<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1997
REGISTRATION NO. 333-21069
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALL COMMUNICATIONS CORPORATION
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW JERSEY 22-3124655
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) INDUSTRIAL CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
1450 ROUTE 22 WEST
MOUNTAINSIDE, NEW JERSEY 07092
(908) 789-8800
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
RICHARD REISS, PRESIDENT
1450 ROUTE 22 WEST
MOUNTAINSIDE, NEW JERSEY 07092
(908) 789-8800
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
GREGORY SICHENZIA, ESQ. STUART NEUHAUSER, ESQ.
JOSHUA M. JAFFE, ESQ. BERNSTEIN & WASSERMAN, LLP
SINGER ZAMANSKY LLP 950 THIRD AVENUE
40 EXCHANGE PLACE NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10005 TELEPHONE NO.: (212) 826-0730
TELEPHONE NO.: (212) 809-8550 FACSIMILE NO.: (212) 371-4730
FACSIMILE NO.: (212) 344-0394
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
(cover continued on next page)
------------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE AND
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
(cover continued from previous page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Units, each consisting of two shares of Common Stock, no
par value per share, and two Class A Warrants(2)........ 805,000Uts. $ 7.00 $ 5,635,000.00 $ 1,707.58
Common Stock, no par value per share, underlying
Units(2)................................................ 1,610,000Shs.
Class A Warrants underlying Units(2)...................... 1,610,000Wts.
Common Stock, no par value per share, issuable upon
exercise of Class A Warrants(3)......................... 1,610,000Shs. 4.25 6,842,500.00 2,073.48
Underwriter's Unit Purchase Options(4).................... 70,000Opts. .001 70.00 .02
Units, each consisting of two shares of Common Stock, no
par value per share, and two Class A Warrants, issuable
upon exercise of Underwriter's Options(3)............... 70,000Uts. 8.40 588,000.00 178.18
Common Stock, no par value per share, underlying
Underwriter's Options................................... 140,000Shs.
Class A Warrants underlying Underwriter's Options(3)...... 140,000Wts.
Common Stock, no par value per share, issuable upon
exercise of Class A Warrants underlying the
Underwriter's Options................................... 140,000Shs. 4.25 595,000.00 180.30
Common Stock, no par value per share, to be sold by
Selling Stockholder..................................... 25,000Shs. 3.50 87,500.00 26.52
Total........................................... $13,748,070.00 $ 4,166.08
Amount previously paid.................................... 4,494.01
------------
Amount due................................................ $ - 0 -
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 105,000 Units which may be issued upon exercise of an option
granted to the Underwriter to cover over-allotments, if any. See
'Underwriting.'
(3) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
of the Class A Warrants and the Underwriter's Options.
(4) Represents options (the 'Underwriter's Options') to purchase 70,000 Units.
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION CAPTIONS IN PROSPECTUS
----------------------------------------------------------------------- ------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front Cover of
Prospectus........................................................... Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus................ Cover Page, Inside Cover Page,
Outside Back Page
3. Summary Information and Risk Factors................................... Prospectus Summary, Risk Factors
4. Use of Proceeds........................................................ Use of Proceeds
5. Determination of Offering Price........................................ Cover Page, Underwriting
6. Dilution............................................................... Dilution
7. Selling Securityholders................................................ Concurrent Offering
8. Plan of Distribution................................................... Prospectus Summary, Underwriting
9. Legal Proceedings...................................................... Business
10. Directors, Executive Officers, Promoters and Control Persons........... Management, Principal Stockholders
11. Security Ownership of Certain Beneficial Owners and Management......... Principal Stockholders
12. Description of Securities.............................................. Description of Securities
13. Interest of Named Experts and Counsel.................................. *
14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.......................................................... Management
15. Organization Within Last Five Years.................................... *
16. Description of Business................................................ Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan of Operation.............. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
18. Description of Property................................................ Business
19. Certain Relationships and Related Transactions......................... Certain Transactions
20. Market for Common Equity and Related Shareholder Matters............... Front Cover Page, Description of
Securities
21. Executive Compensation................................................. Management
22. Financial Statements................................................... Financial Statements
23. Changes in and Disagreements with Accounts on Accounting and Financial
Disclosure........................................................... Change in Accountants
</TABLE>
- ------------
* Not Applicable
<PAGE>
<PAGE>
EXPLANATION NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering of 700,000 Units (the 'Offering
Prospectus'), and one to be used in connection with the sale of 25,000 shares of
Common Stock by the President of the Company (the 'Selling Stockholder's
Prospectus'). The offering Prospectus and the Selling Stockholder's Prospectus
will be identical in all respects except for the alternate pages for the Selling
Stockholder's Prospectus included herein which are labeled 'Alternate Page for
Selling Stockholder's Prospectus.'
<PAGE>
<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.
PRELIMINARY PROSPECTUS, DATED: APRIL 9, 1997
SUBJECT TO COMPLETION
PROSPECTUS
ALL COMMUNICATIONS CORPORATION
700,000 UNITS, CONSISTING OF 1,400,000 SHARES OF COMMON STOCK
AND 1,400,000 REDEEMABLE CLASS A WARRANTS
All Communications Corporation (the 'Company') hereby offers 700,000 units
('Units'), each Unit consisting of two shares of Common Stock, no par value per
share ('Common Stock'), and two redeemable Class A Common Stock Purchase
Warrants ('Warrants'). Each Warrant entitles the registered holder thereof to
purchase one share of Common Stock at a price of $4.25 per share, subject to
adjustment, for four years commencing one year from the date of this Prospectus.
The Common Stock and Warrants comprising the Units will be separately
transferable immediately upon issuance. The Company may redeem the Warrants
commencing , 1998 (18 months from the date of the Prospectus), or earlier
with the consent of Monroe Parker Securities, Inc. (the 'Underwriter'), at a
price of $.10 per Warrant, on not less than 30 days' prior written notice, if
the last sale price of the Common Stock has been at least 250% ($10.63 per
share) of the current Warrant exercise price, subject to adjustment, for at
least 20 consecutive trading days ending within three days prior to the date on
which notice of redemption is given. See 'Description of Securities.'
(Cover continued on following page)
------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY
INVESTORS WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. SEE 'RISK
FACTORS' ON PAGE 7 AND 'DILUTION' ON PAGE 14.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAVE THEY
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) THE COMPANY(2)
<S> <C> <C> <C>
Per Unit..................................................... $7.00 $.70 $6.30
Total(3)................................................ $4,900,000 $490,000 $4,410,000
</TABLE>
(1) Excludes additional compensation to be received by the Underwriter in the
form of (i) options (the 'Underwriter's Options') to purchase 70,000 Units,
exercisable over a period of four years commencing one year from the date of
this Prospectus, at an exercise price equal to 120% of the public offering
price of the Units being offered hereby; and (ii) a 3% non-accountable
expense allowance of $147,000 (or $169,050 if the over-allotment option is
exercised in full) The Company has agreed under certain circumstances to pay
the Underwriter a warrant solicitation fee of 5% of the exercise price
received for each warrant exercised. In addition, the Company and the
Underwriter have agreed to indemnify each other against certain liabilities
under the Securities Act of 1933 (the 'Securities Act'). See 'Underwriting.'
(2) Before deducting expenses, including the Underwriter's non-accountable
expense allowance payable by the Company, estimated at $396,000 (or $418,050
if the over-allotment option is exercised in full).
(3) The Company has granted to the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to an additional
105,000 Units on the same terms solely to cover over-allotments, if any. If
the over-allotment option is exercised in full, the Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company would be
$5,635,000, $563,500 and $5,071,500 respectively.
------------------------
MONROE PARKER SECURITIES, INC.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
<PAGE>
(cover continued)
Prior to this offering, there has been no public market for the Units,
Common Stock or Warrants. The offering price of the Units and the exercise price
and the terms of the Warrants have been determined by negotiations between the
Company and the Underwriter, and are not necessarily related to net asset value,
projected earnings or other established criteria of value. The Company has
applied to list the Units, Common Stock and Warrants on the Boston Stock
Exchange ('BSE') under the symbols 'CMNU,' 'CMN' and 'CMNW,' respectively. It is
anticipated that such securities will also be traded in the over-the-counter
market on the National Association of Securities Dealers, Inc.'s ('NASD') OTC
Electronic Bulletin Board under the symbols 'ACMNU,' 'ACMN' and 'ACMNW,'
respectively. There can be no assurance that an active trading market in the
Company's securities will develop after the completion of this offering, or be
sustained. See 'Underwriting.'
The Registration Statement of which this Prospectus forms a part also
registers up to 25,000 shares of Common Stock on behalf of the President of the
Company (the 'Selling Stockholder'), which may be sold by him for his account
from time to time in open market transactions. The Common Stock to be sold by
the Selling Stockholder is referred to herein as the 'Registered Common Stock.'
The Registered Common Stock offered by the Selling Stockholder is not part of
the underwritten public offering. The Selling Stockholder may not sell the
Registered Common Stock prior to three years from the date of this Prospectus
without the prior consent of the Underwriter.
The Units are being offered on a 'firm commitment' basis by the
Underwriter, subject to prior sale, when, as and if delivered to and accepted by
the Underwriter, and subject to the Underwriter's right to reject orders in
whole or in part, and to the approval of certain legal matters by counsel and
certain other conditions. It is expected that delivery of certificates
representing the Units will be made against payment therefor on or about
, 1997.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited and reported upon by its independent
public accountants after the end of each fiscal year, commencing with its fiscal
year ending December 31, 1997, and will make available such other periodic
reports as the Company may deem to be appropriate or as may be required by law.
The Company has registered the Units, the Common Stock and the Warrants under
the Securities Exchange Act of 1934 (the 'Exchange Act') and, commencing on the
date of this Prospectus, will be subject to the reporting requirements of the
Exchange Act and will file all required information with the Securities and
Exchange Commission (the 'Commission').
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following discussion summarizes certain information contained in this
Prospectus. It does not purport to be complete and is qualified in its entirety
by reference to more detailed information and financial statements, including
the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise
indicated, all share and per share information in this Prospectus (i) gives
effect to the conversion of $750,000 principal amount of 12% Convertible
Subordinated Notes (the 'Bridge Notes') by certain note holders of the Company
(the 'Bridge Unitholders') into 375,000 Bridge Units (the 'Bridge Units'), each
consisting of one share of Common Stock and one Warrant, prior to the completion
of this offering; and (ii) assumes no exercise of (a) the Underwriter's
over-allotment option; (b) the Warrants; (c) the Bridge Unitholders' Warrants;
(d) the Underwriter's Options; (e) outstanding options issued under the
Company's stock option plan; and (f) other outstanding options. See
'Management,' 'Interim Financing,' 'Description of Securities' and
'Underwriting.'
THE COMPANY
All Communications Corporation (the 'Company' or 'ACC') is engaged in the
business of selling, installing and servicing voice and videoconferencing
communications systems, concentrating on the commercial and industrial
marketplace. The Company's voice communications products are intended
principally for small to medium-sized business use; its videoconferencing
communications products are intended for use by all business, governmental,
educational and medical entities. In connection with the sale and service of its
products, the Company also markets peripheral data and telecommunications
products obtained from others. Through its headquarters office in Mountainside,
New Jersey and nationwide subcontractors, the Company sells, installs and
upgrades its communication and information distribution products and services.
VOICE COMMUNICATIONS. ACC is a major reseller of Panasonic Communications
and Systems Company's ('Panasonic') digital telephone systems, voice processing
systems and computer telephone integration solutions in the United States. The
Company's principal voice communications products are multi-featured, fully
electronic, digitally controlled key systems and hybrid telephone systems, voice
processing products with computer telephone integration hardware and software
and related business products and services for commercial distribution. A key
telephone system provides each telephone with direct access to multiple outside
trunk lines and internal communications through intercom lines. A PABX (private
automatic branch exchange) system, through a central switching system, permits
the connection of internal and external lines. A hybrid switching system
provides, in a single system, both key telephone and PABX features. Key
telephone equipment may be used with PABX equipment. Voice processing products
include voice-mail and interactive voice response systems, which allow via a
single line instrument, access to computerized information. All of the Company's
systems are software-based and fully digital. This enables the Company to
readily incorporate a variety of additional features as well as the ability to
expand a system's capability through software enhancements.
The Company sells, installs and services Panasonic telecommunications
products throughout the United States both through employees of the Company and
subcontractors. During the fiscal years ended December 31, 1996 and 1995, one
customer, Coldwell Banker'r', a brand of HFS Incorporated, accounted for
approximately 26% and approximately 28%, respectively, of the Company's total
sales. The Company's current business strategy is to focus on sales,
installation and service operations. In connection with implementing its
business strategy, the Company is seeking to expand its business by offering
customers and potential customers a broader range of products.
VIDEOCONFERENCING. The Company began selling Sony Electronics Inc.'s (a
division of Sony Corporation) ('Sony') videoconferencing products in the third
quarter of 1994, and is currently one of Sony's largest United States Sony
Authorized Videoconferencing Resellers (SAVR). Videoconferencing communications
systems, utilizing advanced technology, enable users at separate locations to
engage in face-to-face discussions. In addition to the use of video conferences
as a corporate communications tool, use of videoconferencing communications
systems is expanding into numerous additional applications, including (i)
teachers providing lectures to students at multiple locations, (ii) physicians
engaging in
3
<PAGE>
<PAGE>
consultations utilizing x-rays and other photographic material, (iii) conducting
multi-location staff training programs and (iv) engineers in separate design
facilities coordinating the joint development of products. Sony's
videoconferencing systems incorporate superior audio and data sharing
capabilities. The systems expand the user's ability to conduct business in
person while substantially reducing or eliminating travel costs and
non-productive travel time. ACC offers what it believes to be the only system
with the built in ability to connect with four locations without the use of an
external bridge. Videoconferencing communication is generally considered to be
more effective than audio communication, as information retention is improved
when presented visually.
Through a non-exclusive agreement with Sprint North Supply ('SNS'), the
exclusive United States distributor of Sony videoconferencing communications
equipment, ACC provides videoconferencing systems for United States customers on
a global basis, with a concentration in the Northeastern United States. The
Company (i) provides its customers with components produced by Sony, a leading
worldwide manufacturer of room based videoconferencing equipment, and several
other manufacturers of ancillary equipment, (ii) selects and integrates those
components into complete systems designed to suit each customer's particular
communications requirements and (iii) provides training and other continuing
services designed to insure that its customers fully and efficiently utilize
their systems. Sony does not sell its videoconferencing products on a direct
basis.
To accommodate ACC's growth in the videoconferencing market sector, the
Company recently opened offices and demonstration facilities in New York City
and Washington, D.C. The Company has assembled a team of industry experts with
substantial videoconferencing communications expertise and, over the past 18
months, has provided over 35 videoconferencing systems on a national and
international basis. Customers of the Company in this area include Fedders,
Waterford Crystal, Deutche Bank, Shearman & Sterling, The British Ministry of
Defense, St. Johns University, Banco de Columbia and Tetra Pak.
During the fiscal years ended December 31, 1996 and 1995, approximately 72%
and 70%, respectively, of the Company's total sales were attributable to the
sale of voice communications equipment manufactured by Panasonic, and
approximately 27% and 27%, respectively, of the Company's total sales were
attributable to the sale of videoconferencing communications equipment
manufactured by Sony. See 'Business -- Sales and Marketing.'
ACC was organized as a New Jersey corporation on August 16, 1991. Its
executive offices are located at 1450 Route 22 West, Mountainside, New Jersey
07092 and its telephone number is (908) 789-8800.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........................... 700,000 Units, each Unit consisting of two shares of Common Stock
and two redeemable Class A Common Stock Purchase Warrants (the
'Warrants'). The Common Stock and Warrants comprising the Units
will be separately transferable immediately upon issuance. See
'Description of Securities.'
Description of Warrants:
Exercise of Warrants....................... Subject to redemption by the Company, the Warrants may be
exercised at any time during the four-year period commencing one
year from the date of this Prospectus at an exercise price of
$4.25 per share, subject to adjustment.
Redemption of Warrants..................... The Warrants are redeemable by the Company commencing 18 months
from the date of the Prospectus, or earlier with the consent of
the Underwriter, at $.10 per Warrant, on not less than 30 days'
prior written notice, provided that the last sale price of the
Common Stock is at least 250% ($10.63 per share) of the current
Warrant exercise price,
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
subject to adjustment, for at least 20 consecutive trading days
ending within three days prior to the date on which notice of
redemption is given. See 'Description of Securities.'
Common Stock Outstanding Prior to
Offering(1)................................ 3,375,000 shares(1)
Common Stock Outstanding After Offering(1)... 4,775,000 shares(1)
Use of Proceeds.............................. The Company intends to utilize the net proceeds from this
offering, estimated at approximately $4,014,000, for telephone
systems inventory, videoconferencing equipment inventory,
leasing new corporate headquarters and leasehold improvements,
hiring additional employees, the purchase of computer equipment
and associated software, marketing and working capital. See 'Use
of Proceeds.'
Proposed Boston Stock Exchange Symbols (2):
Units...................................... CMNU
Common Stock............................... CMN
Warrants................................... CMNW
Proposed NASD's Electronic Bulletin Board
Symbols (2):
Units...................................... ACMNU
Common Stock............................... ACMN
Warrants................................... ACMNW
Risk Factors................................. The securities offered hereby are speculative, involve a high
degree of risk and immediate substantial dilution, and should be
considered only by investors who can afford to sustain a loss of
their entire investment. See 'Risk Factors' and 'Dilution.'
</TABLE>
- ------------
(1) Includes 375,000 shares of Common Stock included in the Bridge Units,
assuming the conversion of $750,000 principal amount of Bridge Notes into
375,000 Bridge Units. Does not include an aggregate of 3,487,500 shares
which may be issued upon exercise of (i) the Warrants included in the Units
offered hereby; (ii) the Underwriter's Options and underlying Warrants;
(iii) the Underwriter's over-allotment option and underlying Warrants; (iv)
the shares underlying the Warrants included in the Bridge Units; (v)
outstanding options issued under the Company's stock option plan; and (vi)
other outstanding options. See 'Management,' 'Interim Financing,'
'Description of Securities' and 'Underwriting.'
(2) Notwithstanding listing on the Boston Stock Exchange and trading on the
NASD's Electronic Bulletin Board, there can be no assurance that an active
trading market for the Company's securities will develop or, if developed,
will be sustained.
5
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<PAGE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Statement of Income Data:
Net revenues........................................................... $3,884,700 $2,641,331
Gross margin........................................................... 1,383,627 859,612
Income from operations................................................. 119,235 48,936
Income before income taxes............................................. 90,209 17,249
Income taxes........................................................... 38,606 8,029
Net income.................................................................. 51,603 9,220
Net income per share...................................................... $.03 $.01
Weighted average number of common shares outstanding........................ 1,977,518 1,884,002
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------- -----------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital................................. $ 748,250 $4,762,250 $ 52,286
Total assets.................................... 2,458,392 $6,081,986 754,640
Total liabilities............................... 1,912,994 1,162,994 673,345
Retained earnings (Accumulated deficit)......... 80,398 (310,008) 28,795
Stockholders' equity............................ 545,398 $4,918,992 81,295
</TABLE>
- ------------
(1) Gives effect to the subsequent conversion of $750,000 principal amount of
Bridge Notes by the Bridge Unitholders into 375,000 Bridge Units and the
sale of the 700,000 Units offered hereby. See 'Use of Proceeds,' 'Interim
Financing' and 'Description of Securities.'
6
<PAGE>
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. Accordingly, in analyzing an investment in these securities,
prospective investors should carefully consider, along with other matters
referred to herein, the following risk factors.
LIMITED HISTORY OF PROFITABLE OPERATIONS. The Company has operated only
since August 1991, and generated net income of $51,603 and $9,220 for the fiscal
years ended December 31, 1996 and 1995, respectively. Although the Company has
achieved revenue growth and profitability during the past two fiscal years,
there can be no assurance that such growth can be sustained or that the Company
will remain profitable. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.' The Company may experience significant
fluctuations in future operating results as a result of a number of factors,
including delays in product enhancements and new product introductions by its
suppliers, market acceptance of new products, and reduction in demand for
existing products as a result of new product introductions by competitors of the
Company's suppliers. Any of these factors could cause quarterly operating
results to vary significantly from prior periods. In addition, the Company's
gross profit percentage may vary significantly depending on the mix of products
and services contributing to revenues in any period.
DEPENDENCE UPON MAJOR CUSTOMER. During the fiscal years ended December 31,
1996 and 1995, one customer, Coldwell Banker'r', a real estate brokerage
franchisor with approximately 2,800 franchise offices and a brand of HFS
Incorporated ('HFS'), accounted for approximately 26% and approximately 28%,
respectively, of the Company's total sales. In December 1996, the Company signed
a non-exclusive Preferred Vendor Agreement ('Agreement') with HFS for a term of
four years expiring December 8, 2000, for the Company to provide telephone and
voice processing systems to the real estate brokerage franchise systems of
Century 21'r', ERA'r' and Coldwell Banker'r', with an aggregate of approximately
9,000 United States franchise offices. The Company expects to continue to sell
its telephone and voice processing systems to Coldwell Banker franchisees as
well as to franchisees of Century 21 and ERA pursuant to the Agreement. It is
expected that sales to Coldwell Banker will continue to be substantial; however,
in view of the Agreement and the anticipated expansion of the Company's
business, it is expected that sales to Coldwell Banker as a percentage of total
sales will decrease. It is, however, anticipated that sales to HFS franchisees,
including Century 21, ERA and Coldwell Banker, will, in the foreseeable future,
account for a substantial portion of the Company's total sales. Any significant
reductions in sales to Coldwell Banker franchisees, or the failure to generate
significant sales to Century 21 and/or ERA franchisees would have an adverse
impact on the Company's total revenues and profitability in the future. See
'Business -- Customers.'
DEPENDENCE ON SUPPLIERS. During the fiscal years ended December 31, 1996
and 1995, approximately 72% and 70%, respectively, of the Company's total sales
were attributable to the sale of voice communications equipment manufactured by
Panasonic Communications & System Company ('Panasonic'), and approximately 27%
and 27%, respectively, of the Company's total sales were attributable to the
sale of videoconferencing communications equipment manufactured by Sony
Electronics Inc. ('Sony'). Termination or change of the Company's ability to
obtain Panasonic and/or Sony products, disruption of supply, their failure to
remain competitive in quality, function or price, or the determination of either
Panasonic or Sony to reduce reliance on independent resellers such as the
Company could have a material adverse effect on the Company. See
'Business -- Sales and Marketing.'
The Company has an agreement with Panasonic authorizing the Company to
serve as its non-exclusive reseller in the United States. The agreement with
Panasonic expires on December 31, 1997 and is automatically renewable for
successive one-year terms unless terminated by either party upon at least 30
days' prior written notice. Sony has recently determined to eliminate all direct
reseller agreements for its videoconferencing products and has designated Sprint
North Supply ('SNS') as its exclusive United States distribution partner for
such products. On February 21, 1997, the Company signed a non-exclusive reseller
agreement with SNS wherein SNS agreed to provide ACC with Sony videoconferencing
equipment through January 31, 1998, on terms which are more favorable than those
on which the Company previously purchased such equipment directly from Sony.
While there are other suppliers of voice and videoconferencing communications
equipment who provide products similar to those which the Company purchases from
Panasonic and SNS, respectively, termination of the
7
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Company's relationship with either or both of these suppliers could have a
material adverse effect on the Company. See 'Business -- Reseller Agreements.'
DEPENDENCE ON PROCEEDS OF THIS OFFERING; POSSIBLE NEED FOR ADDITIONAL
FINANCING. The Company is dependent on the proceeds of this offering to generate
cash for the expansion of its product lines and marketing efforts. The Company
anticipates, based on its proposed plans, that the proceeds of this offering,
together with funds generated from operations, will be sufficient to satisfy its
anticipated cash requirements for approximately two years following the
completion of this offering. In the event that the costs involved in the
development of its expanded operations prove to be greater than anticipated,
additional financing may be required. The Company expects to satisfy any
additional capital requirements with proceeds, if any, from the exercise of
Warrants, or through debt and/or equity financing. The Company has no current
arrangement with respect to such additional financing and there can be no
assurance that such financing, if available, will be on terms acceptable to the
Company. See 'Use of Proceeds' and 'Business.'
DILUTION. A purchaser of Common Stock in this offering will experience an
immediate and substantial dilution of $2.49 (71%) per share between the pro
forma net tangible book value per share after the offering and the public
offering price of $3.50 per share (assuming no value is attributed to the
Warrants). See 'Dilution.'
SALES OF COMMON STOCK AT BELOW OFFERING PRICE; SALE OF COMMON STOCK BY
PRESIDENT. On December 13, 1996, the Company's Chairman of the Board and
President, two of its Vice Presidents and a Director acquired, upon exercise of
options, an aggregate of 1,010,000 shares of Common Stock, at a purchase price
of $.03 per share, or an aggregate purchase price of $30,300. See 'Dilution.'
CONTINUED CONTROL BY MANAGEMENT. Upon completion of this offering (assuming
the conversion of $750,000 principal amount of Bridge Notes into 375,000 Bridge
Units), the officers and directors of the Company will beneficially own
approximately 64.2% of the Company's outstanding Common Stock. The Company's
stockholders do not have the right to cumulative voting in the election of
directors. Accordingly, such individuals will be in a position to effectively
control the Company, including the election of all of the directors of the
Company. See 'Management' and 'Principal Stockholders.'
STAGGERED BOARD OF DIRECTORS. In December 1996, the stockholders of the
Company approved an amendment to the Company's By-Laws dividing the Board of
Directors into three classes, each of which shall serve for a staggered term of
three years. Such division of the Company's Board of Directors could have the
effect of impeding an attempt to take over the Company or change or remove
management, since only one class will be elected annually. Thus, only
approximately one-third of the existing Board of Directors could be replaced at
any election of directors. See 'Management.'
IMPACT ON EARNINGS RESULTING FROM ISSUANCE OF BRIDGE UNITS. In December
1996, the Company completed a bridge financing (the 'Bridge Financing'),
pursuant to which it issued to the Bridge Unitholders an aggregate of $750,000
principal amount of 12% Convertible Subordinated Notes ('Bridge Notes'). The
Bridge Notes are convertible, at the option of the holders, commencing on the
effective date and prior to the date of the completion of this offering, into an
aggregate of up to 375,000 Bridge Units, and the Company will issue to each note
holder one Bridge Unit for each $2.00 principal amount of Bridge Notes presented
for conversion. As a result of the issuance of the Bridge Notes, the Company
incurred a total charge of $390,406 of deferred financing costs at the time of
such issuance, reflecting the value of such securities, and its net income will
be reduced or its net loss will increase by such amount during the fiscal year
ending December 31, 1997. See 'Interim Financing' and 'Financial Statements.'
COMPETITION. The audio and videoconferencing communications industries have
been characterized by pricing pressures and business consolidations. The Company
competes with other manufacturers and distributors of voice communications and
videoconferencing systems, many of which are larger, have greater recognition in
the industry, a longer operating history and greater financial resources than
the Company. The Company's competitors in the voice communications sector
include Lucent Technologies, Inc., Northern Telecom and Toshiba. ACC's
competitors in the video communications sector include Picturetel Corporation,
Compression Labs, Incorporated and VTEL Corporation. Existing competitors may
continue to broaden their product lines and expand their retail operations, and
potential
8
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<PAGE>
competitors may enter into or increase their focus on the audio and/or
videoconferencing communications market, resulting in greater competition for
the Company. In particular, management believes that as the demand for
videoconferencing communications systems continues to increase, additional
competitors, many of which also will have greater resources than the Company,
will enter the videoconferencing market. Consequently, there can be no assurance
that the Company can successfully compete with established and better
capitalized companies. See 'Business -- Competition.'
DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent on the
experience of its management in the continuing development of its retail
operations. The loss of the services of certain of these individuals,
particularly Richard Reiss, Chairman of the Board, Chief Executive Officer and
President of the Company, would have a material adverse effect on the Company's
business. The Company has entered into employment agreements with Mr. Reiss,
Joseph Scotti, Vice President - Sales and Marketing of Voice Products and Leo
Flotron, Vice President - Sales and Marketing of Videoconferencing Products of
the Company. Mr. Reiss' agreement expires on December 31, 2002, and Messrs.
Scotti and Flotron's agreements expire on December 31, 1999. Each of such
agreements may be terminated by the employee upon 90 days' prior written notice
without penalty, subject to a one year non-compete clause. The Company is in the
process of obtaining key-man life insurance in the amount of $1,000,000 on the
life of Mr. Reiss, with the Company as the named beneficiary. The future success
of the Company will also depend upon its ability to attract and retain
additional marketing and sales personnel for its expansion. The Company has set
aside approximately $600,000 from the net proceeds of the offering for such
purpose. The Company faces intense competition for such highly qualified
personnel from other manufacturers and distributors of voice communications and
videoconferencing systems. There can be no assurance that such individuals can
be hired or retained. The failure to recruit additional key personnel could have
a material adverse effect on the Company's business, financial condition and
results of operations. See 'Use of Proceeds' and 'Management.'
BROAD DISCRETION IN APPLICATION OF PROCEEDS BY MANAGEMENT; CHANGE IN USE OF
PROCEEDS. Approximately $1,404,000 (35%) of the estimated net proceeds of this
offering has been allocated to working capital. Additionally, in the event that
the Underwriter's over-allotment option is exercised or to the extent that the
Warrants are exercised, the Company will realize additional net proceeds, which
will be added to working capital. Accordingly, the Company's management will
have broad discretion as to the application of such proceeds. Notwithstanding
its plan to develop its business as described in this Prospectus, future events,
including the problems, expenses, difficulties, complications and delays
frequently encountered by businesses, as well as changes in the economic climate
or changes in government regulations, may make the reallocation of funds
necessary or desirable. Any such reallocation will be at the discretion of the
Board of Directors. See 'Use of Proceeds.'
NO PUBLIC MARKET. Prior to this offering, there has been no public market
for the Units, Common Stock or Warrants. Accordingly, there can be no assurance
that an active trading market in any of such securities will develop and be
sustained upon the completion of this offering or that the market price of such
securities will not decline below the initial public offering price.
ARBITRARY OFFERING PRICE. The initial public offering price of the Units
and the exercise price and terms of the Warrants have been determined by
negotiations between the Company and the Underwriter. See 'Underwriting' for a
discussion of the factors considered in determining the initial public offering
price. Regulatory developments and economic and other external factors, as well
as period-to-period fluctuations in financial results, may also have a
significant impact on the market price of such securities.
POSSIBLE RESTRICTIONS ON MARKET-MAKING ACTIVITIES IN COMPANY'S SECURITIES.
The Underwriter has advised the Company that it intends to make a market in the
Company's securities. Regulation M, which was recently adopted to replace Rule
10b-6 and certain other rules promulgated under the Securities Exchange Act of
1934, as amended (the 'Exchange Act'), may prohibit the Underwriter from
engaging in any market-making activities with regard to the Company's securities
for the period from five business days (or such other applicable period as
Regulation M may provide) prior to any solicitation by the Underwriter of the
exercise of Warrants until the later of the termination of such solicitation
activity or the termination (by waiver or otherwise) of any right that the
Underwriter may have to receive a fee for the exercise of Warrants following
such solicitation. As a result, the
9
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<PAGE>
Underwriter may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable. In addition, under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the Selling Stockholder's securities may not simultaneously
engage in market-making activities with respect to any securities of the Company
for the applicable 'cooling off' period prior to the commencement of such
distribution. Accordingly, in the event the Underwriter is engaged in a
distribution of the Selling Stockholder's securities, it will not be able to
make a market in the Company's securities during the applicable restrictive
period. Any temporary cessation of such market-making activities could have an
adverse effect on the market price of the Company's securities. See
'Underwriting.'
UNDERWRITER'S OPTIONS. The Company has agreed to sell to the Underwriter,
at an aggregate price of $70, the right to purchase up to an aggregate of 70,000
Units (the 'Underwriter's Options'). Such Options will be exercisable for a
four-year period commencing one year after the date of the Prospectus, at a per
Unit exercise price equal to 120% of the initial per Unit public offering price
of the Units being offered hereby. For the life of such Options, the holders
thereof are given the opportunity to profit from a rise in the market price of
the Common Stock or Warrants, which may result in a dilution of the interests of
other stockholders. As a result, the Company may find it more difficult to raise
additional equity capital if it should be needed for its business while such
Options are outstanding. See 'Underwriting.'
EFFECT OF ISSUANCE OF COMMON STOCK UPON EXERCISE OF WARRANTS; POSSIBLE
ISSUANCE OF ADDITIONAL OPTIONS. Immediately after the completion of this
offering, assuming full exercise of the Underwriter's over-allotment option and
the conversion of $750,000 principal amount of Bridge Notes into 375,000 Bridge
Units, the Company will have outstanding warrants to purchase an aggregate of up
to 2,125,000 shares of Common Stock, including the shares issuable upon exercise
of the Warrants offered hereby, the Warrants underlying the Bridge Units and the
Warrants underlying the Underwriter's Options. There is also an outstanding
option, which was granted to the President of the Company pursuant to his
employment agreement with the Company, to purchase 750,000 shares of Common
Stock. In addition, up to 500,000 shares of Common Stock have been reserved for
issuance pursuant to the Company's stock option plan, of which options to
purchase an aggregate of 262,500 shares have been granted to date. Unless
registered for sale, any shares of Common Stock acquired upon the exercise of
such warrants or options would be 'restricted securities' for purposes of Rule
144, subject to the two-year holding period (one year, commencing April 29,
1997) (which commences when shares are issued upon exercise of a warrant or
option), volume and other resale restrictions of Rule 144. The Company has
agreed to use its best efforts to file and maintain, so long as the Warrants are
exercisable, a current registration statement with the Commission relating to
the Warrants and the shares of Common Stock underlying the Warrants. In
addition, the Underwriter has certain demand and 'piggyback' registration rights
with respect to the securities underlying the Underwriter's Options.
The exercise of such warrants or options and the sale of the underlying
shares of Common Stock (or even the potential exercise or sale) may have a
depressive effect on the market price of the Company's securities. The exercise
of the warrants and options also may dilute the interest of investors in this
offering. Moreover, the terms upon which the Company will be able to obtain
additional equity capital may be adversely affected because the holders of the
outstanding warrants and options can be expected to exercise them, to the extent
they are able to, at a time when the Company would, in all likelihood, be able
to obtain any needed capital on terms more favorable to the Company than those
provided in the warrants and options. See 'Management -- Employment
Agreements -- Stock Option Plan,' 'Description of Securities -- Class A
Warrants' and 'Underwriting.'
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF THE WARRANTS. The Warrants may be
redeemed by the Company commencing 18 months from the date of this Prospectus,
or earlier with the consent of the Underwriter, at a redemption price of $.10
per Warrant upon not less than 30 days' prior written notice provided the last
sale price of the Common Stock on Nasdaq (or another national securities
exchange), for 20 consecutive trading days ending within three days of the
notice of redemption, equals or exceeds 250% ($10.63 per share) of the current
Warrant exercise price, subject to adjustment. Redemption of the Warrants could
force the holders to exercise the Warrants and pay the exercise price at a time
when it may be disadvantageous for the holders to do so, sell the Warrants at
the then current market price
10
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<PAGE>
when they might otherwise wish to hold the Warrants, or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants at the time of redemption. See 'Description of Securities -- Class A
Warrants.'
UNDERWRITER'S LIMITED UNDERWRITING EXPERIENCE. The Underwriter has been
actively engaged in the securities brokerage and investment banking business
since 1994. However, the Underwriter has engaged in only limited underwriting
activities, and this offering is only the sixth public offering in which the
Underwriter has acted as the sole or managing Underwriter. There can be no
assurance that the Underwriter's limited experience as an underwriter of public
offerings will not adversely affect the proposed public offering of the Units,
Common Stock and Warrants, the subsequent development of a trading market, if
any, or the market for and liquidity of the Company's securities. Therefore,
purchasers of the securities offered hereby may suffer a lack of liquidity in
their investment or a material diminution of the value of their investment.
UNDERWRITER'S INFLUENCE ON THE MARKET. A significant amount of the Units
offered may be sold to customers of the Underwriter. Such customers subsequently
may engage in transactions for the sale or purchase of such Units and may
otherwise effect transactions in such securities. If they participate in the
market, the Underwriter may exert substantial influence on the market, if one
develops, for the Units, Common Stock and Warrants. Such market-making activity
may be discontinued at any time. The price and liquidity of the Units, Common
Stock and Warrants may be significantly affected by the degree, if any, of the
Underwriter's participation in such market. See 'Underwriting.'
RISKS OF LOW-PRICED STOCKS. The Company has applied to list the Units,
Common Stock and Warrants on the Boston Stock Exchange ('BSE'), and it is
anticipated that such securities will also be traded on the NASD's Electronic
Bulletin Board. If the Company's securities were delisted from the BSE, they
could become subject to Rule 15g-9 under the Exchange Act, which imposes
additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and 'accredited
investors' (generally, individuals with net worths in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, such rule may
adversely affect the ability of broker-dealers to sell the Company's securities
and may adversely affect the ability of purchasers in this offering to sell in
the secondary market any of the securities acquired hereby.
POSSIBLE ADVERSE EFFECT OF 'PENNY STOCK' RULES IN LIQUIDITY FOR THE
COMPANY'S SECURITIES. Commission regulations define a 'penny stock' to be any
non-Nasdaq equity security that has a market price (as therein defined) of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in a penny
stock, of a disclosure schedule prepared by the Commission relating to the penny
stock market. Disclosure is also required to be made about commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on the Nasdaq Stock Market,
or listed or approved for listing on a national securities exchange, such as the
BSE, and have certain price and volume information provided on a current and
continuing basis or meet certain minimum net tangible assets or average revenue
criteria. There can be no assurance that the Company's securities will qualify
for exemption from these restrictions. In any event, even if the Company's
securities were exempt from such restrictions, it would remain subject to
Section 15(b)(6) of the Exchange Act, which gives the Commission the authority
to prohibit any person that is engaged in unlawful conduct while participating
in a distribution of a penny stock from associating with a broker-dealer or
participating in a distribution of a penny stock, if the Commission finds that
such a restriction would be in the public interest. If the Company's securities
were subject to the rules on penny stock, the market liquidity for the Company's
securities could be severely adversely affected. In such event, the regulations
on penny stocks could limit the ability of
11
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broker-dealers to sell the Company's securities and thus the ability of
purchasers of the Company's securities to sell their securities in the secondary
market.
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS.
The Warrants are being registered pursuant to a Registration Statement filed
with the Securities and Exchange Commission ('Commission') under the Securities
Act of 1933 (the 'Securities Act'), of which this Prospectus is a part, and
after its effectiveness the Warrants may be traded, and upon exercise, their
underlying shares of Common Stock may be sold, in the public market that may
develop for the securities for approximately one year thereafter. However,
unless such Registration Statement is kept current by the Company and measures
to qualify or keep qualified such securities in certain states are taken,
investors purchasing the Warrants in this offering, although exercisable, will
not be able to exercise the Warrants or sell its underlying shares of Common
Stock issuable upon exercise of the Warrants in the public market. The Company
has agreed to use its best efforts to qualify and maintain a current
registration statement covering such shares of Common Stock. There can be no
assurance, however, that the Company will be able to maintain a current
registration statement or to effect appropriate qualifications under applicable
state securities laws, the failure of which may result in the exercise of the
Warrants and the resale or other disposition of Common Stock issued, upon such
exercise, being unlawful. See 'Description of Securities -- Class A Warrants.'
POTENTIAL ADVERSE IMPACT OF PREFERRED STOCK ON RIGHTS OF HOLDERS OF COMMON
STOCK. The Company's Certificate of Incorporation authorizes the issuance of up
to 1,000,000 shares of preferred stock with the Board of Directors having the
right to determine the designations, rights, preferences and privileges of the
holders of one or more series of preferred stock. Accordingly, the Board of
Directors is empowered, without shareholder approval, to issue preferred stock
with voting, dividend, conversion, liquidation or other rights which could
adversely affect the voting power and equity interest of the holders of Common
Stock. The preferred stock, which could be issued with the right to more than
one vote per share, could be utilized as a method of discouraging, delaying or
preventing a change of control of the Company. The possible impact on takeover
attempts could adversely affect the price of the Company's Common Stock. The
Company has no current plans to issue any shares of preferred stock. In
addition, for a period of three years from the date of this Prospectus, the
issuance of any shares of preferred stock is subject to the Underwriter's prior
consent. See 'Description of Securities -- Preferred Stock.'
LACK OF DIVIDENDS. To date, the Company has not paid any dividends on its
Common Stock, and intends to retain earnings, if any, for use in its business
and does not anticipate paying any cash dividends in the foreseeable future. See
'Dividend Policy.'
SHARES ELIGIBLE FOR FUTURE SALE. Upon the completion of this offering, the
Company will have 4,775,000 shares of Common Stock outstanding (assuming an
aggregate of $750,000 principal amount of Bridge Notes are converted into
375,000 Bridge Units), including 1,400,000 shares included in the 700,000 Units
offered hereby by the Company, and 25,000 shares of Registered Common Stock
which are included in the Registration Statement of which this Prospectus forms
a part. The remaining 2,975,000 shares of Common Stock currently outstanding are
'restricted securities' as that term is defined in Rule 144 under the Securities
Act, and may not be sold unless such sale is registered under the Securities Act
or is made pursuant to an exemption from registration under the Securities Act,
including the exemption provided by Rule 144. Such shares will be eligible for
sale in the public market pursuant to Rule 144 at various times beginning 90
days after the date of this Prospectus, subject to the three-year lock-up
described below. The 375,000 shares of Common Stock and the 375,000 shares
underlying the 375,000 Warrants comprising the Bridge Units may not be sold
until two years following the date of this Prospectus, during the first year,
unconditionally, and during the second year, without the prior consent of the
Underwriter. The holders of all of the 3,000,000 shares of the Company's Common
Stock currently outstanding (including the 25,000 shares of Registered Common
Stock held by the President) have agreed that, for a period of three years from
the date of this Prospectus, they will not sell any of their shares, or any
shares issuable upon exercise of warrants or options exercisable into shares of
Common Stock, without the prior consent of the Underwriter. Certain officers,
directors, employees and other individuals holding an aggregate amount of
1,250,000 shares of the Company's Common Stock currently outstanding have
agreed, unconditionally, that for a period of three years from
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the date of this Prospectus, they will not sell any of their shares.
Additionally, all officers, directors and 5% shareholders of the Company have
agreed to enter into a separate lock-up agreement whereby for a period of two
years following the date of this Prospectus, they will not sell any of their
shares, or any shares issuable upon exercise of warrants or options exercisable
into shares of Common Stock, during the first year, unconditionally, and during
the second year at a price not less than the public offering price of the
Common Stock. The Company is unable to predict the effect that sales made under
Rule 144 or otherwise may have on the market price of the Common Stock. However,
the possibility that substantial amounts of Common Stock may be sold in the
public market may have an adverse effect on the market price for the Company's
Common Stock. See 'Description of Securities,' 'Shares Eligible for Future
Sale' and 'Underwriting.'
INDEMNIFICATION OF DIRECTORS UNDER NEW JERSEY LAW. Pursuant to both the
Company's Certificate of Incorporation and New Jersey law, the Company's
officers and directors are indemnified by the Company for monetary damages for
breach of fiduciary duty, except for liability which arises in connection with
(i) a breach of duty or loyalty, (ii) acts or omissions not made in good faith
or which involve intentional misconduct or a knowing violation of law, (iii) for
dividend payments or stock repurchases illegal under New Jersey law, or (iv) any
transaction in which the officer or director derived an improper personal
benefit. The Company's Certificate of Incorporation does not have any effect on
the availability of equitable remedies (such as an injunction or rescissions)
for breach of fiduciary duty. However, as a practical matter, equitable remedies
may not be available in particular circumstances. See 'Management -- Director
and Officer Liability.'
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DILUTION
For purposes of the following discussion of dilution and tables, no value
is attributed to the Warrants included in the Units. After giving effect to the
subsequent conversion of $750,000 principal amount of Bridge Notes by the Bridge
Unitholders into 375,000 Bridge Units, the pro forma net tangible book value of
the Company as of December 31, 1996 was $822,492 or $.24 per share. Pro forma
net tangible book value per share is determined by dividing the tangible net
worth of the Company, consisting of tangible assets (exclusive of capitalized
public offering expenses) less total liabilities, by the number of shares of
Common Stock outstanding. After giving effect to the sale by the Company of the
1,400,000 shares of Common Stock included in the 700,000 Units offered pursuant
to this Prospectus at the initial public offering price of $3.50, and the
receipt of the net proceeds therefrom the pro forma net tangible book value of
the Company at December 31, 1996 would be $4,836,492 or $1.01 per share,
representing an immediate increase in net tangible book value of $.77 per share
to present stockholders and an immediate dilution of $2.49 per share or
approximately 71%, to public investors. 'Dilution' means the difference between
the public offering price per share and the pro forma net tangible book value
per share after giving effect to the offering. The following table illustrates
the dilution of a new investor's equity as of December 31, 1996.
<TABLE>
<S> <C> <C>
Public offering price per share......................................................... $3.50
Pro forma net tangible book value per share before offering........................ $.24
Increase per share attributable to public investors................................ .77
----
Pro Forma net tangible book value per share after offering.............................. 1.01
-----
Dilution to public investors............................................................ $2.49
-----
-----
</TABLE>
The following table summarizes, (i) as of the date of this Prospectus, the
number of shares of Common Stock purchased by investors in the Company; (ii) the
375,000 shares of Common Stock included in the 375,000 Bridge Units to be issued
to the Bridge Unitholders upon the conversion of $750,000 principal amount of
Bridge Notes prior to the completion of this offering; (iii) the total cash
consideration and the average price per share paid to the Company for the Common
Stock outstanding prior to the completion of this offering; and (iv) the number
of shares and consideration to be paid by the public investors for the 1,400,000
shares of Common Stock included in the 700,000 Units to be sold in this
offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders................... 3,000,000(1) 62.8% $ 90,000 1.6% $ .03
---------
---------
Bridge Unitholders...................... 375,000(2) 7.9 750,000 13.1 $2.00
---------
---------
Public Investors........................ 1,400,000 29.3 4,900,000 85.3 $3.50
--------- ------- ---------- ------- ---------
---------
Total(1)...................... 4,775,000 100.0% $5,740,000 100.0%
--------- ------- ---------- -------
--------- ------- ---------- -------
</TABLE>
- ------------
(1) Excludes (i) up to 1,400,000 shares of Common Stock issuable upon exercise
of Warrants to be issued to public investors; (ii) up to 280,000 shares of
Common Stock issuable upon exercise of the Underwriter's Options and
underlying Warrants; (iii) up to 420,000 shares of Common Stock issuable
upon exercise of the Underwriter's over-allotment option and underlying
Warrants; (iv) up to 500,000 shares of Common Stock reserved for issuance
upon exercise of options granted pursuant to the Company's stock option
plan, of which options to purchase 262,500 shares have been granted to date;
and (v) up to 750,000 shares issuable upon exercise of an option granted to
the President of the Company pursuant to his employment agreement. See
'Management -- Employment Agreements -- Stock Option Plan,' 'Interim
Financing,' 'Description of Securities' and 'Underwriting.'
(2) Excludes up to 375,000 shares of Common Stock issuable upon exercise of the
Bridge Unitholders' Warrants. See 'Interim Financing' and 'Concurrent
Offering.'
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 700,000 Units offered
hereby, after deducting underwriting discounts and commissions and other
expenses of this offering, are estimated to be $4,014,000 ($4,653,450 if the
Underwriter's over-allotment option is exercised in full). The Company intends
to utilize the net proceeds of this offering over the next 24 months
substantially as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
APPLICATION AMOUNT PERCENTAGE
- --------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Telephone Systems Inventory(1)............................................. $ 635,000 15.8%
Videoconferencing Equipment Inventory(2)................................... 510,000 12.7
Leasing New Corporate Headquarters and Leasehold Improvements(3)........... 240,000 6.0
Hiring Additional Employees(4)............................................. 600,000 14.9
Purchase of Computer Systems and Associated Software(5).................... 175,000 4.4
Marketing(6)............................................................... 450,000 11.2
Working Capital(7)......................................................... 1,404,000 35.0
----------- -----------
$4,014,000 100.0%
----------- -----------
----------- -----------
</TABLE>
- ------------
(1) Includes telephone common equipment ($250,000); telephone sets ($300,000);
and voice mail ($85,000).
(2) Includes video codecs ($240,000); monitors ($145,000); and peripheral
equipment, including cameras and audio systems ($125,000).
(3) Includes costs in connection with moving the Company's headquarters office
to larger facilities in the first half of 1997. It is estimated that such
facilities will contain approximately 10,000 square feet of space to be
utilized for executive, administrative and sales functions and for
demonstration of the Company's voice and video communications systems. An
additional approximately 5,000 square feet of space will be utilized for
warehousing of the Company's inventory. See 'Business -- Facilities.'
(4) Includes costs associated with the planned hiring and retention over the
next two years of two branch sales managers for the Company's voice
products, who will report directly to the Company's Vice President -- Sales
and Marketing of Voice Products; nine voice sales representatives, who will
report directly to the voice branch sales managers; and eight
videoconferencing sales representatives, who will report directly to the
Company's Vice President -- Sales and Marketing of Videoconferencing
Products. See 'Business -- Sales and Marketing.'
(5) Includes costs in connection with upgrading both the hardware and software
of the Company's computer systems, software and local area network (LAN).
The new system will encompass service order entry, inventory management,
billing, accounting, word processing and administrative software. Also
includes consulting fees for project design and implementation.
(6) Includes costs in connection with exhibiting the Company's products at trade
shows ($150,000), costs associated with a direct mail campaign directed to
the approximately 9,000 franchisees of CENTURY 21'r', ERA'r' and Coldwell
Banker'r' ($150,000), as required under the Company's Preferred Vendor
Agreement with HFS Incorporated, and costs of telemarketing the Company's
videoconferencing products to end-users accounts ($150,000). See
'Business -- Sales and Marketing.'
(7) Working capital will be used to pay general and administrative expenses for
general corporate purposes including, but not limited to, paying down any
existing bank credit line and obtaining letters of credit for international
installation projects, as well as for the possible acquisition of other
voice and video communications systems resellers.
------------------------
The foregoing allocations are estimates only and are subject to revision
from time to time to meet the Company's requirements; any excess will be added
to working capital and any shortage will be deducted from working capital.
Furthermore, allocations may be changed in response to unanticipated
developments in the Company's business. The Company may re-allocate such amounts
from time to
15
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<PAGE>
time among the categories shown above or to new categories if it believes such
to be in its best interest. In the event that the Underwriter's over-allotment
option is exercised or to the extent that the Warrants are exercised, including
the Warrants underlying the Bridge Units, the Company will realize additional
net proceeds, which will be added to working capital. Pending full utilization
of the net proceeds of this offering, the Company intends to make temporary
investments in United States government or federally insured securities. The
Company believes that the net proceeds from this offering, plus working capital
from operations and other sources of funds will be adequate to sustain
operations for at least the next two years.
16
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1996; (i) on an historical basis; (ii) on a pro forma basis, giving
effect to the conversion of $750,000 principal amount of Bridge Notes by the
Bridge Unitholders into 375,000 Bridge Units and the recognition of a total
charge of $390,406 of deferred financing costs relating to the Bridge Units
issued in December 1996; and (iii) on such pro forma basis, after giving effect
to the issuance and sale of 700,000 Units offered hereby. This table should be
read in conjunction with the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- --------- -----------
<S> <C> <C> <C>
Long term debt........................................................ $ 816,152(1) $ 66,152 $ 66,152
---------- --------- -----------
Stockholders' equity(2)
Common Stock, no par value, 100,000,000 shares authorized;
3,000,000 shares issued and outstanding, actual; 3,375,000
shares issued and outstanding, pro forma; 4,775,000 shares
issued and outstanding, pro forma as adjusted.................. 90,000 840,000 4,854,000
Additional paid-in capital....................................... 375,000 375,000 375,000
Retained earnings (Accumulated deficit).......................... 80,398 (310,008 ) (310,008 )
---------- --------- -----------
Total stockholders' equity............................. 545,398 904,992 4,918,992
---------- --------- -----------
Total capitalization................................... $1,361,550 $971,144 $4,985,144
---------- --------- -----------
---------- --------- -----------
</TABLE>
- ------------
(1) Includes an aggregate of $750,000 principal amount of 12% Convertible
Subordinated Notes ('Bridge Notes') which were issued by the Company in the
Bridge Financing which was completed in December 1996. See 'Interim
Financing.'
(2) Does not include (i) up to 1,400,000 shares of Common Stock issuable upon
exercise of Warrants to be issued to public investors; (ii) up to 375,000
shares of Common Stock issuable upon exercise of the Bridge Unitholders'
Warrants; (iii) up to 280,000 shares of Common Stock issuable upon exercise
of the Underwriter's Options and underlying Warrants; (iv) up to 420,000
shares of Common Stock issuable upon exercise of the Underwriter's
over-allotment option and underlying Warrants; (v) up to 500,000 shares of
Common Stock reserved for issuance upon exercise of options granted pursuant
to the Company's stock option plan, of which options to purchase 262,500
shares have been granted to date; and (vi) up to 750,000 shares issuable
upon exercise of an option granted to the President of the Company pursuant
to his employment agreement. See 'Management -- Employment
Agreements -- Stock Option Plan,' 'Interim Financing,' 'Description of
Securities,' and 'Underwriting.'
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and it is
currently the intention of the Company not to pay cash dividends on its Common
Stock in the foreseeable future. Management intends to reinvest earnings, if
any, in the expansion of the Company's business. Any future declaration of cash
dividends will be at the discretion of the Board of Directors and will depend
upon the earnings, capital requirements and financial position of the Company,
general economic conditions and other pertinent factors.
17
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<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data and other
operation information of the Company. The selected historical financial data in
the table for the years ended December 31, 1996 and 1995 is derived from the
audited financial statements of the Company. The selected financial data set
forth below should be read in conjunction with the Company's financial
statements and notes thereto and with the section entitled 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.'
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Statement of Income Data:
Net revenues..................................................................... $3,884,700 $2,641,331
Gross margin..................................................................... 1,383,627 859,612
Income from operations........................................................... 119,235 48,936
Income before income taxes....................................................... 90,209 17,249
Income taxes..................................................................... 38,606 8,029
Net income....................................................................... 51,603 9,220
Net income per share............................................................. $.03 $.01
Weighted average number of common shares outstanding............................. 1,977,518 1,884,002
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------- DECEMBER 31,
ACTUAL PRO FORMA(1) 1995
---------- ------------ ------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital................................................. $ 748,250 $ 748,250 $ 52,286
Total assets.................................................... 2,458,392 2,067,986 754,640
Total liabilities............................................... 1,912,994 1,162,994 673,345
Retained earnings (Accumulated deficit)......................... 80,398 (310,008) 28,795
Stockholders' equity............................................ 545,398 904,992 81,295
</TABLE>
- ------------
(1) Gives effect to the subsequent conversion of $750,000 principal amount of
Bridge Notes by the Bridge Unitholders into 375,000 Bridge Units. See 'Use
of Proceeds,' 'Interim Financing' and 'Description of Securities.'
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto. The discussion of
results, causes and trends should not be construed to imply any conclusion that
such results or trends will necessarily continue in the future.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 ('FISCAL 1996') COMPARED TO YEAR ENDED DECEMBER 31,
1995 ('FISCAL 1995')
NET REVENUES. Since 1995, the Company's revenues have consisted primarily
of sales of Panasonic digital telephone and voice processing systems, and Sony
videoconferencing products. The Panasonic systems are most suited for small to
medium-sized businesses, particularly professional offices. The Company's
videoconferencing revenues to date have been derived principally from the sale
of the Sony Trinicom 5000 model, which is targeted to the large commercial and
institutional user.
Operating revenue for fiscal 1996 was $3,884,700, an increase of
$1,243,369, or 47% over fiscal 1995 revenue of $2,641,331. Sales of telephone
and voice processing equipment increased in 1996 by 53% to $2,807,170 over
fiscal 1995 revenue of $1,837,930. The increase was due in part to the hiring of
additional sales personnel in 1995 and into 1996, including a vice president in
charge of sales and marketing of voice products in the third quarter of 1995. In
1995, the Company also began marketing Panasonic products to the Coldwell Banker
real estate brokerage network. In January 1996, the Company and Coldwell Banker
Corporation ('CBC'), owner of the Coldwell Banker brand at the time, entered
into a formal agreement in which the Company provided trade discounts and
favorable terms for an exclusive dealership to sell Panasonic telecommunications
systems to CBC's corporate-owned offices. In December 1996, this agreement was
superseded by the signing of a non-exclusive four-year Preferred Vendor
Agreement with the new owner of the Coldwell Banker brand, HFS Incorporated
('HFS'), to provide Panasonic products to the HFS-owned brands, Century 21, ERA,
and Coldwell Banker real estate brokerage franchise systems. The Company has
paid HFS a $50,000 access fee for marketing rights and will pay HFS commissions
ranging from 2% to 13% of gross sales, depending on the products and services
sold. The agreement obligates the Company to provide various sales and marketing
services, and to commit to a fixed price schedule over the four-year term.
Significant increases in Panasonic equipment prices during the HFS contract
period could have a material adverse impact on the Company's results of
operations in the event the Company is not able to pass along the increases to
HFS franchisees. Sales to Coldwell Banker offices accounted for 26% and 28% of
net revenues in fiscal 1996 and 1995, respectively. The Company expects revenues
generated under the HFS agreement to represent a significant portion of total
operating revenues during fiscal 1997.
Sales of videoconferencing systems increased in 1996 by 48% to $1,039,026
over fiscal 1995 revenue of $704,343. The Company's videoconferencing sales
program began in earnest in the fourth quarter of 1995 with the hiring of a
former Sony executive to serve as vice president in charge of sales and
marketing for videoconferencing and network products. The Company currently has
videoconferencing demonstration facilities in New York City and Washington, D.C.
in addition to its corporate headquarters in New Jersey, and anticipates hiring
additional sales personnel for both videoconferencing and voice communications
products during the first quarter of fiscal 1997.
COST OF REVENUES. Cost of revenues in fiscal 1996 was $2,501,073, or 64% of
net revenues, as compared to $1,781,719, or 67% of net revenues in fiscal 1995.
Cost of revenues consists primarily of net product, installation and customer
training costs. Higher margin sales in fiscal 1996 offset increases in warranty,
depreciation, and compensation costs, to account for the 3% improvement in cost
of revenues as a percentage of net revenues.
Most of the products sold by the Company are purchased under non-exclusive
reseller agreements with Panasonic and SNS. Both agreements specify, among other
things, sales territories, payment terms, purchase quotas and reseller prices.
The Panasonic agreement renews automatically for one-year
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<PAGE>
periods, but may be terminated with or without cause by either party upon 30
days' written notice. The Company recently signed a non-exclusive reseller
agreement with SNS wherein SNS has agreed to provide ACC with Sony
videoconferencing equipment through January 31, 1998. The termination of either
agreement, or their renewal on less favorable terms than currently in effect,
could have a material adverse impact on the Company's business.
GROSS MARGIN. Gross margins increased to $1,383,627, or 36% of net revenues
in fiscal 1996, as compared to $859,612, or 33% of net revenues in fiscal 1995.
The improvement was due primarily to a decrease in lower margin Coldwell Banker
sales as a percentage of total net revenues, from 28% in fiscal 1995 to 26% in
fiscal 1996, although the dollar volume of Coldwell Banker sales actually
increased in 1996.
SELLING. Selling expenses, which include sales salaries, commissions, sales
overhead, and marketing costs, increased to $664,786, or 17% of net revenues in
fiscal 1996, as compared to $482,470, or 18% of net revenues in fiscal 1995. The
increase in dollar terms was due primarily to higher compensation costs, which
related to the hiring of new sales executives in the latter part of 1995, and to
the increase in 1996 sales volume. Due to the anticipated increase in sales
executive and staff salaries, as well as higher marketing costs associated with
the HFS contract, the Company expects selling expenses as a percentage of net
revenues to increase at least through the first half of fiscal 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $599,606, or 15% of net revenues in fiscal 1996, as compared to $328,206, or
12% of net revenues in fiscal 1995. The increase was due primarily to higher
administrative salaries and fringe benefits, depreciation, and telephone
expenses related to the growth in the Company's operations. The Company is
planning a relocation of its headquarters in 1997 to accommodate its growing
sales staffing, overhead, and inventory storage requirements. Accordingly,
general and administrative expenses, to the extent associated with the
relocation, are expected to increase in fiscal 1997. A new employment agreement
with the Company's president, effective January 1, 1997, will also result in
higher compensation costs (see Notes to Financial Statements).
INCOME TAXES. The Company's provision for income taxes was $38,606, or 43%
of fiscal 1996 income before taxes, as compared to $8,029, or 47% of fiscal 1995
income before income taxes. The exceptionally high income tax rates are due
primarily to the partial nondeductibility of certain marketing costs, which have
caused the Company's income to be taxed at higher than expected marginal rates,
as well as high flat tax rates at the state level.
NET INCOME. The Company generated net income of $51,603, or $.03 per share
and $9,220, or $.01 per share for the fiscal years ended December 31, 1996 and
1995, respectively. The increase in fiscal 1996 was primarily the result of
revenue growth and a slight shift in the Company's revenue mix, which produced
higher gross margins. The shift in the Company's revenue mix relates to an
increase in videoconferencing system sales as a percentage of total revenues in
1996. The Company anticipates that videoconferencing product sales will
represent an increasingly greater percentage of total revenues for at least the
next twelve months.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of $748,250,
including $645,614 in cash and cash equivalents. Net cash used by operating
activities for the year ended December 31, 1996 was $461,287. Increases in
accounts receivable due to revenue growth in 1996, as well as increases in
inventories to fill the increasing volume of orders on a timely basis, more than
offset cash flows provided by net income, depreciation, and higher accounts
payable and accrued expense levels.
Net cash used by investing activities for fiscal 1996 was $119,846,
consisting of purchases of furniture and equipment totaling $67,346, and the
$50,000 access fee required under the HFS contract.
Net cash provided by financing activities for fiscal 1996 was $1,072,841,
consisting of $750,000 gross proceeds from a private placement of 12%
Convertible Subordinated Notes ('Bridge Notes') in December 1996, borrowings of
$562,071 under a new bank line of credit and term loan, and proceeds of $37,500
from the exercise of Common Stock options, offset by repayments of outstanding
borrowings under a refinanced credit facility, and principal amortization of
long-term debt, totaling $228,824. The
20
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Company also paid deferred financing costs of $15,406 in connection with its
private placement, and $32,500 in costs associated with its proposed public
offering.
In May 1996, the Company replaced its $150,000 bank line of credit and
equipment term loans totaling $92,700 with a new credit facility from another
bank for a $600,000 working capital line of credit and an $85,000 term loan.
Advances under the line of credit bear interest at the rate 1% above the bank's
Alternate Base Rate (ABR), and are due on demand. The term loan provides for
monthly principal payments of $1,770.83 plus interest at the bank's ABR plus
1.25%. Outstanding borrowings are secured by a first lien on the Company's
assets, a $100,000 United States Treasury Bill hypothecated by the Company's
President, and his unconditional personal guarantee. Panasonic has also
subordinated to the bank its security interest in the Company's inventory
purchases.
As of December 1996, borrowings under the line of credit totaled $447,071,
and the balance of the term loan was $72,604. The bank line of credit is
renewable annually. The Company currently expects that it will be able to renew
the line of credit under similar terms upon its maturity.
The Bridge Notes become due and payable together with accrued interest to
the extent not converted, at the earlier of December 31, 1999 or the date the
Company completes an initial public offering of its securities. The Bridge Notes
are convertible into an aggregate of 375,000 Bridge Units at the rate of one
Bridge Unit per $2.00 of principal amount of Bridge Notes. Each Bridge Unit will
consist of one share of the Company's Common Stock and one Warrant. The terms of
the Warrants will be identical to any Warrants sold in this offering. The
holders of all the Bridge Notes have agreed to convert their Bridge Notes into
Bridge Units.
The Company entered into a letter of intent for a $4.9 million firm
commitment public offering of 700,000 Units, each unit to consist of two shares
of Comm on Stock and two Class A Redeemable Common Stock Purchase Warrants. The
primary purpose of the offering is to provide funds for the relocation and
expansion of the Company's facilities, the hiring of new employees, the purchase
of additional inventory, and other working capital needs.
Management believes the Company's operations and existing financing sources
will generate sufficient cash flow to satisfy the needs of its current
operations for the next twelve months. However, alternative sources of capital
will be necessary in order for the Company to finance its proposed expansion
plans.
IMPACT OF INFLATION
Inflation has had no material effect on the Company's operations or
financial condition.
SEASONALITY
The Company's results of operations are not significantly affected by
seasonal factors.
BUSINESS
GENERAL
All Communications Corporation (the 'Company' or 'ACC') is engaged in the
business of selling, installing and servicing voice and videoconferencing
communications systems, concentrating on the commercial and industrial
marketplace. The Company's voice communications products are intended
principally for small to medium-sized business use; its videoconferencing
communications products are intended for use by all business, governmental,
educational and medical entities. In connection with the sale and service of its
products, the Company also markets peripheral data and telecommunications
products obtained from others. Through its headquarters office in Mountainside,
New Jersey and nationwide subcontractors, the Company sells, installs and
upgrades its communication and information distribution products and services.
VOICE COMMUNICATIONS. ACC is a major reseller of Panasonic Communications
and Systems Company's ('Panasonic') digital telephone systems, voice processing
systems and computer telephone integration solutions in the United States. The
Company's principal voice communications products are multi-featured, fully
electronic, digitally controlled key systems and hybrid telephone systems, voice
21
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<PAGE>
processing products with computer telephone integration hardware and software
and related business products and services for commercial distribution. A key
telephone system provides each telephone with direct access to multiple outside
trunk lines and internal communications through intercom lines. A PABX (private
automatic branch exchange) system, through a central switching system, permits
the connection of internal and external lines. A hybrid switching system
provides, in a single system, both key telephone and PABX features. Key
telephone equipment may be used with PABX equipment. Voice processing products
include voice-mail and interactive voice response systems, which allow via a
single line instrument, access to computerized information. All of the Company's
systems are software-based and fully digital. This enables the Company to
readily incorporate a variety of additional features as well as the ability to
expand a system's capability through software enhancements.
The Company sells, installs and services Panasonic telecommunications
products throughout the United States both through employees of the Company and
subcontractors. During the fiscal years ended December 31, 1996 and 1995, one
customer, Coldwell Banker'r', a brand of HFS Incorporated, accounted for
approximately 26% and approximately 28%, respectively, of the Company's total
sales. The Company's current business strategy is to focus on sales,
installation and service operations. In connection with implementing its
business strategy, the Company is seeking to expand its business by offering
customers and potential customers a broader range of products.
VIDEOCONFERENCING. The Company began selling Sony Electronics Inc.'s (a
division of Sony Corporation) ('Sony') videoconferencing products in the third
quarter of 1994, and is currently one of Sony's largest United States Sony
Authorized Videoconferencing Resellers (SAVR). Videoconferencing communications
systems, utilizing advanced technology, enable users at separate locations to
engage in face-to-face discussions. In addition to the use of video conferences
as a corporate communications tool, use of videoconferencing communications
systems is expanding into numerous additional applications, including (i)
teachers providing lectures to students at multiple locations, (ii) physicians
engaging in consultations utilizing x-rays and other photographic material,
(iii) conducting multi-location staff training programs and (iv) engineers in
separate design facilities coordinating the joint development of products.
Sony's videoconferencing systems incorporate superior audio and data sharing
capabilities. The systems expand the user's ability to conduct business in
person while substantially reducing or eliminating travel costs and
non-productive travel time. ACC offers what it believes to be the only system
with the built in ability to connect with four locations without the use of an
external bridge. Video communication is generally considered to be more
effective than audio communication, as information retention is improved when
presented visually.
Through a non-exclusive agreement with Sprint North Supply ('SNS'), the
exclusive United States distributor of Sony videoconferencing communications
equipment, ACC provides videoconferencing systems for United States customers on
a global basis, with a concentration in the Northeastern United States. The
Company (i) provides its customers with components produced by Sony, a leading
worldwide manufacturer of room based videoconferencing equipment, and several
other manufacturers of ancillary equipment, (ii) selects and integrates those
components into complete systems designed to suit each customer's particular
communications requirements and (iii) provides training and other continuing
services designed to insure that its customers fully and efficiently utilize
their systems. Sony does not sell its videoconferencing products on a direct
basis.
To accommodate ACC's growth in the videoconferencing market sector, the
Company recently opened offices and demonstration facilities in New York City
and Washington, D.C. The Company has assembled a team of industry experts with
substantial videoconferencing communications expertise and, over the past 18
months, has provided over 35 videoconferencing systems on a national and
international basis. Customers of the Company in this area include Fedders,
Waterford Crystal, Deutche Bank, Shearman & Sterling, The British Ministry of
Defense, St. Johns University, Banco de Columbia and Tetra Pak.
INDUSTRY OVERVIEW
VOICE COMMUNICATIONS. Advances in telecommunications technologies have
facilitated the development of increasingly sophisticated telephone systems and
applications. Telecommunications systems have evolved from simple analog
telephones to sophisticated digital systems and applications.
22
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Users increasingly rely upon a variety of applications, including conference
calling, speakerphones, voice processing and automated attendant, to improve
communications within their organizations and with customers and vendors.
Digital technology has facilitated the integration of computing and
telecommunications technologies, which has made possible a number of new
applications that further enhance productivity. Examples of these applications
include caller I.D., where a caller's telephone number is displayed on the
telephone, call accounting, which permits accounting for telephone usage and
toll calls, electronic data interchange between customers and vendors and the
use of automatic number identification coupled with 'database look-up,' where
customer information is retrieved automatically from a computerized database
when the customer calls.
Historically, advanced technologies and applications have been initially
introduced in large telecommunications systems. However, small to medium size
businesses and other organizations, as well as small to medium size facilities
of larger organizations, are increasingly requiring and seeking out
telecommunication systems with advanced features and applications at a more
effective price-performance point, in order to improve efficiency and enhance
competitiveness.
As businesses' telecommunications requirements have become more advanced,
the integration of the different parts of a system has become increasingly
difficult. The system integration, service and support capabilities of
telecommunications suppliers have become significant competitive factors. In
order to meet the needs of end users, suppliers have been increasingly required
to develop close relationships with end users.
VIDEOCONFERENCING. Videoconferencing communications entails the
transmission of video and audio signals and computerized data between two or
more locations through a digital telecommunication network. Videoconferencing
communications systems were first introduced in the late 1970s in the form of
specialized dedicated conference rooms outfitted with expensive electronic
equipment and requiring trained operators. Signals were transmitted over
dedicated transmission lines established between fixed locations. Market
acceptance of early systems was limited because of the low quality of the video
output, as well as the high hardware and transmission costs and limited
availability of transmission facilities.
Technological developments in the 1980's resulted in a dramatic increase in
the quality of video communications, as well as a substantial reduction in its
cost. The proliferation of switched digital networks, which transmit digital, as
opposed to analog signals, eliminated the requirement of dedicated transmission
lines. Advances in data compression and decompression technology, and the
introduction of devices for separating and distributing digital signals over
several channels simultaneously and recombining them after transmission,
resulted in products with substantially improved video and audio quality and
further reduced hardware costs. Competition among telecommunications carriers
during the past decade, together with the expanded use of fiber optic technology
and the development of integrated switched digital networks ('ISDN') have
further contributed to reduced transmission costs.
STRATEGY
The Company resells to end user customers a number of the telecommunication
industry's leading voice-communication and videoconferencing systems and
products through non-exclusive reseller agreements with Panasonic and SNS,
respectively, and is positioned to provide its customers with the installation
and/or integration of the systems and products as well as continued maintenance
and service. The Company believes that continued technological advances in both
the voice communication and videoconferencing industry will result in systems
and products that are readily useful as well as cost effective to a larger
segment of end users. Neither Sony nor Panasonic have developed internal
departments for the direct sale of telecommunication systems, and instead have
chosen to engage resellers such as the Company for the purpose of sales,
marketing, installation and maintenance of their systems and products. The
Company intends to broaden its marketing focus to industries that it believes
will achieve significant benefits through utilization of both voice
communication and videoconferencing systems, and the Company will hold monthly
seminars to introduce the voice communication and videoconferencing systems to
prospective customers. The Company intends to expand its sales activities into
additional geographic markets through the acquisition and establishment of
regional reseller offices and the hiring of additional sales personnel. The
Company also seeks to enhance the sales and services
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provided to end user customers in a more efficient and cost effective manner by
maintaining an inventory of readily available voice communication and
videoconferencing systems, and upgrading the Company's internal computerized
management system. See 'Use of Proceeds.'
PRODUCTS
The Company is a reseller of voice communications products manufactured by
Panasonic Communications and Systems Company's ('Panasonic') Business Telephone
System Division and videoconferencing products manufactured by Sony Electronics
Inc. ('Sony'). The Company has agreements with both Panasonic and Sony
authorizing the Company to serve as their non-exclusive reseller in the United
States and the Company sells, installs and maintains the full line of voice and
videoconferencing products manufactured by these companies.
VOICE COMMUNICATIONS. Panasonic currently manufactures digital key and
hybrid telephone systems under its Digital Business System (DBS) product line
with a maximum capacity of 192 ports. The systems can be configured to have a
maximum of either 64 central office (C.O.) telephone lines and 128 telephone
sets, 56 C.O. telephone lines and 136 telephone sets, or 48 C.O. telephone lines
and 144 telephone sets. The telephone sets can have up to 24 C.O. telephone line
appearances. The telephone sets contain a speaker and microphone in each set for
handsfree intercom conversation and for an optional price of approximately $50
contain a full speakerphone for handsfree conversation on outside lines as well
as intercom. The telephone sets can also have a built-in interactive display for
internal messaging, to measure the length of time of a telephone conversation,
to display the number dialed, or to display the telephone number of the
individual calling into the system where caller identification is part of the
telephone service provided on the lines by the local line service provider.
Panasonic has announced that it intends to release a new system with a
maximum capacity of 576 ports in the fourth quarter of 1997. This new system
will not replace the current DBS product line; it will be positioned as an
enhanced version of the current product line with additional features and
greater capacity.
Panasonic also has manufactured for it, on an original equipment
manufacturer basis, a fully integrated voice processing system. The system
ranges from two to eight voice ports and 30 hours of message storage. The system
has automated attendant features which allow for incoming calls to be answered
electronically and distributed to specific extensions without the use of a
switchboard operator. The system can be interactive with display telephone sets,
which display the number of new messages along with the number of old messages
and allow for one touch commands rather than multiple digit codes to perform
functions of the voice processing system.
The DBS supports several open architecture interfaces that allow external
computers to interact and control the DBS through industry standard interfaces.
The DBS supports an RS-232 system level interface, an RS-232 Hayes based desktop
interface and a Windows Dynamic Data Exchanges (DDE) interface. The Company has
Developer Toolkits available that include the detailed interface specifications,
application notes and development tools to assist third party software
developers to develop vertical market applications for the DBS products. DBS
applications include database look-up (which utilizes caller-ID information to
retrieve customer information automatically from a computerized database),
automated attendant, interactive voice response and call accounting (which
permits the monitoring of telephone usage and toll cost). The Company recently
announced support of the Microsoft Telephone Application Programming Interface
(TAPI) in DBS version 8.0 and support of the Novell Telephony Services
Applications Programming Interface (TSAPI). The DBS is managed through a
Windows-based interface on a PC to facilitate installation, system configuration
and programming.
The Company also sells, installs, and maintains peripheral equipment not
manufactured by Panasonic. The peripheral equipment installed by the Company is
readily available through multiple manufacturers and suppliers.
VIDEOCONFERENCING. Sony manufactures both the Trinicom 5000
videoconferencing system, and the Trinicom 4000 videoconferencing system. Both
systems offer a rollabout design which can be placed into operation quickly and
allows for convenient movement from one conference room to another.
Alternatively, the systems can be installed as permanent fixtures in
custom-built conference rooms
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designed for specific applications, or distance learning classrooms which are
designed for teachers to provide lectures to students at multiple locations
outfitted with similar videoconferencing equipment. Both systems generally
contain the following components:
Monitor
The monitor is a television set that is used at each participating
location for viewing persons and objects involved in the communication. The
screen of the monitor generally includes a window or inset, that may be
used to duplicate the image shown by a monitor located at another site, or
to view documents or other graphic images related to the discussion. Some
systems include dual or multiple monitors, providing full-sized
simultaneous views of both graphic images and meeting participants.
Video Camera
The video camera is similar to a camcorder and is generally located on
top of the monitor. The video cameras included in the Company's systems
record full-color images and have pan, tilt, and zoom capabilities. Some
systems include auxiliary video cameras to provide additional camera angles
or to view various locations within a room.
Codec
The coding-decoding device, known as the 'codec,' is the heart of a
video communications system. Because video images have high information
content, their transmission requires significantly greater bandwidth
(capacity) than is required to transmit audio signals or computer data. One
codec converts analog signals into digital signals and compresses the
digital signals, enabling them to be transmitted over conventional and
ubiquitous data networks, while a second codec decompresses and
reconstitutes the signals into their analog form at the receiving location.
The signals transmitted by codecs are bi-directional, enabling each codec
simultaneously to send and receive signals. The compression-decompression
process is accomplished using algorithms, or mathematical formulae, that
are embedded in the codec.
Inverse Multiplexer
Because video signals (even after digital compression) require greater
bandwidth than is available in most telephone lines, an inverse multiplexer
is used to distribute the signals to several lines prior to transmission.
The distributed signals are then simultaneously transmitted over the
different lines, and a receiving inverse multiplexer recombines them to
their original format.
Multi-point Control Unit
A multi-point control unit, known as an 'MCU' or 'bridge,' is a device
that enables more than two videoconferencing locations to participate
simultaneously in a meeting. The Sony Trinicom 5000 has a built-in MCU for
more than two locations and up to four locations. This built-in MCU feature
is exclusive to the Sony Trinicom 5000.
Document Camera
The document camera may be used to display documents, photographs and
small three-dimensional objects in color. Because the document camera
produces 'freeze-frame' images, enhanced resolution of the recorded item is
possible.
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Videoscan Converter
The videoscan converter facilitates the transmission of computerized
data.
Keypad
The keypad, one of which is required at each participating location,
is the device used to control the video cameras, monitors and other aspects
of the system.
Audio Unit
Each participating site has an audio unit which provides
near-high-fidelity audio communications. Up to three audio units can be
installed per site.
The components listed above included in the Company's systems are
purchased from Sony. The Company also purchases ancillary equipment from
other manufacturers and suppliers for specific custom-built conference
rooms and distance learning classrooms.
RESELLER AGREEMENTS
The Company has an agreement with Panasonic authorizing the Company to
serve as its non-exclusive reseller in the United States. The agreement with
Panasonic expires on December 31, 1997 and is automatically renewable for
successive one-year terms unless terminated by either party upon at least 30
days' prior notice, or immediately by Panasonic upon written notice to the
Company if ACC is in default in the performance of its obligations under the
agreement, or upon the bankruptcy or insolvency of ACC. Sony has recently
determined to eliminate all direct reseller agreements for its videoconferencing
products and has designated SNS as its exclusive United States distribution
partner for such products. On February 21, 1997, the Company signed a
non-exclusive reseller agreement with SNS wherein SNS agreed to provide ACC with
Sony videoconferencing equipment through January 31, 1998, on terms which are
more favorable than those on which the Company purchased such equipment directly
from Sony. The agreement may be terminated by SNS in the event ACC represents
Sony's products in an unfavorable or unprofessional manner. In addition, SNS may
terminate the agreement upon 60 days' written notice if ACC does not promote the
purchase of Sony's products to the best of its abilities, or support or
represent Sony products in a way deemed acceptable to SNS. The agreement may be
terminated by either party upon 60 days' prior notice.
CUSTOMERS
During the fiscal years ended December 31, 1996 and 1995, one customer,
Coldwell Banker'r', a real estate brokerage franchisor with approximately 2,800
franchise offices and a brand of HFS Incorporated ('HFS'), accounted for
approximately 26% and approximately 28%, respectively, of the Company's total
sales. In December 1996, the Company signed a non-exclusive Preferred Vendor
Agreement ('Agreement') with HFS for a term of four years expiring December 8,
2000, for the Company to provide telephone and voice processing systems to the
real estate brokerage franchise systems of Century 21'r', ERA'r' and Coldwell
Banker'r' (the 'Franchisees'), with an aggregate of approximately 9,000 United
States franchise offices. Pursuant to the Agreement, HFS has agreed to promote
the Company and its telephone and voice processing products to the Franchisees
and make available to ACC a list containing the names, business addresses and
contact telephone numbers of the Franchisees. The Company will offer its
products, including installation and maintenance service contracts, to the
Franchisees. The sum of $50,000 was paid to HFS in return for HFS providing
access to the Franchisees. HFS is to receive commissions ranging from 2% to 13%
of gross sales, depending on the products and services sold. The Agreement may
not be terminated by either party except for a material breach in the terms of
the Agreement by either party. The breaching party shall be given notice of the
breach and the opportunity to cure such breach within 30 days of the date of
notice (10 days in the case of a default in payment). HFS can also terminate the
Agreement in the event it receives a bona fide written offer from a supplier for
the services provided by ACC under the Agreement at pricing that is at least 5%
less than the pricing provided in the Agreement. Within 15 days of notice of
such offer, ACC may offer HFS the
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same prices and services offered by such suppliers. If ACC does not make such
offer within 15 days, HFS may terminate the Agreement upon 30 days notice to the
Company.
The Company expects to continue to sell its telephone and voice processing
systems to Coldwell Banker franchisees as well as to franchisees of Century 21
and ERA pursuant to the Agreement. It is expected that sales to Coldwell Banker
will continue to be substantial; however, in view of the Agreement and the
anticipated expansion of the Company's business, it is expected that sales to
Coldwell Banker as a percentage of total sales will decrease. It is, however,
anticipated that sales to the Franchisees will, in the foreseeable future,
account for a substantial portion of the Company's total sales.
To accommodate ACC's growth in the videoconferencing market sector, the
Company recently opened offices and demonstration facilities in New York City
and Washington, D.C. The Company has assembled a team of industry experts with
substantial videoconferencing communications expertise and, over the past 18
months, has provided over 35 videoconferencing systems on a national and
international basis. Customers of the Company in this area include Fedders,
Waterford Crystal, Deutche Bank, Shearman & Sterling, The British Ministry of
Defense, St. Johns University, Banco de Columbia and Tetra Pak.
SALES AND MARKETING
The Company maintains a sales and marketing organization supported by
sales, technical and training personnel versed in the specifications and
features of the voice communications and videoconferencing systems sold to
end-user customers. The Company markets both voice communications and
videoconferencing systems through its direct sales force. The Company also
provides training to its sales force to maintain the expertise necessary to
effectively market and promote the systems.
At its own cost and expense, Panasonic furnishes the Company with sales,
advertising and promotional materials for the voice communication and voice
processing systems, which the Company in turn furnishes to its existing
customers and prospective customers in conjunction with sales promotion programs
of Panasonic. The Company maintains up to date systems for demonstration and
promotion to end-user customers and potential end-user customers. The technical
and training personnel attend sales and service training sessions offered by
Panasonic from time to time to enhance their knowledge and expertise in the
sale, installation and maintenance of the systems.
The Company also has a number of programs in place for promoting the
videoconferencing systems manufactured by Sony. Company personnel including
members of the sales and technical departments attend video communications trade
shows. The Company hosts seminars for the purposes of demonstrating
videoconferencing systems to its customers and prospective customers, and to
provide customers the opportunity to learn more about the Company's products and
services. In order to facilitate enhanced marketing and promotion of the
videoconferencing systems the Company has recently opened offices in Washington,
D.C. and New York City. These locations provide the Company with additional
direct sales forces as well as fully functional demonstration facilities to
customers and potential customers.
During the fiscal years ended December 31, 1996 and 1995, approximately 72%
and 70%, respectively, of the Company's total sales were attributable to the
sale of voice communications equipment manufactured by Panasonic, and
approximately 27% and 27%, respectively, of the Company's total sales were
attributable to the sale of videoconferencing communications equipment
manufactured by Sony.
CUSTOMER SERVICE AND SUPPORT
The Company believes that the service and support it provides to customers
is an important factor in the success of its business. The technical expertise
and experience of the Company's management and employees enables it to provide
its customers with a single source for a variety of systems consulting and
maintenance services.
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The Company provides customers of both voice communication and video
conferencing systems with a full compliment of services to ensure customer
satisfaction and optimal utilization of the systems. As a preliminary component
of a sale to a customer or prospective customer, the Company provides consulting
services in order to assess the customer's needs and specifications and to
determine the most effective method to achieve those needs. Upon delivery of the
system, Company employees install and test the equipment to make sure the
systems are fully functional. In situations where a customer is located at a
great distance from the Company's offices, the Company, on an as-needed basis,
will engage the services of an installation subcontractor located in close
geographic proximity to the customer, for the installation and testing of
equipment sold by the Company to the customer. The retention of an installation
subcontractor located in close proximity to a customer benefits the customer
through quick and cost-effective installation of the system. After the equipment
is functional, the Company provides training to all levels of the customer's
organization. Training includes instruction in systems operation and, with
respect to videoconferencing systems, planning and administration of meetings.
Panasonic provides a one year warranty on defects in materials, design and
workmanship. Sony provides a limited warranty card with its systems and
equipment for a one year warranty on parts-replacement. The Company maintains a
24 hour toll-free technical support hotline that customers may call. The Company
also provides onsite support and maintenance which includes the repair and/or
replacement of equipment.
BACKLOG
At December 31, 1996, order backlog amounted to approximately $693,000,
compared with approximately $140,500 at December 31, 1995. The Company's backlog
consists of firm purchase orders by customers for delivery within the next 90
days.
EMPLOYEES, CONSULTANTS AND SUBCONTRACTORS
As of March 1, 1997, the Company employed 25 full-time employees, as well
as a network of approximately 50 consultants and installation subcontractors who
are available on an as-needed basis for marketing support and to provide
contract installation. Twelve of the Company's employees are engaged in
marketing and sales, eight in installation service and customer support and five
in finance and administration. None of the Company's employees are represented
by a labor union. The Company believes that its employee relations are good.
COMPETITION
The audio and videoconferencing communications industries have been
characterized by pricing pressures and business consolidations. The Company
competes with other manufacturers and distributors of voice communications and
videoconferencing systems, many of which are larger, have greater recognition in
the industry, a longer operating history and greater financial resources than
the Company. The Company's competitors in the voice communications sector
include Lucent Technologies, Inc., Northern Telecom and Toshiba. ACC's
competitors in the video communications sector include Picturetel Corporation,
Compression Labs, Incorporated and VTEL Corporation. Existing competitors may
continue to broaden their product lines and expand their retail operations, and
potential competitors may enter into or increase their focus on the audio and/or
videoconferencing communications market, resulting in greater competition for
the Company. In particular, management believes that as the demand for
videoconferencing communications systems continues to increase, additional
competitors, many of which also will have greater resources than the Company,
will enter the videoconferencing market. Consequently, there can be no assurance
that the Company can successfully compete with established and better
capitalized companies.
FACILITIES
The Company's headquarters office is located at 1450 Route 22 West,
Mountainside, New Jersey 07092. The approximately 4,200 square feet of office
and warehouse space is leased for a term of five years expiring March 31, 2000.
The total base rental for the premises is $54,360 per annum through
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May 31, 1997 and, thereafter, $62,280 per annum through May 31, 2000. The
Company has the option to renew the lease for an additional term of three years,
at a base rental of $75,774 per annum, provided the Company is not in default
thereof. The Company is obligated thereunder to pay its proportionate share of
escalations in real estate taxes and cost escalations of operational services as
well as its proportionate share of the cost of electrical consumption.
The Company leases demonstration facilities located at 1130 Connecticut
Avenue, N.W., Washington, D.C. 20036, on a month-to-month basis at a monthly
rental of $2,500. The lease expires on June 30, 1997. The Company also occupies
demonstration facilities at 521 Fifth Avenue, New York, New York 10175 on a
month-to-month basis, at the rate of $1,000 per month.
On March 20, 1997, the Company entered into a five year lease of
approximately 7,200 square feet of office space and approximately 1,600 square
feet of warehouse space, with the term of the lease to commence on the earlier
of the date on which (i) the premises are completed or (ii) the Company occupies
the facility. The Company has the option to renew the lease for an additional
term of five years, provided the Company is not in default thereof. The
premises, which are located at 225 Long Avenue, Hillside, New Jersey 07205, when
occupied, will serve as the Company's new headquarters office, to be utilized
for executive, administrative and sales functions, the demonstration of the
Company's voice and videoconferencing systems and warehousing of the Company's
inventory. The base rental for the premises during the term of the lease shall
be $63,680 per annum. The Company is also obligated under the lease to pay its
proportionate share of the lessor's operating expenses, i.e., those costs or
expenses incurred by the lessor in connection with the ownership, operation,
management, maintenance, repair and replacement of the premises (including,
among other things, the costs of common area electricity, operational services
and real estate taxes).
INSURANCE
The Company believes that it maintains adequate liability and property
insurance coverage. There can be no assurance that the coverage will be
sufficient for all future claims or that insurance will continue to be available
in adequate amounts at reasonable rates.
LITIGATION
Other than as described below, there are no pending material legal
proceedings to which the Company or any of its properties is subject.
The Company is the subject of a civil action filed by Samantha M. Figeuroa
on July 23, 1996 in the Superior Court of New Jersey, Middlesex County, arising
from an automobile accident involving a vehicle driven by Ms. Figeuroa and one
of the Company's vans. The Company van was driven by an employee of the Company
who has since left ACC. The ex-employee is also named as a party to the action.
Ms. Figeuroa alleges personal injuries due to the negligence of the named
parties and seeks damages of $5,000,000. The liability insurance carrier is
defending the action on behalf of ACC. The Company believes that its liability
insurance is sufficient to cover any potential loss resulting from an adverse
decision.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Richard Reiss(1)(2).......................... 40 Chairman of the Board, Chief Executive Officer and President
Peter Barrett................................ 38 Vice President -- Operations
Joseph Scotti................................ 35 Vice President -- Sales and Marketing of Voice Products
Leo Flotron.................................. 36 Vice President -- Sales and Marketing of Videoconferencing
Products
Scott Tansey................................. 33 Vice President -- Finance
Robert B. Kroner(1)(2)....................... 67 Director
Eric Friedman(1)............................. 48 Director
Peter N. Maluso(2)........................... 42 Director
Andrea Grasso................................ 36 Secretary and Director
</TABLE>
- ------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
In December 1996, the stockholders of the Company approved an amendment to
the Company's By-Laws dividing the Board of Directors into three classes as
nearly equal as possible, with the members of each class being elected to serve
for a staggered term of three years, and one class being elected annually. The
Class I director, Richard Reiss, serves for a term expiring at the 1997 Annual
Meeting of Stockholders. The Class II directors, Robert B. Kroner and Andrea
Grasso, serve for terms expiring at the 1998 Annual Meeting of Stockholders. The
Class III directors, Eric Friedman and Peter N. Maluso, serve for three year
terms expiring at the 1999 Annual Meeting of Stockholders.
Directors are elected at the Company's annual meeting of shareholders and
serve until the conclusion of the terms, at which time their successors are duly
elected by the shareholders. Vacancies and newly created directorships resulting
from any increase in the number of directors or by a resignation of a director
may be filled by a majority vote of directors then remaining in office. Officers
are elected by and serve at the pleasure of the Board of Directors. The Board of
Directors has established an audit committee.
Richard Reiss has been Chairman of the Board, Chief Executive Officer and
President of the Company since its formation in August 1991. From February 1990
to July 1991, he was self employed as an independent telecommunications
consultant. Prior thereto, from 1987 to 1990, Mr. Reiss was Vice
President -- Sales and Marketing of NyCom Information Services, Inc., an
operator's services company. From 1984 through 1987, Mr. Reiss served as the
Chairman and Chief Executive Officer of TeleDigital Corporation, a New Jersey
based interconnect company which, in 1986, was acquired by Standard
Telecommunications Corporation which, in turn, was acquired by JWP Information
Services. Prior thereto, from 1982 to 1984, he was a founder and employed as
Executive Vice President of TeleSolutions, a New Jersey based interconnect
company.
Peter Barrett has been Vice President -- Operations of the Company since
its formation in August 1991, responsible for ACC's operations, installations
and technical aspects. From 1988 to 1991, Mr. Barrett served as a supervisor for
GTE/Fujitsu, responsible for the installation and maintenance of 2800 lines and
related telecommunications equipment at IBM in Franklin Lakes, New Jersey. Prior
thereto, from 1984 through 1987, Mr. Barrett was employed by TeleDigital
Corporation as Vice President -- Operations.
Joseph Scotti joined the Company in August 1995 as Vice President -- Sales
and Marketing, dealing in all aspects of voice communications. From 1990 to
1995, Mr. Scotti held numerous sales and sales management positions with
Northern Telecom. Prior thereto, from 1987 to 1990, he served as a sales
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manager at Cortel Business Systems in New York City. From 1985 to 1987, Mr.
Scotti was employed as an account executive for TeleDigital Corporation. Mr.
Scotti received a B.S. degree in Marketing from St. Peters College.
Leo Flotron joined the Company in October 1995 as Vice President -- Sales
and Marketing, in charge of sales and marketing for videoconferencing and
network products. From 1988 to 1995, Mr. Flotron held numerous positions with
Sony Electronics, Inc., and serves as the Company's liaison with Sony as a
turnkey provider of videoconferencing equipment throughout the United States.
Prior thereto, from 1985 to 1988, Mr. Flotron was Director of Business
Development for Gaynor and Company, a biotechnology company located in New York
City. Mr. Flotron holds a B.S. degree in Business from The University of
Massachusetts in Amherst, and an M.S. degree in Finance from Louisiana State
University.
Scott Tansey joined the Company as Vice President -- Finance in December
1996. From 1992 until he joined the Company, Mr. Tansey served as Director,
Finance and Administration, of Data Transmission Services, Inc., a closely held
long distance wire data communications provider, where he was a member of a
senior management team involved in strategic planning and general business
operating decisions. Prior thereto, from 1989 to 1992, he was employed as
Accounting Manager for Industrial Innovation Management, Inc., a closely held
division of a venture capital firm, where he was responsible for all areas of
finance, accounting and administration. From 1985 to 1989, he was a Senior
Accountant for J.H. Cohn & Company, Accountants, a public accounting firm. Mr.
Tansey received a B.S. degree in Accounting from Rider College, Lawrenceville,
New Jersey, and an M.B.A. degree in Finance from Fairleigh Dickinson University,
Madison, New Jersey. He is a certified public accountant.
Robert B. Kroner has been a director of the Company since its formation in
August 1991. Mr. Kroner is a practicing attorney licensed in the State of New
Jersey, having been engaged in the general practice of law for over the past 40
years. Mr. Kroner received his LLB. degree from Harvard Law School and holds an
LLM. degree from New York University's Graduate School of Law.
Eric Friedman has been a director of the Company since December 1996. He
has served as Vice President and Treasurer of Chem International, Inc., a
publicly held company, since June 1996. From June 1978 through May 1996, he was
a partner in Shachat and Simson, a certified public accounting firm. Mr.
Friedman received a B.S. degree from the University of Bridgeport and is a
certified public accountant.
Peter N. Maluso has been a director of the Company since December 1996.
Since 1995, Mr. Maluso has been employed as a Principal at International
Business Machines, Inc. ('IBM'), responsible for IBM's Global Services Legacy
Transformation Consulting practice in the Northeastern United States. The
practice area concentrates on strategic systems planning, systems assessments,
business process redesign and year 2000 transformations. Prior thereto, from
1988 to 1995, he was a Senior Manager for KPMG Peat Marwick's strategic services
practice in New Jersey. From 1986 to 1988, Mr. Maluso served as a
Principal -- Financial Services Group, at American Management Systems. Prior
thereto, from 1982 to 1986, he was employed by Chase Manhattan Bank as Second
Vice President -- Data Systems Development. Mr. Maluso received his B.A. degree
in Economics from Muhlenberg College and holds an M.B.A. degree in Finance from
Lehigh University. He is a certified public accountant.
Andrea Grasso has been the Secretary of the Company since August 1995, and
a director since December 1996. Ms. Grasso has served as the Company's Office
Administrator since August 1991, responsible for accounts receivable, accounts
payable, payroll, sales reports and bank reports. Prior to joining the Company,
Ms. Grasso operated her own telecommunications business.
BOARD COMMITTEES AND DESIGNATED DIRECTORS
The Board of Directors has an Audit Committee which reviews the results and
scope of the audit and other accounting related matters. The Board of Directors
also has a Compensation Committee which makes recommendations to the Board
concerning salaries and incentive compensation for officers and employees of the
Company and may administer the Company's stock option plan. See
'Management -- Stock Option Plan.'
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The Company has agreed, if requested by the Underwriter, to nominate a
designee of the Underwriter to the Company's Board of Directors for a period of
two years from the date of this Prospectus. The Underwriter has not designated a
nominee as of the date of this Prospectus. See 'Underwriting.'
DIRECTORS' COMPENSATION
Members of the Board of Directors who are not employees of the Company have
not, to date, received any compensation. However, beginning with the next Board
of Directors meeting, the Company expects to pay outside directors $250 for each
meeting of the Board of Directors and any of its committee meetings attended by
such director, and also are entitled to reimbursement of reasonable expenses
incurred in attending such meetings. Additionally, non-employee directors may
receive options under the stock option plan.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's chief executive officer and
its two other executive officers (the 'Named Executive Officers') whose total
annual salary and bonus exceeded $100,000 in any of the last three fiscal years
ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
----------------------------- COMPENSATION
SALARY BONUS ------------
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS (#)
- ------------------------------------------------------------------- ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Richard Reiss, President and Chief Executive Officer............... 1996 $ 108,000 $ 50,000 --
1995 100,000 31,500 --
1994 272,800 -- 560,000
Joseph Scotti, Vice President...................................... 1996 68,640 31,760 --
Leo Flotron, Vice President........................................ 1996 68,640 32,360 --
</TABLE>
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the fiscal year ended
December 31, 1996, and the unexercised options, if any, and the value thereof at
that date, for each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
SHARES NUMBER OF UNEXERCISED IN-
ACQUIRED ON VALUE UNEXERCISED THE-MONEY
EXERCISE REALIZED OPTIONS AT OPTIONS AT FY-
NAME (#) ($) FY-END (#) END ($)
- ----------------------------------------------------- ----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Richard Reiss........................................ 560,000 0 0 0
Joseph Scotti........................................ 200,000 0 0 0
Leo Flotron.......................................... 200,000 0 0 0
</TABLE>
EMPLOYMENT AGREEMENTS
Effective January 1, 1997, the Company entered into an employment agreement
with Richard Reiss, President of the Company. The agreement was to expire
December 31, 2001 and provided for Mr. Reiss to receive an annual base salary as
follows: $138,000 for the fiscal year ending December 31, 1997; $175,000 for the
fiscal year ending December 31, 1998; and $210,000 for the fiscal year ending
December 31, 1999. The annual base salary for Mr. Reiss for the fourth and fifth
years of the employment agreement was to be for amounts recommended by the
Compensation Committee of the Board of Directors, but in no event less than
$210,000 per annum. Effective March 21, 1997, the
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employment agreement with Mr. Reiss was amended. In consideration for Mr. Reiss
agreeing to extend the term of the agreement for an additional year, through
December 31, 2002, and to a reduction of his salary, the Company granted Mr.
Reiss an option outside of the Company's stock option plan to purchase up to
750,000 shares of Common Stock, exercisable at any time through March 20, 2002,
at a price of $3.50 per share. The employment agreement, as amended, provides
for Mr. Reiss to receive an annual base salary as follows: $133,000 for the
fiscal year ending December 31, 1997; $170,000 for the fiscal year ending
December 31, 1998; and $205,000 for the fiscal year ending December 31, 1999.
The annual base salary for Mr. Reiss for the fourth, fifth and sixth years of
the employment agreement shall be for amounts recommended by the Compensation
Committee, but in no event less than $205,000 per annum.
Effective January 1, 1997, the Company entered into employment agreements
with Joseph Scotti, Vice President-Sales and Marketing of Voice Products and Leo
Flotron, Vice President-Sales and Marketing of Videoconferencing Products of the
Company. The agreements expire on December 31, 1999 and each provide for the
following annual base salary: $104,000 for the fiscal year ending December 31,
1997; $114,000 for the fiscal year ending December 31, 1998; and $124,000 for
the fiscal year ending December 31, 1999. Additionally, Messrs. Scotti and
Flotron are each to receive one-half of 1% of net sales of the Company, paid
bi-annually, during the term of their employment agreements.
Messrs. Reiss, Scotti and Flotron have agreed to devote their full business
time to the affairs of the Company. The Company has agreed to secure, and pay
the premiums on, a life insurance policy on the life of Mr. Reiss, in the amount
of $1,000,000, with the benefits payable to his estate or designated
beneficiary. The Company has also agreed to provide Mr. Reiss with the use of an
automobile. Mr. Reiss' employment agreement entitles him to participate in all
Company pension and profit-sharing plans and to receive an option to purchase an
aggregate of up to 100,000 shares of Common Stock under the Company's stock
option plan. The Company has agreed to provide each of Messrs. Scotti and
Flotron with an automobile allowance of $400 per month.
The Company has the right to terminate the aforementioned employment
agreements for 'cause' as defined in the employment agreements. The Company has
the right to terminate Mr. Reiss without cause, upon not less than 90 days'
prior written notice in the event that Mr. Reiss is unable to perform his
required duties for a period of 120 consecutive days due to 'total and permanent
disability,' as defined in the employment agreement. In such event, Mr. Reiss
shall be entitled to receive compensation for the remainder of the term of the
employment agreement. The Company may terminate the employment agreements of
Messrs. Scotti and Flotron without cause, upon not less than ten days' prior
written notice in the event that either Mr. Scotti or Mr. Flotron are unable to
perform their required duties for a period of 90 consecutive days due to 'total
and permanent disability.' In such event the employee shall be entitled to
compensation for the 90-day disability period. Each of the aforementioned
employees may terminate his employment with the Company at any time upon 90
days' prior written notice. In such event, the employee shall only be entitled
to the compensation due through the date of termination. Such employees have
also agreed not to disclose any confidential information of the Company during
the term of employment or thereafter. In addition, these employees have agreed
not to compete with the Company during the term of their employment and for a
period of one year after the date of the termination of their employment with
the Company.
STOCK OPTION PLAN
The Company's Board of Directors and shareholders have adopted a stock
option plan (the 'Stock Option Plan') that provides for the grant to employees,
officers, directors, and consultants of the Company of options to purchase up to
500,000 shares of Common Stock.
Options under the Stock Option Plan may be either 'incentive stock options'
within the meaning of Section 422 of the United States Internal Revenue Code of
1986, as amended (the 'Code'), or non-qualified options. Incentive stock options
may be granted only to employees and consultants of the Company.
The per share exercise price of the Common Stock subject to incentive stock
options granted pursuant to the Stock Option Plan may not be less than the fair
market value of the Common Stock on
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the date the option is granted. Under the Stock Option Plan, the aggregate fair
market value (determined as of the date the option is granted) of the Common
Stock that first became exercisable by any employee in any one calendar year
pursuant to the exercise of incentive stock options may not exceed $100,000. No
person who owns, directly or indirectly, at the time of the granting of an
incentive stock option to him, 10% or more of the total combined voting power of
all classes of stock of the Company (a '10% Stockholder'), shall be eligible to
receive any incentive stock options under the Stock Option Plan unless the
option price is at least 110% of the fair market value of the Common Stock
subject to the option, determined on the date of grant. Non-qualified options
are not subject to this limitation. The Company, however, has agreed with the
Underwriter that it will not grant options to purchase Common Stock under the
plan for thirty-six (36) months after the date of this Prospectus at an exercise
price which is less than the fair market value on the date of grant.
No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by the optionee. Pursuant to the
terms of the Stock Option Plan, unless otherwise provided in any option grant,
in the event of termination of employment, other than by death or permanent
total disability, the optionee will have three months after such termination to
exercise the option. The Stock Option Plan provides that upon termination of
employment of an optionee by reason of death or permanent total disability, an
option remains exercisable for one year thereafter to the extent it was
exercisable on the date of such termination.
Options under the Stock Option Plan must be granted within 10 years from
the effective date thereof. Incentive stock options granted under the Stock
Option Plan cannot be exercised more than 10 years from the date of grant,
except that incentive stock options issued to a 10% Stockholder are limited to
five year terms. Any unexercised options under the Stock Option Plan that expire
or that terminate upon an employee's ceasing to be employed with the Company
become available once again for issuance.
On January 15, 1997, incentive stock options to purchase a total of 85,974
shares of Common Stock were granted under the Stock Option Plan, including an
aggregate of 60,974 to executive officers of the Company (Mr. Reiss, 25,974; and
Mr. Tansey, 35,000), and non-qualified stock options to purchase a total of
81,526 shares of Common Stock were granted under the Stock Option Plan,
including 74,026 to an executive officer (Mr. Reiss). All of such options are
exercisable at a price of $3.50 per share, except for Mr. Reiss' incentive stock
option, which is exercisable at $3.85 per share. The options are fully
exercisable beginning January 15, 1998, except for Mr. Tansey's option, which
vests in 20% increments over a period of five years on each annual anniversary
date of his employment. These options expire on January 15, 2007, except for Mr.
Reiss' incentive stock option, which expires on January 15, 2002.
On March 12, 1997, incentive stock options to purchase a total of 95,000
shares of Common Stock were granted under the Stock Option Plan, including an
aggregate of 40,000 to executive officers of the Company (Mr. Flotron, 20,000;
and Mr. Scotti, 20,000). All of such options are exercisable at a price of $3.50
per share, and vest in 20% increments over a period of five years. These options
expire on March 12, 2002.
To date, options to purchase an aggregate of 262,500 shares of Common Stock
had been granted under the Stock Option Plan, including incentive stock options
to purchase an aggregate of 180,974 shares and non-qualified stock options to
purchase an aggregate of 81,526 shares. Future grants of stock options are in
the discretion of the Board of Directors and, thus, the amount and terms of such
grants, if any, are not presently determinable.
DIRECTOR AND OFFICER LIABILITY
New Jersey's Business Corporation Act permits New Jersey corporations to
include in their certificates of incorporation a provision eliminating or
limiting the personal liability of directors and officers of the corporation for
damages arising from certain breaches of fiduciary duty. The Company's
Certificate of Incorporation includes a provision eliminating the personal
liability of directors and officers to the Company and its stockholders for
damages to the maximum extent permitted by New Jersey law, including exculpation
for acts of omissions in violation of directors' and officers' fiduciary duties
of care. Under current New Jersey law, liability is not eliminated in the case
of a breach of a
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director's or officer's duty of loyalty (i.e., the duty to refrain from
transactions involving improper conflicts of interest) to the Company or its
stockholders, the failure to act in good faith, the knowing violation of law or
the obtainment of an improper personal benefit. The Company's Certificate of
Incorporation does not have any effect on the availability of equitable remedies
(such as an injunction or rescissions) for breach of fiduciary duty. However, as
a practical matter, equitable remedies may not be available in particular
circumstances.
CERTAIN TRANSACTIONS
On March 26, 1994, the Company granted an option to Richard Reiss, Chairman
of the Board and President of the Company, to purchase 560,000 shares of Common
Stock at an exercise price of $.03 per share, expiring on March 26, 1997. On
December 18, 1996, Mr. Reiss exercised his option, acquiring 560,000 shares of
Common Stock for an aggregate price of $16,800. On October 1, 1995, the Company
granted to Leo Flotron, a Vice President of the Company, an option to purchase
200,000 shares of Common Stock at an exercise price of $.03 per share, expiring
on the date of the termination of his employment with the Company. On December
13, 1996, Mr. Flotron exercised his options, acquiring 200,000 shares of Common
Stock for an aggregate price of $6,000. On August 1, 1995, the Company granted
to Joseph Scotti, a Vice President of the Company, an option to purchase 200,000
shares of Common Stock at an exercise price of $.03 per share, expiring on the
date of the termination of his employment with the Company. On December 13,
1996, Mr. Scotti exercised his options, acquiring 200,000 shares of Common Stock
for an aggregate price of $6,000. On September 25, 1995, the Company granted to
Robert Kroner, a director of and general counsel to the Company, an option to
purchase 50,000 shares of Common Stock at an exercise price of $.03 per share,
expiring on September 25, 2000. On December 13, 1996, Mr. Kroner exercised his
option, acquiring 50,000 shares of Common Stock for an aggregate price of
$1,500.
On May 22, 1996, the Company obtained a balance term loan in the amount of
$85,000 ('Loan') from the Bank of New York (NJ) (the 'Bank'). The per annum
interest rate on the Loan is 1.25% above the Bank's Alternate Base Rate. The
Loan is set to mature on May 22, 2000. Additionally, on May 22, 1996, the
Company obtained from the Bank an annually renewable working capital line of
credit ('Credit Line') in the amount of $600,000. The per annum interest rate on
the Credit Line is 1% above the Bank's Alternate Base Rate. The Loan and Credit
Line have been personally guaranteed by Richard Reiss, and are secured by the
accounts receivable, inventory, equipment and vehicles, and general intangibles
of the Company pursuant to a security agreement between the Company and the
Bank, dated May 22, 1996. As additional security for the Loan and Credit Line,
the Company has pledged to the Bank a $100,000 United States Treasury Bill,
which Treasury Bill is owned by Richard Reiss and for which Richard Reiss has
given consent to hypothecate and has authorized the Company to pledge as secured
collateral.
Additionally, on May 22, 1996, the Bank entered into a Subordination
Agreement with Panasonic whereby Panasonic agreed to subordinate its security
interest in the inventory of goods and merchandise supplied by Panasonic to the
Company, to the security interest of the Bank in such inventory. Such inventory
is part of the security underlying the Loan and Credit Line from the Bank.
On January 4, 1995, Richard Reiss, the President of the Company, loaned the
Company $25,000, at an interest rate of 9% per annum, which loan was repaid on
August 8, 1995. On October 30, 1995, Mr. Reiss borrowed $25,000 from the
Company, without interest, which loan was repaid on November 10, 1995. On April
12, 1996, Mr. Reiss loaned the Company $55,000, without interest, which loan was
repaid on May 13, 1996.
In October 1994, the Company loaned $25,000 to Public Switch Corporation, a
privately held company of which Mr. Reiss was a stockholder and a member of the
Board of Directors. The loan was written off in 1995, when the borrower filed
for bankruptcy.
On March 20, 1997, the Company entered into a five year lease with a
limited liability company, of which Eric Friedman, a director of the Company, is
a member, for the premises which will serve as the Company's new headquarters
office. See 'Business -- Facilities.'
See 'Management -- Employment Agreements' for a description of the
employment agreements between the Company and its executive officers.
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The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company has adopted a policy that all future
transactions, including loans, between the Company and its officers, directors,
principal stockholders and their affiliates will be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will continue to
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties and be made for bona fide business purposes.
INTERIM FINANCING
In December 1996, the Company completed a bridge financing (the 'Bridge
Financing'), pursuant to which it issued to seven accredited investors (the
'Bridge Unitholders') an aggregate of $750,000 principal amount of 12%
Convertible Subordinated Notes ('Bridge Notes'). The Bridge Notes bear interest
at the rate of 12% per annum, payable annually on December 31. To the extent not
converted, the principal amount of the Bridge Notes, together with interest
accrued thereon, is due and payable on the earlier of (i) December 31, 1999, or
(ii) the date of the completion of an initial public offering ('IPO') of the
Company's securities (the 'Maturity Date'). Principal and interest on the Bridge
Notes are subordinate to all existing indebtedness of the Company and any future
institutional indebtedness. Commencing on the effective date of an IPO prior to
the Maturity Date, the Bridge Notes are convertible, at the option of the
holders, into an aggregate of up to 375,000 Bridge Units (as hereinafter
defined) and the Company will issue to each note holder one Bridge Unit for each
$2.00 principal amount of Bridge Notes presented for conversion. Each Bridge
Unit shall consist of one share of Common Stock and one Warrant, such Warrant
being identical in all respects to the Warrant comprising a portion of the Units
offered by the Company in the IPO. Upon conversion, all interest accrued on the
Bridge Notes shall be waived. The holders of all of the Bridge Notes have agreed
to convert their notes into Bridge Units. The Bridge Units and/or the Common
Stock and Warrants comprising the Bridge Units may not be sold prior to two
years from the date of this Prospectus, during the first year, unconditionally,
and during the second year, without the prior consent of the Underwriter. See
'Use of Proceeds' and 'Description of Securities-Bridge Units.'
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock by (i) each person who is known by the
Company to be the beneficial owner of 5% or more of the Company's outstanding
Common Stock; (ii) each director of the Company; (iii) each executive officer of
the Company named in the Summary Compensation Table; and (iv) all executive
officers and directors as a group, as of the date of this Prospectus and after
the sale of 700,000 Units by the Company in this offering. Except as otherwise
indicated in the footnotes below, the Company believes that each of the
beneficial owners of the Common Stock listed in the table, based on information
furnished by such owner, has sole investment and voting power with respect to
such shares.
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<TABLE>
<CAPTION>
PERCENTAGE
--------------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OFFERING(2) OFFERING(2)
- -------------------------------------------------------------------- ------------------ ----------- -----------
<S> <C> <C> <C>
Richard Reiss....................................................... 2,810,000(3) 68.1% 50.9%
Peter Barrett....................................................... 150,000 4.4% 3.1%
Joseph Scotti....................................................... 200,000 5.9% 4.2%
Leo Flotron......................................................... 200,000 5.9% 4.2%
Andrea Grasso....................................................... 25,000 0.7% 0.5%
Scott Tansey........................................................ -- -- --
Robert B. Kroner ................................................... 150,000 4.4% 3.1%
111 Northfield Avenue
West Orange, NJ 07052
Eric Friedman ...................................................... 12,500 0.4% 0.3%
9 Settlers Lane
Westfield, NJ 07090
Peter N. Maluso .................................................... -- -- --
193 Westgate Drive
Edison, NJ 08820
All executive officers and directors as a group (nine persons)...... 3,547,500(3) 86% 64.2%
</TABLE>
- ------------
(1) Unless otherwise indicated, the address of such individual is c/o All
Communications Corporation, 1450 Route 22 West, Mountainside, NJ 07092.
(2) Includes 375,000 shares of Common Stock issuable in the event of the
conversion of $750,000 principal amount of Bridge Notes into 375,000 Bridge
Units prior to the completion of this offering. See 'Interim Financing.'
(3) Includes 750,000 shares issuable upon exercise of an option granted to Mr.
Reiss pursuant to his employment agreement with the Company. See
'Management -- Employment Agreements.'
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DESCRIPTION OF SECURITIES
The following description of the Company's securities does not purport to
be complete and is subject in all respects to applicable New Jersey law and to
the provisions of the Company's Certificate of Incorporation and By-Laws, the
Warrant Agreement among the Company and American Stock Transfer & Trust Company,
as warrant agent, pursuant to which the Warrants will be issued and the
Underwriting Agreement between the Company and the Underwriter, copies of all
which have been filed with the Commission as Exhibits to the Registration
Statement of which this Prospectus is a part.
UNITS
Each Unit consists of two shares of Common Stock, no par value per share
('Common Stock'), and two redeemable Class A Common Stock Purchase Warrants
('Warrants'), each Warrant entitling the holder thereof to purchase one share of
Common Stock. The Common Stock and Warrants comprising the Units are separately
transferable immediately upon issuance.
GENERAL
The Company's authorized capital stock, as set forth in its Certificate of
Incorporation, consists of 100,000,000 shares of Common Stock, no par value per
share, and 1,000,000 shares of preferred stock, no par value per share.
COMMON STOCK
There are currently 3,375,000 shares of Common Stock outstanding (including
375,000 shares of Common Stock comprising a part of the 375,000 Bridge Units
issuable upon conversion of $750,000 principal amount of Bridge Notes prior to
the completion of this offering). Holders of Common Stock have the right to cast
one vote for each share held of record on all matters submitted to a vote of
holders of Common Stock, including the election of directors. There is no right
to cumulate votes for the election of directors. Stockholders holding a majority
of the voting power of the capital stock issued and outstanding and entitled to
vote, represented in person or by proxy, are necessary to constitute a quorum at
any meeting of the Company's stockholders, and the vote by the holders of a
majority of such outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger or amendment of the Company's
Certificate of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata based on
the number of shares held, when as and if declared by the Board of Directors,
from funds legally available therefor, subject to the rights of holders of any
outstanding preferred stock. In the event of the liquidation, dissolution or
winding up of the affairs of the Company, all assets and funds of the Company
remaining after the payment of all debts and other liabilities, subject to the
rights of the holders of any outstanding preferred stock, shall be distributed,
pro rata, among the holders of the Common Stock. Holders of Common Stock are not
entitled to preemptive or subscription or conversion rights, and there are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be when issued, fully paid and non-assessable.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of up to
1,000,000 shares of preferred stock, none of which are currently outstanding,
with the Board of Directors having the right to determine the designations,
rights, preferences and privileges of the holders of one or more series of
preferred stock. Accordingly, the Board of Directors is empowered, without
shareholder approval, to issue preferred stock with voting, dividend,
conversion, liquidation or other rights which could adversely affect the voting
power and equity interest of the holders of Common Stock. The preferred stock,
which could be issued with the right to more than one vote per share, could be
utilized as a method of discouraging, delaying or preventing a change of control
of the Company. The possible impact on takeover attempts could adversely affect
the price of the Company's Common Stock. The Company has
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no current plans to issue any shares of preferred stock. In addition, for a
period of three years from the date of this Prospectus, the issuance of any
shares of preferred stock is subject to the Underwriter's prior consent.
CLASS A WARRANTS
The Company has authorized the issuance of five year redeemable Class A
Common Stock Purchase Warrants ('Warrants') to purchase an aggregate of
1,400,000 shares of Common Stock (exclusive of 375,000 Warrants included in the
Bridge Units, 210,000 Warrants issuable upon exercise of the Underwriter's
over-allotment option and 140,000 Warrants underlying the Underwriter's
Options), and has reserved an equivalent number of shares for issuance upon
exercise of such Warrants. Each Warrant entitles the registered holder thereof
to purchase one share of Common Stock at a price of $4.25, subject to
adjustment, for four years commencing one year from the date of this Prospectus.
After expiration, the Warrants will be void and of no value. The Warrants
underlying the Underwriter's Options have the same terms and conditions as the
Warrants to be sold to the public, except that they are subject to redemption by
the Company at any time after the Underwriter's Options have been exercised and
the underlying Warrants are outstanding.
The Company may redeem the Warrants commencing , 1998 (18 months from
the date of the Prospectus), or earlier with the consent of the Underwriter, at
a price of $.10 per Warrant, on not less than 30 days' prior written notice, if
the closing bid price of the Common Stock (if the Common Stock is then traded in
the over-the-counter market) or the last sale price of the Common Stock (if the
Common Stock is then traded on a national securities exchange or the Nasdaq
National Market or SmallCap System) has been at least 250% ($10.63 per share) of
the current Warrant exercise price, subject to adjustment, for at least 20
consecutive trading days ending within three days prior to the date on which
notice of redemption is given.
The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price and number of shares issuable upon
exercise, on the occurrence of certain events, such as stock dividends or
certain other changes in the number of outstanding shares except for shares
issued pursuant to any Company stock option plans for the benefit of its
employees, directors and agents, the Warrants offered hereby, the Underwriter's
Options, the Underwriter's over-allotment option, and any equity securities for
which adequate consideration is received. The Company is not required to issue
fractional shares. In lieu of the issuance of such fractional shares, the
Company will pay cash to such holders of the Warrants. In computing the cash
payable to such holders, a share of Common Stock will be valued at its price
immediately prior to the close of business on the expiration date. The holder of
a Warrant will not possess any rights as a shareholder of the Company unless he
exercises his Warrant.
BRIDGE UNITS
In December 1996, the Company completed a bridge financing (the 'Bridge
Financing'), pursuant to which it issued to the Bridge Unitholders an aggregate
of 750,000 principal amount of 12% Convertible Subordinated Notes (the 'Bridge
Notes'), which bear interest at the rate of 12% per annum and are due and
payable, to the extent not converted, on the earlier of the completion of this
offering or December 31, 1999. Commencing on the date of this Prospectus, the
Bridge Notes are convertible, at the option of the holders, into an aggregate of
up to 375,000 Bridge Units, each consisting of one share of Common Stock and one
Warrant, and the Company will issue to each note holder one Bridge Unit for each
$2.00 principal amount of Bridge Notes presented for conversion. The holders of
all of the Bridge Notes have agreed to convert their notes into Bridge Units.
The Bridge Units and/or the Common Stock and Warrants comprising the Bridge
Units may not be sold prior to two years from the date of this Prospectus,
during the first year, unconditionally, and during the second year, without the
prior consent of the Underwriter. See 'Interim Financing.'
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have 4,775,000
shares of Common Stock outstanding (assuming an aggregate of $750,000 principal
amount of Bridge Notes are converted into 375,000 Bridge Units), including
1,400,000 shares included in the 700,000 Units offered hereby by the Company,
and 25,000 shares of Registered Common Stock which are included in the
Registration Statement of which this Prospectus forms a part. The remaining
2,975,000 shares of Common Stock currently outstanding are 'restricted
securities' as that term is defined in Rule 144 under the Securities Act, and
may not be sold unless such sale is registered under the Securities Act or is
made pursuant to an exemption from registration under the Securities Act,
including the exemption provided by Rule 144. Such shares will be eligible for
sale in the public market pursuant to Rule 144 at various times beginning 90
days after the date of this Prospectus, subject to the three-year lock-up
described below. The 375,000 shares of Common Stock and the 375,000 shares
underlying the 375,000 Warrants comprising the Bridge Units may not be sold
until two years following the date of this Prospectus, during the first year,
unconditionally, and during the second year, without the prior consent of the
Underwriter. The holders of all of the 3,000,000 shares of the Company's Common
Stock currently outstanding (including the 25,000 shares of Registered Common
Stock held by the President) have agreed that, for a period of three years from
the date of this Prospectus, they will not sell any of their shares, or any
shares issuable upon exercise of warrants or options exercisable into shares of
Common Stock, without the prior consent of the Underwriter. Certain officers,
directors, employees and other individuals holding an aggregate amount of
1,250,000 shares of the Company's Common Stock currently outstanding have
agreed, unconditionally, that for a period of three years from the date of this
Prospectus, they will not sell any of their shares. Additionally, all officers,
directors and 5% shareholders of the Company have agreed to enter into a
separate lock-up agreement whereby they have agreed that, for a period of two
years following the date of this Prospectus, they will not sell any of their
shares, or any shares issuable upon exercise of warrants or options exercisable
into shares of Common Stock, during the first year, unconditionally, and during
the second year at a price not less than the public offering price of the Common
Stock. The Company is unable to predict the effect that sales made under Rule
144 or otherwise may have on the market price of the Common Stock. However, the
possibility that substantial amounts of Common Stock may be sold in the public
market may have an adverse effect on the market price for the Company's Common
Stock.
In general, under Rule 144 as currently in effect, a shareholder (or
shareholders whose shares are aggregated) who has beneficially owned any
restricted securities for at least two years (one year, commencing April 29,
1997) (including a shareholder who may be deemed to be an affiliate of the
Company), will be entitled to sell, within any three-month period, that number
of shares that does not exceed the greater of (i) 1% of the then outstanding
shares of Common Stock (47,750 shares based on 4,775,000 shares of Common Stock
outstanding upon completion of this offering, assuming the Underwriter's
over-allotment option is not exercised) or (ii) the average weekly trading
volume of the Common Stock during the four calendar weeks preceding the date on
which notice of such sale is given to the Commission, provided certain public
information, manner of sale and notice requirements are satisfied. A shareholder
who is deemed to be an affiliate of the Company, including members of the Board
of Directors and senior management of the Company, will still need to comply
with the restrictions and requirements of Rule 144, other than the two-year
holding period requirement, in order to sell shares of Common Stock that are not
restricted securities, unless such sale is registered under the Securities Act.
A shareholder (or shareholders whose shares are aggregated) who is deemed not to
have been an affiliate of the Company at any time during the 90 days preceding a
sale by such shareholder, and who has beneficially owned restricted shares for
at least three years (two years, commencing April 29, 1997), will be entitled to
sell such shares under Rule 144 without regard to the volume limitations
described above.
LISTING ON THE BOSTON STOCK EXCHANGE
The Company has applied to list the Units, Common Stock and Warrants on the
Boston Stock Exchange under the symbols 'CMNU,' 'CMN' and 'CMNW,' respectively.
It is anticipated that such
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securities will also be traded in the over-the-counter market on the NASD's OTC
Electronic Bulletin Board under the symbols 'ACMNU,' 'ACMN' and 'ACMNW,'
respectively.
No assurance can be given that the prices of such securities will be so
quoted or that a trading market for the Company's securities will develop or be
sustained, or at what price the securities will trade.
TRANSFER/WARRANT AGENT AND REGISTRAR
American Stock Transfer & Trust Company, New York, New York, is the
transfer and warrant agent and registrar for the securities of the Company.
NEW JERSEY SHAREHOLDER PROTECTION ACT
The Company is subject to the New Jersey Shareholder Protection Act (the
'Protection Act') which restricts certain business combinations by the Company
with any of its 10% stockholders. Generally, the Protection Act prohibits a
resident domestic New Jersey corporation with its principal executive offices
and significant business operations in New Jersey from engaging in any business
combination (defined generally as any merger, consolidation, sale, lease,
exchange, mortgage or pledge, or any stock transfer, securities
reclassification, liquidation or dissolution, excluding certain transactions
involving assets or securities which have a market value below that specified in
the Protection Act) with an 'Interested Shareholder' (defined generally as any
person who is the beneficial owner of 10% or more of the voting power of the
outstanding shares or any affiliate of the Corporation who at any time within
the five-year period immediately prior to the date of the business combination
has been the beneficial owner of 10% or more of the voting power of the
outstanding shares) for a period of five years from the date the Interested
Shareholder became an Interested Shareholder, unless such transaction is
approved by the board of directors prior to the date the shareholder became an
interested Shareholder. In addition, the Protection Act prohibits any business
combination at any time with an Interested Shareholder other than a transaction
that (i) is approved by the board of directors of the applicable company prior
to the date the Interested Shareholder became the Interested Shareholder; or
(ii) is approved by the affirmative vote of the holders of two-thirds of the
voting shares not beneficially owned by the Interested Shareholder at a meeting
called for that purpose; or (iii) satisfies certain stringent price and terms
criteria.
Certain stockholders may consider the Protection Act to have
disadvantageous effects. Tender offers or other non-open market acquisitions of
shares by persons attempting to acquire control through market purchases may
cause the market price of the shares to reach levels that are higher than would
be otherwise the case. The Protection Act may discourage any or all of such
acquisitions, particularly those of less than all of the Company's shares, and
may thereby deprive certain holders of the Company's shares of an opportunity to
sell their shares at a temporarily higher market price.
These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company. The Commission has indicated that the use of
authorized unissued shares of voting stock could have an anti-takeover effect.
In such cases, various specific disclosures to the stockholders are required.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
by and between the Company and the Underwriter (the 'Underwriting Agreement'),
the Underwriter has agreed to purchase from the Company, and the Company has
agreed to sell to the Underwriter, an aggregate of 700,000 Units, at the initial
public offering price less the underwriting discounts and commissions set forth
on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of certificates representing the Units is subject
to certain conditions precedent, and that the Underwriter will purchase all of
the Units offered hereby on a 'firm commitment' basis if any are purchased.
41
<PAGE>
<PAGE>
The Underwriter has advised the Company that it proposes initially to offer
the Units directly to the public at the initial 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 Unit. After the initial public offering,
the public offering price and concession may be changed.
The Company has granted to the Underwriter an option, exercisable during
the 45-day period after the date of this Prospectus, to purchase up to an
aggregate of 105,000 additional Units at the initial per Unit public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus. The Underwriter may exercise this option only to cover
over-allotments, if any, made in connection with the sale of the Units offered
hereby.
The Company has agreed to pay to the Underwriter a non-accountable expense
allowance equal to 3% of the gross proceeds of this offering, including any
Units purchased pursuant to the Underwriter's over-allotment option, no portion
of which has been paid to date.
The Company and the Underwriter have agreed to indemnify each other
against, or to contribute to losses arising out of, certain civil liabilities in
connection with this offering, including liabilities under the Securities Act.
The Company and all of its current stockholders have agreed not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or
rights to acquire shares of Common Stock without the prior written consent of
the Underwriter for a period of three years after the date of this Prospectus.
The Company has agreed to sell to the Underwriter, for an aggregate price
of $70, the right to purchase up to an aggregate of 70,000 Units (the
'Underwriter's Options'). The Underwriter's Options will be exercisable for a
four-year period commencing one year after the date of the Prospectus, at a per
Unit exercise price equal to 120% of the initial per Unit public offering price
of the Units being offered hereby. The Warrants underlying the Underwriter's
Options have the same terms and conditions as the Warrants to be sold to the
public in this offering, except that they are subject to redemption by the
Company at any time after the Underwriter's Options have been exercised and the
underlying Warrants are outstanding. The Underwriter's Options may not be sold,
assigned, transferred, pledged or hypothecated for a period of five years from
the date of the Prospectus except to the Underwriter or its officers.
The Company has agreed to file, during the four-year period beginning one
year from the date of the Prospectus, on two separate occasions (on only one
occasion at the cost of the Underwriter), at the request of the holders of a
majority of the Underwriter's Options and the underlying shares of Common Stock
and Warrants, and to use its best efforts to cause to become effective, a
post-effective amendment to the Registration Statement or a new registration
statement under the Securities Act, as required to permit the public sale of the
shares of Common Stock and Warrants issued or issuable upon exercise of the
Underwriter's Options. In addition, the Company has agreed to give advance
notice to holders of the Underwriter's Options of its intention to file certain
registration statements commencing one year and ending five years after the date
of the Prospectus, and in such case, holders of such Underwriter's Options or
underlying shares of Common Stock and Warrants shall have the right to require
the Company to include all or part of such shares of Common Stock and Warrants
underlying such Underwriter's Options in such registration statement at the
Company's expense.
For the life of the Underwriter's Options, the holders thereof are given
the opportunity to profit from a rise in the market price of the shares of
Common Stock and Warrants, which may result in a dilution of the interests of
other stockholders. As a result, the Company may find it more difficult to raise
additional equity capital if it should be needed for the business of the Company
while the Underwriter's Options are outstanding. The holders of the
Underwriter's Options might be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain additional equity capital on
terms more favorable to the Company than those provided by the Underwriter's
Options. Any profit realized on the sale of the shares of Common Stock issuable
upon the exercise of the Underwriter's Options may be deemed additional
underwriting compensation.
The underwriting agreement provides for the Underwriter to receive a
finder's fee, ranging from 5% of the first $3,000,000 down to 1% of the excess
over $10,000,000 of the consideration involved in any capital business
transaction (including mergers and acquisitions) consummated by the Company in
42
<PAGE>
<PAGE>
which the Underwriter introduced the other party to the Company during the
five-year period following the completion of the offering.
The Underwriting Agreement provides that, for a period of two years from
the date of the Prospectus, the Company will nominate a person selected by the
Underwriter, and reasonably acceptable to the Company, for election to serve as
a member of the Company's Board of Directors.
Upon the exercise of the Warrants, the Company will pay the Underwriter a
fee of 5% of the aggregate exercise price if (i) the market price of its Common
Stock on the date the Warrant is exercised is greater than the then exercise
price of the Warrants; (ii) the exercise of the Warrant was solicited by a
member of NASD and the customer states in writing that the transaction was
solicited and designates in writing the broker-dealer to receive compensation
for the exercise; (iii) the Warrant is not held in a discretionary account; (iv)
disclosure of compensation arrangements was made both at the time of the
Offering and at the time of exercise of the Warrants; and (v) the solicitation
of exercise of the Warrant was not in violation of Regulation M promulgated
under the Exchange Act.
The Commission has recently adopted Regulation M to replace Rule 10b-6 and
certain other rules promulgated under the Exchange Act. Regulation M may
prohibit the Underwriter from engaging in any market making activities with
regard to the Company's securities for the period from five business days (or
such other applicable period as Regulation M may provide) prior to any
solicitation by the Underwriter of the exercise of Warrants until the later of
the termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Underwriter may have to receive a fee for the
exercise of Warrants following such solicitation. As a result, the Underwriter
may be unable to provide a market for the Company's securities during certain
periods while the Warrants are exercisable.
Prior to this offering there has been no public trading market for the
Company's securities. The initial public offering price of the Units and the
exercise price and the terms of the Warrants have been determined by negotiation
between the Company and the Underwriter. Factors considered in determining the
initial public offering price, in addition to prevailing market conditions,
included the history of and prospects for the industry in which the Company
competes, and assessment of the Company's management, the prospects of the
Company, its capital structure and such other factors as were deemed relevant.
The foregoing includes a summary of all of the material terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement that is on file as an exhibit to the
Registration Statement of which this Prospectus is a part.
The Underwriter has informed the Company that no sales will be made to any
account over which the Underwriter exercises discretionary authority.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Singer Zamansky LLP, New York, New York. Certain legal matters will
be passed upon for the Underwriter by Bernstein & Wasserman, LLP, New York, New
York. Singer Zamansky LLP represents the Underwriter in other matters.
EXPERTS
The financial statements of the Company included in this Prospectus have
been audited by Schneider Ehrlich & Wengrover LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
CONCURRENT OFFERING
The Registration Statement, of which this Prospectus forms a part, also
covers 25,000 shares of Common Stock being offered by the Selling Stockholder
pursuant to the Selling Stockholder's Prospectus.
43
<PAGE>
<PAGE>
ADDITIONAL INFORMATION
The Company is not a reporting company under the Exchange Act. The Company
has filed a Registration Statement on Form SB-2 under the Securities Act with
the Commission in Washington, D.C. with respect to the Units offered hereby.
This Prospectus, which is part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and the Units
offered hereby, reference is hereby made to the Registration Statement and such
exhibits, which may be inspected without charge at the office of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and at 500 West Madison (Suite 1400), Chicago, Illinois 60661. Copies
of such material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
Following the offering, the Company will be subject to the reporting and
other requirements of the Exchange Act and intends to furnish to its
stockholders annual reports containing audited financial statements and may
furnish interim reports as it deems appropriate.
44
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Independent Auditors' Report........................................................................ F-2
Balance Sheets...................................................................................... F-3
Statements of Income................................................................................ F-4
Statements of Stockholders' Equity.................................................................. F-5
Statements of Cash Flows............................................................................ F-6
Notes to Financial Statements....................................................................... F-7 - F-15
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of ALL COMMUNICATIONS CORPORATION
We have audited the accompanying balance sheets of All Communications
Corporation as of December 31, 1996 and 1995, and the related statements of
income, cash flows, and stockholders' equity for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the financial position of All
Communications Corporation as of December 31, 1996 and 1995 and the results of
its operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.
SCHNEIDER EHRLICH & WENGROVER LLP
Woodbury, New York
January 21, 1997
F-2
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................................................... $ 645,614 $153,906
Accounts receivable (net of allowance for doubtful accounts of $25,000 and $10,000,
respectively)..................................................................... 681,411 346,502
Inventory.......................................................................... 497,353 145,047
Deferred income taxes.............................................................. 9,119 --
Other current assets............................................................... 11,595 8,517
---------- --------
Total current assets.......................................................... 1,845,092 653,972
Furniture, equipment and leasehold improvements -- net.................................. 128,984 91,758
Deferred financing costs................................................................ 390,406 --
Deferred stock offering costs........................................................... 32,500 --
Other assets............................................................................ 61,410 8,910
---------- --------
Total assets.................................................................. $2,458,392 $754,640
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank loan payable.................................................................. $ 447,071 $100,000
Current portion of long-term debt.................................................. 21,250 21,210
Accounts payable................................................................... 505,319 364,420
Accrued expenses................................................................... 108,259 81,437
Income taxes payable............................................................... -- 4,421
Deferred income taxes.............................................................. -- 13,871
Customer deposits.................................................................. 14,943 16,027
---------- --------
Total current liabilities..................................................... 1,096,842 601,386
---------- --------
Noncurrent liabilities
12% Convertible Subordinated Notes payable......................................... 750,000 --
Long-term debt, less current portion............................................... 51,354 65,218
Deferred income taxes.............................................................. 14,798 6,741
---------- --------
Total noncurrent liabilities....................................................... 816,152 71,959
---------- --------
Total liabilities............................................................. 1,912,994 673,345
COMMITMENTS AND CONTINGENCIES -- SEE NOTES
Stockholders' equity
Preferred stock, $.01 par value; 1,000,000 shares authorized, none issued or
outstanding....................................................................... -- --
Common Stock, no par value; 100,000,000 authorized; 3,000,000 and 1,750,000 issued
and outstanding, respectively..................................................... 90,000 52,500
Additional paid-in capital......................................................... 375,000 --
Retained earnings.................................................................. 80,398 28,795
---------- --------
Total stockholders' equity.................................................... 545,398 81,295
---------- --------
Total liabilities and stockholders' equity.................................... $2,458,392 $754,640
---------- --------
---------- --------
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net revenues.......................................................................... $3,884,700 $2,641,331
Cost of revenues...................................................................... 2,501,073 1,781,719
---------- ----------
Gross margin.......................................................................... 1,383,627 859,612
---------- ----------
Operating expenses:
Selling.......................................................................... 664,786 482,470
General and administrative....................................................... 599,606 328,206
---------- ----------
Total operating expenses.................................................... 1,264,392 810,676
---------- ----------
Income from operations................................................................ 119,235 48,936
---------- ----------
Other (income) expenses
Loan writeoff.................................................................... -- 25,000
Interest income.................................................................. -- (634)
Interest expense................................................................. 29,026 7,321
---------- ----------
Total other (income) expenses............................................... 29,026 31,687
---------- ----------
Income before income taxes............................................................ 90,209 17,249
Provision for income taxes............................................................ 38,606 8,029
---------- ----------
Net income............................................................................ $ 51,603 $ 9,220
Net income per common and common equivalent share..................................... $.03 $.01
---------- ----------
---------- ----------
Weighted average common and common equivalent shares outstanding...................... 1,977,518 1,884,002
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1995........................... 1,666,666 $50,000 $ -- $ 19,575 $ 69,575
Issuance of common stock
for Services rendered at $.03 per share............. 83,334 2,500 -- -- 2,500
Net income for the year............................... -- -- -- 9,220 9,220
--------- ------- ---------- -------- --------
Balances at December 31, 1995......................... 1,750,000 52,500 -- 28,795 81,295
Exercise of common stock options...................... 1,250,000 37,500 -- -- 37,500
Value imputed to conversion feature of the 12%
Convertible Subordinated Notes...................... -- -- 375,000 -- 375,000
Net income for the year............................... -- -- -- 51,603 51,603
--------- ------- ---------- -------- --------
Balances at December 31, 1996......................... 3,000,000 $90,000 $375,000 $ 80,398 $545,398
--------- ------- ---------- -------- --------
--------- ------- ---------- -------- --------
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1995
---------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income........................................................................ $ 51,603 $ 9,220
Adjustments to reconcile net income to net cash provided (used) by operating
activities:
Depreciation and amortization................................................ 30,120 6,835
Loan writeoff................................................................ -- 25,000
Common stock issued for services............................................. -- 2,500
Increase (decrease) in cash attributable to changes in assets and liabilities
Accounts receivable..................................................... (334,909) (241,941)
Inventory............................................................... (352,306) (131,976)
Other current assets.................................................... (3,078) (8,517)
Accounts payable........................................................ 140,899 326,505
Accrued expenses........................................................ 26,822 69,359
Income taxes payable.................................................... (4,421) 4,421
Deferred income taxes................................................... (14,933) (3,734)
Customer deposits....................................................... (1,084) 13,077
---------- ---------
Net cash provided (used) by operating activities................... (461,287) 70,749
---------- ---------
Cash Flows From Investing Activities
Purchases of furniture, equipment and leasehold improvements...................... (67,346) (98,593)
Increase in other assets.......................................................... (52,500) (6,710)
---------- ---------
Net cash used by investing activities.............................. (119,846) (105,303)
---------- ---------
Cash Flows From Financing Activities
Proceeds from issuance of common stock............................................ 37,500 --
Deferred financing costs.......................................................... (15,406) --
Deferred stock offering costs..................................................... (32,500) --
Proceeds from long-term debt...................................................... 85,000 92,700
Payments on long-term debt........................................................ (98,824) (6,272)
Proceeds from bank loans.......................................................... 477,071 100,000
Payments on bank loans............................................................ (130,000) --
Proceeds from stockholder loan receivable......................................... -- 25,000
Repayment of stockholder loan receivable.......................................... -- (25,000)
Proceeds from stockholder loan payable............................................ 55,000 25,000
Repayment of stockholder loan payable............................................. (55,000) (25,000)
Proceeds from issuance of convertible subordinated notes.......................... 750,000 --
---------- ---------
Net cash provided by financing activities.......................... 1,072,841 186,428
---------- ---------
Increase in Cash and Cash Equivalents.................................................. 491,708 151,874
Cash at Beginning of Period............................................................ 153,906 2,032
---------- ---------
Cash and Cash Equivalents at End of Period............................................. $ 645,614 $ 153,906
---------- ---------
---------- ---------
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest..................................................................... $ 29,026 $ 7,321
---------- ---------
---------- ---------
Income taxes................................................................. $ 60,807 $ 7,422
---------- ---------
---------- ---------
Supplemental Disclosure of Non-Cash Financing Activities
Value imputed to conversion feature of the 12% Convertible Subordinated Notes:
Deferred financing costs.......................................................... $ 375,000
Additional paid-in capital........................................................ (375,000)
----------
Net cash.......................................................................... $ --
----------
----------
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS
All Communications Corporation (the 'Company') was incorporated on August
16, 1991 under the laws of the State of New Jersey. The Company is engaged in
the business of selling, installing and servicing voice and videoconferencing
communications systems to commercial and institutional customers located
principally within the United States. The Company is headquartered in
Mountainside, New Jersey.
Most of the products sold by the Company are purchased under non-exclusive
dealer agreements with Panasonic Communications & Systems Company ('Panasonic')
for digital business telephone systems and related products, and with Sony
Electronics, Inc. ('Sony') for videoconferencing equipment. Both agreements
specify, among other things, sales territories, payment terms, purchase quotas
and reseller prices. The Panasonic agreement renews automatically for one-year
periods, but may be terminated with or without cause by either party upon thirty
days written notice. Panasonic holds a security interest in Panasonic inventory
maintained by the Company, which has been subordinated to the security interest
of the Company's lender. The Company is currently negotiating a new agreement
with Sony to succeed the current contract scheduled to expire on March 31, 1997.
The termination of either agreement, or their renewal on less favorable terms
than currently in effect, could have a material adverse impact on the Company's
business.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORY
Inventory is valued at the lower of cost (determined on a first-in,
first-out basis), or market.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported revenues
and expenses. Actual results could vary from the estimates that were used.
REVENUE RECOGNITION
Revenue from the sale and installation of voice and videoconferencing
systems is recognized at the time the systems are installed, with reserves
established for the estimated future costs of service warranties. Customer
prepayments are deferred until product systems have been installed. Service
revenues are recognized at the time the services are rendered and the Company
has no significant further obligations to the customer.
INCOME PER SHARE
Income per share is computed using the weighted average number of common
and common equivalent shares outstanding during the period. In accordance with
the rules of the Securities and Exchange Commission, shares issuable upon the
conversion of the 12% Subordinated Convertible Notes Payable have been included
in the calculation of common and common equivalent shares outstanding for all
periods presented using the treasury stock method.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
F-7
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents, and
trade accounts receivable. The Company places its cash and cash equivalents
primarily in commercial checking accounts and interest-bearing time deposits.
Balances may from time to time exceed federally insured limits.
The Company performs ongoing credit evaluations of its customers and to
date has not experienced any material losses. Revenues to one significant
customer accounted for 26% and 28% of net revenues for the years ended December
31, 1996 and 1995, respectively. At December 31, 1996, receivables from this
customer represented approximately 25% of net accounts receivable.
DEPRECIATION AND AMORTIZATION
Furniture, equipment and leasehold improvements are stated at cost.
Furniture and equipment are depreciated over the estimated useful lives of the
related assets, which range from three to five years. Leasehold improvements are
amortized over the shorter of either the asset's useful life or the related
lease term. Depreciation is computed on the straight-line method for financial
reporting purposes and on the modified accelerated cost recovery system (MACRS)
for income tax purposes.
INCOME TAXES
The Company uses the liability method to determine its income tax expense
as required under Statement of Financial Accounting Standards No. 109 (SFAS
109). Under SFAS 109, deferred tax assets and liabilities are computed based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance if, based on the
weight of available evidence, it is more likely than not that all or some
portion of the deferred tax assets will not be realized. The ultimate
realization of the deferred tax asset depends on the Company's ability to
generate sufficient taxable income in the future.
DEFERRED STOCK OFFERING COSTS
Costs incurred in connection with the Company's proposed public offering of
common stock and warrants will be charged to capital in the event the offering
is successful, or charged to operations if the offering is abandoned.
LONG-LIVED ASSETS
In accordance with SFAS No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of', the Company
records impairment losses on long-lived assets used in operations, including
goodwill and intangible assets, when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
RECENT ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, 'Accounting for Stock-based Compensation'. SFAS No. 123 is effective for
fiscal years beginning after December 15, 1995, and requires that the Company
either recognize in its financial statements costs related to its employee
stock-based compensation plans, such as stock option and stock purchase plans,
or make pro forma disclosures of such costs in a footnote to the financial
statements. The Company has elected to continue to use the intrinsic value-based
method of APB Opinion No. 25, as allowed under SFAS No.
F-8
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
123, to account for all of its employee stock-based compensation plans. The
adoption of SFAS No. 123 did not have a material effect on the Company's
financial position or results of operations.
NOTE 3 -- FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Leasehold improvements..................................................................... $ 9,768 $ 9,768
Office furniture........................................................................... 13,187 11,872
Computer equipment......................................................................... 25,024 20,253
Demonstration equipment.................................................................... 41,136 --
Vehicles................................................................................... 76,824 56,700
-------- -------
165,939 98,593
Less: Accumulated depreciation............................................................. 36,955 6,835
-------- -------
$128,984 $91,758
-------- -------
-------- -------
</TABLE>
Depreciation expense was $30,120 and $6,835 for the years ended December
31, 1996 and 1995, respectively.
NOTE 4 -- SALES AGREEMENTS
In December 1996, the Company signed a non-exclusive four-year Preferred
Vendor Agreement with HFS Incorporated ('HFS') to provide Panasonic telephone
and voice processing systems to its Century 21, ERA, and Coldwell Banker brand
real estate brokerage franchise systems. The Company has paid a $50,000 access
fee for marketing rights and will pay HFS commissions ranging from 2% to 13% of
gross sales, depending on the products and services sold. The agreement requires
the Company to establish toll-free telephone service for HFS franchisees, to
commit personnel to the handling of franchisee accounts and to defray the cost
of certain marketing activities. The Company has also agreed to a fixed price
schedule over the term of the agreement.
The access fee is included in Other Assets in the accompanying Balance
Sheet, and will be amortized on a straight-line basis over the term of the
contract.
The HFS contract supersedes a four-year agreement signed in January 1996
with Coldwell Banker Corporation ('CBC'), the previous owner of the Coldwell
Banker brand, in which the Company provided trade discounts and favorable terms
for an exclusive dealership to sell Panasonic telecommunications systems to
CBC's corporate-owned brokerage offices.
NOTE 5 -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Sales taxes payable.......................................... $ 35,909 $18,413
Other........................................................ 72,350 63,024
-------- -------
$108,259 $81,437
-------- -------
-------- -------
</TABLE>
F-9
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- TRANSACTIONS WITH RELATED PARTIES
In January 1995, the president of the Company loaned the Company $25,000 at
an interest rate of 9% per annum, which loan was repaid in August 1995. In
October 1995, the president borrowed $25,000 from the Company, without interest,
which loan was repaid in November 1995. In April 1996, the president loaned the
Company $55,000, without interest, which loan was repaid in May 1996.
In October 1994, the Company provided a $25,000 loan to a privately-held
entity. The Company's president was a stockholder in the entity and became a
member of its board. The loan was written off in 1995 when the entity filed for
bankruptcy.
NOTE 7 -- NOTES PAYABLE AND LONG-TERM DEBT
TERM LOANS AND LINES OF CREDIT
In 1995, the Company entered into a Loan and Security Agreement with a bank
that provided a $150,000 line of credit, bearing interest at the prime rate plus
1% per annum. The lender also provided term financing to the Company at various
dates in 1995 for the purchase of equipment in the aggregate amount of $92,700.
The loans were evidenced by four promissory notes bearing fixed rates of
interest ranging from 8.75% to 9% per annum.
In May 1996, the Company entered into a new credit facility with a bank for
a $600,000 working capital line of credit and an $85,000 term loan, and repaid
outstanding borrowings with its previous lender. Advances under the line of
credit bear interest at the rate 1% above the bank's 'Alternate Base Rate'
('ABR') (9.25% at December 31, 1996), and are due on demand. The line of credit
is renewable annually. The term loan provides for monthly principal payments of
$1,770.83 plus interest at the bank's ABR plus 1.25% (9.5% at December 31,
1996).
Substantially all of the assets of the Company are pledged as security for
the loans. The Company's principal stockholder has pledged a United States
Treasury Bill in the amount of $100,000 as additional collateral and has
provided a personal guarantee on the loans. Panasonic has also subordinated to
the bank its security interest in Panasonic inventory owned by the Company.
12% CONVERTIBLE SUBORDINATED NOTES PAYABLE
In December 1996, the Company realized net proceeds of $734,594 from a
private placement of $750,000 principal amount of 12% Convertible Subordinated
Notes (the 'Bridge Notes'). The notes bear interest at the rate of 12% per annum
and become due and payable together with accrued interest, to the extent not
converted, at the earlier of December 31, 1999 or the date the Company completes
an initial public offering (IPO) of its securities. Principal and interest are
subordinated to all existing indebtedness of the Company and to any future
institutional indebtedness.
Commencing on the effective date of an IPO prior to the maturity date, the
notes are convertible, at the option of the holder, into an aggregate of 375,000
Bridge Units at the rate of one Unit per $2.00 of principal amount of notes.
Each Bridge Unit will consist of one share of the Company's Common Stock and one
warrant. The term of the warrants will be identical to any warrants sold in the
IPO. Upon conversion, all accrued interest will be waived.
Costs incurred in connection with the private placement totaling $390,406
have been capitalized as deferred financing costs. This amount includes an
imputed value of $375,000, or $1.00 per Bridge Unit, assigned to the conversion
feature of the Bridge Notes. Deferred financing costs are being amortized on a
straight-line basis over the term of the loan.
The aggregate maturities of long-term debt for the next four years ending
December 31, are as follows: 1997 -- $21,250; 1998 -- $21,250; 1999 -- $771,250
and 2000 -- $8,854.
F-10
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- STOCKHOLDERS' EQUITY
ISSUANCE OF COMMON STOCK
In April 1995, the Company issued 33,334 and 50,000 shares of its Common
Stock, respectively, to an officer and the Company's attorney in consideration
of services rendered. The Company's board of directors valued these shares at
$2,500, or $.03 per share.
STOCK OPTIONS
In 1994, the Company issued 560,000 nonqualified options to its president
and principal stockholder exercisable at $.03 per share. In 1995, the Company
issued additional nonqualified options to certain of its employees and advisors
to purchase up to 725,000 shares of the Company's Common Stock for $.03 per
share, including a five-year option to purchase 50,000 shares issued to the
Company's general counsel who is also a board member. A total of 35,000 options
were canceled in 1996 when the option holders left the Company.
The Company has elected to use the intrinsic value-based method of APB
Opinion No. 25 to account for all of its employee stock-based compensation
plans. Accordingly, no compensation cost has been recognized in the accompanying
financial statements for stock options because the exercise price of each option
equals or exceeds the fair value of the underlying common stock as of the grant
date for each stock option, except for stock granted in April 1995 in which the
Company has recorded stock compensation of $2,500, as determined by the
Company's Board of Directors.
The Company has adopted the pro forma disclosure provisions of SFAS No.
123. Had compensation cost for the Company's stock-based compensation grants
been determined in a manner consistent with the fair value approach described in
SFAS No. 123, the Company's net income and net income per share as reported
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995
------- ------
<S> <C> <C>
Net income
As reported......................................................... $51,603 $9,220
Adjusted pro forma.................................................. 51,507 7,630
Net income per share
As reported......................................................... .03 .01
Adjusted pro forma.................................................. .03 .01
</TABLE>
The fair value of each option is estimated on the date of grant using the
minimum value method with the following weighted average assumptions: No
dividends, an expected life of one to two years, and a risk-free interest rate
of 6.00% for the year ended December 31, 1995.
A summary of the status of the Company's options for the years ended
December 31, 1996 and 1995, is as follows:
F-11
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
---------------------- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
FIXED EXERCISE FIXED EXERCISE
OPTIONS PRICE OPTIONS PRICE
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year..................... 560,000 $ .03 1,285,000 $ .03
Granted.............................................. 725,000 .03 -- --
Forfeited............................................ -- -- (35,000) .03
Exercised............................................ -- -- (1,250,000) .03
--------- ----------
Outstanding at end of year/period.................... 1,285,000 --
--------- ----------
--------- ----------
Options exercisable at period-end.................... 1,210,000 --
--------- ----------
--------- ----------
Weighted average fair value of options granted during
the year........................................... $ .0025 $ --
--------- ----------
--------- ----------
</TABLE>
In December 1996, the Board of Directors adopted the Company's Stock Option
Plan (the 'Plan') and has reserved up to 500,000 shares of Common Stock for
issuance thereunder. The Plan provides for the granting of options to officers,
directors, employees and advisors of the Company. The exercise of incentive
stock options ('ISOs') issued to employees who are less than 10% stockholders
shall not be less than the fair market value of the underlying shares on the
date of grant or not less than 110% of the fair market value of the shares in
the case of an employee who is a 10% stockholder. The exercise price of
restricted stock options shall not be less than the par value of the shares to
which the option relates. Options are not exercisable for a period of one year
from the date of grant. Thereafter, options may be exercised as determined by
the Board of Directors, with maximum terms of ten and five years, respectively,
for ISOs issued to employees who are less than 10% stockholders and employees
who are 10% stockholders. In addition, under the plan, no individual will be
given the opportunity to exercise ISO's valued in excess of $100,000, in any
calendar year, unless and to the extent the options have first become
exercisable in the preceding year. The maximum number of shares with respect to
which options may be granted to an individual during any twelve month period is
100,000. The Plan will terminate in 2006.
As of January 21, 1997, the Company had granted 85,974 incentive stock
options exercisable at prices ranging from $3.50 to $3.85 per share and 81,526
non-qualified options exercisable at $3.50 per share under the Plan.
PREFERRED STOCK
On December 6, 1996, the Company's stockholders approved an amendment to
the Company's Certificate of Incorporation to authorize the issuance of up to
1,000,000 shares of Preferred Stock. The rights and privileges of the Preferred
Stock have not yet been determined.
F-12
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Current:
Federal........................................................... $ 39,320 $ 7,089
State............................................................. 14,219 4,674
-------- -------
Total current................................................ 53,539 11,763
-------- -------
Deferred:
Federal........................................................... (13,589) (3,398)
State............................................................. (1,344) (336)
-------- -------
Total deferred............................................... (14,933) (3,734)
-------- -------
$ 38,606 $ 8,029
-------- -------
-------- -------
</TABLE>
The Company's effective tax rate differs from the statutory federal tax
rate as shown in the following table:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1996 1995
------- ------
<S> <C> <C>
Computed 'expected' tax expense.......................................... $18,944 $2,587
State tax expenses, net of federal benefit............................... 7,495 1,320
Non-deductible items..................................................... 8,032 3,128
Other.................................................................... 4,135 994
------- ------
$38,606 $8,029
------- ------
------- ------
</TABLE>
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of 1996 and 1995 are
presented below:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1996 1995
------- -------
<S> <C> <C>
Deferred tax liabilities:
Depreciation....................................................... $14,799 $ 6,741
Tax basis change in accounting method.............................. 6,780 19,271
------- -------
Total deferred tax liabilities..................................... 21,579 26,012
------- -------
Deferred tax assets:
Allowance for doubtful accounts.................................... 7,950 2,700
Accrued reserves................................................... 7,950 2,700
------- -------
Total deferred tax assets.......................................... 15,900 5,400
------- -------
Net deferred tax liabilities............................................ $ 5,679 $20,612
------- -------
------- -------
</TABLE>
NOTE 10 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective December 31, 1995, the Company adopted SFAS No. 107, which
requires disclosing fair value to the extent practicable for financial
instruments which are recognized or unrecognized in the balance sheet. The fair
value of the financial instruments disclosed therein are not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider
F-13
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the tax consequences of realization or settlement. The following table
summarizes financial instruments by individual balance sheet accounts as of
December 31, 1996.
<TABLE>
<CAPTION>
CARRYING
AMOUNT FAIR VALUE
---------- ----------
<S> <C> <C>
Debt maturing within one year..................................... $ 468,321 $ 468,321
Long-term debt.................................................... 801,354 801,354
---------- ----------
Totals....................................................... $1,269,675 $1,269,675
---------- ----------
---------- ----------
</TABLE>
For debt classified as current, it was assumed that the carrying amount
approximated fair value for these instruments because of their short maturities.
The fair value of long-term debt is based on current rates at which the Company
could borrow funds with similar remaining maturities. The carrying amount of
long-term debt approximates fair value.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
The Company's board of directors has approved new employment agreements for
three of its officers, effective January 1, 1997. The agreement with the
Company's president has a five-year term and provides for an annual salary of
$138,000 in the first year, increasing to $175,000 and $210,000 in the second
and third years, respectively. In years four and five, the president's base
salary will be $210,000, but can be increased at the discretion of the board of
director's compensation committee. Under the agreement, the Company will secure
and pay the premiums on a $1,000,000 life insurance policy payable to the
president's designated beneficiary or his estate. The agreement further provides
for medical benefits, the use of an automobile, and grants of 25,974 incentive
stock options and 74,026 non-qualified stock options under the Company's Stock
Option Plan. This agreement was subsequently amended (see Note 13).
The other agreements have a three-year term and replace three-year
contracts currently in effect. Those contracts, which were initiated in 1995,
each provided for salaries of $62,400 per year with 10% annual increases, plus
the grant of 200,000 immediately vested options to purchase shares of the
Company's common stock at $.03 per share. The new agreements each provide for
annual salaries of $104,000 in the first year, increasing by $10,000 each year
thereafter. The agreements further provide for an incentive bonus equal to 1/2
of 1% of net sales payable twice yearly to both officers. Each employee will
also be entitled to a monthly automobile allowance.
Each of the three agreements may be terminated without cause by the
respective employee upon ninety days written notice to the Company.
CONSULTING AGREEMENT
The Company has an agreement for an indefinite term with its general
counsel to provide corporate legal services for a fee of $18,000 per year.
OPERATING LEASES
The Company leases its facilities pursuant to a non-cancelable operating
lease agreement.
Future minimum annual rentals on this lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<C> <S> <C>
1997 ..................................................... $ 58,980
1998 ..................................................... 62,280
1999 ..................................................... 62,280
2000 ..................................................... 25,950
--------
$209,490
--------
--------
</TABLE>
Rent expense has been recognized on a straight-line basis to account for
fixed rental escalations during the lease term, resulting in deferred rent of
$4,572 at December 31, 1996. The Company also
F-14
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
leases demonstration facilities at two other locations on a month-to-month
basis. Total rent expense for the years ended December 31, 1996 and 1995 was
$73,957 and $44,300, respectively.
LAWSUIT
The Company is the subject of a civil action filed by an individual on July
23, 1996 in the Superior Court of New Jersey, Middlesex County, arising from an
automobile accident involving a vehicle driven by the plaintiff and a
Company-owned van driven by an individual employed by the Company at the time.
The plaintiff alleges personal injuries due to the negligence of the Company,
the employee, and the driver of a third vehicle involved in the accident, and
seeks damages of $5,000,000. The Company's liability insurance carrier is
defending the action. Although an evaluation of the outcome cannot be made at
the present time, the Company believes that its liability insurance is
sufficient to cover any potential loss resulting from an adverse decision, and
accordingly, has not recorded any provisions for loss in the accompanying
financial statements.
NOTE 12 -- PROPOSED PUBLIC OFFERING
In December 1996, the Company entered into a letter of intent for a $4.9
million firm commitment public offering of 700,000 Units, each unit to consist
of two shares of Common Stock and two Class A Redeemable Common Stock Purchase
Warrants.
NOTE 13 -- SUBSEQUENT EVENTS -- UNAUDITED
NEW RESELLER AGREEMENT
In February 1997, the Company entered into a non-exclusive agreement with
Sprint North Supply ('SNS'), the recently designated exclusive distributor of
Sony videoconferencing products. Under the agreement, SNS will sell Sony
videoconferencing equipment to the Company on terms which are more favorable
than those on which the Company purchased equipment under the Sony reseller
agreement. The agreement expires on January 31, 1998, but may be terminated by
either party upon 60 days' written notice.
AMENDED EMPLOYMENT AGREEMENT
In March 1997, the Company's board of directors approved changes to the
1997 employment agreement with the Company's president (see Note 11). The
amendment provides for an extension of the agreement for an additional year to
six years; a reduction in annual salary to $133,000, $170,000 and $205,000 in
the first, second and third years, respectively, and a minimum annual base
salary of $205,000 in years four through six; and the issuance of 750,000
nonqualified stock options at an exercise price of $3.50 per share.
NEW LEASE
In March 1997, the Company entered into a new five-year lease for the use
of office and warehouse space. The lease provides for annual base rent of
$63,680 plus a proportionate share of operating expenses, and includes a five
year renewal option. The lease will commence on the earlier of the date on which
the construction of the premises is completed, or the Company occupies the
facility. The building is owned by an entity in which a member of the Company's
board of directors is a part owner. The Company believes that the lease reflects
a fair rental value for the property.
F-15
<PAGE>
<PAGE>
__________________________________ __________________________________
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OR PROJECTIONS OF FUTURE PERFORMANCE
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY SUCH OTHER INFORMATION,
PROJECTIONS OR REPRESENTATIONS, IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS
HAVING BEEN SO AUTHORIZED. THE DELIVERY OF THIS PROSPECTUS OR ANY SALE HEREUNDER
AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY ANY OF THE COMMON STOCK OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................ 3
Risk Factors...................................... 7
Dilution.......................................... 14
Use of Proceeds................................... 15
Capitalization.................................... 17
Dividend Policy................................... 17
Selected Financial Data........................... 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 19
Business.......................................... 21
Management........................................ 30
Certain Transactions.............................. 35
Interim Financings................................ 36
Principal Stockholders............................ 36
Description of Securities......................... 38
Underwriting...................................... 41
Legal Matters..................................... 43
Experts........................................... 43
Concurrent Offering............................... 43
Additional Information............................ 44
Index to Financial Statements..................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN ITS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
700,000 UNITS
ALL COMMUNICATIONS
CORPORATION
CONSISTING OF
1,400,000 SHARES OF COMMON STOCK
AND
1,400,000 REDEEMABLE
CLASS A WARRANTS
---------------------
PROSPECTUS
---------------------
MONROE PARKER
SECURITIES, INC.
, 1997
__________________________________ __________________________________
<PAGE>
<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.
[ALTERNATIVE PAGE FOR SELLING STOCKHOLDER'S PROSPECTUS]
PROSPECTUS
PRELIMINARY PROSPECTUS, DATED APRIL 9, 1997
SUBJECT TO COMPLETION
ALL COMMUNICATIONS CORPORATION
25,000 SHARES OF COMMON STOCK
This Prospectus relates to the sale of 25,000 shares of Common Stock, no
par value per share ('Common Stock'), by the President of the Company (the
'Selling Stockholder'). The Common Stock to be sold by the Selling Stockholder
is referred to herein as the 'Registered Common Stock.' See 'Selling Stockholder
and Plan of Distribution.'
Application been made to list the Common Stock on the Boston Stock Exchange
('BSE') under the symbol 'CMN.' It is also anticipated that such securities will
also be traded in the over-the-counter market on the National Association of
Securities, Inc.'s ('NASD') OTC Electronic Bulletin Board under the symbol
'ACMN.'
The Company will not receive any proceeds from the sale by the Selling
Stockholder of the Registered Common Stock.
------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY
INVESTORS WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. SEE 'RISK
FACTORS' ON PAGE 7 AND 'DILUTION' ON PAGE 14.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAVE THEY
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
<PAGE>
The Selling Stockholder may be deemed an 'Underwriter' as defined in the
Securities Act of 1933 (the 'Securities Act'). If any broker-dealers are used by
the Selling Stockholder, any commissions paid to broker-dealers and, if
broker-dealers purchase any Registered Common Stock as principals, any profits
received by such broker-dealers on the resales of the Registered Common Stock
may be deemed underwriting discounts or commissions under the Securities Act. In
addition, any profit realized by the Selling Stockholder may be deemed to be
underwriting commissions. All costs, expenses and fees in connection with the
registration of the Registered Common Stock offered by the Selling Stockholder,
estimated at approximately $1,180, will be borne by the Selling Stockholder.
Brokerage commissions, if any, attributable to the sale of the Registered Common
Stock will be borne by the Selling Stockholder. The Company has agreed to
indemnify the Selling Stockholder against certain liabilities, including
liabilities under the Securities Act.
The 25,000 shares of Common Stock offered hereby may be sold from time to
time by the Selling Stockholder, or by transferees, commencing three years from
the date of this Prospectus, or earlier with the consent of Monroe Parker
Securities, Inc. (the 'Underwriter'). No underwriting arrangements have been
entered into by the Selling Stockholder. The distribution of the Selling
Stockholder's securities by the Selling Stockholder may be effected by one or
more transactions that may take place on the over-the-counter market, including
ordinary broker's transactions, privately negotiated transactions or through the
sale to one or more dealers for resale of such securities as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Stockholder in connection with the sales of the Selling Stockholder's
securities. See 'Selling Stockholder and Plan of Distribution.'
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering (the 'Offering')
by the Company of 700,000 Units, each Unit consisting of two shares of Common
Stock and two Warrants, was declared effective by the Securities and Exchange
Commission (the 'Commission').
A-2
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........................... 25,000 shares of Common Stock (the 'Registered Common Stock') are
being offered by the President of the Company (the 'Selling
Stockholder'). The sales by the Selling Stockholder are not part
of the Offering. The Selling Stockholder may not sell the
Registered Common Stock prior to three years from the date of
this Prospectus without the consent of the Underwriter.
The Selling Stockholder has advised the Company that any sales of
the Registered Common Stock will be made on the Boston Stock
Exchange, or on the NASD's OTC Electronic Bulletin Board at
prevailing prices or in private transactions at negotiated
prices. See 'Selling Stockholder and Plan of Distribution.'
Common Stock Outstanding(1).................. 4,775,000 shares(1)
Use of Proceeds.............................. The Company will not receive any proceeds from the sale by the
Selling Stockholder of the Registered Common Stock.
Proposed Boston Stock Exchange
Symbol(2):
Common Stock............................ CMN
Proposed NASD's Electronic Bulletin Board
Symbol(2):
Common Stock............................ ACMN
Risk Factors................................. The securities offered hereby are speculative, involve a high
degree of risk and immediate substantial dilution, and should be
considered only by investors who can afford to sustain a loss of
their entire investment. See 'Risk Factors' and 'Dilution.'
</TABLE>
- ------------
(1) Includes 1,400,000 shares of Common Stock included in the Offering and
375,000 shares of Common Stock included in the Bridge Units, each consisting
of one share of Common Stock and one redeemable Class A Warrant of the
Company, assuming the conversion of $750,000 principal amount of Bridge
Notes into 375,000 Bridge Units. Does not include an aggregate of 3,487,500
shares which may be issued upon exercise of (i) the Warrants underlying the
Units included in the Offering; (ii) the Underwriter's Options and
underlying Warrants ; (iii) the Underwriter's over-allotment option and
underlying Warrants; (iv) the shares underlying the Warrants included in the
Bridge Units; (v) outstanding options issued under the Company's stock
option plan; and (vi) other outstanding options. See 'Interim Financing,'
'Description of Securities' and 'Underwriting.'
(2) Notwithstanding listing on the Boston Stock Exchange, and trading on the
NASD's Electronic Bulletin Board, there can be no assurance that an active
trading market for the Company's securities will develop or, if developed,
will be sustained.
A-3
<PAGE>
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Stockholder of the Registered Common Stock. The net proceeds to the Company from
the sale of the 700,000 Units in the Offering, after deducting underwriting
discounts and commissions and other expenses of the Offering, are estimated to
be $4,014,000 ($4,653,450 if the Underwriter's over-allotment option is
exercised in full). The Company intends to utilize the net proceeds of this
offering over the next 24 months substantially as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
APPLICATION AMOUNT PERCENTAGE
- --------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Telephone Systems Inventory(1)............................................. $ 635,000 15.8%
Videoconferencing Equipment Inventory(2)................................... 510,000 12.7
Leasing New Corporate Headquarters and Leasehold Improvements(3)........... 240,000 6.0
Hiring Additional Employees(4)............................................. 600,000 14.9
Purchase of Computer Systems and Associated Software(5).................... 175,000 4.4
Marketing(6)............................................................... 450,000 11.2
Working Capital(7)......................................................... 1,404,000 35.0
----------- -----------
$4,014,000 100.0%
----------- -----------
----------- -----------
</TABLE>
- ------------
(1) Includes telephone common equipment ($250,000); telephone sets ($300,000);
and voice mail ($85,000).
(2) Includes video codecs ($240,000); monitors ($145,000); and peripheral
equipment, including cameras and audio systems ($125,000).
(3) Includes costs in connection with moving the Company's headquarters office
to larger facilities in the first half of 1997. It is estimated that such
facilities will contain approximately 10,000 square feet of space to be
utilized for executive, administrative and sales functions and for
demonstration of the Company's voice and video communications systems. An
additional approximately 5,000 square feet of space will be utilized for
warehousing of the Company's inventory. See 'Business -- Facilities.'
(4) Includes costs associated with the planned hiring and retention over the
next two years of two branch sales managers for the Company's voice
products, who will report directly to the Company's Vice President -- Sales
and Marketing of Voice Products; nine voice sales representatives, who will
report directly to the voice branch sales managers; and eight
videoconferencing sales representatives, who will report directly to the
Company's Vice President -- Sales and Marketing of Videoconferencing
Products. See 'Business -- Sales and Marketing.'
(5) Includes costs in connection with upgrading both the hardware and software
of the Company's computer systems, software and local area network (LAN).
The new system will encompass service order entry, inventory management,
billing, accounting, word processing and administrative software. Also
includes consulting fees for project design and implementation.
(6) Includes costs in connection with exhibiting the Company's products at trade
shows ($150,000), costs associated with a direct mail campaign directed to
the approximately 9,000 franchisees of CENTURY 21'r', ERA'r' and Coldwell
Banker'r' ($150,000), as required under the Company's Preferred Vendor
Agreement with HFS Incorporated, and costs of telemarketing the Company's
videoconferencing products to end-users accounts ($150,000). See
'Business -- Sales and Marketing.'
(7) Working capital will be used to pay general and administrative expenses for
general corporate purposes including, but not limited to, paying down any
existing bank credit line and obtaining letters of credit for international
installation projects, as well as for the possible acquisition of other
voice and video communications systems resellers.
------------------------
The foregoing allocations are estimates only and are subject to revision
from time to time to meet the Company's requirements; any excess will be added
to working capital and any shortage will be
A-4
<PAGE>
<PAGE>
dedicated from working capital. Furthermore, allocations may be changed in
response to unanticipated developments in the Company's business. The Company
may re-allocate such amounts from time to time among the categories shown above
or to new categories if it believes such to be in its best interest. In the
event that the Underwriter's over-allotment option is exercised or to the extent
that the Warrants are exercised, including the Warrants underlying the Bridge
Units, the Company will realize additional net proceeds, which will be added to
working capital. Pending full utilization of the net proceeds of this offering,
the Company intends to make temporary investments in United States government or
federally insured securities. The Company believes that the net proceeds from
this offering, plus working capital from operations and other sources of funds
will be adequate to sustain operations for at least the next two years.
A-5
<PAGE>
<PAGE>
SELLING STOCKHOLDER AND PLAN OF DISTRIBUTION
In addition to the 700,000 Units being registered hereunder to be sold by
the Company in the Offering, the Company is registering for sale pursuant to the
Registration Statement of which this Prospectus is a part, 25,000 shares of
Common Stock ('Registered Common Stock') on behalf of Richard Reiss, the
President of the Company (the 'Selling Stockholder'). Such shares of Common
Stock may be sold commencing three years from the date of this Prospectus, or
earlier with the consent of the Underwriter.
The following table sets forth certain information with respect to the
Selling Stockholder, as of the date of this Prospectus, and after the sale of
700,000 Units by the Company in the Offering and 25,000 shares of Common Stock
by the Selling Stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR NUMBER OF OWNED AFTER
TO OFFERING(1) SHARES THE OFFERING(1)
--------------------- TO BE --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------------ --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Richard Reiss......................................... 2,810,000(2) 68.1% 25,000 2,785,000 50.4%
</TABLE>
- ------------
(1) Includes 375,000 shares of Common Stock issuable upon the Conversion of
$750,000 principal amount of Bridge Notes into 375,000 Bridge Notes prior to
the Completion of the Offering. See 'Interim Financing.'
(2) Includes 750,000 shares issuable upon exercise of an option granted to Mr.
Reiss pursuant to his employment agreement with the Company. See
'Management -- Employment Agreements.'
The Company will not receive any proceeds from the sale by the Selling
Stockholder of the Registered Common Stock.
The Selling Stockholder has agreed to reimburse the Company for certain
expenses in connection with the registration of the Registered Common Stock.
These expenses consist of $25 (SEC filing fee attributable to the Selling
Stockholder's securities); $280 (based upon a pro rata share of Blue Sky legal
expenses and filing fees); $700 (based upon a pro rata share of legal fees and
expenses); and $175 (based upon a pro rata share of accounting fees and
expenses), for a total of $1,180. Such amounts will be paid to the Company on
the date of the completion of the Offering.
The Selling Stockholder has advised the Company with respect to the
Registered Common Stock, that sales may be effected from time to time in
transactions (which may include block transactions) by or for the account of the
Selling Stockholder in the over-the-counter market or in negotiated
transactions, a combination of such methods of sale or otherwise, and securities
may be transferred by gift. The Selling Stockholder may effect such transactions
by selling his securities directly to purchasers, through broker-dealers acting
as agents for the Selling Stockholder or to broker-dealers who may purchase
shares as principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholder and/or the purchasers
from whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
The Commission has recently adopted Regulation M to replace Rule 10b-6 and
certain other rules and regulations under the Exchange Act. Regulation M
prohibits any person engaged in the distribution of the Selling Securityholders'
securities from simultaneously engaging in market-making activities with respect
to any securities of the Company during the applicable 'cooling-off' period (one
or five business days) prior to the commencement of such distribution.
Accordingly, in the event the Underwriter is engaged in a distribution of a
Selling Stockholder's securities, it will not be able to make a market in the
Company's securities during the applicable restrictive period. However, the
Underwriter has not agreed to and is not obligated to act as broker-dealer in
the sale of the Selling Stockholder's securities and the Selling Stockholder may
be required, and in the event the Underwriter is a market-maker, will likely be
required, to sell such securities through another broker-dealer. In addition, if
the Selling Stockholder desires to sell his securities, he will be subject to
the applicable provisions of the
A-6
<PAGE>
<PAGE>
Exchange Act and the rules and regulation thereunder, which provisions may limit
the timing of the purchases and sales of shares of the Company's securities by
the Selling Stockholder.
The Selling Stockholder and broker-dealers, if any, acting in connection
with such sales might be deemed to be 'underwriters' within the meaning of
Section 2(11) of the Securities Act and any commission received by them and any
profit on the resale of the securities might be deemed to be underwriting
discount and commissions under the Securities Act. The Selling Stockholder may
agree to indemnify any agent, dealer, or broker-dealer that participates in
transactions involving sales of the Company's securities against certain
liabilities, including liabilities arising under the Securities Act. Sales of
the Company's securities by the Selling Stockholder, or even the potential of
such sales, would likely have an adverse effect on the market price of the
Common Stock.
At the time a particular offer of the Company's securities is made by or on
behalf of the Selling Stockholder, to the extent required, a Prospectus will be
distributed which will set forth the number of Bridge Units, shares of Common
Stock and Warrants being offered and the terms of the offering, including the
name or names of any underwriters, dealers or agents, if any, the purchase price
paid by any underwriter for the Company's securities purchased from the Selling
Stockholder and any discounts, commissions or concessions allowed or reallowed
or paid to dealers, and the proposed selling price to the public.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Singer Zamansky LLP, New York, New York.
EXPERTS
The financial statements of the Company included in this Prospectus have
been audited by Schneider Ehrlich & Wengrover LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
CONCURRENT OFFERING
The Registration Statement, of which this Prospectus forms a part, also
covers 700,000 Units, each consisting of two shares of Common Stock and two
Warrants being offered by the Company in the Offering made pursuant to the
Offering Prospectus.
ADDITIONAL INFORMATION
The Company is not a reporting company under the Exchange Act. The Company
has filed a Registration Statement on Form SB-2 under the Securities Act with
the Commission in Washington, D.C. with respect to the Units offered hereby.
This Prospectus, which is part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and the Units
offered hereby, reference is hereby made to the Registration Statement and such
exhibits, which may be inspected without charge at the office of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and at 500 West Madison (Suite 1400), Chicago, Illinois 60661. Copies
of such material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
Following the offering, the Company will be subject to the reporting and
other requirements of the Exchange Act and intends to furnish to its
stockholders annual reports containing audited financial statements and may
furnish interim reports as it deems appropriate.
A-7
<PAGE>
<PAGE>
[ALTERNATE BACK COVER]
_____________________________ _____________________________
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OR PROJECTIONS OF FUTURE PERFORMANCE
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY SUCH OTHER INFORMATION,
PROJECTIONS OR REPRESENTATIONS, IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS
HAVING BEEN SO AUTHORIZED. THE DELIVERY OF THIS PROSPECTUS OR ANY SALE HEREUNDER
AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY ANY OF THE COMMON STOCK OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................................... 3
Risk Factors............................................................................................................... 7
Dilution................................................................................................................... 14
Use of Proceeds............................................................................................................ 15
Capitalization............................................................................................................. 17
Dividend Policy............................................................................................................ 17
Selected Financial Data.................................................................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 19
Business................................................................................................................... 21
Management................................................................................................................. 30
Certain Transactions....................................................................................................... 34
Interim Financings......................................................................................................... 35
Principal Stockholders..................................................................................................... 36
Selling Securityholders and Plan of Distribution...........................................................................
Description of Securities.................................................................................................. 37
Underwriting............................................................................................................... 40
Legal Matters.............................................................................................................. 42
Experts.................................................................................................................... 42
Concurrent Offering........................................................................................................ 42
Additional Information..................................................................................................... 43
Index to Financial Statements.............................................................................................. F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN ITS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
ALL COMMUNICATIONS
CORPORATION
25,000 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1997
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 14A:3-5 of the New Jersey Business Corporation Act and paragraph 6
of the Company's Certificate of Incorporation (Exhibit 3.3) provide for
indemnification of directors and officers of the Company under certain
circumstances.
Reference is made to Paragraphs 6 and 7 of the Underwriting Agreement
(Exhibit 1.1) with respect to indemnification of the Company and the
Underwriter.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
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 a director, officer or controlling person in
connection with the securities being registered hereunder, 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
Securities Act and will be governed by the final adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities offered hereby.
<TABLE>
<S> <C>
SEC registration fee........................................................... $ 4,494.01
NASD registration fee.......................................................... 1,983.02
National Securities Exchange listing fee....................................... 22,500.00
Printing and engraving......................................................... 40,000.00
Accountants' fees and expenses................................................. 25,000.00
Legal fees..................................................................... 100,000.00
Transfer agent's and warrant agent's fees and expenses......................... 5,000.00
Blue Sky fees and expenses..................................................... 40,000.00
Underwriter's non-accountable expense allowance................................ 147,000.00
Miscellaneous.................................................................. 10,022.97
-----------
Total................................................................ $396,000.00
-----------
-----------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information concerning the issuance by the Registrant of
its securities within the past three years without registering the securities
under the Securities Act of 1933. All such securities are restricted securities
and the certificates bear a restrictive legend.
II-1
<PAGE>
<PAGE>
(a) The following table sets forth the Registrant's sales of unregistered
securities during the period from April 28, 1995 through December 13, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NAME DATE OF PURCHASE COMMON STOCK CONSIDERATION
- ---------------------------------------------------------- ------------------ ------------ -------------
<S> <C> <C> <C>
Peter Barrett............................................. April 28, 1995 50,000 $ 1,500
Robert B. Kroner.......................................... April 28, 1995 33,334 1,000
Robert B. Kroner.......................................... December 13, 1996 50,000 1,500
E. Gerald Kay............................................. December 13, 1996 100,000 3,000
Maureen Rini.............................................. December 13, 1996 25,000 750
Robin Kubu................................................ December 13, 1996 25,000 750
Leo Flotron............................................... December 13, 1996 200,000 6,000
Joseph Scotti............................................. December 13, 1996 200,000 6,000
Keith Blackmore........................................... December 13, 1996 25,000 750
Douglas Roser............................................. December 13, 1996 25,000 750
Andrea Grasso............................................. December 13, 1996 25,000 750
Maria Aversa.............................................. December 13, 1996 2,500 75
Eric Gerkens.............................................. December 13, 1996 2,500 75
Richard Reiss............................................. December 18, 1996 560,000 16,800
Anthony Zarro............................................. December 18, 1996 10,000 300
------------ -------------
1,333,334 $40,000
------------ -------------
------------ -------------
</TABLE>
(b) In December 1996, the Company completed a bridge financing ('Bridge
Financing'), pursuant to which it issued to seven accredited investors an
aggregate of $750,000 principal amount of 12% Convertible Subordinated Notes
('Bridge Notes'). To the extent not converted, the principal amount of the
Bridge Notes is due and payable on the earlier of the completion of this
offering or December 31, 1999. Commencing on the effective date of this
offering, the Bridge Notes are convertible, at the option of the holders, into
an aggregate of up to 375,000 Bridge Units, each consisting of one share of
Common Stock and one Warrant, and the Company will issue to each note holder one
Bridge Unit for each $2.00 principal amount of Bridge Notes presented for
conversion. The following table sets forth the names of the investors in the
Bridge Financing, together with the principal amount of Bridge Notes acquired by
each investor.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME BRIDGE NOTES
- ---------------------------------------------------------------------- ------------
<S> <C>
Charles S. Junger..................................................... $150,000
E. Gerald Kay......................................................... 125,000
Knoll-Smith Partnership............................................... 125,000
Stephen Capizzi....................................................... 100,000
R.F. Properties Corp. ................................................ 75,000
Kenneth Lipson........................................................ 150,000
Eric Friedman......................................................... 25,000
------------
$750,000
------------
------------
</TABLE>
The issuances described in paragraphs (a) and (b) are exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
as transactions not involving a public offering.
All of the individuals listed in paragraph (a) above were employees or
consultants to the Company at the time of the issuances. Richard Reiss is the
Chairman of the Board and President of the Company, Messrs. Barrett, Flotron and
Scotti are Vice Presidents and Robert B. Kroner is a Director and the General
Counsel of the Company. Messrs. Kay and Zarro provided consulting services to
the Company.
II-2
<PAGE>
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
1.1 -- Form of Amended Underwriting Agreement.
1.2 -- Form of Amended Underwriter's Options.
1.3 -- Form of Consulting Agreement between the Registrant and the Underwriter.(1)
1.4 -- Form of Amended Selected Dealers Agreement.
3.1 -- Certificate of Incorporation, as amended.(1)
3.2 -- By-Laws, as amended.(1)
4.1 -- Form of Amended Warrant Agreement among the Registrant and American Stock Transfer & Trust Company,
as Warrant Agent.
4.2 -- Specimen Common Stock Certificate of Registrant.
4.3 -- Specimen Class A Warrant Certificate of Registrant.
5.1 -- Opinion of Singer Zamansky LLP.(1)
10.1 -- Agreement, dated December 9, 1996, between the Registrant and HFS Incorporated.(1)
10.2 -- Dealer Agreement, dated May 20, 1992, between the Registrant and Panasonic Communications & Systems
Company.(1)
10.3 -- 1996 Reseller Agreement, dated April 1, 1996, between the Registrant and Sony Electronics Inc.(1)
10.4 -- Employment Agreement, effective January 1, 1997, between the Registrant and Richard Reiss.(1)
10.5 -- Employment Agreement, effective January 1, 1997, between the Registrant and Joseph Scotti.(1)
10.6 -- Employment Agreement, effective January 1, 1997, between the Registrant and Leo Flotron.(1)
10.7 -- Lease Agreement for premises located at 1450 Route 22, Mountainside, New Jersey, dated April 13,
1995, between the Registrant and Mountain Plaza Associates.(1)
10.8 -- First Amendment to Lease Agreement for premises located at 1450 Route 22, Mountainside, New Jersey,
dated June 27, 1996, between the Registrant and Mountain Plaza Associates.(1)
10.9 -- Sublease Agreement for premises located at 1130 Connecticut Avenue, N.W., Washington D.C., dated July
1, 1996, between the Registrant and Charles L. Fishman, P.C.(1)
10.10 -- Stock Option Plan.(1)
10.11 -- Agreement, dated February 21, 1997, between the Registrant and Sprint North Supply.(1)
10.12 -- Dealer Sales Agreement, dated March 10, 1997, between the Registrant and Sprint North Supply.(1)
10.13 -- Subordination Agreement, dated March 22, 1996, between the Registrant and Panasonic Communications &
Systems Company.(1)
10.14 -- Balance Term Loan Agreement, dated May 22, 1996, between the Registrant and The Bank of New York
(NJ).(1)
10.15 -- Credit Line Agreement, dated May 22, 1996, between the Registrant and The Bank of New York (NJ).(1)
10.16 -- Employment Agreement, effective March , 1997, between the Registrant and Richard Reiss.(1)
10.17 -- Lease Agreement for premises located at 225 Long Avenue, Hillside, New Jersey, dated March , 1997,
between the Registrant and Vitamin Realty Associates, L.L.C.(1)
11.1 -- Computation of Income Per Share.(1)
24.1 -- Consent of Schneider Ehrlich & Wengrover LLP, the Company's Independent Auditors (see Page II-6).
24.2 -- Consent of Singer Zamansky LLP (Included in Exhibit 5.1).
25.1 -- Powers of Attorney (see Page II-5).
27.1 -- Financial Data Schedule, Article 5.(1)
</TABLE>
- ------------
(1) Previously filed.
II-3
<PAGE>
<PAGE>
ITEM 28. UNDERTAKINGS
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
(3) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(4) To remove from the registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
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 hereunder, 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
Securities Act and will be governed by the final adjudication of such issue.
(6) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(7) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-4
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
amended Registrant certifies that it has reasonable grounds to believe it meets
all the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Mountainside, New Jersey on April 9, 1997.
ALL COMMUNICATIONS CORPORATION
By: /S/ RICHARD REISS
.................................
RICHARD REISS,
CHAIRMAN
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Reiss his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits and schedules thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully ratifying and confirming all that said attorney-in-fact and
agent or their substitutes or substitute may lawfully do or cause to be done by
virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
amended Registration Statement has been signed by the following persons in the
capacities indicated on April 9, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ RICHARD REISS Chairman of the Board of Directors, Chief April 9, 1997
......................................... Executive Officer and President (Principal
RICHARD REISS Executive Officer)
/s/ SCOTT TANSEY Vice President -- Finance (Principal April 9, 1997
......................................... Financial and Accounting Officer)
SCOTT TANSEY
/s/ ROBERT B. KRONER Director April 9, 1997
.........................................
ROBERT B. KRONER
/s/ ERIC FRIEDMAN Director April 9, 1997
.........................................
ERIC FRIEDMAN
PETER MALUSO* Director April 9, 1997
.........................................
PETER MALUSO
ANDREA GRASSO Director April 9, 1997
.........................................
ANDREA GRASSO
*By: /s/ RICHARD REISS
.........................................
RICHARD REISS, ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
amended Registration Statement on Form SB-2 of our report dated January 21, 1997
relating to the financial statements of All Communications Corporation, which
appears in such Prospectus. We also consent to the reference to us under the
heading 'Experts' is such Prospectus.
SCHNEIDER EHRLICH & WENGROVER LLP
Woodbury, New York
April 9, 1997
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
------ ----------------------- ------------------
<C> <S> <C>
1.1 -- Form of Amended Underwriting Agreement.
1.2 -- Form of Amended Underwriter's Options.
1.3 -- Form of Consulting Agreement between the Registrant and the Underwriter.(1)
1.4 -- Form of Amended Selected Dealers Agreement.
3.1 -- Certificate of Incorporation, as amended.(1)
3.2 -- By-Laws, as amended.(1)
4.1 -- Form of Amended Warrant Agreement among the Registrant and American Stock Transfer & Trust Company,
as Warrant Agent.
4.2 -- Specimen Common Stock Certificate of Registrant.
4.3 -- Specimen Class A Warrant Certificate of Registrant.
5.1 -- Opinion of Singer Zamansky LLP.(1)
10.1 -- Agreement, dated December 9, 1996, between the Registrant and HFS Incorporated.(1)
10.2 -- Dealer Agreement, dated May 20, 1992, between the Registrant and Panasonic Communications & Systems
Company.(1)
10.3 -- 1996 Reseller Agreement, dated April 1, 1996, between the Registrant and Sony Electronics Inc.(1)
10.4 -- Employment Agreement, effective January 1, 1997, between the Registrant and Richard Reiss.(1)
10.5 -- Employment Agreement, effective January 1, 1997, between the Registrant and Joseph Scotti.(1)
10.6 -- Employment Agreement, effective January 1, 1997, between the Registrant and Leo Flotron.(1)
10.7 -- Lease Agreement for premises located at 1450 Route 22, Mountainside, New Jersey, dated April 13,
1995, between the Registrant and Mountain Plaza Associates.(1)
10.8 -- First Amendment to Lease Agreement for premises located at 1450 Route 22, Mountainside, New Jersey,
dated June 27, 1996, between the Registrant and Mountain Plaza Associates.(1)
10.9 -- Sublease Agreement for premises located at 1130 Connecticut Avenue, N.W., Washington D.C., dated July
1, 1996, between the Registrant and Charles L. Fishman, P.C.(1)
10.10 -- Stock Option Plan.(1)
10.11 -- Agreement, dated February 21, 1997, between the Registrant and Sprint North Supply.(1)
10.12 -- Dealer Sales Agreement, dated March 10, 1997, between the Registrant and Sprint North Supply.(1)
10.13 -- Subordination Agreement, dated March 22, 1996, between the Registrant and Panasonic Communications &
Systems Company.(1)
10.14 -- Balance Term Loan Agreement, dated May 22, 1996, between the Registrant and The Bank of New York
(NJ).(1)
10.15 -- Credit Line Agreement, dated May 22, 1996, between the Registrant and The Bank of New York (NJ).(1)
10.16 -- Employment Agreement, effective March , 1997, between the Registrant and Richard Reiss.(1)
10.17 -- Lease Agreement for premises located at 225 Long Avenue, Hillside, New Jersey, dated March , 1997,
between the Registrant and Vitamin Realty Associates, L.L.C.(1)
11.1 -- Computation of Income Per Share.(1)
24.1 -- Consent of Schneider Ehrlich & Wengrover LLP, the Company's Independent Auditors (see Page II-6).
24.2 -- Consent of Singer Zamansky LLP (Included in Exhibit 5.1).
25.1 -- Powers of Attorney (see Page II-5).
27.1 -- Financial Data Schedule, Article 5.(1)
</TABLE>
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(1) Previously filed.
STATEMENT OF DIFFERENCES
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The registered trademark symbol shall be expressed as 'r'
<PAGE>
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700,000 Units (each Unit consisting of two (2) shares of Common Stock,
no par value per share and two (2) Warrants for Common Stock)
ALL COMMUNICATIONS CORPORATION
UNDERWRITING AGREEMENT
New York, New York
__________, 1997
Monroe Parker Securities, Inc.
2500 Westchester Avenue
Purchase, New York 10577
All Communications Corporation, a New Jersey corporation (the
"Company"), proposes to issue and sell to you (the "Underwriter"), an aggregate
of 700,000 Units ("Units"), each Unit consisting of two (2) shares of Common
Stock, no par value per share ("Common Stock"), and two (2) Class A Redeemable
Purchase Warrants for Common Stock ("Warrants"). The Units, Common Stock and
Warrants may be collectively referred to hereinafter as the "Securities". Each
Warrant entitles the registered holder thereof to purchase one (1) share of
Common Stock at an exercise price of $4.25 per share for a period of three (3)
years, commencing __________, 1998 (one (1) year from the Effective Date)
through __________, 2001. The Warrants are subject to redemption by the Company
upon not less than thirty (30) days' notice at any time after ___________, 1998
(eighteen (18) months from the Effective Date) or earlier with the consent of
the Underwriter, at $.10 per warrant, if the closing sale price per share of
Common Stock has equaled or exceeded 250% of the then exercise price of the
Warrants on all 20 business days ending on the third day prior to the written
notice of redemption. In addition, the Company proposes to grant to the
Underwriter the option referred to in Section 2(b) to purchase all or any part
of an aggregate of 105,000 additional Units.
Unless the context otherwise requires, the aggregate of 700,000 Units to
be sold by the Company (together with the additional Units sold pursuant to
Section 2(b)) and the shares of Common Stock and the Warrants comprising the
Units, are herein called the "Units." The Common Stock to be outstanding after
giving effect to the sale of the Units are also called the "Shares."
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You have advised the Company that you desire to purchase the Units.
The Company confirms the agreements made by it with respect to the purchase of
the Units by the Underwriter as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with you that:
(a) A registration statement (File No. 333-_______) on Form SB-2
relating to the public offering of the Units, including a form of prospectus
subject to completion, copies of which have heretofore been delivered to you,
has been prepared in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed in such registration statement), with
such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by you prior to the execution of this Agreement. As used in this
Agreement, the term "Company" means All Communications Corporation and/or each
of its subsidiaries ("Subsidiaries"); the term "Registration Statement" means
such registration statement, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to be filed pursuant
to said Rule 424(b), such term means the prospectus included in the Registration
Statement; except that if such registration statement or prospectus is amended
or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so supplemented, or both, as the case may be.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to and on the
First Closing Date (as hereinafter defined) or the
2
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Option Closing Date, as the case may be, (i) the Registration Statement and
Prospectus will in all respects conform to the requirements of the Act and the
Rules and Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make statements
therein not misleading; provided, however, that the Company makes no
representations, warranties or agreements as to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
the Underwriter specifically for use in the preparation thereof. It is
understood that the statements set forth in the Prospectus with respect to
stabilization, under the heading "Underwriting", the Risk Factor entitled
"Underwriter's Limited Underwriting Experience" and the identity of counsel to
the Underwriter under the heading "Legal Matters" constitute for purposes of
this Section and Section 6(b) the only information furnished in writing by or on
behalf of the Underwriter for inclusion in the Registration Statement and
Prospectus, as the case may be.
(c) The Company and its Subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation with full corporate power and
authority to own their properties and conduct their business as described in the
Prospectus and are duly qualified or licensed to do business as foreign
corporations and are in good standing in each other jurisdiction in which the
nature of their business or the character or location of their properties
require such qualification, except where the failure to so qualify will not
materially adversely affect the Company's or Subsidiaries' business, properties
or financial condition.
(d) The authorized, issued and outstanding capital stock of the
Company and its Subsidiaries, including the predecessors of the Company, is as
set forth the Company's financial statements contained in the Registration
Statement; the shares of issued and outstanding capital stock of the Company and
its Subsidiaries set forth therein have been duly authorized, validly issued and
are fully paid and nonassessable; except as set forth in the Prospectus, no
options, warrants, or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company or its Subsidiaries have been granted or
entered into by the Company or its Subsidiaries; and the capital stock conforms
to all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Units and the shares of Common Stock, when paid for,
issued and delivered pursuant to this Agreement, will have been duly authorized,
issued and delivered and will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the right of creditors generally or by general equitable principles, and
entitled to the rights and preferences provided by the Certificate of
Incorporation, which will be in the form filed as an exhibit to the Registration
Statement. The terms of the Common Stock conform to the description thereof in
the Registration Statement and Prospectus.
3
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<PAGE>
The Warrants, when paid for, issued and delivered pursuant to
this Agreement, will have been duly authorized, issued and delivered and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the right of creditors generally
or by general equitable principles, and entitled to the benefits provided by the
warrant agreement pursuant to which such Warrants are to be issued (the "Warrant
Agreement"), which will be substantially in the form filed as an exhibit to the
Registration Statement. The shares of Common Stock issuable upon exercise of the
Warrants have been reserved for issuance upon the exercise of the Warrants and
when issued in accordance with the terms of the Warrants and Warrant Agreement,
will be duly and validly authorized validly issued, fully paid and
non-assessable and free of preemptive rights. The Warrant Agreement has been
duly authorized and, when executed and delivered pursuant to this Agreement,
assuming due authorization, execution and delivery by the transfer agent, will
have been duly executed and delivered and will constitute the valid and legally
binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Warrants and Warrant Agreement conform to the respective descriptions
thereof in the Registration Statement and Prospectus.
The Purchase Option (as defined in the Registration Statement),
when paid for, issued and delivered pursuant to this Agreement will constitute
valid and legally binding obligations of the Company enforceable in accordance
with their terms and entitled to the benefits provided by the Purchase Option,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Securities issuable upon exercise of the Purchase Option (and the shares of
Common Stock issuable upon exercise of the Warrants) when issued and paid for in
accordance with this Agreement, the Purchase Option and the Warrant Agreement,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights.
(f) This Agreement has been duly and validly authorized, executed
and delivered by the Company. The Company has full power and authority to
authorize, issue and sell the Units to be sold by it hereunder on the terms and
conditions set forth herein, and no consent, approval, authorization or other
order of any governmental authority is required in connection with such
authorization, execution and delivery or in connection with the authorization,
issuance and sale of the Units or the Purchase Option, except such as may be
required under the Act or state securities laws.
(g) Except as described in the Prospectus, or which would not
have a material adverse effect on the condition (financial or otherwise),
business prospects, net worth or properties of the Company and the Subsidiaries
taken as a whole (a "Material Adverse Effect"), the Company and its Subsidiaries
are not in violation, breach or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien,
4
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<PAGE>
charge or encumbrance upon any of the property or assets of the Company or its
Subsidiaries pursuant to the terms of any material indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
its Subsidiaries is a party or by which the Company or its Subsidiaries may be
bound or to which any of the property or assets of the Company or its
Subsidiaries is subject, nor will such action result in any violation of the
provisions of the certificate of incorporation or the by-laws of the Company or
its Subsidiaries, as amended, or any statute or any order, rule or regulation
applicable to the Company or its Subsidiaries of any court or of any regulatory
authority or other governmental body having jurisdiction over the Company or its
Subsidiaries.
(h) Subject to the qualifications stated in the Prospectus, the
Company and its Subsidiaries have good and marketable title to all properties
and assets described in the Prospectus as owned by them, free and clear of all
liens, charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to their business; all of the material
leases and subleases under which the Company or its Subsidiaries is the lessor
or sublessor of properties or assets or under which the Company and its
Subsidiaries holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company and its Subsidiaries are not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and, to the best knowledge of the Company, no claim has been asserted
by anyone adverse to rights of the Company or its Subsidiaries as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or its Subsidiaries
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company and its Subsidiaries own or lease all such properties described in
the Prospectus as are necessary to their operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) ________________, which has given its report on certain
financial statements filed with the Commission as a part of the Registration
Statement, is with respect to the Company, independent public accountants as
required by the Act and the Rules and Regulations.
(j) The financial statements, and schedules together with related
notes, set forth in the Prospectus or the Registration Statement present fairly
the financial position and results of operations and changes in cash flow
position of the Company and its Subsidiaries on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Said statements and schedules and related notes have been
prepared in accordance with generally accepted accounting principles applied on
a basis which is consistent during the periods involved except as disclosed in
the Prospectus and Registration Statement.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and except as otherwise
disclosed or contemplated therein,
5
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<PAGE>
the Company and its Subsidiaries have not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which would
have a Material Adverse Effect, and there has not been any change in the capital
stock of, or any incurrence of short-term or long-term debt by, the Company or
its Subsidiaries or any issuance of options, warrants or other rights to
purchase the capital stock of the Company or its Subsidiaries or any material
adverse change or any development involving, so far as the Company or its
Subsidiaries can now reasonably foresee a prospective adverse change in the
condition (financial or otherwise), net worth, results of operations, business,
key personnel or properties of it which would have a Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company or its Subsidiaries is a party before or by any
court or governmental agency or body, which might result in any material adverse
change in the financial condition, business prospects, net worth, or properties
of the Company or its Subsidiaries, nor are there any actions, suits or
proceedings related to environmental matters or related to discrimination on the
basis of age, sex, religion or race; and no labor disputes involving the
employees of the Company or its Subsidiaries exist or to the knowledge of the
Company, are threatened which might be expected to have a Material Adverse
Effect.
(m) Except as disclosed in the Prospectus, the Company and its
Subsidiaries have filed all necessary federal, state and foreign income and
franchise tax returns required to be filed as of the date hereof and have paid
all taxes shown as due thereon; and there is no tax deficiency which has been,
or to the knowledge of the party, may be asserted against the Company or its
Subsidiaries.
(n) Except as disclosed in the Registration Statement or
Prospectus, the Company and its Subsidiaries have sufficient licenses, permits
and other governmental authorizations currently necessary for the conduct of
their business or the ownership of their properties as described in the
Prospectus and is in all material respects complying therewith and owns or
possesses adequate rights to use all material patents, patent applications,
trademarks, service marks, trade-names, trademark registrations, service mark
registrations, copyrights and licenses necessary for the conduct of such
businesses and have not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of the
activities or business of the Company and its Subsidiaries are in violation of,
or cause the Company or its Subsidiaries to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any agency
or body of the United States or of any state, county or locality, the violation
of which would have a Material Adverse Effect.
(o) The Company and its Subsidiaries have not, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign
6
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governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments or contributions required or allowed by
applicable law. The Company's and Subsidiaries' internal accounting controls and
procedures are sufficient to cause the Company and its Subsidiaries to comply in
all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all laws
imposing such taxes will have been complied with in all material respects.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) Except as disclosed in the Registration Statement, the
Company has no Subsidiaries.
(s) Except as disclosed in the Registration Statement, the
Company has not entered into any agreement pursuant to which any person is
entitled either directly or indirectly to compensation from the Company for
services as a finder in connection with the proposed public offering.
(t) Except as previously disclosed in writing by the Company to
the Underwriter or as disclosed in the Registration Statement, no officer,
director or stockholder of the Company has any National Association of
Securities Dealers, Inc. (the "NASD") affiliation.
(u) No other firm, corporation or person has any rights to
underwrite an offering of any of the Company's securities.
7
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2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company agrees to issue and sell to the Underwriter and the
Underwriter agrees to buy from the Company at $6.30 per Unit, at the place and
time hereinafter specified, 700,000 Units (the "First Units").
Delivery of the First Units against payment therefor shall take
place at the offices of Bernstein & Wasserman, LLP, 950 Third Avenue, New York,
New York (or at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., New York time, on __________, 1997,
or at such later time and date as the Underwriter may designate in writing to
the Company at least two business days prior to such purchase, but not later
than __________, 1997 such time and date of payment and delivery for the First
Units being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter (the
"Over-Allotment Option") to purchase all or any part of an aggregate of an
additional 105,000 Units to cover over allotments at the same price per Unit as
the Underwriter shall pay for the First Units being sold pursuant to the
provisions of subsection (a) of this Section 2 (such additional Units being
referred to herein as the "Option Units"). This option may be exercised within
45 days after the effective date of the Registration Statement upon written
notice by the Underwriter to the Company advising as to the amount of Option
Units as to which the option is being exercised, the names and denominations in
which the certificates for such Option Units are to be registered and the time
and date when such certificates are to be delivered. Such time and date shall be
determined by the Underwriter but shall not be earlier than four nor later than
ten full business days after the exercise of said option (but in no event more
than 55 days after the Effective Date), nor in any event prior to the First
Closing Date, and such time and date is referred to herein as the "Option
Closing Date." Delivery of the Option Units against payment therefor shall take
place at the offices of Bernstein & Wasserman, LLP, 950 Third Avenue, New York,
NY 10022 (or at such other place as may be designated by agreement between the
Underwriter and the Company). The option granted hereunder may be exercised only
to cover over-allotments in the sale by the Underwriter of First Units referred
to in subsection (a) above. No Option Units shall be delivered unless all First
Units shall have been delivered to the Underwriter as provided herein.
(c) The Company will make the certificates for the Units to be
purchased by the Underwriter hereunder available to you for checking at least
two full business days prior to the First Closing Date or the Option Closing
Date (which are collectively referred to herein as the "Closing Dates"). The
certificates shall be in such names and denominations as you may request, at
least three full business days prior to the Closing Dates. Delivery of the
certificates at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
8
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Definitive certificates in negotiable form for the Units to be
purchased by the Underwriter hereunder will be delivered by the Company to you
for the account of the Underwriter against payment of the respective purchase
prices by the Underwriter, by wire transfer or certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by wire transfer or certified or bank cashier's
checks payable in New York Clearing House funds at the offices of Bernstein &
Wasserman, LLP, 950 Third Avenue, New York, N.Y., at the time and date of
delivery of such Units as required by the provisions of subsection (b) above,
against receipt of the certificates for such Units by you for your account
registered in such names and in such denominations as you may reasonably
request.
It is understood that the Underwriter proposes to offer the Units
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
3. Covenants of the Company. The Company covenants and agrees with
the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective. If required, the Company will file
the Prospectus and any amendment or supplement thereto with the Commission in
the manner and within the time period required by Rule 424(b) under the Act.
Upon notification from the Commission that the Registration Statement has become
effective, the Company will so advise you and will not at any time, whether
before or after the effective date, file any amendment to the Registration
Statement or supplement to the Prospectus of which you shall not previously have
been advised and furnished with a copy or to which you or your counsel shall
have reasonably objected in writing or which is not in compliance with the Act
and the Rules and Regulations. At any time prior to the later of (A) the
completion by the Underwriter of the distribution of the Units contemplated
hereby (but in no event more than nine months after the date on which the
Registration Statement shall have become or been declared effective) and (B) 25
days after the date on which the Registration Statement shall have become or
been declared effective, the Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel to the Company and the
Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise you, and provide you copies of any written advice, of the receipt of any
comments of the Commission, of the effectiveness of any post-effective amendment
to the Registration Statement, of the filing of any supplement to the Prospectus
or any amended Prospectus, of any request made by the
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Commission for an amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of the
issuance by the Commission or any state or regulatory body of any stop order or
other order or threat thereof suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Units for offering
in any jurisdiction, or of the institution of any proceedings for any of such
purposes, and will use its best efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and dealers to use the Prospectus in connection with the sale of
the Units for such period as in the opinion of counsel to the Underwriter and
the Company the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations. In case of the happening, at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or dealer of any event of which the
Company has knowledge and which materially affects the Company or the securities
of the Company, or which in the opinion of counsel for the Company and counsel
for the Underwriter should be set forth in an amendment of the Registration
Statement or a supplement to the Prospectus in order to make the statements
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required to be delivered to a purchaser of the Units or in
case it shall be necessary to amend or supplement the Prospectus to comply with
law or with the Rules and Regulations, the Company will notify you promptly and
forthwith prepare and furnish to you copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter, except that in case the
Underwriter is required, in connection with the sale of the Units to deliver a
Prospectus nine months or more after the effective date of the Registration
Statement, the Company will upon request of and at the expense of the
Underwriter, amend or supplement the Registration Statement and Prospectus and
furnish the Underwriter with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will furnish such information as may be required
and to otherwise cooperate and use its best efforts to qualify or register the
Units for sale under the
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securities or "blue sky" laws of such jurisdictions as you may designate and
will make such applications and furnish such information as may be required for
that purpose and to comply with such laws, provided the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or to
execute a general consent of service of process in any jurisdiction in any
action other than one arising out of the offering or sale of the Units. The
Company will, from time to time, prepare and file such statements and reports as
are or may be required to continue such qualification in effect for so long a
period as the counsel to the Company and the Underwriter deem reasonably
necessary.
(c) If the sale of the Units provided for herein is not
consummated as a result of the Company not performing its obligations hereunder
in all material respects, the Company shall pay all costs and expenses incurred
by it which are incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in Section
8, including the accountable expenses of the Underwriter (including the
reasonable fees and expenses of counsel to the Underwriter), if the offering is
not consummated.
(d) The Company will use its best efforts to (i) cause a
registration statement under the Exchange Act to be declared effective
concurrently with the completion of this offering and will notify you in writing
immediately upon the effectiveness of such registration statement, and (ii) to
obtain and keep current a listing in the Standard & Poors or Moody's OTC
Industrial Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Exchange Act, the Company, at its expense,
will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail and
at its expense, will furnish to you during the period ending five (5) years from
the date hereof, (i) as soon as practicable after the end of each fiscal year,
but no earlier than the filing of such information with the Commission a balance
sheet of the Company and any of its Subsidiaries as at the end of such fiscal
year, together with statements of income, surplus and cash flow of the Company
and any Subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as practicable after the end of each of the first
three fiscal quarters of each fiscal year, but no earlier than the filing of
such information with the Commission, consolidated summary financial information
of the Company for such quarter in reasonable detail; (iii) as soon as they are
publicly available, a copy of all reports (financial or other) mailed to
security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission or any securities exchange or automated quotation system on which any
class of securities of the Company is listed; and (v) such other information as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
Subsidiaries, such financial statements referred to in subsection (e) above will
be on a consolidated basis to the extent
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the accounts of the Company and its subsidiary or Subsidiaries are consolidated
in reports furnished to its stockholders generally.
(g) The Company will deliver to you at or before the First
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon your order, from time to time until
the effective date of the Registration Statement, as many copies of any
Preliminary Prospectus filed with the Commission prior to the effective date of
the Registration Statement as you may reasonably request. The Company will
deliver to the Underwriter on the effective date of the Registration Statement
and thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as the Underwriter may from time to time
reasonably request.
(h) The Company will make generally available to its security
holders and to the registered holders of its Warrants and deliver to you as soon
as it is practicable to do so but in no event later than 90 days after the end
of twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Securities substantially for the purposes set forth under "Use of Proceeds" in
the Prospectus and, except as set forth therein, shall not use any proceeds to
pay any (i) debt for borrowed funds, or (ii) debt or obligation owed to any
insider outside of salary in the ordinary course of business.
(j) The Company will promptly prepare and file with the
Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
opinion of counsel to the Underwriter and counsel to the Company, may be
reasonably necessary or advisable in connection with the distribution of the
Securities, and will use its best efforts to cause the same to become effective
as promptly as possible.
(k) The Company will reserve and keep available the maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Purchase Option outstanding from time to time.
(l) (1) For a period of thirty six (36) months from the First
Closing Date or twenty four (24) months with respect to the Bridge Lenders to
the Company or Richard Reiss, no officer, director or shareholder of any
securities prior to the offering will, directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of, acquire any option
to dispose of, or
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otherwise dispose of any shares of Common Stock without the prior written
consent of the Underwriter, other than as set forth in the Registration
Statement. In order to enforce this covenant, the Company shall impose
stop-transfer instructions with respect to the securities owned by every
shareholder prior to the offering until the end of such period (subject to any
exceptions to such limitation on transferability set forth in the Registration
Statement). If necessary to comply with any applicable Blue-sky Law, the shares
held by such shareholders will be escrowed with counsel for the Company or
otherwise as required.
(2) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization or
similar transactions or as result of the exercise of warrants or options to
purchase up to 500,000 shares of Common Stock pursuant to an incentive and
non-qualified stock option plan disclosed in or issued or granted pursuant to
plans disclosed in the Registration Statement, the Company shall not, for a
period of thirty six (36) months following the First Closing Date, directly or
indirectly, offer, sell, issue or transfer any shares of its capital stock, or
any security exchangeable or exercisable for, or convertible into, shares of the
capital stock or (including stock options) register any of its capital stock
(under any form of registration statement including Form S-8), without the prior
written consent of the Underwriter upon at least 30 days' notice. Options
granted pursuant to plans must be exercisable at the fair market value on the
date of grant. Notwithstanding the foregoing provisions, the Company may issue
securities during said thirty six (36) month period in connection with
acquisitions by the Company which would have a positive effect on the Company's
income statement based upon generally accepted accounting principles.
(m) Upon completion of this offering, the Company will make all
filings required, including registration under the Exchange Act, to obtain the
listing of the Units, Common Stock and the Warrants in the Boston Stock Exchange
and NASD OTC Bulletin Board, and will use its best efforts to effect and
maintain such listing for at least five years from the date of this Agreement.
(n) Except for the transactions contemplated by this Agreement
and as disclosed in the Prospectus, the Company represents that it has not taken
and agrees that it will not take, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result in the stabilization or manipulation of the price of any of the
Securities.
(o) On the First Closing Date and simultaneously with the
delivery of the Units, the Company shall execute and deliver to you the Purchase
Option. The Purchase Option will be substantially in the form filed as an
Exhibit to the Registration Statement.
(p) On the First Closing Date, the Company will have in force key
person life insurance on the life of Mr. Reiss in an amount of not less than
$1,000,000, payable to the Company, and will use its best efforts to maintain
such insurance during the three year period commencing with the First Closing
Date.
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(q) So long as any Warrants are outstanding and the exercise
price of the Warrants is less than the market price of the Common Stock, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter as many
copies of each such Prospectus as such Underwriter or dealer may reasonably
request. The Company shall not call for redemption of any of the Warrants unless
a registration statement covering the securities underlying the Warrants has
been declared effective by the Commission and remains current at least until the
date fixed for redemption.
(r) For a period of five (5) years following the Effective Date,
the Company will maintain registration with the Commission pursuant to Section
12(g) of the Exchange Act and will provide to the Underwriter copies of all
filings made with the Commission pursuant to the Exchange Act. In the event that
the Company fails to maintain registration with the Commission pursuant to
Section 12(g) during such five year period, the Company will provide reasonable
access to an independent accountant designated by the Underwriter, to all books,
records and other documents or statements that reflect the Company's financial
status at least once each quarter, at the Company's expense.
(s) The Company agrees to pay the Underwriter a warrant
solicitation fee of 5.0% of the exercise price of any of the Warrants exercised
beginning one (1) year after the Effective Date (not including warrants
exercised by the Underwriter) if (a) the market price of the Company's Common
Stock on the date the Warrant is exercised is greater than the exercise price of
the Warrant, (b) the exercise of the Warrant was solicited by the Underwriter
and the holder of the warrant designates the Underwriter in writing as having
solicited such Warrant, (c) the Warrant is not held in a discretionary account,
(d) disclosure of the compensation arrangement is made upon the sale and
exercise of the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Securities Exchange Act of 1934, and (f) solicitation of
the exercise is in compliance with the NASD Notice to Members 81-38 (September
22, 1981).
(t) For a period of two years from the Effective Date, at the
request of the Underwriter, the Company shall provide promptly, at the expense
of the Company, copies of the Company's monthly transfer sheets furnished to it
by its transfer agent and copies of the securities position listings provided to
it by the Depository Trust Company.
(u) The Company hereby agrees that:
(i) The Company will pay a finder's fee to the Underwriter,
equal to five percent (5%) of the first $3,000,000 of the consideration involved
in any transaction, 4% of the next $3,000,000 of consideration involved in the
transaction, 3% of the next $2,000,000, 2% of the next $2,000,000 and 1% of the
excess, if any, for future consummated transactions, if any, introduced by the
Underwriter (including mergers, acquisitions, joint ventures, and any
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other business for the Company introduced by the Underwriter) consummated by the
Company (an "Introduced Consummated Transaction"), in which the Underwriter
introduced the other party to the Company during a period ending five years
following the First Closing Date; and
(ii) Any finder's fee due hereunder will be paid in cash or
other consideration that is acceptable to the Underwriter, at the closing of the
particular Introduced Consummated Transaction for which the finder's fee is due.
(v) Intentionally Ommitted (CA)
(w) For a period of two (2) years following the Effective Date
the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's financial
statements for each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
10-Q quarterly report and the mailing of quarterly financial information to
stockholders, provided that the Company shall not be required to file a report
of such accountants relating to such review with the Commission. The Company
will retain its present legal counsel and independent certified public
accountants for at least one year from the Closing Date.
(x) For the two (2) year period commencing on the First Closing
Date, the Company shall recommend and use its best efforts to elect a designee
of the Underwriter as a member of the Company's Board of Directors. Such
designee shall serve on the Compensation Committee of the Board of Directors so
long as such designee would qualify as disinterested for the purpose of Section
162(m) of the Internal Revenue Code of 1986, as amended. Alternatively, the
Underwriter may appoint an advisor who will be able to attend all meetings of
the Board of Directors. However, the Board of Directors shall have the right to
require such advisor to execute a confidentiality agreement satisfactory to the
Company. The Underwriter shall also have the right to written notice no later
than notice to other directors of each meeting and to obtain copies of the
minutes, if requested, from all Board of Directors meetings for two (2) years
following the Effective Date of the Registration Statement, whether or not a
nominee of the Underwriter attends or participates in any such Board meeting. To
the extent permitted by law, the Company will indemnify the Underwriter and its
designee for the actions of such designee as a director of the Company. The
Company will use its best efforts to obtain liability insurance not to exceed
$50,000 per year in premiums to cover acts of officers and directors, including
said designee. The Company agrees to reimburse the Underwriter immediately upon
the Underwriter's request therefor of any reasonable travel and lodging expenses
directly incurred by the Underwriter in connection with its designee or
representative attending Company Board meetings on the same basis for other
Board members.
(y) For a period of thirty (30) days from and after the Effective
Date, the Company will not issue a press release or engage in any publicity
other than promotion by the Company of its products and services and other press
releases in the ordinary course of its business, without the Underwriter's prior
written consent, unless required by law.
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4. Conditions of Underwriter's Obligation. The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder, are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New York time,
on the day following the date of this Agreement, or at such later time or on
such later date as to which you may agree in writing; on or prior to the Closing
Dates no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that or a similar purpose shall
have been instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the satisfaction of the Commission; and no stop order shall be
in effect denying or suspending effectiveness of such qualification nor shall
any stop order proceedings with respect thereto be instituted or pending or
threatened. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act.
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Singer Zamansky LLP, counsel for
the Company, in form and substance satisfactory to counsel for the Underwriter,
to the effect that:
(i) the Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of organization, with all requisite
corporate power and authority to own their properties and conduct their business
as described in the Registration Statement and Prospectus and are duly qualified
or licensed to do business as foreign corporations and are in good standing in
each other jurisdiction in which the ownership or leasing of their properties or
conduct of their business requires such qualification except where the failure
to qualify or be licensed will not have a Material Adverse Effect;
(ii) the authorized capitalization of the Company as of
_______, 1997 is as set forth in the Registration Statement; the Securities as
set forth in the Registration Statement have been duly authorized and upon
payment of consideration therefor, will be validly issued, fully paid and
non-assessable and conform in all material respects to the description thereof
contained in the Prospectus; to such counsel's knowledge the outstanding shares
of capital stock of the Company and its Subsidiaries have not been issued in
violation of the preemptive rights of any shareholder and to such counsel's
knowledge the shareholders of the Company do not have any preemptive rights or
other rights to subscribe for or to purchase, nor are there any restrictions
upon the voting or transfer of any of the capital stock except as provided in
the Prospectus or as required by law. The Securities, the Purchase Option and
the Warrant Agreement conform in all material respects to the respective
descriptions thereof contained in the
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Prospectus; the shares of Common Stock, and the shares of Common Stock issuable
upon exercise of Warrants, the Purchase Option, and the Warrant Agreement will
have been duly authorized and, when issued and delivered in accordance with
their respective terms, will be duly and validly issued, fully paid,
non-assessable, free of preemptive rights to the best of their knowledge; to the
best of their knowledge, all prior sales by the Company of the Company's
securities, have been made in compliance with or under an exemption from
registration under the Act and applicable state securities laws; a sufficient
number of shares of Common Stock has been reserved for issuance upon exercise of
the Warrants and Common Stock has been reserved for issuance upon exercise of
the Warrants contained in the Purchase Option and to the best of such counsel's
knowledge, neither the filing of the Registration Statement nor the offering or
sale of the Securities as contemplated by this Agreement gives rise to any
registration rights other than those which have been waived or satisfied for or
relating to the registration of any shares of Common Stock;
(iii) this Agreement, the Purchase Option, and the Warrant
Agreement have been duly and validly authorized, executed and delivered by the
Company;
(iv) the certificates evidencing the Securities as
described in the Registration Statement comply in all material respects with the
descriptions set forth therein, and comply with the Delaware General Corporation
Law, as in effect on the date hereof; each Warrant will be exercisable for one
share of the Common Stock of the Company, respectively, and at the prices
provided for in the Warrant Agreement;
(v) except as otherwise disclosed in the Registration
Statement, such counsel knows of no pending or threatened legal or governmental
proceedings to which the Company or its Subsidiaries are a party which would
materially adversely affect the business, property, financial condition or
operations of the Company or its Subsidiaries; or which question the validity of
the Securities, this Agreement, the Warrant Agreement or the Purchase Option, or
of any action taken or to be taken by the Company pursuant to this Agreement,
the Warrant Agreement or the Purchase Option; to such counsel's knowledge there
are no governmental proceedings or regulations required to be described or
referred to in the Registration Statement which are not so described or referred
to;
(vi) the execution and delivery of this Agreement, the
Purchase Option or the Warrant Agreement and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions herein or
therein contemplated, will not result in a breach or violation of, or constitute
a default under the certificate of incorporation or by-laws of the Company or
its Subsidiaries, or to the best knowledge of counsel after due inquiry, in the
performance or observance of any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness or in any material contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the Company or
its Subsidiaries is a party or by which they or any of their properties is bound
or in violation of any order, rule, regulation, writ, injunction, or decree of
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any government, governmental instrumentality or court, domestic or foreign the
result of which would have a Material Adverse Effect;
(vii) the Registration Statement has become effective
under the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and the Prospectus
(except for the financial statements and other financial data contained therein,
or omitted therefrom, as to which such counsel need express no opinion) as of
the Effective Date comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations;
(viii) in the course of preparation of the Registration
Statement and the Prospectus such counsel has participated in conferences with
the President of the Company with respect to the Registration Statement and
Prospectus and such discussions did not disclose to such counsel any information
which gives such counsel reason to believe that the Registration Statement or
any amendment thereto at the time it became effective contained any untrue
statement of a material fact required to be stated therein or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any supplement
thereto contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make statements therein, in light of the
circumstances under which they were made, not misleading (except, in the case of
both the Registration Statement and any amendment thereto and the Prospectus and
any supplement thereto, for the financial statements, notes thereto and other
financial information (including without limitation, the pro forma financial
information) and schedules contained therein, as to which such counsel need
express no opinion);
(ix) all descriptions in the Registration Statement and
the Prospectus, and any amendment or supplement thereto, of contracts and other
agreements to which the Company or its Subsidiaries is a party are accurate and
fairly present in all material respects the information required to be shown,
and such counsel is familiar with all contracts and other agreements referred to
in the Registration Statement and the Prospectus and any such amendment or
supplement or filed as exhibits to the Registration Statement, and such counsel
does not know of any contracts or agreements to which the Company or its
Subsidiaries is a party of a character required to be summarized or described
therein or to be filed as exhibits thereto which are not so summarized,
described or filed;
(x) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in connection with
the authorization, issuance, transfer, sale or delivery of the Securities by the
Company, in connection with the execution, delivery and performance of this
Agreement by the Company or in connection with the taking of any action
contemplated herein, or the issuance of the Purchase Option or the Securities
underlying the Purchase Option, other than registrations or qualifications of
the Securities under applicable state or foreign securities or Blue Sky laws and
registration under the Act; and
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(xi) the Units, shares of Common Stock and the Warrants
have been duly authorized for quotation on the Boston Stock Exchange.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law other than the law of
the United States or of the State of New York or Delaware upon opinions of
counsel satisfactory to you, in which case the opinion shall state that they
have no reason to believe that you and they are not entitled to so rely.
(c) Intentionally Omitted.
(d) All corporate proceedings and other legal matters relating to
this Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by Bernstein & Wasserman, LLP,
counsel to the Underwriter.
(e) You shall have received a letter prior to the Effective Date
and again on and as of the First Closing Date from ________________, independent
public accountants for the Company, substantially in the form reasonably
acceptable to you, providing you with such "cold comfort" as you may reasonably
require.
(f) At the Closing Dates, (i) the representations and warranties
of the Company contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of the Closing Dates
taking into account for the Option Closing Dates the effect of the transactions
contemplated hereby and the Company or its Subsidiaries shall have performed all
of its obligations hereunder and satisfied all the conditions on its part to be
satisfied at or prior to such Closing Date; (ii) the Registration Statement and
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and shall in all material respects conform to the
requirements thereof, and neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; (iii) there shall
have been, since the respective dates as of which information is given, no
material adverse change, or to the Company or its Subsidiaries's knowledge, any
development involving a prospective material adverse change, in the business,
properties, condition (financial or otherwise), results of operations, capital
stock, long-term or short-term debt or general affairs of the Company or its
Subsidiaries from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement, and
the Company or its Subsidiaries shall not have incurred any material liabilities
or entered into any material agreement not in the ordinary course of business
other than as referred to in the Registration Statement and Prospectus; (iv)
except as set forth in the Prospectus, no action, suit
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or proceeding at law or in equity shall be pending or threatened against the
Company or its Subsidiaries which would be required to be set forth in the
Registration Statement, and no proceedings shall be pending or threatened
against the Company or its Subsidiaries before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company or its Subsidiaries, and (v) you shall have received, at
the First Closing Date, a certificate signed by each of the President and the
principal operating officer of the Company or its Subsidiaries, dated as of the
First Closing Date, evidencing compliance with the provisions of this subsection
(f).
(g) Upon exercise of the Over-Allotment Option provided for in
Section 2(b) hereof, the obligations of the Underwriter to purchase and pay for
the Option Units referred to therein will be subject (as of the date hereof and
as of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at
the Option Closing Date, and no stop order suspending the effectiveness thereof
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending, or, to your knowledge or the knowledge of the
Company, shall be contemplated by the Commission, and any reasonable request on
the part of the Commission for additional information shall have been complied
with to the satisfaction of the Commission.
(ii) At the Option Closing Date there shall have been
delivered to you the signed opinion of Singer Zamansky LLP, counsel to the
Company, dated as of the Option Closing Date, in form and substance reasonably
satisfactory to Bernstein & Wasserman, LLP, counsel to the Underwriter, which
opinion shall be substantially the same in scope and substance as the opinion
furnished to you at the First Closing Date pursuant to Sections 4(b) hereof,
except that such opinion, where appropriate, shall cover the Option Securities.
(iii) At the Option Closing Date there shall have be
delivered to you a certificate of the President and the principal operating
officer of the Company, dated the Option Closing Date, in form and substance
reasonably satisfactory to Bernstein & Wasserman, LLP, counsel to the
Underwriter, substantially the same in scope and substance as the certificate
furnished to you at the First Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory to you from
________________, dated the Option Closing Date and addressed to the Underwriter
confirming the information in their letter referred to in Section 4(e) hereof
and stating that nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date not more than
five business days prior to the Option Closing Date, which would require any
change in said letter if it were required to be dated the Option Closing Date.
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(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option Units shall
be reasonably satisfactory in form and substance to you, and you and Bernstein &
Wasserman, LLP, counsel to the Underwriter, shall have been furnished with all
such documents, certificates, and opinions as you may reasonably request in
connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or conditions contained
herein.
(h) No action shall have been taken by the Commission or the NASD
the effect of which would make it improper, at any time prior to the Closing
Date, for members of the NASD to execute transactions (as principal or agent) in
the Securities and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the Underwriter or the
Company, shall be contemplated by the Commission or the NASD. The Company and
the Underwriter represent that at the date hereof each has no knowledge that any
such action is in fact contemplated against it by the Commission or the NASD.
(i) If any of the conditions herein provided for in this Section
shall not have been fulfilled in all material respects as of the date indicated,
this Agreement and all obligations of the Underwriter under this Agreement may
be canceled at, or at any time prior to, each Closing Date by the Underwriter
notifying the Company of such cancellation in writing or by telegram at or prior
to the applicable Closing Date. Any such cancellation shall be without liability
of the Underwriter to the Company.
5. Conditions of the Obligations of the Company, The obligation of
the Company to sell and deliver the Units is subject to the following
conditions:
(a) The Registration Statement shall have become effective not
later than 10:00 A.M. New York time, on the day following the date of this
Agreement, or on such later date as the Company and the Underwriter may agree in
writing.
(b) At the Closing Dates, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued under the Act
or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for
in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Units on
exercise of the Over-Allotment Option provided for in Section 2(b) hereof shall
be affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the
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Act or Section 20(a) of the Exchange Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which such Underwriter or
such controlling person may become subject, under the Act or otherwise, and (ii)
to reimburse, as incurred, the Underwriter and such controlling persons for any
legal or other expenses reasonably incurred in connection with investigating,
defending against or appearing as a third party witness in connection with any
losses, claims, damages or liabilities; insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) relating to (i) and (ii) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, (B) any blue
sky application or other document executed by the Company specifically for that
purpose containing written information specifically furnished by the Company and
filed in any state or other jurisdiction in order to qualify any or all of the
Securities under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), or arise out of
or are based upon the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be required to indemnify the
Underwriter and any controlling person or be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto, provided, further that the indemnity with respect to any
Preliminary Prospectus shall not be applicable on account of any losses, claims,
damages, liabilities or litigation arising from the sale of Securities to any
person if a copy of the Prospectus was not delivered to such person at or prior
to the written confirmation of the sale to such person. This indemnity will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and reasonable attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each
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case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any Blue Sky Application in reliance upon
and in conformity with written information furnished to the Company by the
Underwriter specifically for use in the preparation thereof and for any
violation by the Underwriter in the sale of such Securities of any applicable
state or federal law or any rule, regulation or instruction thereunder relating
to violations based on unauthorized statements by Underwriter or its
representative; provided that such violation is not based upon any violation of
such law, rule or regulation or instruction by the party claiming
indemnification or inaccurate or misleading information furnished by the Company
or its representatives, including information furnished to the Underwriter as
contemplated herein. This indemnity agreement will be in addition to any
liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the reasonable fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party and in
the reasonable judgment of the counsel to the indemnified party, it is advisable
for the indemnified party to be represented by separate counsel (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party, which firm shall be designated in writing by the indemnified
party). No settlement of any action against an indemnified party shall be made
without the consent of the indemnified party, which shall not be
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<PAGE>
unreasonably withheld in light of all factors of importance to such indemnified
party. If it is ultimately determined that indemnification is not permitted,
then an indemnified party will return all monies advanced to the indemnifying
party.
7. Contribution.
In order to provide for just and equitable contribution under the
Act in any case in which the indemnification provided in Section 6 hereof is
requested but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that the express provisions of
Section 6 provide for indemnification in such case, then the Company and each
person who controls the Company, in the aggregate, and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) (after contribution from others) in such proportions
that the Underwriter is responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that the
underwriting discount for each of the Units appearing on the cover page of the
Prospectus bears to the public offering price appearing thereon and the Company
shall be responsible for the remaining portion; provided, however, that if such
allocation is not permitted by applicable law then allocated in such proportion
as is appropriate to reflect relative benefits but also the relative fault of
the Company and the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company or the Underwriter and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriter agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriter to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages or by any other method of allocation
that does not take account of the equitable considerations referred to in this
Section 7. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company, its officers, directors and
controlling persons, and the Company, its officers, directors and controlling
persons shall be entitled to contribution from the Underwriter to the full
extent permitted by law. The foregoing contribution agreement shall in no way
affect the contribution liabilities of any persons having liability under
Section 11 of the Act other than the Company and the Underwriter. No
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contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement; provided, however, that such
consent shall not be unreasonably withheld in light of all factors of importance
to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale
of the Securities to the Underwriter is consummated, the Company will pay all
costs and expenses incident to the performance of this Agreement by the Company
including, but not limited to, the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Units contemplated hereby; all expenses,
including reasonable fees not to exceed $40,000 and disbursements of counsel to
the Underwriter, in connection with the qualification of the Securities under
the state securities or blue sky laws which the Underwriter shall designate; the
cost of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, and the
Blue Sky Memorandum, any fees relating to the listing of the Units, Common Stock
and Warrants on Nasdaq, the OTC Bulletin Board or the Boston Stock Exchange or
any other securities exchange, the cost of printing the certificates
representing the Securities; fees for bound volumes and prospectus memorabilia
and the fees of the transfer agent and warrant agent. The Company shall pay any
and all taxes (including any transfer, franchise, capital stock or other tax
imposed by any jurisdiction) on sales to the Underwriter hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus as called for
in Section 3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall at
the First Closing Date pay to the Underwriter a non-accountable expense
allowance of $126,000. In the event the overallotment option is exercised, the
Company shall pay to the Underwriter at the Option Closing Date an additional
amount in the aggregate equal to 3% of the gross proceeds received upon exercise
of the overallotment option. In the event the transactions contemplated hereby
are not consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant, representation
or warranty contained herein or because any other condition to the Underwriter's
obligations hereunder required to be fulfilled by the Company is not fulfilled)
the Company shall not be liable for any expenses of the Underwriter, including
the Underwriter's legal fees. In the event the transactions contemplated hereby
are not consummated by reason of the Company being unable to perform its
obligations hereunder in all material respects, the Company shall be liable for
the actual accountable out-of-pocket expenses of the Underwriter, including
reasonable legal fees.
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(c) Except as disclosed in the Registration Statement, no person
is entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter, against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees), to which the Underwriter or person may become subject insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. Effective Date.
The Agreement shall become effective upon its execution except
that you may, at your option, delay its effectiveness until 11:00 A.M., New York
time on the first full business day following the effective date of the
Registration Statement, or at such earlier time on such business day after the
effective date of the Registration Statement as you in your discretion shall
first commence the public offering of the Units. The time of the initial public
offering shall mean the time of release by you of the first newspaper
advertisement with respect to the Securities, or the time when the Securities
are first generally offered by you to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by you at any time before it
becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13,
14 and 15 shall remain in effect notwithstanding such termination.
10. Termination.
(a) After this Agreement becomes effective, this Agreement,
except for Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 hereof, may be terminated
at any time prior to the First Closing Date, by you if in your judgment (i)
trading in securities on the New York Stock Exchange or the American Stock
Exchange having been suspended or limited, (ii) material governmental
restrictions have been imposed on trading in securities generally (not in force
and effect on the date hereof), (iii) a banking moratorium has been declared by
federal or New York state authorities, (iv) an outbreak of major international
hostilities involving the United States or other substantial national or
international calamity has occurred, or (v) the passage by the Congress of the
United States or by any state legislative body of similar impact, of any act or
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative accounting institute or board, or any governmental
executive, which is reasonably believed likely by the Underwriter to have a
material adverse impact on the business, financial condition or financial
statements of the Company.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
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11. Purchase Option.
At or before the First Closing Date, the Company will sell the
Underwriter or its designees for a consideration of $70, and upon the terms and
conditions set forth in the form of Purchase Option annexed as an exhibit to the
Registration Statement, a Purchase Option to purchase an aggregate of 70,000
Units. In the event of conflict in the terms of this Agreement and the Purchase
Option with respect to language relating to the Purchase Option, the language of
the Purchase Option shall control.
12. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that it is
registered as a broker-dealer in all jurisdictions in which it is offering the
Units and that it will comply with all applicable state or federal laws relating
to the sale of the Units, including but not limited to, violations based on
unauthorized statements by the Underwriter or its representatives.
13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Underwriter and the
undertakings set forth in or made pursuant to this Agreement will remain in full
force and effect until three years from the date of this Agreement, regardless
of any investigation made by or on behalf of the Underwriter, the Company or any
of its officers or directors or any controlling person and will survive delivery
of and payment of the Securities and the termination of this Agreement.
14. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Representative, will be mailed, delivered or telecopied
and confirmed to them at Monroe Parker Securities, Inc., 2500 Westchester
Avenue, Purchase, New York 10577, with a copy sent to Bernstein & Wasserman,
LLP, 950 Third Avenue, New York, New York 10022, Attention: Steven F. Wasserman,
or if sent to the Company, will be mailed, delivered or telecopied and confirmed
to it at 1450 Route 22 West, Suite 103, Mountainside, NJ 07092, with a copy sent
to Singer Zamansky LLP, 48 Exchange Place, 20th Floor, New York, NY 10005.
Notice shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication.
15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of
the Underwriter, the Company, any person controlling the Company or the
Underwriter, and directors of the Company, nominees for directors (if any) named
in the Prospectus, its officers who have signed the Registration Statement, and
their respective executors, administrators, successors, assigns and
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<PAGE>
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser, as
such purchaser, from the Underwriter of the Units.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance
with, of the laws of the State of New York applicable to agreements made and to
be entirely performed within New York.
17. Counterparts.
This agreement may be executed in one or more counterparts each
of which shall be deemed to constitute an original and shall become effective
when one or more counterparts have been signed by each of the parties hereto and
delivered to the other parties (including by fax, followed by original copies by
overnight mail).
18. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement of the parties
hereto and supersedes all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended except in writing, signed by the Underwriter and the Company.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
ALL COMMUNICATIONS CORPORATION
By:
_________________________________
Name: Richard Reiss
Title: President
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
MONROE PARKER SECURITIES, INC.
By:
______________________________
Name: Stephen J. Drescher
Title: Director Corporate Finance
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Option to Purchase
70,000 Units
ALL COMMUNICATIONS CORPORATION
PURCHASE OPTION
Dated: __________, 1997
THIS CERTIFIES that Monroe Parker Securities, Inc., 2500 Westchester
Avenue, Purchase, NY 10577 (hereinafter sometimes referred to as the "Holder"),
is entitled to purchase from ALL COMMUNICATIONS CORPORATION (hereinafter
referred to as the "Company"), at the prices and during the periods as
hereinafter specified, up to 70,000 Units ("Units"), each Unit consisting of two
(2) shares of Common Stock, no par value per share ("Common Stock"), and (2)
Class A Redeemable Common Stock Purchase Warrants ("Warrants"). Each Warrant
entitles the registered holder thereof to purchase one (1) share of Common Stock
at an exercise price of $4.25 per share. The Warrants (hereinafter, the
"Warrants") are exercisable for a three year period, commencing __________,
1998 (one (1) year from the Effective Date). Hereinafter, the Units, shares of
Common Stock and Warrants shall be referred to as an "Option Securities" or
"Securities."
The Securities have been registered under a Registration Statement on
Form SB-2 (File No. 333-________) declared effective by the Securities and
Exchange Commission on __________, 1997 (the "Registration Statement"). This
Option (the "Option") to purchase 70,000 Units was originally issued pursuant to
an underwriting agreement between the Company and Monroe Parker Securities, Inc.
as underwriter (the "Underwriter"), in connection with a public offering of
700,000 Units (collectively, the "Public Securities") through the Underwriter,
in consideration of $70.00 received for the Option.
Except as specifically otherwise provided herein, the Common Stock and
the Warrants issued pursuant to this Option shall bear the same terms and
conditions as described under the caption
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<PAGE>
"Description of Securities" in the Registration Statement, and the Warrants
shall be governed by the terms of the Warrant Agreement dated as of __________,
1997, executed in connection with such public offering (the "Warrant
Agreement"), except that the holder shall have registration rights under the
Securities Act of 1933, as amended (the "Act"), for the Option, the Units, the
Common Stock and the Warrants included in the Option, and the shares of Common
Stock underlying the Warrants, as more fully described in paragraph 6 of this
Option. In the event of any reduction of the exercise price of the Warrants
included in the Public Securities, the same changes to the Warrants included in
the Option and the components thereof shall be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with paragraph 8 of this Option, and
during the periods as follows:
(a) Between __________, 1998 (one (1) year from the Effective Date)
and __________, 2002, inclusive, the Holder shall have the option to purchase
Units hereunder at a price of $8.40 per Unit (subject to adjustment pursuant to
paragraph 8 hereof) (the "Exercise Price").
(b) After __________, 2002, the Holder shall have no right to
purchase any Units hereunder.
2. The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the Exercise Price then in effect for the number of Option Securities
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any; and (iii) delivery to the Company of a duly executed
agreement signed by the person(s) designated in the purchase form to the effect
that such person(s) agree(s) to be bound by the provisions of paragraph 6 and
subparagraphs (b), (c) and (d) of paragraph 7 hereof. This Option shall be
deemed to have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date this Option is
surrendered and payment is made in accordance
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with the foregoing provisions of this paragraph 2, and the person or persons in
whose name or names the certificates for shares of Common Stock and Warrants
shall be issuable upon such exercise shall become the holder or holders of
record of such Common Stock and Warrants at that time and date. The Common Stock
and Warrants and the certificates for the Common Stock and Warrants so purchased
shall be delivered to the Holder within a reasonable time, not exceeding ten
(10) days, after the rights represented by this Option shall have been so
exercised.
3. This Option shall not be transferred, sold, assigned, or hypothecated
for a period of five (5) years from the Effective Date, except that it may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer of the Holder or selling group member of the
offering during such period. Any transfer after one (1) year must be accompanied
with an immediate exercise of the Option. Any such assignment shall be effected
by the Holder (i) executing the form of assignment at the end hereof and (ii)
surrendering this Option for cancellation at the office or agency of the Company
referred to in paragraph 2 hereof, accompanied by a certificate (signed by an
officer of the Holder if the Holder is a corporation), stating that each
transferee is a permitted transferee under this paragraph 3 hereof; whereupon
the Company shall issue, in the name or names specified by the Holder (including
the Holder) a new Option or Options of like tenor and representing in the
aggregate rights to purchase the same number of Option Securities as are
purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued as part of the Option Securities purchased hereunder and the
Common Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable. The Company
further covenants and agrees that during the periods within which this Option
may be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Option and that it will have authorized and reserved a sufficient number of
shares of Common Stock for issuance upon exercise of the Warrants included in
the Option Securities.
5. This Option shall not entitle the Holder to any voting,
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dividend, or other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph l(a) hereof, the Company
shall advise the Holder or its transferee, whether the Holder holds the Option
or has exercised the Option and holds Option Securities or any of the securities
underlying the Option Securities, by written notice at least 20 days prior to
the filing of any post-effective amendment to the Registration Statement or of
any new registration statement or post-effective amendment thereto under the Act
covering any securities of the Company, for its own account or for the account
of others (other than a registration statement on Form S-4 or S-8 or any
successor forms thereto), and will for a period of five years from the effective
date of the Registration Statement, upon the request of the Holder within 10
days of the receipt of the Company's notice, include in any such post-effective
amendment or registration statement, such information as may be required to
permit a public offering of the Option, all or any of the Units, Common Stock,
or Warrants included in the Units or the Common Stock issuable upon the exercise
of the Warrants (the "Registrable Securities"). The Company shall supply
prospectuses and such other documents as the Holder may request in order to
facilitate the public sale or other disposition of the Registrable Securities,
use its best efforts to register and qualify any of the Registrable Securities
for sale in such states as such Holder designates provided that the Company
shall not be required to qualify as a foreign corporation or a dealer in
securities or execute a general consent to service of process in any
jurisdiction in any action and do any and all other acts and things which may be
reasonably necessary or desirable to enable such Holders to consummate the
public sale or other disposition of the Registrable Securities, and furnish
indemnification in the manner provided in paragraph 7 hereof. The Holder shall
furnish information and indemnification as set forth in paragraph 7 except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Registrable
Securities. The Company shall use its best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit the
holders of Registrable Securities requested to be included in the registration
to include such securities in such underwritten offering on the same terms and
conditions as any similar securities of the Company included therein.
Notwithstanding the foregoing, if the managing underwriter or
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underwriters of such offering advises the holders of Registrable Securities that
the total amount of securities which they intend to include in such offering is
such as to materially and adversely affect the success of such offering, then
the amount of securities to be offered for the accounts of holders of
Registrable Securities shall be eliminated, reduced, or limited to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount, if any, recommended by such managing underwriter or
underwriters (any such reduction or limitation in the total amount of
Registrable Securities to be included in such offering to be borne by the
holders of Registrable Securities proposed to be included therein pro rata). The
Holder will pay its own legal fees and expenses and any underwriting discounts
and commissions on the securities sold by such Holder and shall not be
responsible for any other expenses of such registration.
(b) If any 50% holder (as defined below) shall give notice to the
Company at any time during the period set forth in paragraph l(a) hereof to the
effect that such holder desires to register under the Act this Option or any of
the underlying securities contained in the Option Securities underlying the
Option under such circumstances that a public distribution (within the meaning
of the Act) of any such securities will be involved then the Company will
promptly, but no later than 60 days after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement pursuant to the Act, to the end that the Option and/or
any of the Securities underlying the Option Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective for a
period of 120 days (including the taking of such steps as are reasonably
necessary to obtain the removal of any stop order); provided that such holder
shall furnish the Company with appropriate information in connection therewith
as the Company may reasonably request in writing. The 50% holder (which for
purposes hereof shall mean any direct or indirect transferee of such holder)
may, at its option, request the filing of a post-effective amendment to the
current Registration Statement or a new registration statement under the Act
with respect to the Registrable Securities on only one occasion during the term
of this Option. The Holder may at its option request the registration of the
Option and/or any of the securities underlying the Option in a registration
statement made by the Company as contemplated by
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Section 6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the Securities issuable upon exercise of the Option and
even though the Holder has not given notice of exercise of the Option. The 50%
holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to the Option or
separately as to the Common Stock and/or Warrants included in the Option and/or
the Common Stock issuable upon the exercise of the Warrants, and such
registration rights may be exercised by the 50% holder prior to or subsequent to
the exercise of the Option. Within ten business days after receiving any such
notice pursuant to this subsection (b) of paragraph 6, the Company shall give
notice to the other holders of the Options, advising that the Company is
proceeding with such post-effective amendment or registration statement and
offering to include therein the securities underlying the Options of the other
holders. Each holder electing to include its Registrable Securities in any such
offering shall provide written notice to the Company within twenty (20) days
after receipt of notice from the Company. The failure to provide such notice to
the Company shall be deemed conclusive evidence of such holder's election not to
include its Registrable Securities in such offering. Each holder electing to
include its Registrable Securities shall furnish the Company with such
appropriate information (relating to the intentions of such holders) in
connection therewith as the Company shall reasonably request in writing. All
costs and expenses of only one such post-effective amendment or new registration
statement shall be borne by the Company, except that the holders shall bear the
fees of their own counsel and any underwriting discounts or commissions
applicable to any of the securities sold by them.
The Company shall be entitled to postpone the filing of
any registration statement pursuant to this Section 6(b) otherwise required to
be prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Rule 10b-6 under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lock-up as a result
of an underwritten
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public offering and such underwriter has refused in writing, the Company's
request to waive such lock-up. In the event of such postponement, the Company
shall be required to file the registration statement pursuant to this Section
6(b), within 60 days of the consummation of the event requiring such
postponement.
The Company will use its best efforts to maintain such registration
statement or post-effective amendment current under the Act for a period of at
least six months (and for up to an additional three months if requested by the
Holder) from the effective date thereof. The Company shall supply prospectuses,
and such other documents as the Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities,
use its best efforts to register and qualify any of the Registrable Securities
for sale in such states as such holder designates, provided that the Company
shall not be required to qualify as a foreign corporation or a dealer in
securities or execute a general consent to service of process in any
jurisdiction in any action and furnish indemnification in the manner provided in
paragraph 7 hereof.
(c) The term "50% holder" as used in this paragraph 6 shall mean the
holder of at least 50% of the Common Stock and the Warrants underlying the
Option (considered in the aggregate) and shall include any owner or combination
of owners of such securities, which ownership shall be calculated by determining
the number of shares of Common Stock held by such owner or owners as well as the
number of shares then issuable upon exercise of the Warrants.
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to the Option or any shares or warrants issued or issuable upon the
exercise of any Options, is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder of the securities covered
by such registration statement, amendment, or supplement (such holder being
hereinafter called the "Distributing Holder"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages, or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such
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underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Distributing Holder
and each such controlling person and underwriter for any legal or other expenses
reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder or any other Distributing Holder, for use in the
preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each person,
if any, who controls the Company (within the meaning of the Act) against any
losses, claims, damages, or liabilities, joint and several, to which the Company
or any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such
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Distributing Holder for use in the preparation thereof; and will reimburse the
Company or any such director, officer, or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Paragraph 7.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the
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denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Notwithstanding anything to the contrary contained in the Warrant Agreement, in
the event an adjustment to the Exercise Price is effected pursuant to this
Subsection (a) (and a corresponding adjustment to the number of Option
Securities is made pursuant to Subsection (d) below), the exercise price of the
Warrants shall be adjusted so that it shall equal the price determined by
multiplying the exercise price of the Warrants by a fraction, the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after giving effect to such action and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
In such event, there shall be no adjustment to the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in Subsection (e) below) on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the number of shares then comprising an Option
Securities by the product of the Exercise Price in effect immediately prior to
the date of such issuance multiplied by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on the record
date mentioned below and the number of additional shares of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at such current market price per share of the Common
Stock, and the denominator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date and the number of additional shares
of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever
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such rights or warrants are issued and shall become effective immediately after
the record date for the determination of shareholders entitled to receive such
rights or warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not delivered) after
the expiration of such rights or warrants the Exercise Price shall be readjusted
to the Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and-dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the number of shares
then comprising an Option Securities by the product of the Exercise Price in
effect immediately prior thereto multiplied by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding multiplied
by the current market price per share of Common Stock (as defined in Subsection
(e) below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) Whenever the Exercise Price payable upon exercise of this Option
is adjusted pursuant to Subsections (a), (b) or (c) above, the number of Option
Securities purchasable upon exercise of this Option shall simultaneously be
adjusted by multiplying the number of Option Securities initially issuable upon
exercise of this Option by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
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(e) For the purpose of any computation under Subsections (b) or (c)
above, the current market price per share of Common Stock at any date shall be
deemed to be the average of the daily closing prices for 20 consecutive business
days before such date. The closing price for each day shall be the last sale
price regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is admitted
to trading or listed, or if not listed or admitted to trading on such exchange,
the average of the highest reported bid and lowest reported asked prices as
reported by NASDAQ, or other similar organization if NASDAQ is no longer
reporting such information, or if not so available, the fair market price as
determined by the Board of Directors.
(f) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least fifteen cents
($0.15) in such price; provided, however, that any adjustments which by reason
of this Subsection (i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock, or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Common Stock or securities convertible into Common
Stock (including Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly, but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Option Securities issuable upon exercise of this
Option and, if requested, information describing the transactions giving rise to
such adjustments, to be mailed to the Holder, at the address set forth herein,
and shall cause a certified copy thereof to be mailed to its transfer agent, if
any. The Company may retain
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a firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to make
any computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder thereafter shall become entitled to
receive any shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this Option shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Subsections (a) to (g), inclusive above.
(i) No adjustments shall be made in connection with future public
offerings.
9. This Agreement shall be governed by and in accordance with the laws
of the State of New York.
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IN WITNESS WHEREOF, All Communications Corporation has caused this
Option to be signed by its duly authorized officers under its corporate seal,
and this Option to be dated as of the date first above written.
ALL COMMUNICATIONS CORPORATION
By: ______________________________
Richard Reiss
President
(Corporate Seal)
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PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,
_____Units, each consisting of two Shares of Common Stock, no par value per
share, of All Communications Corporation and two (2) Warrants and herewith makes
payment of $______________ therefor, and requests that the Warrants and
certificates for shares of Common Stock be issued in the name(s) of, and
delivered to _________________________ whose address(es) is (are) ______________
_____________________________________________.
Dated:
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TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________________ the right to purchase Units, each
consisting of two (2) shares of Common Stock and two (2) Warrants of All
Communications Corporation, in the numbers set forth below represented by the
foregoing Option to the extent of _____ shares of Common Stock and ____
Warrants, and appoints _________________________________ attorney to transfer
such rights on the books of All Communications Corporation, with full power of
substitution in the premises.
Dated:
By: ______________________________
Address:
________________________________
________________________________
________________________________
In the presence of:
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A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. NO
OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE
CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY
SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE
DATE.
ALL COMMUNICATIONS CORPORATION
700,000 UNITS CONSISTING OF
1,400,000 SHARES OF COMMON STOCK, NO PAR VALUE
AND
1,400,000 CLASS A REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
SELECTED DEALERS AGREEMENT
_______ __, 1997
Dear Sirs:
1. Monroe Parker Securities, Inc. (the "Underwriter"), has agreed to
offer on a firm commitment basis, subject to the terms and conditions and
execution of the Underwriting Agreement, 700,000 Units each consisting of two
(2) shares of Common Stock, no par value per share ("Common Stock") of All
Communications Corporation (the "Company") and two (2) Class A Redeemable Common
Stock Purchase Warrants ("Warrants") (hereinafter, collectively referred to as
the "Units"; including any shares of Common Stock and Warrants offered pursuant
to an over-allotment option, the "Firm Units"). Each Warrant is exercisable to
purchase one (1) share of Common Stock. The Firm Units are more particularly
described in the enclosed Preliminary Prospectus, additional copies of which, as
well as the Prospectus (after effective date), will be supplied in reasonable
quantities upon request.
2. The Underwriter is soliciting offers to buy Units, upon the terms and
conditions hereof, from Selected Dealers, who are to act as principals,
including you, who are (i) registered with the Securities and Exchange
Commission ("the Commission") as broker-dealers under the Securities Exchange
Act of 1934, as amended ("the 1934 Act"), and members in good standing with the
National Association of Securities Dealers, Inc. ("the NASD"), or (ii) dealers
of
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institutions with their principal place of business located outside the United
States, its territories and possessions and not registered under the 1934 Act
who agree to make no sales within the United States, its territories and
possessions or to persons who are nationals thereof or residents therein and, in
making sales, to comply with the NASD's interpretation with respect to
free-riding and withholding. The Units are to be offered to the public at a
price of $7.00 per Unit. Selected Dealers will be allowed a concession of not
less than __% of the aggregate offering price. You will be notified of the
precise amount of such concession prior to the effective date of the
Registration Statement. The offer is solicited subject to the issuance and
delivery of the Units and their acceptance by the Underwriter, to the approval
of legal matters by counsel and to the terms and conditions as herein set forth.
3. Your offer to purchase may be revoked in whole or in part without
obligation or commitment of any kind by you any time prior to acceptance and no
offer may be accepted by us and no sale can be made until after the registration
statement covering the Units has become effective with the Commission. Subject
to the foregoing, upon execution by you of the Offer to Purchase below and the
return of same to us, you shall be deemed to have offered to purchase the number
of Units set forth in your offer on the basis set forth in paragraph 2 above.
Any oral notice by us of acceptance of your offer shall be immediately followed
by written or telegraphic confirmation preceded or accompanied by a copy of the
Prospectus. If a contractual commitment arises hereunder, all the terms of this
Selected Dealers Agreement shall be applicable. We may also make available to
you an allotment to purchase Units, but such allotment shall be subject to
modification or termination upon notice from us any time prior to an exchange of
confirmations reflecting completed transactions. All references hereafter in
this Agreement to the purchase and sale of the Units assume and are applicable
only if contractual commitments to purchase are completed in accordance with the
foregoing.
4. You agree that in re-offering the Units, if your offer is accepted
after the Effective Date, you will make a bona fide public distribution of same.
You will advise us upon request of the Units purchased by you remaining unsold,
and we shall have the right to repurchase such Units upon demand at the public
offering price less the concession as set forth in paragraph 2 above. Any of the
Units purchased by you pursuant to this Agreement are to be re-offered by you to
the public at the public offering price, subject to the terms hereof and shall
not be offered or sold by you below the public offering price before the
termination of this Agreement.
5. Payment for Units which you purchase hereunder shall be made by you
on such date as we may determine by certified or bank cashier's check payable in
New York Clearinghouse funds to Monroe Parker Securities, Inc. Certificates for
the Securities shall be delivered as soon as practicable at the offices of
Monroe Parker Securities, Inc., 2500 Westchester Avenue, Purchase, New York
10577. Unless specifically authorized by us, payment by you may not be deferred
until delivery of certificates to you.
6. A registration statement covering the offering has been filed with
the Commission in respect to the Units. You will be promptly advised when the
registration statement becomes
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effective. Each Selected Dealer in selling the Units pursuant hereto agrees
(which agreement shall also be for the benefit of the Company) that it will
comply with the applicable requirements of the Securities Act of 1933 and of the
1934 Act and any applicable rules and regulations issued under said Acts. No
person is authorized by the Company or by the Underwriter to give any
information or to make any representations other than those contained in the
Prospectus in connection with the sale of the Units. Nothing contained herein
shall render the Selected Dealers a member of the underwriting group or partners
with the Underwriter or with one another.
7. You will be informed by us as to the states in which we have been
advised by counsel the Units have been qualified for sale or are exempt under
the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Units in any state.
8. The Underwriter shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. The Underwriter shall not be under any liability to you,
except such as may be incurred under the Securities Act of 1933 and the rules
and regulations thereunder, except for lack of good faith and except for
obligations assumed by us in this Agreement, and no obligation on our part shall
be implied or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Units; such contractual commitment can only be made in
accordance with the provisions of paragraph 3 hereof.
10. You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("Association") and registered as a
broker-dealer or are not eligible for membership under Section I of the By-Laws
of the Association who agree to make no sales within the United States, its
territories or possessions or to persons who are nationals thereof or residents
therein and, in making sales, to comply with the NASD's interpretation with
respect to free-riding and withholding. Your attention is called to the
following: (a) Rules 2730, 2740,2420 and 2750 of the NASD Conduct Rules of the
Association and the interpretations of said Section promulgated by the Board of
Governors of such Association including the interpretation with respect to
"Free- Riding and Withholding"; (b) Section 10(b) of the 1934 Act and Rules
10b-6 and 10b-10 of the general rules and regulations promulgated under said
Act; (c) Securities Act Release #3907; (d) Securities Act Release #4150; and (e)
Securities Act Release #4968 requiring the distribution of a Preliminary
Prospectus to all persons reasonably expected to be purchasers of Units from you
at least 48 hours prior to the time you expect to mail confirmations. You, if a
member of the Association, by signing this Agreement, acknowledge that you are
familiar with the cited law, rules and releases, and agree that you will not
directly and/or indirectly violate any provisions of applicable law in
connection with your participation in the distribution of the Units.
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11. In addition to compliance with the provisions of paragraph 10
hereof, you will not, until advised by us in writing or by wire that the entire
offering has been distributed and closed, bid for or purchase Units or its
component securities in the open market or otherwise make a market in such
securities or otherwise attempt to induce others to purchase such securities in
the open market. Nothing contained in this paragraph 11 shall, however, preclude
you from acting as agent in the execution of unsolicited orders of customers in
transactions effectuated for them through a market maker.
12. You understand that the Underwriter may in connection with the
offering engage in stabilizing transactions. If the Underwriter contracts for or
purchases in the open market in connection with such stabilization any Units
sold to you hereunder and not effectively placed by you, the Underwriter may
charge you the Selected Dealer's concession originally allowed you on the Units
so purchased, and you agree to pay such amount to us on demand.
13. By submitting an Offer to Purchase you confirm that your net capital
is such that you may, in accordance with Rule 15c3-1 adopted under the 1934 Act,
agree to purchase the number of Units you may become obligated to purchase under
the provisions of this Agreement.
14. You agree that (i) you shall not recommend to a customer the
purchase of Firm Units unless you shall have reasonable grounds to believe that
the recommendation is suitable for such customer on the basis of information
furnished by such customer concerning the customer's investment objectives,
financial situation and needs, and any other information known to you, (ii) in
connection with all such determinations, you shall maintain in your files the
basis for such determination, and (iii) you shall not execute any transaction in
Firm Units in a discretionary account without the prior specific written
approval of the customer.
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15. You represent that neither you nor any of your affiliates or
associates owns any Common Stock of the Company.
16. All communications from you should be directed to us at the office
of Monroe Parker Securities, Inc., 2500 Westchester Avenue, Purchase, New York
10577. All communications from us to you shall be directed to the address to
which this letter is mailed.
Very truly yours,
MONROE PARKER SECURITIES, INC.
By:
_____________________________________
Name:
Title:
ACCEPTED AND AGREED TO AS OF THE ______
DAY OF ____________, 1997
[Name of Dealer]
By: ____________________________
Its
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TO: Monroe Parker Securities, Inc.
2500 Westchester Avenue
Purchase, New York 10577
We hereby subscribe for ____________ Units of All Communications
Corporation in accordance with the terms and conditions stated in the foregoing
letter. We hereby acknowledge receipt of the Prospectus referred to in the first
paragraph thereof relating to said Units. We further state that in purchasing
said Units we have relied upon said Prospectus and upon no other statement
whatsoever, whether written or oral. We confirm that we are a dealer actually
engaged in the investment banking or securities business and that we are either
(i) a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD") or (ii) a dealer with its principal place of business located
outside the United States, its territories and its possessions and not
registered as a broker or dealer under the Securities Exchange Act of 1934, as
amended, who hereby agrees not to make any sales within the United States, its
territories or its possessions or to persons who are nationals thereof or
residents therein. We hereby agree to comply with the provisions of Rule 2740 of
the NASD Conduct Rules, and if we are a foreign dealer and not a member of the
NASD, we also agree to comply with the NASD's interpretation with respect to
free-riding and withholding, to comply, as though we were a member of the NASD,
with the provisions of Rules 2730 and 2750 of the NASD Conduct Rules.
Name of
Dealer:
____________________________________
By:
_____________________________
Address:
_____________________________
_____________________________
Dated: _____________, 1997
<PAGE>
<PAGE>
WARRANT AGREEMENT
AGREEMENT, dated as of this ____ day of _______, 1997, by and between
ALL COMMUNICATIONS CORPORATION, a New Jersey corporation ("Company"), and
American Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, in connection with a public offering of up to 805,000 Units,
each consisting of two (2) shares of Common Stock, no par value per share, and
two (2) Class A Redeemable Common Stock Purchase Warrants (the "Warrants")
pursuant to an underwriting agreement (the "Underwriting Agreement") dated
__________, 1997 between the Company and Monroe Parker Securities, Inc.
("Monroe"), and the issuance to Monroe or its designees of a Purchase Option to
purchase 70,000 additional Units, consisting of 140,000 shares of Common Stock
and 140,000 Warrants (the "Purchase Option"), and the issuance to certain bridge
lenders of 375,000 bridge units, consisting of 375,000 shares of Common Stock
and 375,000 Warrants (the "Bridge Warrants") the Company will issue up to
2,125,000 Warrants;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
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<PAGE>
1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock of the Company of
which at the date hereof consists of __________ authorized shares, no par value
per share, and shall also include any capital stock of any class of the Company
thereafter authorized which shall not be limited to a fixed sum or percentage in
respect to the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary liquidation, dissolution, or
winding up of the Company; provided, however, that the shares issuable upon
exercise of the Warrants shall include (1) only shares of such class designated
in the Company's Certificate of Incorporation as Common Stock on the date of the
original issue of the Warrants or (ii), in the case of any reclassification,
change, consolidation, merger, sale, or conveyance of the character referred to
in Section 9(c) hereof, the stock, securities, or property provided for in such
section or (iii), in the case of any reclassification or change in the
outstanding shares of Common Stock issuable upon exercise of the Warrants as a
result of a subdivision or combination or consisting of a change in par value,
or from par value to no par value, or from no par value to par value, such
shares of Common Stock as so reclassified or changed.
(b) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business shall
be administered, which office is located at the date hereof at 40 Wall Street,
New York, New York 10005.
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Company, of an amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean ______, 1998 (one
(1) year from the Effective Date).
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(e) "Purchase Price" shall mean the purchase price per share to
be paid upon exercise of each Warrant in accordance with the terms hereof, which
price shall be $4.25 per share, subject to adjustment from time to time pursuant
to the provisions of Section 9 hereof, and subject to the Company's right, upon
approval of a majority of the holders of shares of Common Stock of the Company,
to reduce the Purchase Price upon notice to all warrantholders.
(f) "Redemption Price" shall mean the price at which the Company
may, at its option, redeem the Warrants, in accordance with the terms hereof,
which price shall be $0.10 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as of
any particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on __________, 2001 or the Redemption Date as defined in Section 8,
whichever is earlier; provided that if such date shall in the State of New York
be a holiday or a day on which banks are authorized or required to close, then
5:00 P.M. (New York time) on the next following day which in the State of New
York is not a holiday or a day on which banks are authorized or required to
close. Upon notice to all warrantholders the Company shall have the right to
extend the warrant expiration date.
2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant initially shall entitle the Registered Holder of
the Warrant representing such Warrant to purchase one share of Common Stock upon
the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
shall be executed by the Company and delivered to the Warrant Agent. Upon
written order of the Company
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signed by its President or Chairman or a Vice President and by its Secretary or
an Assistant Secretary, the Warrant Certificates shall be countersigned, issued,
and delivered by the Warrant Agent.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 2,125,000 shares
of Common Stock, subject to adjustment as described herein, upon the exercise of
Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued
hereunder, (ii) those issued on or after the Initial Warrant Exercise Date, upon
the exercise of fewer than all Warrants represented by any Warrant Certificate,
to evidence any unexercised warrants held by the exercising Registered Holder,
(iii) those issued upon any transfer or exchange pursuant to Section 6; (iv)
those issued in replacement of lost, stolen, destroyed, or mutilated Warrant
Certificates pursuant to Section 7; (v) those issued pursuant to the Purchase
Option; and (vi) those issued at the option of the Company, in such form as may
be approved by the its Board of Directors, to reflect any adjustment or change
in the Purchase Price, the number of shares of Common Stock purchasable upon
exercise of the Warrants or the Redemption Price therefor made pursuant to
Section 9 hereof.
(e) Pursuant to the terms of the Purchase Option, Monroe may
purchase up to 70,000 Units, consisting of 140,000 shares of Common Stock and
140,000 Warrants. The Purchase Option shall not be transferred, sold, assigned
or hypothecated for a period of one (1) year from the Effective Date, except
that it may be transferred to persons who are officers of Monroe or selling
group members in the offering.
3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in
the form annexed hereto as Exhibit A (the provisions of which are
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hereby incorporated herein) and may have such letters, numbers, or other marks
of identification or designation and such legends, summaries, or endorsements
printed, lithographed, or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage or to the requirements of Section
2(b). The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange, or in lieu of mutilated,
lost, stolen, or destroyed Warrant Certificates) and issued in registered form.
Warrant Certificates shall be numbered serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President, or any Vice President and by
its Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may nevertheless
be countersigned by the Warrant Agent, issued and delivered with the same force
and effect as though the person who signed such Warrant Certificates had not
ceased to be an officer of the Company or to hold such office. After
countersignature by the Warrant Agent, Warrant Certificates shall be delivered
by the Warrant Agent to the Registered Holder without further action by the
Company, except as otherwise provided by Section 4 hereof.
4. Exercise. Each Warrant may be exercised by the Registered Holder
thereof at any time on or after the Initial Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set forth
herein and in the applicable Warrant Certificate. A Warrant shall be deemed to
have been exercised immediately prior to the close of business on the Exercise
Date and the person entitled to receive the securities
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deliverable upon such exercise shall be treated for all purposes as the holder
of those securities upon the exercise of the Warrant as of the close of business
on the Exercise Date. As soon as practicable on or after the Exercise Date the
Warrant Agent shall deposit the proceeds received from the exercise of a Warrant
and shall notify the Company in writing of the exercise of the Warrants.
Promptly following, and in any event within five days after the date of such
notice from the Warrant Agent, the Warrant Agent, on behalf of the Company,
shall cause to be issued and delivered by the Transfer Agent, to the person or
persons entitled to receive the same, a certificate or certificates for the
securities deliverable upon such exercise (plus a certificate for any remaining
unexercised Warrants of the Registered Holder), unless prior to the date of
issuance of such certificates the Company shall instruct the Warrant Agent to
refrain from causing such issuance of certificates pending clearance of checks
received in payment of the Purchase Price pursuant to such Warrants. Upon the
exercise of any Warrant and clearance of the funds received, the Warrant Agent
shall promptly remit the payment received for the Warrant (the "Warrant
Proceeds") to the Company or as the Company may direct in writing.
5. Reservation of Shares; Listing; Payment of Taxes, etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery, be duly and validly issued,
fully paid, nonassessable, and free from all taxes, liens, and charges with
respect to the issue thereof, (other than those which the Company shall promptly
pay or discharge) and that upon issuance such shares shall be listed on each
national securities exchange or eligible for inclusion in each automated
quotation system, if any, on which the other shares of outstanding Common Stock
of the Company are then listed or eligible for inclusion.
(b) The Company covenants that if any securities to be reserved
for the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly
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issued or delivered upon such exercise, then the Company will, to the extent the
Purchase Price is less than the Market Price (as hereinafter defined), in good
faith and as expeditiously as reasonably possible, endeavor to secure such
registration or approval and will use its reasonable efforts to obtain
appropriate approvals or registrations under state "blue sky" securities laws.
With respect to any such securities, however, Warrants may not be exercised by,
or shares of Common Stock issued to, any Registered Holder in any state in which
such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp, or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance, or delivery of any shares upon exercise
of the Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock issuable upon exercise of the Warrants, and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Warrants.
6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute
and the Warrant Agent shall countersign, issue, and deliver in exchange therefor
the Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
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(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and the Warrant Agent
shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of this Agreement or resignation as Warrant Agent, or disposed of or
destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice to the contrary. The Warrants which are being publicly offered with
shares of Common Stock pursuant to the Underwriting Agreement will be
immediately detachable from the Common Stock and transferable separately
therefrom.
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7. Loss or Mutilation. Upon receipt by the Company and the Warrant Agent
of evidence satisfactory to them of the ownership of and loss, theft,
destruction, or mutilation of any Warrant Certificate and (in case of loss,
theft, or destruction) of indemnity satisfactory to them, and (in the case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall (in the absence of notice to the Company and/or
Warrant Agent that the Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
8. Redemption.
(a) Subject to the provisions of paragraph 2(e) hereof, on not
less than thirty (30) days notice given at any time after six (6) months after
the Initial Warrant Exercise Date, or earlier with the consent of Monroe, the
Warrants may be redeemed, at the option of the Company, at a redemption price of
$0.10 per Warrant, provided the Market Price of the Common Stock receivable upon
exercise of the Warrant shall equal or exceed 250% of the then exercise price of
the Warrants per share (the "Target Price"), subject to adjustment as set forth
in Section 8(f) below. Market Price for the purpose of this Section 8 shall mean
the average closing sale price for all twenty (20) consecutive trading days
ending on the third day prior to the date of the notice of redemption, which
notice shall be mailed no later than five days thereafter, of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automatic
Quotation System, the NASD OTC Electronic Bulletin Board or any national
securities exchange on which the Common Stock is traded.
(b) If the conditions set forth in Section 8(a) are met, and the
Company desires to exercise its right to redeem the Warrants, it shall mail a
notice of redemption to each of the Registered Holders of the Warrants to be
redeemed, first class, postage prepaid, not later than the thirtieth day before
the date fixed for redemption, at their last address as shall appear on the
records maintained pursuant to Section 6(b). Any notice mailed in the manner
provided herein shall be conclusively presumed to have
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been duly given whether or not the Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid, and (iv) that the
right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on
the business day immediately preceding the date fixed for redemption. The date
fixed for the redemption of the Warrant shall be the Redemption Date. No failure
to mail such notice nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such redemption except as to a
Registered Holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant
Secretary of the Company that notice of redemption has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the Redemption Date.
On and after the Redemption Date, Holders of the Warrants shall have no further
rights except to receive, upon surrender of the Warrant, the Redemption Price.
(e) From and after the Redemption Date specified for, the Company
shall, at the place specified in the notice of redemption, upon presentation and
surrender to the Company by or on behalf of the Registered Holder thereof of one
or more Warrant Certificates evidencing Warrants to be redeemed, deliver or
cause to be delivered to or upon the written order of such Holder a sum in cash
equal to the redemption price of each such Warrant. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the redemption price, shall
cease.
(f) If the shares of the Company's Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, the Target
Price shall be proportionally adjusted by the ratio which the total number of
shares of Common Stock outstanding immediately prior to such event bears to the
total
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number of shares of Common Stock to be outstanding immediately after such event.
9. Adjustment of Exercise Price and Number of Shares of Common Stock
or Warrants.
(a) Subject to the exceptions referred to in Section 9(g) below,
in the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the Market Price of the Common Stock (as defined in Section 8) on the date of
the sale or issue any shares of Common Stock as a stock dividend to the holders
of Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision,
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in subsection
9(f)(G) below) for the issuance of such additional shares would purchase at such
current market price per share of Common Stock, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant to
this Section 9, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions contained in Section
9(b) hereof) be such number of shares (calculated to the nearest tenth)
purchasable at the Purchase Price in effect immediately prior to such adjustment
multiplied by a fraction, the numerator of which shall be the Purchase Price in
effect immediately prior to such adjustment and the denominator of which shall
be the Purchase Price in effect immediately after such adjustment.
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(b) The Company may elect, upon any adjustment of the Purchase
Price hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants (calculated to the nearest tenth)
determined by multiplying the number one by a fraction, the numerator of which
shall be the Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the Purchase Price in effect immediately after
such adjustment. Upon each adjustment of the number of Warrants pursuant to this
Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10 hereof,
the number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization, or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization, or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage, or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization, or other change,
consolidation, merger, sale, or conveyance by a holder of the number of shares
of Common Stock that
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might have been purchased upon exercise of such Warrant immediately prior to
such reclassification, capital reorganization, or other change, consolidation,
merger, sale, or conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The Company shall not effect any
such consolidation, merger, or sale unless prior to or simultaneously with the
consummation thereof the successor (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing assets or other
appropriate corporation or entity shall assume, by written instrument executed
and delivered to the Warrant Agent, the obligation to deliver to the holder of
each Warrant such shares of stock, securities, or assets as, in accordance with
the foregoing provisions, such holders may be entitled to purchase and the other
obligations under this Agreement. The foregoing provisions shall similarly apply
to successive reclassification, capital reorganizations, and other changes of
outstanding shares of Common Stock and to successive consolidations, mergers,
sales, or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the Purchase Price per
share, the number of shares purchasable thereunder, and the Redemption Price
therefor as the Purchase Price per share, and the number of shares purchasable
and the Redemption Price therefore were expressed in the Warrant Certificates
when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a brief
statement of the facts accounting for such adjustment. The Company will promptly
file such certificate
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with the Warrant Agent and cause a brief summary thereof to be sent by ordinary
first class mail to Monroe and to each registered holder of Warrants at his last
address as it shall appear on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary or
an Assistant Secretary of the Company that such notice has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (i) to (vii) shall also be applicable:
(i) The number of shares of Common Stock outstanding at
any given time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change of
Shares for purposes of said sections.
(ii) No adjustment of the Purchase Price shall be made
unless such adjustment would require an increase or decrease of at least $.10 in
such price; provided that any adjustments which by reason of this subsection
(ii) are not required to be made shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment which, together
with any adjustment(s) so carried forward, shall require an increase or decrease
of at least $.10 in the Purchase Price then in effect hereunder.
(iii) In case of (1) the sale by the Company for cash of
any rights or warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or any securities convertible into or exchangeable for
Common Stock without the payment of any further consideration other than cash,
if any (such convertible or exchangeable securities being herein called
"Convertible Securities"), or (2) the issuance by the Company, without the
receipt by the Company of any consideration therefor, of any rights or warrants
to subscribe for or purchase, or any options for the purchase of, Common Stock
or Convertible Securities, in each case, if (and only if) the consideration
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payable to the Company upon the exercise of such rights, warrants, or options
shall consist of cash, whether or not such rights, warrants, or options, or the
right to convert or exchange such Convertible Securities, are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such rights, warrants, or options or upon the conversion or exchange
of such Convertible Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such rights, warrants,
or options, plus the consideration received by the Company for the issuance or
sale of such rights, warrants, or options, plus, in the case of such Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock issuable upon
the exercise of such rights, warrants, or options or upon the conversion or
exchange of such Convertible Securities issuable upon the exercise of such
rights, warrants, or options) is less than the fair market value of the Common
Stock on the date of the issuance or sale of such rights, warrants, or options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such rights, warrants, or options or upon the conversion or exchange
of such Convertible Securities (as of the date of the issuance or sale of such
rights, warrants, or options) shall be deemed to be outstanding shares of Common
Stock for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have
been sold for cash in an amount equal to such price per share.
(iv) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which Common
Stock is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by the
Company for the sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities) is less than the fair market value or
the Common Stock on the date of the sale of such Convertible Securities, then
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities (as of the
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date of the sale of such Convertible Securities) shall be deemed to be
outstanding shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount equal to such price
per share.
(v) In case the Company shall modify the rights of
conversion, exchange, or exercise of any of the securities referred to in
subsection (iii) above or any other securities of the Company convertible,
exchangeable, or exercisable for shares of Common Stock, for any reason other
than an event that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification is less
than the market price on the date prior to such modification, the Purchase Price
to be in effect after such modification shall be determined by multiplying the
Purchase Price in effect immediately prior to such event by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding
multiplied by the market price on the date prior to the modification plus the
number of shares of Common Stock which the aggregate consideration receivable by
the Company for the securities affected by the modification would purchase at
the market price and of which the denominator shall be the number of shares of
Common Stock outstanding on such date plus the number of shares of Common Stock
to be issued upon conversion, exchange, or exercise of the modified securities
at the modified rate. Such adjustment shall become effective as of the date upon
which such modification shall take effect.
(vi) On the expiration of any such right, warrant, or
option or the termination of any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect hereunder shall
forthwith be readjusted to such Purchase Price as would have obtained (a) had
the adjustments made upon the issuance or sale of such rights, warrants,
options, or Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually delivered (and
the total consideration received therefor) upon the exercise of such rights,
warrants, or options or upon the conversion or exchange of such Convertible
Securities and (b) had adjustments been made on the basis of the Purchase Price
as adjusted under clause (a) for all transactions (which would have affected
such adjusted Purchase Price) made after the issuance or sale of such rights,
warrants, options, or Convertible Securities.
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(vii) In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be deemed
to be the gross sales price therefor without deducting therefrom any expense
paid or incurred by the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each Warrant
will be made, however,
(i) upon the sale or exercise of the Warrants, including
without limitation the sale or exercise of any of the Warrants comprising the
Purchase Option; or
(ii) upon the sale of any shares of Common Stock in the
Company's initial public offering, including, without limitation, shares sold
upon the exercise of any over-allotment option granted to the Underwriters in
connection with such offering; or
(iii) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants, or options were outstanding on
the date of the original sale of the Warrants or were thereafter issued or sold
other than issuances of preferred stock in connection with acquisitions by the
Company; or
(iv) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made upon the
issuance or sale of such Convertible Securities and whether or not such
Convertible Securities were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(v) upon the issuance or sale of Common Stock or
Convertible Securities in a private placement unless the issuance
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or sale price is less than 85% of the fair market value of the Common Stock on
the date of issuance, in which case the adjustment shall only be for the
difference between 85% of the fair market value and the issue or sale price; or
(vi) upon the issuance or sale of Common Stock or
Convertible Securities to shareholders of any corporation which merges into the
Company or from which the Company acquires assets and some or all of the
consideration consists of equity securities of the Company, in proportion to
their stock holdings of such corporation immediately prior to the acquisition
but only if no adjustment is required pursuant to any other provision of this
Section 9.
(h) Intentionally Omitted.
(i) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(j) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant, or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants, or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants, or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this section 9(j), that
exercise of warrants is permissible during periods prior to the Initial Warrant
Exercise Date) of his Warrants. Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.
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10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 9 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of such fractional share,
determined as follows:
(i) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ Quotation System, the current value shall be the last
reported sale price of the Common Stock on such exchange on the last business
day prior to the date of exercise of this Warrant or if no such sale is made on
such day, the average of the closing bid and asked prices for such day on such
exchange; or
(ii) If the Common Stock is not listed or admitted to
unlisted trading privileges, the current value shall be the mean of the last
reported bid and asked prices reported by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of this Warrant; or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or
19
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reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, or conveyance or otherwise), or to receive notice
of meetings, or to receive dividends or subscription rights, until such Holder
shall have exercised such Warrants and been issued shares of Common Stock in
accordance with the provisions hereof.
12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
13. Agreement of Warrant Holders. Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a warrant that:
(a) The warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person or by his attorney
duly authorized in writing and only if the Warrant Certificates representing
such Warrants are surrendered at the office of the Warrant Agent, duly endorsed
or accompanied by a proper instrument of transfer satisfactory to the Warrant
Agent and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder and as
the absolute, true, and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and cancelled by it and retired. The Warrant Agent shall also cancel
Common Stock following exercise of any or all of the Warrants represented
20
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<PAGE>
thereby or delivered to it for transfer, splitup, combination, or exchange.
15. Concerning the Warrant Agent. The Warrant Agent acts hereunder as
agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder be
deemed to make any representations as to the validity, value, or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered, or omitted by it in reliance on any warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order, or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically
21
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<PAGE>
prescribed). The Warrant Agent shall not be liable for any action taken,
suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order, or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses, and liabilities, including
judgments, costs, and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder except losses,
expenses, and liabilities arising as a result of the Warrant Agent's negligence
or wilful misconduct.
The Warrant Agent may resign its duties and be discharged from
all further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or wilful misconduct), after giving
60 days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 30 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its stockholders,
of not less than $10,000,000 or a stock transfer company. After acceptance in
writing of such appointment by the new warrant agent is received by the Company,
such new warrant agent shall be vested with the same powers, rights, duties, and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act, or deed; but if for any reason
it shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act, or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the
22
<PAGE>
<PAGE>
resigning Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the trust business of the Warrant Agent
shall be a successor warrant agent under this Agreement without any further act,
provided that such corporation is eligible for appointment as successor to the
Warrant Agent under the provisions of the preceding paragraph. Any such
successor warrant agent shall promptly cause notice of its succession as warrant
agent to be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
16. Modification of Agreement. The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this Agreement (i)
that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained; or (ii) that they may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Warrant Certificates; provided,
however, that this Agreement shall not otherwise be modified, supplemented, or
altered in any respect except with the consent in writing of the Registered
Holders of Warrant Certificates representing not less than 50% of the Warrants
then outstanding; and provided, further, that no change in the number or nature
of the securities purchasable upon the exercise of any Warrant, or the Purchase
Price therefor, or the acceleration of the Warrant Expiration Date, shall be
made without the consent in writing of the Registered Holder of the Warrant
Certificate
23
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<PAGE>
representing such Warrant, other than such changes as are specifically
prescribed by this Agreement as originally executed or are made in compliance
with applicable law.
17. Notices. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company, 1450 Route 22 West, Suite 103, Mountainside, NJ 07092,
Attention: President, with a copy sent to Singer Zamansky LLP, 48 Exchange
Place, 20th Floor, New York, NY 10005, Attention: Alexander Bienenstock, Esq. or
at such other address as may have been furnished to the Warrant Agent in writing
by the Company; and if to the Warrant Agent, at its Corporate office.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws.
19. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy, or claim, in equity or at law,
or to impose upon any other person any duty, liability, or obligation.
20. Termination. This Agreement shall terminate at the close of
business on the Warrant Expiration Date of all the Warrants or such earlier date
upon which all Warrants have been exercised, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section 15
hereof shall survive such termination.
21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
24
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ALL COMMUNICATIONS CORPORATION
By: _____________________________
Richard Reiss
Its: President
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: _____________________________
Its: Authorized Officer
25
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<PAGE>
EXHIBIT A
[Form of Face of Warrant Certificate]
No. W Warrants
VOID AFTER ________ __, 2001
STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
ALL COMMUNICATIONS CORPORATION
THIS CERTIFIES THAT FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Common Stock Purchase Warrants ("Warrants") specified above. Each
Warrant initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock, no
par value per share ("Common Stock"), of ALL COMMUNICATIONS CORPORATION, a
Delaware corporation (the "Company"), at any time between the Initial Warrant
Exercise Date and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of AMERICAN
STOCK TRANSFER & TRUST COMPANY as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $4.25 (the "Purchase Price") in lawful money
of the United States of America in cash or by official bank or certified check
made payable to All Communications Corporation.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement") dated ________ __,
1997, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modifications or adjustment.
<PAGE>
<PAGE>
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Initial Warrant Exercise Date" shall mean ________ __, 1998.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
________ __, 2001, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00 p.m.
(New York time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. This Warrant shall not be exercisable by a Registered Holder in any
state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any transfer fee in addition
to any tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
2
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<PAGE>
This Warrant may be redeemed at the option of the Company, at a
redemption price of $.10 per Warrant at any time after ________ __, 1998 or
earlier with the consent of Monroe Parker Securities, Inc., provided the Market
Price (as defined in the Warrant Agreement) for the securities issuable upon
exercise of such Warrant shall exceed 250% of the then exercise price of the
Warrants. Notice of redemption shall be given not later than the thirtieth day
before the date fixed for redemption, all as provided in the Warrant Agreement.
On and after the date fixed for redemption, the Registered Holder shall have no
rights with respect to this Warrant except to receive the $.10 per Warrant upon
surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
ALL COMMUNICATIONS CORPORATION
By: ____________________________
Richard Reiss
Its: President
Date: ______________________________
[Seal]
3
<PAGE>
<PAGE>
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: ______________________________
Its: Authorized Officer
4
<PAGE>
<PAGE>
[Form of Reverse of Warrant Certificate]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
____________________________________________
(please insert social security or other identifying number)
and be delivered to
____________________________________________
____________________________________________
____________________________________________
____________________________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below:
____________________________________________
____________________________________________
____________________________________________
(Address)
<PAGE>
<PAGE>
____________________________________________
(Date)
____________________________________________
(Taxpayer Identification Number)
If this Warrant has been solicited by a member of the National Association of
Securities Dealers, Inc., the name of such firm is:__________:
SIGNATURE GUARANTEED
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto
____________________________________________
(please insert social security or other identifying number)
____________________________________________
____________________________________________
____________________________________________
____________________________________________
(please print or type name and address)
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints _________________________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.
____________________________________________
2
<PAGE>
<PAGE>
(Date)
SIGNATURE GUARANTEED
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
3
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<PAGE>
NUMBER SHARES
C
ALL COMMUNICATIONS CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 016628 10 9
COMMON STOCK
THIS CERTIFIES THAT:
IS OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE, OF
ALL COMMUNICATIONS CORPORATION
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of New
Jersey, and to the Certificate of Incorporation and Bylaws of the Corporation,
as now or hereafter amended. This certificate is not valid until countersigned
by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED:
ALL COMMUNICATIONS CORPORATION
CORPORATE
SEAL
1991
NEW JERSEY
/s/ ANDREA GRASSO /s/ RICHARD REISS
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY, NEW YORK, NY
TRANSFER AGENT AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE>
<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:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-...........Custodian..........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act..........
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
|______________________________________|
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ____________________________
________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR
OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE
MEDALLION PROGRAM.
________________________________________________________________________________
STOCK MARKET INFORMATION EXCHANGE
www.stockinformation.com
COLUMBIA FINANCIAL PRINTING CO., P.O. BOX 219, BETHPAGE, NY 11714
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
NUMBER VOID AFTER APRIL , 2002 WARRANTS
W REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANT
</TABLE>
ALL COMMUNICATIONS CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
PURCHASE WARRANTS CUSIP 016628 11 7
THIS CERTIFIES THAT
FOR VALUE RECEIVED:
or registered assigns (the 'Registered Holder') is the owner of the number of
Redeemable Class A Common Stock Purchase Warrants ('Warrants') specified above.
Each Warrant initially entitles the Registered Holder to purchase, subject to
the terms and conditions set forth in this Certificate and the Warrant Agreement
(as hereinafter defined), one fully paid and nonassessable share of Common
Stock, no par value per share ('Common Stock'), of ALL COMMUNICATIONS
CORPORATION, a New Jersey corporation (the 'Company'), at any time between the
Initial Warrant Exercise Date (as herein defined) and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of AMERICAN STOCK TRANSFER & TRUST COMPANY, as Warrant
Agent, or its successor (the 'Warrant Agent'), accompanied by payment of $4.25
('Purchase Price') in lawful money of the United States of America in cash or by
official bank or certified check made payable to All Communications Corporation.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the 'Warrant Agreement') dated
, 1997, by and between the Company and the Warrant
Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modifications or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term 'Initial Warrant Exercise Date' shall mean
, 1998.
The term 'Expiration Date' shall mean 5:00 p.m. (New York time on April ,
2002, or such earlier date as the Warrants shall be redeemed. If such date shall
in the State of New York be a holiday or a day on which the banks are authorized
to close, then the Expiration Date shall mean 5:00 p.m. (New York time) the next
following day which in the State of New York is not a holiday or a day on which
banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any transfer fee in addition
to any tax or other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distribution, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at a redemption
price of $.10 per Warrant at any time after , 1998 or
earlier with the consent of Monroe Parker Securities, Inc. upon not less than 30
days' prior written notice, if the closing bid price of the Common Stock (if the
Common Stock is then traded in the over-the-counter market) or the last sale
price of the Common Stock (if the Common Stock is then traded on a national
securities exchange or the Nasdaq National Market or SmallCap System) has been
at least 250% of the Purchase Price, subject to adjustment, for at least 20
consecutive trading days ending within three days prior to the date on which
notice of redemption is given. On and after the date fixed for redemption, the
Registered Holder shall have no rights with respect to this Warrant except to
receive the $.10 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New Jersey.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, The Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
<TABLE>
<S> <C> <C>
DATED:
ALL COMMUNICATIONS CORPORATION
CORPORATE SEAL 1991 NEW JERSEY
/s/ Andrea Grasso /s/ Richard Reiss
SECRETARY PRESIDENT
</TABLE>
COUNTERSIGNED AND REGISTERED,
AMERICAN STOCK TRANSFER & TRUST COMPANY, NEW YORK, NY
AS WARRANT AGENT
BY:
AUTHORIZED SIGNATURE
<PAGE>
<PAGE>
ALL COMMUNICATIONS CORPORATION
REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE WARRANTS
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to exercise
______________ Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of and be
delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
| |
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- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
- --------------------------------------------------------------------------------
and, if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
| |
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- --------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)
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_______________________________________
Dated: ______________________, 19___. Signature
_______________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
_____________________________________ face of this Warrant Certificate.)
Soliciting Broker: _____________________________________________________________
ASSIGNMENT
TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO ASSIGN WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
- ---------------------------------------
| |
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- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
- --------------------------------------------------------------------------------
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints
_______________________________________________________________________ attorney
to transfer this Warrant Certificate on the books of the Company, with full
power of substitution in the premises.
Dated: ______________________, 19___. _______________________________________
Signature
_____________________________________ _______________________________________
SIGNATURE GUARANTEED Signature
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
STOCK MARKET INFORMATION EXCHANGE
www.stockinformation.com
<PAGE>
