended to
result in decreases in demand for assessment and selection services, training
and development programs and background reports. Customer contact monitoring
and employment process administration services are generally not affected by
seasonality.
21
<PAGE>
These uncertainties make the estimation of revenue and the results of
operations on a quarterly basis difficult and increase the potential margin
for error in performance forecasts derived from such estimates. As a result,
the Company believes that period-to-period comparison of its results of
operations is not necessary meaningful and should not be relied upon as any
indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from working capital requirements,
capital expenditures and principal and interest payments on debt.
Historically, the Company's primary source of liquidity has been cash flow
generated internally from operations, supplemented by short-term borrowings
under bank lines of credit and long-term equipment financing. Cash flow
provided by operating activities was $270,000 and $589,000 for the nine month
periods ended December 31, 1995 and 1996, respectively, on net income of
$579,000 and $1.19 million, respectively, offset principally by changes in
working capital. Cash flow from operations was $691,000 and $290,000, in
fiscal years 1995 and 1996, respectively, on net income of $571,000 and
$732,000, respectively, offset principally by changes in operating assets and
liabilities.
Cash flow used in investing activities was $141,000 and $1.55 million for
the nine month periods ended December 31, 1995 and 1996, respectively, and
$242,000 and $280,000 in fiscal years 1995 and 1996, respectively. These
investment expenditures were primarily for computer equipment and, in the nine
month period ended December 31, 1996, for furniture and equipment for a new
operations center in Melville, New York.
Cash flow generated from financing activities was $1,039,000 for the nine
month period ended December 31, 1996 and was attributable to an increase in
short-term bank borrowings. Cash flow used in financing activities was
$269,000 for the nine month period ended December 31, 1995 and $243,000 and
$169,000 for the fiscal years ended 1995 and 1996, respectively, and was
primarily used for debt repayment, offset by increased short-term bank
borrowings of $100,000 in fiscal 1996 the proceeds of which were used for
working capital purposes.
The Company's external sources of liquidity have principally been borrowings
under bank lines of credit. As of March 1, 1997, the Company had available
bank lines of credit aggregating $3.0 million, of which approximately $2.0
million was unused. These lines of credit mature in September 1997. The
Company intends to replace its existing lines of credit with a new bank credit
facility following consummation of the Offering. The Company also has a $1.9
million equipment lease facility, of which approximately $1.0 million was
unused as of March 1, 1997. Borrowings under this facility convert to term
loans payable over five years after the related assets are placed in service.
All of the approximately $900,000 of borrowings under this facility have been
converted and have maturity dates ranging from November 2001 to February 2002.
The Company anticipates using a portion of the net proceeds from the
Offering to repay short-term and long-term bank debt estimated to be $2.0
million and $900,000 at the time of completion of the Offering, respectively,
to fund additional expansion of facilities and software development of
approximately $2.0 million, and to fund sales and marketing efforts of
approximately $1.5 million. The remaining net proceeds of approximately $8.25
million will be utilized for working capital purposes, including management
staff additions, and for possible acquisitions.
The Company believes that funds generated from operations, together with
existing cash, available credit lines under bank facilities and the net
proceeds from the Offering will be sufficient to finance its current
operations, and planned expansion and internal growth for at least the next
twelve months.
22
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which prescribes a new method of accounting
for stock-based compensation that determines compensation expense based on
fair value measured at the grant date. SFAS No. 123 gives companies that grant
stock options or other equity instruments to employees, the option of either
adopting the new rules or continuing current accounting; however, disclosure
would be required of the proforma amounts as if the new rules had been
adopted. SFAS No. 123 is effective for transactions entered into in fiscal
years that begin after December 15, 1995. The Company has elected to continue
with the current accounting method and disclose the proforma impact, which is
not expected to be material, of SFAS No. 123 in the notes to its financial
statements which form a part of this Prospectus.
23
<PAGE>
BUSINESS
OVERVIEW
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking
to hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into four core areas: assessment and
selection; training and development; customer contact monitoring; and
employment process administration. The Company, which has been providing human
resources services for over 18 years, believes that it is well positioned to
be a single-source solution for organizations which outsource all or a portion
of these human resources functions.
The Company's assessment and selection services entail designing and
implementing assessment processes for the selection of new hires and the
evaluation of existing employees for advancement to positions of increased
responsibility. The Company's training and development services include live
simulations, competency surveys for job skill evaluation, and situational
exercises through which managers are introduced to techniques to improve their
performance. The Company's customer contact monitoring capability typically is
used by clients which utilize inbound and outbound call centers for their
customer contact service functions. The Company's employment process
administration services address clients' recurring staffing needs resulting
from regular employee turnover, as well as large-scale, rapid hiring needs for
clients who do not have the in-house capacity to fulfill their needs. In
fiscal 1996 and the nine months ended December 31, 1996, the Company processed
145,000 and 288,000 candidates, respectively.
The Company's clients are in a wide range of industries, including
telecommunications, financial services, information technology, consumer
products and healthcare, and are principally Fortune 500 companies for which
customer service, sales and call center functions are critical components of
their businesses. Current customers include American Express Company,
BellSouth Corporation, Citibank, N.A., Dean Witter Reynolds, Inc. Georgia-
Pacific Corporation, Hewlett-Packard Company, NYNEX Corporation, Inc., Oxford
Health Plans, Inc., Pepsi-Cola Bottling Co., United Parcel Service of America,
Inc. and Westinghouse Electric Corporation. The Company provides its services
primarily through its two operations centers in Melville, New York, but also
through its three regional offices and at clients' locations. The Company
employs 242 employees, approximately 41% of whom have masters or doctoral
degrees, primarily in psychology.
The Company believes that its business has benefited from a number of
significant industry trends which have increased the demand for its human
resource outsourcing services. For example, as global markets have continued
to become more competitive, many businesses have begun to view the interface
between customer and company as an increasingly critical leverage point and
have placed heightened emphasis on sales and customer service functions,
specifically the recruitment and deployment of highly skilled and trained
sales and service staffs. Additionally, many businesses have engaged in
corporate downsizing in an effort to remain competitive, resulting in
inadequate staffing to meet future growth and peak period activity.
Furthermore, in an attempt to achieve a greater focus on their core
businesses, many companies are outsourcing non-revenue producing functions,
such as human resources.
The Company also believes that it has a number of competitive strengths
which are valued by its clients, in particular the Company's expertise in
behavior-based simulation assessment. The Company believes that its use of
realistic, job-specific simulations results in more accurate assessment and a
greater likelihood that applicants who are hired will possess the skills
necessary to perform their required functions. The Company's expertise in this
area is applicable not only to its assessment services, for both new hires and
existing employees, but also for its customer contact monitoring services,
where observation of job-specific performance is a necessary skill. The
Company's proprietary software, which is integral to the delivery of most of
the Company's services, provides a competitive advantage by allowing the
Company to manage and report the large volumes of data generated by its
services quickly and efficiently. Furthermore, the Company believes that its
demonstrated ability to both develop and deliver large-scale, cost-effective
human resources solutions also provides it with a significant competitive
advantage. The Company's ability to successfully provide one of its services
to a client, such as assessment and selection, has often resulted in requests
from that client to provide additional services, such as employment process
administration, customer contact monitoring or training and development. The
Company believes that these competitive advantages have allowed it to provide
services to several of its clients for over a decade.
24
<PAGE>
The Company was founded in 1978 as a New York corporation by Messrs.
Reynolds, Salig and Adler and was recently reorganized in March 1996 as a
Delaware holding company for its three subsidiaries.
STRATEGY
The Company's objective is to strengthen its position as a leading provider
of its services in support of a range of human resources outsourcing
functions. Key elements of the Company's business strategy to achieve this
objective include:
Increase Penetration of Existing Clients. The Company intends to increase
its penetration of existing clients by identifying additional opportunities to
address an existing client's human resources needs and promoting those company
capabilities not currently being utilized. Once a business relationship is
established between the Company and a client organization, the Company
believes it has significant opportunities to increase the volume and expand
the scope of the services provided by the Company to a client by utilizing
information generated from the initial engagement to uncover opportunities for
the provision of additional services.
Develop New Clients. The Company intends to develop new client relationships
by identifying large, primarily Fortune 500, clients with substantial human
resources needs. The Company currently utilizes a number of techniques to
develop new accounts, including responding to requests for proposals, pursuing
client referrals and actively marketing to potential clients. The Company
expects to continue to focus on the telecommunications and financial services
markets and to target other industries as they expand their telephone customer
sales and service functions. Similar to its strategy with existing accounts,
the Company expects to initially be engaged to provide one or more specific
services, and then to promote the Company's other capabilities as the Company
identifies additional opportunities to address a client's human resources
needs. To support this strategy, the Company has recently begun to expand the
scope of its sales and marketing efforts through personnel additions and the
development of marketing materials.
Expand Customer Contact Monitoring Services. The Company intends to continue
to develop programs for the remote monitoring of customer service call centers
in order to capitalize on the growing opportunity in this area. As the use of
call centers by businesses in nearly every industry increases, organizations
are becoming concerned about managing the quality of contact between their
customers and their sales and service representatives. Carefully designed and
professionally executed call monitoring programs are an important element in
managing that quality. In addition, users of both company operated and
outsourced call centers have discovered discrepancies in results between
internal reviews of customer service representatives performance and the
opinions and surveys of their customers, often finding that customers'
opinions of the quality of the customer service provided are lower than the
quality reviews given by the Company's customer service supervisors. The
Company believes that these businesses will continue to look to external
sources for objective monitoring of this function.
Expand Existing Services Beyond the Sales and Customer Service
Functions. The Company's services have historically been directed toward sales
and customer service positions. Those positions have accounted for large
numbers of new hires and replacement hires at client companies. In addition,
quality staffing in those positions has been important to employers, because
those positions are the contact point between an organization and its
customers. The Company believes, however, that its services can be valuable to
other functions within an organization and intends to extend its services into
these areas in order to enhance its position as a single-source provider of
human resources outsourcing solutions. For example, the Company can provide
employment process administration for an entire organization, from large-scale
recruitment and assessment of lower-level employees to executive assessment
for top-level management positions. Similarly, the Company can apply its
training and development techniques to functional areas beyond sales and
service, such as, the administrative, operations and manufacturing functions.
25
<PAGE>
SERVICES
The Company offers a wide range of human resources outsourcing services,
including the sourcing, assessment, selection and training of new employees,
and the assessment, selection, training and monitoring of existing employees.
The Company's services are organized into the following four core areas:
assessment and selection, training and development, customer contact
monitoring and employment process administration. The Company has assigned a
vice president to each one of these core areas who is responsible for
overseeing the design and assuring the quality of delivery of the services in
each of these areas. The Company employs 242 employees, approximately 41% of
whom have masters or doctoral degrees, primarily in psychology. In fiscal 1996
and the nine months ended December 31, 1996, the Company processed 145,000 and
288,000 candidates, respectively.
Assessment and Selection. The Company designs and implements assessment
processes for the selection of new hires and the evaluation of existing
employees for positions of increased responsibility. These assessment services
have generally been provided for positions for which large numbers of staff
are required and where effectiveness in the job directly impacts the business'
revenue. The Company may design either a single assessment instrument, which
is delivered as part of an existing selection process, or the entire selection
process itself, as required by the particular client. Assessment was the first
service provided by the Company and has served as the foundation for several
of its other services.
On a typical engagement, the Company first custom designs the assessment
tools necessary for an effective selection process. This generally involves
field research and job analysis to determine the critical components of the
position and the key competencies required to execute it successfully.
Virtually all of the Company's assessment projects include the use of live
simulations, either in person or over the telephone, in order to ensure that
candidates possess the skill requirements for the position sought. The Company
has found that the use of job-specific, behavior-based techniques to determine
a candidate's ability to actually perform the required tasks provides clients
with a more accurate selection process and a more qualified workforce. The
Company's staff of professional industrial psychologists design each
assessment instrument to meet the standards for test validity established by
the Society for Industrial and Organizational Psychology, Uniform Guidelines
on Employee Selection Procedures issued by the federal government in 1978, as
well as other professional standards. The Company has applied its validation
procedures to selection mechanisms for a wide variety of desired skills,
including multilingual fluency, which the Company believes is becoming an
increasingly important requirement for customer sales and service positions.
The Company believes that the custom-designed nature of its assessment and
selection services, in particular its use of tailored simulation exercises,
gives the Company a significant competitive advantage over off-the-shelf
solutions.
Once the Company has designed and validated an assessment process, it then
deploys a team of industrial psychologists and staff to implement the process
in a manner best suited to the particular client and the type of position
being filled. Implementation can range from performing assessments
telephonically from the Company's operations centers to deploying an entire
staff to an on-site facility at the client to administer the selection
process. In either case, the Company typically uses its proprietary database
and report generation software and customizes it to track the process and
provide information to the client. The Company has found that its assessment
services are most appropriate for large-scale hiring needs. However, once it
has established and implemented an effective process, most businesses will
retain the Company to provide these services on an ongoing basis to replace
employees lost to attrition, as well as to hire additional employees as
necessary for future growth.
In addition to the assessment of prospective new hires, the Company also
provides assessment services for the evaluation of existing employees for
advancement to positions of increased responsibility. The Company utilizes
techniques similar to those for new hires in order to identify employees who
possess the additional skills necessary for supervisory or management
positions. These techniques are also used to identify specific skills that
require training and development intervention. The Company's programs can be
conducted on the telephone and through correspondence, electronic mail, and
voicemail to replicate the manner in which a particular client's
26
<PAGE>
managers actually interact with their staff. The programs are designed through
extensive field research and job analysis and result in the delivery of
development reports to each participant outlining areas for improvement.
The Company also provides executive assessment services which involve the
evaluation of executive applicants for general and functional management level
positions. The Company uses evaluation methods similar to those used for
operational level employees, however, executive assessments generally involve
more comprehensive procedures, including in-depth interviews and extensive
testing. The Company has recently begun expanding its executive assessment
resources through staff additions and the leasing of additional space. The
Company intends to develop the capability to deliver this service from each of
its three regional offices.
Training and Development. The Company's training and development services
are an outgrowth of the Company's expertise in conducting live simulations for
job skill evaluations. A typical training and development program begins with
the administration of competency evaluation surveys to a manager's colleagues
which are analyzed by the Company's staff. Simulations are then developed in
order to allow further testing by the Company's assessment professionals of
the manager's relevant job skills. Based on the skills necessary for the
particular functions performed by the manager, the Company develops a training
program through which the manager is introduced to techniques for improving
his or her performance. Once the training program is completed, the manager is
often put through another set of simulation exercises to determine how well
the suggested improvements have been understood and adopted by the manager.
The Company then provides each participant with a written development plan for
further improvement.
The Company's training and development services can also be used to assist
in determining the potential for assigning existing employees to newly-created
positions. In one instance, a team of the Company's industrial psychologists
worked with the client to define the new job requirements and design a
telephone-based simulation to assess the employees' aptitude for the new
function. The Company's staff tested more than 2,500 customer service
representatives over a three-month period. The Company's simulation services
are now used to screen over 3,000 prospective new hires for this client
annually for both the sales and service positions.
The Company believes a major opportunity for growth in its training and
development services is in the area of remote management. Through its client
engagements, the Company has developed an understanding of the challenges
inherent in managing large numbers of employees who are geographically
dispersed. As organizations downsize and flatten their organizational
structures, executives are being asked to manage greater numbers of
individuals. In addition, due to the expanding geographical scope of many
businesses and the growing use of telecommuting, managers are being forced to
learn to communicate with, supervise and motivate their employees
telephonically and by electronic mail, rather than through face-to-face
meetings. The Company believes it has developed the knowledge and expertise
necessary to train managers to deal more effectively with these challenges.
Customer Contact Monitoring. The Company provides monitoring services for
clients who engage in large-scale use of call centers for their customer
contact functions. These call centers may consist of clients' employees or
external vendors contracted by the client. The establishment of call centers
as the primary means by which major companies provide customer and sales
related services has led to an increased demand for the Company's services
from existing and potential clients. As heightened domestic and global
competition has led to the availability of an increased number of alternative
or substitute products and services in many industries, the role of customer
service has assumed a greater level of importance in terms of customer
acquisition and retention. As a consequence, companies are becoming
increasingly more vigorous in their efforts to insure that customer service
representatives employed by them or by vendors operating on their behalf are
complying with their service quality standards.
The Company's proprietary monitoring system can provide analyses and results
of customer contact representatives' performance on an individual, team and
call center basis, with comparisons against established service quality
standards and group norms. Over the course of a recent three-month pilot
program, begun in October 1996 performed on behalf of a financial services
client, the Company successfully monitored
27
<PAGE>
approximately 10,500 calls remotely from its Melville, New York facility. The
successful completion of that pilot program resulted in the signing of a
multi-year agreement with the client for the conduct of on-going remote call
monitoring.
Employment Process Administration. The Company offers complete employment
process administration services to clients who have large-scale hiring needs
and who do not have the in-house capacity to fulfill their needs. Employment
processes provided by the Company typically include: advertising for and
recruiting applicants; establishing automated telephonic voice response
systems to screen prospective applicants; arranging for the physical
facilities and equipment necessary for the pre-screening process; performing
background checks on applicants; and conducting testing and simulations
utilizing the Company's assessment expertise to select applicants for
recommendation to the client. The Company can also provide any of these
services individually on an as needed basis. In particular, the Company
provides clients who have their own internal employment processes with ongoing
background check services.
To meet a client's needs, the Company is frequently asked to secure
facilities and equipment, establish an interactive voice response system to
screen prospective applicants, develop proprietary database and report
generation software and staff a facility with test administrators and
coordinators. The Company has in the past scheduled and tested up to 500
applicants per day, provided client access to the database for ongoing status
reports and provided complete support up to the point of hire.
CLIENTS
The Company has long-standing relationships, some of which have extended
beyond a decade, with many of its clients. Historically, clients that provide
in excess of 10% of the Company's revenues have changed from year to year.
Customers accounting for more than 10% of the Company's revenues were
Ameritech Corporation and Hewlett-Packard Company in fiscal 1996 and NYNEX
Corporation for the nine month period ending December 31, 1996. The Company
provided assessment and selection services and background reports to Ameritech
Corporation and training and development services to Hewlett-Packard. The
Company believes the following to be a representative list of its existing and
recent clients:
<TABLE>
<CAPTION>
INDUSTRY CLIENT
-------------------------------------------------------------------
<S> <C>
Financial Services American Express Company
Citibank, N.A.
Dean Witter Reynolds, Inc.
Mastercard International, Inc.
Moody's Investors Service, Inc.
The Putnam Companies
Republic National Bank of New York
-------------------------------------------------------------------
Telecommunications Ameritech Corporation
Bell Atlantic Corporation
Bell South Corporation
NYNEX Corporation
Southwestern Bell Telephone Company
US WEST, Inc.
-------------------------------------------------------------------
Healthcare Manor Care, Inc.
Oxford Health Plans Inc.
-------------------------------------------------------------------
Information Technology Hewlett-Packard Company
Lucent Technologies Inc.
-------------------------------------------------------------------
Consumer Products Anheuser-Busch Companies, Inc.
Pepsi-Cola Bottling Co.
The Procter & Gamble Company
-------------------------------------------------------------------
Other Georgia-Pacific Corporation
United Parcel Service of America, Inc.
Westinghouse Electric Corporation
</TABLE>
28
<PAGE>
MARKETING AND SALES
The Company has historically developed new accounts by targeting clients
with large volume human resource needs originating primarily from their
customer contact staffing requirements. The Company has acquired such accounts
by responding to requests for proposals, pursuing client referrals and
actively marketing to potential new clients. The Company has generally
solicited prospective accounts through personal contacts by members of the
Company's management team and professional staff. Recently, the Company has
begun to expand the scope of its sales and marketing effort and to dedicate
additional resources to this function.
The Company expects that future initial contact between a client or
prospective client and the Company will occur at the regional sales level and
through divisional vice presidents who have been assigned responsibility for
each of the Company's four core business areas namely: assessment and
selection, training and development, customer contact monitoring and
employment process administration. The Company believes that this structure
enables the Company to be proactive in managing the provision of services to
clients. Accordingly, the Company has reorganized its marketing and sales
effort to decentralize its marketing and sales functions.
Sales efforts are now conducted on two levels; by divisional vice
presidents, each of whom concentrates on developing sales for their respective
practice area, and by the regional vice presidents, each of whom is concerned
with developing sales across all of the Company's services to clients or
potential clients in their respective geographical areas.
The marketing and sales activities of the divisional vice presidents and the
regional vice presidents are directed by a vice president in charge of
marketing and sales with overall responsibility of establishing revenue goals,
targets and timetables. The vice president of marketing and sales is also
responsible for assisting both divisional vice presidents and the regional
vice presidents in responding to requests for proposals and in designing and
developing marketing programs.
The Company believes that this integrated structure enables the Company to
serve its clients effectively at a local level by means of the establishment
of long-term local contacts, while at the same time providing clients with
direct access to the administrative resources and management expertise of a
large organization.
OPERATIONS
Most substantial users of the types of services provided by the Company
purchase such services on an as-required basis and, consequently, the Company
must be capable of scaling its resources rapidly and efficiently to meet a
client's needs. The Company has a large number of highly-skilled personnel
available to it on both a full-time and part-time basis enabling it to deliver
services quickly and in a cost effective manner. Each of the Company's four
key business areas is supported by the Company's operations centers which are
designed to deliver a range of services tailored to the specific needs of the
Company's clients. Clients are serviced by a number of locations: the
Company's corporate headquarters in New York City; its two operations centers
in Melville, New York; and two additional regional sales offices with limited
operations capability located in Campbell, California and St. Louis, Missouri.
The Company's operations centers are responsible for the delivery of all the
Company's services to its clients on a day-to-day basis. The Company's
corporate headquarters, which also serves as the regional office for the
eastern United States, contains the general management, sales and marketing
and financial functions for the Company. It also contains the offices of the
divisional vice presidents in charge of the four core areas of the Company's
business. Most of the Company's training and development services are
conducted and managed from this location although the Company frequently
provides training and development services and certain aspects of the
employment process administration off-site at clients' offices or remote
locations. The Company's Melville operations center supports the employment
processing, assessment and selection and customer contact monitoring services
while the Campbell, California, St. Louis, Missouri, and regional office
component of the New York corporate headquarters maintain contact with both
new and existing clients in order to identify client needs and monitor client
satisfaction with the level of service provided by the Company.
29
<PAGE>
The Company's operations center has the capacity to conduct 500 assessments
per day, and to assess candidates and employees from over 800 client locations
throughout the country. Customer contact monitoring, the newest service
offered by the Company, and employment process administration are also
conducted from the Company's operations center, which has the capacity to
monitor 2,000 calls per day and the capacity to process 1,000 pre-employment
background checks each day.
COMPETITION
The Company believes that the human resources industry is highly fragmented
and that no one participant or small number of participants is dominant in the
industry. The principal competition encountered by the Company across the full
range of services provided by the Company are human resources consulting
firms, smaller companies who are specialized providers of certain services
provided by the Company and consulting firms that are affiliated with large
multinational accounting firms. In addition, the human resources staffs of
many large organizations which are existing or potential clients of the
Company may already provide one or more of the basic services provided by the
Company. Key competitive factors include depth of industry knowledge, breadth
of skills and services offered, level of experience, flexibility,
responsiveness to customer requests and availability of resources to perform a
wide variety of projects in a timely manner and price.
In the area of assessment services, the Company encounters competition from
large firms such as Aon Consulting, Development Dimensions International and
Personnel Decisions International. In the area of training and development,
the Company competes with Aon Consulting, Development Dimensions
International, The Center for Creative Leadership and TeleSpectrum Worldwide.
In the area of employment process administration, the Company competes with
the human resources outsourcing departments within organizations such as Ernst
& Young LLP, Fiserve, Inc., Manpower Temporary Services and Norrell
Corporation. In the area of customer contact monitoring, the Company is
presently unaware of any competitors.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company primarily relies on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company generally enters into
confidentiality agreements with its employees and clients that limit access to
and distribution of its proprietary information. The Company also believes
that factors such as the technical and creative skills of its personnel, the
Company's corporate knowledge and expertise in behavioral assessment and name
recognition are essential to establishing and maintaining a leadership
position in its industry. The Company seeks to protect its database,
documentation and other written materials under trade secret and copyright
laws.
EMPLOYEES
As of December 31, 1996 the Company employed 242 employees, of whom 160 were
full-time, and 82 employees were part-time. Approximately 41% of the Company's
employees have masters or doctoral degrees. Historically, the Company has
generally been able to satisfy its hiring needs. The Company's staffing
efforts have been aided by the location of the Company's headquarters in New
York City and its operations center in Melville, New York, both near a number
of colleges and universities, which places the Company in close proximity to a
large, highly-skilled labor pool. No assurance can be given, however, that
this will continue to be the case, particularly if the Company experiences
substantial future growth. The inability of the Company to hire sufficient,
qualified personnel to service its future growth would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Risk Factors -- Management of Growth."
The Company has no collective bargaining agreements or any similar union
agreements and the Company has never experienced any work stoppages. The
Company considers its relations with its employees to be good.
FACILITIES
The Company's corporate headquarters is located in leased offices occupying
approximately 11,300 square feet at 780 Third Avenue, New York, New York
10017. The lease for this space will expire in 2006. The
30
<PAGE>
Company also leases office space at the following locations: Campbell,
California; St. Louis, Missouri; and two offices in Melville, New York. The
terms of these leases expire between 1997 and 2006. It is anticipated that the
approximately 20,000 square feet of office space now occupied by the Melville
operations center will be increased by approximately 25,000 square feet to an
aggregate of approximately 45,000 square feet. The Company anticipates that as
its business grows, it will establish more regional offices and continue to
enlarge existing offices.
LEGAL PROCEEDINGS
From time-to-time the Company is involved in various legal proceedings that
are incidental to the conduct of its business. The Company is not involved in
any pending or threatened legal proceedings which the Company believes could
reasonably be expected to have a material adverse effect on the Company's
financial condition or results of operations.
31
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the executive officers
and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Bernard F. Reynolds..... 54 Chairman of the Board and Chief Executive Officer
Eli Salig............... 48 President and Chief Operating Officer, Director
Seymour Adler, Ph.D. ... 48 Executive Vice President, Director
William B. Fucarino..... 35 Vice President and Chief Financial Officer
David Tory.............. 54 Director
Michael J. Boylan....... 50 Director
Ilan Kaufthal........... 49 Director
Carl Seldin Koerner,
Esq. ................... 47 Secretary and Director
Dennis L. Stevens....... 44 Vice President, Marketing and Sales
Paul Squires, Ph.D. .... 45 Vice President, Training and Development Services
</TABLE>
BERNARD F. REYNOLDS co-founded the Company in 1978. Prior to that time, Mr.
Reynolds held positions as a Senior Officer and Director Human Resources and
Training at Dean Witter Reynolds, Inc. and Bache and Company Incorporated. Mr.
Reynolds is a former Chairman of the Wall Street Human Resource Directors
Association, and has served on the Human Resources Management Committee of the
Securities Industry Association.
ELI SALIG co-founded the Company in 1978. Previously Mr. Salig worked in
Human Resources and Training at Dean Witter Reynolds, Inc. and immediately
prior to founding the Company, Mr. Salig was a Vice President and a Director
of Corporate Personnel at Dean Witter Reynolds, Inc.
SEYMOUR ADLER, PH.D. co-founded the Company in 1978. Prior to Dr. Adler's
present assignments he served as Vice President, Research and Development at
the Company. In addition to having served as a consultant to industry
throughout his professional career, Dr. Adler has been on the faculties of the
City University of New York, and Purdue University, and currently is on the
faculty of Stevens Institute of Technology.
WILLIAM B. FUCARINO has served as Controller and Chief Financial Officer of
the Company since 1991. Prior to joining the Company, Mr. Fucarino was
employed as a General Practice Manager with Coopers & Lybrand.
DAVID TORY joined the Company in 1996 as a Director. Currently, Mr. Tory
acts as an independent consultant to industry. From 1988 through 1995 Mr. Tory
was employed as President and Chief Executive Officer of The Open Software
Foundation, a non-profit consortium comprised of major computer hardware and
software companies and user organizations. From 1978 to 1988, Mr. Tory was
employed by Computer Associates, Inc. in Europe and the United States. Mr.
Tory is a member of the Board of Directors of Ross Systems Inc.
MICHAEL J. BOYLAN joined the Company in 1996 as a Director. He is the Vice
Chairman--Publishing Operations of American Media, Inc., a leading publisher
in the field of personality journalism. Mr. Boylan is also currently employed
as President of MacFadden Publishing, Inc., a privately held New York based
firm which publishes a variety of trade and consumer titles.
ILAN KAUFTHAL joined the Company in 1996 as a Director. Mr. Kaufthal is
Managing Director and head of Mergers and Acquisitions for the Investment
Banking Department of Schroder Wertheim & Co., Inc. Mr. Kaufthal joined
Schroder Wertheim & Co., Inc. in February 1987 and is a member of its
Executive Committee. Prior to joining Schroder Wertheim & Co., Inc., Mr.
Kaufthal was employed by NL Industries Inc., where he served as its Senior
Vice President and Chief Financial Officer. Mr. Kaufthal is a member of the
Boards of Directors of Cambrex Corporation, United Retail Group, Inc., Rexene
Corporation and Russ Berrie and Company, Inc.
32
<PAGE>
CARL SELDIN KOERNER, ESQ. joined the Company in 1996 as a Director and
Secretary. Mr. Koerner is a partner in the law firm of Koerner Silberberg &
Weiner, LLP, counsel to the Company.
DENNIS L. STEVENS joined the Company in 1995. Prior to joining the Company,
Mr. Stevens served for two years as Managing Director, Marketing and
Communications in the Consulting Services division at Price Waterhouse L.L.P.
From 1980 to 1993 Mr. Stevens was a Vice President of Marketing at American
Express Travel Related Services Inc., with overall management responsibility
for product management, new product development, advertising and research.
PAUL SQUIRES, PH.D. joined the Company in 1996. Prior to joining the
Company, from 1979 to 1996 Dr. Squires held senior positions at AT&T Corporate
Human Resources with primary responsibility for selection, testing and
employee development. In 1995, Dr. Squires was Director of Lucent Technologies
Microelectronics International University, responsible for developing a single
world-wide training organization which provided support to 18,000 employees.
Dr. Squires has served as an adjunct professor at Stevens Institute of
Technology since 1986.
BOARD COMMITTEES
The Board of Directors of the Company has established a compensation
committee (the "Compensation Committee") and an audit committee (the "Audit
Committee"). The Compensation Committee, which consists of Messrs. Boylan,
Kaufthal and Koerner, determines the salaries and bonuses of the Company's
executive officers. The Compensation Committee also administers the Company's
1996 Stock Option and Grant Plan (the "Option Plan"), the Company's 1996
Directors' Stock Option Plan (the "Directors' Plan") and the Company's 1996
Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Audit Committee
recommends the appointment of auditors and oversees the accounting and audit
functions of the Company. Messrs. Boylan, Kaufthal and Tory currently serve as
members of the Audit Committee.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid or earned during fiscal 1996 by the Company's Chief
Executive Officer and the four other most highly paid executive officers whose
total salary and bonus exceeded $100,000 for services rendered to the Company
and its subsidiaries during fiscal 1996 (collectively, the "Named
Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
FOR YEAR ENDED MARCH LONG-TERM
31, 1996(1) COMPENSATION
-------------------- ----------------
NAME AND PRINCIPAL POSITION SALARY BONUS STOCK OPTIONS(#)
- --------------------------- ---------- --------- ----------------
<S> <C> <C> <C>
Bernard F. Reynolds....................... $237,169 $30,000 --
Chairman of the Board and Chief Executive
Officer
Eli Salig................................. $237,169 $20,000 --
President and Chief Operating Officer
Seymour Adler, Ph.D. ..................... $223,332 $25,000 --
Executive Vice President
William B. Fucarino....................... $ 87,500 $30,000 25,846(2)
Vice President and Chief Financial
Officer
Dennis Stevens............................ $106,250 -- --
Vice President and Director of Marketing
and Sales
</TABLE>
- --------
(1) Annual salary for the year commencing April 1, 1997 and ending March 31,
1998 will be $260,000, $240,000 and $230,000 for Messrs. Reynolds, Salig
and Adler, respectively.
(2) Represents options received in connection with the Reorganization. See
"Certain Transactions--The Reorganization."
33
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into executive employment agreements on January 16,
1997 with Bernard F. Reynolds, Eli Salig and Seymour Adler. The annual base
salaries of Messrs. Reynolds, Salig and Adler under their employment
agreements are $260,000, $240,000 and $230,000, respectively. Each executive
is entitled to fringe benefits and an annual bonus to be determined by the
Board of Directors. Each executive can be terminated for cause (as defined in
the employment agreements) with all future compensation ceasing. If the
executive is terminated without cause, dies during the term, or is unable to
competently and continuously perform the duties assigned to him because of ill
health or other disability (as defined in the employment agreements), the
executive or the executive's estate or beneficiaries shall be entitled to full
compensation for three years following the date thereof. During the period of
employment and for a period of three years thereafter, Messrs. Reynolds, Salig
and Adler are prohibited from competing with the Company. In order for a
restrictive covenant to be enforceable under applicable state law, the
covenant must be limited in terms of scope and duration. While the Company
believes that the covenants in the employment contracts are enforceable, there
can be no assurance that a court will declare them to be enforceable under
particular circumstances.
STOCK OPTION AND GRANT PLAN
The Option Plan was adopted by the Company's Board of Directors as of March
31, 1996 and approved by its stockholders on January 16, 1997. Officers,
directors, employees, consultants and key persons of the Company are eligible
to participate in the Option Plan. The Option Plan is designed to provide
employees and such other individuals with a performance incentive, a direct
stake in the Company's future welfare and an incentive to remain with the
Company. The Company believes that the Option Plan will encourage qualified
persons to seek employment with the Company.
The Option Plan provides for grants of options to purchase shares of Common
Stock intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") ("Incentive Options"),
as well as options that do not so qualify ("Non-Qualified Options"). The
Option Plan provides that options for an aggregate of 800,000 shares of Common
Stock are available for award.
The Option Plan provides that it will be administered by the Compensation
Committee. The Compensation Committee determines which officers, directors,
employees, consultants and key persons shall receive options and the terms and
conditions of the options, including the exercise price of each option, the
term of each option, the number of shares of Common Stock to be covered by
each option and any performance objectives or vesting standards applicable to
each option. Subject to the requirements of the Code, the Compensation
Committee will also designate whether the options granted shall be Incentive
Options or Non-Qualified Options.
34
<PAGE>
Option Grants. As of January 24, 1997 there were 368,533 shares issuable upon
the exercise of outstanding options. The following table sets forth certain
information with respect to stock options granted during fiscal 1996 to the
Named Executives pursuant to the Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
SHARES SUBJECT TO OPTIONS GRANTED TO OVER OPTION TERM (1)
COMMON STOCK EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ----------------- ------------------ -------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Bernard F. Reynolds..... -- -- -- -- -- --
Eli Salig............... -- -- -- -- -- --
Seymour Adler, Ph.D. ... -- -- -- -- -- --
William B. Fucarino..... 25,846 -- $1.22(2) -- $ 7,200 $ 30,143
Dennis Stevens.......... -- -- -- -- -- --
</TABLE>
- --------
(1) This column shows the hypothetical gains or "option spreads" of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full 10-year term of the options. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the Securities and Exchange
Commission (the "SEC") and do not represent the Company's estimate or
projection of future Common Stock prices.
(2) Fair market value as determined by the Company's Board of Directors on the
date of grant was $0.92 per share.
Option Exercises and Holdings. The following table sets forth the stock
option values as of March 31, 1996, in each case for the Named Executives:
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END (#) YEAR-END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bernard F. Reynolds......... -- -- -- --
Eli Salig................... -- -- -- --
Seymour Adler, Ph.D. ....... -- -- -- --
William B. Fucarino......... -- 25,846 $0 $0
Dennis Stevens.............. -- -- -- --
</TABLE>
- --------
(1) Prior to the Offering, the Common Stock of the Company has not been
publicly traded. The Board of Directors, in connection with grants of stock
options that it makes from time to time, determines the fair market value
of the Common Stock as of the grant date. For purposes of calculating the
value recognized at fiscal year end, the Company has used the deemed fair
market value as of March 31, 1996, as determined by the Company's Board of
Directors, of $0.92 per share.
DIRECTORS STOCK OPTION PLAN
The Directors' Plan was adopted by the Company's Board of Directors and
approved by its stockholders on January 15, 1997. Under the Directors' Plan,
options to acquire an aggregate of 50,000 shares of Common Stock may be
granted. Each member of the Board of Directors who is not an employee of the
Company or a subsidiary thereof shall automatically be granted an option to
acquire 5,000 shares of Common Stock on the first day such individual serves as
a director. In addition, each director who is appointed chairperson of a
committee of the Board of Directors shall receive an option to purchase 2,500
shares of Common Stock upon his appointment to
35
<PAGE>
such committee. Such options will vest ratably over three years, provided that
any option so granted will become immediately exercisable in full upon the
termination of service of the director because of disability or death. Options
issued under the Directors' Plan will expire ten years from the date upon which
such option is granted. Under the Directors' Plan, each of Messrs. Kaufthal,
Tory, Boylan and Koerner will be granted an option to purchase 5,000 shares of
Common Stock on the date of this Prospectus, exercisable at the initial public
offering price. Mr. Boylan will be granted an option to purchase an additional
5,000 shares of Common Stock at the initial public offering price as a result
of his appointment as the chairman of the Audit Committee and Compensation
Committee.
DIRECTOR COMPENSATION
Directors are reimbursed for certain expenses incurred by them in connection
with attendance at meetings of the Board and committees thereof. Other than
with respect to reimbursement of expenses, directors who are also employees or
officers of the Company do not receive cash compensation for services as a
director.
EMPLOYEE STOCK PURCHASE PLAN
The Stock Purchase Plan provides an opportunity for eligible employees of the
Company to purchase shares of Common Stock, at a discount, through regular
period salary reductions of up to 10% of their pre-tax gross compensation. A
maximum of 250,000 shares of Common Stock may be issued under the Stock
Purchase Plan.
The first offering under the Stock Purchase Plan will begin on the
commencement of this Offering and end on September 30, 1997. Unless otherwise
determined by the Board of Directors or the Compensation Committee, subsequent
offerings will commence on the first business day occurring on or after each
October 1 and April 1 thereafter and will end on the last business day
occurring on or before the following March 31 and September 30, respectively.
The Board of Directors or the Compensation Committee may, in its discretion,
select a different offering period for any offering, provided that the duration
of the offering is not more than one year. All employees who are customarily
employed by the Company or a subsidiary designated by the Board of Directors or
the Compensation Committee for more than twenty hours per week and have been so
employed for at least six months as of the first day of the applicable offering
period are eligible to participate in the Stock Purchase Plan.
The maximum number of shares which may be purchased by a participating
employee of the Company during an offering will be determined by the Board of
Directors or the Compensation Committee. An employee may purchase shares under
the Stock Purchase Plan by authorizing payroll deductions of up to 10% of his
regular pay during this offering period. Unless the employee has previously
withdrawn from the offering, his accumulated payroll deductions will be used to
purchase Common Stock on the last business day of the period at a price equal
to 85% of the price of the Common Stock on the offering date or the exercise
date, whichever is lower. Under applicable tax rules, an employee may purchase
no more than $25,000 of the fair market value worth of Common Stock in any
calendar year (determined on the first day of the offering period(s) in which
such stock is purchased); certain other tax limitations may apply.
The Stock Purchase Plan will be administered by the Board of Directors or the
Compensation Committee. The Board of Directors or the Compensation Committee
may at any time amend the Stock Purchase Plan, subject to the approval of the
Company's stockholders if and to the extent required to comply with Rule 16b-3
under the Exchange Act or to preserve the favorable tax treatment of
participants, or discontinue the Stock Purchase Plan.
The Stock Purchase Plan is intended to qualify as an "employee stock purchase
plan" as defined in Section 423 of the Code, which provides that an employee
will not have income for federal income tax purposes at the start of an
offering or upon the purchase of shares of Common Stock at the end of an
offering, but generally will recognize ordinary income, in addition to capital
gain or loss, when the employee sells the shares. The Company generally will
not be entitled to a tax deduction upon either the purchase or sale of shares
issued under the Stock Purchase Plan if certain holding period requirements are
met.
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<PAGE>
401(K) PLAN
In November 1995, pursuant to a merger between the Assessment Solutions
Incorporated Profit Sharing Plan and the Proudfoot Reports Incorporated Profit
Sharing Plan, the Assessment Solutions Incorporated Profit Sharing Plan was
terminated and the 401(k) feature under the Assessment Solutions Incorporated
Profit Sharing Plan was merged into the 401(k) feature under the Proudfoot
Reports Incorporated 401(k) Retirement Plan. Upon the merger into the
Proudfoot Reports Incorporated 401(k) Retirement Plan, Proudfoot Reports
Incorporated terminated its Pension Plan, effective November 30, 1995.
Any employee who has worked for the Company or its subsidiaries for one year
and is over 21 years of age is eligible to participate in the 401(k) plan.
Each eligible employee may elect to contribute to the 401(k) plan, through
payroll deductions, up to 15% of his or her compensation for services rendered
in any year, not to exceed a statutorily proscribed annual limit. Participants
in the 401(k) plan are fully vested in their own salary deduction
contributions. Contributions can be made by the Company on a discretionary
basis. Each participant becomes fully vested in the Company's contributions
allocated to his or her account upon completion of five years service within
the Company. No such contributions were made in 1995 and 1996. The Company's
contributions are tax deductible to the Company.
37
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock (i) immediately prior to
the consummation of the Offering and (ii) as adjusted to reflect the sale of
the shares of Common Stock pursuant to the Offering by (a) each person who is
known by the Company to own beneficially five percent or more of the
outstanding shares of Common Stock, (b) each of the Company's directors, (c)
each Named Executive and (d) all current directors and executive officers of
the Company as a group. Except as indicated in the footnotes to this table,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PERCENTAGE OF AFTER OFFERING
SHARES BENEFICIALLY SHARES AND OVER-ALLOTMENT
NUMBER OF OWNED (2)(3) SUBJECT OPTION(4)
SHARES --------------------- TO OVER- --------------------
BENEFICIALLY BEFORE AFTER ALLOTMENT NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNED (2) OFFERING OFFERING (3) OPTION SHARES PERCENTAGE
- ---------------------------------------- ------------ -------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bernard F. Reynolds (5)............ 2,783,746 60.2% 40.8% 207,900 2,575,846 37.7%
Eli Salig.......................... 1,269,222 27.4% 18.6% 95,700 1,173,522 17.2%
Seymour Adler, Ph.D. (6)........... 364,121 7.7% 5.2% 26,400 337,721 4.9%
William B. Fucarino (7)............ 25,846 * * -- 25,846 *
David Tory......................... -- -- -- -- -- --
Michael J. Boylan.................. -- -- -- -- -- --
Ilan Kaufthal...................... -- -- -- -- -- --
Carl Seldin Koerner, Esq. ......... -- -- -- -- -- --
Dennis Stevens..................... -- -- -- -- -- --
All directors and executive offi-
cers as a group (9 persons)....... 4,442,935 93.0% 63.7% 330,000 4,112,935 59.0%
</TABLE>
- --------
*Less than 1%.
(1) The address of each beneficial owner is c/o ASI Solutions Incorporated,
780 Third Avenue, New York, New York, 10017.
(2) The number of shares of Common Stock beneficially owned includes shares
issuable pursuant to stock options that may be exercised within sixty days
of January 20, 1997. Shares issuable pursuant to such options are deemed
outstanding for computing the percentage of beneficial ownership of the
person holding such options but are not deemed outstanding for computing
the beneficial ownership of any other person. The number of shares of
Common Stock outstanding after the Offering includes the 2,200,000 shares
of Common Stock being offered for sale by the Company in the Offering.
(3) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(4) Assumes Underwriters' over-allotment option is exercised in full.
(5) Includes 1,391,871 shares held by Mr. Reynolds as trustee.
(6) Includes 124,841 shares subject to currently exercisable stock options.
(7) Consists of 25,846 shares subject to currently exercisable stock options.
38
<PAGE>
CERTAIN TRANSACTIONS
THE REORGANIZATION
The Company is a holding company with three subsidiaries, Assessment
Solutions Incorporated ("Assessment Solutions"), Proudfoot Reports Incorporated
("Proudfoot") and C3 Solutions Incorporated ("C3"). The Company was organized
in March 1996 as part of a reorganization (the "Reorganization") in which it
acquired, solely in exchange for Common Stock of the Company, all of the
outstanding capital stock of Proudfoot and 95% of the outstanding capital stock
of Assessment Solutions, which had been separately owned but commonly
controlled companies.
Immediately prior to the Reorganization, Mr. Reynolds sold 521,000 shares of
common stock of Proudfoot to Assessment Solutions in exchange for the
cancellation of $250,000 of indebtedness owed by Mr. Reynolds to Assessment
Solutions. Also in connection with the Reorganization, options to purchase
100,000 shares of Proudfoot common stock held by certain employees of Proudfoot
were exchanged for options to purchase 51,692 shares of Common Stock of the
Company. On November 4, 1996, the remaining 5% of the issued and outstanding
shares of common stock of Assessment Solutions that were not held by the
Company were redeemed by Assessment Solutions.
OFFICER LOANS
During fiscal 1996, the Company loaned $233,519, $112,617 and $17,597 to
Messrs. Reynolds, Salig and Adler, respectively. The loans are evidenced by 5-
year notes bearing interest at the rate of 7% per annum and requiring equal
annual principal payments over the term of the notes. Messrs. Reynolds, Salig
and Adler have agreed to repay this indebtedness in full in the event that the
Underwriters' over-allotment option is exercised in full.
RELEASE OF GUARANTEES
Messrs. Reynolds and Salig have personally guaranteed the Company's
indebtedness under its bank credit facility. The Company intends to repay this
indebtedness in full with the proceeds of the Offering. The Company has
obtained the agreement of the bank to release the personal guarantees in
connection with the Offering. See "Use of Proceeds."
REGISTRATION RIGHTS AGREEMENT
The Company entered into a Registration Rights Agreement with Bernard F.
Reynolds, Eli Salig and Seymour Adler, dated as of January 15, 1997 (the
"Registration Rights Agreement"). The Registration Rights Agreement provides
that Messrs. Reynolds, Salig and Adler are entitled to demand and incidental
registration rights.
INTEREST OF COUNSEL
Carl Seldin Koerner, a director and secretary of the Company, is a managing
partner of the law firm of Koerner Silberberg & Weiner, LLP. Such firm has been
general counsel to the Company since 1989 and is acting as counsel to the
Company in connection with this Offering. The Company believes that the fees
paid to Koerner Silberberg & Weiner, LLP are comparable to those fees that
would have been paid to an unrelated third party law firm. Pursuant to the
Directors' Plan Mr. Koerner will be granted an option to purchase 5,000 shares
of Common Stock on the date of this Prospectus, exercisable at the initial
public offering price.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING COMMON STOCK
The authorized capital stock of the Company upon completion of the Offering
will consist of 18,000,000 shares of Common Stock, of which 6,825,158 shares
will be issued and outstanding, and 2,000,000 shares of undesignated preferred
stock issuable in series by the Board of Directors (the "Preferred Stock"), of
which no shares will be issued and outstanding. The following summary
description of the capital stock of the Company is qualified in its entirety by
reference to the Company's Certificate and By-laws, copies of which are filed
as exhibits to the Registration Statement of which this Prospectus is a part.
The Certificate and By-laws have been adopted by the stockholders and the Board
of Directors of the Company.
Common Stock. The holders of Common Stock are entitled to one vote per share
on all matters to be voted on by stockholders. The holders of Common Stock are
not entitled to cumulative voting rights. Therefore, the holders of a majority
of the shares voted in the election of directors can elect all of the directors
then standing for election, subject to the rights of the holders of Preferred
Stock, if and when issued. The holders of Common Stock have no preemptive or
other subscription rights.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor, with each share of Common Stock sharing equally in
such dividends. The possible issuance of Preferred Stock with a preference over
Common Stock as to dividends could impact the dividend rights of holders of
Common Stock.
There are no redemption provisions with respect to the Common Stock. All
outstanding shares of Common Stock, including the shares offered hereby, are,
or will be upon completion of the Offering, fully paid and non-assessable.
The By-laws provide that the number of directors shall be fixed by the Board
of Directors. Any director of the Company may be removed from office only for
cause by the holders of two-thirds of the outstanding shares of the Company
entitled to vote at an election of directors.
Undesignated Preferred Stock. The Board of Directors of the Company is
authorized, without further action of the stockholders of the Company, to issue
up to 2,000,000 shares of Preferred Stock in one or more classes or series and
to fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences, and the number of shares constituting any series or
the designation of such series. However, pursuant to the Certificate, the
holders of Preferred Stock would not have cumulative voting rights with respect
to the election of directors. Any such Preferred Stock issued by the Company
may rank prior to the Common Stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and may be
convertible into shares of Common Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on specific
issuances. The issuance of Preferred Stock could adversely affect the voting
power of the holders of Common Stock and could have the effect of delaying,
deferring, or preventing a change in control of the Company.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BY-LAWS
General. A number of provisions of the Certificate and By-laws concern
matters of corporate governance and the rights of stockholders. Certain of
these provisions, as well as the ability of the Board of Directors to issue
shares of Preferred Stock and to set the voting rights, preferences and other
terms thereof, may be deemed to have an anti-takeover effect and may discourage
takeover attempts not first approved by the Board of Directors (including
takeovers which certain stockholders may deem to be in their best interests).
To the extent takeover attempts are discouraged, temporary fluctuations in the
market price of the Common Stock, which may result from actual or rumored
takeover attempts, may be inhibited.
40
<PAGE>
In addition, the By-laws provide that shareholders may remove a director only
for cause and only by the vote of the holders of two-thirds of the outstanding
shares of the Company entitled to vote at an election of directors. This
provision, when coupled with the provision of the By-laws authorizing only the
Board of Directors to fill vacant directorships, will preclude shareholders
from removing incumbent directors without cause and simultaneously gaining
control of the Board of Directors by filling the vacancies created by such
removal with their own nominees, and will make more difficult, and therefore
may discourage, a proxy contest to change control of the Company. These
provisions, together with the ability of the Board to issue Preferred Stock
without further stockholder action, also could delay or frustrate the removal
of incumbent directors or the assumption of control by stockholders, even if
such removal or assumption would be beneficial to stockholders of the Company.
In addition, these provisions could discourage or make more difficult a merger,
tender offer or proxy contest, even if they would be favorable to the interests
of stockholders, and could potentially depress the market price of the Common
Stock. The Board of Directors of the Company believes that these provisions are
appropriate to protect the interests of the Company and all of its
stockholders. The Board of Directors has no present plans to adopt any other
measures or devices which may be deemed to have an anti-takeover effect.
Meetings of Stockholders. The By-laws provide that, unless otherwise required
by law, a special meeting of stockholders may be called by the Chairman of the
Board or upon the request of at least 51% of the members of the Board of
Directors. The By-laws provide that only those matters brought before the
meeting at the direction of the chairman of the meeting or set forth in the
notice of special meeting may be considered or acted upon at that special
meeting, unless otherwise provided by law. In addition, the By-laws set forth
certain advance notice and informational requirements and time limitations on
any director nomination or any new business which a stockholder wishes to
propose for consideration at an annual or special meeting of stockholders.
No Stockholder Action by Written Consent. The Certificate provides that if at
any time a class of stock of the Company becomes registered pursuant to the
Exchange Act and the rules and regulations of the SEC and such stock is being
traded on a nationally recognized exchange, any action required or permitted to
be taken by a stockholder of the Company at an annual or special meeting of
stockholders must be effected at a duly called meeting and may not be taken or
effected by a written consent of stockholders in lieu thereof.
Indemnification and Limitation of Liability. The By-laws and the Certificate
provide that directors and officers of the Company shall be, and, in the
discretion of the Board of Directors, non-officer employees may be, indemnified
by the Company to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on behalf of the Company.
The By-laws and the Certificate also provide that the right of directors and
officers to indemnification shall be a contract right and shall not be
exclusive of any other right now possessed or hereafter acquired under any by-
law, agreement, vote of stockholders or disinterested directors of the Company
or otherwise. The Certificate contains a provision permitted by Delaware law
that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director
has breached his or her duty of loyalty, failed to act in good faith, engaged
in intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation
Law or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws. In addition, this
provision does not affect the availability of equitable remedies, such as an
injunction or rescission, for breach of fiduciary duty.
Amendment of the Certificate. The Certificate provides that an amendment
thereof must be approved by a majority of the Board of Directors and thereafter
approved by a majority of the total votes eligible to be cast by holders of
voting stock, provided, however, that amendment of the indemnification
provisions set forth in the Certificate must be approved by the holders of two-
thirds of the total votes eligible to be cast by holders of voting stock.
Amendment of By-laws. The Certificate provides that the Board of Directors of
the Company is authorized to adopt, amend or repeal any or all of the By-laws
of the Company, including By-law amendments increasing or reducing the
authorized number of directors.
41
<PAGE>
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the Offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person or affiliate, or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the board of directors of the corporation before the person becomes an
interested stockholder; (ii) the stockholder acquired 85% or more of the
outstanding voting stock of the corporation in the same transaction that made
the stockholder an interested stockholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and authorized by the holders of at
least 66% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder. Under Section
203, an "interested stockholder" is defined (with certain limited exceptions)
as any person that is (i) the owner of 15% or more of the outstanding voting
stock of the corporation or (ii) an affiliate or associate of the corporation
and was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to the
date on which it is sought to be determined whether such person is an
interested stockholder.
A corporation may, at its option, exclude itself from the coverage of Section
203 by amending its certificate of incorporation or by-laws by action of its
stockholders to exempt itself from coverage, provided that such by-law or
charter amendment shall not become effective until 12 months after the date it
is adopted. Neither the Certificate nor the By-laws of the Company contain any
such exclusion.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, Bernard F. Reynolds, Eli Salig
and Seymour Adler have certain demand and incidental registration rights. The
demand registration rights provide that following the Offering and after a
specified time, upon written request by a holder of Common Stock, the holder
shall have, with certain limitations, the right to require the Company to
register the requested shares of such holder. Unless otherwise provided by
applicable state securities laws, in connection with one demand registration
the Company shall pay all registration and filing fees, excluding all sales
commissions or other similar selling charges, with respect to the shares
registered. In connection with additional demand registrations, the holder
shall pay all registration and filing fees. The incidental registration rights
provide that if the Company proposes to register any offer or sale of Common
Stock under the 1933 Act for its own account or the account of any shareholder,
the Company shall give such holders notice of the registration and upon request
by a holder, include such holder's shares of Common Stock in the registration,
subject to certain rights of any underwriter of the offering to which such
registration relates to exclude such shares from the registration. All expenses
relating to the Offering, excluding sales commissions or other similar selling
charges, shall be paid by the Company, unless otherwise provided by applicable
state securities laws. The holders of such registration rights have waived such
rights in connection with the Offering and have also agreed with the
Underwriters not to exercise such rights for a period of 180 days following the
date of this Prospectus.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York, One Wall Street, New York, New York 10286. Its telephone number is (212)
635-7110.
42
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have a total of 6,825,158
shares of Common Stock outstanding. Of these shares, the 2,200,000 shares sold
in the offering (2,530,000 if the Underwriters' over-allotment option is
exercised in full) will be freely transferable without restriction under the
1933 Act, except for any shares held by "affiliates" of the Company as that
term is used under the 1933 Act and the regulations promulgated thereunder and
except to the extent such shares are subject to the agreements with the
Underwriters described below.
The remaining 4,625,158 shares (4,295,158 if the Underwriters' over-allotment
option is exercised in full) are held by officers, directors, employees and
other stockholders of the Company, were sold by the Company in reliance on
exemptions from the registration requirements of the 1933 Act and are
"restricted securities" within the meaning of Rule 144 ("Rule 144") adopted
under the 1933 Act (the "Restricted Securities"). Beginning 180 days after the
effective date of the Registration Statement of which this Prospectus is a part
(the "Effective Date"), upon the expiration of agreements (the "Lock-up
Agreements") entered into between the Underwriters and such stockholders, all
of the Restricted Securities will be eligible for sale in the public market
subject to the provisions of Rule 144 and an additional 176,553 shares will be
eligible for sale subject to the provisions of Rule 701 ("Rule 701") adopted
under the 1933 Act.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned Restricted Securities for at least a two-year period (as
computed under Rule 144) is entitled to sell within any three-month period a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 68,252 shares after giving
effect to the Offering), or (ii) the average weekly trading volume in the
Company's Common Stock during the four calendar weeks immediately preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain provisions relating to the manner and notice of sale and the
availability of current public information about the Company. In addition,
under Rule 144(k), a person (or persons whose shares are aggregated) who is not
deemed to have been an affiliate of the Company at any time during the 90 days
immediately preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least a three-year period (as computed under Rule
144), would be entitled to sell such shares under Rule 144(k) without regard to
the volume limitations and other conditions described above. Affiliates
continue to be subject to certain limitations under Rule 144, including volume
of sale limitations, regardless of the time period that shares are held. The
SEC recently adopted certain amendments to Rule 144 that will reduce by one
year the holding period required for shares subject to Rule 144 and Rule 144(k)
to become eligible for resale in the public market. The amendments will become
effective April 29, 1997. The Restricted Securities may also be sold at any
time pursuant to an effective registration statement under the 1933 Act.
Under the Option Plan and the Directors' Plan, there are an aggregate of
850,000 shares of Common Stock reserved for issuance. As of the Effective Date,
options to purchase 368,533 shares have been granted pursuant to the Option
Plan and the Directors' Plan. Holders of outstanding stock options have also
entered into Lock-up Agreements with the Underwriters. Beginning 180 days after
the Effective Date, upon the expiration of the Lock-up Agreements, 176,533
shares of Common Stock underlying currently exercisable stock options will be
eligible for sale in accordance with the requirements of Rule 701. Securities
issued in reliance on Rule 701 are restricted securities and may be sold by
persons other than affiliates of the Company subject only to the manner of sale
provisions of Rule 144, and may be sold by affiliates of the Company subject to
the volume limitations of Rule 144 and all other provisions of Rule 144 except
its two-year minimum holding period.
The Company intends to file one or more registration statements on Form S-8
under the 1933 Act to register shares of Common Stock reserved for issuance
under the Option Plan and the Directors' Plan. If the Company files one or more
registration statements on Form S-8, non-affiliate holders of shares registered
under the Form S-8 that are issuable upon exercise of stock options granted
pursuant to the Option Plan and the Directors' Plan
43
<PAGE>
will be able to sell such shares in the public market without regard to the
restrictions of Rule 144. Affiliates will continue to be subject to certain
limitations on sale, including the volume restrictions described above. The
Company has agreed with the Underwriters not to file any such registration
statement on Form S-8 with respect to, or otherwise register for resale with
the SEC, shares of Common Stock subject to stock options, during the 180-day
period commencing on the Effective Date.
The Lock-up Agreements provide that the Company's officers, directors, each
of its stockholders and each holder of outstanding options or warrants to
purchase Common Stock will not, without the prior written consent of H.C.
Wainwright & Co., Inc., directly or indirectly, offer, sell, pledge, contract
to sell, grant any option to purchase or otherwise dispose of any shares of
Common Stock beneficially owned or otherwise held or any securities convertible
into, derivative of or exercisable or exchangeable for such Common Stock during
the 180-day period commencing on the Effective Date. The Company has also
agreed that it will not, without the prior written consent of H.C. Wainwright &
Co., Inc., directly or indirectly, offer, sell, pledge, contract to sell, grant
any option to purchase or otherwise dispose of any shares of Common Stock
beneficially owned or otherwise held or any securities convertible into,
derivative of or exercisable or exchangeable for such Common Stock during the
180-day period commencing on the Effective Date except for (i) the sale of the
shares of Common Stock in the Offering and (ii) upon the exercise of options to
purchase Common Stock outstanding on the Effective Date.
Prior to the Offering, there has been no public market for the Company's
Common Stock. No prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale
will have on the market price prevailing from time to time. Nevertheless, sales
of substantial amounts of Common Stock in the public market after the
restrictions described above lapse could adversely affect the prevailing market
price and the ability of the Company to raise equity capital in the future.
44
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below (the "Underwriters"), for whom H.C. Wainwright & Co.,
Inc. and Janney Montgomery Scott Inc. are acting as representatives (the
"Representatives"), and each of the Underwriters has severally agreed to
purchase from the Company the respective number of shares of Common Stock set
forth opposite its name below at the initial public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that, subject to the terms and conditions set
forth therein, the Underwriters are obligated to purchase all of the shares of
Common Stock being sold pursuant to the Underwriting Agreement if any of the
shares of Common Stock are purchased. Under certain circumstances, under the
Underwriting Agreement, the commitments of non-defaulting Underwriters may be
increased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
H.C. Wainwright & Co., Inc. ................................
Janney Montgomery Scott Inc. ...............................
Total..................................................... 2,200,000
=========
</TABLE>
The Underwriters have reserved up to 5% of the shares of Common Stock offered
hereby for sale at the initial public offering price to employees and certain
other persons having business relationships with the Company. The number of
shares available for sale to the general public will be reduced to the extent
such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the Underwriters to the general public on the same
basis as the other shares offered hereby. Certain individuals purchasing
reserved shares may be required to agree not to sell, offer or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date
of this Prospectus.
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of Common Stock on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Selling Stockholders have granted the Underwriters an option to purchase
up to an additional 330,000 shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. Such option, which will expire 30 days after the date of
this Prospectus, may be exercised solely to cover over-allotments, if any, made
in connection with the sale of shares of Common Stock offered hereby. To the
extent that the Underwriters exercise this option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage thereof which the number of shares of Common
Stock to be purchased initially by that Underwriter bears to the total number
of shares of Common Stock to be purchased initially by the Underwriters. If
purchased, the Underwriters will offer such additional shares on the same terms
as those on which the 2,200,000 shares of Common Stock are being offered
hereby.
On the closing of the Offering, the Company will sell to the Representatives,
individually and not as representatives of the Underwriters, for nominal
consideration, the Representatives' Warrants entitling the Representatives to
purchase an aggregate of 220,000 shares of Common Stock at an initial exercise
price per share equal to 150% of the initial public offering price hereunder.
The Representatives' Warrants will be exercisable for a period of four years
commencing one year after the date of this Prospectus and will contain certain
demand and incidental registration rights relating to the underlying Common
Stock. The Representatives' Warrants cannot be transferred, assigned or
hypothecated, in whole or in part, for a period of twelve months
45
<PAGE>
from the date of their issuance, except to any officer or partner of the
Representatives. The Representatives' Warrants will contain anti-dilution
provisions providing for appropriate adjustment of the exercise price and the
number of shares issuable upon exercise thereof upon the occurrence of certain
events.
For the life of the Representatives' Warrants, their holders have, at nominal
cost, the opportunity to profit from a rise in the market price for the Common
Stock without assuming the risk of ownership, with a resulting dilution in the
interest of other security holders. As long as the Representatives' Warrants
remain unexercised, the terms under which the Company could obtain additional
capital may be adversely affected. Moreover, the holders of the
Representatives' Warrants might be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital by a new
offering of its securities on terms more favorable than those provided by the
Representatives' Warrants. Additionally, if the Representatives should exercise
their registration rights to effect a distribution of the underlying shares of
Common Stock, the Representatives, prior to and during such distribution, would
be unable to make a market in the Common Stock. If the Representatives must
cease making a market, the market and market price for the Common Stock may be
adversely affected and holders of the Common Stock may be unable to sell the
Common Stock.
The Company has granted H.C. Wainwright & Co., Inc., the right to act as the
Company's managing underwriter and financial advisor on an exclusive basis
until November 4, 1998 with respect to any sales of equity securities by the
Company, any sale or disposition of the Company or any of its assets or the
acquisition by the Company of any securities or assets of any other business
entity. In addition, the Company has granted to H.C. Wainwright & Co., Inc. the
right to nominate one director to the Company's Board of Directors. While this
representative director may be a director, officer, partner, employee or
affiliate of H.C. Wainwright & Co., Inc., H.C. Wainwright & Co., Inc. presently
intends to nominate an independent director to fill that position and it is
contemplated that this individual will serve on the Compensation Committee.
The Company and the Company's existing stockholders have, subject to certain
exceptions in the case of the Company for the grant of employee and director
stock options, agreed not to, directly or indirectly, sell, offer to sell,
grant any option for sale of, or otherwise dispose of, any Common Stock of the
Company, or any security convertible or exchangeable into, or exercisable for,
such capital stock, or, in the case of the Company, file any registration
statement with respect to any of the foregoing, for a period of 180 days after
the date of this Prospectus, without the prior written consent of the
Underwriters.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price of the Common Stock will be determined by
negotiations among the Company and the Underwriters. Among the factors to be
considered in such negotiations, in addition to prevailing market conditions,
will be certain financial information of the Company, an assessment of the
Company's management, estimates of the business potential and earnings
prospects of the Company, the present state of the Company's development and
operations, the present state of the Company's industry in general and other
factors deemed relevant. The initial public offering price set forth on the
cover page of this Prospectus should not, however, be considered an indication
of the actual value of the Common Stock. Such price is subject to change as a
result of market conditions and other factors. There can be no assurance that
an active trading market will develop for the Common Stock or that the Common
Stock will trade in the public market subsequent to the Offering at or above
the initial public offering price.
In connection with the Offering, the Underwriters and certain selling group
members may engage in stabilizing, syndicate short covering transactions or
other transactions that stabilize, maintain or otherwise affect the market
price of the Common Stock. Stabilizing transactions may consist of initiating
bids or effecting purchases on the Nasdaq National Market for the purpose of
preventing or retarding a decline in the market price of the Common Stock. Bids
or purchases effected by the Underwriters or selling group members for such
46
<PAGE>
purposes may be instituted at prices no higher than the initial public offering
price or the most recent independent bid, whichever is less. Such transactions
may stabilize the market price of the Common Stock at a level above that which
might otherwise prevail and, if commenced, may be discontinued at any time.
Application has been made for listing of the Common Stock on the Nasdaq
National Market under the symbol ASIS, subject to official notice of issuance.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the 1933 Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Koerner Silberberg & Weiner, llp, New York, New York. Goodwin,
Procter & Hoar llp, Boston, Massachusetts, has acted as counsel for the
Underwriters in connection with the Offering.
EXPERTS
The consolidated balance sheet of ASI Solutions Incorporated as of March 31,
1996 and 1995 and the consolidated statements of income, stockholders' equity
and cash flows for each of the three years ended March 31, 1996 included in
this registration statement have been included herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing. The report of Coopers &
Lybrand L.L.P. for the year ended March 31, 1994 is based in part upon the
audit of Assessment Solutions Incorporated, one of the consolidated entities,
conducted by William W. Oliver, CPA. The opinion of Coopers & Lybrand L.L.P.
for 1994, as it relates to the amounts for Assessment Solutions, is based
solely on the report of William W. Oliver, CPA. The financial statements of
Assessment Solutions are referred to based upon the authority of William W.
Oliver, CPA as an expert in accounting and auditing.
CHANGE IN INDEPENDENT ACCOUNTANTS
Assessment Solutions retained Coopers & Lybrand L.L.P. as its independent
accountants and replaced William W. Oliver, CPA in fiscal 1995. The report of
William W. Oliver, CPA on the financial statements of Assessment Solutions as
of March 31, 1994 and for the fiscal year then ended contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or application of accounting principles. During the
fiscal year ended March 31, 1994 and through the date of replacement, there
were no disagreements with William W. Oliver, CPA on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. The change in independent accountants was approved by the Board of
Directors of Assessment Solutions. During the two fiscal years and any
subsequent interim period prior to engaging Coopers & Lybrand, the Registrant
had no discussions with Coopers & Lybrand regarding either the application of
an accounting principle, the type of opinion that would be rendered in the
financial statements of Assessment Solutions, or any matter that was the
subject of a disagreement with the prior auditor.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Prospectus summary and under the captions "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such statements may include,
but are not limited to, projections of revenues, income or loss, capital
expenditures, plans for future operations, financing needs or plans and plans
relating to services of the Company, as well as assumptions relating to the
foregoing. Additional written or oral forward-looking statements may be made by
the Company from time to time in filings with the Securities and
47
<PAGE>
Exchange Commission or otherwise. Such forward-looking statements also involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following general economic and business
conditions: the loss of, or the failure to replace, any significant customers;
continued emphasis by many of the Company's clients on reducing operational
expenses and maintaining high quality control which encourages outsourcing of
such clients' non-revenue producing functions; changes in business strategy or
development plans; the timing and success of any enhancements to the Company's
services and programs; the quality of any new management personnel the Company
is able to attract to assist the growth of the Company's business; the
availability, terms and deployment of capital; the business abilities and
judgments of recently hired personnel; the continued availability of qualified
personnel; and other factors referenced in this Prospectus. The words
"believe," "expect," "anticipate," "estimate," "project" and similar
expressions identify forward-looking statements which speak only as of the date
of this Prospectus.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form S-
1 (the "Registration Statement") under the 1933 Act and the rules and
regulations promulgated thereunder, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information regarding the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed as part of the Registration Statement. Statements contained in the
Prospectus concerning the provisions or contents of any contract, agreement or
other document referred to herein are not necessarily complete with respect to
each such contract, agreement or document filed as an exhibit to the
Registration Statement. Reference is made to such exhibits for a more complete
description of the matters involved, and each statement shall be deemed
qualified in its entirety by such reference.
The Registration Statement, including the exhibits and schedules thereto, may
be inspected and copied at the public reference facilities maintained at the
Commission at Room 1204, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Company is required to file
electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) System.
The electronically filed documents, including reports, proxy statements and
other information, are maintained by the Commission and may be found at the
World Wide Web site http:// www. sec. gov. Application has been made for
listing of the Common Stock on the Nasdaq National Market. When listed, certain
reports, proxy statements and certain other information can also be inspected
at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C.
20006.
48
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants, Coopers & Lybrand L.L.P. .............. F-2
Report of Independent Accountant, William W. Oliver, C.P.A. .............. F-3
Consolidated Balance Sheets as of March 31, 1995 and 1996, and (unaudited)
December 31, 1996........................................................ F-4
Consolidated Statements of Income for the years ended March 31, 1994, 1995
and 1996, and (unaudited) for the nine months ended December 31, 1995 and
1996..................................................................... F-5
Consolidated Statements of Stockholders' Equity for the years ended March
31, 1994, 1995 and 1996, and (unaudited) for the nine months ended
December 31, 1995 and 1996............................................... F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1994,
1995 and 1996, and (unaudited) for the nine months ended December 31,
1995 and 1996............................................................ F-7
Notes to Consolidated Financial Statements................................ F-8
</TABLE>
F-1
<PAGE>
The accompanying consolidated financial statements of ASI Solutions
Incorporated have been prepared to give effect to the planned stock split to
be effected as a stock dividend described in Note 11. When this stock split to
be effected as a stock dividend has occurred we will issue the following
report.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders ofASI Solutions Incorporated:
We have audited the consolidated balance sheets of ASI Solutions
Incorporated and Subsidiaries as of March 31, 1996 and 1995, and the
consolidated statements of income, stockholders' equity and cash flows for
each of the three years ended March 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits. We did not
audit the financial statements of Assessment Solutions Incorporated, one of
the consolidated entities (Note 1), for the year ended March 31, 1994, which
statements reflect revenue and net income of $3,454,776 and $122,140,
respectively. These financial statements were audited by another auditor whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Assessment Solutions Incorporated for the year ended
March 31, 1994 is based solely on the report of the other auditor.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 and the report of the other
auditor provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditor, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ASI Solutions Incorporated as
of March 31, 1996 and 1995, and the consolidated results of their operations
and their cash flows for each of the three years ended March 31, 1996, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 18, 1996, except as to the
information presented in Note 11,
for which the date is January 16, 1997.
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANT
To the Board of Directors and Stockholders of
Assessment Solutions Incorporated:
I have audited the statements of income, stockholders' equity and cash flows
of Assessment Solutions Incorporated for the year ended March 31, 1994 (none
of which is shown separately herein). These financial statements are the
responsibility of Assessment Solutions Incorporated's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
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 statements of income, stockholders'
equity and cash flows are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of income, stockholders' equity and cash flows. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
statements of income, stockholders' equity and cash flows. I believe that my
audit of the statements of income, stockholders' equity and cash flows
provides a reasonable basis for my opinion.
In my opinion, the statements of income, stockholders' equity and cash flows
referred to above present fairly, in all material respects, the results of
operations and the cash flows of Assessment Solutions Incorporated for the
year ended March 31, 1994, in conformity with generally accepted accounting
principles.
William W. Oliver, C.P.A.
New York, New York
June 24, 1994
F-3
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
--------------------- DECEMBER 31,
1995 1996 1996
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 228,453 $ 69,583 $ 146,099
Accounts receivable, net................... 1,277,539 2,029,045 3,337,392
Prepaid expenses and other current assets.. 58,233 54,884 83,639
Notes receivable from stockholders......... 349,288 72,746 72,746
---------- ---------- ----------
Total current assets...................... 1,913,513 2,226,258 3,639,876
Property and equipment, net................. 402,024 520,724 1,763,248
Notes receivable from stockholders.......... -- 290,984 310,080
Intangible assets, net...................... 57,956 1,107,871 1,134,593
Other assets................................ 96,614 96,768 228,857
---------- ---------- ----------
Total assets.............................. $2,470,107 $4,242,605 $7,076,654
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank...................... $ 58,333 $ 100,000 $ 809,275
Notes payable to stockholder............... 210,789 -- --
Accounts payable and accrued expenses...... 683,049 839,382 1,119,957
Accrued income taxes....................... 572,591 756,503 1,087,007
---------- ---------- ----------
Total current liabilities................. 1,524,762 1,695,885 3,016,239
Notes payable to bank....................... -- -- 329,510
Other liabilities........................... 94,882 150,492 142,865
---------- ---------- ----------
Total liabilities......................... 1,619,644 1,846,377 3,488,614
---------- ---------- ----------
Commitments (Note 6)
Stockholders' equity:
Common stock, $.01 par value; authorized,
5,000,000 shares;
issued and outstanding, 4,625,158 shares.. -- 46,252 46,252
Additional paid-in capital................. -- 1,109,218 1,109,218
Retained earnings.......................... -- 1,240,758 2,432,570
Predecessor equity......................... 850,463 -- --
---------- ---------- ----------
Total stockholders' equity................ 850,463 2,396,228 3,588,040
---------- ---------- ----------
Total liabilities and stockholders'
equity................................... $2,470,107 $4,242,605 $7,076,654
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED MARCH 31, ENDED DECEMBER 31,
----------------------------------- -----------------------
1994 1995 1996 1995 1996
---------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................. $6,028,175 $8,022,623 $10,558,113 $7,690,787 $12,858,779
Cost of services........ 3,206,650 4,178,736 5,206,854 3,739,104 5,905,213
---------- ---------- ----------- ---------- -----------
Gross profit............ 2,821,525 3,843,887 5,351,259 3,951,683 6,953,566
Operating expenses:
General and
administrative ....... 1,687,837 1,947,384 2,225,551 1,611,449 2,206,820
Sales and marketing.... 618,117 744,433 1,100,205 813,827 1,253,957
Research and
development........... 283,417 375,086 613,906 412,600 842,876
---------- ---------- ----------- ---------- -----------
Income from operations.. 232,154 776,984 1,411,597 1,113,807 2,649,913
Other income............ -- 276,202 -- -- --
Interest (expense)
income, net............ (24,405) (14,374) 2,227 (10,118) (13,265)
---------- ---------- ----------- ---------- -----------
Income before provision
for income taxes and
cumulative effect of
change in accounting
principle.............. 207,749 1,038,812 1,413,824 1,103,689 2,636,648
Provision for income
taxes ................. 60,941 467,876 681,455 524,846 1,444,836
---------- ---------- ----------- ---------- -----------
Income before cumulative
effect of change in
accounting principle... 146,808 570,936 732,369 578,843 1,191,812
Cumulative effect of
change in accounting
principle.............. 19,091 -- -- -- --
---------- ---------- ----------- ---------- -----------
Net income.............. $ 165,899 $ 570,936 $ 732,369 $ 578,843 $ 1,191,812
========== ========== =========== ========== ===========
Net income per proforma
common and common
equivalent share (Note
2)..................... $ 0.04 $ 0.12 $ 0.16 $ 0.12 $ 0.26
========== ========== =========== ========== ===========
Proforma weighted
average common and
common equivalent
shares outstanding
(Note 2)............... 4,667,404 4,667,404 4,667,404 4,667,404 4,667,404
========== ========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ASSESSMENT
SOLUTIONS PROUDFOOT
ASI SOLUTIONS INCORPORATED REPORTS
INCORPORATED COMMON INCORPORATED
COMMON STOCK STOCK(1) COMMON STOCK(2) ADDITIONAL
----------------- -------------- ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- ------ ------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1993.......... 100 $16,750 1,900,000 $19,000 $ 306,324 $ (228,446) $ 113,628
Net income............. 165,899 165,899
---- ------- ---------- ------- ---------- ---------- ----------
March 31, 1994.......... 100 16,750 1,900,000 19,000 306,324 (62,547) 279,527
Net income............. 570,936 570,936
---- ------- ---------- ------- ---------- ---------- ----------
March 31, 1995.......... 100 16,750 1,900,000 19,000 306,324 508,389 850,463
Net income............. 732,369 732,369
Settlement of stock-
holder note........... (250,000) (250,000)
Recapitalization of
Company............... 4,625,158 $46,252 (100) (16,750) (1,900,000) (19,000) 1,052,894 1,063,396
--------- ------- ---- ------- ---------- ------- ---------- ---------- ----------
March 31, 1996.......... 4,625,158 46,252 -- -- -- -- 1,109,218 1,240,758 2,396,228
Net income (unau-
dited)................ 1,191,812 1,191,812
--------- ------- ---- ------- ---------- ------- ---------- ---------- ----------
December 31, 1996
(unaudited)............ 4,625,158 $46,252 -- $ -- -- $ -- $1,109,218 $2,432,570 $3,588,040
========= ======= ==== ======= ========== ======= ========== ========== ==========
</TABLE>
- --------
(1) Assessment Solutions Incorporated common stock has no par value; 200
shares authorized, 100 shares issued and outstanding.
(2) Proudfoot Reports Incorporated common stock is $0.01 par value; 2,000,000
shares authorized; 1,900,000 shares issued and outstanding.
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------- ---------------------
1994 1995 1996 1995 1996
--------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating
activities
Net income............. $ 165,899 $ 570,936 $ 732,369 $ 578,843 $1,191,812
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 119,013 154,582 174,576 111,106 282,167
Provision for doubtful
accounts............. 10,000 -- (4,956) -- --
Accrual of straight-
line rent............ 7,790 (12,948) 63,553 56,877 (7,627)
Loss on write-off of
leasehold
improvements......... -- 17,120 -- -- --
Deferred income
taxes................ 25,434 (4,317) (7,943) (4,987) (13,728)
Changes in operating
assets and
liabilities:
Accounts receivable... 34,294 (297,824) (746,550) (294,102) (1,308,346)
Prepaid expenses and
other current
assets............... 7,558 (33,173) 3,349 (3,225) (15,025)
Other assets.......... 33,478 (34,167) (154) (12,420) (132,089)
Notes receivable from
stockholders......... (86,855) (41,826) (264,442) (311,036) (19,096)
Accounts payable and
accrued expenses..... (137,584) (19,692) 156,333 7,560 363,448
Other liabilities..... 23,893 (49,734) -- -- --
Accrued income taxes.. (94,593) 442,536 183,912 141,102 247,625
--------- --------- --------- --------- ----------
Net cash provided by
operating
activities........... 108,327 691,493 290,047 269,718 589,141
--------- --------- --------- --------- ----------
Cash flow from investing
activities:
Acquisition of
property and
equipment............ (130,352) (242,154) (279,795) (141,360) (1,456,410)
Purchase of minority
shareholder
interest............. -- -- -- -- (95,000)
--------- --------- --------- --------- ----------
Net cash used in
investing
activities........... (130,352) (242,154) (279,795) (141,360) (1,551,410)
--------- --------- --------- --------- ----------
Cash flow from financing
activities:
Cash overdraft........ 21,487 (21,487) -- -- --
Notes payable to
stockholder.......... 60,000 51,161 (210,789) (210,789) --
Proceeds from
borrowings........... -- -- 100,000 -- 1,038,785
Principal repayment of
debt................. (109,374) (272,657) (58,333) (58,333) --
--------- --------- --------- --------- ----------
Net cash (used in)
provided by financing
activities........... (27,887) (242,983) (169,122) (269,122) 1,038,785
--------- --------- --------- --------- ----------
Net increase (decrease)
in cash................ (49,912) 206,356 (158,870) (140,764) 76,516
Cash, at beginning of
the period............. 72,009 22,097 228,453 228,453 69,583
--------- --------- --------- --------- ----------
Cash, at end of the
period................. $ 22,097 $ 228,453 $ 69,583 $ 87,689 $ 146,099
========= ========= ========= ========= ==========
Supplemental cash flow
information:
Cash paid for:
Interest.............. $ 23,185 $ 16,296 $ 5,875 $ 3,485 $ 21,419
Income taxes.......... $ 33,374 $ 31,562 $ 463,287 $ 420,875 $1,113,077
</TABLE>
Supplemental disclosure of non-cash transactions:
The Reorganization of the Company as of March 31, 1996 resulted in a partial
change in accounting basis with an increase in intangible assets and a
corresponding increase in shareholders' equities of approximately $1,063,000
(See Note 1)
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF DECEMBER 31, 1996 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
On March 26, 1996, ASI Solutions Incorporated (the "Company") was
incorporated in the State of Delaware. Effective March 31, 1996, the Company
issued 4,625,158 shares of Common Stock in exchange for substantially all of
the issued and outstanding shares of common stock of Proudfoot Reports
Incorporated ("PRI") and 95% of the Common Stock of Assessment Solutions
Incorporated ("Assessment Solutions"). During fiscal 1997, the remaining 5% of
the outstanding common stock of Assessment Solutions was redeemed. The initial
stockholders of the Company were also the principal stockholders of PRI and
Assessment Solutions, the two previously separate but commonly controlled
companies. After the reorganization, Assessment Solutions and PRI are wholly-
owned subsidiaries of the Company. C3 Solutions Incorporated ("C3") was formed
on September 16, 1996 as a wholly-owned subsidiary of the Company. The
Company, Assessment Solutions, PRI and C3 are hereinafter referred to
collectively as the "Company."
Assessment Solutions is a management consulting firm with primary emphasis
on research and the application of simulation technology to the assessment of
sales, service and management personnel. PRI provides pre-employment and post-
employment background checks.
The exchange described above has been accounted for as a reorganization
since all entities involved were under common control. The financial
statements for all periods prior to March 31, 1996 have been presented on a
consolidated basis at the historical cost basis of the entities involved in a
manner similar to a pooling of interests (the "Predecessor"). All intercompany
accounts and transactions have been eliminated in consolidation.
The financial statements as of March 31, 1996, the date of the
Reorganization, and for all subsequent interim periods presented, reflect the
interests attributable to the one controlling shareholder of both combined
entities at their historical basis of accounting. The remaining interests have
been accounted for as a purchase of minority interests and the excess of the
purchase price over the related historical cost of $1,063,000 has been
allocated to intangible assets. As a result of the Reorganization, the results
of operations of the Company after the Reorganization are not directly
comparable to the financial statements of the Predecessor.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of 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 the reported amounts of revenues and expenses during the
reporting period. The most significant estimates made are for the
recoverability of accounts receivable. Actual results could differ from those
estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration
of credit risk consist of accounts receivable and cash deposits. Cash deposits
generally do not exceed insurable limits. Accounts receivable are concentrated
among a limited number of major companies. To reduce credit risk, the Company
performs credit evaluations of its customers but does not generally require
collateral. For the years ended March 31, 1994, 1995 and 1996, revenues from
the Company's top five customers represented approximately 62% of total
revenues. Accounts receivable from five customers represented approximately
65% of total accounts receivable at March 31, 1995 and 1996, respectively. For
the nine months ended December 31, 1996, sales to the Company's top five
customers represented 58% of total revenue. Accounts receivable from five
customers represented 64% of total accounts receivable at December 31, 1996.
F-8
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1996 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
Allowances for doubtful accounts were approximately $29,000, $24,000 and
$24,000 as of March 31, 1995 and 1996 and December 31, 1996, respectively.
The majority of the Company's customers are large, established businesses
located throughout the United States and internationally.
Property and Equipment
Furniture and equipment are stated at cost and depreciated over their
estimated useful lives of five years using the straight-line method. Leasehold
improvements are amortized over the shorter of the lease term or estimated
useful life of the related assets. Maintenance and repairs are charged to
expense as incurred; renewals and improvements which extend the life of assets
are capitalized. Gains or losses on the disposition of assets are included in
income.
Intangible Assets
Intangible assets principally include customer lists and the excess of
purchase price over the fair value of identifiable net assets acquired. The
intangible assets are amortized on a straight-line basis over their estimated
useful lives ranging from 10 to 40 years. Amortization expense relating to
intangible assets was $13,481 for each of the years ended March 31, 1994, 1995
and 1996, and $10,111 and $68,281 for the nine months ended December 31, 1995
and 1996, respectively. Accumulated amortization relating to intangible assets
was $126,909, $140,390 and $208,671 as of March 31, 1995 and 1996 and December
31, 1996, respectively.
Long-lived Assets
If events or changes in circumstances indicate that the carrying amount of a
long-lived asset, including intangible assets, may not be recoverable, the
Company estimates the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash
flows (undiscounted) is less than the carrying amount of the long-lived asset,
an impairment loss is recognized. To date, no impairment losses have been
recognized. Effective April 1, 1995, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 121 ("Accounting for Long-
Lived Assets and Long-Lived Assets to be Disposed of") which did not have a
material impact on the Company's consolidated financial statements.
Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased with an
original maturity date of three months or less from the date of purchase to be
a cash equivalent.
Revenue
The Company recognizes revenue as earned upon completion of services.
Rent Expense
The Company recognizes rent expense for operating leases on a straight-line
basis over the term of the related lease.
Income Taxes
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
which requires that deferred income taxes be recognized for the tax
consequences in future years of differences between the tax bases of assets
and liabilities and their
F-9
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1996 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized. Income tax expense consists of the tax payable for the period and
the change during the period in deferred tax assets and liabilities (See
Note 7.) Upon adoption of SFAS No. 109, in fiscal 1994, the Company recorded a
cumulative effect of change in accounting principle of $19,091.
Proforma Net Income Per Share
Net income per share for all periods has been computed using the weighted
average number of common and common equivalent shares outstanding of
4,667,404. Since potentially dilutive instruments issued within one year prior
to a proposed initial public offering, at exercise prices below the expected
initial public offering price, must be treated as outstanding for all periods,
an additional 42,246 shares are reflected in the weighted average number of
common shares outstanding.
Interim Financial Data (Unaudited)
The interim financial data as of December 31, 1996 and for the nine months
ended December 31, 1995 and 1996 are unaudited; however, in the opinion of
management, such interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
consolidated financial position and the consolidated results of operations and
cash flows for the periods.
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board Issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which prescribes a new method of accounting
for stock-based compensation that determines compensation expense based on
fair value measured at the grant date. SFAS No. 123 gives companies that grant
stock options or other equity instruments to employees, the option of either
adopting the new rules or continuing current accounting; however, disclosure
would be required of the pro forma amounts as if the new rules had been
adopted. SFAS No. 123 is effective for transactions entered into in fiscal
years that begin after December 15, 1995. The Company has elected to continue
with the current accounting method and disclose the proforma impact in the
notes to the consolidated financial statements.
3. RELATED PARTY TRANSACTIONS
The Company has 5-year notes receivable bearing interest at 7% from three
officer-stockholders in the aggregate amount of $363,730 as of March 31, 1996.
The notes provide for annual principal payments of $72,746.
On March 31, 1996, a stockholder of Assessment Solutions transferred 521,000
shares of common stock in PRI to Assessment Solutions in full settlement of a
note receivable from the stockholder in the amount of $250,000. In the
consolidated financial statements, the investment in PRI has been accounted
for as a reduction of additional paid-in capital. A director of the Company is
also a partner of the law firm that is the Company's general counsel. Expenses
incurred by the Company for legal services provided by this law firm were
approximately $38,000 for the year ended March 31, 1996.
F-10
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1996 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
4. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------- DECEMBER 31,
1995 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
Furniture and equipment.................... $1,093,305 $1,373,100 $2,638,413
Leasehold improvements..................... 110,393 110,393 301,491
---------- ---------- ----------
1,203,698 1,483,493 2,939,904
Less, accumulated depreciation and
amortization............................... 801,674 962,769 1,176,656
---------- ---------- ----------
$ 402,024 $ 520,724 $1,763,248
========== ========== ==========
</TABLE>
Depreciation and amortization expense relating to property and equipment was
$105,532, $141,101 and $161,095 for the years ended March 31, 1994, 1995 and
1996, respectively. Depreciation and amortization expense relating to property
and equipment was $100,995 and $213,886 for the nine months ended December 31,
1995 and 1996, respectively.
5. NOTES PAYABLE TO BANK
Notes payable to bank at March 31, 1996 and December 31, 1996 include
outstanding lines of credit from a bank of $100,000 and $750,000 which are
payable on demand and bear interest at the bank's prime rate (8.25% at
December 31, 1996) plus 1%. The weighted average interest rate of the
borrowings for the years ended March 31, 1996 and the nine months ended
December 31, 1996 was 9.25%. The Company also has a standby letter of credit
with a bank in the amount of $509,000 in connection with a lease for office
space which reduces the amount available under the lines of credit. The unused
amount under these lines of credit at December 31, 1996 is $1,991,000.
The Company also has a $1.9 million line of credit available for furniture
and equipment purchases to be utilized in connection with expansion of
existing and new facilities. As the purchased assets are placed in service by
the Company, the borrowings convert to five year term loans with interest
payable at the bank's prime rate plus 1%. As of December 31, 1996, there was
approximately $388,785 outstanding under this facility, of which $59,275 is
due within one year and is included in notes payable to bank.
As of March 31, 1995, the Company had a $58,333 note payable to a bank,
which matured in October 1995 and bore interest at the bank's prime rate plus
1%.
All of the debt is collateralized by substantially all the assets of the
Company and is guaranteed by two principal stockholders.
6. LEASE COMMITMENTS
The Company leases facilities under various operating leases which expire on
various dates through 2006. The leases include escalations for operating
expenses and real estate taxes. Rent expense charged to operations was
$444,000, $483,000, and $584,000 for the years ended March 31, 1994, 1995 and
1996, respectively and $441,000 and $542,000 for the nine months ended
December 31, 1995 and 1996, respectively.
The Company relocated one of its corporate offices during fiscal 1995. The
Company received $217,000 from its former landlord to terminate its office
lease. This amount is recognized as other income in the 1995 consolidated
statement of income. Also included in the income from lease termination is
$76,322 relating to the reversal of accrued straight line lease adjustments
offset by a $17,120 loss on the write-off of leasehold improvements.
F-11
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1996 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
As of March 31, 1996, future minimum annual rental payments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1997............................................................ $643,000
1998............................................................ 579,000
1999............................................................ 560,000
2000............................................................ 529,000
2001............................................................ 280,000
Thereafter...................................................... 177,000
</TABLE>
7. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------- --------------------
1994 1995 1996 1995 1996
------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Current:
Federal...................... $ 3,856 $285,142 $430,818 $330,345 $ 909,397
State and local.............. 31,651 187,051 258,580 199,488 549,167
Deferred...................... 25,434 (4,317) (7,943) (4,987) (13,728)
------- -------- -------- -------- ----------
$60,941 $467,876 $681,455 $524,846 $1,444,836
======= ======== ======== ======== ==========
</TABLE>
The difference between the effective federal income tax provision calculated
using statutory rates and the actual provision recorded is due principally to
the effect of state and local income taxes and the portion of travel and
entertainment expenses which is not deductible and for the nine months ended
December 31, 1996 the non-deductibility of intangible assets arising in the
Reorganization. The tax provision for the nine months ended December 31, 1996
also includes a $96,000 charge pertaining to a recently completed examination
by the Internal Revenue Service of the 1993 and 1994 tax returns of Assessment
Solutions. Deferred tax assets, which are not material, are included in
prepaid expenses and other current assets and relate primarily to depreciation
and accrued rent payable.
8. RETIREMENT PLANS
PRI had a noncontributory defined contribution plan covering substantially
all employees. The Company contributed an amount equal to one percent of
participants' wages for those individuals who met eligibility requirements.
Contributions approximated $6,900 for the year ended March 31, 1995. Effective
November 30, 1995, the plan was terminated. All employee account balances were
distributed based on their balances as of such date.
The Company has a 401(k) profit sharing plan, covering substantially all
employees. Employees can contribute to a maximum of 15% of their earnings up
to IRS limitations. Contributions can be made by the Company on a
discretionary basis and vest over a five year period. No Company contributions
have been made under this plan.
F-12
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1996 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
9. STOCK OPTION PLAN
In August 1991, the shareholders of PRI approved the adoption of a Stock
Option Plan (the "Plan") pursuant to which a maximum 100,000 shares of Common
Stock were available to be issued for non-qualified options. At March 31,
1996, fully vested options to acquire 100,000 shares of Common Stock at an
average price of $.48 per share were issued and outstanding. No options issued
under the Plan had been exercised or expired through March 31, 1996. In
connection with the reorganization, the Plan was terminated and all option
holders exchanged their options for 51,692 options from the newly formed Stock
Option and Grant Plan of the Company. (See Note 11)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, variable rate notes payable and notes receivable
from stockholders are reflected in the accompanying balance sheet at amounts
considered by management to reasonable approximate fair value. The Company
estimates the fair value of its long-term notes receivable and payable using
discounted cash flow analyses based upon current interest rates of notes with
similar maturities.
11. SUBSEQUENT EVENTS
Initial Public Offering
The Company is contemplating an initial public offering (the "Offering") of
2,200,000 shares of common stock. The Company anticipates to use the net
proceeds to pay down debt and for general corporate purposes.
Common Stock Warrants
In connection with the Offering the Company has sold to the representatives
of the underwriters at nominal consideration warrants to acquire 220,000
shares of Common Stock during the four year period commencing one year after
the date of the Offering at an exercise price equal to 150% of the Offering
price per common share.
Stock Option and Grant Plan
The Company's Stock Option and Grant Plan (the "Option Plan") was adopted by
the Company's Board of Directors as of March 31, 1996 and approved by its
stockholders on January 16, 1997. Officers, directors, employees, consultants
and key persons of the Company will be eligible to participate in the Option
Plan. The Option Plan provides that options for an aggregate of 800,000 shares
of Common Stock are available for award. As of December 31, 1996 there were
51,692 options outstanding at a weighted average price of $5.70.
Stock Purchase Plan
In January 1997, the Company created an Employee Stock Purchase Plan (the
"Stock Purchase Plan") which provides for eligible employees to purchase
shares of Common Stock, at a discount (85% of the offering price of the Common
Stock on the offering date or the exercise date, whichever is lower), through
regular period salary reductions of up to 10% of their pre-tax gross
compensation. A maximum of 250,000 shares of Common Stock may be issued under
the Stock Purchase Plan. The first offering under the Stock Purchase Plan will
begin on the commencement of the Offering and end on September 30, 1997. Under
applicable tax rules, an employee may purchase no more than $25,000 of the
fair market value worth of common stock in any calendar year (determined on
the first day of this offering period(s) in which such stock is purchased);
certain other tax limitations may apply. The Stock Purchase Plan is intended
to qualify as an employee stock purchase plan as defined in Section 423 of the
Internal Revenue Service Code.
F-13
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1996 AND FOR THE NINE MONTHS
ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
Directors' Stock Option Plan
In January 1997 the Company adopted a stock option and grant plan for non-
employee directors pursuant to which options to acquire a maximum aggregate of
50,000 shares of Common Stock may be granted to non-employee directors. The
options issued vest ratably over three years, expire ten years from grant date
and cannot have exercise prices less than the fair market value of the Common
Stock on date of grant. On January 15, 1997, 25,000 options were granted and
are exercisable at the Offering price.
Employment Agreements
In January 1997 the Company entered into employment agreements with three
key executives that expire on the third anniversary of the date upon which the
Company notifies the executive of the Company's intention to terminate (except
in the case of termination due to cause) their employment. The agreements
provide for an aggregate salary of $730,000 per annum plus fringe benefits and
an annual bonus to be determined by the Board of Directors. Each employment
agreement includes a covenant not to compete with the Company for a period of
three years after employment ceases.
Notes Payable to Bank
Effective on the Offering date, the Company will have an additional line of
credit from its bank containing generally the same provisions as its current
line of credit with borrowings up to $7,000,000 and the release of the
personal guarantees of two principal shareholders.
Common Stock
Effective on the Offering date, the Company's Articles of Incorporation will
be restated to increase the number of authorized shares of Common Stock to 18
million shares.
Preferred Stock
Effective on the Offering date, the Board of Directors of the Company is
authorized, without further action of the stockholders of the Company, to
issue up to 2,000,000 shares of Preferred Stock in one or more classes or
series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series or the designation of such series. However, pursuant to the
Certificate, the holders of Preferred Stock would not have cumulative voting
rights with respect to the election of directors. Any such Preferred Stock
issued by the Company may rank prior to the Common Stock as to dividend
rights, liquidation preference or both, may have full or limited voting rights
and may be convertible into shares of Common Stock.
Stock Dividend
In January 1997 the Company's Board of Directors declared an approximately
1.06 for 1 stock split to be effected as a stock dividend on the date of the
prospectus. All references in the financial statements to shares of Common
Stock have been retroactively adjusted to reflect this stock split to be
effected as a stock dividend.
F-14
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IF GIVEN OR MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SO-
LICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JU-
RISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
The Company.............................................................. 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 11
Dividend Policy.......................................................... 11
Capitalization........................................................... 12
Dilution................................................................. 13
Selected Financial and Operating Data.................................... 14
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
Business................................................................. 24
Management............................................................... 32
Principal and Selling Stockholders....................................... 37
Certain Transactions..................................................... 38
Description of Capital Stock............................................. 39
Shares Eligible for Future Sale.......................................... 42
Underwriting............................................................. 44
Legal Matters............................................................ 46
Experts.................................................................. 46
Change in Independent Accountants........................................ 46
Special Note Regarding Forward-Looking Statements........................ 46
Additional Information................................................... 47
Index to Consolidated Financial Statements............................... F-1
</TABLE>
------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,200,000 SHARES
[LOGO OF ASI SOLUTIONS INCORPORATED]
ASI SOLUTIONS
INCORPORATED
COMMON STOCK
------------
PROSPECTUS
------------
JANNEY MONTGOMERY SCOTT INC.
H.C. WAINWRIGHT & CO., INC.
March , 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses payable by the
Company in connection with the issuance and distribution of the Common Stock:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 6,134.00
Nasdaq National Market Listing Filing Fee....................... 34,563.00
NASD Filing Fee................................................. 2,524.00
Printing and Engraving.......................................... 150,000.00
Accountant's Fees and Expenses.................................. 200,000.00
Legal Fees and Expenses......................................... 250,000.00
Transfer Agent and Registrar Fees............................... 10,000.00
Blue Sky Fees and Expenses (including attorney's fees).......... 5,000.00
Miscellaneous................................................... 41,779.00
-----------
Total......................................................... $700,000.00
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation, subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware. Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify, subject to the standards therein
prescribed, any person in connection with any action, suit or proceeding
brought or threatened by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or was serving as such
with respect to another corporation or other entity at the request of such
corporation.
The Company's Certificate provides that each person who was or is made a
party to (or is threatened to be made a party to) or is otherwise involved in
any civil or criminal action, suit or proceeding by reason of the fact that
such person is or was a director or officer of the Company shall be
indemnified and held harmless by the Company to the fullest extent authorized
by Section 145 of the General Corporation Law of the State of Delaware against
all expense, liability and loss (including without limitation attorneys' fees)
incurred by such person in connection therewith.
Nothing contained in the Company's Certificate shall eliminate or limit the
liability of directors (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law;
(iii) under Section 174 of the General Corporation Law of the State of
Delaware; or (iv) for any transaction from which the director derived an
improper personal benefit.
The Company maintains directors and officers liability insurance covering
all directors and officers of the Company against claims arising out of the
performance of their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information reflects sales by the Company of unregistered
securities within the past three years. There were no underwriters involved in
the transactions and there were no underwriting discounts or commissions paid
in connection therewith. The issuances of the securities exchanged or sold in
the transactions referenced below were not registered under the 1933 Act in
reliance on the exemption in Section 4(2) of the 1933 Act, as amended, and the
regulations promulgated thereunder. The purchasers of securities in each
II-1
<PAGE>
transaction described below represented their intention to acquire the
securities for investment only and not with a view to or for sale in
connection with any distribution thereof. All purchasers of securities in each
such transaction had access to adequate information concerning the Company.
1. The Company entered into an agreement and plan of reorganization as of
March 31, 1996 (the "Reorganization") with all of the shareholders of
Proudfoot Reports Incorporated ("Proudfoot") and shareholders owning 95% of
the Common Stock of Assessment Systems Incorporated ("Assessment Solutions").
The Reorganization resulted in the issuance of 1,040,346 shares of the
Company's Common Stock in exchange for all of the shares of Proudfoot common
stock and the issuance of 3,870,086 shares of the Company's Common Stock in
exchange for 95% of the Assessment Solutions common stock. As a result of the
Reorganization, Assessment Solutions received 285,274 shares of the Company's
Common Stock which Assessment Solutions then contributed to the capital of the
Company. Subsequent to the Reorganization, the following individuals held the
amount of shares of the Company's Common Stock set forth below:
<TABLE>
<S> <C>
Bernard F. Reynolds......................................... 2,783,742 shares
Eli Salig................................................... 1,269,224 shares
Seymour Adler, Ph.D......................................... 239,280 shares
Tod Parrott................................................. 208,070 shares
F. S. Smith................................................. 124,842 shares
</TABLE>
2. On March 31, 1996 in connection with the Reorganization, Bernard F.
Reynolds, Eli Salig and Seymour Adler, officers of the Company, issued five-
year notes bearing 7% interest to the Company in the amount of $363,732. The
notes provide for annual principal payments of $72,746 and are currently
outstanding.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
*3.1 Form of First Restated Certificate of Incorporation of the Company
*3.2 Form of By-laws of the Company
4.1 Specimen of Common Stock Certificate
5.1 Opinion of Koerner Silberberg & Weiner, LLP as to the legality of the
Common Stock being registered
10.1 Form of Warrant Agreement by and between the Company, H.C. Wainwright
& Co., Inc. and Janney Montgomery Scott Inc.
10.2 Registration Rights Agreement between the Company, Bernard F.
Reynolds, Eli Salig and Seymour Adler, Ph.D.
*10.3 Form of Stock Option and Grant Plan of the Company
*10.4 Form of Director's Stock Option Plan of the Company
*10.5 Revised Form of Employee Stock Purchase Plan of the Company
10.6 Employment Agreement between the Company and Bernard F. Reynolds
10.7 Employment Agreement between the Company and Eli Salig
10.8 Employment Agreement between the Company and Seymour Adler, Ph.D.
*10.9 Sublease dated July 2, 1996 between ASI and Nikon Inc. regarding the
space at 1300 Walt Whitman Road, Melville, New York
*10.10 Lease dated January 27, 1984 between ASI and 780 Third Avenue
Associates regarding the space at 780 Third Avenue, New York, New
York, and the Third Amendment to the lease dated August 7, 1996
*10.11 Sublease dated October 6, 1994 between Proudfoot and Nikon, Inc.
regarding the space at 1300 Walt Whitman Road, Melville, New York, and
the Amendment to the sublease, dated July 2, 1996
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.12 Lease dated January 25, 1996 between ASI and Pruneyard Associates
regarding the space at 1999 South Bascom Avenue, Campbell, California
10.13 Revised Commitment letter dated March 3, 1997 between the Company and
Fleet Bank, N.A.
+10.14 Agreement by and between Assessment Systems, Inc. and Telesector
Resources Group, Inc. ("NYNEX")
*16.1 Letter regarding change in certifying accountant
*21.1 List of Subsidiaries of the Company
23.1 Consent of Koerner Silberberg & Weiner, LLP (Included in Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of William W. Oliver, C.P.A.
*24.1 Power of Attorney (Included in page II-5)
27.1 Revised Financial Data Schedule
</TABLE>
- --------
*Previously filed
+Confidential treatment has been requested as to a portion of this document.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide the Underwriter at the closing
specified in the Underwriting Agreement, certificates in such denominations
and registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions referred to under Indemnification of Directors and
Officers or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the 1933
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A of the 1933 Act and
contained in a form of Prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the 1933 Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 1933 Act, each
post-effective amendment that contains a form of Prospectus shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company, has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunder duly authorized in the City of New York, State of New
York on March , 1997.
ASI SOLUTIONS INCORPORATED
/s/ Bernard F. Reynolds
By: ..................................
Bernard F. Reynolds
Chief Executive Officer and
Chairman
of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Bernard F. Reynolds Chairman of the Board and
............................ Chief Executive Officer March , 1997
BERNARD F. REYNOLDS
President and Chief
* Operating Officer March , 1997
............................
ELI SALIG
Executive Vice President
* March , 1997
............................
SEYMOUR ADLER, PH.D.
* Vice President and Chief March , 1997
............................ Financial Officer
WILLIAM B. FUCARINO (Principal Financial
Officer and Principal
Accounting Officer)
Director
* March , 1997
............................
DAVID TORY
Director
* March , 1997
............................
MICHAEL J. BOYLAN
Director
* March , 1997
............................
ILAN KAUFTHAL
Secretary and Director
* March , 1997
............................
CARL SELDIN KOERNER, ESQ.
/s/ Bernard F. Reynolds
* By: .....................
BERNARD F. REYNOLDS,
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
*3.1 Form of First Restated Certificate of Incorporation of the
Company
*3.2 Form of By-laws of the Company
4.1 Specimen of Common Stock Certificate
5.1 Opinion of Koerner Silberberg & Weiner, LLP as to the legality
of the Common Stock being registered
10.1 Form of Warrant Agreement by and between the Company, H.C.
Wainwright & Co., Inc. and Janney Montgomery Scott Inc.
10.2 Registration Rights Agreement between the Company, Bernard F.
Reynolds, Eli Salig and Seymour Adler, Ph.D.
*10.3 Form of Stock Option and Grant Plan of the Company
*10.4 Form of Director's Stock Option Plan of the Company
*10.5 Revised Form of Employee Stock Purchase Plan of the Company
10.6 Employment Agreement between the Company and Bernard F.
Reynolds
10.7 Employment Agreement between the Company and Eli Salig
10.8 Employment Agreement between the Company and Seymour Adler,
Ph.D.
*10.9 Sublease dated July 2, 1996 between ASI and Nikon Inc.
regarding the space at 1300 Walt Whitman Road, Melville, New
York
*10.10 Lease dated January 27, 1984 between ASI and 780 Third Avenue
Associates regarding the space at 780 Third Avenue, New York,
New York, and the Third Amendment to the lease dated August 7,
1996
*10.11 Sublease dated October 6, 1994 between Proudfoot and Nikon,
Inc. regarding the space at 1300 Walt Whitman Road, Melville,
New York, and the Amendment to the sublease, dated July 2, 1996
*10.12 Lease dated January 25, 1996 between ASI and Pruneyard
Associates regarding the space at 1999 South Bascom Avenue,
Campbell, California
10.13 Commitment letter dated March 3, 1997 between the Company and
Fleet Bank, N.A.
+10.14 Agreement by and between Assessment Systems, Inc. and
Telesector Resources Group, Inc. ("NYNEX")
*16.1 Letter regarding change in certifying accountant
*21.1 List of Subsidiaries of the Company
23.1 Consent of Koerner Silberberg & Weiner, LLP (Included in
Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of William W. Oliver, C.P.A.
*24.1 Power of Attorney (Included in page II-5)
27.1 Revised Financial Data Schedule
</TABLE>
- --------
*Previously filed
+Confidential treatment has been requested as to a portion of this document.
<PAGE>
EXHIBIT 1.1
2,200,000 Shares/1/
ASI SOLUTIONS INCORPORATED
Common Stock
UNDERWRITING AGREEMENT
_________________, 1997
H.C. Wainwright & Co., Inc.
Janney Montgomery Scott Inc.
As Representatives of the several Underwriters
c/o H.C. Wainwright & Co., Inc.
One Boston Place
Boston, Massachusetts 02108
Dear Sirs and Madams:
ASI Solutions Incorporated, a Delaware corporation (the "Company"),
proposes to issue and sell 2,200,000 shares (the "Firm Shares") of its
authorized but unissued Common Stock. Certain stockholders of the Company named
in Schedule II hereto (the "Selling Stockholders") also propose to grant to the
Underwriters (as defined below) an option to purchase up to 330,000 additional
shares of Common Stock (the "Optional Shares" and, with the Firm Shares,
collectively, the "Shares"). The Common Stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned.
The Company and the Selling Stockholders hereby confirm the agreements made
with respect to the purchase of the Shares by the several underwriters, for whom
you are acting, named in Schedule I hereto (collectively, the "Underwriters,"
which term shall also include any underwriter purchasing Shares pursuant to
Section 3(b) hereof). You represent and warrant that you have been authorized
by each of the other Underwriters to enter into this Underwriting Agreement (the
"Agreement") on its behalf and to act for it in the manner herein provided.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
STOCKHOLDERS. The Company and each of the Selling Stockholders hereby represent
and warrant to the several Underwriters as of the date hereof and as of each
Closing Date (as defined below) that:
(a) The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 33-_____), including
the related preliminary prospectus, for the registration under the Securities
Act of 1933, as amended (the "Securities Act") of the Shares. Copies of such
registration statement and of each amendment thereto, if any, including the
related preliminary prospectus (meeting the requirements of Rule 430A of the
rules and regulations of the Commission) heretofore filed by the Company with
the Commission have been delivered to you.
The term Registration Statement as used in this Agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and
/1/ Plus an option to purchase from the Selling Stockholders up to 330,000
additional shares to cover over-allotments.
<PAGE>
contained in the Prospectus referred to below, in the form in which it became
effective, and any registration statement filed pursuant to Rule 462(b) of the
rules and regulations of the Commission with respect to the Shares (a "Rule
462(b) registration statement"), and, in the event of any amendment thereto
after the effective date of such registration statement (the "Effective Date"),
shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended (including any Rule 462(b) registration
statement). The term Prospectus as used in this Agreement shall mean the
prospectus relating to the Shares first filed with the Commission pursuant to
Rule 424(b) and Rule 430A (or if no such filing is required, as included in the
Registration Statement) and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the filing
with the Commission of such supplement or the effectiveness of such amendment)
such prospectus as so supplemented or amended. The term Preliminary Prospectus
as used in this Agreement shall mean each preliminary prospectus included in
such registration statement prior to the time it becomes effective.
(b) The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
(c) Each of the Company and its subsidiaries has been duly incorporated and
each is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and authority to own
or lease its properties and conduct its business as described in the
Registration Statement and the Prospectus and as being conducted, and is duly
qualified as a foreign corporation and in good standing in all jurisdictions in
which the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole).
(d) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 21.1 to the Registration Statement. Except as otherwise described in
the Prospectus, the Company owns all of the outstanding capital stock of its
subsidiaries free and clear of all claims, liens, charges and encumbrances. The
Company and each of its subsidiaries are in possession of, and operating in
compliance with, all material authorizations, licenses, permits, consents,
certificates and orders material to the conduct of their respective businesses
as described in the Prospectus, all of which are valid and in full force and
effect.
(e) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any material
adverse change in the business, properties, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business,
other than as set forth in the Registration Statement and the Prospectus, and
since such dates, except in the ordinary course of business, neither the Company
nor any of its subsidiaries has entered into any material transaction not
referred to in the Registration Statement and the Prospectus.
(f) The Registration Statement and the Prospectus comply and on the Closing
Date (as hereinafter defined) and any later date on which Optional Shares are to
be purchased, the Prospectus will comply, in all material respects, with the
provisions of the Securities Act and the rules and regulations of the Commission
thereunder; on the Effective Date, the Registration Statement did not contain
any untrue statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; and, on the Effective Date the Prospectus did not and,
on the Closing Date and
2
<PAGE>
any later date on which Optional Shares are to be purchased, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties in this paragraph shall apply to
statements in, or omissions from, the Registration Statement or the Prospectus
made in reliance upon and in conformity with information herein or otherwise
furnished in writing to the Company by or on behalf of the Underwriters for use
in the Registration Statement or the Prospectus.
(g) The Company has authorized and outstanding capital stock as set forth
under the heading "Capitalization" in the Prospectus. The issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company and the related notes
thereto included in the Prospectus, neither the Company nor any subsidiary has
any outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required by the Securities Act and the rules and regulations promulgated
thereunder ("Rules and Regulations") to be shown with respect to such plans,
arrangements, options and rights.
(h) The Shares are duly authorized, are (or, in the case of Shares to be
sold by the Company, will be, when issued and sold to the Underwriters as
provided herein) validly issued, fully paid and nonassessable and conform to the
description thereof in the Prospectus. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
transfer and sale of the Shares to be sold by the Selling Stockholders or the
issuance and sale of the Shares to be sold by the Company as contemplated
herein.
(i) The Warrants (as defined in Section 6(p) below) will conform to the
description thereof in the Prospectus and, when sold to and paid for by the
Representatives in accordance with the Warrant Agreement (as defined in Section
6(p) below), will be duly authorized and validly issued and will be valid and
binding obligations of the Company entitled to all the benefits of the Warrant
Agreement. The Warrant Shares (as defined in Section 6(p) below) will be duly
authorized and reserved for issuance upon exercise of the Warrants and, when
issued upon such exercise in accordance with the terms of the Warrants and the
Warrant Agreement, will be duly and validly issued, fully paid and
nonassessable, free of preemptive rights and will conform to the description
thereof in the Prospectus.
(j) Prior to the Closing Date, (i) the Shares to be issued and sold by the
Company and to be sold by the Selling Stockholders and (ii) the Warrant Shares,
will be authorized for listing on the Nasdaq National Market upon official
notice of issuance.
(k) The Shares to be sold by the Company will be sold free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest, and
will conform to the description thereof contained in the Prospectus. Except as
described in the Prospectus, no preemptive right, co-sale right, registration
right, right of first refusal or other similar right to subscribe for or
purchase securities of the Company exists with respect to the issuance and sale
of the Shares by the Company pursuant to this Agreement. No stockholder of the
Company has any right which has not been waived, or complied with, to require
the Company to register the sale of any shares owned by such stockholder under
the Securities Act in the public offering contemplated by this Agreement.
3
<PAGE>
(l) The Company has all requisite corporate power and authority to enter
into this Agreement and perform the transactions contemplated hereby and
thereby. This Agreement and the Warrant Agreement have been duly authorized,
executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium laws affecting creditors' rights
generally and except as to those provisions relating to rights to indemnity or
contribution for liabilities arising under federal and state securities laws.
The making and performance of this Agreement and the Warrant Agreement by the
Company and the consummation of the transactions contemplated hereby and thereby
(i) will not violate any provisions of the Certificate of Incorporation, Bylaws
or other organizational documents of the Company or any of its subsidiaries, and
(ii) will not conflict with, result in a material breach or violation of, or
constitute, either by itself or upon notice or the passage of time or both, a
material default under (A) any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective properties may be bound or affected, or
(B) any statute or any authorization, judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or other
governmental body applicable to the Company and its subsidiaries, taken as a
whole, or to which any of their respective properties are subject. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body that has not already been
obtained is required for the execution and delivery of this Agreement and the
Warrant Agreement or the consummation of the transactions contemplated by this
Agreement and the Warrant Agreement, except for compliance with the Securities
Act, the Blue Sky laws applicable to the public offering of the Shares by the
several Underwriters and the clearance of such offering with the National
Association of Securities Dealers, Inc. (the "NASD") and the listing of the
Shares on the Nasdaq National Market System.
(m) The consolidated financial statements and schedules of the Company and
the related notes thereto included in the Registration Statement and the
Prospectus present fairly on a consolidated basis the financial position of the
Company and its subsidiaries as of the respective dates of such financial
statements and schedules, and the results of operations and cash flows of the
Company and its subsidiaries for the respective periods covered thereby. Such
statements, schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods specified, as certified by the independent accountants
named in subsection 10(f) (except to the extent that certain footnote
disclosures regarding any stub period may have been omitted in accordance with
the applicable rules of the Commission under the Exchange Act). No other
financial statements or schedules are required to be included in the
Registration Statement. The selected financial data set forth in the Prospectus
under the captions "Capitalization" and "Selected Financial and Operating Data"
fairly present the information set forth therein on the basis stated in the
Registration Statement.
(n) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The representations and warranties given by the Company and its
officers to its independent public accountants for the purpose of supporting the
letters referred to in Sections 10(f) and (g) are true and correct.
(o) Neither the Company nor any of its subsidiaries is (i) in violation or
default of any provision of its Certificate of Incorporation, Bylaws or other
organizational documents, or (ii) in material breach of, or default with respect
to, any provision of any agreement, judgment, decree, order, mortgage, deed of
trust, lease, franchise,
4
<PAGE>
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any state
of facts which, with notice or lapse of time or both, would constitute such a
breach or default on the part of the Company and its subsidiaries, taken as a
whole.
(p) There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have not
been described or filed as an exhibit to the Registration Statement as required.
The contracts so described in the Prospectus are in full force and effect on the
date hereof.
(q) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best knowledge of
the Company and the Selling Stockholders, threatened to which the Company or any
of its subsidiaries is or is threatened to be made a party or of which property
owned or leased by the Company or any of its subsidiaries is or has been
threatened to be made the subject, which actions, suits or proceedings could,
individually or in the aggregate, prevent or materially adversely affect the
transactions contemplated by this Agreement or the Warrant Agreement or result
in a material adverse change in the business, properties, condition (financial
or otherwise), or results of operations of the Company and its subsidiaries,
taken as a whole; there are no outstanding claims, asserted or otherwise,
against the Company, any of its subsidiaries, or any of their respective
officers or directors, for violations of any federal or state securities laws,
or any other applicable laws, relating to any purchase, sale, or redemption of,
or other transaction with respect to, the Common Stock or shares of capital
stock of any of the Company's subsidiaries; and no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent which
could materially adversely affect the business, properties, condition
(financial or otherwise), or results of operations of the Company or its
subsidiaries, taken as a whole. Neither the Company nor any of its subsidiaries
is a party or subject to the provisions of any material injunction, judgment,
decree or order of any court, regulatory body, administrative agency or other
governmental body. Except as disclosed in the Prospectus, there are no material
legal or governmental actions, suits or proceedings pending or, to the Company's
and the Selling Stockholders' best knowledge, threatened against any executive
officers or directors of the Company.
(r) The Company or the applicable subsidiary has good title to all the
properties and assets reflected as owned in the financial statements hereinabove
described (or elsewhere in the Prospectus), subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those, if any, reflected in
such financial statements (or elsewhere in the Prospectus), or (ii) those which
are not material in amount to the Company and its subsidiaries, taken as a
whole, and do not adversely affect the use made and proposed to be made of such
property by the Company or its subsidiaries. The Company or the applicable
subsidiary holds its leased properties under valid and binding leases. Except
as described in the Prospectus, the Company owns or leases all such properties
as are necessary to its operations as now conducted or as proposed to be
conducted.
(s) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not (A) incurred any material liabilities or obligations,
indirect, direct or contingent, or (B) entered into any oral or written
agreement or other transaction, which in the case of (A) or (B) is not in the
ordinary course of business; (ii) the Company and its subsidiaries have not
sustained any material loss or interference with their respective businesses or
properties from fire, flood, windstorm, accident or other calamity, whether or
not covered by insurance; (iii) the Company and its subsidiaries have not paid
or declared any dividends or other distributions with respect to their
respective capital stock and the Company and its subsidiaries are not in default
in the payment of principal or interest on any outstanding debt obligations;
(iv) there has not been any change in the capital stock of the Company or its
subsidiaries (other than upon the sale of the Shares hereunder or upon the
exercise of any options or warrants disclosed in the Prospectus); (v) there has
not been any material increase in the short- or long-term debt of the Company
and its subsidiaries; and (vi) there has not
5
<PAGE>
been any material adverse change or any development involving or which may
reasonably be expected to involve a prospective material adverse change, in the
business, condition (financial or otherwise), properties, or results of
operations of the Company and its subsidiaries, taken as a whole.
(t) The Company and its subsidiaries are conducting business in compliance
with all applicable laws, rules and regulations of the jurisdictions in which
they are conducting business, except where the failure to be so in compliance
would not have a material adverse effect on the business, properties, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole .
(u) The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns, and all such tax returns are
complete and correct in all material respects, and the Company and its
subsidiaries have not failed to pay any taxes which were payable pursuant to
said returns or any assessments with respect thereto. The Company has no
knowledge of any tax deficiency which has been or is likely to be threatened or
asserted against the Company or its subsidiaries.
(v) The Company has not distributed, and will not distribute prior to the
later to occur of (i) completion of the distribution of the Shares, or (ii) the
expiration of any time period within which a dealer is required under the
Securities Act to deliver a prospectus relating to the Shares, any offering
material in connection with the offering and sale of the Shares other than the
Prospectus, the Registration Statement and any other materials permitted by the
Securities Act and consented to by the Underwriters.
(w) Each of the Company and its subsidiaries maintains insurance of the
types and in the amounts generally deemed adequate for their business,
including, but not limited to, directors' and officers' insurance, insurance
covering real and personal property owned or leased by the Company and its
subsidiaries against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect. The Company has not been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially adversely affect the business,
properties, condition (financial or otherwise) or results of operations of the
Company or its subsidiaries, taken as a whole.
(x) Neither the Company nor any of its subsidiaries nor, to the best of the
Company's or the Selling Stockholder's knowledge, any of their employees or
agents has at any time during the last five years (i) made any unlawful
contribution to any candidate for foreign office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment to any foreign,
federal or state governmental officer or official or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
(y) Neither the Company nor any Selling Stockholder has taken and will not
take, directly or indirectly, any action designed to or that might be reasonably
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(z) The Company has caused (i) each of its executive officers and directors
as set forth in the Prospectus and (ii) the holders of all of the outstanding
Common Stock (and shares issuable upon the exercise or conversion of any option
that vests prior to October 1, 1997, warrant or other security) to furnish to
the Underwriters an agreement in form and substance satisfactory to H.C.
Wainwright & Co., Inc. pursuant to which each such party has agreed that during
the period of one hundred eighty (180) days after the date the Registration
Statement becomes effective, without the prior written consent of H.C.
Wainwright & Co., such party will not, directly or indirectly, offer, sell,
pledge, contract to sell, grant any option to purchase or otherwise dispose of
any
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shares of Common Stock beneficially owned or otherwise held by such party
(including, without limitation, shares of Common Stock which may be deemed to be
beneficially owned by such party in accordance with the rules and regulations of
the Securities and Exchange Commission and shares of Common Stock which may be
issued upon exercise of a stock option or warrant) or any securities convertible
into, derivative of or exercisable or exchangeable for such Common Stock;
provided, however, that if such party is an individual, he or she may transfer
any or all of the Common Stock held by such party either during his or her
lifetime or on death, by gift, will or intestacy, to his or her immediate family
or to a trust the beneficiaries of which are exclusively such party and/or a
member or members of his or her immediate family (any of such transferees are
hereinafter referred to as a "Permitted Transferee"); provided, that in any such
case the Permitted Transferee executes a lock-up agreement in substantially the
same form covering the remainder of the lock-up period.
(aa) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba.
(bb) Except as specifically disclosed in the Prospectus, the Company and
its subsidiaries have sufficient trademarks, trade names, copyrights, licenses,
approvals and governmental authorizations to conduct their businesses as now
conducted; the expiration or absence of any trademarks, trade names, copyrights,
licenses, approvals or governmental authorizations would not have a material
adverse effect on the business, properties, condition (financial or otherwise)
or results of operations of the Company or its subsidiaries; neither the Company
nor any Selling Stockholder has any knowledge of any infringement by the Company
or its subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and no claims have
been made or are threatened against the Company or its subsidiaries regarding
trademark, trade name, copyright, license, trade secret or other infringement
which could have a material adverse effect on the business, business prospects,
properties, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries, taken as a whole.
(cc) Except as disclosed in the Prospectus, (i) the Company and its
subsidiaries are in compliance in all material respects with all material rules,
laws and regulations relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to their business, (ii) neither the Company nor any
of its subsidiaries has received any notice from any governmental authority or
third party of an asserted claim under Environmental Laws, (iii) no facts
currently exist that will require the Company or any of its subsidiaries to make
future material capital expenditures to comply with Environmental Laws, and (iv)
to the knowledge of the Company and Selling Stockholders, no property which is
or has been owned, leased or occupied by the Company or any of its subsidiaries
has been designated as a Superfund site pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C.Section 9601, et seq.), or otherwise designated as a contaminated site
under applicable state or local law.
(dd) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 2. ADDITIONAL REPRESENTATIONS AND WARRANTIES, AND COVENANTS, OF
THE SELLING STOCKHOLDERS.
Each of the Selling Stockholders represents and warrants and covenants to
the several Underwriters as of the date hereof and as of each Closing Date
hereinafter mentioned that:
(a) Such Selling Stockholder is the sole shareholder of record of, and has
good title to, the Shares to be sold by such Selling Stockholder hereunder, free
and clear of all liens, encumbrances, pledges, charges,
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security interests and claims whatsoever, with full right and authority to
deliver the same hereunder, subject, in the case of each Selling Stockholder, to
the rights of_________________, as Custodian (the "Custodian"), and that upon
the delivery of and payment for such Shares hereunder, each Underwriter who
takes such Shares without knowledge of any adverse claim will acquire all the
rights of such Selling Stockholder in such Shares free of any adverse claim,
lien in favor of the issuer and restriction on transfer imposed by the issuer.
(b) Certificates in negotiable form for the Shares to be sold by such
Selling Stockholder have been placed in custody under a Custody Agreement for
delivery under this Agreement with the Custodian; such Selling Stockholder
specifically agrees that the Shares represented by the certificates so held in
custody for such Selling Stockholder are subject to the interests of the several
Underwriters and the Company, that the arrangements made by such Selling
Stockholder for such custody, including the Power of Attorney provided for in
such Custody Agreement, are to that extent irrevocable, and that the obligations
of such Selling Stockholder shall not be terminated by any act of such Selling
Stockholder or by operation of law, whether by the death or incapacity of such
Selling Stockholder (or, in the case of a Permitted Transferee of a Selling
Stockholder that is not an individual, the dissolution or liquidation of such
Permitted Transferee) or the occurrence of any other event; if any such death,
incapacity, dissolution, liquidation or other such event should occur before the
delivery of such Shares, certificates for the Shares shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity, dissolution, liquidation or other event had not
occurred, regardless of whether the Custodian shall have received notice of
such death, incapacity, dissolution, liquidation or other event.
(c) Such Selling Stockholder has reviewed the Registration Statement and
Prospectus and, although such Selling Stockholder has not independently verified
the accuracy or completeness of all the information contained therein, nothing
has come to the attention of such Selling Stockholder that would lead such
Selling Stockholder to believe that (i) on the Effective Date, the Registration
Statement contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, (ii) on the Effective Date the
Prospectus contained and, on the Closing Date and any later date on which
Optional Shares are to be purchased contains, any untrue statement of a material
fact or omitted or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) All information in the Registration Statement or the Prospectus, or any
amendment or supplement thereto, relating to such Selling Stockholder
(including, without limitation, the information relating to the Selling
Stockholder which is set forth in the Prospectus under the caption "Principal
Stockholders"), and all representations and warranties of such Selling
Stockholder in the Custody Agreement are true and correct in all respects and do
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The sale of the Shares by such Selling Stockholder pursuant hereto
is not prompted by such Selling Stockholder's knowledge of any material
information concerning the Company or any subsidiary which is not set forth in
the Prospectus.
(e) Such Selling Stockholder has full power and authority to enter into
this Agreement and the Custody Agreement and perform the transactions
contemplated hereby and thereby. This Agreement and the Custody Agreement have
been duly authorized, executed and delivered by or on behalf of such Selling
Stockholder and the form of such Custody Agreement has been delivered to you.
(f) The making and performance of this Agreement and the Custody Agreement
and the consummation of the transactions contemplated hereby and thereby will
not result in a breach or violation by such Selling Stockholder of any of the
terms or provisions of, or constitute a default by such Selling Stockholder
under,
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any indenture, mortgage, deed of trust, trust (constructive or other), loan
agreement, lease, franchise, license or other agreement or instrument to which
such Selling Stockholder is a party or by which such Selling Stockholder or any
of its properties is bound, any statute, or any judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to such
Selling Stockholder or any of its properties.
SECTION 3. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell the
2,200,000 Firm Shares to the several Underwriters, and each of the Underwriters
agrees to purchase from the Company the respective aggregate number of Firm
Shares set forth opposite its name in Schedule I. The price at which such Firm
Shares shall be sold by the Company and purchased by the several Underwriters
shall be $___ per share. The obligation of each Underwriter to the Company
shall be to purchase from the Company that number of Firm Shares which
represents the same proportion of the total number of Firm Shares to be sold by
the Company pursuant to this Agreement as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto represents of the
total number of Firm Shares to be purchased by all Underwriters pursuant to this
Agreement, as adjusted by you in such manner as you deem advisable to avoid
fractional shares. In making this Agreement, each Underwriter is contracting
severally and not jointly; except as provided in paragraphs (b) and (c) of this
Section 3, the agreement of each Underwriter is to purchase only the respective
number of shares of the Firm Shares specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 9 or 10 hereof) to purchase and pay
for the number of Shares agreed to be purchased by such Underwriter or
Underwriters, the Company shall immediately give notice thereof to you, and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon between you
and such purchasing Underwriter or Underwriters and upon the terms herein set
forth, all or any part of Shares which such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters fail so to
make such arrangements with respect to all such shares and portion, the number
of Shares which each non-defaulting Underwriter is otherwise obligated to
purchase under this Agreement shall be automatically increased on a pro rata
basis to absorb the remaining shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase; provided, however, that the non-
defaulting Underwriters shall not be obligated to purchase the portion which the
defaulting Underwriter or Underwriters agreed to purchase if the aggregate
number of such Shares exceeds 10% of the total number of Shares which all
Underwriters agreed to purchase hereunder. If the total number of Shares which
the defaulting Underwriter or Underwriters agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such Shares and portion on the terms herein
set forth. In any such case, either you or the Company shall have the right to
postpone the Closing Date determined as provided in Section 5 hereof for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to Section 5 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 3(b) as if such party had originally been a
party to this Agreement and had been allocated the number of Shares actually
purchased by it as a result of its original commitment (if applicable) to
purchase Shares and its purchase of Shares pursuant to this Section 3(b). If
neither the non-defaulting Underwriters nor the Company shall make arrangements
within the 24-hour periods stated above for the purchase of all of the Shares
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter and
without
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any liability on the part of any non-defaulting Underwriter to the Company.
Nothing in this paragraph (b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein
contained, and subject to the terms and conditions herein set forth, the Selling
Stockholders hereby grant an option to the several Underwriters to purchase,
severally and not jointly up to 330,000 Optional Shares from the Selling
Stockholders at the same price per share as the Underwriters shall pay for the
Firm Shares, with the Optional Shares to be sold by each Selling Stockholder set
forth opposite the name of such Selling Stockholder on Schedule II hereto. Said
option may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters and may be exercised in whole or in part at any time
on or before the thirtieth day after the date of this Agreement upon written or
telegraphic notice by you to the Company setting forth the aggregate number of
Optional Shares as to which the several Underwriters are exercising the option.
Delivery of certificates for the Optional Shares, and payment therefor, shall be
made as provided in Section 5 hereof. The number of Optional Shares to be
purchased by each Underwriter shall be the same percentage of the total number
of Optional Shares to be purchased by the several Underwriters as such
Underwriter is purchasing of the Firm Shares, as adjusted by you in such manner
as you deem advisable to avoid fractional shares.
SECTION 4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of the
Shares to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information (insofar as such information relates to the
Underwriters) set forth in the last paragraph on the front cover page and under
"Underwriting" in the Registration Statement, any Preliminary Prospectus and the
Prospectus relating to the Shares constitutes the only information furnished by
the Underwriters to the Company for inclusion in the Registration Statement, any
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company and the Selling Stockholders
that the statements made therein are correct.
SECTION 5. DELIVERY OF AND PAYMENT FOR THE SHARES AND WARRANTS.
(a) Delivery of certificates for the Firm Shares, the Optional Shares (if
the option granted by Section 3(c) hereof shall have been exercised not later
than 10:00 A.M., Boston time, on the date two business days preceding the
Closing Date), and the Warrant Shares, and payment therefor, shall be made at
the office of Goodwin, Procter & Hoar LLP, Exchange Place, Boston,
Massachusetts at 10:00 a.m., Boston time, on the fourth business day after the
date of this Agreement, or at such time on such other day, not later than seven
full business days after such fourth business day, as shall be agreed upon in
writing by the Company and you. The date and hour of such delivery and payment
(which may be postponed as provided in Section 3(b) hereof) are herein called
the "Closing Date".
(b) If the option granted by Section 3(c) hereof shall be exercised after
10:00 a.m., Boston time, on the date two business days preceding the Closing
Date, delivery of certificates for the shares of Optional Shares, and payment
therefor, shall be made at the office of Goodwin, Procter & Hoar LLP, Exchange
Place, Boston, Massachusetts at 10:00 a.m., Boston time, on the third business
day after the exercise of such option.
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(c) Payment for the Shares and the Warrants purchased from the Company
shall be made to the Company or its order, and payment for the Shares purchased
from the Selling Stockholders shall be made, in the discretion of the
Underwriters, to them or to the Custodian, for the account of the Selling
Stockholders, in each case by (i) one or more certified or official bank check
or checks in next day funds (and the Company and the Selling Stockholders agree
not to deposit any such check in the bank on which drawn until the day following
the date of its delivery to the Company or the Custodian, as the case may be) or
(ii) federal funds wire transfer (A) if to the Company, to an account designated
by the Company, and (B) if to the Selling Stockholders, to either an account
designated by each such Selling Stockholder or to the Custodian's account, as
each such Selling Stockholder may direct. Such payment shall be made upon
delivery of certificates for the Shares and the Warrants to you for your account
and the respective accounts of the several Underwriters (including without
limitation by "full-fast" electronic transfer by Depository Trust Company)
against receipt therefor signed by you. Certificates for the Shares and the
Warrants to be delivered to you shall be registered in such name or names and
shall be in such denominations as you may request at least one business day
before the Closing Date, in the case of Firm Shares and the Warrants, and at
least one business day prior to the purchase thereof, in the case of the
Optional Shares. Such certificates will be made available to the Underwriters
for inspection, checking and packaging at the offices of H.C. Wainwright & Co.,
Inc.'s clearing agent, __________________________, on the business day prior to
the Closing Date or, in the case of the Optional Shares, by 3:00 p.m., New York
time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Stockholders for shares to be purchased by any Underwriter whose
check shall not have been received by you on the Closing Date or any later date
on which Optional Shares are purchased for the account of such Underwriter. Any
such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
SECTION 6. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS. Each of
the Company and the Selling Stockholders covenants and agrees as follows:
(a) The Company will, and the Selling Stockholders shall use their best
efforts to cause the Company to, (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) the Company will not, and the Selling Stockholders shall use their best
efforts to ensure that the Company does not, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously have been advised and furnished with a copy or to which you shall
have reasonably objected in writing or which is not in compliance with the
Securities Act or the rules and regulations of the Commission.
(b) The Company will, and the Selling Stockholders shall use their best
efforts to cause the Company to, promptly notify each Underwriter in the event
of (i) the request by the Commission for amendment of the Registration Statement
or for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction, or (v) the receipt by the Company of notice
of the initiation or threatening of any proceeding for such purpose. The
Company and the Selling Stockholders will make every reasonable effort to
prevent the issuance of such a stop order and, if such an order shall at any
time be issued, to obtain the withdrawal thereof at the earliest possible
moment.
(c) The Company will, and the Selling Stockholders shall use their best
efforts to cause the Company to, (i) on or before the Closing Date, deliver to
you a signed copy of the Registration Statement as
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originally filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing thereof,
a signed copy of each post-effective amendment, if any, to the Registration
Statement (together with, in each case, all exhibits thereto unless previously
furnished to you) and will also deliver to you, for distribution to the
Underwriters, a sufficient number of additional conformed copies of each of the
foregoing (but without exhibits) so that one copy of each may be distributed to
each Underwriter, (ii) as promptly as possible deliver to you and send to the
several Underwriters, at such office or offices as you may designate, as many
copies of the Prospectus as you may reasonably request, and (iii) thereafter
from time to time during the period in which a prospectus is required by law to
be delivered by an Underwriter or dealer, likewise send to the Underwriters as
many additional copies of the Prospectus and as many copies of any supplement to
the Prospectus and of any amended prospectus, filed by the Company with the
Commission, as you may reasonably request for the purposes contemplated by the
Securities Act.
(d) If at any time during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company will, and the Selling Stockholders shall use their best efforts to
cause the Company to, forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended prospectus so that the Prospectus as
so supplemented or amended will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time such
Prospectus is delivered to such purchaser, not misleading. If, after the
initial public offering of the Shares by the Underwriters and during such
period, the Underwriters shall propose to vary the terms of offering thereof by
reason of changes in general market conditions or otherwise, you will advise the
Company in writing of the proposed variation, and, if in the opinion either of
counsel for the Company or of counsel for the Underwriters such proposed
variation requires that the Prospectus be supplemented or amended, the Company
will forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended prospectus setting forth such variation. The Company
authorizes the Underwriters and all dealers to whom any of the Shares may be
sold by the several Underwriters to use the Prospectus, as from time to time
amended or supplemented, in connection with the sale of the Shares in accordance
with the applicable provisions of the Securities Act and the rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, and the Selling Stockholders shall use
their best efforts to cause the Company to cooperate, when and as requested by
you, in the qualification of the Shares for offer and sale under the securities
or blue sky laws of such jurisdictions as you may designate and, during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, in keeping such qualifications in good standing under
said securities or blue sky laws; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to qualify as
a foreign corporation in any jurisdiction in which it is not so qualified. The
Company will, from time to time, prepare and file such statements, reports, and
other documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for distribution of
the Shares.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to
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stockholders of the Company and of all information, documents and reports filed
with the Commission (including the Report on Form SR required by Rule 463 of the
Commission under the Securities Act).
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement
which need not be certified by independent certified public accountants unless
required by the Securities Act or the rules and regulations thereunder, but
which shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder, covering a period of at least twelve months beginning with
the day immediately succeeding the Effective Date.
(i) The Company agrees to pay, and the Selling Stockholders agree to use
their best efforts to cause the Company to pay, all costs and expenses incident
to the performance of their obligations under this Agreement, including all
costs and expenses incident to (i) the preparation, printing and filing with the
Commission and the NASD of the Registration Statement, any Preliminary
Prospectus and the Prospectus, (ii) the furnishing to the Underwriters and, if
applicable, the persons designated by them of copies of any Preliminary
Prospectus and of the several documents required by paragraph (c) of this
Section 6 to be so furnished, (iii) the printing of this Agreement and related
documents delivered to the Underwriters, (iv) the preparation, printing and
filing of all supplements and amendments to the Prospectus referred to in
paragraph (d) of this Section 6, (v) the furnishing to you and the Underwriters
of the reports and information referred to in paragraph (g) of this Section 6
and (vi) the printing and issuance of stock certificates, including the transfer
agent's fees. The Selling Stockholders will pay any transfer taxes incident to
the transfer to the Underwriters of the Shares being sold by the Selling
Stockholders.
(j) The Company agrees to reimburse you, and the Selling Stockholders shall
use their best efforts to cause the Company to reimburse you, for the account of
the several Underwriters, for blue sky fees and related disbursements (including
reasonable counsel fees and reasonable disbursements and cost of printing
memoranda for the Underwriters) paid by or for the account of the Underwriters
or their counsel in qualifying the shares under state securities or blue sky
laws and in the review of the offering by the NASD.
(k) The Company and the Selling Stockholders acknowledge that the
provisions of paragraphs (i) and (j) of this Section are intended to relieve the
Underwriters from the payment of the expenses and costs which the Company
hereby agrees to pay and shall not affect any agreement which the Company and
the Selling Stockholders may make, or may have made, for the sharing of any such
expenses and costs.
(l) The Company hereby agrees that, without the prior written consent of
H.C. Wainwright & Co., Inc., the Company will not, for a period of 180 days
following the date the Registration Statement becomes effective, directly or
indirectly, offer, sell, pledge, contract to sell, grant any option to purchase
or otherwise dispose of any shares of Common Stock owned beneficially or
otherwise (including, without limitation, shares of Common Stock which may be
deemed to be beneficially owned in accordance with the rules and regulations of
the Securities and Exchange Commission and shares of Common Stock which may be
issued upon exercise of a stock option or warrant) or any securities convertible
into, derivative of or exercisable or exchangeable for such Common Stock, except
for the issuance of shares of Common Stock upon the exercise of options to
purchase Common Stock which are outstanding on the date hereof.
(m) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the shares has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you
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concerning the substance of, and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(n) The Company is familiar with the Investment Company Act of 1940, as
amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(o) The Company agrees to maintain directors' and officers' insurance
customary for the size and nature of the Company's business for a period of two
years from the date of this Agreement.
(p) At the Closing Date, the Company will further issue and sell to the
Representatives or, at its direction, to its bona fide officers or partners, as
described below, for a total purchase price of $220, warrants (the "Warrants")
entitling the holders thereof to purchase up to an aggregate of 220,000 shares
of Common Stock (subject to adjustment) (the "Warrant Shares") for a period of
four (4) years, such period to commence one year after the effective date of the
Registration Statement (except as otherwise set forth in the Warrant Agreement
referred to below). Said Warrants shall contain terms and provisions set forth
in the Warrant Agreement of even date among the Company and the Representatives
(the "Warrant Agreement"). As provided in the Warrant Agreement, the
Representatives may designate that some of all of the Warrants be issued in
varying amounts directly to its bona fide officers or partners and not to the
Representatives. Such designation will be made by the Representatives only if it
determines that such issuances would not violate the rules and interpretations
of the Board of Governors of the NASD relating to the review of corporate
financing arrangements and subject to applicable federal and state securities
laws. As further provided, no transfer, assignment or hypothecation of the
Warrants shall be made by the Representatives for a period of 12 months from the
issuance of the Warrants, except to its bona fide officers or partners and
subject to applicable federal and state securities laws.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 7, the
Company and the Selling Stockholders, jointly and severally, agree to indemnify
and hold harmless each Underwriter and each person (including each partner or
officer thereof) who controls any Underwriter within the meaning of Section 15
of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the common law or otherwise, and the
Company and the Selling Stockholders, jointly and severally, agree to reimburse
each such Underwriter and controlling person for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
and the Selling Stockholders contained
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in this paragraph (a) shall not apply to any such losses, claims, damages,
liabilities or expenses if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated in writing to the
Company by or on behalf of any Underwriter for use in any Preliminary Prospectus
or the Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, (2) the indemnity agreement contained in this paragraph (a)
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Shares which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with subparagraphs (ii) and (iii) of paragraph (c) of Section 6
hereof and (3) each Selling Stockholder shall only be liable under this
paragraph with respect to (A) information pertaining to such Selling Stockholder
furnished by or on behalf of such Selling Stockholder expressly for use in any
Preliminary Prospectus or the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto or (B) facts that would constitute
a breach of any representation or warranty of such Selling Stockholder set forth
in Section 2 hereof. The indemnity agreements of the Company and the Selling
Stockholders contained in this paragraph (a) and the representations and
warranties of the Company and the Selling Stockholders contained in Sections 1
and 2 hereof shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Shares.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Statement on his own
behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, and the Selling Stockholders from and against any and
all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement) or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated in writing to the
Company by or on behalf of such indemnifying Underwriter for use in the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto. The indemnity agreement of each Underwriter contained in
this paragraph (b) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified party
and shall survive the delivery of and payment for the Shares.
(c) Each party indemnified under the provision of paragraphs (a) and (b) of
this Section 7 agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding
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against, it in respect of which indemnity may be sought on account of any
indemnity agreement contained in such paragraphs, it will promptly give written
notice (the "Notice") of such service or notification to the party or parties
from whom indemnification may be sought hereunder. No indemnification provided
for in such paragraphs shall be available to any party who shall fail so to give
the Notice if the party to whom such Notice was not given was unaware of the
action, suit, investigation, inquiry or proceeding to which the Notice would
have related and was prejudiced by the failure to give the Notice, but the
omission so to notify such indemnifying party or parties of any such service or
notification shall not relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of such indemnity agreement. Any indemnifying party
shall be entitled at its own expense to participate in the defense of any
action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(the "Notice of Defense") to the indemnified party, to assume (alone or in
conjunction with any other indemnifying party or parties) the entire defense of
such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the indemnifying party or parties,
by counsel chosen by such indemnifying party or parties and reasonably
satisfactory to the indemnified party or parties; provided, however, that (i) if
the indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled to have counsel chosen by such
indemnified party or parties participate in, but not conduct, the defense. If,
within a reasonable time after receipt of the Notice, an indemnifying party
gives a Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) through
(c) of this Section 7 for any legal or other expenses subsequently incurred by
the indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the indemnifying
party or parties shall bear the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the proviso to
the preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under paragraph (a) or (b) of
this Section 7, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as
is appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each indemnifying party in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Selling Stockholders on the one hand and the Underwriters on the other shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the shares received by the Company and the Selling
Stockholders and the total underwriting discount received by the Underwriters,
as set forth in the table on the cover page of the Prospectus, bear to the
aggregate public offering price of the shares. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
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state a material fact relates to information supplied by each indemnifying party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) Neither the Company nor the Selling Stockholders will, without the
prior written consent of each Underwriter, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such Underwriter and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding.
(f) The liability of each Selling Stockholder under such Selling
Stockholder's representations and warranties contained in Section 2 hereof and
under the indemnity and reimbursement agreements contained in the provisions of
this Section 7 and Section 8 hereof shall be limited to an amount equal to the
initial public offering price of the shares sold by such Selling Stockholder to
the Underwriters. The Company and the Selling Stockholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
SECTION 8. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, (and subject, in the case of a
Selling Stockholder, to the provisions of paragraph (f) of Section 7), the
Company and the Selling Stockholders hereby jointly and severally agree to
reimburse on a monthly basis the Underwriters for all reasonable legal and other
expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 8 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such
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payments shall promptly refund them and (ii) such persons shall provide to the
Company, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
SECTION 9. TERMINATION. This Agreement may be terminated by you at any
time prior to the Closing Date by giving written notice to the Company and the
Selling Stockholders in accordance with Section 10, or if after the date of this
Agreement trading in the Common Stock shall have been suspended, or if there
shall have occurred (i) the engagement in hostilities or an escalation of major
hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change in economic or political conditions in the financial markets of
the United States or the Company's industry sector would, in the Underwriters'
reasonable judgment, make the offering or delivery of the shares impracticable,
(iii) suspension of trading in securities generally or a material adverse
decline in value of securities generally on the New York Stock Exchange, the
American Stock Exchange, or The Nasdaq Stock Market, or limitations on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such exchange or system, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order
of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Underwriters' reasonable opinion materially and adversely affects or will
materially or adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Underwriters' reasonable opinion has a material adverse effect on the securities
markets in the United States. If this Agreement shall be terminated pursuant to
this Section 9, there shall be no liability of the Company or the Selling
Stockholders to the Underwriters and no liability of the Underwriters to the
Company and the Selling Stockholders; provided, however, that in the event of
any such termination, the Company and the Selling Stockholders agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Stockholders under this Agreement, including all costs and expenses referred to
in paragraphs (i) and (j) of Section 6 hereof.
SECTION 10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Shares shall be subject to
the performance by the Company and by the Selling Stockholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Optional Shares are to be purchased, as the case may
be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Shares hereunder and
the validity and form of the certificates representing the Shares, all corporate
proceedings and other legal matters incident to the foregoing, and the form of
the Registration Statement and of the Prospectus (except as to the financial
statements contained therein), shall have been approved at or prior to the
Closing Date by Goodwin, Procter & Hoar llp counsel for the Underwriters.
(c) You shall have received from Koerner, Silberberg & Weiner, counsel for
the Company and the Selling Stockholders, an opinion, addressed to the
Underwriters and dated the Closing Date, covering the matters set forth in Annex
A hereto, and if Optional Shares are purchased at any date after the Closing
Date, additional
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opinions from such counsel, addressed to the Underwriters and dated such later
date, confirming that the statements expressed as of the Closing Date in such
opinion remains valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct, and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading; (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment; (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein; (iv) the
Commission has not issued any order preventing or suspending the use of the
Prospectus or any Preliminary Prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending the effectiveness
of the Registration Statement has been issued; and to the best knowledge of the
respective signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act; (v) neither the Company nor
any of its subsidiaries has any material contingent obligations which are not
disclosed in the Registration Statement and the Prospectus; (vi) there are not
any pending or known threatened legal proceedings to which the Company or any of
its subsidiaries is a party or of which property of the Company or any of its
subsidiaries is the subject which are material and which are not disclosed in
the Registration Statement and the Prospectus; (vii) there are not any
franchises, contracts, leases or other documents which are required to be filed
as exhibits to the Registration Statement which have not been filed as required;
and (viii) the representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later date on
which Optional Shares are to be purchased, as the case may be.
(e) You shall have received on the Closing Date and on any later date on
which Optional Shares are purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (viii) of paragraph (d) of this Section 10 are true and
correct.
(f) You shall have received from Coopers & Lybrand, a letter or letters,
addressed to the Underwriters and dated the Closing Date and any later date on
which Optional Shares are purchased, confirming that they are independent
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder and
based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (the "Original Letter"), but
carried out to a date not more than three business days prior to the Closing
Date or such later date on which Optional Shares are purchased (i) confirming,
to the extent true, that the statements and conclusions set forth in the
Original Letter are accurate as of the Closing Date or such later date, as the
case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of the Original Letter or to reflect the availability of more recent
financial statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company
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or any of its subsidiaries which, in your sole judgment, makes it impractical or
inadvisable to proceed with the public offering of the Shares or the purchase of
the Optional Shares as contemplated by the Prospectus.
(g) You shall have received from Coopers & Lybrand, a letter stating that
their review of the Company's system of internal accounting controls, to the
extent they deemed necessary in establishing the scope of their examination of
the Company's financial statements as at [December 31, 1996], did not disclose
any weakness in internal controls that they considered to be material
weaknesses.
(h) You shall have been furnished evidence in usual written or telegraphic
form from the appropriate authorities of the several jurisdictions, or other
evidence satisfactory to you, of the qualification referred to in paragraph (f)
of Section 6 hereof.
(i) Prior to the Closing Date, the Shares and the Warrant Shares shall have
been duly authorized for listing by the Nasdaq National Market upon official
notice of issuance.
(j) The Warrant Agreement and the Warrants shall have been executed and
delivered to the Representatives on behalf of the Company.
(k) On or prior to the Closing Date, you shall have received agreements
from all executive officers and directors as set forth in the Prospectus and the
holders of all shares of outstanding Common Stock (including shares issuable
upon the exercise or conversion of any option that vests prior to October 1,
1997, warrant or other security), in form reasonably satisfactory to H.C.
Wainwright & Co., Inc., stating that without the prior written consent of H. C.
Wainwright & Co., Inc., such person or entity will not, for a period of 180 days
following the date the Registration Statement became effective, directly or
indirectly, offer, sell, pledge, contract to sell, grant any option to purchase
or otherwise dispose of any shares of Common Stock beneficially owned or
otherwise held by such person or entity (including, without limitation, shares
of Common Stock which may be deemed to be beneficially owned by such person or
entity in accordance with the rules and regulations of the Securities and
Exchange Commission and shares of Common Stock which may be issued upon exercise
of a stock option or warrant) or any securities convertible into, derivative of
or exercisable or exchangeable for such Common Stock; provided, however, that,
in the case of any such person, he or she may transfer any or all of the Common
Stock held by such person to a Permitted Transferee; provided, that in any such
case the Permitted Transferee executes a lock-up agreement in substantially the
same form covering the remainder of the lock-up period.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Goodwin, Procter & Hoar LLP, counsel for the
Underwriters, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and the Selling Stockholders. Any such termination shall be without
liability of the Company or the Selling Stockholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Stockholders; provided, however, that (i) in the event of such termination, the
Company and the Selling Stockholders agree to indemnify and hold harmless the
Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Stockholders under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company or the Selling
Stockholders to perform any agreement herein, to fulfill any of the conditions
herein, or to comply with any provision hereof other than by reason of a default
by any of the Underwriters, the Company and the Selling Stockholders will
reimburse the Underwriters severally upon demand for all
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out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the transactions
contemplated hereby.
SECTION 11. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
STOCKHOLDERS. The obligation of the Company and the Selling Stockholders to
deliver the Shares shall be subject to the conditions that (a) the Registration
Statement shall have become effective and (b) no stop order suspending the
effectiveness thereof shall be in effect and no proceedings therefor shall be
pending or threatened by the Commission.
In case either of the conditions specified in this Section 11 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Stockholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Stockholders to the Underwriters and
without liability of the Underwriters to the Company and the Selling
Stockholders; provided, however, that in the event of any such termination the
Company and the Selling Stockholders agree to indemnify and hold harmless the
Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Stockholders under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof.
SECTION 12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of the Company, the Selling Stockholders and the
several Underwriters and, with respect to the provisions of Section 7 hereof,
the several parties (in addition to the Company and the Selling Stockholders,
and the several Underwriters) indemnified under the provisions of said Section
7, and their respective personal representatives, successors and assigns.
Nothing in this Agreement is intended or shall be construed to give to any other
person, firm or corporation any legal or equitable remedy or claim under or in
respect of this Agreement or any provision herein contained. The term
"successors and assigns" as herein used shall not include any purchaser, as such
purchaser, of any of the shares from any of the several Underwriters.
SECTION 13. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing or by telegraph and, if to the
Underwriters, shall be mailed, telexed, telegraphed, transmitted by facsimile
transmission or delivered to H.C. Wainwright & Co., Inc., One Boston Place,
Boston, Massachusetts 02108, Attention: ___________; and if to the Company,
shall be mailed, telexed, telegraphed, transmitted by facsimile transmission or
delivered to it at its office, 780 Third Avenue, New York, New York 10017,
Attention: Bernard F. Reynolds. All notices given by telex, telegraph or
facsimile transmission shall be promptly confirmed by letter.
SECTION 14. MISCELLANEOUS. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or the Selling Stockholders or their respective directors
or officers, and (c) delivery and payment for the Shares under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
Date, the provisions of paragraph (2) of Section 1 and paragraphs (l), (m) and
(n) of Section 6 hereof shall be of no further force or effect.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
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SECTION 16. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of The Commonwealth of Massachusetts.
SECTION 17. GENERAL. This Agreement and the Warrant Agreement constitute
the entire agreement of the parties to this Agreement and the Warrant Agreement
and supersede all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof and
thereof. This Agreement may be executed in several counterparts, each one of
which shall be an original, and all of which together shall constitute one and
the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Attorneys-in-fact by or on behalf
of the Selling Stockholders and you.
Any person executing and delivering this Agreement as Attorney-in-fact for
the Selling Stockholders represents by so doing that he has been duly appointed
as Attorney-in-fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-fact to take
such action. Any action taken under this Agreement by the Attorney-in-fact will
be binding on all of the Selling Stockholders.
[Remainder of page intentionally left blank.]
22
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed copies hereof, whereupon it will
become a binding agreement among the Company, the Selling Stockholders and the
several Underwriters, including you, all in accordance with its terms.
Very truly yours,
ASI SOLUTIONS INCORPORATED
By:________________________________________
Title:
THE SELLING STOCKHOLDERS
By:________________________________________
Attorney-in-fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted
by us in Boston, Massachusetts as of
the date first above written.
H.C. WAINWRIGHT & CO., INC.
JANNEY MONTGOMERY SCOTT INC.
______________________________________
Acting for ourselves and as the Representatives of
the several Underwriters named in the attached
Schedule A
By: H.C. Wainwright & Co., Inc.
By:____________________________
Name:
Principal
For itself and on behalf of the
Representatives
23
<PAGE>
SCHEDULE I
UNDERWRITERS
NUMBER OF FIRM
UNDERWRITERS SHARES TO BE PURCHASED
________________________________________________________________________________
H.C. Wainwright & Co., Inc......................................................
Janney Montgomery Scott Inc.....................................................
Total..............................................................
I-1
<PAGE>
SCHEDULE II
SELLING STOCKHOLDERS
NAME AND ADDRESS NUMBER OF OPTIONAL
OF SELLING STOCKHOLDERS SHARES TO BE SOLD
________________________________________________________________________________
_______________________.........................................................
_______________________.........................................................
Total................................................................
I-2
<PAGE>
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF KOERNER, SILBERBERG & WEINER
COUNSEL FOR THE COMPANY
AND THE SELLING STOCKHOLDERS
In connection with the preparation of this opinion, we have examined,
and have relied as to matters of fact upon, originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, agreements,
documents and other instruments and such certificates or comparable documents of
public officials, and have made such other and further investigations as we have
deemed relevant and necessary as a basis of the opinions hereinafter set forth.
We have relied upon, without independent investigation, the representations and
warranties of the Company and the Selling Stockholders contained in the
__________________ and upon statements and representations of officers and other
representatives of the Company. In such examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. In
addition, we have, with your permission, assumed that each of the
____________________ has been duly authorized, executed and delivered on behalf
of the parties thereto (other than the Company and the Selling Stockholders).
We have also assumed that all of the parties to the ____________________ will
perform their respective obligations thereunder in accordance with their
respective terms and conditions.
In connection with the opinions expressed herein as being made "to our
knowledge," our examination has been limited to (i) a review of documents in our
firm's files as to which we have represented the Company, (ii) conversations
with certain of the executive officers of the Company, and (iii) reasonable
inquiry by this firm into applicable laws. We have made no independent
investigation as to the accuracy or completeness of any representations,
warranties, data or other information, written or oral, made or furnished by the
Company to us or to you.
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified as a foreign
corporation and in good standing in each state of the United States of America
in which the nature of its business or its ownership or leasing of property
requires such qualification (except where the failure to be so qualified would
not have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole) and has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
all the issued and outstanding capital stock of each of the subsidiaries of the
Company has been duly authorized and validly issued and is fully paid and
nonassessable (with respect to the subsidiaries, subject to Section 630 of the
New York Business Corporation Law), and is owned by the Company free and clear
of all liens, encumbrances and security interests, and to the best of such
counsel's knowledge, other than as described in the Prospectus, no options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in such subsidiaries are outstanding;
(ii) the authorized capital stock of the Company consists of 2,000,000
shares of Preferred Stock, $.01 par value, none of which are outstanding, and
20,000,000 shares of Common Stock, $.01 par value, of which there are
outstanding 4,625,158 shares; all of the outstanding shares of such capital
stock (including the Firm Shares and the Optional Shares issued, if any) have
been duly authorized and validly issued and are fully paid and nonassessable;
any Optional Shares purchased after the Closing Date have been duly authorized
and, when issued and delivered to, and paid for by, the Underwriters as provided
in the Underwriting Agreement, will be validly issued and fully paid and
nonassessable; and no preemptive rights of, or rights of refusal in favor of,
A-1
<PAGE>
stockholders exist with respect to the Shares, or the issue and sale thereof,
pursuant to the Certificate of Incorporation or Bylaws of the Company or any
other instrument and, to the knowledge of such counsel, there are no contractual
preemptive rights that have not been waived, rights of first refusal or rights
of co-sale which exist with respect to the Shares being sold by the Selling
Securityholders or the issue and sale of the Shares by the Company;
(iii) the Registration Statement has become effective under the
Securities Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act, and with the
rules and regulations of the Commission thereunder;
(v) such counsel have no reason to believe that the Registration
Statement (except as to the financial statements and schedules and other
financial and statistical data contained therein, as to which such counsel need
not express any opinion or belief) at the Effective Date contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus (except as to the financial statements and schedules and
other financial and statistical data contained therein, as to which such
counsel need not express any opinion or belief) as of its date or at the Closing
Date (or any later date on which Optional Shares are purchased), contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9 (Description of Securities to be Registered), 10
(Interests of Names Experts and Counsel) (insofar as it relates to such counsel)
and 11(c) (Legal Proceedings) of Form S-1 and under the caption "Certain
Transactions" in the Prospectus is, to such counsel's knowledge, accurately and
adequately set forth therein in all material respects or no response is required
with respect to such Items, and the description of the Company's stock option
plan and the options granted and which may be granted thereunder in the
Prospectus accurately and fairly presents the information required to be shown
with respect to said plan and options to the extent required by the Securities
Act and the rules and regulations of the Commission thereunder;
(vii) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion of
such counsel are of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement, which are not described and filed as required;
(viii) all issuances and repurchases or redemptions by the Company
and any of its subsidiaries of any of their respective securities have been
effected in compliance with all federal and state securities laws;
(ix) the Underwriting Agreement and the Warrant Agreement have been
duly authorized, executed and delivered by the Company;
(x) the Underwriting Agreement has been duly executed and delivered by
or on behalf of the Selling Stockholders and the Custody Agreement between the
Selling Stockholders and______________, as Custodian,
A-2
<PAGE>
including the power of attorney contained in such Custody Agreement, have been
duly executed and delivered by the several Selling Stockholders;
(xi) the Company has the requisite corporate power and authority to
enter into the Underwriting Agreement and the Warrant Agreement and to sell and
deliver the Shares and the Warrants to be sold by it to the several
Underwriters;
(xii) the Custody Agreements, including the power of attorney
contained therein, are valid and binding agreements of each of the Selling
Stockholders enforceable in accordance with their terms except as enforceability
may be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium receivership, fraudulent conveyance and other similar
laws now or hereinafter in effect relating to or affecting creditors', debtors'
and shareholders' rights generally and except with respect to those provisions
relating to indemnity or contribution for liabilities under the Securities Act,
as to which no opinion need be expressed, and each Selling Stockholder has full
legal right and authority to enter into the Underwriting Agreement and the
Custody Agreement, including the power of attorney contained therein, and to
sell, transfer and deliver in the manner provided in the Underwriting Agreement
the Shares sold by such Selling Stockholder hereunder;
(xiii) the issue and sale by the Company of the Shares and the
Warrants sold by the Company as contemplated by the Underwriting Agreement and
the Warrant Agreement will not conflict with, or result in a breach of, or
constitute a default under the Certificate of Incorporation or Bylaws of the
Company or any of its subsidiaries or any agreement or instrument known to such
counsel to which the Company or any of its subsidiaries is a party or by which
any of its properties may be bound or any applicable law or regulation, or so
far as is known to such counsel, any order, writ, injunction or decree, of any
jurisdiction, court or governmental instrumentality;
(xiv) to the best of our knowledge, the transfer and sale by the
Selling Stockholders of the Shares to be sold by the Selling Stockholders as
contemplated by the Underwriting Agreement and the Custody Agreement, including
the power of attorney contained therein, will not conflict with, result in a
breach of, or constitute a default under any agreement or instrument known to
such counsel to which any of the Selling Stockholders is a party or by which any
of the Selling Stockholders or any of their properties may be bound, or any
applicable law or regulation, or so far is known to such counsel, order, writ,
injunction or decree of any jurisdiction, court or governmental instrumentality
body;
(xv) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;
(xvi) good title to the Shares under the Underwriting Agreement, free
and clear of all liens, encumbrances, equities, security interests and claims,
has been transferred to the Underwriters who have severally purchased such
Shares under the Underwriting Agreement, assuming for the purpose of this
opinion that the Underwriters purchased the same in good faith without notice of
any adverse claims;
(xvii) good title to the Warrants under the Warrant Agreement, free
and clear of all liens, encumbrances, equities, security interests and claims,
has been transferred to the Representative who has purchased such Warrants under
the Warrant Agreement, assuming for the purpose of this opinion that the
Representative purchased the same in good faith without notice of any adverse
claims;
A-3
<PAGE>
(xviii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been obtained
under the Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Shares by
the Underwriters and the clearance of the offering with the NASD and the Nasdaq
National Market System;
(xix) the Shares issued and sold by the Company and sold by the
Selling Stockholders and the Warrant Shares will be duly authorized for listing
by the Nasdaq National Market upon official notice of issuance.
(xx) The Warrants conform to the description thereof in the Prospectus
(it being understood that with respect to the fair presentation of such
description and whether it is an accurate summary such counsel's opinion is
limited to that set forth in clause (vi) above) and have been duly authorized
and validly issued and are valid and binding obligations of the Company entitled
to all the benefits of the Warrant Agreement and are enforceable against the
Company, (except (1) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium, fraudulent conveyance, or
other similar laws now or hereinafter in effect relating to or affecting
creditors', debtors' and shareholders' rights generally and by general
principles of equity, (2) that the remedies of specific performance and
injunctive and other forms of relief are subject to general equitable
principles, whether such enforcement is sought at law or in equity, and such
enforcement may be subject to the discretion of the court before which any
proceedings therefor may be brought and (3) as rights to indemnity and
contribution may be limited by state or federal laws or by policies underlying
such laws). The Warrant Shares have been duly authorized and reserved for
issuance upon exercise of the Warrants and, when issued upon such exercise in
accordance with the terms of Warrants and the Warrant Agreement, will be duly
and validly issued, fully paid and nonassessable, free of preemptive rights and
will conform to the description thereof in the Prospectus.
We express no opinion as to the laws of any state or other
jurisdiction other than as to the substantive laws of the State of New York, the
General Corporation Law of the State of Delaware and the federal law of the
United States, without giving effect to principles relating to conflicts of law.
This opinion is rendered to you in connection with the above-described
transactions and is for your exclusive benefit. This opinion may not be relied
upon by you for any other purpose, or relied upon or furnished to any other
person, firm or corporation without our prior written consent.
____________________________________
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or of the State of New York,
upon opinions of local counsel satisfactory in form and scope to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representatives and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel.
A-4
<PAGE>
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER SHARES
6 __
ASI SOLUTIONS INCORPORATED
TOTAL AUTHORIZED ISSUE
18,000,000 SHARES PAR VALUE $.01 EACH See Reverse for
Certain Definitions
COMMON STOCK
THIS IS TO CERTIFY THAT ________________________________________ IS THE OWNER OF
__________________________________________________________________fully paid and
non-assessable shares of the above Corporation transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized Attorney
upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the Corporation and the signatures of its duly authorized
officers.
DATED
- -------------------------------------- --------------------------------------
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations. Additional abbreviations may also
be used though not in the list.
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ____________ Custodian ____________ (Minor)
under Uniform Gifts to Minors Act ________________________ (State)
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
--------------------------------------
For value received, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
represented by the within Certificate, and hereby irrevocably constitutes and
appoints _______________________________________________________________________
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.
Dated _______________________________
In presence of --------------------------------------
- -------------------------------------
NOTICE: The signature to this assign-
ment must correspond with the name as
written upon the face of the certifi-
cate in every particular without
alterations or enlargement, or any
change whatever.
<PAGE>
EXHIBIT 5.1
March 5, 1997
Re: Registration Statement on Form S-1 for 2,200,000 shares of common
stock , par value $0.01 per share, of ASI Solutions Incorporated
Gentlemen:
We have acted as counsel to ASI Solutions Incorporated, a
Delaware corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-1 (Registration No. 33-20401)(the "Registration
Statement") and Amendment No. 1 to the Registration Statement which has been
filed by the Company on the date hereof with the Securities and Exchange
Commission (the "Commission"), relating to the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of an aggregate of 2,530,000
shares (the "Shares") of the Company's common stock, par value $0.01 per share
(the "Common Stock"), to be offered in connection with the offering described in
the Prospectus, dated the date hereof (the "Prospectus"), which forms a part of
the Registration Statement.
The Registration Statement has been filed in connection with (i)
2,200,000 shares (the "Company Shares") of Common Stock offered by the Company
pursuant to the Registration Statement and (ii) 330,000 shares (the "Selling
Stockholder Shares") of Common Stock offered by certain stockholders of the
Company which may be purchased pursuant to an overallotment option pursuant to
the Registration Statement.
The Common Stock is described in the Prospectus which forms a part of the
Registration Statement, to which this opinion is an exhibit.
In our capacity as counsel to the Company, we have examined each of
the Restated Certificate of Incorporation, as amended, and the By-laws of the
Company, such records of the Company's corporate proceedings as we have deemed
relevant, the Registration Statement as filed with the Commission and Amendment
No. 1 thereto, and such other certificates, records and documents as we have
deemed necessary for the purpose of this opinion.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons signing or delivering any instrument, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, the authenticity of the originals of such latter documents and the due
authorization and valid execution and delivery of all documents. As to any
facts material to this opinion, we have relied upon statements and
representations of officers and other representatives of the Company and its
subsidiaries and others.
Based on the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. The Company Shares have been duly authorized and are
<PAGE>
validly issued, fully paid and nonassessable.
2. The Selling Stockholder Shares have been duly authorized and
validly issued and are fully paid and nonassessable.
We express no opinion on the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to this firm under the
heading "Legal Matters" in the Prospectus which forms a part of the Registration
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
Koerner Silberberg & Weiner
By:__________________________
<PAGE>
EXHIBIT 10.1
ASI SOLUTIONS INCORPORATED,
H.C. WAINWRIGHT & CO., INC.
AND
JANNEY MONTGOMERY SCOTT INC.
WARRANT AGREEMENT
DATED AS OF _______, 1997
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of __________, 1997 by and among ASI SOLUTIONS
INCORPORATED, a Delaware corporation (the "Company"), H.C. WAINWRIGHT & CO.,
INC. ("Wainwright") and JANNEY MONTGOMERY SCOTT INC. ("Janney" and, together
with Wainwright, the "Representatives").
WHEREAS, the Company and the Representatives have entered into an
Underwriting Agreement of even date herewith (the "Underwriting Agreement"); and
WHEREAS, the Company proposes to issue to the Representatives warrants as
hereinafter described (the "Warrants") to purchase up to an aggregate of 220,000
shares, subject to adjustment as hereinafter provided (the "Shares"), of the
Company's common stock, par value $.0l per share (the "Common Stock").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth and for other good and valuable consideration, the parties
hereto agree as follows:
1. Issuance of Warrants; Form of Warrant. As more fully set forth below,
-------------------------------------
the Company will issue, sell and deliver the Warrants to the Representatives or
their bona fide officers or partners, as named by the Representatives in
---- ----
accordance with Section 6(p) of the Underwriting Agreement, for an aggregate
price of $220, concurrently with the closing (the "Closing") under the
Underwriting Agreement relating to the public offering, pursuant to a
registration statement on Form S-1 (File No. 33-_____) (the "Registration
Statement"), of 2,200,000 shares of Common Stock (plus an option to purchase up
to an additional 330,000 shares of Common Stock to cover over-allotments) (the
"Offering"). Specifically, at the Closing, the Company will issue, sell and
deliver (a) _______ of the Warrants to Wainwright or its bona fide officers or
---- ----
partners for an aggregate price of $____ and (b) _______ of the Warrants to
Janney or its bona fide officers or partners for an aggregate price of $_____.
---- ----
The form of the Warrants shall be substantially as set forth on Exhibit A
---------
attached hereto. The Warrants shall be executed on behalf of the Company by the
manual or facsimile signature of the present or any future Chairman of the
Board, President or Vice President of the Company, under its corporate seal,
affixed or in facsimile, attested by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company.
2. The Warrants shall be numbered and shall be registered in a Warrant
register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant register (the "Warrant Holder")
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration of
transfer of Warrants which are registered or are to be registered in the name of
or at the direction of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with
<PAGE>
such knowledge of such facts that its participation therein amounts to bad
faith. The Warrants shall be registered initially in the name of "H.C.
Wainwright & Co., Inc." and "Janney Montgomery Scott Inc.", as the case may be,
in such denominations as Wainwright and Janney may request in writing to the
Company; provided however, that prior to the Closing, Wainwright and/or Janney
-------- -------
may designate that their respective Warrants be issued in varying amounts
directly to their respective bona fide officers or partners and not to each of
---- ----
them directly in accordance with Section 6(p) of the Underwriting Agreement.
Such designation will only be made by Wainwright and/or Janney if they determine
such issuances would not violate the rules and interpretations of the Board of
Governors of the National Association of Securities Dealers, Inc. (the "NASD")
relating to the review of corporate financing arrangements, and subject to
applicable federal and state securities law.
3. Transfer of Warrants. The Warrants may not be transferred, assigned,
--------------------
pledged, hypothecated, sold, made subject to a security interest, or otherwise
transferred, in part or in whole, prior to the first anniversary of the
effective date of the Registration Statement (the "Effective Date"), except to
the bona fide officers or partners of the Representatives, and subject to
---- ----
applicable federal and state securities law, and only on the books of the
Company upon delivery thereof duly endorsed by the Warrant Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited with the Company. In case of
transfer by executors, administrators, guardians or other legal representatives,
duly authenticated evidence of their authority shall be produced and may be
required to be deposited with the Company in its discretion. Upon any
registration of transfer, the Company shall deliver a new Warrant or new
Warrants to the persons entitled thereto. A Warrant may be exchanged at the
option of the Warrant Holder thereof for another Warrant, or other Warrants, of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock upon surrender to the
Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause a Warrant to be transferred on its
books to any person unless the Warrant Holder thereof shall furnish to the
Company evidence of compliance with the Securities Act of 1933, as amended (the
"Act"), and applicable state securities law, in accordance with the provisions
of Section 10 of this Agreement.
4. Term of Warrants; Exercise of Warrants. Each Warrant entitles the
--------------------------------------
Warrant Holder thereof to purchase one Share at a purchase price of $____ per
Share [TO BE EQUAL TO 150% OF THE INITIAL PUBLIC OFFERING PRICE] (the "Exercise
Price") at any time from the first anniversary of the Effective Date (except as
otherwise set forth herein) until 5:00 p.m., Boston time (the "Close of
Business"), on the day immediately preceding the fifth anniversary of the
Effective Date (the "Expiration Date"). The Exercise Price and the number of
Shares issuable upon exercise of each Warrant are subject to adjustment upon the
occurrence of certain events, pursuant to the provisions of Section 8 of this
Agreement. Subject to the provisions of this Agreement, each Warrant Holder
shall have the right, which may be exercised as set forth in
2
<PAGE>
such Warrant, to purchase from the Company (and the Company shall issue and sell
to such Warrant Holder) the number of fully paid and nonassessable Shares
specified in such Warrant Holder's Warrant, upon surrender to the Company, or
its duly authorized agent, of such Warrant, with an election to purchase
attached thereto in the form of Exhibit B to this Agreement duly completed and
---------
signed, with (if requested by the Company within two business days of surrender
of the Warrant with the election to purchase) signatures guaranteed by a member
firm of a national securities exchange, a commercial bank (not a savings bank or
savings and loan association) or trust company located in the United States or a
member of the NASD, and upon payment to the Company of the Exercise Price, as
adjusted in accordance with the provisions of Section 8 of this Agreement, for
the number of Shares in respect of which such Warrant is then exercised.
Notwithstanding the method of exercise set forth in any Warrant, in the event
that the Warrant Holder thereof has not exercised such Warrant prior to the
Close of Business on the Expiration Date and the current market price per share
of Common Stock at the Close of Business on the Expiration Date (as determined
substantially in accordance with Section 8(d), but using the closing prices or
quotations, as the case may be, on such Expiration Date rather than a 30-day
average) is greater than the Exercise Price, then the Warrant Holder thereof
shall be deemed to have exercised such Warrant in full immediately prior to the
Close of Business on the Expiration Date (an "Automatic Exercise"). Payment of
the Exercise Price may be made in cash or by check payable to the order of the
Company in the amount obtained by multiplying the number of Shares for which
such Warrant is then being exercised by the Exercise Price then in effect (such
amount, the "Exercise Payment"), except that the Warrant Holder may, at its
option, elect to pay the Exercise Payment by delivering to the Company the
number of shares of Common Stock determined by dividing the Exercise Payment by
the current market price (as defined in paragraph (d) of Section 8) of a share
of Common Stock on the date of exercise or by cancelling a portion of such
Warrant that is equal to the number of shares determined by dividing the
Exercise Payment by the current market price (as defined in paragraph (d) of
Section 8) of a share of Common Stock as of the date of exercise. In the event
of an Automatic Exercise of any Warrant, the Warrant Holder thereof shall be
deemed to have chosen to cancel the portion of its Warrant that is equal to the
number of shares determined by dividing the Exercise Payment by the current
market price (as defined in paragraph (d) of Section 8) of a share of Common
Stock as of the Close of Business on the Expiration Date. Except as set forth
in Section 8, no adjustment shall be made for any dividends on any Shares
issuable upon exercise of a Warrant. Upon each surrender of Warrants and payment
of the Exercise Payment as aforesaid, or upon the occurrence of an Automatic
Exercise, the Company shall issue and cause to be delivered with all reasonable
dispatch (but in any event within three (3) business days) to or upon the
written order of the Warrant Holder and (subject to receipt of evidence of
compliance with the Act and applicable state securities laws in accordance with
the provisions of Section 10 of this Agreement) in such name or names as such
Warrant Holder may designate, a certificate or certificates for the number of
full Shares so purchased upon the exercise of such Warrant, together with cash,
as provided in Section 9 of this Agreement, in respect of any fractional Shares
otherwise issuable upon such surrender. Such certificate or certificates shall
be deemed to have been issued, and any person so designated to be named therein
shall be deemed to have
3
<PAGE>
become a holder of record of such Shares, as of the date of the surrender of
such Warrant and payment of the Exercise Payment as aforesaid,
or as of the date of the Automatic Exercise; provided, however, that if, at the
-------- -------
date of surrender of such Warrant and payment of such Exercise Payment, the
transfer books for the Common Stock or other class of stock purchasable upon the
exercise of such Warrant shall be closed, the certificates for the Shares shall
be issuable as of the date on which such books shall next be opened (whether
before, on or after the Expiration Date), and until such date the Company shall
be under no duty to deliver any certificate for such Shares; provided further,
-------- -------
however, that the transfer books of record, unless otherwise required by law,
- -------
shall not be closed at any one time for a period longer than four (4) days. The
rights of purchase represented by a Warrant shall be exercisable, at the
election of the Warrant Holder thereof, either in full or from time to time in
part and, in the event that any Warrant is exercised in respect of less than all
of the Shares purchasable on such exercise at any time prior to the Expiration
Date, a new Warrant or new Warrants will be issued for the remaining number of
Shares specified in the Warrant or Warrants so surrendered.
5. Payment of Taxes. The Company will pay all documentary stamp taxes, if
----------------
any, attributable to the issuance of Shares upon the exercise of a Warrant;
provided, however, that the Company shall not be required to pay any tax or
- -------- -------
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificates for Shares in a name other than that of the
Warrant Holder who exercised the Warrant in respect of which such Shares are
issued.
6. Mutilated or Missing Warrants. In case any Warrant shall be mutilated,
-----------------------------
lost, stolen or destroyed, the Company shall issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft
or destruction of such Warrant or an indemnity, also reasonably satisfactory to
the Company.
7. Reservation of Shares, etc. There have been reserved, and the Company
--------------------------
shall at all times keep reserved, out of the authorized and unissued Common
Stock, an aggregate number of shares of Common Stock sufficient to provide for
the exercise of the rights of purchase represented by the outstanding Warrants.
In addition, upon any adjustment to the number and kind of securities
purchasable upon exercise of the Warrants, the Company shall reserve, and shall
at all times thereafter keep reserved, out of the authorized and unissued Common
Stock or such other kind of securities, an aggregate number of shares of Common
Stock or shares, units or otherwise of such other kind of securities sufficient
to provide for the exercise of the rights to purchase represented by the
outstanding Warrants. After the Effective Date, the transfer agent for the
Common Stock (the "Transfer Agent"), and every subsequent Transfer Agent, if
any, for Shares issuable upon the exercise of any of the rights of purchase
represented by the Warrants, will be irrevocably authorized and directed at all
times
4
<PAGE>
until the Expiration Date to reserve such aggregate number of authorized and
unissued shares of Common Stock as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent Transfer Agent for any Shares issuable upon the exercise
of the rights of purchase represented by the Warrants. The Company will supply
any such Transfer Agent with duly executed stock certificates for such purpose
and will itself provide or otherwise make available any cash which may be
distributable as provided in Section 9 of this Agreement. Any Warrant
surrendered in the exercise of the rights thereby evidenced shall be cancelled,
and until delivery to the person surrendering such Warrant of stock certificates
representing the Shares to be issued to such person as a result of such
exercise, such cancelled Warrant shall constitute sufficient evidence of the
number of Shares that have been issued upon the exercise of such Warrant. No
shares of Common Stock shall be subject to reservation in respect of any
unexercised Warrant subsequent to the Expiration Date.
8. Adjustments of Exercise Price and Number of Shares. The Exercise Price
--------------------------------------------------
and the number and kind of securities purchasable upon exercise of each Warrant
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
(a) In case the Company shall (i) declare a dividend on its Common Stock in
shares of Common Stock or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company, other than any such
reclassification to which paragraph (j) of this Section 8 applies, the number of
Shares purchasable upon exercise of each Warrant immediately prior thereto shall
be adjusted so that the Warrant Holder thereof shall be entitled to receive the
kind and number of shares of Common Stock or other securities of the Company
which he would have owned or have been entitled to receive after the happening
of any of the events described above had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect thereto.
An adjustment made pursuant to this paragraph (a) shall become effective
immediately after the effective date of such event, retroactive to the record
date, if any, for such event.
(b) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock, entitling them to subscribe for or to purchase
shares of Common Stock or securities convertible into or exchangeable for Common
Stock (other than "poison pill" rights referred to in paragraph (l) of this
Section 8) at a price per share (or having a conversion price per share) that is
lower on the record date for the determination of stockholders entitled to
receive such rights, options or warrants than the then current market price per
share of Common Stock (as defined in paragraph (d) below), the number of Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Shares theretofore purchasable upon exercise of such
Warrant by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business
5
<PAGE>
on the record date for the determination of stockholders entitled to
receive such rights, options or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase (or into which the convertible
securities so offered are initially convertible), and of which the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the record date for the determination of stockholders entitled to
receive such rights, options or warrants plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate initial conversion price of the convertible securities
so offered) would purchase at the then current market price per share of Common
Stock. Such adjustment shall be made whenever such rights, options or warrants
are issued, and shall become effective retroactively to the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.
(c) In case the Company shall distribute to all holders of its Common Stock
shares of stock (other than Common Stock) or evidences of its indebtedness or
assets (excluding cash dividends out of retained earnings and dividends or
distributions referred to in paragraph (a) of this Section 8) or rights, options
or warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred to in
paragraph (b) above and paragraph (l) below), then in each case the number of
Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Shares theretofore purchasable upon the
exercise of such Warrant by a fraction, of which the numerator shall be the
current market price per share of Common Stock (as defined in paragraph (d)
below) on the record date mentioned below in this paragraph (c), and of which
the denominator shall be the current market price per share of Common Stock on
such record date, less the then fair value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive) of the
portion of the shares of stock or assets or evidences of indebtedness so
distributed or of such subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution, retroactive to the record date for
the determination of stockholders entitled to receive such distribution.
(d) For the purpose of any computation under paragraphs (b) and (c) of this
Section 8 or under Section 4 or Section 9, the current market price per share of
Common Stock at any date shall be deemed to be the average of the daily closing
prices per share for the 30 consecutive trading days commencing 45 trading days
before the date of such computation. The closing price for each day shall be the
last reported sale price regular way or, in case no such reported sale takes
place on such day, the average of the closing bid and asked prices regular way
for such day, in either case on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading, or if the
Common Stock is not listed or admitted to trading on any national securities
exchange, but is traded in the over-the-counter market, the closing sale price
of the Common Stock or, in case no sale is publicly reported, the average of the
closing bid and asked quotations for the Common Stock on the Nasdaq National
Market System ("NASDAQ") or any comparable system, or if the
6
<PAGE>
Common Stock is not listed on NASDAQ or a comparable system, the closing
sale price of the Common Stock or, in case no sale is publicly reported, the
average of the closing bid and asked prices as furnished by two members of the
NASD selected from time to time by the Company for that purpose.
(e) No adjustment in the number of Shares purchasable upon exercise of each
Warrant shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Shares purchasable upon
the exercise of each Warrant; provided, however, that any adjustments which by
-------- -------
reason of this paragraph (e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
shall be made to the nearest one thousandth of a share.
(f) Whenever the number of Shares purchasable upon the exercise of each
Warrant is adjusted, as herein provided, the Exercise Price shall be adjusted by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Shares purchasable upon
the exercise of each Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Shares so purchasable immediately
thereafter.
(g) For the purpose of this Section 8, the term "shares of Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the Company
at the date of this Agreement or (ii) any other class of stock resulting from
successive changes or reclassification of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, any Warrant Holder shall become entitled to
purchase any shares of capital stock of the Company other than shares of Common
Stock, thereafter the number of such other shares so purchasable upon exercise
of each Warrant and the Exercise Price thereof shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Shares contained in this Section 8, and
the provisions of Sections 4, 5, 7, 9 and 12, with respect to the Shares, shall
apply on like terms to any such other shares.
(h) The Company may, at its option, at any time during the term of a
Warrant, reduce, either temporarily or permanently, the then current Exercise
Price to any amount deemed appropriate by the Board of Directors of the Company;
provided, however, that any such reduction may be temporary only to the extent
- -------- -------
that Warrant Holders receive written notice from the Company stating the term of
such temporary reduction; and further provided, that following the expiration of
------- --------
such temporary reduction, the Exercise Price may not be raised to an amount in
excess of the Exercise Price in effect immediately prior to such temporary
reduction.
(i) Whenever the number of Shares purchasable upon the exercise of each
Warrant or the Exercise Price of such Shares is adjusted, as herein provided,
the Company
7
<PAGE>
shall promptly mail by first class mail, postage prepaid, to each Warrant Holder
notice of such adjustment or adjustments. The Company may retain a firm of
independent public accountants (who may be the regular accountants employed by
the Company) to make any computation required by this Section 8 and shall cause
such accountants to prepare a certificate setting forth the number of Shares
purchasable upon the exercise of each Warrant and the Exercise Price thereof
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive evidence of the correctness of such
adjustment, and each Warrant Holder shall have the right to inspect such
certificate during reasonable business hours.
(j) In case of any consolidation of the Company with or merger of the
Company with and into another corporation or other entity or any consolidation
with or merger of any other corporation or other entity with and into the
Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of Shares and in which the Company is the
surviving corporation) or in case of any sale or conveyance to another
corporation or other person or entity of the property of the Company as an
entirety or substantially as an entirety, (i) notwithstanding the provisions of
Section 4 hereof, each Warrant Holder shall have the right to exercise any
Warrant then held immediately prior to such consolidation, merger, sale or
conveyance upon payment of the Exercise Price then in effect and (ii) with
respect to any Warrants which are not exercised as provided in clause (i) above,
the Company or such successor or purchasing corporation or person or entity (or
an affiliate of such successor or purchasing corporation or person or entity),
as the case may be, agrees that each Warrant Holder shall have the right after
the happening of any such consolidation, merger, sale or conveyance (except for
a consolidation, merger, sale or conveyance in which the consideration received
by the Company's stockholders consists solely of cash) upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities and
property which he would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had such Warrant
been exercised immediately prior to such action and the securities issued upon
such exercise been held since the date of such exercise; provided, however, that
-------- -------
in the event any such transaction as described above shall be effected for a
consideration per share of Common Stock consisting only of cash in an amount
less than the Exercise Price at the time (as adjusted pursuant hereto)
multiplied by two, each Warrant Holder shall have the right to receive, as of
the effective time of such transaction and in cancellation of his Warrant, the
fair value of such Warrant as of the time immediately prior to such transaction
(without taking such transaction into account) as determined in good faith by
the Board of Directors of the Company. The provisions of this paragraph (j)
shall similarly apply to successive consolidations, mergers, sales or
conveyances.
(k) Notwithstanding any adjustment in the Exercise Price or the number or
kind of shares purchasable upon the exercise of a Warrant pursuant to this
Agreement, a certificate for a Warrant issued prior or subsequent to such
adjustment may continue to express
8
<PAGE>
the same price and number and kind of shares as are initially issuable pursuant
to this Agreement.
(l) Notwithstanding the foregoing, in the event that the Company shall
distribute "poison pill" rights pursuant to a "poison pill" stockholder rights
plan (the "Rights"), the Company shall, in lieu of making any adjustment
pursuant to Section 8(b) or Section 8(c) hereof, make proper provision so that
each Warrant Holder who exercises a Warrant after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such exercise, in addition to the Shares issuable upon
such exercise, a number of Rights to be determined as follows: (i) if such
exercise occurs on or prior to the date for the distribution to the holders of
Rights of separate certificates evidencing such Rights (the "Distribution
Date"), the same number of Rights to which a holder of a number of shares of
Common Stock equal to the number of Shares issuable upon such exercise at the
time of such exercise in accordance with the terms and provisions of and
applicable to the Rights; and (ii) if such exercise occurs after the
Distribution Date, the same number of Rights to which a holder of the number of
Shares into which the Warrant so exercised was exercisable immediately prior to
the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
9. Fractional Interests. The Company shall not be required to issue
--------------------
fractions of Shares on the exercise of a Warrant. If more than one Warrant
shall be presented for exercise in full at the same time by the same Warrant
Holder, the number of Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Shares purchasable on
exercise of the Warrants so presented. If any fraction of a Share would, except
for the provisions of this Section 9, be issuable on the exercise of any Warrant
(or specified portions thereof), the Company shall purchase such fraction from
the Warrant Holder for an amount in cash equal to the same fraction of the
current market price per share of Common Stock (determined as provided in
paragraph (d) of Section 8) on the date of exercise.
10. Restrictions on Disposition. The issuance of the Warrants has been
---------------------------
registered under the Act pursuant to the Registration Statement. The
Representatives represent and warrant to the Company that they understand that
neither the Warrants nor the Shares may be transferred except pursuant to (i) an
effective registration statement under the Act or (ii) any available rule or
exemption from registration under the Act permitting such disposition.
11. Certificates to Bear Legends. Each Warrant shall be subject to a
----------------------------
stop-transfer order and the certificate or certificates therefor shall bear the
following legend:
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE WARRANTS REPRESENTED BY THIS
CERTIFICATE NOR
9
<PAGE>
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (ii) ANY AVAILABLE RULE OR EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES.
The Shares or other securities issued upon exercise of a Warrant shall be
subject to a stop-transfer order and the certificate or certificates evidencing
any such Shares or securities shall bear a legend in substantially the following
form:
THE SHARES OR SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAWS AND THE SHARES OR OTHER SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR
(ii) ANY AVAILABLE RULE OR EXEMPTION FROM REGISTRATION UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES.
12. Registration Rights.
-------------------
(a) Demand Registration Rights. The Company covenants and agrees with
--------------------------
the Representatives and any other or subsequent Warrant Holder(s) or registered
holder(s) of Shares or registered holder(s) of other securities for which the
Warrants become exercisable (for purposes of this Section 12, collectively, the
"Warrant Holders" and each a "Warrant Holder") that, upon written request (a
"Registration Request") of the then Warrant Holder(s) of at least a majority of
the securities issued and issuable pursuant to the Warrants, made at any time
within the period commencing on the first anniversary of the Effective Date and
ending at the Close of Business on the Expiration Date, the Company will file
with all deliberate speed and, in any event, within 45 days after receipt of
such Registration Request, at its sole expense, no more than once, and at the
Warrant Holders' expense, no more than once, a registration statement or a
Regulation A offering statement (as requested by the Warrant Holders and if
permitted under the Securities Act) registering or qualifying the Shares or
other securities for which the Warrants become exercisable for sale. Within 15
days after receiving any such notice, the Company shall give notice to the other
Warrant Holders advising that the Company is proceeding with such registration
statement or Regulation A offering statement and offering to include therein the
Shares or other securities for which the Warrants become exercisable of such
Warrant Holders. The Company shall not be obligated to any such other Warrant
Holder unless such other Warrant Holder shall accept such offer by notice in
writing
10
<PAGE>
to the Company within 10 days after receipt of such notice from the
Company. No other securities of the Company shall be entitled to participate in
such registration or qualification. The Company will use its best efforts,
through its officers, directors, auditors and counsel in all matters necessary
or advisable, to file and cause to become effective such registration statement
or Regulation A offering statement (if permitted under the Securities Act) as
promptly as practicable and for a period of two years thereafter to reflect in
the registration statement or Regulation A offering statement (if permitted
under the Securities Act) financial statements which are prepared in accordance
with Section 10(a)(3) of the Securities Act and any facts or events arising
that, individually or in the aggregate, represent a fundamental or material
change in the information set forth in the registration statement or Regulation
A offering statement to enable any Warrant Holder to exercise Warrants and to
sell Shares or other securities for which the Warrants become exercisable,
during such two-year period. If any registration pursuant to this paragraph (a)
is an underwritten offering, the Company will select an underwriter (or managing
underwriter if such offering should be syndicated) approved by the Warrant
Holders of a majority of the Warrants or Shares or other securities for which
the Warrants become exercisable to be included in such registration.
Notwithstanding the foregoing, the Company may postpone the filing of such
registration statement or offering statement for a reasonable period of time
after receipt of the original written Registration Request (not exceeding 90
days) if, in the good faith opinion of the Company's Board of Directors,
effecting the registration would adversely affect a material or other comparable
transaction or would require the Company to make public disclosure of
information the public disclosure of which would have a material adverse effect
upon the Company.
(b) Piggyback Registration Rights. The Company covenants and agrees
-----------------------------
with the Representatives and any other or subsequent Warrant Holder(s) that if,
at any time within the period commencing on the first anniversary of the
Effective Date and ending at the Close of Business on the day immediately
preceding the seventh anniversary of the Effective Date, it proposes to register
any class of security under the Act in a primary registration on behalf of the
Company or in a secondary registration on behalf of holders of such securities
and the registration form to be used may be used for registration of the Shares
or other securities for which the Warrants become exercisable, the Company will
give prompt written notice (which, in the case of a registration pursuant to the
exercise of demand registration rights other than those provided in Section
12(a) of this Agreement, shall be within 10 business days after the Company's
receipt of notice of such exercise and, in any event, shall be at least 45 days
prior to such filing) to each Warrant Holder (regardless of whether the Warrant
Holder shall have theretofore availed himself or herself of the right provided
in Section 12(a)) at the addresses appearing on the records of the Company of
its intention to effect a registration. The Company will offer to include in
such registration such number of Shares or other securities for which the
Warrants are exercisable with respect to which the Company has received written
requests for inclusion therein within 10 days after receipt of notice from the
Company; provided, that if such registration is to be underwritten, the
--------
Company shall not be required to include the Shares or other securities for
which the Warrants become exercisable in such
11
<PAGE>
registration to the extent the managing underwriter(s) determines in
good faith that such inclusion would materially adversely affect the offering
being made by such registration. All registrations requested pursuant to this
Section 12(b) are referred to herein as "Piggyback Registrations." This
paragraph is not applicable to a registration statement filed by the Company on
Forms S-4 or S-8 or any successor forms.
(c) Action to be Taken by the Company. In connection with the
---------------------------------
registration of the Shares or other securities for which the Warrants become
exercisable in accordance with paragraphs (a) or (b) above, the Company agrees
to:
(i) bear the expense of any registration or qualification
under paragraph (a), on one occasion, or under paragraph (b), on any number
of occasions, 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 any counsel for the
Warrant Holder(s), or (B) any underwriters' discount or commission in
respect to such Shares or other securities for which the Warrants become
exercisable, payment of which shall, in each case, be the sole
responsibility of the respective Warrant Holder(s) thereof;
(ii) use its best efforts to register or qualify the Shares or
other securities for which the Warrants become exercisable for offer or sale
under state securities or blue sky laws of such jurisdictions as the Warrant
Holders shall reasonably request and do any and all other acts and things
which may be necessary or advisable to enable the Warrant Holders to
consummate the proposed sale, transfer or other disposition of such
securities in any jurisdiction;
(iii) furnish to each holder copies of any registration
statement for the Shares or other securities for which the Warrants become
exercisable, any prospectus included in any such registration statement and
all amendments and supplements to such documents, in each case as soon as
available and in such quantities as such Warrant Holder may from time to
time reasonably request; and
(iv) if registration is to be pursuant to an underwritten
offering, enter into a cross-indemnity agreement in customary form, with
each underwriter, if any, and each Warrant Holder of securities included in
such registration statement.
13. Notices to Warrant Holders; Dissolution; Exercise Rights.
--------------------------------------------------------
(a) Nothing contained in this Agreement or in any Warrant shall be
construed as conferring upon any Warrant Holder the right to vote or to receive
dividends or to consent or to receive notice as a stockholder in respect of the
meetings of stockholders or the election of directors of the Company or any
other matter, or any rights whatsoever as a stockholder of the Company;
provided, however, that in the event that a meeting of
- -------- -------
12
<PAGE>
stockholders shall be called to consider and take action on a proposal for the
voluntary dissolution of the Company or a consolidation, merger or sale of all
or substantially all of its property, assets, business and goodwill as an
entirety, then, in that event, the Company shall cause a notice thereof to be
sent by first-class mail, postage prepaid, at least 20 business days prior to
the date fixed as a record date or the date of closing the transfer books in
relation to such meeting, to each Warrant Holder at such Warrant Holder's
address appearing on the Warrant register. If such notice shall have been so
given and if such a voluntary dissolution shall be authorized at such meeting or
any adjournment thereof, then (i) notwithstanding the provisions of Section 4
hereof, each Warrant Holder shall have the right, at the election of the Warrant
Holder, (A) to exercise any Warrant then held immediately prior to such
voluntary dissolution upon payment of the Exercise Price then in effect or (B)
to receive, as of the effective date of the dissolution, the fair value of such
Warrant as of the time immediately prior to the authorization of the dissolution
(without taking the dissolution into account) as determined by the Board of
Directors of the Company and (ii) from and after the date on which such
voluntary dissolution shall have been duly authorized by the stockholders, the
purchase rights represented by such Warrant and all other rights with respect
thereto shall cease and terminate.
(b) In the event the Company intends to make any distribution on its
Common Stock (or other securities which may be purchasable in lieu thereof upon
the exercise of a Warrant), including, without limitation, any such distribution
to be made in connection with a consolidation or merger in which the Company is
the continuing corporation, or to issue subscription rights or warrants to
holders of its Common Stock, the Company shall cause a notice of its intention
to make such distribution to be sent by first-class mail, postage prepaid, at
least 10 business days prior to the date fixed as a record date or the date of
closing the transfer books in relation to such distribution, to each registered
Warrant Holder at such Warrant Holder's address appearing on the Warrant
register.
14. Notices. Any notice pursuant to this Agreement to be given or made by
-------
any Warrant Holder to the Company shall be sufficiently given or made as of the
third business day following mailing if sent by first-class mail, postage
prepaid, or as of the day after mailing if sent by a nationally recognized
overnight courier, addressed as follows (or to such other address as the Company
may designate by notice given in accordance with this Section 14 to the Warrant
Holder(s)):
ASI Solutions Incorporated
780 Third Avenue
New York, NY 10017
Attn: President
Notices or demands authorized by this Agreement to be given or made by the
Company to any Warrant Holder shall be sufficiently given or made (except as
otherwise provided in this Agreement) as of the third business day following
mailing if sent by first-class mail, postage
13
<PAGE>
prepaid, or as of the day after mailing if sent by a nationally recognized
overnight courier, addressed to such Warrant Holder at the address of such
Warrant Holder as shown on the Warrant register, Common Stock register or the
register for such other security for which the Warrants become exercisable.
15. Covenant as to Certain Transactions. The Company shall not consummate
-----------------------------------
any consolidation, merger, sale or conveyance (as described in Section 8(j)
hereof) unless prior thereto (a) the successor or purchasing corporation (or an
affiliate of such successor or purchasing corporation), as the case may be,
shall have a sufficient aggregate number of authorized shares and other
securities which have not been issued or reserved for issuance to permit the
exercise in full of the Warrants in accordance with Section 8(j) hereof and (b)
the Company and such successor or purchasing corporation or affiliate shall have
executed and delivered to each Warrant Holder a supplemental agreement
confirming that the requirements of Section 8(j) hereof shall be promptly
performed in accordance with their terms and that such consolidation, merger,
sale or conveyance shall not result in a default by the Company, such successor
or purchasing corporation or such affiliate under this Agreement (as the same
shall have been assumed by such successor or purchasing corporation or such
affiliate) and further providing that such successor or purchasing corporation
or such affiliate shall assume all obligations of the Company hereunder and
agree to be bound hereby. In the event of and after the happening of any such
consolidation, merger, sale or conveyance, the term "the Company," as used
herein, shall be deemed to refer to such successor or purchasing corporation or
such affiliate, as the case may be.
16. Governing Law. This Agreement and each Warrant issued hereunder shall
-------------
be governed by and construed in accordance with the substantive laws of the
State of Delaware without giving effect to the principles of conflicts of law
thereof.
17. Counterparts. The Agreement may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute one and the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
ASI SOLUTIONS INCORPORATED
By:_______________________________________
Name:
Title:
H.C. WAINWRIGHT & CO., INC.
By:_______________________________________
Name:
Title:
JANNEY MONTGOMERY SCOTT INC.
By:_______________________________________
Name:
Title:
15
<PAGE>
EXHIBIT A
---------
(Form of Warrant Certificate)
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE OFFERED OR SOLD EXCEPT PURSUANT
TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (ii) ANY AVAILABLE
RULE OR EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION
OF SECURITIES.
No._________ ______ Warrants
VOID AFTER 5:00 P.M. BOSTON TIME
ON _____________, 2002
ASI SOLUTIONS INCORPORATED
Warrant Certificate
THIS CERTIFIES THAT, for value received, _________________, or registered
assigns, is the owner of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase at any time from _______________, 1998
(except as otherwise set forth in the Warrant Agreement referred to below),
until 5:00 p.m., Boston time on __________, 2002 (the "Expiration Date"), one
fully paid and nonassessable share of the common stock, par value $.0l per share
(the "Common Stock"), of ASI SOLUTIONS INCORPORATED, a Delaware corporation (the
"Company"), at the purchase price of $_________ per share (the "Exercise
Price"), upon presentation and surrender of this Warrant Certificate with the
Form of Election to Purchase duly executed. The number of Warrants evidenced by
this Warrant Certificate (and the number of shares of Common Stock which may be
purchased upon exercise hereof) set forth above, and the Exercise Price per
share set forth above, are the number and Exercise Price as of the date of
original issuance of the Warrants, based on the shares of Common Stock of the
Company as constituted at such date. As provided in the Warrant Agreement
referred to below, the Exercise Price and the number or kind of securities which
may be purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are, upon the happening of certain events, subject to modification
and adjustment.
16
<PAGE>
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of an agreement dated as of
__________, 1997 (the "Warrant Agreement") by and among the Company, H.C.
Wainwright & Co., Inc. and Janney Montgomery Scott Inc., which Warrant Agreement
is hereby incorporated herein by reference and made a part hereof and to which
Warrant Agreement reference is hereby made for a full description of the rights,
limitations of rights, duties and immunities hereunder of the Company and the
holder of the Warrant Certificate. Copies of the Warrant Agreement are on file
at the principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates so surrendered entitled such holder to purchase. If this Warrant
Certificate shall be exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby, but in lieu thereof, a cash payment
will be made by the Company, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to vote or receive
dividends or be deemed the holder of Common Stock or any other securities which
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained in the Warrant Agreement or herein be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or, except as provided
in the Warrant Agreement, to receive notice of meetings or to receive dividends
or subscription rights or otherwise, until the Warrant or Warrants evidenced by
this Warrant Certificate shall have been exercised and the shares of Common
Stock or other securities shall have become deliverable as provided in the
Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period during
which the transfer books for the Company's Common Stock or other securities
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for the shares of
Common Stock or other securities purchasable upon such exercise until the date
of the reopening of said transfer books, subject to the terms of the Warrant
Agreement.
17
<PAGE>
IN WITNESS WHEREOF, ASI SOLUTIONS INCORPORATED has caused the signature of
its President and Secretary to be printed hereon and its corporate seal to be
printed hereon.
Dated:
ASI SOLUTIONS INCORPORATED
By:_______________________________________
President
Attest:
___________________________________
Secretary
18
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED, ____________________________________________
hereby sells, assigns and transfers unto
_________________________________________, this Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _______________________________________________ to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________________, _____
__________________________________________
Signature
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond in all
respects to the name as written upon the face of this Warrant Certificate,
without alteration, enlargement or any change whatsoever.
Accepted:
___________________________
Assignee:
19
<PAGE>
EXHIBIT B
---------
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate).
TO ASI SOLUTIONS INCORPORATED:
The undersigned hereby irrevocably elects to exercise __________
Warrants represented by this Warrant Certificate to purchase the shares of
Common Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
Please insert social security or other
identifying number
______________________________
_______________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number
______________________________
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated:_______________, 19__
__________________________________________
Signature
Signature Guaranteed:
20
<PAGE>
NOTICE
The signature on the foregoing election to purchase must correspond in
all respects to the name as written upon the face of this Warrant Certificate,
without alteration, enlargement or any change whatsoever.
359307.c5
21
<PAGE>
EXHIBIT 10.2
ASI SOLUTIONS INCORPORATED
--------------------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of January 15, 1997, by and among
Bernard F. Reynolds ("Reynolds"), residing at 6 Merry Meeting Lane, Lloyd
Harbor, New York 11743, Eli Salig ("Salig"), residing at 145 West 67th Street,
New York, New York 10023, Seymour Adler, Ph.D. ("Adler"), residing at 1291
Wellington Avenue, Teaneck, New Jersey 07666 and ASI Solutions Incorporated, a
Delaware corporation with its principal place of business at 780 Third Avenue,
New York, New York 10017 (the "Company"). All of the parties to this Agreement
are hereinafter collectively referred to sometimes as the "Parties". Reynolds,
Salig and Adler are hereinafter collectively referred to sometimes as the
"Stockholders" and individually as a "Stockholder."
WHEREAS, the Stockholders and the Company wish to provide for various
matters affecting the rights of the Stockholders as stockholders of the Company
and enter into this Agreement in order to effectuate such purpose;
WHEREAS, each Stockholder is the owner of common stock of the Company, par
value $.01 per share (the "Common Stock");
WHEREAS, Reynolds owns 2,783,746 shares of Common Stock representing 60.2%
of the outstanding Common Stock; Salig owns 1,269,222 shares of Common Stock
representing 27.4% of the outstanding Common Stock; and Adler owns 364,121
shares of the Common Stock representing 7.8% of the outstanding Common Stock;
and
WHEREAS, all shares of Common Stock of the Company now held or hereafter
acquired by the Stockholders shall be deemed to be shares of the Stockholders
(the "Stockholder Shares") and shall be subject to this Agreement;
1
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and the terms and conditions set forth in this Agreement, the Parties hereto
agree as follows:
1. Representations and Warranties.
------------------------------
Each of the Stockholders represents and warrants that:
(a) Ownership of Common Stock. He owns the number of shares of Common
-------------------------
Stock ascribed to him in the preamble to this Agreement.
(b) Authorization. He has full right, power and authority to execute this
-------------
Agreement and to perform fully the obligations hereunder; he has duly executed
and delivered this Agreement, and this Agreement constitutes his legal, valid
and binding obligation, enforceable against him in accordance with its terms.
(c) Conflicts. This Agreement does not and will not conflict with or
---------
result in the breach of any term or provision of, or constitute a default under
any agreement or instrument to which he is a party or by which he is bound, or
any law, rule, regulation, order, judgment or decree of any court or
governmental authority applicable to him.
(d) Consents. Except as expressly contemplated by this Agreement, no
--------
consent, approval, authorization, registration, declaration or filing with any
governmental authority is required to be obtained or made in connection with the
execution, delivery or performance of this Agreement.
2. Incidental Registration Rights.
------------------------------
(a) If the Company at any time proposes to register any shares of Common
Stock under the Securities Act of 1933, as amended (the "Securities Act"), by
registration on Forms S-1, S-2 or S-3 or any successor or similar form(s),
whether or not for sale for its own
2
<PAGE>
account (other than registrations of securities in connection with an employee
benefit plan, Company stock option or dividend reinvestment plan or in
connection with the acquisition of assets or shares of or merger or
consolidation with another corporation), and the registration form to be used
may also be used for the registration of shares of Stockholder Shares (an
"Incidental Registration"), the Company shall each such time notify the
Stockholders at least 30 days prior to the filing of any registration statement
with respect thereto. Upon the receipt of a written request of any Stockholder
made within 10 days after such notice (which request shall specify the Common
Stock intended to be disposed of by each holder and the intended method of
disposition thereof), the Company will use its best efforts, subject to the
limitations set forth below, to include in such registration all such
Stockholder Shares with respect to which the Company has received a written
request for inclusion by any Stockholder, provided that the Company shall not be
--------
obligated to register in an Incidental Registration Stockholder Shares
constituting less than two and one-half percent (2 1/2 %) of the total number of
shares of Common Stock then outstanding, unless the Company shall be registering
all of the shares of Common Stock held by such Stockholder. Each request shall
also contain an undertaking from the Stockholders to provide all information and
material and to take all actions as may be required by the Company in order to
permit the Company to comply with all applicable federal and state securities
laws. For the purposes of this subsection (a), "best efforts" shall not require
the Company to reduce the amount or sale price of the securities it proposes to
register.
(b) Each selling Stockholder shall pay all sales commissions or other
similar selling charges with respect to Stockholder Shares sold by such
Stockholder pursuant to a registration. The Company shall pay all registration
and filing fees, fees and expenses for compliance with federal and state
securities laws, printing expenses, messenger and delivery expenses, fees and
disbursements of counsel and accountants for the Company and fees and expenses
of one counsel for all selling Stockholders in connection with an Incidental
Registration, to be selected by the selling Stockholders holding a majority of
the Stockholder Shares to be sold in such registration, unless the applicable
state securities laws require that stockholders whose securities are being
registered pay their pro rata share of such fees, expenses
3
<PAGE>
and disbursements, in which case each Stockholder participating in the
registration shall pay its pro rata share of all such fees, expenses and
disbursements based on his pro rata share of the total number of shares being
registered.
(c) If an Incidental Registration is an underwritten registration, only
shares of Common Stock which are to be distributed by the underwriters may be
included in the registration. If the managing underwriters advise the Company
in writing that in their opinion the number of shares of Common Stock requested
to be included in such registration exceeds the number which can be sold in such
offering or will have a material adverse effect on the price of the shares of
Common Stock to be sold, the Company will include in such registration (i)
first, the shares of Common Stock which the Company proposes to register and
shares of Common Stock of any other holders of shares of Common Stock or
options, warrants or other securities convertible into Common Stock who are
entitled to incidental registration rights prior to those which the Stockholders
propose to register, allocated among the Company and such holders in accordance
with any agreement among the Company and such holders; and (ii) second,
Stockholder Shares which the Stockholders propose to register and shares of
Common Stock any other holders of shares of Common Stock or options, warrants or
other securities convertible into Common Stock who are entitled to incidental
registration rights on a par with that which the Stockholders propose to
register, in proportion to the number of shares of Common Stock such
Stockholders and other holders propose to include in the Incidental
Registration. The managing underwriters for a registration pursuant to this
Section shall be chosen by the Company.
(d) Notwithstanding the foregoing, if at any time after giving written
notice to the Stockholders of its intention to register any shares of Common
Stock pursuant to subsection (a) of this Section 2 and prior to the effective
date of the Registration Statement filed in connection with such registration,
the Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to each
Stockholder and thereupon shall be relieved of its obligation to register any
Stockholder
4
<PAGE>
Shares in connection with such registration (but not from its obligation to pay
certain expenses in connection therewith as provided in subsection (b) above).
(e) The Company may suspend its obligation to register Stockholder Shares
pursuant to this Section 2 if, in the opinion of counsel to the Company, the
Stockholder Shares proposed to be sold pursuant to this Section 2 can be sold in
the same volume and manner as they are proposed to be sold by such Stockholder
in a transaction exempt from registration pursuant to the Securities Act and
similar state securities laws.
(f) Each Stockholder agrees not to sell or offer for sale any of his
Stockholder Shares within 7 days prior to or 90 days after the effective date of
any registration (except as part of such registration).
3. Registration Upon Request.
-------------------------
(a) Request for Registration. At any time after the Company has completed
------------------------
an IPO pursuant to a registration and shall no longer be restricted from
commencing a second registration pursuant to applicable law and upon the written
request of one or more Stockholders holding in the aggregate at least seven
percent ( 7%) of the shares of outstanding Common Stock (each an "Initiating
Holder") requesting that the Company effect pursuant to this Section 3 the
registration of any of such Initiating Holders' Stockholder Shares (a "Demand
Registration") under the Securities Act (which request shall specify the
Stockholder Shares requested to be registered, the proposed amounts thereof, and
the intended method of disposition by such Initiating Holders), the Company
shall promptly give written notice of such requested registration to all
Stockholders, and thereupon the Company will, as expeditiously as reasonably
possible, use its best efforts to effect the registration of: (i) the
Stockholder Shares which the Company has been so requested to register by the
Initiating Holder, for disposition in accordance with the intended method of
disposition stated in such request, and (ii) all other Stockholder Shares owned
by Stockholders, the holders of which shall have made a written request to the
5
<PAGE>
Company for registration thereof (which request shall specify the Stockholder
Shares requested to be registered, the proposed amounts thereof and the intended
method of disposition by such Stockholder) within 30 days after the receipt of
such written notice from the Company, all to the extent requisite to permit the
disposition by the holders of the securities constituting Stockholder Shares so
to be registered, provided that the Company shall not be required to effect any
--------
registration pursuant to this Section 3 if it is a registration with respect to
which the Company is not required to pay expenses pursuant to Section 3(b)(i)
unless the Company shall have received assurances satisfactory to it that the
Initiating Holder will bear the expenses of registration.
(b) Limitations on Registrations. The registration rights granted to the
----------------------------
Initiating Holders pursuant to this Section 3 are subject to the following
limitations:
(i) Each selling Stockholder shall pay all sales commissions or
other similar selling charges with respect to his Stockholder Shares sold
pursuant to a registration. In connection with one Demand Registration
pursuant to this Section 3, at the request of the Initiating Holder, the
Company shall pay all registration and filing fees, fees and expenses of
compliance with federal and state securities laws, printing expenses,
messenger and delivery expenses, fees and disbursements of counsel and
accountants for the Company and fees and expenses of one counsel, selected
by the selling Stockholders holding a majority of the Stockholder Shares to
be sold in such registration, for all selling Stockholders in connection
with a Demand Registration, unless the applicable state securities laws
require that stockholders whose securities are being registered pay their
pro rata share of such fees, expenses and disbursements, in which case each
Stockholder participating in the registration shall pay its pro rata share
of all such fees, expenses and disbursements based on its pro rata share of
the total number
6
<PAGE>
of shares being registered. In all other instances, the selling
Stockholders shall pay all expenses of a Demand Registration;
(ii) Initiating Holders holding a majority of the shares of
Common Stock held by all Initiating Holders shall determine (A) whether
such Demand Registration shall be the one Demand Registration in which the
Company pays expenses pursuant to clause (i) of this section, (B) the
method of distribution of the securities to be registered and (C) if an
underwritten offering, shall select the managing underwriter of such
offering;
(iii) The Company shall be entitled to postpone for a
reasonable time not exceeding 120 days the filing of any registration
statement under this Section 3 if, at the time it receives a request for a
Demand Registration pursuant thereto, the Board of Directors of the Company
shall determine in good faith that such offering will interfere with a
pending financing, merger, sale of assets, recapitalization or other
corporate action which the Company is actively pursuing and is material to
the business of the Company; and
(iv) A Registration Statement that does not become effective or
does not remain effective for the period specified in Section 4(b) shall be
deemed not to constitute a Registration Statement filed pursuant to this
Section 3, provided that, if such Registration Statement does not become
--------
effective or does not remain effective for such period solely by reason of
the Initiating Holders' refusal to proceed, it shall be deemed to
constitute a Registration Statement filed pursuant to this Section 3,
unless the Initiating Holders shall have
7
<PAGE>
elected to pay all expenses in connection with such registration as
aforesaid.
(c) If any registration pursuant to this Section 3 involves an
underwritten offering and the managing underwriter requests that the
participants in such offering grant the underwriters an over-allotment or "green
shoe" option for the purpose of covering over-allotments that may be made by the
underwriters in connection with such offering, then a percentage of the shares
proposed to be sold by each selling Stockholder, which portion shall not exceed
the maximum amount then permitted by the rules of the National Association of
Securities Dealers, Inc. and shall equal the percentage of the shares proposed
to be sold by other sellers in the offering that is applied to the same purpose,
shall be made subject to such over-allotment option, unless otherwise agreed in
the underwriting agreement relating thereto. Each of the Initiating Holders and
the other sellers may withdraw from any Demand Registration pursuant to this
Section 3 by giving written notice to the Company, the managing underwriter, if
any, and the other Stockholders prior to the effective date of such Registration
Statement.
(d) The Company may suspend its obligation to register shares of
Common Stock by a Stockholder pursuant to this Section 3 if, in the opinion of
counsel to the Company, the shares of Common Stock proposed to be sold by such
Stockholder pursuant to this Section 3 can be sold in the same volume and manner
as they are proposed to be sold by such Stockholder in a transaction exempt from
registration pursuant to the Securities Act, as amended, and similar state
securities laws.
(e) Each Stockholder agrees not to sell or offer for sale any of such
Stockholder's shares of Common Stock within 7 days prior to or 90 days after the
effective date of any registration (except as part of such registration).
8
<PAGE>
4. Registration Procedures.
-----------------------
If and whenever the Company is required to use its best efforts to
effect the registration of any Stockholder Shares under the Securities Act as
provided in this Agreement, the Company will promptly:
(a) prepare and file with the Securities and Exchange Commission
("SEC") a Registration Statement with respect to such securities and use its
best efforts to cause such Registration Statement to become effective;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement, but in no event for a period of more than 4 months after such
Registration Statement becomes effective;
(c) furnish to counsel (if any) selected by the selling Stockholders
holding a majority of the Stockholder Shares to be sold in such registration,
copies of all documents proposed to be filed with the SEC in connection with
such registration, which documents will be subject to the review of such
counsel;
(d) furnish to each seller of securities such number of conformed
copies of such Registration Statement and of each amendment and supplement
thereto (in each case including all exhibits, except that the Company shall not
be obligated to furnish any seller of securities with more than 2 copies of such
exhibits), such number of copies of the prospectus comprised in such
Registration Statement (including each preliminary prospectus and any
9
<PAGE>
summary prospectus), in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request in order to
facilitate the disposition of the securities owned by such seller;
(e) use its best efforts to register or qualify such securities
covered by such Registration Statement under such other securities or blue sky
laws of such jurisdictions as may apply, and do any and all other acts and
things which may be necessary or advisable to enable such seller to consummate
the disposition in such jurisdictions of the securities owned by such seller,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified, or to consent to general service of process in any such
jurisdiction;
(f) in connection with an underwritten offering only, furnish to each
seller copies of: (i) an opinion of counsel for the Company, dated the effective
date of the Registration Statement, and (ii) a "comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in the Registration Statement, each covering substantially
the same matters with respect to the Registration Statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountant's letters delivered to
the underwriters in underwritten public offerings of securities;
(g) notify each seller of any such securities covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, or the happening of any event
as a result of which the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller prepare and furnish to such
seller a reasonable number of copies of a supplement to or an
10
<PAGE>
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(h) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at least
12 months, but not more than 18 months, beginning with the first month after the
effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of section 11(a) of the Securities Act; and use its best
efforts to list such securities on any securities exchange on which the Common
Stock is then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange, and to provide a
transfer agent and registrar (which, in each case, may be the Company) for such
Stockholder Shares not later than the effective date of such registration
statement.
The Company may require each seller of any securities as to which any
registration is being affected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing and as shall be required by law in
connection therewith.
Each Stockholder hereby agrees that upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 4(g),
such holder will promptly discontinue such holder's disposition of Stockholder
Shares pursuant to the Registration Statement covering such Stockholder Shares
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 4(g), and, if so directed by the Company,
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
covering such Stockholder Shares at the time of receipt of such notice. In the
event the Company shall give
11
<PAGE>
such notice, the period mentioned in Section 4(b) shall be extended by the
number of days during the period from and including the date when each seller of
any Stockholder Shares covered by such Registration Statement shall have
received the notice of the event of the kind described in Section 4(g) to but
not including the date when each such seller receives copies of the supplemented
or amended prospectus contemplated by Section 4(g).
5. Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any Stockholder Shares under the Securities Act, the Company will, and hereby
does, indemnify and hold harmless, in the case of any Registration Statement
filed pursuant to Sections 2 and 3 hereof, each Stockholder, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arising out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any Registration Statement under which such Stockholder Shares were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse each Stockholder for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company shall not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such Stockholder specifically stating that it is for
use in the preparation thereof. Such
12
<PAGE>
indemnity shall remain in full force regardless of any investigation made by or
on behalf of a Stockholder.
(b) Indemnification by Selling Stockholders. As a condition to
---------------------------------------
including any Stockholder Shares in any Registration Statement, the Company
shall have received an undertaking satisfactory to it from each Stockholder so
including Stockholder Shares, to indemnify and hold harmless ( in the same
manner and to the same extent as set forth in subdivision (a) of this Section 5)
the Company, and each director of the Company, each officer of the Company and
each other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such Stockholder specifically stating that it is for use in the preparation
of such Registration Statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement; provided, however, that the
-------- -------
liability of a Stockholder under this Section 5(b) shall be limited to the
amount of proceeds received by such indemnifying party in the offering giving
rise to such liability. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer, or controlling Person and shall survive the transfer of such
securities by a Stockholder.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
-----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
-------- -------
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 5, except to the
extent that the indemnifying party is
13
<PAGE>
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party shall be entitled
to participate in and, unless in such indemnified party's reasonable judgement a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, to assume the defense thereof jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent (which consent shall
not be unreasonably withheld). No indemnifying party shall, without the consent
of the indemnified party (which consent shall not be unreasonably withheld),
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
(d) Contribution. If the indemnification provided for in this
------------
Section 5 shall for any reason be held by a court to be unavailable to an
indemnified party under paragraph (a) or (b) hereof in respect of any loss,
claim, damage, or liability, or any action or proceeding in respect thereof,
then, in lieu of the amount paid or payable under subparagraph (a) or (b)
hereof, the indemnified party and the indemnifying party under subparagraph (a)
or (b) hereof shall contribute to the aggregate losses, claims, damages, and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating the same), (i) in such proportion as is appropriate to
reflect the relative fault of the Company and the Stockholders covered by the
Registration Statement which resulted in such loss, claim, damage or liability,
or action in respect thereof, with respect to the statement or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable consideration, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable
14
<PAGE>
law, in such proportion as shall be appropriate to reflect the relative benefits
received by the Company from the offering of the securities covered by such
Registration Statement. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld.
(e) Other Indemnification. Indemnification and contribution similar
---------------------
to that specified in the preceding subdivisions of this Section 5 (with
appropriate modifications) shall be given by the Company and the Stockholders
proposing to offer and sell Stockholder Shares with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and contribution
------------------------
required by this Section 5 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage, or liability is incurred.
(g) Additional Rights. Any indemnification agreements contained herein
-----------------
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made or omitted by or on behalf of any indemnified party.
6. Stock Certificate Legend.
------------------------
A copy of this Agreement shall be filed with the Secretary of the
Company and kept with the records of the Company. Each certificate representing
Stockholder Shares shall
15
<PAGE>
bear upon its face substantially the following legend, in addition to any other
legends that may be required:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, ("THE SECURITIES ACT"), AND MAY
NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT, AND
ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS IN THE OPINION OF
COUNSEL, SATISFACTORY TO THE ISSUER, SUCH SALE OR TRANSFER IS EXEMPT
FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE SECURITIES ACT.
The certificate representing Stockholder Shares for sale pursuant to an
effective Registration Statement under the Securities Act or pursuant to Rule
144 (to the extent permitted hereby) shall be replaced, at the expense of the
Company, with certificates not bearing the legend required by this Section.
7. Certificate of Incorporation; By-Laws; Restrictions on Other
------------------------------------------------------------
Agreements; No Circumvention; etc.
- ---------------------------------
Each Stockholder shall vote his shares of Common Stock, at any regular
or special meeting of stockholders of the Company or in any written consent
executed in lieu of such a meeting of stockholders, and shall take all other
actions necessary to ensure that the certificate of incorporation and by-laws of
the Company do not, at any time, conflict with the provisions of this Agreement.
No Stockholder may do indirectly, that which he is not permitted to do by this
Agreement. In the event that any stock or other securities are issued in
respect of, in
16
<PAGE>
exchange for, or in substitution of, any shares of Common Stock by reason of any
reorganization, recapitalization, reclassification, merger, consolidation,
spinoff, partial or complete liquidation, stock dividend, stock split or revere
stock split, sale of assets, distribution to stockholders or combinations of the
shares of Common Stock or any other change in the Company's capital structure,
such capital stock or other securities shall be deemed subject to this
Agreement, and appropriate adjustments shall be made in the percentages
specified in this Agreement and as otherwise may be necessary to fairly and
equitably preserve, as far as practicable, the original rights and obligations
of the Parties.
8. Participation in Underwritten Registrations.
-------------------------------------------
No Stockholder may participate in any underwritten registration
hereunder unless such Stockholder (i) agrees to sell such Stockholder's
securities on the basis provided in any underwriting arrangements approved by
the Stockholders entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements or this Agreement.
9. Termination.
-----------
This Agreement shall terminate on the earlier of (i) 10 years from the
date of this Agreement or (ii) the date on which neither Reynolds, Salig or
Adler own any Common Stock.
10. Binding Effect.
--------------
The provisions of this Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective heirs, legal
representatives and successors.
17
<PAGE>
11. Notices.
-------
Notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed duly given when
delivered personally (or delivery is refused) or sent by mail (certified or
registered mail, postage prepaid, return receipt requested), as follows:
(a) If to Bernard F. Reynolds:
6 Merry Meeting Lane
Lloyd Harbor, New York 11743
(b) If to Eli Salig:
145 West 67th Street
New York, New York 10023
(c) If to Seymour Adler, Ph.D.:
1291 Wellington Avenue
Teaneck, New Jersey 07666
(d) If to ASI Solutions Incorporated:
780 Third Avenue
New York, New York 10017
With a copy to:
Koerner Silberberg & Weiner, LLP
112 Madison Avenue, Third Floor
New York, New York 10016
Attention: Carl Seldin Koerner, Esq.
18
<PAGE>
or at such other address as such party shall have furnished to the other parties
in writing.
12. Entire Agreement; Amendments.
----------------------------
This Agreement embodies the entire agreement and understanding between
the Parties relating to the subject matter hereof. Neither this Agreement nor
any provision hereof may be changed, discharged or terminated orally, without an
instrument in writing signed by the Company and each of the Stockholders at the
time owning Stockholder Shares.
13. Governing Law.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware regardless of the law that
might be applied under principles of conflicts of law.
14. Headings.
--------
All headings are inserted herein for convenience only and do not form
a part of this Agreement.
15. Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
19
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date written above.
ASI SOLUTIONS INCORPORATED
By: ____________________________________________
Bernard F. Reynolds
Chief Executive Officer
________________________________________________
Bernard F. Reynolds
________________________________________________
Eli Salig
________________________________________________
Seymour Adler, Ph.D.
20
<PAGE>
Exhibit 10.5
FORM OF
ASI SOLUTIONS INCORPORATED
1996 EMPLOYEE STOCK PURCHASE PLAN
The purpose of the ASI Solutions Incorporated 1996 Employee Stock Purchase
Plan (the "Plan") is to provide eligible employees of ASI Solutions Incorporated
(the "Company") and certain of its subsidiaries with opportunities to purchase
shares of the Company's common stock, $.01 par value (the "Common Stock"). Two
hundred fifty thousand (250,000) shares of Common Stock in the aggregate have
been approved for this purpose. The Plan is intended to constitute an "employee
stock purchase plan" within the meaning of Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be interpreted in
accordance with that intent.
1. Administration. The Plan will be administered by the Company's Board
---------------
of Directors (the "Board") or by a committee appointed by the Board for such
purpose (the "Committee"). The Board or the Committee has authority to make
rules and regulations for the administration of the Plan, and its
interpretations and decisions with regard thereto shall be final and conclusive.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
2. Offerings. The Company will make one or more offerings to eligible
----------
employees to purchase Common Stock under the Plan ("Offerings"). The initial
Offering will begin on the date of the Initial Public Offering and will end on
September 30, 1997 (the "Initial Offering"). Thereafter, an Offering will begin
on the first business day occurring on or after each October 1 and April 1 and
will end on the last business day occurring on or before the following March 31
and September 30, respectively. The Board or the Committee may, in its
discretion, select a different offering period for any offering, provided that
the duration of the offering is not longer than one year.
3. Eligibility. All employees of the Company (including employees who are
------------
also directors of the Company) and all employees of each Designated Subsidiary
(as defined in Section 11) are eligible to participate in any one or more of the
Offerings under the Plan, provided that as of the first day of the applicable
Offering (the "Offering Date") they are customarily employed by the Company or a
Designated Subsidiary for more than twenty (20) hours a week and have completed
at least six (6) months of employment.
4. Participation. An employee eligible on any Offering Date may
--------------
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least ten (10) business days before the Offering Date (or by
such other deadline as shall be established for the Offering). The form will
(a) state the percentage to be deducted from his Compensation (as defined in
Section 11) per pay period, (b) authorize the purchase of Common Stock for him
in each Offering in accordance with terms of the Plan and (c) specify the exact
name or names in
<PAGE>
which shares of Common Stock purchased for him are to be issued pursuant to
Section 10. An employee who does not enroll in accordance with these procedures
will be deemed to have waived his right to participate. Unless an employee
files a new enrollment form or withdraws from the Plan, his deductions and
purchases will continue at the same percentage of compensation for future
Offerings, provided he remains eligible. Notwithstanding the foregoing,
participation in the Plan will neither be permitted nor be denied contrary to
the requirements of the Code.
5. Employee Contributions. Each eligible employee may authorize payroll
------------------------
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his Compensation for each pay period. The Company will maintain book
accounts showing the amount of the payroll deductions made by each
participating employee for each Offering. No interest will accrue or be paid on
payroll deductions.
6. Deductions Changes. An employee may not increase or decrease his
-------------------
payroll deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering (subject to the limitations of
Section 5) by filing a new enrollment form at least ten (10) business days
before the next Offering Date (or by such other deadline as shall be established
for the Offering).
7. Withdrawal. An employee may withdraw from participation in the Plan by
-----------
delivering a written notice of withdrawal to his appropriate payroll location.
The employee's withdrawal will be effective as of the next business day.
Following an employee's withdrawal, the Company will promptly refund to him his
entire account balance under the Plan (after payment for any Common Stock
purchased before the effective date of withdrawal). Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Offering, but may enroll in a subsequent Offering in accordance with
Section 4.
8. Grant of Options. On each Offering Date, the Company will grant to
-----------------
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, whole shares of Common Stock
reserved for the purposes of the Plan up to a maximum determined by dividing ten
percent (10%) of such employee's projected Compensation for the period of the
Offering by eighty five percent (85%) of the Fair Market Value of the Common
Stock (as defined in Section 11) on the Offering Date. The purchase price for
each share purchased under such Option (the "Option Price") will be 85% of the
Fair Market Value of the Common Stock on the Offering Date or the Exercise Date,
whichever is less.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the preceding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
2
<PAGE>
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
rights to purchase stock under the Plan, and any other employee stock purchase
plan of the Company and its Parents and Subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such stock (determined on the option
grant date or dates) for each calendar year in which the Option is outstanding
at any time. The purpose of the limitation in the preceding sentence is to
comply with Section 423(b)(8) of the Code.
9. Exercise of Option and Purchase of Shares. Each employee who continues
------------------------------------------
to be a participant in the Plan on the Exercise Date shall be deemed to have
exercised his Option on such date and shall acquire from the Company such number
of whole shares of Common Stock reserved for the purpose of the Plan as his
accumulated payroll deductions on such date will purchase at the Option Price,
subject to any other limitations contained in the Plan. Any balance remaining
in an employee's account at the end of an Offering will be refunded to the
employee promptly; provided that any balance remaining in an employee's account
at the end of an Offering solely by reason of the inability to purchase a
fractional share will be carried forward to the next Offering.
10. Issuance of Certificates. Certificates representing shares of Common
-------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship or in the name of a broker authorized by the
employee to be his, or their, nominee for such purpose.
11. Definitions
-----------
The term "Compensation" means the amount of total cash compensation, prior
to salary reduction pursuant to either Section 125 or 401(k) of the Code,
including base pay, commissions, overtime, and incentive and bonus awards, but
excluding allowances and reimbursements for expenses such as relocation
allowances or travel expenses, income or gains or the exercise of Company stock
options, and similar items.
The term "Designated Subsidiary" means any present or future Subsidiary (as
defined below) that is designated from time to time by the Board or the
Committee to participate in the Plan. Subsidiaries may be so designated either
before or after the Plan is approved by the stockholders.
The term "Fair Market Value of the Common Stock" means the last reported
sale price of the Common Stock on the Nasdaq National Market ("NASDAQ") on a
given day or, if no sales of Common Stock were made on that day, the last
reported sale price of the Common Stock on the next preceding day on which sales
were made.
The term "Parent" means a "parent corporation" with respect to the
Company, as
3
<PAGE>
defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to
the Company, as defined in Section 424(f) of the Code.
12. Rights on Retirement, Death, or Other Termination of Employment. If a
----------------------------------------------------------------
participating employee's employment terminates for any reason before the
Exercise Date for any Offering, no payroll deduction will be taken from any pay
due and owing to the employee and the balance in his account will be paid to him
or, in the case of his death, to his designated beneficiary as if he had
withdrawn from the Plan under Section 7. An employee will be deemed to have
terminated employment, for this purpose, if the corporation that employs him,
having been a Designated Subsidiary, ceases to be a Subsidiary, or if the
employee is transferred to any corporation other than the Company or a
Designated Subsidiary.
13. Optionees Not Stockholders. Neither the granting of an Option to an
---------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under the Plan
until such shares have been purchased by and issued to him.
14. Rights Not Transferable. Rights under the Plan are not transferable
------------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
15. Application of Funds. All funds received or held by the Company
---------------------
under the Plan may be combined with other corporate funds and may be used for
any corporate purpose.
16. Adjustment in Case of Changes Affecting Common Stock. In the event of
-----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
17. Amendment of the Plan. The Board or the Committee may at any time,
----------------------
and from time to time, amend the Plan in any respect, except that without the
approval, within twelve (12) months of such Board or Committee action, by the
holders of a majority of the shares of stock of the Company present or
represented and entitled to vote at a meeting of stockholders, no amendment
shall be made (a) increasing the number of shares approved for the Plan or (b)
redefining the class of corporations whose employees are eligible to receive
options under the Plan.
18. Insufficient Shares. If the total number of shares of Common Stock
--------------------
that would
4
<PAGE>
otherwise be purchased on any Exercise Date plus the number of shares purchased
under previous Offerings under the Plan exceeds the maximum number of shares
issuable under the Plan, the shares then available shall be apportioned among
participants in proportion to the amount of payroll deductions accumulated on
behalf of each participant that would otherwise be used to purchase Common Stock
on such Exercise Date.
19. Termination of the Plan. The Plan may be terminated at any time by
------------------------
the Board or the Committee. Upon termination of the Plan, all amounts in the
accounts of participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
-------------------------
deliver Common Stock under the Plan is subject to listing on NASDAQ (or other
national exchange) and obtaining all governmental approvals required in
connection with the authorization, issuance, or sale of such stock.
The Plan shall be governed by Delaware law except to the extent that
such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Any provision
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan. To ensure compliance with such Rule, the Board or the
Committee may limit the right of covered employees to withdraw from the Plan or
to resume participation following withdrawal.
21. Issuance of Shares. Shares may be issued upon exercise of an Option
-------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Tax Withholding. Participation in the Plan is subject to any required
----------------
tax withholding on income of the participant in connection with the Plan. Each
employee agrees, by entering the Plan, that the Company and its Subsidiaries
shall have the right to deduct any such taxes from any payment of any kind
otherwise due to the employee, including shares issuable under the Plan.
23. Notification upon Sale of Shares. Each employee agrees, by entering
---------------------------------
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
--------------------------------------------
effect on the first day of the Company's initial public offering, subject to
approval by the holders of a majority of the shares of stock of the Company
present or represented and entitled to vote at a meeting of stockholders, which
approval must occur within twelve (12) months of the adoption of the Plan
5
<PAGE>
by the Board.
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
Employment Agreement dated as of January 16, 1997 by and between ASI
Solutions Incorporated (the "Company"), a Delaware corporation, and Bernard F.
Reynolds (the "Employee").
WHEREAS, the Employee is employed as Chairman of the Board and Chief
Executive Officer of the Company; and
WHEREAS, the Employee's services have contributed to the growth of the
Company; and
WHEREAS, the Company desires to continue to employ and retain the
experience, ability and services of the Employee and to prevent any other
competitive business from securing his services to utilize his experience,
background and know-how; and
WHEREAS, the Board of Directors recognizes that these arrangements are
being made to help assure a continuing dedication by the Employee to his duties
to the Company; and
WHEREAS, the Board of Directors wishes to demonstrate to the employees of
the Company that the Company is concerned with the welfare of its employees and
intends to ensure that loyal employees are treated fairly;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and for other good and valuable consideration, each of the parties,
intending to be legally bound, hereby agree to the following terms and
conditions.
1
<PAGE>
1. Term. The Company hereby employs the Employee, and the Employee hereby
----
accepts such employment, for a term commencing as of the date of this Agreement
and ending on the date of termination of the Employee's Employment pursuant to
the provisions of Section 4 or 5 (said period hereinafter referred to as the
"Term").
2. Duties. The Employee shall serve in the capacity of Chairman of the
------
Board and Chief Executive Officer of the Company (or such other and comparable
titles and positions as shall be given to the Employee by the Board of Directors
of the Company). The Employee shall faithfully perform the duties of said
offices and shall perform such other services of an executive, managerial or
administrative nature as shall be specified and designated by the Board of
Directors of the Company, it being understood that such duties shall be
reasonably comparable to those duties heretofore performed by the Employee for
the Company. The Employee shall devote substantially all of his business time
and effort to the performance of his duties hereunder, except for illness or
incapacity.
3. Compensation and Benefits.
-------------------------
3.1 Salary. During the Term of this Agreement, the Company shall pay the
------
Employee an annual salary (the "Annual Salary"), calculated as follows: (i) Two
Hundred Sixty Thousand Dollars ($260,000), in equal monthly installments, less
such deductions as shall be required to be withheld by law; plus (ii) an annual
salary increase to reflect the increase in the Consumer Price Index (as defined
below). To compute the annual increase attributable to the Consumer Price
Index, the Consumer Price Index as of November 1996 shall be compared with the
Consumer Price Index for each successive November of the Term. Any increase in
the Consumer Price Index between November 1996 and November of any subsequent
year during the Term shall cause an increase in the Annual Salary in the same
proportion as the change in Consumer Price Index between the two dates. Any
increase so calculated shall be applied to the Annual Salary and shall be
payable beginning January of each year of the Term. In the event the Consumer
Price Index decreases or remains the same, there will be no effect on the
Employee's Annual Salary for the annual period next to commence. For purposes
of this Section, the
2
<PAGE>
Consumer Price Index shall mean the Consumer Price Index for All Urban
Consumers, All-Items, for New York-Northeast New Jersey-Long Island, NY-NJ-CT
(1982-84=100) published by the United States Bureau of Labor Statistics,
Department of Labor, or its successor then in effect. If publication of the
Consumer Price Index is discontinued, the parties hereto shall accept comparable
statistics on the cost of living adjustment for New York City as computed and
published by an agency of the United States or by a responsible financial
periodical or recognized authority to be selected by the parties.
3.2 Bonus. During the Term, the Employee shall receive an annual bonus in
-----
an amount as shall be determined by the Board of Directors of the Company.
3.3 Benefits. During the Term, the Employer shall provide and the
--------
Employee may participate (to the extent that the Employee is eligible under the
terms of such plans or programs) in the following:
(a) family medical, dental, and eye care insurance coverage (with "family"
defined as spouse and all dependent children, under the age 21);
(b) life and disability insurance; and
(c) incentive, pension or profit sharing plans, deferred compensation
arrangements, stock option plans or similar benefits that may be available
to executive officers of the Company.
3.4 Automobile. During the Term, the Employer shall provide the Employee
----------
with an automobile to the same extent and in accordance with the policy for
executive officers of the Company. The automobile shall be comparable in
quality to that which the Company presently provides to the Employee. The
Company shall also pay all insurance, maintenance, fuel, repairs, registration
fees and other operating costs.
3
<PAGE>
3.5 Vacation. The Employee shall be entitled to receive four (4) weeks of
--------
vacation per year, during which time his compensation shall be paid in full.
3.6 Expenses. The Company shall pay or reimburse the Employee for all
--------
reasonable and properly documented out-of-pocket expenses actually incurred or
paid by the Employee during the Term in the performance of the Employee's
services under this Agreement.
4. Termination Due to Death, Disability, Voluntary Resignation or
--------------------------------------------------------------
Termination Without Cause.
-------------------------
4.1 Termination Due to Death. If the Employee dies during the Term, this
------------------------
Agreement shall terminate as of the date of the Employee's death and the
Employee's estate or beneficiaries shall be entitled to receive any salary,
bonus and other benefits earned and accrued prior to the date of death together
with reimbursement for any out-of-pocket expenses incurred prior to the date of
death. The Employee's estate or beneficiaries shall also be entitled to receive
payments equivalent to the Employee's Annual Salary for a period of three (3)
years following the date of death.
4.2 Termination Due to Disability. If the Employee is unable to
-----------------------------
competently perform the duties assigned to him because of ill health or other
disability, for a period in excess of one hundred twenty (120) consecutive or
non-consecutive days out of any twelve (12) month period, the Company may, at
its option, terminate the employment of the Employee immediately by written
notice to the Employee. The Employee shall be entitled to receive any salary,
bonus and other benefits earned and accrued together with reimbursement for any
out-of-pocket expenses incurred, for the period prior to the notice of
termination. The Employee shall also be entitled to receive for a period of
three (3) years following the date of the Company's notice of termination, the
Employee's Annual Salary and all other benefits provided to executive officers,
with the exception of those benefits provided pursuant to Sections 3.2 and 3.5
hereof.
4
<PAGE>
4.3 Termination Due to Voluntary Resignation. If the Employee voluntarily
----------------------------------------
resigns from the Company (in which case such resignation shall be effective on
the date the Employee provides the Company with notice of such resignation), the
Employee shall be entitled to receive any salary, bonus or other benefits earned
and accrued prior to the date of resignation, together with reimbursement for
any out-of-pocket expenses incurred prior to the date of resignation.
4.4 Termination Without Cause. The Company may terminate the Employee
-------------------------
at any time for any reason other than those specified in Section 5 hereof,
effective thirty (30) days after written notice is given to the Employee of such
termination; provided, however, that the Employee shall be entitled to receive
for a period of three (3) years following the date of the Company's notice of
termination, the Employee's Annual Salary and all other benefits provided to
executive officers, with the exception of those benefits provided pursuant to
Sections 3.2 and 3.5 hereof. The Employee shall not be obligated to perform any
services for the Company during such three (3) year period.
5. Termination for Cause. If the Employee: (i) is convicted of a felony
---------------------
or any crime involving the Company or its subsidiaries (except where such felony
or crime derives from actions taken at the direction of the Board of Directors
of the Company in writing); or (ii) is determined by the Board of Directors of
the Company to have engaged in: (a) willful misconduct (as hereinafter defined);
(b) willful or gross neglect; (c) fraud; (d) misappropriation; (e) embezzlement;
(f) material breach of his fiduciary duty; or (g) conduct in wanton disregard of
corporate policy in the performance of his duties hereunder, the Company may
terminate the Employee's employment immediately, at any time within thirty (30)
days after receiving notice of the occurrence of any of the events described in
clauses (i) and (ii) above, by written notice to the Employee. In the event of
termination under this Section 5, the Employee shall have no right to receive
any compensation or other benefit hereunder on and after the date of the
termination, other than salary and other benefits earned and accrued prior to
the date of termination and reimbursement for out-of-pocket expenses incurred
prior to the date of termination. As used in
5
<PAGE>
this Agreement, the term "willful misconduct" shall mean willful failure of the
Employee to perform his duties.
6. Covenant of the Employee.
------------------------
6.1 Covenant Against Competition. The Employee acknowledges that: (i) the
----------------------------
principal business of the Company and its subsidiaries is human resources
consulting and outsourcing services (the "Present Business"); (ii) the Company
and its subsidiaries is one of a limited number of entities which have developed
the present business; (iii) the Present Business is national in scope; (iv) the
Employee's work for the Company and its subsidiaries has given and will continue
to give him access to the confidential affairs and proprietary information of
the Company and its subsidiaries not readily available to the public; and (v)
the agreements and covenants of the Employee contained in this Section 6.1 are
essential to the business and goodwill of the Company. Accordingly, the
Employee covenants that:
(a) Throughout the Employee's employment with the Company and for a period
of three (3) years following the date that the Employee is given notice of
termination from the Company (in the case of termination for disability,
termination without cause or termination with cause) or for a period of three
(3) years following the date that the Employee resigns from the Company (the
"Restricted Period"), the Employee shall not, in the United States of America,
directly or indirectly: (1) engage in the Present Business or any other
principal line of business developed by the Company during the Term (hereinafter
collectively referred to as the "Company Business") for the Employee's own
account; (2) render any services in any capacity to any person or entity (other
than the Company or its subsidiaries) engaged in the Company Business; or (3)
become interested in any entity engaged in the Company Business (other than the
Company or its subsidiaries) as a partner, shareholder, principal, agent,
trustee, consultant or in any other relationship or capacity; provided, however,
the Employee may own, directly or indirectly, solely as an investment,
securities of any such entity which are traded on any national securities
exchange or NASDAQ if the Employee: (A) is not a controlling person of, or a
member of a group which controls such entity and (B) does not, directly or
indirectly, own ten
6
<PAGE>
percent (10%) or more of any class of securities of such entity.
(b) During the Restricted Period, the Employee shall keep secret and
retain in strictest confidence, and shall not use for his benefit or the benefit
of others, except in connection with the business and affairs of the Company and
its subsidiaries, all confidential matters relating to the Company Business and
to the Company and its subsidiaries learned by the Employee heretofore or
hereafter, directly or indirectly, from the Company and its subsidiaries,
including any information concerning the business, affairs, customers, clients,
sources of supply and customer lists of the Company or its subsidiaries (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone except with the Company's express written consent
and except for Confidential Company Information which: (1) is publicly known at
the time of receipt, or thereafter becomes publicly known through no wrongful
act of the Employee, or (2) is received from a third party who is not under an
obligation to keep such information confidential. The rights of the Company
pursuant to this Section are in addition to and shall not be deemed to limit
those rights and remedies available under common law for protection of the type
of confidential information which constitutes "trade secrets" as defined by
controlling law.
(c) The Employee shall not, without the Company's prior written consent,
directly or indirectly, knowingly solicit or encourage to leave the employment
of the Company or its subsidiaries, any employee of the Company or its
subsidiaries nor shall the Employee hire any employee who has left the
employment of the Company or its subsidiaries within one (1) year of the
termination of such Employee's employment with the Company or its subsidiaries.
(d) All memoranda, notes, lists, records and other documents (and all
copies thereof) constituting Confidential Company Information made or compiled
by the Employee or made available to the Employee concerning the Company
Business or the Company or its subsidiaries shall be the Company's property,
shall be kept confidential in accordance with the provisions of this Section and
shall be delivered to the Company at any time upon request.
7
<PAGE>
6.2 Rights and Remedies Upon Breach. If the Employee breaches, or
-------------------------------
threatens to commit a breach of any of the provisions of Section 6.1 (the
"Restrictive Covenants"), the Company shall have the following rights and
remedies (upon compliance with any necessary prerequisites imposed by law for
the availability of such remedies), each of the rights and remedies being
independent of the other and severally enforceable, and all of the rights and
remedies being in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity:
(a) The right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, including, without limitation,
the right to have restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) entered against the Employee preventing violations of
such covenants, threatened or actual, and whether or not then continuing, it
being acknowledged and agreed that any such breach will cause irreparable injury
to the Company and that money damages will not provide an adequate remedy to the
Company;
(b) The right and remedy to require the Employee to account for and pay
over to the Company all compensation, profits, monies, accruals, increments or
other benefits derived or received by him primarily as the result of any
transactions constituting a breach of the Restrictive Covenants. The Employee
shall promptly account for and pay over such sums to the Company. The Company
may set-off any amounts due to the Company under this Section against any
amounts owed to the Employee.
7. Indemnification. The Company shall indemnify, defend and hold the
---------------
Employee harmless from any losses, liabilities, claims, damages, costs,
attorneys fees and expenses as may result from the Employee's actions that were
either taken within the scope of the Employee's duty or authorized in writing by
the Board of Directors of the Company. The Company shall have the right to
settle and/or compromise any such claims on behalf of the Employee. The
Employee shall cooperate with and assist the Company in any litigation or
settlements involving any claims
8
<PAGE>
which are the subject of this provision.
8. Other Provisions.
----------------
8.1 Severability. The Employee acknowledges and agrees that: (i) he has
------------
had an opportunity to seek the advice of counsel in connection with this
Agreement; (ii) the Restrictive Covenants herein are reasonable in geographical
and temporal scope and in all other respects; and (iii) the Company would not
have entered into this Agreement but for the Restrictive Covenants contained in
this Agreement. If it is determined that any of the provisions of this
Agreement, including, without limitation, any of the Restrictive Covenants, or
any part thereof, is invalid or unenforceable, the remainder of the provisions
of this Agreement shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
8.2 Blue-Penciling. If any court determines that any of the covenants
--------------
contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of duration
or geographical scope, the said duration or scope of such provision, as the case
may be, shall be reduced so that such provision becomes enforceable and, in its
reduced form, such provision shall then be deemed enforceable and shall be
enforced.
8.3 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally, sent by express
mail or by certified or registered mail, (return receipt requested and postage
prepaid). Any such notice shall be deemed complete when so delivered
personally, or if mailed, five (5) days after the date of deposit with the
United States Postal Service, as follows:
9
<PAGE>
(i) If to the Company, to:
Koerner Silberberg & Weiner, LLP
112 Madison Avenue, 3rd Floor
New York, New York 10016
Attention: Carl Seldin Koerner, Esq.
(ii) If to the Employee, to:
Bernard F. Reynolds
6 Merry Meeting Lane
Lloyd Harbor, New York 11743
Any party may, by notice given in accordance with this Section to the other
parties hereto, designate another recipient or address for receipt of notices
hereunder.
8.4 Arbitration. Any controversy or claim arising out of, or relating
-----------
to this Agreement, or its breach, shall be settled by arbitration in accordance
with the then governing rules of the American Arbitration Association in the
City of New York. Judgement upon the award rendered may be entered and enforced
in any court of competent jurisdiction.
8.5 Entire Agreement. This Agreement supersedes all previous written or
----------------
oral understandings and agreements between the Company and the Employee and
contains the entire agreement between the parties with respect to the subject
matter hereof.
8.6 Waivers and Amendments. This Agreement and any of the terms contained
----------------------
herein may not be amended, superseded, canceled, renewed, extended or waived,
unless by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, preclude any other or further exercise thereof or the
10
<PAGE>
exercise of any other such right, power or privilege. The failure of either
party to insist upon performance of any terms or conditions of the Agreement
shall not be construed a waiver of future performance of any such term, covenant
or condition, and the obligations of either party with respect thereto shall
continue in full force and effect.
8.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
8.8 Assignment. This Agreement, and the Employee's rights and obligations
----------
hereunder, may not be assigned by the Employee. Any purported assignment by the
Employee in violation hereof shall be null and void. In the event of any sale,
transfer or other disposition of all or substantially all of the Company's
assets or business, whether by merger, consolidation or otherwise, the Company
may assign this Agreement and its rights hereunder.
8.9 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the Company, its successors and assigns, including without limitation
any person, partnership, company or corporation which may acquire substantially
all of the Company's assets or business, or with or into which the Company may
be liquidated, consolidated, merged or otherwise combined. This Agreement shall
also inure to the benefit of, and shall be binding upon the Employee, his heirs,
distributees and personal representatives.
8.10 Headings. The headings in this Agreement are for reference only and
--------
shall not affect the interpretation of this Agreement.
8.11 Counterparts. This Agreement may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts together shall constitute one and the
same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed their names as of the
day and year first above written.
ASI Solutions Incorporated
By:___________________________________________
----------------------------------------------
Bernard F. Reynolds
12
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
Employment Agreement dated as of January 16, 1997 by and between ASI
Solutions Incorporated (the "Company"), a Delaware corporation, and Eli Salig
(the "Employee").
WHEREAS, the Employee is employed as President and Chief Operating Officer
of the of the Company; and
WHEREAS, the Employee's services have contributed to the growth of the
Company; and
WHEREAS, the Company desires to continue to employ and retain the
experience, ability and services of the Employee and to prevent any other
competitive business from securing his services to utilize his experience,
background and know-how; and
WHEREAS, the Board of Directors recognizes that these arrangements are
being made to help assure a continuing dedication by the Employee to his duties
to the Company; and
WHEREAS, the Board of Directors wishes to demonstrate to the employees of
the Company that the Company is concerned with the welfare of its employees and
intends to ensure that loyal employees are treated fairly;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and for other good and valuable consideration, each of the parties,
intending to be legally bound, hereby agree to the following terms and
conditions.
1
<PAGE>
1. Term. The Company hereby employs the Employee, and the Employee hereby
----
accepts such employment, for a term commencing as of the date of this Agreement
and ending on the date of termination of the Employee's Employment pursuant to
the provisions of Section 4 or 5 (said period hereinafter referred to as the
"Term").
2. Duties. The Employee shall serve in the capacity of President and
------
Chief Operating Officer of the Company (or such other and comparable titles and
positions as shall be given to the Employee by the Board of Directors of the
Company). The Employee shall faithfully perform the duties of said offices and
shall perform such other services of an executive, managerial or administrative
nature as shall be specified and designated by the Board of Directors of the
Company, it being understood that such duties shall be reasonably comparable to
those duties heretofore performed by the Employee for the Company. The Employee
shall devote substantially all of his business time and effort to the
performance of his duties hereunder, except for illness or incapacity.
3. Compensation and Benefits.
-------------------------
3.1 Salary. During the Term of this Agreement, the Company shall pay the
------
Employee an annual salary (the "Annual Salary"), calculated as follows: (i) Two
Hundred Forty Thousand Dollars ($240,000), in equal monthly installments, less
such deductions as shall be required to be withheld by law; plus (ii) an annual
salary increase to reflect the increase in the Consumer Price Index (as defined
below). To compute the annual increase attributable to the Consumer Price
Index, the Consumer Price Index as of November 1996 shall be compared with the
Consumer Price Index for each successive November of the Term. Any increase in
the Consumer Price Index between November 1996 and November of any subsequent
year during the Term shall cause an increase in the Annual Salary in the same
proportion as the change in Consumer Price Index between the two dates. Any
increase so calculated shall be applied to the Annual Salary and shall be
payable beginning January of each year of the Term. In the event the Consumer
Price Index decreases or remains the same, there will be no effect on the
Employee's Annual Salary for the annual period next to commence. For purposes
of this Section, the
2
<PAGE>
Consumer Price Index shall mean the Consumer Price Index for All Urban
Consumers, All-Items, for New York-Northeast New Jersey-Long Island, NY-NJ-CT
(1982-84=100) published by the United States Bureau of Labor Statistics,
Department of Labor, or its successor then in effect. If publication of the
Consumer Price Index is discontinued, the parties hereto shall accept comparable
statistics on the cost of living adjustment for New York City as computed and
published by an agency of the United States or by a responsible financial
periodical or recognized authority to be selected by the parties.
3.2 Bonus. During the Term, the Employee shall receive an annual bonus in
-----
an amount as shall be determined by the Board of Directors of the Company.
3.3 Benefits. During the Term, the Employer shall provide and the
--------
Employee may participate (to the extent that the Employee is eligible under the
terms of such plans or programs) in the following:
(a) family medical, dental, and eye care insurance coverage (with "family"
defined as spouse and all dependent children, under the age 21);
(b) life and disability insurance; and
(c) incentive, pension or profit sharing plans, deferred compensation
arrangements, stock option plans or similar benefits that may be available
to executive officers of the Company.
3.4 Automobile. During the Term, the Employer shall provide the Employee
----------
with an automobile to the same extent and in accordance with the policy for
executive officers of the Company. The automobile shall be comparable in
quality to that which the Company presently provides to the Employee. The
Company shall also pay all insurance, maintenance, fuel, repairs, registration
fees and other operating costs.
3
<PAGE>
3.5 Vacation. The Employee shall be entitled to receive four (4) weeks of
--------
vacation per year, during which time his compensation shall be paid in full.
3.6 Expenses. The Company shall pay or reimburse the Employee for all
--------
reasonable and properly documented out-of-pocket expenses actually incurred or
paid by the Employee during the Term in the performance of the Employee's
services under this Agreement.
4. Termination Due to Death, Disability, Voluntary Resignation or
--------------------------------------------------------------
Termination Without Cause.
-------------------------
4.1 Termination Due to Death. If the Employee dies during the Term, this
------------------------
Agreement shall terminate as of the date of the Employee's death and the
Employee's estate or beneficiaries shall be entitled to receive any salary,
bonus and other benefits earned and accrued prior to the date of death together
with reimbursement for any out-of-pocket expenses incurred prior to the date of
death. The Employee's estate or beneficiaries shall also be entitled to receive
payments equivalent to the Employee's Annual Salary for a period of three (3)
years following the date of death.
4.2 Termination Due to Disability. If the Employee is unable to
-----------------------------
competently perform the duties assigned to him because of ill health or other
disability, for a period in excess of one hundred twenty (120) consecutive or
non-consecutive days out of any twelve (12) month period, the Company may, at
its option, terminate the employment of the Employee immediately by written
notice to the Employee. The Employee shall be entitled to receive any salary,
bonus and other benefits earned and accrued together with reimbursement for any
out-of-pocket expenses incurred, for the period prior to the notice of
termination. The Employee shall also be entitled to receive for a period of
three (3) years following the date of the Company's notice of termination, the
Employee's Annual Salary and all other benefits provided to executive officers,
with the exception of those benefits provided pursuant to Sections 3.2 and 3.5
hereof.
4
<PAGE>
4.3 Termination Due to Voluntary Resignation. If the Employee voluntarily
----------------------------------------
resigns from the Company (in which case such resignation shall be effective on
the date the Employee provides the Company with notice of such resignation), the
Employee shall be entitled to receive any salary, bonus or other benefits earned
and accrued prior to the date of resignation, together with reimbursement for
any out-of-pocket expenses incurred prior to the date of resignation.
4.4 Termination Without Cause. The Company may terminate the Employee
-------------------------
at any time for any reason other than those specified in Section 5 hereof,
effective thirty (30) days after written notice is given to the Employee of such
termination; provided, however, that the Employee shall be entitled to receive
for a period of three (3) years following the date of the Company's notice of
termination, the Employee's Annual Salary and all other benefits provided to
executive officers, with the exception of those benefits provided pursuant to
Sections 3.2 and 3.5 hereof. The Employee shall not be obligated to perform any
services for the Company during such three (3) year period.
5. Termination for Cause. If the Employee: (i) is convicted of a felony
---------------------
or any crime involving the Company or its subsidiaries (except where such felony
or crime derives from actions taken at the direction of the Board of Directors
of the Company in writing); or (ii) is determined by the Board of Directors of
the Company to have engaged in: (a) willful misconduct (as hereinafter defined);
(b) willful or gross neglect; (c) fraud; (d) misappropriation; (e) embezzlement;
(f) material breach of his fiduciary duty; or (g) conduct in wanton disregard of
corporate policy in the performance of his duties hereunder, the Company may
terminate the Employee's employment immediately, at any time within thirty (30)
days after receiving notice of the occurrence of any of the events described in
clauses (i) and (ii) above, by written notice to the Employee. In the event of
termination under this Section 5, the Employee shall have no right to receive
any compensation or other benefit hereunder on and after the date of the
termination, other than salary and other benefits earned and accrued prior to
the date of termination and reimbursement for out-of-pocket expenses incurred
prior to the date of termination. As used in
5
<PAGE>
this Agreement, the term "willful misconduct" shall mean willful failure of the
Employee to perform his duties.
6. Covenant of the Employee.
------------------------
6.1 Covenant Against Competition. The Employee acknowledges that: (i) the
----------------------------
principal business of the Company and its subsidiaries is human resources
consulting and outsourcing services (the "Present Business"); (ii) the Company
and its subsidiaries is one of a limited number of entities which have developed
the present business; (iii) the Present Business is national in scope; (iv) the
Employee's work for the Company and its subsidiaries has given and will continue
to give him access to the confidential affairs and proprietary information of
the Company and its subsidiaries not readily available to the public; and (v)
the agreements and covenants of the Employee contained in this Section 6.1 are
essential to the business and goodwill of the Company. Accordingly, the
Employee covenants that:
(a) Throughout the Employee's employment with the Company and for a period
of three (3) years following the date that the Employee is given notice of
termination from the Company (in the case of termination for disability,
termination without cause or termination with cause) or for a period of three
(3) years following the date that the Employee resigns from the Company (the
"Restricted Period"), the Employee shall not, in the United States of America,
directly or indirectly: (1) engage in the Present Business or any other
principal line of business developed by the Company during the Term (hereinafter
collectively referred to as the "Company Business") for the Employee's own
account; (2) render any services in any capacity to any person or entity (other
than the Company or its subsidiaries) engaged in the Company Business; or (3)
become interested in any entity engaged in the Company Business (other than the
Company or its subsidiaries) as a partner, shareholder, principal, agent,
trustee, consultant or in any other relationship or capacity; provided, however,
the Employee may own, directly or indirectly, solely as an investment,
securities of any such entity which are traded on any national securities
exchange or NASDAQ if the Employee: (A) is not a controlling person of, or a
member of a group which controls such entity and (B) does not, directly or
indirectly, own ten
6
<PAGE>
percent (10%) or more of any class of securities of such entity.
(b) During the Restricted Period, the Employee shall keep secret and
retain in strictest confidence, and shall not use for his benefit or the benefit
of others, except in connection with the business and affairs of the Company and
its subsidiaries, all confidential matters relating to the Company Business and
to the Company and its subsidiaries learned by the Employee heretofore or
hereafter, directly or indirectly, from the Company and its subsidiaries,
including any information concerning the business, affairs, customers, clients,
sources of supply and customer lists of the Company or its subsidiaries (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone except with the Company's express written consent
and except for Confidential Company Information which: (1) is publicly known at
the time of receipt, or thereafter becomes publicly known through no wrongful
act of the Employee, or (2) is received from a third party who is not under an
obligation to keep such information confidential. The rights of the Company
pursuant to this Section are in addition to and shall not be deemed to limit
those rights and remedies available under common law for protection of the type
of confidential information which constitutes "trade secrets" as defined by
controlling law.
(c) The Employee shall not, without the Company's prior written consent,
directly or indirectly, knowingly solicit or encourage to leave the employment
of the Company or its subsidiaries, any employee of the Company or its
subsidiaries nor shall the Employee hire any employee who has left the
employment of the Company or its subsidiaries within one (1) year of the
termination of such Employee's employment with the Company or its subsidiaries.
(d) All memoranda, notes, lists, records and other documents (and all
copies thereof) constituting Confidential Company Information made or compiled
by the Employee or made available to the Employee concerning the Company
Business or the Company or its subsidiaries shall be the Company's property,
shall be kept confidential in accordance with the provisions of this Section and
shall be delivered to the Company at any time upon request.
7
<PAGE>
6.2 Rights and Remedies Upon Breach. If the Employee breaches, or
-------------------------------
threatens to commit a breach of any of the provisions of Section 6.1 (the
"Restrictive Covenants"), the Company shall have the following rights and
remedies (upon compliance with any necessary prerequisites imposed by law for
the availability of such remedies), each of the rights and remedies being
independent of the other and severally enforceable, and all of the rights and
remedies being in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity:
(a) The right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, including, without limitation,
the right to have restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) entered against the Employee preventing violations of
such covenants, threatened or actual, and whether or not then continuing, it
being acknowledged and agreed that any such breach will cause irreparable injury
to the Company and that money damages will not provide an adequate remedy to the
Company;
(b) The right and remedy to require the Employee to account for and pay
over to the Company all compensation, profits, monies, accruals, increments or
other benefits derived or received by him primarily as the result of any
transactions constituting a breach of the Restrictive Covenants. The Employee
shall promptly account for and pay over such sums to the Company. The Company
may set-off any amounts due to the Company under this Section against any
amounts owed to the Employee.
7. Indemnification. The Company shall indemnify, defend and hold the
---------------
Employee harmless from any losses, liabilities, claims, damages, costs,
attorneys fees and expenses as may result from the Employee's actions that were
either taken within the scope of the Employee's duty or authorized in writing by
the Board of Directors of the Company. The Company shall have the right to
settle and/or compromise any such claims on behalf of the Employee. The
Employee shall cooperate with and assist the Company in any litigation or
settlements involving any claims
8
<PAGE>
which are the subject of this provision.
8. Other Provisions.
----------------
8.1 Severability. The Employee acknowledges and agrees that: (i) he has
------------
had an opportunity to seek the advice of counsel in connection with this
Agreement; (ii) the Restrictive Covenants herein are reasonable in geographical
and temporal scope and in all other respects; and (iii) the Company would not
have entered into this Agreement but for the Restrictive Covenants contained in
this Agreement. If it is determined that any of the provisions of this
Agreement, including, without limitation, any of the Restrictive Covenants, or
any part thereof, is invalid or unenforceable, the remainder of the provisions
of this Agreement shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
8.2 Blue-Penciling. If any court determines that any of the covenants
--------------
contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of duration
or geographical scope, the said duration or scope of such provision, as the case
may be, shall be reduced so that such provision becomes enforceable and, in its
reduced form, such provision shall then be deemed enforceable and shall be
enforced.
8.3 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally, sent by express
mail or by certified or registered mail, (return receipt requested and postage
prepaid). Any such notice shall be deemed complete when so delivered
personally, or if mailed, five (5) days after the date of deposit with the
United States Postal Service, as follows:
9
<PAGE>
(i) If to the Company, to:
Koerner Silberberg & Weiner, LLP
112 Madison Avenue, 3rd Floor
New York, New York 10016
Attention: Carl Seldin Koerner, Esq.
(ii) If to the Employee, to:
Eli Salig
145 West 67th Street
New York, New York 10023
Any party may, by notice given in accordance with this Section to the other
parties hereto, designate another recipient or address for receipt of notices
hereunder.
8.4 Arbitration. Any controversy or claim arising out of, or relating
-----------
to this Agreement, or its breach, shall be settled by arbitration in accordance
with the then governing rules of the American Arbitration Association in the
City of New York. Judgement upon the award rendered may be entered and enforced
in any court of competent jurisdiction.
8.5 Entire Agreement. This Agreement supersedes all previous written or
----------------
oral understandings and agreements between the Company and the Employee and
contains the entire agreement between the parties with respect to the subject
matter hereof.
8.6 Waivers and Amendments. This Agreement and any of the terms contained
----------------------
herein may not be amended, superseded, canceled, renewed, extended or waived,
unless by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, preclude any other or further exercise thereof or the
10
<PAGE>
exercise of any other such right, power or privilege. The failure of either
party to insist upon performance of any terms or conditions of the Agreement
shall not be construed a waiver of future performance of any such term, covenant
or condition, and the obligations of either party with respect thereto shall
continue in full force and effect.
8.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
8.8 Assignment. This Agreement, and the Employee's rights and obligations
----------
hereunder, may not be assigned by the Employee. Any purported assignment by the
Employee in violation hereof shall be null and void. In the event of any sale,
transfer or other disposition of all or substantially all of the Company's
assets or business, whether by merger, consolidation or otherwise, the Company
may assign this Agreement and its rights hereunder.
8.9 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the Company, its successors and assigns, including without limitation
any person, partnership, company or corporation which may acquire substantially
all of the Company's assets or business, or with or into which the Company may
be liquidated, consolidated, merged or otherwise combined. This Agreement shall
also inure to the benefit of, and shall be binding upon the Employee, his heirs,
distributees and personal representatives.
8.10 Headings. The headings in this Agreement are for reference only and
--------
shall not affect the interpretation of this Agreement.
8.11 Counterparts. This Agreement may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts together shall constitute one and the
same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed their names as of the
day and year first above written.
ASI Solutions Incorporated
By:___________________________________________
----------------------------------------------
Eli Salig
12
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
Employment Agreement dated as of January 16, 1997 by and between ASI
Solutions Incorporated (the "Company"), a Delaware corporation, and Seymour
Adler, Ph.D. (the "Employee").
WHEREAS, the Employee is employed as Executive Vice President of the
Company; and
WHEREAS, the Employee's services have contributed to the growth of the
Company; and
WHEREAS, the Company desires to continue to employ and retain the
experience, ability and services of the Employee and to prevent any other
competitive business from securing his services to utilize his experience,
background and know-how; and
WHEREAS, the Board of Directors recognizes that these arrangements are
being made to help assure a continuing dedication by the Employee to his duties
to the Company; and
WHEREAS, the Board of Directors wishes to demonstrate to the employees of
the Company that the Company is concerned with the welfare of its employees and
intends to ensure that loyal employees are treated fairly;
NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and for other good and valuable consideration, each of the parties,
intending to be legally bound, hereby agree to the following terms and
conditions.
1
<PAGE>
1. Term. The Company hereby employs the Employee, and the Employee hereby
----
accepts such employment, for a term commencing as of the date of this Agreement
and ending on the date of termination of the Employee's Employment pursuant to
the provisions of Section 4 or 5 (said period hereinafter referred to as the
"Term").
2. Duties. The Employee shall serve in the capacity of Executive Vice
------
President of the Company (or such other and comparable titles and positions as
shall be given to the Employee by the Board of Directors of the Company). The
Employee shall faithfully perform the duties of said offices and shall perform
such other services of an executive, managerial or administrative nature as
shall be specified and designated by the Board of Directors of the Company, it
being understood that such duties shall be reasonably comparable to those duties
heretofore performed by the Employee for the Company. The Employee shall devote
substantially all of his business time and effort to the performance of his
duties hereunder, except for illness or incapacity.
3. Compensation and Benefits.
-------------------------
3.1 Salary. During the Term of this Agreement, the Company shall pay the
------
Employee an annual salary (the "Annual Salary"), calculated as follows: (i) Two
Hundred Thirty Thousand Dollars ($230,000), in equal monthly installments, less
such deductions as shall be required to be withheld by law; plus (ii) an annual
salary increase to reflect the increase in the Consumer Price Index (as defined
below). To compute the annual increase attributable to the Consumer Price
Index, the Consumer Price Index as of November 1996 shall be compared with the
Consumer Price Index for each successive November of the Term. Any increase in
the Consumer Price Index between November 1996 and November of any subsequent
year during the Term shall cause an increase in the Annual Salary in the same
proportion as the change in Consumer Price Index between the two dates. Any
increase so calculated shall be applied to the Annual Salary and shall be
payable beginning January of each year of the Term. In the event the Consumer
Price Index decreases or remains the same, there will be no effect on the
Employee's Annual Salary for the annual period next to commence. For purposes
of this Section, the
2
<PAGE>
Consumer Price Index shall mean the Consumer Price Index for All Urban
Consumers, All-Items, for New York-Northeast New Jersey-Long Island, NY-NJ-CT
(1982-84=100) published by the United States Bureau of Labor Statistics,
Department of Labor, or its successor then in effect. If publication of the
Consumer Price Index is discontinued, the parties hereto shall accept comparable
statistics on the cost of living adjustment for New York City as computed and
published by an agency of the United States or by a responsible financial
periodical or recognized authority to be selected by the parties.
3.2 Bonus. During the Term, the Employee shall receive an annual bonus in
-----
an amount as shall be determined by the Board of Directors of the Company.
3.3 Benefits. During the Term, the Employer shall provide and the
--------
Employee may participate (to the extent that the Employee is eligible under the
terms of such plans or programs) in the following:
(a) family medical, dental, and eye care insurance coverage (with "family"
defined as spouse and all dependent children, under the age 21);
(b) life and disability insurance; and
(c) incentive, pension or profit sharing plans, deferred compensation
arrangements, stock option plans or similar benefits that may be available
to executive officers of the Company.
3.4 Automobile. During the Term, the Employer shall provide the Employee
----------
with an automobile to the same extent and in accordance with the policy for
executive officers of the Company. The automobile shall be comparable in
quality to that which the Company presently provides to the Employee. The
Company shall also pay all insurance, maintenance, fuel, repairs, registration
fees and other operating costs.
3
<PAGE>
3.5 Vacation. The Employee shall be entitled to receive four (4) weeks of
--------
vacation per year, during which time his compensation shall be paid in full.
3.6 Expenses. The Company shall pay or reimburse the Employee for all
--------
reasonable and properly documented out-of-pocket expenses actually incurred or
paid by the Employee during the Term in the performance of the Employee's
services under this Agreement.
4. Termination Due to Death, Disability, Voluntary Resignation or
--------------------------------------------------------------
Termination Without Cause.
-------------------------
4.1 Termination Due to Death. If the Employee dies during the Term, this
------------------------
Agreement shall terminate as of the date of the Employee's death and the
Employee's estate or beneficiaries shall be entitled to receive any salary,
bonus and other benefits earned and accrued prior to the date of death together
with reimbursement for any out-of-pocket expenses incurred prior to the date of
death. The Employee's estate or beneficiaries shall also be entitled to receive
payments equivalent to the Employee's Annual Salary for a period of three (3)
years following the date of death.
4.2 Termination Due to Disability. If the Employee is unable to
-----------------------------
competently perform the duties assigned to him because of ill health or other
disability, for a period in excess of one hundred twenty (120) consecutive or
non-consecutive days out of any twelve (12) month period, the Company may, at
its option, terminate the employment of the Employee immediately by written
notice to the Employee. The Employee shall be entitled to receive any salary,
bonus and other benefits earned and accrued together with reimbursement for any
out-of-pocket expenses incurred, for the period prior to the notice of
termination. The Employee shall also be entitled to receive for a period of
three (3) years following the date of the Company's notice of termination, the
Employee's Annual Salary and all other benefits provided to executive officers,
with the exception of those benefits provided pursuant to Sections 3.2 and 3.5
hereof.
4
<PAGE>
4.3 Termination Due to Voluntary Resignation. If the Employee voluntarily
----------------------------------------
resigns from the Company (in which case such resignation shall be effective on
the date the Employee provides the Company with notice of such resignation), the
Employee shall be entitled to receive any salary, bonus or other benefits earned
and accrued prior to the date of resignation, together with reimbursement for
any out-of-pocket expenses incurred prior to the date of resignation.
4.4 Termination Without Cause. The Company may terminate the Employee
-------------------------
at any time for any reason other than those specified in Section 5 hereof,
effective thirty (30) days after written notice is given to the Employee of such
termination; provided, however, that the Employee shall be entitled to receive
for a period of three (3) years following the date of the Company's notice of
termination, the Employee's Annual Salary and all other benefits provided to
executive officers, with the exception of those benefits provided pursuant to
Sections 3.2 and 3.5 hereof. The Employee shall not be obligated to perform any
services for the Company during such three (3) year period.
5. Termination for Cause. If the Employee: (i) is convicted of a felony
---------------------
or any crime involving the Company or its subsidiaries (except where such felony
or crime derives from actions taken at the direction of the Board of Directors
of the Company in writing); or (ii) is determined by the Board of Directors of
the Company to have engaged in: (a) willful misconduct (as hereinafter defined);
(b) willful or gross neglect; (c) fraud; (d) misappropriation; (e) embezzlement;
(f) material breach of his fiduciary duty; or (g) conduct in wanton disregard of
corporate policy in the performance of his duties hereunder, the Company may
terminate the Employee's employment immediately, at any time within thirty (30)
days after receiving notice of the occurrence of any of the events described in
clauses (i) and (ii) above, by written notice to the Employee. In the event of
termination under this Section 5, the Employee shall have no right to receive
any compensation or other benefit hereunder on and after the date of the
termination, other than salary and other benefits earned and accrued prior to
the date of termination and reimbursement for out-of-pocket expenses incurred
prior to the date of termination. As used in
5
<PAGE>
this Agreement, the term "willful misconduct" shall mean willful failure of the
Employee to perform his duties.
6. Covenant of the Employee.
------------------------
6.1 Covenant Against Competition. The Employee acknowledges that: (i) the
----------------------------
principal business of the Company and its subsidiaries is human resources
consulting and outsourcing services (the "Present Business"); (ii) the Company
and its subsidiaries is one of a limited number of entities which have developed
the present business; (iii) the Present Business is national in scope; (iv) the
Employee's work for the Company and its subsidiaries has given and will continue
to give him access to the confidential affairs and proprietary information of
the Company and its subsidiaries not readily available to the public; and (v)
the agreements and covenants of the Employee contained in this Section 6.1 are
essential to the business and goodwill of the Company. Accordingly, the
Employee covenants that:
(a) Throughout the Employee's employment with the Company and for a period
of three (3) years following the date that the Employee is given notice of
termination from the Company (in the case of termination for disability,
termination without cause or termination with cause) or for a period of three
(3) years following the date that the Employee resigns from the Company (the
"Restricted Period"), the Employee shall not, in the United States of America,
directly or indirectly: (1) engage in the Present Business or any other
principal line of business developed by the Company during the Term (hereinafter
collectively referred to as the "Company Business") for the Employee's own
account; (2) render any services in any capacity to any person or entity (other
than the Company or its subsidiaries) engaged in the Company Business; or (3)
become interested in any entity engaged in the Company Business (other than the
Company or its subsidiaries) as a partner, shareholder, principal, agent,
trustee, consultant or in any other relationship or capacity; provided, however,
the Employee may own, directly or indirectly, solely as an investment,
securities of any such entity which are traded on any national securities
exchange or NASDAQ if the Employee: (A) is not a controlling person of, or a
member of a group which controls such entity and (B) does not, directly or
indirectly, own ten
6
<PAGE>
percent (10%) or more of any class of securities of such entity.
(b) During the Restricted Period, the Employee shall keep secret and
retain in strictest confidence, and shall not use for his benefit or the benefit
of others, except in connection with the business and affairs of the Company and
its subsidiaries, all confidential matters relating to the Company Business and
to the Company and its subsidiaries learned by the Employee heretofore or
hereafter, directly or indirectly, from the Company and its subsidiaries,
including any information concerning the business, affairs, customers, clients,
sources of supply and customer lists of the Company or its subsidiaries (the
"Confidential Company Information") and shall not disclose the Confidential
Company Information to anyone except with the Company's express written consent
and except for Confidential Company Information which: (1) is publicly known at
the time of receipt, or thereafter becomes publicly known through no wrongful
act of the Employee, or (2) is received from a third party who is not under an
obligation to keep such information confidential. The rights of the Company
pursuant to this Section are in addition to and shall not be deemed to limit
those rights and remedies available under common law for protection of the type
of confidential information which constitutes "trade secrets" as defined by
controlling law.
(c) The Employee shall not, without the Company's prior written consent,
directly or indirectly, knowingly solicit or encourage to leave the employment
of the Company or its subsidiaries, any employee of the Company or its
subsidiaries nor shall the Employee hire any employee who has left the
employment of the Company or its subsidiaries within one (1) year of the
termination of such Employee's employment with the Company or its subsidiaries.
(d) All memoranda, notes, lists, records and other documents (and all
copies thereof) constituting Confidential Company Information made or compiled
by the Employee or made available to the Employee concerning the Company
Business or the Company or its subsidiaries shall be the Company's property,
shall be kept confidential in accordance with the provisions of this Section and
shall be delivered to the Company at any time upon request.
7
<PAGE>
6.2 Rights and Remedies Upon Breach. If the Employee breaches, or
-------------------------------
threatens to commit a breach of any of the provisions of Section 6.1 (the
"Restrictive Covenants"), the Company shall have the following rights and
remedies (upon compliance with any necessary prerequisites imposed by law for
the availability of such remedies), each of the rights and remedies being
independent of the other and severally enforceable, and all of the rights and
remedies being in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity:
(a) The right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, including, without limitation,
the right to have restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) entered against the Employee preventing violations of
such covenants, threatened or actual, and whether or not then continuing, it
being acknowledged and agreed that any such breach will cause irreparable injury
to the Company and that money damages will not provide an adequate remedy to the
Company;
(b) The right and remedy to require the Employee to account for and pay
over to the Company all compensation, profits, monies, accruals, increments or
other benefits derived or received by him primarily as the result of any
transactions constituting a breach of the Restrictive Covenants. The Employee
shall promptly account for and pay over such sums to the Company. The Company
may set-off any amounts due to the Company under this Section against any
amounts owed to the Employee.
7. Indemnification. The Company shall indemnify, defend and hold the
---------------
Employee harmless from any losses, liabilities, claims, damages, costs,
attorneys fees and expenses as may result from the Employee's actions that were
either taken within the scope of the Employee's duty or authorized in writing by
the Board of Directors of the Company. The Company shall have the right to
settle and/or compromise any such claims on behalf of the Employee. The
Employee shall cooperate with and assist the Company in any litigation or
settlements involving any claims
8
<PAGE>
which are the subject of this provision.
8. Other Provisions.
----------------
8.1 Severability. The Employee acknowledges and agrees that: (i) he has
------------
had an opportunity to seek the advice of counsel in connection with this
Agreement; (ii) the Restrictive Covenants herein are reasonable in geographical
and temporal scope and in all other respects; and (iii) the Company would not
have entered into this Agreement but for the Restrictive Covenants contained in
this Agreement. If it is determined that any of the provisions of this
Agreement, including, without limitation, any of the Restrictive Covenants, or
any part thereof, is invalid or unenforceable, the remainder of the provisions
of this Agreement shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
8.2 Blue-Penciling. If any court determines that any of the covenants
--------------
contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of duration
or geographical scope, the said duration or scope of such provision, as the case
may be, shall be reduced so that such provision becomes enforceable and, in its
reduced form, such provision shall then be deemed enforceable and shall be
enforced.
8.3 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally, sent by express
mail or by certified or registered mail, (return receipt requested and postage
prepaid). Any such notice shall be deemed complete when so delivered
personally, or if mailed, five (5) days after the date of deposit with the
United States Postal Service, as follows:
9
<PAGE>
(i) If to the Company, to:
Koerner Silberberg & Weiner, LLP
112 Madison Avenue, 3rd Floor
New York, New York 10016
Attention: Carl Seldin Koerner, Esq.
(ii) If to the Employee, to:
Seymour Adler, Ph.D.
1291 Wellington Avenue
Teaneck, New Jersey 07666
Any party may, by notice given in accordance with this Section to the other
parties hereto, designate another recipient or address for receipt of notices
hereunder.
8.4 Arbitration. Any controversy or claim arising out of, or relating
-----------
to this Agreement, or its breach, shall be settled by arbitration in accordance
with the then governing rules of the American Arbitration Association in the
City of New York. Judgement upon the award rendered may be entered and enforced
in any court of competent jurisdiction.
8.5 Entire Agreement. This Agreement supersedes all previous written or
----------------
oral understandings and agreements between the Company and the Employee and
contains the entire agreement between the parties with respect to the subject
matter hereof.
8.6 Waivers and Amendments. This Agreement and any of the terms contained
----------------------
herein may not be amended, superseded, canceled, renewed, extended or waived,
unless by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, preclude any other or further exercise thereof or the
10
<PAGE>
exercise of any other such right, power or privilege. The failure of either
party to insist upon performance of any terms or conditions of the Agreement
shall not be construed a waiver of future performance of any such term, covenant
or condition, and the obligations of either party with respect thereto shall
continue in full force and effect.
8.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
8.8 Assignment. This Agreement, and the Employee's rights and obligations
----------
hereunder, may not be assigned by the Employee. Any purported assignment by the
Employee in violation hereof shall be null and void. In the event of any sale,
transfer or other disposition of all or substantially all of the Company's
assets or business, whether by merger, consolidation or otherwise, the Company
may assign this Agreement and its rights hereunder.
8.9 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the Company, its successors and assigns, including without limitation
any person, partnership, company or corporation which may acquire substantially
all of the Company's assets or business, or with or into which the Company may
be liquidated, consolidated, merged or otherwise combined. This Agreement shall
also inure to the benefit of, and shall be binding upon the Employee, his heirs,
distributees and personal representatives.
8.10 Headings. The headings in this Agreement are for reference only and
--------
shall not affect the interpretation of this Agreement.
8.11 Counterparts. This Agreement may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts together shall constitute one and the
same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed their names as of the
day and year first above written.
ASI Solutions Incorporated
By:___________________________________________
----------------------------------------------
Seymour Adler, Ph.D.
12
<PAGE>
EXHIBIT 10.13
[LETTERHEAD OF FLEET BANK]
Shari M. Delouya
Vice President
Corporate Banking Division
March 3, 1997
Assessment Systems, Incorporated
780 Third Avenue
New York, New York 10017
Gentlemen:
We are pleased to advise you that Fleet Bank, N.A. (the "Bank") has
approved for Assessment Systems, Incorporated (the "Company") a $7,000,000 loan
facility, subject to the following terms and conditions (the "Commitment").
Borrower: The Borrower will be the Company, a New York corporation.
--------
Facility: A line of credit facility (the "Line") in an amount at any one
--------
time outstanding of $7,000,000. The Line is expressly subject to the terms and
conditions contained in this Commitment, including without limitation, the
provisions relating to the IPO contained in the Section entitled "Special
Condition". The proceeds of the Line will be used for working capital purposes
and/or acquisitions. All acquisitions shall be subject in all respects to the
approval of the Bank prior to any advance under the Line for such purpose.
Interest Rate: A fluctuating rate per annum equal to the Prime Rate, as
-------------
hereinafter defined, plus one (1%) percent. Prime Rate means and refers to the
floating rate of interest per annum announced by the Bank from time to time as
being the so-called "Prime Rate" of interest charged by the Bank. Interest
shall be payable monthly in arrears and shall be calculated on the basis of a
360 day year for actual days elapsed. Any payment or part thereof not made
within ten (10) days after it is due, shall be assessed a late charge of five
(5%) percent of the entire payment. In the event of a default beyond any
applicable grace or cure periods, the Company shall pay the late charge, and
interest upon the unpaid remaining balance shall be charged at a default rate of
five (5%) percent above the otherwise applicable interest rate.
Fees: There shall be a $7,000 origination fee payable upon acceptance of
----
the Commitment ($6,000 fee already paid to the Bank on 1/21/97). The Company
agrees that such fee has been earned by the issuance of the Commitment and is
non-refundable whether or not the facility described herein is closed.
<PAGE>
-2-
Assessment Systems, Incorporated
March 3, 1997
There shall be a commitment fee equal to 1/4 of 1% per annum of the
average daily unused portion of the Line, payable quarterly in arrears,
commencing sixty (60) days after the completion of the Company's IPO. Such fee
shall be increased by an amount sufficient to compensate the Bank for any
capital requirement imposed by law or regulation with respect to the Bank's
obligation under the Bank's commitment to make the Line available.
The Company shall pay the fees of the Bank's counsel and all expenses
incurred by the Bank relating to the Line. Such fees and expenses shall be
payable even if the transaction is not closed.
Expiration Date: March 31, 1998.
---------------
Guarantors: Unconditional guarantees of payment of ASI Solutions, Inc.
----------
and Proudfoot Reports, Inc.
Collateral: First priority perfected security interest in all personal
----------
property of the Company and the Guarantors.
Prepayment: At any time without premium or penalty.
----------
Environmental Matters: The Bank will require evidence satisfactory to
---------------------
the Bank that the Company has not violated, has incurred no liability under, and
has no property subject to lien or exposure to lien under and federal, state or
local environmental law or regulation. The loan documents shall contain
provisions dealing with environmental matters and the Company shall indemnify
the Bank against liability and costs in connection therewith.
Cross-collateral: All obligations of the Company to the Bank to be
----------------
cross-collateralized with any other loan facilities provided by the Bank.
Cross-default: All obligations of the Company to the Bank and all third
-------------
parties to be cross-defaulted.
Payments: All payments of principal, interest and other charges are
--------
authorized to be charged to any demand deposit account maintained by the Company
with the Bank.
Borrowing Base: Except to the extent provided in this paragraph, the
--------------
outstanding amount of all borrowings under the Line shall be limited to 75% of
Eligible Receivables minus the amount, if any, outstanding under any other
credit facilities from the Bank to the Company. As used herein "Eligible
Receivables" means the Company's then outstanding accounts receivable satisfying
the Bank's standard criteria, outstanding less than 90 days from the invoice
date and otherwise acceptable to the Bank in its sole discretion.
Notwithstanding the foregoing, advances under the line for acquisition purposes
may exceed the Borrowing Base if the Bank has been provided with cash or other
collateral acceptable to the Bank having a collateral value sufficient to
cover any shortfall in the Borrowing Base.
<PAGE>
-3-
Assessment Systems, Incorporated
March 3, 1997
Financial Reports: The Company shall deliver the following documents to
-----------------
the Bank: (i) within 120 days after the close of each fiscal year, the 10-K of
the Company together with the annual consolidated and consolidating financial
statements of the Company and its subsidiaries, audited by a firm of independent
certified public accountants acceptable to the Bank, (ii) within 60 days after
the end of each of the first three fiscal quarters of each fiscal year, the 10-Q
of the Company together with quarterly consolidated financial statements of the
Company and its subsidiaries, prepared by management of the Company and
certified as correct by the President or chief financial officer of the Company,
(iii) within 15 days after the last day of each month, and prior to each
advance, accounts receivable aging reports of the Company and the Guarantors
accompanied by a borrowing base certificate, in forms satisfactory to the Bank,
executed by the chief financial or accounting officer of the Company, (iv) any
report filed with the Securities and Exchange Commission or any securities
exchange and (v) all other financial statements and reports reasonably requested
by the Bank. At the time it delivers each of the financial statements described
in (i) and (ii) above, the Company shall deliver a certificate of its president
and chief financial or accounting officer and a certificate of such accountants,
in the case of (i) above, evidencing the Company's compliance with all financial
covenants and stating that, except as disclosed on such certificate, the person
making such certificate has no knowledge of any event of default. The
documentation will also contain escalating financial penalties to compensate the
Bank for its efforts to ensure compliance with the financial statement and
information reporting delivery requirements set forth above.
Financial Covenants: At the end of each semi-annual fiscal period, the
-------------------
Company and its subsidiaries on a consolidated basis shall maintain:
(a) A maximum leverage ratio of total liabilities to tangible net worth
minus officer loans receivable of 2.5 to 1.0.
(b) An Interest Coverage Ratio, as hereinafter defined, of at least 5.0
to 1.0.
(c) A minimum net worth equal to a minimum of the proceeds of the IPO,
to be established at the time of closing.
The Company shall also maintain a minimum tangible net worth as at the
end of each semi-annual fiscal period to be determined by the Bank.
As used above, "tangible net worth" means the sum of capital surplus,
earned surplus and capital stock minus deferred charges, intangibles and
treasury stock; and Interest Coverage Ratio means the ratio of earnings before
interest and taxes ("EBIT") to interest expense.
<PAGE>
-4-
Assessment Systems, Incorporated
March 3, 1997
Special Condition: The Bank's obligation hereunder shall be subject to
-----------------
its and its counsel's review of the documentation relating to the IPO including,
without limitation, the offering memorandum and S-1 registration statement which
will be satisfactory in all respects to the Bank and its counsel and the
completion of the IPO, which IPO shall be a true equity offering without debt
characteristics, and actual receipt by the Company of the proceeds.
Documentation: The Bank's obligation hereunder shall be subject to
-------------
preparation and execution of formal documentation acceptable to the Bank and its
counsel, which shall include without limitation provisions reflecting the terms
hereof together with such representations, warranties, events of default and
financial, affirmative, negative and other covenants acceptable to the Bank in
all respects.
Legal Opinion: The Company to furnish the Bank with an opinion of
-------------
counsel in form and substance acceptable to the Bank and its counsel.
Participations: The Bank reserves the right to sell participations in
--------------
the Line to other lenders and the Company agrees that its financial statements
and other information submitted to the Bank may be distributed to other
potential participants.
Closing Date: The date all appropriate documentation is executed by all
------------
relevant parties to the transaction, but no later than April 15, 1997 (the
"Closing"). If the Closing fails to occur on or prior to such date, the
Commitment shall expire and become unenforceable against the Bank unless
extended in writing by the Bank.
Conditions to Closing: (a) The Bank reserves the right to terminate its
---------------------
obligations under the Commitment after acceptance thereof by the Company, and
the Bank shall be under no obligation to make any Loan hereunder, in any of the
following events:
(i) The failure of the Company or the Guarantors to comply,
within the times specified, with any of the provisions or conditions provided
for in this Commitment.
(ii) Non-payment of the fees and expenses provided for in this
Commitment.
(iii) Any change in the prospects or financial condition of the
Company or of any Guarantor which the Bank deems adverse, or one or more
conditions exist or events have occurred with respect to the Company or any
Guarantor which the Bank deems adverse.
(iv) The Company or any Guarantor shall be in default beyond
applicable grace periods, if any, in the performance of any obligation to the
Bank or any third party under any agreement between the Company and/or any
Guarantor and the Bank or between the Company and/or any Guarantor and any such
third party.
(b) The Bank and its counsel to be satisfied as to all legal matters.
<PAGE>
-5-
Assessment Systems, Incorporated
March 3, 1997
Prior Communications: This Commitment supersedes all prior
--------------------
communications between the Company and the Bank, whether written or oral.
Survival: This Commitment and all of its conditions not satisfied at the
--------
Closing of the Line, or to the extent not inconsistent with the provisions of
the documents evidencing the Line, shall survive the Closing.
If the above terms are acceptable to you, please sign and return by
March 15, 1997 the enclosed copy of this letter together with your check in the
amount of $1,000 representing the balance of the origination fee. This
Commitment shall terminate and become unenforceable against the Bank unless
returned to the Bank within the stated period.
Very truly yours,
FLEET BANK, N.A.
By: /s/ Shari Delouya
Shari Delouya
Vice President
Agreed and Accepted
ASSESSMENT SYSTEMS, INCORPORATED
By: /s/ William B. Fucarino
--------------------------------
Name: William B. Fucarino
Title: CFO
Guarantors:
ASI SOLUTIONS, INC.
By: /s/ William B. Fucarino
--------------------------------
Name: William B. Fucarino
Title: CFO
PROUDFOOT REPORTS, INC.
By: /s/ William B. Fucarino
--------------------------------
Name: William B. Fucarino
Title: CFO
<PAGE>
EXHIBIT 10.14
CONFIDENTIAL TREATMENT
----------------------
Contract Number
G12463P
Page 1 of 14
NYNEX
Assessment Systems, Inc. Telesector Resources Group
780 Third Avenue NYNEX
New York, N.Y. 10017 240 East 38th Street
Attn: Mr. Bernard Reynolds New York, N.Y. 10016
Attn: Mr. Sean Mahoney
Sourcing Process Leader
THIS AGREEMENT by and between Assessment Systems, Inc., a corporation with
an office at 780 Third Avenue, New York, N.Y. 10017 (hereinafter called
"Consultant"), and Telesector Resources, a corporation with an office at 240
East 38th Street, New York, N.Y. 10016 (hereinafter called "NYNEX").
W I T N E S S E T H:
-------------------
WHEREAS, NYNEX desires to have Consultant perform certain consulting work
for it; and
WHEREAS, Consultant desires to perform such work for NYNEX.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
and agreements hereinafter contained, the parties do hereby agree as follows:
1. Term: Scope of Work
-------------------
(a) This Agreement shall be effective on April 1, 1996 and shall end
November 1, 1996, provided that NYNEX may extend this Agreement for periods of
60 upon thirty days' written notice. Any termination or expiration of this
Agreement shall not affect the obligations of either party to the other under
existing Statements of Work issued under this Agreement, but such shall continue
in effect as though this Agreement had not been terminated.
(b) Consultant agrees to provide consulting services ("Services") to NYNEX
as described in Exhibit A, Statement of Work, agreed to the parties from time to
time, substantially in the form attached hereto as Exhibit A and incorporated
herein by reference.
Consultant will accept or reject any Statement of Work provided by NYNEX
within five business days of receipt. NYNEX may consider any Statement of Work
not rejected by Consultant in ten business days after it was sent to Consultant
as having been accepted.
The parties understand and agree that this is a non-exclusive agreement,
and NYNEX reserves the right to undertake all work on its own behalf or through
any third party.
(c) Any parent, affiliate or subsidiary company of NYNEX may obtain
services from Consultant under this Agreement pursuant to Statements of Work
substantially in the form of Exhibit A attached hereto.
<PAGE>
Contract Number
G12463p
Page 2 of 14
2. CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
--------------------------------
has been filed separately with the Securities and Exchange Commission.
3. Assignment
----------
NYNEX and Consultant agree that this Agreement is personal in nature and
that neither party may assign its rights under this Agreement without the prior
written consent of the other party, except that:
(a) this Agreement may be assigned in whole or in party by NYNEX to any
entity controlling, controlled by or under common control with NYNEX (an
"Affiliate") upon written notice to Consultant; or
<PAGE>
Contract Number
G12463P
Page 3 of 14
(b) Consultant may assign the right to receive money due from NYNEX
providing that any assignment of monies shall be void and ineffective to the
extent that (i) Consultant fails to provide NYNEX at least thirty (30) days
prior written notice or (ii) the assignment attempts to impose upon NYNEX
obligations to the assignee additional to the payments of such monies, or
precludes NYNEX from dealing solely and directly with Consultant on all matters
pertaining to the Agreement.
(c) Any assignment not permitted by this paragraph shall be void and
ineffective.
4. Cancellations: Modifications
----------------------------
(a) NYNEX may cancel the services they ordered at any time. If NYNEX
cancels services it shall pay only for services already performed.
(b) NYNEX may modify services ordered by issuing a modified Statement of
Work. If the change alters the value of the services ordered, Consultant will
promptly notify NYNEX of any proposed changes in price, and Consultant shall
adjust the price accordingly, provided that as to price increases, unless an
increase is specified in this Agreement, any increase shall be an amount less
than or equal to the sum of the increased costs and expenses Consultant is able
to document.
5. No Subcontractors
-----------------
Consultant agrees not to subcontract any portion of the work to be
performed hereunder without the prior written consent of NYNEX.
6. Independent Contractor
----------------------
The status of Consultant to NYNEX hereunder shall be that of an independent
contractor and not any other relationship, including partner, agent or employee.
Consultant shall not make any representation to the contrary to any person.
Consultant shall not bind, or attempt to bind, NYNEX to any obligation with any
third party. In all of its activities under this Agreement, Consultants shall
act consistently with its status as an independent contractor. None of
Consultant's employees shall be deemed employees of NYNEX. NYNEX does not and
will not have actual, potential or any other control over Consultant or its
employees, except as otherwise expressly set forth in this Agreement.
7. Taxes
-----
Consultant agrees that it shall be its responsibility to withhold all
federal, state or local income taxes, social security taxes, unemployment and
other payroll taxes required by law to be withheld from the compensation of its
employees performing services hereunder.
8. Work Product
------------
(a) For the purposes of this Agreement, the term "Work Product" shall mean
all information, ideas, concepts, inventions, discoveries, developments or
improvements, whether of process, product, program, apparatus, design, method or
technique, marketing plan or presentation, or compilation of information,
technical information, business information, specifications, drawings, know-how
records, documentation, works of authorship and other creative works, and all
other knowledge and data, whether expressed in writing, orally or otherwise, and
whether or not protectable by patent, trademark, copyright or
<PAGE>
Contract Number
G12463P
Page 4 of 14
other applicable law, which are conceived, developed, acquired or first actually
reduced to practice or writing by or on behalf of Consultants, its employees,
its agents, or its contractors, alone or jointly with NYNEX employees or other
persons, as a result of or in connection with the performance by Consultant of
Services under this Agreement.
(b) Consultant agrees that it will disclose and furnish promptly to NYNEX
all Work Product originated or developed in connection with the performance of
services by Consultant under this Agreement. Consultant further agrees that all
such Work Product shall be NYNEX property, shall be kept in confidence by
Consultant and shall be used only for services performed under this Agreement,
and may not be used or copied for other purposes except upon such terms as may
be agreed upon between the parties hereto in writing.
9. Authorship and Copyright
------------------------
(a) The entire right, title and interest, including copyright and other
proprietary rights, in all original works of authorship fixed in any tangible
medium of expression heretofore or hereafter originated or developed by
Consultant as part of the services covered by this Agreement, shall be
transferred to and vested in NYNEX. The parties expressly agree to consider as
works made for hire all Work Product ordered or commissioned by NYNEX which
qualify as such in accordance with the copyright laws. For all such original
works, Consultant agrees to provide documentation satisfactory to NYNEX to
assure the conveyance of all such right, title and interest, including
copyright, to NYNEX. The cost of conveying such right shall be at NYNEX's
expense. In the event that the Work Product is deemed not to be a work made for
hire, Consultant hereby irrevocably transfers, assigns and conveys the exclusive
copyright ownership thereof to NYNEX, free and clear of any liens, claims or
other encumbrances, to the fullest extent permitted by law.
(b) Consultant warrants the originality of the Work Product prepared for
NYNEX hereunder, its disclosure to NYNEX exclusively and that no portion of the
Work Product prepared for NYNEX under this Agreement is derived from any work
owned by another party.
(c) In the event that third party work or Consultant's reused software or
data are used in the development of, or are incorporated within, materials to be
delivered pursuant to this Agreement, then Consultant will notify NYNEX and will
obtain for NYNEX a non-exclusive, royalty-free worldwide license to make, use,
sell and sublicense such work, software, or data.
10. Inventions
----------
(a) Consultant agrees that if any inventions, discoveries or improvements
are conceived, first reduced to practice, made or developed, in the course of,
or as a result of, the performance of services by Consultant under this
Agreement, Consultant will assign to NYNEX Consultant's right, title and
interest in and to such inventions, discoveries and improvements, and any
patents, copyrights or other forms of legal protection that may be granted
thereon in any country of the world.
(b) Consultant further agrees that, without charge to NYNEX, Consultant
will sign all papers and do all acts which may be necessary, desirable or
convenient to enable NYNEX at its expense to file and prosecute applications for
patents on such inventions, discoveries and improvements, and to maintain
patents granted thereon. Consultant also agrees to acquire from Consultant's
employees, agents and contractors who perform services under this Agreement,
such assignment and rights as to assure that NYNEX shall receive all of the
rights provided for in this Agreement.
<PAGE>
Contract Number
G12463P
Page 5 of 14
Consultant shall provide a copy of all documents to show that all Intellectual
Property developed by its employees, agents and contractors has been transferred
to Consultant.
11. Consultant's Information
------------------------
No information (such as specifications, drawings, sketches, models,
samples, tools, computer or other apparatus programs, technical or business
information or data, written, oral or other) furnished by Consultant to NYNEX
under this Agreement shall be considered to be confidential or proprietary to
Consultant, unless the information is specifically covered by a separate
nondisclosure agreement signed by both parties to this Agreement. If the
nondisclosure agreement was signed prior to this Agreement it will only be
effective if attached to this Agreement as an Exhibit and is specifically
incorporated by reference in this Agreement.
12. NYNEX Information
-----------------
(a) Any NYNEX information furnished to Consultant under this Agreement or
that Consultant comes in contact with on NYNEX premises or under NYNEX control
shall remain NYNEX property. All copies of such information in written, graphic
or other tangible form, and all Work Product derived from or reflecting such
information, shall be returned or sent to NYNEX at its request. No copies shall
be made of any documents or other media provided by NYNEX without the prior
written consent of NYNEX. Unless such information was previously known to
Consultant free of any obligation to keep it confidential, or has been or is
subsequently made public by NYNEX or a third party without breach of any
agreement, it shall be kept confidential by Consultant and shall be used only in
performing services under this Agreement, and may not be used for other purposes
except upon such terms as may be agreed upon between Consultant and NYNEX in
writing. NYNEX may require Consultant or its employees, agents or
representatives to sign a separate written agreement protecting NYNEX
proprietary information.
(b) Consultant agrees not to advertise, promote or publicize matters
relating to the services performed or furnished under this Agreement or to
mention or imply any relationship or connection with NYNEX or any of its
Affiliates in any of its advertising, promotions or publicity without the prior
written consent of NYNEX.
13. Government Laws and Regulations.
-------------------------------
Consultant agrees, in connection with the performance of services
hereunder, to comply with all applicable federal, state, or local regulations,
including, but not limited to, all applicable requirements of the Fair Labor
Standards Act, as amended, and of regulations and orders of the United States
Department of Labor issued thereunder. Consultant agrees that it will not
discriminate against any employee or applicant for employment on account of
race, color, religion, sex, disability or national origin and will comply with
the terms of the Non-Discrimination Compliance Agreement of even date herewith
executed by Consultant and attached hereto. Consultant has, and shall maintain
during the term of this Agreement, all known permits or other appropriate
records that may be required by law. Notwithstanding any other provisions of
this Agreement Consultant shall not export directly or indirectly, any U.S.
source technical data to any country outside the United States which export may
be in violation of the United States Export Control Laws and Regulations.
<PAGE>
Contract Number
G12463P
Page 6 of 14
Consultant agrees not to bring any toxic or hazardous material onto the property
of NYNEX without the prior written permission of NYNEX. Consultant agrees to be
responsible for the handling and management of all such toxic or hazardous
materials that it uses in providing services under this Agreement. Consultant
shall not bring any toxic or hazardous materials on the premises of NYNEX
without first notifying NYNEX in writing and providing NYNEX with an appropriate
MSDS.
14. New York PSC Audits
-------------------
Consultant represents that it has fully disclosed any engagements for
management or operational audits of New York Telephone Company as mandated by
the New York Public Service Commission that it or any of its affiliates have
been involved in, and that such audits along with the dates of such audits, are
attached to this Agreement.
15. Records
-------
Consultant agrees to maintain records of its activities under this
Agreement in accordance with its established procedures for four (4) years after
the termination of this Agreement. NYNEX shall have the right to audit or review
the records of Consultant relating to the work performed, and any expenses
incurred, in connection with this Agreement.
16. Specifications; Best Efforts
----------------------------
Consultant will perform services under this Agreement in compliance with
all government and industry standards and specifications, including any
standards and specifications published by Consultant, unless previously rejected
by NYNEX. Consultant agrees to undertake this assignment on a professional best
efforts basis and that its findings and recommendations will reflect its best
professional judgment based on the information available to it. Consultant will
perform its duties hereunder with promptness and diligence and in accordance
with the highest professional standards in Consultant's field.
Consultant shall comply with any trip or scheduling requirements needed for
the timely performance of Services. NYNEX shall not be obligated to accept or
pay Consultant for late or untimely performance. If the services do not conform
with the requirements of this Agreement, then NYNEX, in addition to any other
rights it may have under law or this Agreement, may reject some or all of the
services. If NYNEX reasonably believes that Consultant cannot or will not be
able to properly perform the services on schedule, NYNEX may have another party
perform some or all of the services, with any incurred costs being borne by
Consultant.
17. Successors and Assigns
----------------------
This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their respective successors and permitted assigns.
<PAGE>
Contract Number
G12463P
Page 7 of 14
18. Indemnification
---------------
Consultant agrees to indemnify and hold NYNEX and its Affiliates harmless
against any losses, damages, liabilities, claims or demands (including all
costs, expenses and reasonable attorneys' fees on account thereof or in
connection with any investigation or preparation related thereto or the
enforcement of the indemnification provisions of this Agreement) (collectively,
the "Indemnified Amounts") that may be made as a result of Consultant's acts or
omissions including, but not limited to, claims made: (i) by anyone for
infringement of any trademark, copyright, patent, trade secret or other
intellectual property right relating to use or reproduction of information or
materials provided, developed or originated by Consultant; (ii) by anyone for
injuries (including death) to persons or damage to property (including theft) or
other cause of action resulting from Consultant's acts or omissions or those of
persons furnished by Consultant while performing work for NYNEX pursuant to this
Agreement or in connection with materials furnished by Consultant pursuant to
this Agreement; (iii) by persons furnished by Consultant or any subcontractors
under worker's compensation or similar acts; (iv) in connection with the
services contemplated by this Agreement; or (v) under any federal securities
laws, or under any other statute, at common law or otherwise, arising out of or
in connection with the services contemplated by this Agreement or any
information obtained in connection with the performance of such services. NYNEX
agrees to notify Consultant promptly of any written claims or demands against
NYNEX for which Consultant is responsible hereunder and NYNEX shall be entitled,
at its option, to assume the defense or settlement of any such claim. Consultant
shall promptly reimburse NYNEX for Indemnified Amounts as they are incurred.
19. Designated Representative
-------------------------
For purposes of Services provided under this Agreement, the designated
representative of NYNEX shall be the person indicated on the Statement of Work
governing such Services. Consultant shall be entitled to rely on the foregoing
designation until notified in writing of a change in NYNEX's designated
representative.
20. Insurance
---------
Consultant shall secure and maintain at its expense during the term of this
Agreement (i) statutory workers' compensation and employers liability with
limits of not less than $500,000; (ii) Commercial General Liability insurance
for a combined single limit of at least $1,000,000 per occurence for bodily
injury and property damage with a policy aggregate of $2,000,000; (iii)
Comprehensive Automobile Liability insurance for a combined single limit of
$1,000,000 per occurrence; and (iv) Professional Errors and Omissions insurance
in an amount of $1,000,000 per occurrence with a policy aggregate of $2,000,000.
Consultant shall deliver a certificate of insurance on which NYNEX is named as
an additional insured with reference to (ii) above. Furthermore, NYNEX must
receive at least ten (10) days' notice of cancellation or modification of the
above insurance.
21. Impleader and Limited Liability of NYNEX
----------------------------------------
Consultant agrees not to implead or bring any action against NYNEX
(including its parent, affiliate or subsidiary companies), its successors,
assigns, employees or officers based on any claim by any of its employees for
personal injury or death that occurs in the course or scope of employment of
such person. Consultant also agrees that neither NYNEX nor any of its parent,
affiliate or subsidiary companies shall be liable for any consequential,
punitive or exemplary damages for any acts or failure to act under this
Agreement.
<PAGE>
Contract Number
G12463P
Page 8 of 14
22. Work Conditions
---------------
By executing this Agreement and by agreeing to any Statement of Work under
this Agreement, Consultant acknowledges that it is fully informed as to the
nature and location of the work, the physical, climatic and other conditions
prevailing at the worksite, and all other matters which may affect the work, the
cost thereof or the time for performing the work. If a Statement of Work
requests that Consultant performs services for which it is not fully informed
with respect to any of these matters, Consultant must notify NYNEX in writing
prior to acceptance.
23. Notices
-------
Any notice to be given hereunder by either party shall be in writing and
shall be deemed to have been given five (5) days after deposit in registered or
certified mail, return receipt requested, or immediately if delivered by hand,
by overnight courier or by telecopier, addressed as follows:
If to Consultant: Assessment Systems, Inc.
780 Third Avenue
New York, N.Y. 10017
Attn: Mr. Bernard Reynolds
Telephone No. 212 319-8400
Fax No. 212 319-6839
If to NYNEX: NYNEX
240 East 38th Street, 15th Floor
New York, N.Y. 10016
Mr. Sean Mahoney
Sourcing Process Leader
Telephone No. 212338-7254
Fax No. 212 682-6921
or to such other address as may be designated in writing by either party in
accordance herewith.
24. Choice of Law
-------------
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
WITHIN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. ALL
ACTIONS UNDER THIS AGREEMENT SHALL BE BROUGHT IN A COURT OF COMPETENT SUBJECT
MATTER JURISDICTION IN NEW YORK AND BOTH PARTIES AGREE TO ACCEPT THE PERSONAL
JURISDICTION OF SUCH COURT.
<PAGE>
Contract Number
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Page 9 of 14
25. Amendments
----------
No modification, alteration or amendment of this Agreement shall be
effective unless contained in a writing signed by both parties and specifically
referring hereto.
26. Non-Waiver
----------
No course of dealing or failure of either party to strictly enforce the
terms and conditions of this Agreement shall be construed as a waiver of the
future performance of that term or condition.
27. Severability
------------
In the event that one or more provisions contained in this Agreement are
for any reason held to be unenforceable in any respect under the laws of the
jurisdiction governing the Agreement, such unenforceability shall not affect any
other term or condition of this Agreement and this Agreement shall be construed
as if the unenforceable provision was not contained in this Agreement.
28. Captions and Interpretations
----------------------------
28.1 The captions of sections in this Agreement are for convenience only and
may not accurately or fully describe all of the requirements of a section. The
captions do not limit or modify the terms of this Agreement or any section of
this Agreement.
28.2 Whenever the provisions of this Agreement require one party to obtain the
permission or consent of the other party, unless specified otherwise, the party
from whom the consent or permission is needed may withhold the consent or
permission for any reason or no reason at all.
29. Gifts and Gratuities and Conflicts of Interest
----------------------------------------------
29.1 Consultant certifies that, to the best of its knowledge and belief, no
economic, beneficial employment or managerial relationship exists between
Consultant and any employee of NYNEX or its parent, affiliate or subsidiary
companies, or between Consultant and any relative of an employee of NYNEX or
any such companies, which would tend in any way to influence such employee in
the performance of his or her duties on behalf of NYNEX or its parent, affiliate
or subsidiary company in connection with the awarding, making, amending or
making determinations concerning the performance of this Agreement.
29.2 The exchange or offering of any money, gift item, personal service,
entertainment or unusual hospitality by either party to this Agreement to the
other party is expressly prohibited. This prohibition is equally applicable to
either party's officers, employees, agents or immediate family members. Any
violation of this provision constitutes a breach of this contract.
29.3 NYNEX may, by written notice to Consultant, terminate Consultant's right to
proceed under this Agreement without any liability whatsoever on the part of
NYNEX if NYNEX finds:
(a) that Consultant violated the certification contained in this
section regarding any conflict of interest; or
<PAGE>
Contract Number
G12463P
Page 10 of 14
(b) that gratuities (as discussed in this paragraph) were offered or
given by Consultant or any of its employees, agents or representatives, to
any officer or employee of NYNEX or its parent, subsidiary or affiliate
companies awarding, making, amending an agreement or securing favorable
treatment with respect to the performance of such agreement.
29.4 In the event this Agreement is terminated as provided in this section NYNEX
shall be entitled to pursue the same remedies against Consultant as it could
pursue in the event of a breach of the Agreement by Consultant.
29.5 The rights and remedies of NYNEX in this clause shall not be exclusive and
are in addition to any other rights and remedies provided by law or under this
Agreement.
30. Survival of Obligations
-----------------------
Consultant obligations under this Agreement, which by their nature would
continue beyond the termination, cancellation or expiration of this Agreement
shall survive termination, cancellation or expiration of this Agreement.
31. Termination
-----------
NYNEX may terminate this Agreement at any time by giving written notice to
Consultant. In such event, Consultant shall be entitled hereunder only to
charges for work actually performed and expenses actually incurred prior to the
date of termination, in each case in accordance with Section 2 hereof.
32. Entire Agreement
----------------
This Agreement constitutes the entire agreement and understanding between
the parties with respect to the subject matter hereof and merges and supersedes
all prior discussions and writings with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
ASSESSMENT SYSTEMS, INC. NYNEX
By /s/ Eli Salig By /s/ Harold Bell
---------------------- ---------------------
Name ELI SALIG Name HAROLD BELL
--------------------- -------------------
print print
Title EVP Title DIRECTOR
-------------------- ------------------
Date 10 MAY 1996 Date 5/14/96
--------------------- -------------------
<PAGE>
Contract Number
G12463P
Page 11 of 14
EXHIBIT A
STATEMENT OF WORK
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
has been filed separately with the Securities and Exchange Commission.
<PAGE>
Contract Number
G12463P
Page 12 of 14
EXHIBIT A
STATEMENT OF WORK (con't)
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
has been filed separately with the Securities and Exchange Commission.
Designated NYNEX Representatives:
NYNEX NYNEX
1095 Ave. of the Americas, 2nd floor 240 East 38th Street, 15th floor
New York, N.Y. 10036 New York, N.Y. 10016
Attn: Mr. Tom O'Gara Attn: Mr. Sean Mahoney-SPL
212-395-2247 212-338-7254
NYNEX
1095 Ave. of the Americas, 2nd floor
New York, N.Y. 10036
Attn: Ms. Corinne Costa
212-395-2422
<PAGE>
Contract Number
G12463P
Page 13 of 14
EXHIBIT B
COMPENSATION
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
has been filed separately with the Securities and Exchange Commission.
Each invoice submitted shall reflect a brief description of the services
performed during that period.
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
has been filed separately with the Securities and Exchange Commission.
INVOICES TO: COPIES OF INVOICES TO:
NYNEX NYNEX
1095 Ave of the Americas, 2nd floor 240 East 38th Street, 15th floor
New York, N.Y. 10036 New York, N.Y. 10016
Attn: Mr. Tom O'Gara Attn: Mr. Sean Mahoney - SPL
212 395-2247 212 338-7254
<PAGE>
Contract Number
G12463P
Page 14 of 14
EXHIBIT B
COMPENSATION (con't)
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the
document has been filed separately with the Securities and Exchange Commission.
ACCEPTED AND AGREED:
- -------------------
ASSESSMENT SYSTEMS, INC. NYNEX
/s/ Eli Salig /s/ Harold Bell
By:___________________________ By:___________________________
Eli Salig Harold Bell
Name:_________________________ Name:_________________________
print print
EVP Director
Title:________________________ Title:________________________
10 May 1996 5/14/96
Date:_________________________ Date:_________________________
<PAGE>
i/c/w Contract No. G12463P
NON-DISCLOSURE AGREEMENT
------------------------
This agreement, made and entered into this 15th day of April, 1996, by and
between Assessment Systems, Inc., a corporation having an office at 780 Third
Avenue, New York, N.Y. 10017 (hereinafter referred to as "CONSULTANT") and
Telesector Resources Group, Inc, ("NYNEX"), a corporation duly organized and
existing under the laws of the State of Delaware and having an office at 240
East 38th Street, New York, New York 10016. NYNEX shall remain and include
Telesector Resources Group, Inc., its holding and parent companies, and its or
their affiliates and subsidiaries.
WITNESSETH THAT:
WHEREAS, in order for CONSULTANT to provide consultant services to NYNEX it may
be necessary or desirable for NYNEX to disclose to CONSULTANT certain
confidential and proprietary material, information, data, and other
communications concerning NYNEX's past, current, future and proposed or
potential customers, products, services, operations, business forecasts,
procurement requirements, plans strategies and technology; and
WHEREAS, CONSULTANT and NYNEX wish to define the agreed upon terms and
conditions governing the confidentially of material, information and data
furnished and to be furnished by NYNEX to CONSULTANT in connection with its
present and future business plans.
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
undertakings expressed herein, agree with each other as follows:
1. For the purposes of this Non-Disclosure Agreement, the term "Confidential
Information" shall mean material, information, data and other communications
(a) disclosed by NYNEX and/or one or more of its parent, subsidiary or
affiliated corporations, appropriately marked as "Confidential," "Proprietary"
or the like or otherwise disclosed in a manner consistent with its proprietary
and confidential nature; or (b) produced during the course of the working
relationship between NYNEX and CONSULTANT, which would either give NYNEX'
competitors an advantage or diminish or eliminate NYNEX' advantage over its
competitors.
2. ALL NYNEX Confidential Information:
(a) is hereby acknowledged by CONSULTANT to be of a proprietary nature to,
and to constitute secrets of NYNEX;
(b) shall not be copied, used, distributed, disclosed, disseminated or
communicated in any way or form by CONSULTANT whether or not for its own
benefit, to anyone outside or within its own organization, except on a
"need-to-know" basis to the extent necessary for: (i) negotiations, discussions
and consultations with personnel or authorized representatives of NYNEX; (ii)
supplying NYNEX with products or services at its order; (iii) preparing bids,
estimates and proposals for submission to NYNEX; and (iv) any other purpose
which NYNEX may authorize in writing;
(c) shall not be used by CONSULTANT for any purposes other than those set
forth herein, without the experts prior written permission of NYNEX;
(d) shall be held by CONSULTANT in the strictest confidence, and shall be
treated by it with the same degree of care to avoid disclosure to any third
party as is used with respect to CONSULTANT'S own information of like
importance, or, a minimum, shall be treated with a reasonable degree of care to
avoid any such disclosure. CONSULTANT shall be liable for the disclosure of
Confidential Information of
<PAGE>
NYNEX if such care is not used. The burden shall be upon CONSULTANT to show that
such care, in fact, was used; and
(e) Confidential Information is hereby acknowledged by CONSULTANT to be
the sole property of NYNEX and shall be returned to NYNEX (including, without
limitation, all materials, documents, drawings, models, apparatus, sketches,
designs, specifications and lists, encompassing or evidencing same or related
thereto, and all copies/formats thereof), within seven (7) days after receipt by
CONSULTANT of a written request from NYNEX setting forth the Confidential
Information to be returned. Upon receipt of such request, CONSULTANT also shall
erase or destroy any such Confidential Information in any computer memory or
data storage apparatus.
3. The obligations set forth in Paragraph 2 hereof shall not apply, or shall
terminate, with respect to any particular portion of NYNEX Confidential
Information which:
(a) was in CONSULTANT's possession, free of any obligation of confidence,
prior to receipt from NYNEX, as proven by CONSULTANT's written records;
provided, however, that CONSULTANT immediately informs NYNEX, in writing, to
establish its prior possession;
(b) is already in the public domain at the time NYNEX communicates it to
CONSULTANT, or becomes available to the public through no breach of this
Non-Disclosure Agreement by CONSULTANT;
(c) is received independently from a third party free to disclose such
information to CONSULTANT;
(d) is developed by CONSULTANT, independently of and without reference to
any Confidential Information of NYNEX or any other information that NYNEX has
disclosed in confidence to any third party, as proven by CONSULTANT's written
records;
(e) is disclosed by CONSULTANT to a third party, with the express prior
written permission of NYNEX;
(f) is disclosed by CONSULTANT in order to satisfy any legal requirement
of any competent government body; provided, however, that immediately upon
CONSULTANT's receipt of any such request, CONSULTANT shall first advise NYNEX of
same before making any disclosure to such body, so that NYNEX may either
interpose an objection to such disclosure before such body, or take action to
assure confidential handling of the Confidential Information by such body, or
take other action to protect the Confidential Information which NYNEX deems
appropriate under the circumstances; or
(g) in any event, five (5) years after the date of execution of this
Non-Disclosure Agreement.
4. Nothing contained in this Non-Disclosure shall be construed as obligating
NYNEX to disclose any particular information to CONSULTANT.
5. Nothing contained in this Non-Disclosure Agreement shall be construed as
granting to or conferring on CONSULTANT, expressly or impliedly, any rights, by
license or otherwise, to the Confidential Information of NYNEX or any other
material, information or data, or any invention, discovery, improvement or
product conceived, made or acquired prior to, on or after the date of this
Non-Disclosure Agreement.
6. CONSULTANT warrants and represents that CONSULTANT has bound its employees,
agents and subcontractors to the terms and conditions of this Agreement or that
each and every employee, agent or subcontractor has personally executed a
Non-Disclosure Agreement containing terms and conditions no less stringent than
the terms and conditions contained herein; and furthermore CONSULTANT hereby
<PAGE>
agrees to indemnify, hold harmless and defend NYNEX from and against any loss,
cost, damage, expense or claim arising out of any breach of this provision or
the failure of CONSULTANT or its employees, agents or subcontractors to protect
such Confidential Information.
7. This Non-Disclosure Agreement shall become effective upon the day and year
first written, and shall remain in effect until terminated in writing by either
party. Notwithstanding any such termination, the rights and obligations with
respect to the disclosure of Confidential Information set forth herein shall
survive the termination of this Non-Disclosure Agreement.
8. CONSULTANT further agrees that it shall not, without the prior written
consent of NYNEX, make any news release, public announcement, or denial or
confirmation of all or any part of the discussions or negotiations, or in any
manner advertise or publish the fact that the parties have entered into
discussions or negotiations with each other, or disclose any details connected
with such discussions or negotiations to any third party, including any
disclosure with respect to this Non-Disclosure Agreement, the negotiations
culminating herein, or any phase of any program hereunder.
9. No term or provision of this Non-Disclosure Agreement shall be deemed
waived, and no breach excused, unless such waiver or consent shall be in writing
and signed by the party claimed to have waived or consented. Any consent by any
party to, or waiver of, a breach by the other, whether express or implied, shall
not constitute a consent to waiver of, or be cause for, any other, different or
subsequent breach.
10. The construction, interpretation and performance of this Agreement and all
transactions under it shall be governed by the laws of the State of New York.
ASSESSMENT SYSTEMS, INC. NYNEX
By: /s/ Eli Salig By: /s/ Harold Bell
---------------------------- ---------------------------
Name: ELI SALIG Name: HAROLD BELL
-------------------------- -------------------------
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Title: EVP Title: DIRECTOR
------------------------- ------------------------
Date: 10 MAY 1996 Date: 5/14/96
-------------------------- -------------------------
<PAGE>
NYNEX
CONTRACT NO. G12463P
AMENDMENT NO. 01
ACCEPTANCE SHALL BE INDICATED BY
(1) SIGNING AND (2) RETURNING DUPLICATE
------- -------------------
Assessment Systems, Inc. Telesector Resources Group, Inc
780 Third Avenue, 22nd floor (A NYNEX Company)
New York, N.Y. 10017 240 East 38th Street, 15th floor
Attn: Mr. Bernard Reynolds New York, N.Y. 10016
Attn: Mr. Sean Mahoney - SPL
SERVICE: Testing, assessment and interview process of additional field
personnel.
Telesector Resources Group, Inc., (herein after referred to as NYNEX) Agreement
with you No. G12463P is amended as follows:
Effective July 9th, 1996, Exhibit A--Statement of Work, will be expanded to
provide services for additional NYNEX field personnel, and Exhibit
B--Compensation, will be modified to provide for compensation for the additional
service. Exhibits A and B are attached and are made part of the Agreement.
All other Terms and Conditions of the Agreement are reaffirmed and remain in
effect to the extent that they do not conflict with this Agreement.
(1) Sign Here and (2) Return To Address Above:
-----------------------------------------
TELESECTOR RESOURCES GROUP, INC.
ASSESSMENT SYSTEMS, INC. (A NYNEX COMPANY)
By /s/ Eli Salig By /s/ Harold Bell
---------------------------------- -----------------------------
Title EXEC. V.P Title Dir Strategic Servicing
-------------------------------- ---------------------------
Name ELI SALIG Name HAROLD BELL
-------------------------------- ----------------------------
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Accepted: Date 24 July 1996
------------
<PAGE>
Contract # G12463P
Amendment No.01
EXHIBIT A
STATEMENT OF WORK
This Amendment to the Statement of Work, entered into by Assessment
Systems, Inc. ("ASI") and NYNEX pursuant to the terms and conditions of the
Consulting Agreement between the parties dates July 9,1996.
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
has been filed separately with the Securities and Exchange Commission.
AGREED AND ACCEPTED:
Assessment Systems, Inc. Telesector Resources Group, Inc.
(A NYNEX Company)
By: /s/ Eli Salig By: /s/ Harold Bell
------------------------ ------------------------
Name: Eli Salig Name: Harold Bell
------------------------ ------------------------
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Title: Executive Vice President Title: Dir. Strategic Services
------------------------ ------------------------
Date: 24 July 1996 Date: 5 August 1996
------------------------ ------------------------
<PAGE>
Contract # G12463P
Amendment No.01
EXHIBIT B
COMPENSATION
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
has been filed separately with the Securities and Exchange Commission.
<PAGE>
NYNEX
CONTRACT NO. G12463P
AMENDMENT NO.01
ACCEPTANCE SHALL BE INDICATED BY
(1) SIGNING AND (2) RETURNING DUPLICATE TO:
------- -------------------
Assessment Systems, Inc. Telesector Resources Group, Inc.
780 Third Avenue 240 E. 38th Street, 15th Flr.
New York, NY 10017 New York, NY 10016
Attn: Bernard Reynolds Attn: Sean Mahoney
SERVICE: Consulting Services.
NYNEX Telesector Resources, Group, Inc. Agreement with you No. G12463P dated
April 1, 1996, as hereto modified by Amendment No. 01 is hereby amended as
follows:
The section marked "Term; Scope of Work" subsection (a) is hereby changed to
read:
"This Agreement shall be effective on April 1, 1996 and shall end February 28,
1997, provided that NYNEX may extend this Agreement for periods of 90 days upon
thirty days' written notice. Any termination or expiration of this Agreement
shall not affect the obligations of either party to the other under existing
Statements of Work issued under this Agreement, but such shall continue in
effect as though this Agreement had not been terminated"
All other Terms and Conditions of the Agreement are reaffirmed and remain in
effect to the extent that they do not conflict with this Agreement.
(1) Sign Here and (2) Return To Address Above:
---- -----------------------
Accepted:
Assessment Systems, Inc. Telesector Resources Group, Inc.
(A NYNEX Company)
By /s/ Eli Salig By /s/ Victor Severino
------------------------------- ---------------------------------
Name ELI SALIG Name VICTOR SEVERINO
----------------------------- -------------------------------
Title EVP Title DIRECTOR - SOURCING PROCESS LEADER
---------------------------- ------------------------------
Date 12-24-96 Date 1/6/97
----------------------------- -------------------------------
<PAGE>
NYNEX
CONTRACT NO. G12463P
AMENDMENT NO. 03
ACCEPTANCE SHALL BE INDICATED BY
(1) SIGNING AND (2) RETURNING DUPLICATE
------- -------------------
Assessment Systems, Inc. Telesector Resources Group, Inc.
780 Third Avenue (A NYNEX Company)
New York, N.Y. 10017 240 East 38th Street, 15th Floor
Attn: Mr. Seymore Adler New York, N.Y. 10016
Attn: Mr. Sean Mahoney - SPL
Telesector Resources Group, Inc., (known now as NYNEX), Agreement with you No.
G12463P dated April 1, 1996, and Amended by Amendment No. 01 and Amendment No.
02, is further modified by Amendment No. 03 as follows:
Effective March 3, 1996, the contract expiration date will be extended until
May 1, 1997.
In addition, the Scope/Statement of Work will be expanded to include services as
identified on Exhibit A, attached.
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document has
been filed separately with the Securities and Exchange Commission.
All other Terms and Conditions of the Agreement are reaffirmed and remain in
effect to the extent that they do not conflict with this Agreement.
(1) Sign Here and (2) Return To Address Above:
--------- -----------------------
TELESECTOR RESOURCES GROUP, INC.
ASSESSMENT SYSTEMS, INC. (A NYNEX Company)
By /s/ Eli Salig By /s/ Sean M. Mahoney
--------------------------------- ------------------------------
Title EVP Title Sourcing Process Leader
------------------------------- ---------------------------
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Date: 2-11-97 Date: 4 February 1997
------------------------------- ---------------------------
<PAGE>
EXHIBIT A
STATEMENT OF WORK
SERVICE REPRESENTATIVE SELECTION
STATEMENT OF CONSULTANT WORK AND
ASSESSMENT SYSTEMS INCORPORATED (ASI) FEE ESTIMATES
CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the
document has been filed separately with the Securities and Exchange Commission.
Designated NYNEX Representative:
Mr. Ralph Thompson
Managing Director - Marketing
1095 Avenue of the Americas, 25th floor
New York, NY 10036
212-395-3781
AGREED AND ACCEPTED:
TELESECTOR RESOURCES GROUP, INC.
ASSESSMENT SYSTEMS, INC. (A NYNEX COMPANY)
By: /s/ Eli Salig By: /s/ Sean M. Mahoney
----------------------------- -----------------------------
Name: Eli Salig Name: Sean M. Mahoney
--------------------------- ---------------------------
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Title: Exec V.P. Title: Sourcing Proc. Ldr.
-------------------------- --------------------------
Date: 11 February 1997 Date: 4 February 1997
--------------------------- ---------------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Amendment No.
1 to Form S-1 of our report dated June 18, 1996, except as to the information
presented in Note 11, for which the date is January 16, 1997, on our audits of
the consolidated balance sheets of ASI Solutions Incorporated as of March 31,
1996 and 1995, and the consolidated statements of income, stockholders' equity
and cash flows for each of the three years ended March 31, 1996. We also
consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
New York, New York
March 7, 1997
<PAGE>
EXHIBIT 23.3
ASI Solutions Incorporated
780 Third Avenue
New York, NY 10017
With regard to the submission of your Amendment No. 1 to your registration
statement Form S-1 to the Securities and Exchange Commission on or about March
5, 1997, consent hereby is given (1) to include my recently issued report,
dated June 24, 1994, (relating to the statements of income, stockholders'
equity and cash flows of Assessment Solutions Incorporated for the year ended
March 31, 1994 not presented separately therein) appearing in the Prospectus
that is part of the Form S-1 and (2) to refer to me in that Prospectus as an
expert in accounting and auditing in connection with the aforementioned report
and financial statements.
/s/ William W. Oliver
William W. Oliver, CPA
New York, New York
March 5, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from ASI
Solutions Incorporated Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1996 and the Consolidated Statements of Income for the fiscal year
ended March 31, 1996 and the nine months ended December 31, 1996.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> MAR-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1995 APR-01-1996
<PERIOD-END> MAR-31-1996 DEC-31-1996
<CASH> 69,583 146,099
<SECURITIES> 0 0
<RECEIVABLES> 2,053,045 3,361,392
<ALLOWANCES> (24,000) (24,000)
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,226,258 3,639,876
<PP&E> 1,483,493 2,939,904
<DEPRECIATION> (962,769) (1,176,656)
<TOTAL-ASSETS> 4,242,605 7,076,654
<CURRENT-LIABILITIES> 1,695,885 3,016,239
<BONDS> 0 0
0 0
0 0
<COMMON> 46,252 46,252
<OTHER-SE> 2,349,976 3,541,788
<TOTAL-LIABILITY-AND-EQUITY> 4,242,605 4,242,605
<SALES> 10,558,113 12,858,779
<TOTAL-REVENUES> 0 0
<CGS> 5,206,854 5,905,213
<TOTAL-COSTS> 9,146,516 10,208,866
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,227 (13,265)
<INCOME-PRETAX> 1,413,824 2,636,648
<INCOME-TAX> 681,455 1,444,836
<INCOME-CONTINUING> 732,369 1,191,812
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 732,369 1,191,812
<EPS-PRIMARY> 0.16 0.26
<EPS-DILUTED> 0 0
</TABLE>
