As filed with the U.S. Securities and
Exchange Commission on November 12, 1997
Registration No. 333-40001-NY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM SB-2
Registration Statement
Under The Securities Act of 1933
New Jersey 2899 223-319-224
State of Standard Industrial IRS Employer
Incorporation Classification Code Identification No.
PPA TECHNOLOGIES, INC.
163 South St.
Hackensack, New Jersey 07601
(201) 457-1221
Address, including zip code and telephone number, including area code of
registrant's principal executive offices and principal place of business or
intended principal place of business.
ROGER L. FIDLER
163 South St.
Hackensack, New Jersey 07601
(Name and Address of Agent for Service)
Copies of Communication to:
Roger L. Fidler, 163 South St., Hackensack, New Jersey 07601, (201) 457-1221
Steve Gutstein, Esq., Attorney at Law,
276 Fifth Avenue, New York, New York 10001
Approximate date of proposed sale to public: As soon as possible after the
effective date of the Registration Statement.
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CALCULATION OF REGISTRATION FEE
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Title of Amount to be Proposed maximum Proposed maximum Amount
each class registered offering price aggregate Registration
of Securities l per Unit (1) offering Price (1) Fee
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Units consisting
of 1 Share of
Common Stock
and 1 Class
A Warrant 1,150,000 $6.00 $6,900,000.00 $2,090.91
Common Stock,
no par value
per share,(2)
underlying
Class A
Warrants 1,150,000 $7.00 $8,050,000.00 $2,439.40
Underwriter's
warrants, no
par value 115,000 $0.001 $115.00 $0.04
Units, no
par value
per share,
underlying
Underwriter's
Warrants 115,000 $7.20 $828,000.00 $250.91
Units, no
par value
per share,
underlying
warrants in
Underwriter's
Warrant Units 115,000 $7.00 $805,000.00 $243.94
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Total Registration-Fee ----------------------------- $ 5025.20
The Exhibit Index is located at page 54
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 416 there are also being registered such additional shares
as may be issued pursuant to the anti-dilution provisions of the Warrants.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
<PAGE>
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PPA TECHNOLOGIES, INC.
CROSS REFERENCE SHEET FOR PROSPECTUS
(Pursuant to Item 501 of Regulation S-K)
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Item No. Caption in Prospectus
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus............................Forepart, Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus...........................Inside Front Cover Page
3. Summary Information Risk Factors
and Ratio of Earnings
to-Fixed Charges.............................. Prospectus Summary
4. Use of Proceeds.............................. Use of Proceeds
5. Determination of offering Price.............. Description of Units;
Description of Capital Stock
6. Dilution..................................... Dilution
7. Selling Security Holders..................... Not Applicable
8. Plan of Distribution......................... Underwriting
9. Legal Proceedings............................ Legal Proceedings
10. Directors and Executive Officers............. Management
11. Security ownership of Certain
Beneficial owners and Management............. Principal Shareholders
12. Description of Securities to Be
Registered................................... Description of Units
13. Interest of Named Experts and
Counsel ..................................... Legal Counsel, Experts
<PAGE>
14. Information With Respect To
The Registrant; Organization
with Five Years............................. Prospectus Summary;
The Company; Dividend Policy;
Selected Financial Information;
Management's Discussion
Analysis of Financial Condition
and Results of Operations;
Business; Management; Principal
Shareholders; Certain
Transactions; Description of
the Securities.
15. Disclosure of Commission
Position on Indemnification
For Securities Act Liabilities.................... Not applicable
16. Description of Business....................... Business of the Company
17. Description of Property....................... Business of the Company
18. Interest of Management and Others
in Certain Transactions....................... Certain Transactions;
Principal Shareholders
19. Certain Market information.................... Risk Factors; Description
of Securities; Underwriting
20. Remuneration of Directors and officers........ Remuneration
21. Financial Statements.......................... Financial Statements
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<PAGE>
PROSPECTUS
PPA TECHNOLOGIES, INC.
1,000,000 Units, Each consisting of One Share of
One Share of Common Stock and One Class A Redeemable
Common Stock Purchase Warrant,
offered at a price of $6.00 per Unit
-----------------------------
All of the Units (the "Units") offered hereby (the "Offering"), each
Unit consisting of one share of common stock, without par value, (hereinafter
referred to as "Share" or "Share of Common Stock") and one "Class A" Redeemable
Common Stock Purchase Warrant (hereinafter referred to as the "Warrants" or
"Redeemable Warrants"), exercisable into one share of common stock per warrant
for a period of one year from the effective date ("Effective Date") of the
registration statement of which this prospectus (this "Prospectus") is a part at
an exercise price of $7.00 per share, are being offered by PPA Technologies,
Inc. (the "Company" or "PPA"). The Warrants are redeemable at the Company's
option commencing [ ] (90 days after the effective date (the "Effective Date")of
the registration statement (the "Registration Statement") of which the
Prospectus is a part) upon 30 days notice to the Warrant holders at $.05 per
Warrant if the closing bid price of the Common Stock in the over-the-counter
market as reported by ("NASD") shall have for a period of 30 consecutive trading
days ending within 15 days of the notice of redemption average in excess of
$8.50 per share (subject to adjustments in the case of a stock split, stock
dividend, recapitalization or similar event). Since it is the Company's present
intention to exercise such right, Warrant holders should presume that the
Company would call the Redeemable Warrants for redemption if such criteria are
met. The Redeemable Warrants are immediately detachable and separately tradeable
from the Units upon issuance. It is anticipated that the Shares of Common Stock
and Redeemable Warrants will be included on the NASDAQ Small-Cap Market
("Nasdaq") under the symbols "PPAS" and "PPAW", respectively.
Prior to the offering, there has been no market for the securities of
the company. There can be no assurance that a market for the company's
securities will develop after completion of this offering or, if developed, that
it will be maintained. As a consequence of such a limited market, a purchaser of
the Shares may be unable to sell the Shares when desired and may have to hold
the Shares indefinitely. See "Risk Factors Limited Trading Market." The
determination of the offering price of the Shares was made arbitrarily by the
Company. See "Risk Factors - Arbitrary Offering Price."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION TO
PUBLIC INVESTORS. A PROSPECTIVE PURCHASER MAY LOSE HIS TOTAL INVESTMENT. SEE
"RISK FACTORS" AND "DILUTION."
- ------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY It is A CRIMINAL OFFENSE.
=================================================================
Price to Underwriting Proceeds to
Public Discounts(l) Company(2)
- -----------------------------------------------------------------
Per Unit $6.00 $0.60 $5.40
- -----------------------------------------------------------------
Total(3) $6,000,000 $600,000 $5,400,000
=================================================================
(1) The Company will agree, subject to the sale of at least 1,000,000 Units
being offered hereby, to pay to Kenneth Jerome & Co., as the representative of
the several Underwriters (the "Representative") the Underwriting Discounts.
Additionally, the Company agrees: (i) to indemnify the Underwriter or Dealer
against certain liabilities, including liabilities under the Securities Act of
1933; and, (ii) to sell to the Underwriter, at a nominal price, warrants to
purchase 10% of the number of Units sold by the Underwriter or Dealers, with an
exercise price of $7.20 per Unit, which warrants shall be exercisable for four
years commencing one year after issuance.(See "Underwriting.")
(2) Before deducting expenses payable by the Company in connection with the
Offering estimated at approximately $347,000. These expenses include filing
fees, printing, a 3% non-accountable fee to the Underwriters, legal and
accounting fees. Net proceeds to the Company after such expenses are estimated
to be $5,053,000.
(3) The Company has granted to the Underwriters an option (the "Over-Allotment
Option") exercisable within 45 days after the date of this Prospectus to
purchase up to 150,000 additional Units, upon the same terms and conditions as
set forth above, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts, and
Proceeds to Company will be $6,900,000, $690,000, and $6,210,000, respectively.
See "Underwriting."
The date of this Prospectus is _________ 1997.
Kenneth Jerome & Company, Inc.
In connection with this offering, the Underwriters may over-allot or effect
transactions which stabilize or maintain the market price of the Units and the
components thereof at a level above that which might otherwise prevail in the
open market. Such transactions may be effected on the NASDAQ SmallCap market.
Such stabilizing, if commenced, may be discontinued at any time.
The Units are offered by the underwriters subject to prior sale, to allotment
and withdrawal, and to cancellation or modification of the offer, without
notice. The Underwriters reserve the right, in their sole discretion, to reject
any order, in whole or in part, for the purchase of any Units. In addition, each
Underwriter reserves the right to cancel any confirmation of sale, even after
the purchase price has been paid, if, in the opinion of that Underwriter,
completion of such sale would violate Federal or State securities laws or a rule
or policy of The National Association of Securities Dealers, Inc.
AVAILABLE INFORMATION
The Company intends to file with the Securities and Exchange Commission (the
"Commission"), New York, New York, a registration statement on Form SB-2 under
the Act with respect to the Units offered hereby. For further information about
the company and the securities being offered hereby, reference is made to the
registration statement and to the financial statements and exhibits filed as a
part thereof. Statements contained in this Prospectus as to the contents of any
contract or any other document 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. The registration statement, including exhibits
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and the Northeast Regional Office located at 7 World Trade
Center, New York, New York and copies of all or any part thereof may be obtained
from such offices after payment of the fees prescribed by the Commission.
Reports to Shareholders
The Company intends to furnish its shareholders with annual reports
containing audited financial statements as soon as practicable at the end of
each fiscal year, commencing with the next fiscal year. In addition, the Company
may, from time to time, issue unaudited interim reports and financial
statements. As a result of the effectiveness of the registration statement of
which this Prospectus is a part, the Company will incur a reporting obligation
under the Securities Exchange Act of 1934.
<PAGE>
Glossary
Coalescent - A liquid material which when exposed to the environment becomes a
solid.
Volatile Organic Compound ("VOC") - liquid substances which evaporate when
exposed to the environment.
Coupling Agent - A material which can either bond two materials together with
greater strength or, alternatively, can also serve to bond two different
materials together more weakly.
Resin - Organic polymer.
Hologenated - Compounds containing a halogen, e.g. chlorine or flourine.
Phr - Parts per hundred of resin.
V0 - Flame spread rate.
Plate-out - Bloom to the surface of mobile phases.
Cross-linking - Establishment of chemical bonds between different substances.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information
and financial statements, including the notes thereto, appearing elsewhere in
this Prospectus and, accordingly, should be read in conjunction with such
information and statements.
The Company
PPA Technologies, Inc. (the "Company" or "PPA") was incorporated on July 22,
1994 under the laws of the State of New Jersey. The Company's principal offices
are located at 163 South St., Hackensack, NJ 07601 and its telephone number is
(201) 457-1221.
PPA Technologies, Inc., hereinafter referred to as PPA Technologies or "the
Company", was formed to develop and manufacture innovative specialty chemical
products with applications in the plastics and coatings industries.
After research, development and testing, PPA has begun to sell certain products.
In general, PPA Technologies' products improves processing and/or the end
product. This is accomplished through its proprietary Coupling Agents and
Reactive Coalescents. In these areas, the Company's products are an advance in
environmental performance, product performance, cost performance, or, in many
cases, performance in more than one of these parameters. (See "Business of the
Company").
The Offering
The Company is offering hereby through the Underwriter on a "firm commitment
basis" 1,000,000 Units at an offering price of $6.00 per Unit. Each Unit is
comprised of one (1) share of common stock (no par value per share) and one (1)
Class A redeemable common stock purchase warrant exercisable for five years from
the Effective Date at an exercise price of $7.00 per common share. The
Redeemable Common Stock Purchase Warrants (hereinafter referred to as the
"Warrants" or "Redeemable Warrants") are redeemable at the Company's option
commencing [ ] (90 days after the Effective Date) upon 30 days notice to the
Warrant holders at $.05 per Warrant if the closing bid price of the Common Stock
in the over-the-counter market as reported by NASDAQ shall have for a period of
30 consecutive trading days ending within fifteen days of the notice of
redemption average in excess of $8.50 per share (subject to adjustments in the
case of a reverse stock split, stock dividend, etc.). The Redeemable Warrants
are immediately detachable and separately tradeable from the Units upon
issuance. The offering price of the Units and the exercise price of the
Redeemable Warrants were determined by the Company and the Underwriter. Such
prices bear no relation to the book value, assets or earnings of the Company, or
to any other generally recognized objective criteria of value.
Common Stock:
On June 20, 1996, the stockholders approved an increase in the authorized
capital to 10,000,000 Shares of Common Stock par value, and 1,000,000 shares of
preferred stock having a par value of $100.00 each. On June 28, 1996 the Board
of Directors effected a 1,000 to 1 stock split upon the filing of the Amendment
of the Certificate of Incorporation authorized by the stockholders. All
financial and stock related numbers set forth herein reflect this stock split,
except where otherwise specifically stated.
Common Stock Outstanding at June 30, 1997 ....... 1,555,000(1)
Preferred Stock Outstanding at June 30, 1997 ..... 3261(1)
To be offered(2) ................................ 1,000,000
To be outstanding after the offering(2).......... 2,555,000
Use of Proceeds........... The Company intends to use the net proceeds of this
offering principally for production equipment,
salaries, inventory, advertising, administrative
overhead and working capital. The proceeds of this
Offering will enable the Company to expand marketing
of its entire line of products, and to build an
inventory of its products. (See "Use of Proceeds.")
Risk Factors and Dilution ..... Prospective Investors should carefully consider
the factors described under the captions "Risk
Factors" and "Dilution."
NASDAQ Proposed Listing Symbol (3) .............................PPAS, PPAW
- --------------
(1) Does not include an aggregate of 500,000 shares reserved for issuance under
the Company's Stock Grant and Stock Option Plans nor does it include options on
1,275,000 shares, exerciseable at $1.00 per share, held by management.
(2) Does not include the exercise of any of the Redeemable Warrants contained in
said Units, nor the exercise of any Underwriter's Warrants or the Unit Warrants
contained in the Units issuable upon the exercise of the Underwriter's Warrants,
nor the outstanding warrants held by current shareholders.
(3) The Company intends to apply for and anticipates listing on the NASDAQ Small
Cap Market, but there can be no guarantee that such listing will be approved, or
if approved that such listing will be maintained, or if listed that a market
will develop or if developed, that such market will be sustained.
<PAGE>
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SUMMARY FINANCIAL INFORMATION
The following table summarizes certain selected financial data of the Company
and is qualified in its entirety by the more detailed financial statements
contained elsewhere in this Memorandum.
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Income Statement:
Year Ending Year Ending Year Ending Three Months Ended
June 30,1995 June 30, 1996 June 30, 1997 September 30, 1997
Sales 226,202 155,525 131,335 $33,285
Cost Of Goods 156,348 104,552 61,453 10,337
------- ------- ------ ------
Gross Profit 69,854 50,973 69,882 22,948
Operating Expenses 181,651 165,388 211,080 128,312
Other Income -0- -0- -0- -0-
Other Expenses -0- -0- 3065 9,367
Net Profit(Loss) (111,797) (114,715) (144,263) (115,001)
Per share (0.07) (0.08) (0.09) (0.07)
Shares Outstanding 1,555,000 1,555,000 1,555,000 1,555,000
Dividends -0- -0- -0- -0-
</TABLE>
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Balance Sheet
as of: September 30,
1997 As Adjusted(1)
Cash And Cash Equivalents 84,608 5,137,608
Working Capital (deficit) (280,503) 4,772,497
Total Assets 269,775 5,322,775
Current Liabilities 407,201 407,201
Long Term Debt -0- -0-
Stockholders' (deficit) (137,426) 4,915,574
Equity
</TABLE>
(1) Gives effect to the issuance and sale of the maximum 1,000,000 Units offered
hereby and the receipt of the estimated net proceeds ($5,053,000) before their
application. This does not take into account any potential revenues from the
150,000 Units allotted for the over-allotment. See "Use of Proceeds".
<PAGE>
RISK FACTORS
The Units being offered hereby are speculative and involve a high degree of
risk. In addition to the other information in this Prospectus, prospective
investors, prior to making an investment, should carefully consider the
following risks and speculative factors inherent in and affecting the business
of the Company and this offering.
Risks Associated With Forward-Looking Statements. This Prospectus contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities and Exchange Act of 1934, as
amended, (the "Exchange Act" and the Company intends that such forward-looking
statements be subject to the safe harbors for such statements under such
sections.
The forward-looking statements herein are based on current expectations
that involve a number of risks and uncertainties. Such forward-looking
statements are based on assumptions that the Company will continue to design,
market and provide new products and services on a timely basis, that competitive
conditions in the polymers and additives markets will not change adversely or
materially, that demand for the Company's products will continue or increase,
that the market will accept the Company's new and existing products, that the
Company will retain and add qualified sales, research and systems integration
personnel and consultants, that the Company's forecasts will accurately
anticipate market demand, and that there will be no material adverse change in
the Company's operations or business. The foregoing assumptions are based on
judgments with respect to, among other things, future economic, competitive and
market conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Accordingly, although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any such assumption
could prove to be inaccurate and therefore there can be no assurance that the
results contemplated in forward-looking statements will be realized.
Accumulated Losses; History of Operating Losses; Explanatory Paragraph
Within Accountants' Opinion. The Company commenced in July of 1994. In order to
execute its business strategy and develop new products, the Company will require
significant funds. Increased spending and decreased sales levels resulted in a
net loss of $144,263 for the fiscal year ended June 30, 1997, and a loss of
$115,001 for the three months ended September 30, 1997 and may result in future
losses as the Company will incur significant expenses in connection with
research and development of its products, development of its direct and indirect
selling and marketing strategies, and the hiring of additional personnel. There
can be no assurance that the Company will be profitable in the future or that
the net proceeds of this offering, together with any funds provided by
operations and presently available capital, will be sufficient to fund the
Company's ongoing operations. At September 30, 1997, the Company's current
liabilities exceeded its current assets by $280,503, its cash balance was
$84,608. The Company is dependent on generating additional sales to improve cash
flow, and it is possible that the Company will require additional debt or equity
bridge financing prior to completion of this offering. The Company believes its
current operating funds, along with the proceeds of the offering after amounts
used to repay debt, will be sufficient to finance its cash requirements for at
least the next 12 months. See "Use of Proceeds." If the Company has insufficient
funds, there can be no assurance that additional financing can be obtained on
acceptable terms, if at all. The absence of such financing would have a material
adverse effect on the Company's business, including a possible reduction or
cessation of operations. The report of the Company's independent accountants on
the Company's financial statements as of June 30, 1997 contains an explanatory
statement concerning the Company's ability to continue as a going concern. See
"Financial Statements-Report of Independent Auditors."
No Trading Market. There is no trading market for the Company's Common
Stock and there is no assurance that such a market will develop after this
offering, or if such a market develops, that it will be maintained. Holders of
the Shares may, therefore, have difficulty in selling their stock should they
desire to do so and should be able to withstand the risk of holding their Shares
indefinitely.
Proceeds of Offering. A substantial portion of the proceeds of the
offering will be used for general working capital. If the maximum number of
Shares is sold, working capital will comprise 8.2% of total net proceeds.
Management will have broad discretion as to the use of such proceeds and
management reserves the right to reallocate all proceeds to working capital.
See "Use of Proceeds."
Additional Capital. The Company believes that the minimum proceeds of
this offering will allow the Company to meet all of its presently planned future
operations for at least twelve months. However, a significant portion of the
proceeds will be used to develop and improve product lines. Thus, while the
Company has no plans that would require it to seek additional funding, it may be
required to do so to complete or accelerate these development programs. There
can be no assurance that such funding will be available on terms acceptable to
the Company, and the failure to procure such funding on acceptable terms could
materially and adversely affect the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation -- Liquidity and
Capital Resources."
Financial Condition; Decreasing Sales; The Company's sales to date have
been lower in each succeeding year. There can be no assurance that this trend
will be reversed. Even applying the proceeds of this offering, the Company might
not be able to significantly improve revenues and profitability. Failure to
reverse this trend would materially and adversely affect the Company's ability
to exist.
Limitations Imposed by Environmental Regulation. Federal, state and local
environmental laws govern air emissions and discharges into water and the
generation, transportation, storage, and treatment and disposal of solid and
hazardous waste. These laws establish standards governing most aspects of the
construction and operation of the Company's facilities, and often require
multiple governmental permits before these facilities can be constructed,
modified, or operated. There can be no assurance that all required permits will
be issued for the Company's projects under development or for future projects,
or that the requirements for continued environmental regulatory laws and
policies governing their enforcement may change, requiring new technology or
stricter standards for the control of discharges of air or water pollutants, or
for solid or hazardous waste or ash handling and disposal. Such future
developments could affect the manner in which the Company operates its plants
and could require significant additional expenditures to achieve compliance with
such requirements. It is possible that compliance may not be technically or
economically feasible. To the date of this Prospectus, the Company has not
experienced any delays or costs associated with environmental regulations that
have materially effected the Company's business.
Untested Marketing Strategy. To date, the Company has experienced
development and shipment delays due to a lack of working capital and resultant
inadequate staffing and there is no assurance that such delays will not
continue. To date, the Company's product marketing efforts have been very
limited and the Company has not been able to capitalize on the interest
generated by said marketing efforts. There is no assurance that if the Company
applies the proceeds of this offering to marketing and distribution that these
problems will disappear.
Dependence On Others; Limited Manufacturing Capability. At its present
stage of development, the registrant has developed and continues to develop new
chemicals and new uses for existing chemicals by combining them with chemicals
proprietary to the Company. The Company's strategy for the research,
development, marketing, distribution, and commercialization of its products
entails entering into various arrangements with third party toll manufacturers,
and it is dependent upon the ability of these outside parties to perform their
responsibilities. The Company may also enter into marketing agreements and
arrangements with various third parties, rely on collaborative partners to
conduct research efforts and trials, and to manufacture and distribute certain
of the Company's products. The Company does not currently have in place all such
relationships. The Company does have those relationships in place which are
presently deemed adequate to support the Company's business for the next twelve
months, including toll manufacturing of proprietary chemicals, and end users in
the ink, paint, and plastic industries which will run field tests on the
Company's products. There can be no assurance that the Company will be
successful in establishing all the necessary collaborative arrangements or that,
if established, the arrangements will be successful or on terms that will enable
the Company to achieve profitability.
Possible Delisting of Securities from Nasdaq System; Risks Relating to
Low-Priced Stocks. It is currently anticipated that the Company's Common Stock
and Warrants will be eligible for listing on the Nasdaq SmallCap market upon the
completion of this offering. In order to continue to be listed on Nasdaq,
however, the Company must maintain $2,000,000 in total assets, a $1,000,000
market value of the public float and $1,000,000 in total capital and surplus. In
addition, continued inclusion requires two market-makers and a minimum bid price
of $1.00 per share. The failure to meet these maintenance criteria in the future
may result in the delisting of the Common Stock from Nasdaq, and trading, if
any, in the Company's securities would thereafter be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, an investor could find
it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's securities.
In addition, if the Common Stock were to become delisted from trading on
Nasdaq and the trading price of the Common Stock were to fall below $5.00 per
share, trading in the Common Stock would also be subject to the requirements of
certain rules promulgated under the Exchange Act, which require additional
disclosure by broker-dealers in connection with any trades involving a stock
defined as a penny stock (generally, any non Nasdaq equity security that has a
market price of less than $5.00 per share, subject to certain exceptions). Such
rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors (generally institutions). For these types of transactions, the
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. The additional burdens imposed upon broker-dealers by such requirements
may discourage broker-dealers from effecting transactions in the Common Stock,
which could severely limit the market price and liquidity of the Common Stock
and the ability of purchasers in this offering to sell the Common Stock in the
secondary market.
Business Dependent Upon Key Employee. The business of the Company is
specialized. The continued employment of Gerald Sugerman is critical to the
Company's proposed product development and the conduct of the Company's business
Upon closing, the Company intends to procure key man insurance insuring Mr.
Sugerman. There can be no assurance that the Company will be able to retain Mr.
Sugerman or other equally qualified individuals to run the affairs of the
Company.
Need To attract And Retain Qualified Personnel. The Company currently
has only four full time employees. The Company's ability to develop, produce,
and market its products, and to achieve a competitive industry position will
depend, in large part, on its ability to attract and retain qualified personnel,
including a Chief Financial Officer. Prior to large scale commercial production
of its products, the Company will have to hire significant numbers of technical
and production personnel. Competition for qualified personnel may be intense and
the Company may be required to compete for such personnel with companies having
substantially greater financial and other resources. The Company's failure to
attract and retain such personnel could have a materially adverse effect upon
its business.
Competition. The Company is aware of several business entities in the
United States marketing products similar to those offered by the Company and the
Company's customers. Some of these companies have substantially greater capital
resources, larger staffs and more sophisticated facilities than the Company.
Such companies may produce products which are more effective than any developed
by the Company or its customers and may be more successful than the Company or
its customers in their production and marketing of such products. There can be
no assurance that other companies will not enter the markets developed by the
Company or its customers. There can be no assurance that the Company will be
able to compete successfully in the future with existing or new competitors. See
"Business of the Company--Competition."
No Cumulative Voting - Control by Management. The Company's Certificate
of Incorporation does not provide for cumulative voting. The Company's present
shareholders will own approximately 60.9% (not including the exercise of options
held by management, which, if exercised, would increase such ownership to 73.4%)
of the Company's outstanding Common Stock following the offering, and thus will
be able to continue to elect all of the Company's directors and control the
Company. More specifically, Management, will own approximately 44% (not
including the exercise of options held by management, which, if exercised, would
increase such ownership to 62.3%) of the Company's outstanding Common Stock
following the offering. Thus, Management will be able to continue to control the
election of all of the Company's directors and control the Company. See
"Principal Shareholders" and "Description of Capital Stock."
Lack of Dividends. The Company has not paid dividends since its inception
and does not intend to pay any dividends in the foreseeable future, but intends
to retain all earnings, if any, for use in its business operations. Prospective
investors who seek dividend income from their investment should not purchase the
Shares offered by this Prospectus. See "Description of Capital Stock--Dividends"
Immediate Substantial Dilution. The present shareholders have acquired
a controlling interest in the Company at a cost substantially below the offering
price of the Shares. Upon the completion of the offering, investment in the
Company's Common Stock will result in an immediate substantial dilution of
approximately $4.03 per share if all Units are sold at $6.00 per Unit, while the
present shareholders will realize an immediate increase in the net tangible book
value of approximately $1.97 per share if the all Units are sold. The foregoing
assumes that no Redeemable Warrants are exercised and does not take the
over-allotment into account. See "Dilution."
Management Experience. Gerald Sugerman is the originator of the Company's
business concept and has run the Company since inception. No officer of the
Company has had, prior to the organization of the Company, experience in the
managerial aspects of the inks, paints, and plastics polymer additives industry.
Since the business is relatively new, the experience of management can give no
assurance that the business will continue to succeed.
See "Management."
Arbitrary offering Price. The Offering Price at which the Shares are being
offered has been arbitrarily determined by the Company and the Underwriter.
There is no relationship between the said prices and the Company's assets, book
value, net worth or any other economic or recognized criteria of value.
Sales Pursuant to Rule 144. Officers, Directors and/or affiliates of the
Company hold 1,555,000 Common Shares of the Company, all of which are, subject
to quantity limitations discussed below, available for sale. Such shares are
"restricted securities" under Rule 144, as promulgated by the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, which
shares may not be freely resold. Rule 144 provides, in essence, that any
shareholder of the Company, after holding restricted securities for a period of
one year, may, every three months, sell them in an unsolicited brokerage
transaction in an amount equal to 1% of the Company's outstanding Common Shares,
or the average weekly trading volume, if any, during the four weeks preceding
the sale. After two years, non-affiliated shareholders holding restricted
securities are no longer subject to the 1% limitation and may sell unlimited
amounts of shares they own. If a substantial part of the shares which can be
sold were so sold, the price of the Company's Common Shares might be adversely
affected. (See "Principal Shareholders" and "Underwriting.")
Underwriter's Warrants The Company has agreed to sell to the
Representative Underwriter Warrants (the "Underwriter's Warrants") to purchase
an aggregate of 10% of the Units sold by the Company hereby. The Underwriter's
Warrants may be exercised for a period of four years commencing one year after
the date of this Prospectus, at a price equal to 120% of the public offering
price. For the life of the Underwriter's Warrants, the holders are given, at a
nominal cost, the opportunity to profit from a rise in the market price for the
Common Stock of the Company without assuming the risk of ownership, with a
resulting dilution in the interest of the other securities holders. As long as
the Underwriter's Warrants remain unexercised, the terms under which the Company
could obtain additional capital may be adversely affected. Moreover, the holders
of the Underwriter's Warrants might be expected to exercise them at a time when
the Company would, in all likelihood, be able to obtain additional capital by a
new offering of its securities on terms more favorable than those provided by
the Underwriter's Warrants. See "Descriptions of Securities - Underwriter's
Warrants" and "Underwriting."
Product Protection and Infringement. The Company relies on a
combination of patent and trade secret laws, nondisclosure and other contractual
agreements and technical measures to protect its proprietary rights in its
products. The company has applied for several patents, both domestic and
foreign, and will be applying for several more patents. Such protection may not
preclude competitors from developing products with features similar to the
Company's products. The Company believes that its products, trademark and other
proprietary rights do not infringe on the proprietary rights of third parties.
There can be no assurance, however, that third parties will not assert
infringement claims against the Company in the future. The successful assertion
of such claims would have a material adverse effect on the Company's business,
operating results and financial condition. See "Business of the Company -
Proprietary Rights."
Possible Difficulties In Obtaining Supplies. The success of the
Company's additive products will depend on the ability of the Company to obtain
significant amounts of raw materials at affordable prices. The Company may
encounter shortages or delays in obtaining adequate amounts of raw materials,
and the Company has not yet entered into an arrangement pursuant to which it
will ensure adequate access to those materials. The failure of the Company to
obtain adequate materials at affordable prices could have a material adverse
affect on the Company's ability to produce and deliver its products.
Credit Risk. Although the Company has not experienced any material losses
related to client inability to pay for its services, as the Company's customer
base expands it may be subject to increased credit risk. Because the Company's
revenues are derived from a small number of significant customers, the Company's
receivables are similarly concentrated. The inability of one of these
significant customers to satisfy its obligations to the Company could have an
adverse material affect on the Company. Also, in the event that the Company's
additives performance does not meet customer expectations, customers could hold
back on payments for portions of overall contract prices until additional
services have been performed and additives added. Such hold backs could cause
the Company to: (I) incur losses on its product or earn less profit than
anticipated; or (ii)fail to receive payments for certain portions of its
product. See "Risk Factors-Revenue Concentration From Small Group of Customers."
Authorization and Issuance of Preferred Stock. The Company's Articles of
Incorporation, as amended authorize the issuance of up to 1,000,000 shares of
Preferred Stock with such rights and preferences as may be determined from time
to time by the Board of Directors. Accordingly, under the Articles of
Incorporation the Board of Directors may, without stockholder approval, issue
Preferred Stock with dividend, liquidation, conversion, voting, redemption or
other rights which could adversely affect the voting power or other rights of
the holders of the Common Stock. The issuance of any shares of Preferred Stock,
having rights superior to those of the Common Stock, may result in a decrease of
the value or market price of the Common Stock and could be used by the Board of
Directors as a device to prevent a change in control of the Company. Holders of
the Preferred Stock may have the right to receive dividends, certain preferences
in liquidation and conversion rights. The Company has issued any Preferred Stock
in payment of debt and services rendered, and until this Offering is completed,
the Company intends to continue to do so. See "Description of
Securities-Preferred Stock."
Current Prospectus and State Registration Required to Exercise Warrant.
Purchasers of the Warrants included as a component of the Units in this offering
will not be able to exercise them unless at the time of exercise, a current
prospectus under the Securities Act, covering the shares of Common Stock
issuable upon exercise of the Warrants, is effective and such shares have been
registered for sale or are exempt from registration under the applicable
securities or "blue sky" laws of the states in which the various holders of the
Warrants reside. Although the Company has undertaken to use reasonable efforts
to maintain the effectiveness of a current prospectus covering the Common Stock
underlying the Warrants, there can be no assurance that the Company will be able
to do so. Although the Company will use its best efforts to register or qualify
the shares for sale in jurisdictions where the registered holders of the
Warrants reside, no assurance can be given that the Company will be able to do
so. Further, the Company may determine not to register or qualify the shares
underlying the Warrants in jurisdictions where time and expense do not justify
such action. The value of the Warrants may be greatly reduced if a current
prospectus covering the shares underlying the Warrants is not effective or if
such Common Stock is not registered or exempt from registration in the states in
which the holders of the Warrants then reside. See "Description of Securities."
Limitations on Liability of Directors. The Company's Articles of
Incorporation substantially limit the liability of the Company's Directors to
its shareholders for breach of fiduciary or other duties to the Company, to the
full extent permitted by New Jersey law. See "Description of
Securities-Indemnification and Waiver of Director Liabilities."
<PAGE>
USE OF PROCEEDS
The net proceeds to be realized by the Company from the sale of the Units
offered hereby, after deducting all commissions and expenses of the offering, is
estimated at $5,053,000. Included in the expenses of this offering are the
commissions and projected legal fees, accounting fees, filing fees and printing
costs. No officer, director or affiliate of the Company, or associated person of
them, will receive any portion of the gross proceeds of this offering, except
for legal fees owed to the law firm of its President in an amount not to exceed
$100,000.00, and the forward going payments due to Gerald Sugerman, Vice
President and Secretary of the Company for future payments due under his
employment contract, which provides for payments of $10,000 per month. (See
"Remuneration of Officers and Directors") These funds will be used by the
Company in substantially the following manner:
<TABLE>
ADMINISTRATIVE
<S> <C>
Equipment $6,000
Supplies 2,000
Salaries 240,000
Overhead 60,000
------
308,000
PRODUCTION & CUSTOMER SERVICE
Salaries 240,000
Equipment 1,800,000
Inventory 450,000
-------
2,490,000
PRODUCT DEVELOPMENT
Equipment 300,000
Supplies 175,000
Salaries 110,000
-------
585,000
MARKETING
Advertising 500,000
Salaries 650,000
Travel and Entertainment 50,000
------
1,200,000
WORKING CAPITAL 470,000
TOTAL ------------------------ $5,053,000
</TABLE>
Since the proceeds of this Offering, will be applied over time, the actual
expenditure of such proceeds for any purpose could vary significantly from the
anticipated expenditures described above. The Company reserves the right,
therefore, to reallocate proceeds among the uses described above, including to
working capital, depending upon factors such as the results of the Company's
marketing efforts, the Company's success in developing new products, and
technological advances in the industry.
The net proceeds of this offering may not be used immediately. Any net
proceeds of this offering that are not expended immediately will be deposited
only in short-term interest bearing obligations of the United States government.
See "MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".
DIVIDEND POLICY
The payment by the Company of dividends, if any, in the future rests within
the discretion of its Board of Directors and will depend, among other things,
upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Company has not paid any
dividends to date and does not anticipate that it will be in a position to pay
any dividends in the foreseeable future.
<PAGE>
DILUTION
As of September 30, 1997, there were 1,555,000 of the Company's Common
Shares issued and outstanding. See "Description of Securities." If all Units
(1,000,000) offered hereby are sold there will be 2,555,000 Shares outstanding.
As of September 30, 1997, the approximate net tangible book value of the
Company's common stock (total tangible assets less total liabilities) was
$(138,776) or $(.09) per share. See "CAPITALIZATION." Giving effect to the sale
of 1,000,000 Units and receipt of the net proceeds therefrom, the pro forma net
tangible book value of the Company would be approximately $4,914,224, or $1.92
per share. This represents an immediate dilution of $4.08 for each share of
Common Stock purchased by new investors and an immediate increase of $2.01 per
share to existing shareholders.
<TABLE>
<S> <C>
Sale price per unit $6.00
Net tangible book value per unit
before offering............ $(0.09)
Increase to present shareholders
in net tangible book value
attributable to sale of
shares offered........... $2.01
Pro Forma net tangible book value
per share after offering... $1.92
Dilution of net tangible book
value per share to new
investors.................. $4.08
</TABLE>
The officers and directors of the Company have acquired their common
shares for no cash and for property and services valued at $1,450. If the
maximum number of Shares is sold, the new investors shall acquire 1,000,000
shares (about 39.13% of the total outstanding common shares) at a price of $6.00
per share or a total of $6,000,000. The following table summarizes the number of
shares acquired from the Company and the aggregate consideration paid by the
existing shareholders and to be paid by new shareholders in this Offering:
<TABLE>
<CAPTION>
Number of Percentage Aggregate
Shares Acquired of Shares Consideration
from Company Held by Group Paid for Shares
<S> <C> <C> <C>
Existing
shareholders........1,555,000 60.87% $76,750
New shareholders....1,000,000 39.13% $6,000,000
Total...............2,555,000 100.0% $6,076,750
</TABLE>
SELECTED FINANCIAL INFORMATION
The following table sets forth certain selected financial data for the
years ended June 30, 1995, 1996, and 1997, and the fiscal quarter ended
September 30, 1997. This information is derived from the Company's financial
statements which appear elsewhere in this Prospectus. The selected financial
data is qualified by reference to, and should be read in conjunction with, the
Company's financial statements and notes thereto included elsewhere in this
Prospectus and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS".
<TABLE>
<CAPTION>
Balance Sheet
as of: Year Ending Year Ending Year Ending For the three months
June 30,1995 June 30, 1996 June 30, 1997 ended Sept. 30, 1997
<S> <C> <C> <C> <C>
Sales 226,202 155,525 131,335 33,285
Cost Of Goods 156,348 104,552 61,453 10,337
------- ------- ------ ------
Gross Profit 69,854 50,973 69,882 22,948
Operating Expenses 181,651 165,388 211,080 128,312
Other Income -0- -0- -0- -0-
Other Expenses -0- -0- 3,065 9,637
Net Profit(Loss) (111,797) (114,715) (144,263) (115,001)
Per share (0.07) (0.08) (0.09) (.07)
Shares Outstanding 1,555,000 1,555,000 1,555,000 1,555,000
Dividends -0- -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet
as of: Sept. 30, 1997 As Adjusted(1)
<S> <C> <C>
Cash And Cash Equivalents 84,608 5,137,608
Working Capital (defecit) (280,503) 4,772,497
Total Assets 269,775 5,322,775
Current Liabilities 407,201 407,201
Long Term Debt -0- -0-
Stockholders' (defecit) (137,426) 4,915,574
Equity
</TABLE>
(1) Gives effect to the issuance and sale of the maximum 1,000,000 Units offered
hereby and the receipt of the estimated net proceeds ($5,053,000) before their
application, including the application to the expenses of this offering. This
does not take into account any potential proceeds from the 150,000 shares
exercisable from the over-allotment option, nor any proceeds from exercise of
the Redeemable Warrants or the Underwriters Warrants.
See "Use of Proceeds".
<TABLE>
<CAPTION>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of September
30, 1997 and as adjusted to give effect to the issuance and sale of the shares
upon the closing of this offering:
Actual As Adjusted
<S> <C> <C>
Current Liabilities 407,201 407,201
Long Term Liabilities 0 0
Stockholders' Equity:
Preferred Stock 296,600 296,600
Common Stock, no par
value authorized
10,000,000 shares;
issued and outstanding
1,555,000 shares; as
adjusted 2,555,000 51,750 5,053,750
Deficit Accumulated During
Development Stage (485,776) (485,776)
Total Liabilities and
Stockholders' Equity (137,426) 4,864,574
Total Capitalization 544,627 5,271,775
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE PERIOD
FROM INCEPTION (JULY 22, 1994) TO SEPTEMBER 30, 1997.
Development stage activities.
The Company has been a development stage enterprise from its inception July 22,
1994, to September 30, 1997. During this period, management devoted the majority
of its efforts to obtaining new customers for its products, developing sources
of supply, developing and testing formulas, pursuing and finding a management
team to begin the process of: completing its marketing goals; furthering its
research and development for its products; marketing limited quantities of the
Company's products; completing the documentation for and selling initial shares
through the Company's private placement; and completing the documentation for
the Company's initial public offering. These activities were funded by the
Company's management and investments from stockholders and borrowings from
related third parties. The Company has not yet generated sufficient revenues
during its limited operating history to fund its ongoing operating expenses,
repay outstanding indebtedness, or fund its product development activities. For
the period of inception July 22, 1994, to September, 1997, the Company completed
the development of its first product line.
Results of operations.
Results of Operations for the period of inception (July 22, 1994) to
September 30, 1997
Revenues were $546,347. Cost of goods sold was $322,690.
Gross profit was $213,657.
General and Administrative costs were $704,246 consisting of $686,731 of general
and administrative expenses, and $17,515 incurred for depreciation and
amortization. The net loss for the period was $485,776.
Liquidity and capital resources.
The Company increased liquidity by $84,608 from a cash balance of $1,000 at the
Company's inception through the sale of $299,315 in convertible notes payable,
and the sale of 25,000 shares of common stock aggregating $50,000.
The Company expended $5,000 for security deposits, purchased $35,897 of
equipment, increased by $42,679 inventory, and increased by $2,733 accounts
receivable.
The Company is initiating an initial public offering of 1,000,000 Units at $6.00
per Unit for an aggregate of $6,000,000. Management believes that the present
cash balance will pay the initial cost of beginning the set-up of the business
and the initial cost of the Offering. The Company will defer the expenses of the
Offering until the Offering is completed and the offering expenses will be
deducted from proceeds received therefrom. The Offering proceeds will be
sufficient to satisfy Management's objectives of purchasing equipment for office
, production and product development of $2,106,000, purchasing supplies for
office and product development of $177,000, financing the payment of
administrative, production, and marketing salaries of $1,240,000, pay
advertising of $500,000, purchase inventory of $450,000, pay overhead of
$60,000, pay travel and entertainment expenses of $50,000, provide working
capital of $470,000, pay Underwriter's Discounts of $600,000 and pay projected
offering expenses of $347,000.
<PAGE>
BUSINESS OF THE COMPANY
SUMMARY
PPA Technologies, Inc., hereinafter referred to as "PPA" or "the
Company", was incorporated in the State of New Jersey in July, 1994 to develop
and manufacture innovative specialty chemical products with broad application in
the plastics and coatings industries. The Company now markets coupling agents
and has recently launched the marketing of paints and coatings utilizing the
Company's proprietary reactive coalescent technology.
THE INDUSTRY
Industry
The Company operates in two industries, plastics and coatings. Each of
these are vast in total worldwide production and sales.
The plastic industry is composed of several subsets, however to present
a concept of general size, worldwide sales of polyvinyl chloride ("PVC")
exceeded 18 billion dollars in 1995. Sales by the twenty five largest film and
sheet plastics manufactures were 12.4 billion dollars in 1996. Domestic sales of
PVC pipe totaled about 8.7 billion dollars in 1996.
The global paints and coatings market totaled $65 billion in 1995. In
North America alone 4.7 million metric tons were produced in 1995 having a value
of about 15 billion dollars. The top ten producers accounted for about 60% of
the market.
Coupling Agents
Coupling agents are organometallic compounds which may be delivered in
liquid, powder or pelletized forms depending primarily upon customer need. These
products are used primarily by plastics compounders and manufacturers of plastic
products to obtain improved line speed, faster throughput, lower operating
temperatures and pressures, better dry blend and hot melt flow, reduced energy
requirements, better control over wall/sheet thickness, higher impact resistance
and greater flame retardance.
Since only small quantities (.2 to 2% of the total product mix by
weight) of these compounds are used, worldwide market volumes of coupling agents
are quite low and total only several million pounds. However, because of the
great benefits to be derived from their use, profit margins on coupling agents
are quite high. Also, the totality of products in which coupling agents could be
used is vast, including at least 10% of the total plastics output worldwide. At
present there are only two sources of these compounds, one of which is PPA.
Reactive Coalescents
Reactive Coalescents allow resin producers and coatings end-users to
utilize Zero VOC solutions in place of current solvent-based packages. In
architectural and industrial coatings, volatile organic solvents have been
historically required and applied to a) dissolve the resin, and b) to provide
coalescing action. These traditional solvents, which comprise the competing
products for the Company's reactive coalescents, have markets exceeding $5
billion per year. Historically they have been used because of their low price
and a lack of concern regarding the environmental impact of their use, i.e. the
evaporation of the solvent into the air. With increasing restrictions being
placed upon the use of VOC's because of these environmental concerns the use of
solvents is under wide spread attack and many companies have been attempting to
develop replacements for these solvents in a wide variety of applications. To
date such replacements have been generally unsatisfactory and limited in
application.
The architectural coatings market alone was over 450 million gallons in
1995 out of a total paint and coatings volume of one billion gallons. Reactive
coalescents typically comprise 15% of the complete formulation, for an
architectural requirement of 67.5 million gallons of reactive coalescents or
$918 million. As the Clean Air Act, 42 U.S.C. sections 7401-7671, is further
enforced along with new environmental legislation, the need to replace solvent
with chemical coalescents will increase.
According to the Chemical Marketing Reporter, October 19, 1995 edition "The
$300 million additives segment is expected to continue to outpace the coatings
business as a whole, and the bulk of this growth comes from the push to reduce
solvent use." As the percentage of solvents in coatings continues to shrink in
favor of water and additives, including reactive coalescents, demand for
reactive coalescents, such as those produced by the company, should increase.
Flame Retardants
Flame retardants comprise 40% to 50% of all additives for plastics
worldwide. Historically, halogenated materials have been the preferred flame
retardants, comprising about 80% of the market. In the past ten years, this
group of chemicals has become the subject of legislated restrictions and in
general has lost market share to less effective additives because of well known
disadvantages: they often cause localized corrosion of metals in direct contact
(e.g. wire and cable), cannot incinerate scrap or used product due to hazardous
fumes generated, and their thermal decomposition and/or combustion results in
toxic fumes. Effective early in 1991, Western Electric banned all use of
halogenated chemicals from its wire and cable coatings.
Non-halogenated chemicals are available, with significant drawbacks,
including reject rates of 8 to 30% due to poor wetting and/or dispersion of
flame retardant. These flame retardants as a rule do not melt and therefore will
inhibit hot melt flow, making it necessary to employ higher cost resin for
acceptable processing.
Flame retardants comprise a significant percentage of all additives for
plastics worldwide. Almost 90% of the $3 billion per year domestic plastic
additives sector is comprised of just four products - plasticizers, flame
retardants, impact modifiers and lubricants. Of the approximately 35 billion
pound annual polyolefin market, about 10% or 3.5 billion pounds contain flame
retardant. At an average loading of 50 phr flame retardant, the 3.5 billion
pounds polyolefins sector translates to about one billion pounds of flame
retardant sold annually.
Halogen-based chemicals are added at 45 to 50 phr and are currently sold at
$1.40 to $2.40 per pound. The Company's flame retardants will cost about 40%
less to achieve the same degree of flame retardance. Aluminum and magnesium
hydroxides do not have the disadvantages of the halogen compounds discussed
above, but these hydroxides offer limited application. With an upper temperature
limit of 320oF, and the need for as much as 75 to 85 phr in the formulation to
achieve a Vo UL (a standard flame spread rate measurement) rating, only a small
number of uses are possible. (See "The Company's Products - Flame Retardants").
<PAGE>
THE COMPANY'S PRODUCTS
Coupling Agents
PPA offers approximately 15 different organometallic coupling agents
available in liquid, powder or pelletized forms. Like their competitor products,
they can be and are used primarily by plastics compounders and manufacturers of
plastic products to obtain improvements such as: higher line speed, faster
throughput, lower operating temperatures and pressures, better dry blend flow
and hot melt flow, reduced energy requirements, better control over wall/sheet
thickness, higher impact resistance and greater flame retardance.
Since all coupling agents are presently proprietary products, the
opportunity for the production of value added products utilizing these compounds
is more than feasible. The overwhelming advantage of the coupling agents in
almost all applications is the ability to produce a more cost effective product
with the coupling agent thereby creating a true "value added" situation enabling
either direct sales of the agent or production of a more finished product at
competitive price advantages in large markets of essentially fungible
commodities. Most purchasers in fact prefer receipt of compounded resins (resins
in to which additives, such as the coupling agents, have been added) rather than
the pure coupling agents (which would then be added to the resin by the end
user). While margins on the value added products are lower than the coupling
agents, the total gross profit from operating a compounding facility is many
times greater than from sale of the coupling agents alone. It is the Company's
intention to move into value added products where feasible.
Our coupling agents have already been successful in extrusion,
injection and blow molding operations, so Management assumes that coupling
agents can be beneficially utilized in a large part of the total plastics
market.
Reactive Coalescents
Approximately 23 reactive coalescent packages have been developed
to-date. These products allow resin producers and coatings end-users to utilize
Zero VOC solutions in place of current solvent-based packages. In architectural
(building) and industrial coatings, volatile organic solvents have been
historically required and applied to a) dissolve the resin, and b) to provide
coalescing action. PPA coalescing packages are 100% solids (after application),
Zero VOC (as measured by present test methodologies), water-reducible systems
that provide all of the necessary dissolution and coalescing of solvent-based
systems, but which are a) without solvents for immediate Clean Air Act
compliance, b) more cost effective since there is no wasted solvent to evaporate
out of the coating, and of considerable importance, and c) generate harder, more
durable films due to chemically reactive cross-linking versus no cross-linking
in organic solvent systems.
Flame Retardants
PPA flame retardants are non-halogenated for health and safety concerns,
and they utilize coupling agents for maximum dispersion efficiency. The end
result allows the end user to: a) use lower cost resin than with alterative
flame retardants, b) run at 10 to 20% higher speed, and at lower temperatures,
and c) only PPA offers a concentrated compound that the customer can add at a
1:1 rate to achieve high resistance such as Vo.
PPA flame retardants are targeted for polyolefins only at this time.
This means high density polyethylene, low density polyethylene, and
polypropylene.
With respect to cost, PPA materials cost will be $0.95 to $1.10 per
pound of compound for large volume purchases. This represents a distinct price
advantage over the competition which typically sells for $2.80 per pound and
requires as much as 45 weight percent in polyolefins to acheive 94 Vo. The
anticipated sales volume is 1% of the market for olefins (hydrocarbons
containing at least one double bond) or 10 MM lbs/yr.
PPA flame retardants offer U.L.94 Vo efficacy in 1/16" polypropylene at
just 30 to 35 phr. PPA coupling agents are employed for their large surface
activity which creates the following advantages in comparison to both
halogenated and non-halogenated flame retardants:
1. The ability to use lower cost resin than with alternative flame retardants;
2. The melt index is basically unaffected; 3. Manufacturing processes can run at
10 to 20% higher speeds, and at lower temperatures; and,
4. PPA can offer a concentrated compound that the customer can add at a
1:1 rate to achieve high resistance such as Vo. (This advantage is in
comparison to non-halogenated additives only).
As with all of the Company's products, the apparent technological
superiority in flame retardant technology has yet to be translated into sales
due to, in the Company's opinion, lack of funds for marketing, advertising, and
sales efforts.
Governmental Regulation
As a chemical manufacturer the Company is subject to a wide variety of
local, state and federal regulations. While the Company believes that it is in
compliance with all applicable regulations, there can be no assurance that from
time to time unintentional violations of such regulations will not occur. In the
event of such violations, the company may be subject to fines, injunctive action
and other forms or governmental action which would have a material and adverse
impact on the Company (see Risk Factors-Governmental Regulation.) The following
is a brief survey of some of the applicable federal regulations believed by the
Company to include all material regulations. Many states, including the State of
New Jersey where the Company has its principle place of business, also regulate
certain aspects of the chemical industry. In general, compliance with federal
regulation would comprise the more difficult burden. One example discussed
herein below, California, has more stringent regulation.
The Resource Conservation and Recovery Act 42 U.S.C. Sec. 6901-6987
("RCRA") was enacted in 1976. The Comprehensive Environmental Response,
Compensation and Liability Act, 42 USC Sec. 9601-9657 ("CERCLA") was enacted in
1980. These statutes regulate the disposed of hazardous waste and the clean-up
of chemicals that have been, or will be, subject to illegal disposal. The Toxic
Substance Control Act (hereinafter TOSCA) also governs aspects of chemical
disposal. The Clean Air Act and the Clean Water Act also control emissions into
the atmosphere and water systems (hereinafter these statutes are referred to as
PCS.)
The company believes that it is a) not in violation of the PCS and b)
not subject to the PCS because of the nature of the materials being utilized by
the Company at this time. However, existing environmental laws may be amended
and new laws may be enacted by Congress and state legislatures and new
environmental regulations may be issued by regulatory agencies. For these
reasons, the Company cannot predict the specific environmental control
requirements that it will face in the future.
Compliance with Federal, State and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment, may have a material
effect on the capital expenditures, earnings and competitive position of the
registrant and its subsidiaries.
MARKETING
Having completed Research & Development work for fifteen coupling
agents, limited marketing and sales have commenced. Various powder and pellet
forms of these are also available. The current list of active customers includes
five plastics manufacturers. As a result of the sales effort PPA coupling agents
have been accepted in several different applications such as PVC pipe production
and sporting goods production.
Trials are ongoing for the utilization of coupling agents in PVC window
frames, PVC electrical conduit, glass and carbon reinforced nylon structural
composites, carbon filled polystyrene electrical conductors, color concentrates
in polyethylene, polypropylene and ABS (acrylonitrile butadiene styrene), and
several ink and paint applications, including waterbourne and solvent based
systems. So far these tests have been successful.
The reactive coalescent packages have proven successful in wood
coatings and architectural applications. Regional, national and international
companies have shown interest in these products and testing by these companies
are also ongoing.
Marketing in these areas have to date been limited to direct mail to
potential customers and referrals through the personal business contacts of the
officers. The Company has recently employed two full time salesmen to expand
this effort with primary focus on printing inks. The Company intends to expand
these marketing efforts upon the successful conclusion of this Offering, See
"Use of Proceeds" by attendance at trade shows, advertising in trade journals
and by hiring additional sales personnel. The Company also plans to expand
marketing to Europe, especially with products that have significant
environmental impacts, such as paints and inks.
ADDITIONAL FINANCING
The Company believes that the minimum proceeds of this Offering will
allow the Company to meet all of its presently planned future operations for at
least twelve months. However, the Company's anticipated development projects may
require a substantial amount of funds in order to fully develop these proposed
future products to their fullest potential. (See "USE OF PROCEEDS" and
"FINANCIAL STATEMENTS.") The proceeds of this Offering may be inadequate to
permit the Company to achieve its research objectives, and there can be no
assurance that the Company will be able to raise additional funds when needed on
terms acceptable to the Company, if at all. (See "RISK FACTORS - Additional
Capital.")
EMPLOYEES
The Company employs a President and an Executive Vice President for
Scientific Affairs. In addition, the Company employs one chemical technician,
two marketing representatives, one secretary and one part-time administrative
assistant. During the next twelve months the company anticipates opening several
production facilities requiring the acquisition of about one hundred production
personnel, plant management and technical sales representatives. There can be no
assurance that the Company will be able to hire such personnel or if hired
retain their service.
PROPRIETARY RIGHTS
The Company relies on a combination of patent and trade secret laws,
nondisclosure and other contractual agreements and technical measures to protect
its proprietary rights in its products. Despite these precautions, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that the Company regards as proprietary.
The Company believes that its products, trademark and other proprietary
rights do not infringe on the proprietary rights of third parties. There can be
no assurance, however, that third parties will not assert infringement claims
against the Company in the future. (See "RISK FACTORS - Proprietary Rights.")
FACILITIES
The Company leases 4,000 square feet of industrial space and 2,000 square
feet of office space under a three year lease with an option to extend the lease
for three years. The lease contains cost of living increases and current rent
payments, including taxes, are $3,513 per month. The Company anticipates renting
additional production facilities upon the successful conclusion of this offering
as required by demand for the Company's products.
In the event that pending applications are not granted, or if
subsequently obtained patents are either invalidated or designed around, the
Company would be materially and adversely affected.
<PAGE>
MANAGEMENT
The names of the Officers and Directors of the Company, their ages and
positions with the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Roger Fidler 46 President, Director
Gerald Sugerman 60 Executive Vice President,Secretary,
Treasurer, Director
James Wright 64 Director
Albert Mersberg 56 Director
</TABLE>
The above officers and directors will hold office until the next annual meeting,
or until their successors are elected and qualified.
MANAGEMENT
Roger L. Fidler Mr. Fidler has been President of the Company and a director
of the company since inception in July 1994. He has been continuosly engaged in
the private practice of law as a sole proprietor since 1983 and has held several
directorships in both private and public corporations. During the time period
from 1992 to the present, Mr. Fidler has been employed both as President of the
Company and engaged in the private practice of law. He is currently President
and Sole Director of D-Lanz Development Group, Inc. an inactive public company.
Mr. Fidler holds degrees in Law (J.D.) from the University of South Carolina,
Columbus, South Carolina (1977), in Physics (M.S.) from the University of
Illinois Urbana, Illinois (1974) and a B.S. from Dickinson College (1972),
Carlisle, PA.
Gerald Sugerman, Ph.D. Dr. Sugerman has served full time as Executive Vice
President, Sectretary, Treasurer, and as a Director of the Company since
inception in July of 1994. As PPA's Chief Scientist he is in charge of all
technical developments. From February, 1992 until July, 1994, Dr. Sugerman was
President of Pi-Tech Inc., a specialty chemical company. Dr. Sugerman received
his Ph.D. in organic chemistry from Fordham University in 1960, and holds
several other degrees. He has authored over 100 papers and holds more than fifty
patents.
James Wright Mr. Wright has been a director since inception. Mr. Wright is a
retired businessman who until 1989 was a principal in a sand and gravel mining
company in New Jersey. Mr. Wright holds a Bachelor of Science degree in Business
Administration from Rider University (B.S. 1961), Lawrenceville, New Jersey. Mr.
Wright serves on the Audit Committee.
Albert Mersberg Mr. Mersberg became a director of the Company in September,
1997. He had previously consulted for the Company from inception until November,
1996. He is currently employed as Technical Manager of New Product Development
by Sampson Coatings, Inc of Richmond, VA where he has been employed since
December, 1996. Mr. Mersberg previously was employed by Lawrence McFadden Co. in
Philadelphia, PA from 1991 to December, 1996 in a similar capacity. He holds a
B.S. degree in Chemistry from the State University of New York at Buffalo.
<PAGE>
RENUMERATION OF OFFICERS AND DIRECTORS
No officer of the Company has received compensation since inception in July,
1994 except Dr. Sugerman, Exec. V.P. of the Company. Directors are not
compensated for serving on the Board of Directors. No contingent forms of
remuneration, property, or other benefits were conferred during that period.
The Company has entered into written employment and assignment
agreements with Gerald Sugerman and Roger Fidler. Pursuant to these Agreements,
Mr. Sugerman assigned his rights to any and all technologies and improvements
thereto to the products presently marketed by the Company and which he may
develop from time to time while employed by the Company. The capacity and annual
salaries for key management is set forth below.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term
Name & Position Salary/yr. Bonus Other(1) Compensation
<S> <C> <C> <C> <C>
Roger Fidler $120,000 -0- -0- -0-
President
Gerald Sugerman $120,000 -0- -0- -0-
Executive Vice
President;
Director
</TABLE>
(1) Mr. Fidler's contract provides for sale commissions which have not been
earned to the date of this Prospectus. Mr. Sugerman's contract provides
for royalties of 5% on sales to a maximum of $350,000 payment, and 2%
of sales thereafter.
<PAGE>
STOCK OPTION INFORMATION
The following table sets forth certain information with respect to the
value of stock options held by the Named Executive Officer for the fiscal year
ended September 30, 1997.
<TABLE>
<CAPTION>
Fiscal Year-End Option Value Table
Number Of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired Options On June 30, 1997 June 30,1997($)(1)(2)(3)
On Value ------------------------ ------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Roger Fidler -0- -0- 425,000 -0- 2,100,000 -0-
Gerald Sugerman -0- -0- 850,000 -0- 4,200,000 -0-
- -----------
</TABLE>
(1) Based upon an assumed initial public offering price of $6.00 per share of
Common Stock.
(2) Options are in-the-money if the fair market value of the Common Stock
exceeds the exercise price.
(3) Represents the total gain which would be realized if all the in-the-money
options beneficially held at December 31, 1995 were exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and $6.00, the fair market price as
of the initial public offering date, as determined by the offering price.
EMPLOYEE STOCK OPTION PLAN INFORMATION
The Company has adopted a Stock Grant Program and a Stock Option
Program. The Stock Grant Program provides for the issuance to officers,
directors and key employees stock grants as determined by the Board of
Directors. The recipient must continue employment with the Company for two years
after the grant is made or forfeit the stock. The stock option program is also
available for officers, directors and key employees and permits the Board to
issue options which are exercisable in equal amounts over a five year period.
Any unvested options expire upon the termination of employment with the Company.
To the date of this Prospectus, no stock options have been issued pursuant to
the Stock Option Program and no grants were made under the Stock Grant Plan.
CERTAIN TRANSACTIONS
The Company was organized primarily through the efforts of Roger Fidler and
incorporated on July 22, 1994 under the laws of the State of New Jersey. On July
29, 1994, the Company's Board of Directors approved the issuance of 75 shares
each to Mr. Fidler and James Wright as consideration for organizational expenses
and services valued at $100 each.
On October 24, 1994, an agreement was made by which the Company acquired
certain license rights in return for the assumption of certain liabilities
and the issuance of 975 Shares to Gerald Sugerman.
Effective November 1, 1994, the Company entered into a two year employment
contract with Gerald Sugerman which provides for salary of $120,000 per annum.
In June, 1996 the Company entered into a five year employment agreement with Dr.
Sugerman requiring the payment of $10,000 per month plus 5% royalty on sales he
makes up to a maximum salary of $350,000. In addition, he receives life
insurance equal to twice his annual salary, disability insurance, vacation pay,
and sick leave.
On February 5, 1996, the Company entered into an employment agreement with
Roger Fidler by which Mr. Fidler's salary would be set by the Board of Directors
from time to time. On January 1, 1998 this salary will commence at the rate of
$10,000 per month. In addition, Mr. Fidler receives commission on gross sales of
between 10% and 15% on sales initiated by him.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the share
ownership, both before and after the prospective closing of the offering made
hereby, of the Company's common stock by its officers and directors, both
individually and as a group, and by the present record and/or beneficial owners
of more than 5% of the outstanding amount of such stock:
<TABLE>
<CAPTION>
Number of Percentage(2) Percentage(2)
Name Shares of shares of shares
Owned Owned Prior After
to Offering Offering
Gerald
<S> <C> <C> <C> <C>
Sugerman(1) 1,825,000 75.9% 53.6%
8 Cambridge Dr
Allendale, NJ 07401
Roger Fidler(1) 500,000 25.3% 16.8%
400 Grove Street
Glen Rock, NJ 07452
James Wright 75,000 4.78 2.9
244C Mayflower Way
Jamesburg, NJ 08831
Officers
and Directors
as a Group(3) 1,125,000 82.3% 60.1%
- -----------------
</TABLE>
(1)Gives effect to 425,000 and 850,000 shares underlying options held by Fidler
and Sugerman, respectively.
(2) Does not give effect to (i)up to 1,000,000 shares of Common Stock issuable
upon the exercise of the Class A Unit Warrants; (ii) the common stock underlying
the Underwriter's Over Allotment Option (150,000 shares); and (iii) the common
shares underlying the Underwriter's Warrant Units (200,000 shares). See
"Underwriting" and "Certain Transactions."
DESCRIPTION OF SECURITIES
Preferred Stock
The authorized capital stock of the Company consists in part of 1,000,000
shares of Preferred Stock, $100 par value per share (the "Preferred Stock"). The
Company's present issued and outstanding number of Preferred shares is 3,261.
The holders of Preferred Stock have preference as to liquidation, receive a 5%
dividend, and may have their shares redeemed by the Company at par value plus
accrued dividends during a five year period.
Common Stock
The authorized capital stock of the Company consists of, in part,
10,000,000 shares of Common Stock, without par value (the "Common Stock"). The
Company's present issued and outstanding number of common shares is 1,555,000.
The holders of Common Stock have equal ratable rights to dividends from funds
legally available therefor, when, as and if declared by the Board of Directors
of the Company; are entitled to share ratably in all of the assets of the
Company available for distribution to holders of Common stock upon liquidation,
dissolution or winding up of the affairs of the Company; do not have preemptive,
subscription or conversion rights and there are no redemption or sinking fund
provisions applicable thereto. Such shares are entitled to one vote per share on
all matters which stockholders may vote on at all meetings of shareholders. All
shares of Common Stock now outstanding are fully paid and nonassessable and all
shares of Common Stock which are the subject of this Offering, when issued, will
be fully paid and nonassessable.
Non-Cumulative Voting
The holders of shares of Common Stock of the Company do not have cumulative
voting rights. Thus, the holders of more than 50% of such outstanding shares,
voting for the election of directors, can elect all of the directors to be
elected, and in such event, the holders of the remaining shares will not be able
to elect any of the Company's directors. If the shares offered hereby are sold,
the present shareholders will own approximately 60.9% of the Company's
outstanding shares. If the options held by management were exercised, the
present shareholders would own 73.9% of the Company's outstanding shares, and in
either event, will remain in a position to elect all of the members of the Board
of Directors. Further, Mr. Sugerman, Executive Vice President of the Company,
exercised his options only, he would own approximately 53.6% of the Company's
Common Stock and would therefore control the Company. (See "Principal
Shareholders").
Transfer Agent and Registrar
The Company has chosen Liberty Transfer Company of Huntington, New York
as its transfer agent.
Reports to Shareholders
The Company intends to furnish its shareholders with annual reports
containing audited financial statements as soon as practicable at the end of
each fiscal year, commencing with the next fiscal year. In addition, the Company
may, from time to time, issue unaudited interim reports and financial
statements.
Dividends
The payment by the Company of dividends, if any, in the future rests within
the discretion of its Board of Directors and will depend, among other things,
upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Company has not paid any
dividends to date and does not anticipate that it will be in a position to pay
any dividends in the foreseeable future.
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Kenneth Jerome
& Company, Inc. is acting as Representative, have severally agreed, subject to
the terms and conditions of the Underwriting Agreement (the "Underwriting
Agreement") to purchase from the Company and the Company has agreed to sell to
the Underwriters on a firm commitment basis, the respective number of units of
Common Stock and Redeemable Warrants as set forth opposite their names:
Underwriter Number of Units
Kenneth Jerome & Company, Inc............ 1,000,000
Total.................................... 1,000,000
The Underwriters are committed to purchase all the Securities offered
hereby, if any of such Securities are purchased. The Underwriting Agreement
provides that the obligations of the several Underwriters are subject to
conditions precedent specified therein.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities to the public at the public offering
prices set forth on the cover page of this Prospectus and to certain dealers
less concessions of not in excess of $0.60 per unit. Such dealers may reallow a
concession not in excess of $0.60 per unit to other dealers. After the
commencement of this Offering, the public offering prices, concessions and
reallowances may be changed by the Representative.
The Representative has advised the Company that it does not anticipate
sales to discretionary accounts by the Underwriters to exceed ten (10%) percent
of the total number of Securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payment that the Underwriters may be required to make. The Company has also
agreed to pay to the Representative an expense allowance on a non-accountable
basis equal to three percent (3%) of the gross proceeds derived from the sale of
the Securities underwritten.
The Underwriters have been granted an option by the Company, exercisable
within 45 days after the date of this Prospectus, to purchase up to an
additional 150,000 units at the initial public offering price per unit offered
hereby, less underwriting discounts and the expense allowance. Such option may
be exercised only for the purpose of covering over-allotments, if any, incurred
in the sale of the Securities offered hereby. To the extent such option is
exercised in whole or in part, each Underwriter will have a firm commitment,
subject to certain conditions, to purchase the number of the additional units
proportionate to its initial commitment.
The holders of 1,500,000 outstanding shares of Common Stock, including all
of the Company's directors, officers and principal stockholders, have agreed not
to directly or indirectly, offer to sell, contract to sell, sell, transfer,
assign, encumber, grant an option to purchase, pledge or otherwise dispose of
any beneficial interest in such securities for a period of 13 months following
the date of this Prospectus without the prior written consent of the
Representative. An appropriate legend shall be marked on the face of the
certificates representing all of such securities.
The Company has agreed that, for three years after the date of this
Prospectus, it will use its best efforts to cause one individual designated by
the Representative, if any, to be elected to the Company's Board of Directors.
Such individual may be a director, officer, employee or affiliate of the
Representative. In the event the Representative elects not to designate a person
to serve on the Company's Board of Directors, the Representative may designate a
person to attend meetings of the Board of Directors.
Prior to this Offering, there has been no public market for the Securities.
Consequently, the initial public offering prices of the Securities and the terms
of the Redeemable Warrants have been arbitrarily determined by negotiations
between the Company and the Representative and are not necessarily related to
the Company's asset value, net worth or other established criteria of value. The
factors considered in such negotiations, in addition to prevailing market
conditions, include the history of and prospects for the industry in which the
Company competes, an assessment of the Company's management, the prospects of
the Company, its capital structure and certain other factors as were deemed
relevant.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete but does include all
material terms . Reference is made to a copy of each such agreement which is
filed as an exhibit to the Registration Statement.
The Company also agreed to indemnify the Representative against certain
liabilities, including liabilities under the Securities Act, or to contribute to
related payments that the Representative may be required to make. In addition,
the Company granted the Representative, for a period of five years commencing on
the final closing of this offering a right of first refusal to be the managing
underwriter or placement agent for any securities to be offered by the Company.
The Company will also sell to the Representative warrants (the
"Underwriter's Warrants") to purchase up to 100,000 Units at a price $7.20 per
Unit. The Underwriter's Warrants will be exercisable for a period of four years
commencing one year after the Effective Date of this Offering, at an initial per
Unit exercise price of 120% of the offering price per Share. The Underwriter's
Warrants cannot be transferred, assigned or hypothecated for one year from the
date of their issuance, except that they may be assigned, in whole or in part,
to any successor, officer or partner of the Underwriter (or to officers and
partners of any such successor or partner). The Underwriter's Warrants will
contain anti-dilution provisions providing for appropriate adjustment of the
exercise price and number of Shares which may purchased upon exercise upon the
occurrence of certain events. The anti-dilution provisions of the Underwriter's
Warrants generally are triggered by the issuance of Common Stock (or securities
convertible or exchangeable into common stock) by the Company at prices below
the market price of the Common Stock at the time of such issuance (subject to
certain exceptions), as well as stock splits, stock dividends and other similar
dilutive events in which the Company increases its outstanding stock without
receiving additional consideration.
The Company has agreed that it will, upon request of the Representative
within the four-year period commencing one year from the Effective Date,
register the Underwriter's Warrants and the underlying securities once at the
Company's expense. The Company has also agreed, during the four-year period
commencing one year from the Effective Date, to register on a "piggy-back"
basis, and on an unlimited number of occasions, the Underwriter's Warrants and
the underlying securities whenever the Company files a Registration Statement.
See "RISK FACTORS - Underwriter's Warrants."
Holders of four percent (4%) or more of the Company's outstanding
shares have agreed not to sell, grant any option for sale, or otherwise dispose
of, directly or indirectly, any shares of the Company's Common Stock or other
securities of the Company for a period of twelve months from the date of the
consummation of the Offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby are being passed
upon for the Company by Roger L. Fidler, Esq., 400 Grove Street, Glen Rock, New
Jersey 07452. Mr. Fidler is the beneficial owner of 75,000 shares of the
Company's Common Stock, holds an option to acquire 425,000 more shares, and from
inception until the date of this Prospectus was and is a director and president
of the Company. The Underwriter is represented by Steven I. Gutstein, Esq., 276
Fifth Avenue, New York, New York 10001.
EXPERTS
The financial statements of PPA Technologies, Inc. for the years ending
June 30, 1996 and June 30, 1995 included elsewhere in this Prospectus have been
included herein and in reliance upon the report of Thomas P. Monahan, CPA, an
independent certified public accountant, appearing elsewhere herein, and upon
the authority of said firm as an expert in accounting and auditing.
ADDITIONAL INFORMATION
The Company will not become subject to the reporting requirements of
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 until
completion of this Offering. The Company has filed with the Securities and
Exchange Commission (the "Commission"), Washington, D.C. 20549, a Registration
Statement on Form S-1, including amendments thereto, under the Act with respect
to Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Securities offered hereby,
reference is hereby made to such registration statement and to the exhibits and
schedules filed therewith. Statements contained in the Prospectus regarding 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 other document filed as an exhibit to the registration statement, each such
statement being deemed to be qualified in its entirety by such reference. The
registration statement, including all exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission, Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549-1004, and at the
regional offices of the Commission located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at 7 World
Trade Center, Suite 1300, New York, New York 10048 and copies of all or any part
thereof may be obtained from such offices upon the payment of prescribed fees.
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(201) 790-8775
Fax (201) 790-8845
To The Board of Directors and Shareholders
of PPA Technologies, Inc.
I have audited the accompanying balance sheet of PPA Technologies, Inc.
as of June 30, 1997 and the related statements of operations, cash flows and
shareholders' equity for the years ending June 30, 1996 and 1997. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free 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 and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of PPA Technologies,
Inc. as of June 30, 1997 and the results of its operations, shareholders equity
and cash flows for the years ending June 30, 1996 and 1997 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
PPA Technologies, Inc. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company has incurred operating
losses since inception and requires additional capital to continue operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans as to these matters are described in Note
2. the financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or the
amounts and classifications of liabilities that may result from the possible
inability of PPA Technologies, Inc. (a development stage company) to continue as
a going concern.
/S/ Thomas Monahan
Thomas P. Monahan, CPA
August 15, 1997
Paterson, New Jersey
<PAGE>
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, Sept 30, 1997
1997 Unaudited
Assets
Current assets
<S> <C> <C>
Cash $210,657 $84,608
Accounts receivable 2,733 4,442
Inventory 42,679 37,648
------ ------
Total current assets 256,069 126,698
Capital assets-net 28,557 136,727
Other assets
Security deposit 5,000 5,000
License 1,350 1,350
----- -----
Total other assets 6,350 6,350
----- -----
Total Assets $290,976 $269,775
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Accounts payable and accrued expenses $17,685 $4,849
Notes payable 249,315 308,202
40,750
Officer loan payable 46,401 53,400
------ ------
Total current liabilities 313,401 407,201
Long term liabilities
Notes payable
Stockholders Equity
Common Stock-10,000,000 common
shares authorized, no par. At
June 30, 1996 and 1997, the number
of shares outstanding was
1,555,000 and 1,555,000 respectively. 51,750 51,750
Preferred Stock-1,000,000 preferred
shares authorized, $100 par value. At
June 30, 1996 and and 1997, the number
of shares oustanding was 2,966 and
3,261 respectively. 296,600 296,600
Deficit accumulated during development
stage (370,775) (485,776)
--------- ---------
Total stockholders equity (22,425) (137,426)
------- --------
Total liabilities and stockholders
equity $290,976 $269,775
======== ========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the three For the three For the period
For the For the months ended months ended from inception
year ended year ended September 30, 1996 September 30, 1997 July 22, 1994 to
June 30, June 30, Unaudited Unaudited September 30,
1996 1997 1997
<S> <C> <C> <C> <C> <C>
Sales $155,525 $131,335 $47,875 $33,285 $546,347
Cost of goods sold 104,552 61,453 16,852 10,337 332,690
Gross profit 50,973 69,882 31,023 22,948 213,657
Operating expenses
General and administrative 162,808 206,935 70,855 118,167 669,216
Depreciation 2,580 4,145 2,500 10,145 17,515
Total operating expenses 165,388 211,080 73,355 128,312 686,731
(Loss) from operations (114,715) 141,198 (42,332) (105,364) (473,074)
Other expenses
Interest 3,065 9,637 12,702
Total other expenses 3,065 ` 9,637 12,702
Net loss $(114,715) $(144,263) $(41,332) $(115,001) $(485,776)
Net loss per share $(.08) $(.09) $(.03) $(.07) $(.31)
Total number of shares 1,555,000 1,555,000 1,555,000 1,555,000 1,555,000
outstanding
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the three For the three For the period
For the For the months ended months ended from inception
year ended year ended September 30, September 30, July 22, 1994
June 30, June 30, 1996 1997 to September
1996 1997 Unaudited Unaudited 30,
1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net profit (loss) $(114,715) $(144,263) $(41,332) $(115,001) $(485,776)
Depreciation 2,580 4,145 2,500 10,145 17,515
Interest
Non-cash items 29,500
Adjustments
Accounts receivable 49,373 (2,733) (1,250) (1,709) (4,442)
Inventory (32,450) 7,571 (3,000) 5,031 (37,648)
Accounts payable and accrued 461 16,345 1,600 (12,836) 4,849
expenses
TOTAL CASH FLOWS PROVIDED (USED) (94,151) (118,935) (11,982) (114,370) (505,502)
FROM OPERATIONS
CASH FLOWS FROM INVESTING ACTIVITIES
License fee (1,350)
Security deposit (5,000) (5,000)
Capital asset additions (12,889) (16,579) (11,027) (118,315) (152,492)
TOTAL CASH FLOWS PROVIDED (USED) (12,889) (21,579) (11,027) (118,315) (158,842)
FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Officer loan 112,055 46,397 3,200 6,999 53,400
Loan payable 40,000 40,750
Preferred stock 296,600
Notes payable 25,000 224,315 15,000 59,637 308,202
Sale of common stock 50,000 50,000
TOTAL CASH FLOWS PROVIDED (USED) 187,055 270,712 18,200 106,636 748,952
FROM FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH 80,015 130,198 (4,809) (126,049) 84,608
CASH BALANCE BEGINNING OF PERIOD 444 80,459 80,459 210,657 -0-
CASH BALANCE END OF PERIOD $80,459 $210,657 $75,650 $84,608 $84,608
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITY
Deficit
accumulated
during
Common Stock Common Stock Preferred Preferred development Unaudited
Date Stock Stock stage Total
<S> <C> <C> <C> <C>
7-22-1994(1) 150 $100 $100
7-24-1994(2) 1,350 1,350 1,350
6-30-1995 Net loss (111,797) (111,797)
6-30-1995 1,500 1,450 (111,797) (110,347)
5-31-1996(3) 30,000 300 300
6-28-1996(4) 1,500,000 1,450 1,450
6-30-1996(5) 25,000 50,000 50,000
6-30-1996(6) 2,966 296,600 296,600
6-30-1996 Net loss (114,715) (114,715)
6-30-1996 1,555,000 51,750 2,966 $296,600 $(226,512) $121,838
11-30-1996 295 29,500 29,500
6-30-1997 Net loss (144,263) (144,263)
6-30-1997 1,555,000 51,750 3,261 $326,100 $(370,775) $(22,425)
Unaudited
9-30-1997 Net loss -115,001 -115,001
9-30-1997 1,555,000 $51,750 3,261 $326,100 $(485,776) $(137,426)
</TABLE>
(1) Sale of 150 shares of common stock for $100.
(2) Exchange of shares of common stock for acquisition of license agreement.
(3) 30 shares of Common stock sold Pursuant to Reg. D at $10 per share restated
to 30,000 shares post forward split at $.01 per share.
(4) Forward split of common shares in a ratio of 1,000 to 1.
(5) Private placement of 25,000 shares of common stock at $2.00 per share for
$50,000.
(6) Conversion of $296,600 in debt into 2,966 shares of preferred stock at $100
par value each.
See accompanying notes to financial statements.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
Note 1. Organization of the Company and Issuance of Capital Stock
a. Creation of the Company
PPA Technologies, Inc. (the "Company") was incorporated on July 22,1994
under the laws of the State of New Jersey with an authorized number of common
shares of 2,500 no-par value. On June 20, 1996, the certificate of incorporation
was amended changing the number of common shares authorized to 10,000,000, no
par value each and 1,000,000 preferred shares, $100 par value each.
b. Description of the Company
The Company has under development and will manufacture and distribute
specialty chemicals and chemical additives.
c. Issuance of Common stock
On July 23, 1994, the Company sold 75 shares of common stock to Roger
Fidler and 75 shares of common stock to James Wright for a total consideration
of $100. On July 24, 1994, the Company acquired certain patented technologies
from Broadwater Developments, Inc. ("Broadwater"), a British Columbia
corporation for 375 shares of common stock and Gerald Sugerman for 975 shares of
common stock relating to coupling agents to be used as paint additives. The
Company has assigned a value of $1.00 per share of common stock or $1,350 as the
cost basis of this transaction.
On May 31, 1996, the Company sold, pursuant to a private placement under
"Rule 504" of the Securities Act of 1933, as amended, an aggregate of 30 shares
of common stock at $10 per share for an aggregate consideration of $300.
On June 28, 1996, the Company forward split the number of common shares
outstanding in the ratio of 1,000 to 1 restating the number of common shares
outstanding from 1,530 to 1,530,000.
As of June 30, 1996, the Company sold 25,000 shares of common stock at
$2.00 per share for a total of $50,000 through a private placement.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
d. Issuance of Preferred Stock
On June 30, 1996, the Company issued 2,966 shares of preferred stock to
Gerald Sugerman in exchange for moneys due plus accrued and unpaid salary and
moneys advanced to the Company aggregating $296,600 including accrued interest.
On November 30, 1996, the Company issued 295 shares of preferred stock to
Gerald Sugerman in exchange for moneys due for accrued and unpaid salary and
moneys advanced to the Company during the period July 1, 1996 through November
30, 1996 aggregating $29,500 including accrued interest.
Note 2. Summary of Significant Accounting Policies
a. Basis of presentation
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$485,776 for the period from inception July 22, 1994 to September 30, 1997.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the completion of a public offering and with the increase
in working capital, the Company will experience an increase in sales. The
Company will require substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing long-term need to
obtain additional financing. The Company's future capital requirements will
depend on numerous factors including, but not limited to, continued progress
developing its source of inventory, continued research and development and
initiating marketing penetration. The Company plans to engage in such ongoing
financing efforts on a continuing basis.
The financial statements presented at September 30, 1997, consist of the
balance sheet of the Company as at June 30, 1997 and the unaudited balance sheet
as at September 30, 1997 and the related statements of operations, cash flows
and stockholders equity for the year ended June 30, 1996 and 1997 and the
related unaudited statements of operations, cash flows and stockholders equity
for the three months ended September 30, 1996 and 1997.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
b. Cash and Cash Equivalents
The Company treats temporary investments with a maturity of less than three
months as cash.
c. Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight line
methods. Maintenance and repairs are charged against income and betterment's are
capitalized.
d. Earnings per share
Earnings per share have been computed on the basis of total number of
shares outstanding at September 30, 1997. At that date, the total number of
common shares outstanding was 1,555,000.
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
g. Unaudited financial information
In the opinion of Management, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of the Company as of July 31,
1997 and the results of its operations and its cash flows for the seven months
ended July 31, 1997. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the SEC's rules
and regulations of the Securities and Exchange Commission. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year. PPA TECHNOLOGIES, INC. (A Development
Stage Company) NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1997
Note 3. Related Party Transactions
a. Issuance of Common shares
On July 23, 1994, the Company sold 75 shares of common stock to Roger
Fidler and 75 shares of common stock to James Wright for a total consideration
of $100.
On July 24, 1994, the Company acquired certain patented technologies from
Broadwater Developments, Inc. ("Broadwater") for 375 shares of common stock and
Gerald Sugerman for 975 shares of common stock relating to coupling agents to be
used as paint additives. The Company has assigned a value of $1.00 per share of
common stock or $1,350 as the cost basis of this transaction.
b. Issuance of Preferred Stock
As of June 30, 1996 and November 30, 1996, the Company issued 2,969 and 295
shares of preferred stock respectively in consideration for the forgiveness of
$296,904 and $29,500 respectively in moneys due Gerald Sugerman. The shares of
preferred stock have preference as to liquidation, pay a 5% cumulative dividend
and may be redeemed by the Company at par value plus accumulated dividends for a
period of 5 years.
c. Employment Agreement
On June 30, 1995, the Company entered into a five year employment agreement
with Mr. Gerald Sugerman requiring the payment of a salary of $10,000 per month,
a royalty of 5% of gross sales until a total of $350,000 in royalties is earned
and thereafter a 2% royalty on gross sales.
For the year ending June 30, 1997 and for the three months ended September
30, 1997, Mr. Sugerman received $120,000 and $18,416 respectively.
d. Rental of Office Space
For the years ending June 30, 1996 and until May 31, 1997, the Company
occupied office space on a month to month basis at 8 Cambridge Drive, Allendale,
New Jersey.
e. Officer Compensation
For the period from July 22, 1994 to September 30, 1997, the Company has
paid or accrued a salary aggregating $250,000, of which $221,900 of accrued
salary and $104,200 in additional loans
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
payable and reimbursable expenses which were offset by the issuance of
3,261 shares of preferred stock representing $326,100. The balance of $28,100
due in salary was paid with cash. No other officers or employees were paid in
excess of $100,000.
Note 4 - Marketable Securities, Available for Sale
The Company adopted Financial Accounting Standards Board ("FASB") Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities",
which requires that investments in equity securities that have readily
determinable fair values and investments in debt securities be classified in
three categories: held-to-maturity, trading and available-for-sale. Based on the
nature of the assets held by the Company and Management's investment strategy,
the Company's investments have been classified as available-for-sale. Management
determines the appropriate classification of debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date.
Securities classified as available-for-sale are carried at estimated fair
value, as determined by quoted market prices, with unrealized gains and losses,
net of tax, reported in a separate component of stockholders' equity. At June
30, 1997 and September 30, 1997, the Company had no investments that were
classified as trading or held-to-maturity as defined by the Statement.
The following is a summary of cash, cash equivalents and available for sale
securities by balance sheet classification at June 30, 1997:
Estimated
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
Cash $ 210,657 $-0- $-0- $210,657
Total cash and cash
equivalents $ 210,657 $-0- $-0- $210,657
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at September 30, 1997:
Estimated
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
Cash $84,608 $-0- $-0- $ 84,608
Total cash and cash
equivalents $84,608 $-0- $-0- $ 84,608
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
Note 5 - Inventory
Inventory has been recorded at the lower of cost or market under the
first-in first-out method. At June 30, 1996 and 1997, inventory of raw materials
was $42,678 and $37,648 respectively.
Note 6 - Capital Assets
Capital Assets consisted of the following at June 30, 1997:
Accumulated
Asset depreciation Balance
Office equipment 35,927 $7,370 $28,557
Capital Assets consisted of the following at September 30, 1997:
Accumulated
Asset Depreciation Balance
Office equipment $36,237 $9,192 $27,045
Leasehold Improvements 10,034 2,925 7,109
Manufacturing Equipment 107,971 5,398 102,573
Total $154,242 $17,515 $136,727
Note 7 - License Agreement
On October 24, 1994, the Company entered into an agreement with Broadwater
and Pi-Tech, Inc., ("Pi-Tech"), a Delaware corporation controlled by Broadwater
and Gerald Sugerman for the licensing of certain patented technologies relating
to coupling agents used in paints. The Company acquired the licensing agreement
for 375 shares of common stock with Broadwater and 975 shares of common stock
with Gerald Sugerman.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
Note 8 - 12% Convertible Bridge Notes
Beginning May 1, 1996, the Company offered 12% Convertible Bridge Notes
("Notes") and then sold under Rule 504 to the Securities Act of 1933, as
amended, 20 Units consisting of a $25,000 Convertible Note bearing interest of
12% and is convertible, in whole or in part, into up to a maximum of 8,300
shares of common stock. The term of the note is two years with interest payable
annually in arrears. Each Debenture is in the face amount of $25,000 and may be
sold in 1/2 Units.
As of June 30, 1997, the Company has borrowed an aggregate of $296,250
evidenced by the following promissory notes: Note dated May 1, 1996 in the
principal amount of $25,000, Note dated September 20, 1996 in the principal
mount of $15,000, Note dated April 30, 1997 in the principle amount of $11,250,
Note dated May 13, 1997 in the principal amount of $50,000, Note dated May 30,
1997 in the principal amount of $25,000 and Note dated June 19, 1997 in the
principal amount of 120,000 and Note dated July 15, 1997 in the amount of
$50,000 and with accrued interest of $11,952.
In the event of a public offering of the Company's stock, the Company may
compel the conversion of the Notes by paying the Note and accrued interest at
the closing of the public offering.
The indebtedness evidenced by the Notes is of equal priority regardless of
the date of any individual Note and is subordinate and junior to any and all
other indebtedness of the Company, whenever incurred, except indebtedness which
by its terms is expressly subordinated in right of payment to the Notes.
The Company has reserved sufficient authorized but unissued shares for
conversion of the Convertible Notes which shares, upon issuance and delivery,
will be duly and validly issued, fully paid and nonassessable.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
Note 9 - Preferred Stock
On June 20, 1996, the certificate was amended authorizing the issuance of
1,000,000 shares of preferred stock. The preferred stock may be issued in such
classes and with such preferences as the board of directors may, from time to
time, decide in their sole discretion.
As of November 30, 1996, the Company issued an aggregate of 3,261 shares of
preferred stock in consideration for the forgiveness of $326,100 in moneys due
Gerald Sugerman consisting of $221,900 in accrued salary per the employment
agreement and $104,200 in officer loans payable for moneys advanced to the
Company. The shares of preferred stock have preference as to liquidation, pay a
5% cumulative dividend and may be redeemed by the Company at par value plus
accumulated dividends for a period of 5 years.
Note 10 - Commitments and Contingencies
a. Lease Agreements
Through March 13, 1997, the Company occupied laboratory, plant and
warehousing space in Perkasie, Pennsylvania on a month to month basis for $500
per month.
On March 13, 1997, the Company entered into a lease agreement with an
unrelated parted for office and warehousing space at 163 South Street,
Hackensack, New Jersey for a period of 4 years with a monthly rent of $2,500 and
real estate taxes payable separately. The lease requires deposit of 2 months
rent aggregating $5,000. The minimum lease payments each of the next four years
is $30,000. The Company has an option to renew the lease for an additional 4
years at a rental equal to the higher of $30,000 per year or $30,000 per year
plus 90% of the Consumer Price Index for April, 1997.
b. Employment Agreement with Gerald Sugerman
On May 23, 1995, the Company entered into an employment with Gerald
Sugerman as Vice President for Scientific Affairs. The Company is obligated to
pay Mr. Sugerman 10,000 per month, life insurance equal to twice the his annual
salary, medical and disability insurance, automobile expenses equal to $0.30 per
mile, four weeks paid vacation, five sick days, three personal days, all of
which will be accumulated if not taken, reimbursement for travel and promotion
expenses, 5% of net sales until Mr. Sugerman has received $350,000, 2% of net
sales thereafter and Mr. Sugerman is granted an option to purchase up to 850,000
shares of common stock at $1.00 per share for a period of 4 years beginning July
1, 1996.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
As of September 30, 1997, the Company has reserved 850,000 shares of common
stock pending the exercise of this option
c. Employment agreement with Roger Fidler
In February, 1996, the Company entered into an employment agreement with
Roger Fidler as President and Director of Marketing. The Company is obligated to
pay Mr. Fidler a commission on sales equal to 15% of sales of coupling agents,
ink and paint vehicles and 10% of hard resin sales. Commissions on other
products sold through the efforts of Mr. Fidler will be negotiated in good faith
from time to time, but will be based upon the above scale as modified for
differences in the costs of production of the goods sold. The commissions will
be paid only on accounts opened by Mr. Fidler and will be paid for the term of
the contract and for one year after termination. Commissions will not be paid on
existing customers for the purchase of products presently purchased by them.
Upon the successful conclusion of a financing in excess of $500,000 or
sales of $2,000,000 per annum, whichever will occur first, Mr. Fidler will be
entitled to Company paid life insurance plan equal to twice his annual salary,
medical and disability insurance, automobile expenses equal to $0.30 per mile,
reimbursement for travel and promotion expenses Mr. Fidler is granted an option
to purchase up to 425,000 shares of common stock at $1.00 per share for a period
of 4 years beginning July 1, 1996.
As of June 30, 1997 and September 30, 1997, the Company has reserved
425,000 shares of common stock pending the exercise of this option
d. Letter of Intent for Corporate Financing
On April 15, 1996, the Company entered into an financing agreement with
Kenneth Jerome & Co., Inc. of Florham Park, New Jersey concerning an initial
public offering of 1,000,000 Units at $6.00 per Unit for an aggregate of
$6,000,000. Each Unit consisting of 1 share of common stock and 1 five-year
common stock "A" Purchase Warrant. Each Warrant entitling the owner to purchase
1 share of common stock at an exercise price of $7.00. The aggregate amount of
the public offering is subject to adjustment to include in the initial public
offering an over-allotment of 15%. The Company may redeem at $0.05 per class "A"
Warrant provided, however, that the closing bid price of the Company's common
stock in the over-the-counter market as reported by NASDAQ will have for 30
consecutive business days ending 15 days of the date of redemption average in
excess of $8.50 per share (subject to adjustments in the case of a reverse stock
split, stock dividend, etc.).
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
The Company, after applying the net proceeds of the initial public offering
must meet the criteria for listing on either NASDAQ or a regional exchange. The
Company will prepare and file with the Securities and Exchange Commission a
Registration Statement on Form SB-2 for the maximum number of Units offered:
a. 1,150,000 Units, each Unit consisting of one share of common stock and
one five-year common stock A Purchase Warrant, including the over-allotment.
b. 1,150,000 shares of common stock to be issued upon closing, 1,150,000
shares of common stock to be issued upon exercise of the A Warrants and 115,000
shares of common stock to be issued upon exercise of the Underwriter's Warrants.
c. The Company will pay all expenses of the proposed offering and the
issuance, sale and delivery of all of the Units, accounting and legal fees, cost
of "tombstone" advertisements not to exceed $5,000, 3% non-accountable expenses
or a maximum of $207,000 and all administrative costs.
d. The gross commission to the Underwriter will be 10% of the total
proceeds of the public offering.
e. If the offering is sold within the Underwriting Period, the Company will
sell to the Underwriter, Underwriter's Warrants to purchase Units which Units
will equal 10% of the Units offered to the public, at a price of $.001 per
Underwriter's Warrant. The exercise price of the Underwriter's Warrant will be
approximately 120% of the offering price of the Units. The Underwriter's
Warrants will be exercisable for a period of 4 years following the expiration of
1 year from the Effective Date. The Company agrees that it will, upon request by
the Underwriter, within the period commencing 12 months from the Effective Date,
and for a period of 4 years thereafter, on one occasion, at the Company's
expense, file a post-effective amendment to Register the Underwriter's Warrants.
f. The Underwriter's Warrants will contain various anti dilution provisions
which will protect the Underwriter as to the exercise price of the Underwriter's
Warrants and the percentage of common stock to which the Underwriter is
entitled.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
g. Non statutory Stock Option Plan
On January 1, 1997, the Company adopted a Non statutory Stock Option Plan
("Plan"). 300,000 shares of common stock are reserved under the Plan. The Plan
is administered by the Board of Directors. Stock options under the Plan may be
granted to employees, officers, directors, consultants of the Company or any
other parties who have made a significant contribution to the business and
success of the Company. The exercise price under the Plan may be more equal to
or less than the current market price of the Shares of Common Stock. At June 30,
1997 and September 30, 1997, the number of options granted pursuant to this
program is -0-. As of June 30, 1997 and September 30, 1997, the Company has
reserved 300,000 shares of common stock pending the issuance and exercise of
options into shares of common stock.
h. Stock Grant Program
The Company has adopted a stock grant program with 200,000 shares of common
stock. The stock grant program provides for the issuance to officers, directors
and key employees stock grants as determined by the Board of Directors. The
recipient must continue employment with the Company for two years after the
grant is made or forfeit the stock.
As of June 30, 1997 and September 30, 1997, the number of shares of common
stock granted pursuant to this program is -0-.
As of June 30, 1997 and September 30, 1997, the Company has reserved
200,000 shares of common stock pending issuance.
Note 11 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of June 30, 1997 and September 30,
1997, the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carryforward and was fully
offset by a valuation allowance.
At September 30, 1997, the Company has net operating loss carry forwards
for income tax purposes of $485,776. These carryforward losses are available to
offset future taxable income, if any,
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
and expire in the year 2010. The Company's utilization of this carryforward
against future taxable income may become subject to an annual limitation due to
a cumulative change in ownership of the Company of more than 50 percent.
The components of the net deferred tax asset as of June 30, 1997 are as
follows:
Deferred tax asset:
Net operating loss carry forward $ 165,164
Valuation allowance $(165,164)
Net deferred tax asset $-0-
The Company recognized no income tax benefit from the loss generated in the
year ended June 30, 1997. SFAS No. 109 requires that a valuation allowance be
provided if it is more likely than not that some portion or all of a deferred
tax asset will not be realized. The Company's ability to realize benefit of its
deferred tax asset will depend on the generation of future taxable income.
Because the Company has yet to recognize significant revenue from the sale of
its products, the Company believes that a full valuation allowance should be
provided.
Note 12 - Business and Credit Concentrations
The amount reported in the financial statements for cash, trade accounts
receivable and investments approximates fair market value. Because the
difference between cost and the lower of cost or market is immaterial, no
adjustment has been recognized and investments are recorded at cost. Financial
instruments that potentially subject the company to credit risk consist
principally of trade receivables. Collateral is generally not required.
Note 13 - Supplemental Cash Flow Information
The following is supplemental cash flow information for the Company for the
period from inception July 22, 1994 to September 30, 1997:
Acquisition of licensing agreement for 1,350 shares
of common stock $ (1,350)
Issuance of 3,261 shares of preferred stock in
settlement of note payable to Gerald Sugerman $(326,100)
Capital stock 327,450
Total $ -0-
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1997
Note 14 - Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management for its continued existence. The Company will also be
dependent upon its ability to raise additional capital to complete is marketing
program, acquire additional equipment, management talent, inventory and working
capital to engage in profitable business activity. Since its organization, the
Company's activities have been limited to the entering into the marketing of
providing limited quantities of chemical coupling agents and other chemical
additives at competitive pricing, hiring personnel, acquiring equipment and
warehousing space, conducting research and development of its formulas and
preparation of documentation and the sale of a private placement offering.
Note 15 - Subsequent Events
a. Registered Offering
The Company is offering a minimum of 1,000,000 Units to a maximum of
1,150,000 Units at an offering price of $6.00 per Unit. Each Unit consists of 1
share of common stock and one redeemable common stock "A" Purchase Warrant,
exercisable into 1 share of common stock per warrant for a period of 5 years
from the effective date of the registration statement of which this prospectus
is a part at an exercise price of $7.00 per share. The "A" Purchase Warrants are
redeemable at the Company's option commencing 90 days after the effective date
upon 30 days notice to the Warrant holders at $.05 per Warrant if the closing
bid price of the common stock in the over-counter-market as reported by NASDAQ
will have for a period of 30 consecutive trading days ending within 15 days of
the notice of redemption average in excess of $8.50 per share (subject to
adjustments in the case of a reverse stock split, stock dividend, etc.). Since
it is the Company's present intention to exercise such right, Warrant holders
should presume that the Company would call the Redeemable Warrants for
redemption if such criteria are met. The Redeemable Warrants are immediately
detachable and separately tradable from the Units upon issuance.
The shares are being offered by the Company and/or selected dealers on a
"firm commitment basis". The Underwriter will purchase 1,000,000 Units for later
resale, and has reserved the right to purchase up to an additional 150,000 Units
on the date of the Initial Public Offering in case of over booking of sales. The
Company has agreed to sell to the Underwriter, at a nominal price, warrants to
purchase 10% of the number of shares sold by the Underwriter or dealers at an
exercise price of $7.20 per share, which warrants will be exercisable for four
years commencing one year after issuance.
b. Conversion Of Notes Payable
Subsequent to the date of the financial statements, the Company converted
$85,000 plus accrued interest of nates payable into an aggregate of 42,500
shares of common stock.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers.
The By-Laws of the Company provide for indemnification of officers and
directors to the maximum extent allowed by the law of New Jersey, set forth in
greater detail below.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and persons controlling the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
Article VII of the By-Laws of the Company provide for the maximum
indemnification allowed by the law of the State of New Jersey as follows:
"Every person who is or was a director, officer, employee or agent of
the Corporation, or of any corporation which he has served as such at
the request of the Corporation, shall be indemnified by the Corporation
to the fullest extent permitted by law against all expenses and
liabilities reasonably incurred by or imposed upon him, in connection
with any proceeding to which he may be made, or threatened to be made,
a party, or in which he may become involved by reason of his being or
having been a director, officer, employee or agent of the Corporation,
or such other corporation, at the time the expense or liabilities are
incurred."
<PAGE>
ITEM 25. Other Expenses of Issuance and Distribution
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts) are estimated as follows:
<TABLE>
<S> <C>
Registration Fee-Securities and
Exchange Commission..................... $ 5,025.00
NASD Fee ................................... 2,175.00
Transfer Agent's Fee and Expenses .......... 2,800.00
Legal Fees and Expenses .................... 100,000.00
Blue Sky Fees and Expenses ................. 15,000.00
Printing Expenses (including securities) ... 25,000.00
Miscellaneous .............................. 25,000.00
Total.............................. $175,000.00
Estimated.
</TABLE>
ITEM 26. Recent Sales of Unregistered Securities
The following sales made by the issuer within the past three years were
made under circumstances not involving any public offering, and which were
exempt from the registration requirements of the Securities Act of 1933, as
amended, by reason of Section 4(2) thereof and/or the Rules and Regulations
promulgated thereunder, specifically, Rule 504, Regulation D:
<TABLE>
<CAPTION>
Purchaser Security Amount Date Consideration
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Kaplon Common 30,000 shares 3/15/95 $ 300
Gary Metzger Common 25,000 shares 6/30/96 $50,000
AMCO Plastics Common 12,500 shares 11/30/96 $25,000
An Lou Chang Common 30,000 shares 07/01/97 $60,000
Eve Chang Debt $60,000 note 07/01/97 $60,000
Carl D. Fraley Debt $50,000 note 07/01/97 $50,000
Ray Beeler Debt $50,000 note 07/01/97 $50,000
Henry MacUga Debt $25,000 note 07/01/97 $25,000
Haskell Bernat Debt $25,000 note 07/01/97 $25,000
Edward Santangelo Debt $25,000 note 07/01/97 $25,000
Martin Santangelo Debt $25,000 note 07/01/97 $25,000
David Schotz Debt $25,000 note 07/01/97 $25,000
Lois S. MacUga Debt $12,500 note 07/01/97 $12,500
Aaron Lehman Debt $12,500 note 07/01/97 $12,500
David Lipson Debt $12,500 note 07/01/97 $12,500
</TABLE>
<PAGE>
ITEM 27. Exhibits and Financial Statement Schedules
1.(a) Form of Underwriting Agreement
(b) Form of Selected Dealers Agreement
3.(a) Registrant's Certificate of Incorporation
(b) Amendment to Certificate of Incorporation
(c) Registrant's By-Laws
4.(a) Specimen Security Certificate
(b) Form of Warrant*
(c) Form of Underwriter's Warrant
(e) Form of Warrant Agreement
5.(a) Consent and Opinion of Roger Fidler*
10. Material Contracts
(a) Employment Agreement between the Company
and Gerald Sugerman
(b) Employment Agreement between the Company
and Roger Fidler
(c) Lease
24.(a) Consent of Thomas Monahan, Certified Public
Accountant
* To be filed by Amendment
ITEM 28. Undertakings
The undersigned Registrant hereby undertakes that:
(A) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; and,
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement, including
(but not limited to) any addition or deletion of a managing underwriter.
(B) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(C) To remove from registration, by means of a post-effective amendment to
the Registration Statement, any of the securities offered hereby which are not
sold pursuant to the terms of this offering.
(D) Will provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names are required by the underwriter to permit prompt delivery to each
purchaser.
(E) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this Amendment
No. 1 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hackensack and State of
New Jersey, on the 4th day of December, 1997.
PPA TECHNOLOGIES, INC.
BY: /S/ Roger Fidler
Roger Fidler, President
Chief executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
/S/ Roger Fidler President, December 5, 1997
Roger Fidler Director
/S/ Gerry Sugerman Director, December 5, 1997
Gerry Sugerman Treasurer,
Secretary,
Chief Financial and
Accounting Officer
/S/ James Wright Director, December 5, 1997
James Wright
PPA TECHNOLOGIES, INC.
1,000,000 Units
UNDERWRITING AGREEMENT
Kenneth Jerome & Company, Inc.
P.O. Box 38
147 Columbia Turnpike
Florham Park, New Jersey
(201) 966-6669
Ladies and Gentlemen:
PPA Technologies, Inc., a New Jersey corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters"), up to a maximum of 1,000,000 units (1,150,000 units
including the over-allotment) (the "Units"), each Unit consisting of one (1)
share of common stock (the "Shares") and one (1) redeemable five-year common
stock A Purchase Warrant (the "A Warrants"), each A Warrant entitling the owner
to purchase one share of common stock at an exercise price of $7.00. The
offering price per Unit will not be less than $6.00. You will act as the
Company's exclusive underwriter (the "Underwriter" or "You") and will assist the
Company in offering 1,000,000 Units (the "Offering") on a "firm commitment
basis. The Company further agrees to issue, upon the closing date as hereinafter
defined in Section 2, the Underwriter's Warrants more fully discussed in Section
3(t) below (the "Warrants"). The Company hereby confirms the agreement made by
it with respect to the purchase of the Securities by the Underwriter, which
Securities are more fully described in the Registration Statement referred to
below. Kenneth Jerome & Company, Inc. is referred to herein as the "Underwriter"
or the "Representative."
You have advised the Company that the Underwriters desire to act on
a firm commitment basis to publicly offer and sell the Securities for the
Company and that you are authorized to execute this Agreement. The Company
confirms the agreement made by it with respect to the relationship with the
Underwriters as follows:
(a) Subject to the terms and conditions of this Agreement, and on
the basis of the representations, warranties, and agreements herein contained,
the Company agrees to sell to, and the Underwriters agree to buy from the
Company at a purchase price of $6.25 per Unit before any underwriter expense
allowance, a total of 1,000,000 Units consisting of 1,000,000 shares of Common
Stock and 1,000,000 Redeemable Warrants, on a firm commitment basis.
It is understood that the Underwriters propose to offer the
Securities to be purchased hereunder to the public upon the terms and conditions
set forth in the Registration Statement, after the Registration Statement
becomes effective.
(b) Delivery of the Securities against payment therefor shall take
place at the offices of the Clearing Broker, Herzog Heine Geduld, Inc., at 525
Washington Blvd., Jersey City, New Jersey, 07310 within five (5) business days
after the effective date (the AEffective Date@)(or at such other place as may be
designated by agreement between you and the Company) at 10:00 A.M., New Jersey
time, or at such time and date as you and the Company may agree upon in writing,
such time and date of payment and delivery for the Securities being herein
called the "Initial Closing Date."
The Company will make the certificates for the Securities to be
purchased by the Underwriters hereunder available to the Representative for
inspection and packaging at least two (2) full, business days prior to the
Initial Closing Date. The certificates shall be in such names and denominations
as the Underwriters may request to the Company in writing at least two (2)
business days prior to any Closing Date.
(c) In addition, subject to the terms and conditions of this
Agreement and on the basis of the representations, warranties and agreements
herein contained, the Company grants an option to the Underwriters to purchase
up to an additional 150,000 Securities ("Option Securities") at the same terms
per Units as the Underwriters shall pay for the Initial Securities being sold by
the Company pursuant to the provisions of Section 2(a) hereof. This option may
be exercised from time to time, for the purpose of covering overallotments,
within forty-five (45) days after (i) the Effective Date of the Registration
Statement if the Company has elected not to rely on Rule 430A under the Rules
and Regulations of the Securities and Exchange Commission or (ii) the date of
this Agreement if the Company has elected to rely upon Rule 430A under the Rules
and Regulations, upon written notice by the Underwriter setting forth the number
of Option Securities as to which the Underwriter is exercising the option and
the time and date at which such certificates are to be delivered. Such time and
date shall be determined by the Underwriter but shall not be earlier than four
(4) nor later than ten (10) full business days after the date of the exercise of
said option. Nothing herein shall obligate the Underwriter to make any
overallotment.
(d) Definitive certificates in negotiable form for the Securities
to be purchased by the Underwriter hereunder will be delivered at the closing by
the Company to the Underwriters against payment of the purchase price by the
Underwriters by certified or bank cashier's checks or wire transfer in next day
funds payable to the order of the Company.
(e) The information set forth under "Underwriting" in any
Prospectus relating to the Securities proposed to be filed by the Company with
the Securities and Exchange Commission and States designated by the Underwriter
(insofar as such information relates to the Underwriters) and constitutes the
only information furnished by the Underwriter to the Company for inclusion
therein, and you represent and warrant to the Company that the statements made
therein are correct.
(f) On the Initial Closing Date, the Company shall issue and sell
to the Representative, warrants (the "Representative's Warrants") at a purchase
price of $.001 per Representative's Warrant, which shall entitle the holders
thereof to purchase an aggregate of 100,000 shares of Common Stock and 100,000
Redeemable Warrants. The shares of Common Stock and the Redeemable Warrants
issuable upon the exercise of the Representative's Warrants are hereafter
referred to as the "Representative's Securities" or "Representative's Warrant."
The shares of Common Stock issuable upon exercise of the Redeemable Warrants are
hereinafter referred to collectively as the "Warrant Shares". The
Representative's Warrants shall be exercisable for a period of three (3) years
commencing two (2) year from the effective date of the Registration Statement at
a price equaling one hundred thirty percent (130%) of the initial public
offering price of the Units. The form of Representative's Warrant Certificate
shall be substantially in the form filed as an Exhibit to the Registration
Statement. Payment for the Representative's Warrants shall be made on the
Initial Closing Date.
In consideration of the mutual agreements contained herein and of
the interests of the parties in the transactions contemplated hereby; the
parties hereto agree as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with the
Underwriter as follows:
(a) A registration statement on Form SB-2 (File No. 333-2496)(the
"Registration Statement") with respect to the Units, the Warrants and the
securities underlying such Units and Warrants has been prepared by the Company
in conformity with the requirements of the Securities Act of 1933, as amended,
and the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder (collectively called the "Act") and has been filed with
the Commission under the Act. Copies of such Registration Statement, including
any pre-effective and post-effective amendments thereto, the preliminary
prospectuses (meeting the requirements of Rule 430A under the Act) contained
therein and the exhibits, financial statements and schedules, as finally amended
and revised, have heretofore been delivered by the Company to you. The
Registration Statement, which, upon filing of the Prospectus referred to below
with the Commission, shall be deemed to include all information omitted
therefrom in reliance upon Rule 430A and contained in the Prospectus referred to
below, has been declared effective by the Commission under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. The form of prospectus first filed by the Company with
the Commission pursuant to Rule 424(b) and Rule 430A is herein referred to as
the "Prospectus." Each preliminary prospectus included in the Registration
Statement prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus."
(b) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement.
The Company is duly qualified to transact business and in good standing in all
jurisdictions in which the conduct of its business or the location of the
properties owned or leased by it requires such qualification, except where the
failure to qualify would not have a material adverse effect upon the business,
properties, financial condition or prospects of the Company.
The Company has no subsidiaries.
(c) The Company has authorized, issued and outstanding capital
stock as set forth under the heading "Capitalization" in the Prospectus. The
outstanding shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with all federal and state securities laws. All of the Units and
Warrants to be issued and sold pursuant to this Agreement, and the securities
underlying such Units and Warrants, have been duly authorized and, when issued
and paid for as contemplated herein, will be validly issued, fully paid and
nonassessable. No preemptive rights of stockholders exist with respect to any of
the Units or securities underlying the Units or the issue and sale thereof.
Neither the filing of the Registration Statement nor the offering or sale of the
Units or the Warrants as contemplated herein gives rise to any rights, other
than those which have been waived or satisfied, for or relating to the
registration of any of the Company's securities. All necessary and proper
corporate proceedings have been taken to validly authorize the Units, Warrants
and securities underlying such Units and Warrants and no further approval or
authority of the stockholders or the Board of Directors of the Company is
required for the issuance and sale of the Units or Warrants or securities
underlying such Units or Warrants to be sold as contemplated herein.
(d) The Units and the Warrants and the securities underlying the
Units and the Warrants conform with the statements concerning them in the
Registration Statement in all material respects. Except as specifically
disclosed in the Registration Statement and the financial statements of the
Company and the related notes thereto, the Company does not have outstanding any
options to purchase, or any preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell shares of its capital stock or any such options,
rights, convertible securities or obligations. The descriptions of the Company's
stock option and other stock-based plans, and of the options or other rights
granted and exercised thereunder, set forth in the Prospectus are accurate
summaries and fairly present the information required to be shown with respect
to such plans and rights in all material respects. The Company and its
affiliates are not currently offering any securities, nor have they offered or
sold any of the Company's securities since June 30, 1997, except as described in
the Registration Statement.
(e) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus relating to the proposed
offering of the Units or Warrants nor instituted, or to the best knowledge of
the Company, contemplated instituting proceedings for that purpose. Each
Preliminary Prospectus, at the time of filing thereof, contained all statements
which were required to be stated therein by, and in all respects conformed to,
the requirements of the Act. No Preliminary Prospectus contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to information
contained in or omitted from any Preliminary 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 each Preliminary Prospectus under
the heading "UNDERWRITING," and the identity of counsel to Kenneth Jerome &
Company, Inc. under the heading "LEGAL MATTERS" constitute the only written
information furnished to the Company by or on behalf of the Underwriter.
(f) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined below), (i) the
Registration Statement and the Prospectus and any amendments or supplements
thereto will contain all statements which are required to be stated therein by,
and in all respects will conform to the requirements of, the Act; and (ii)
neither the Registration Statement nor any amendment thereto, and neither the
Prospectus nor any supplement thereto, will contain any untrue statement of a
material fact or omits or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to information
contained in or omitted from the Registration Statement or the Prospectus, or
any such amendment or supplement, 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 under the heading "UNDERWRITING," and the
identity of counsel to Kenneth Jerome & Company, Inc. under the heading "LEGAL
MATTERS," constitute the only written information furnished to the Company by or
on behalf of the Underwriter.
(g) The consolidated financial statements of the Company, together
with related notes and schedules as set forth in the Registration Statement,
present fairly in all material respects the financial position, the results of
operations and cash flows of the Company, at the indicated dates and for the
indicated periods. Such consolidated financial statements, schedules and related
notes have been prepared in accordance with generally accepted accounting
principles, consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary and selected financial and statistical data and schedules
included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement.
(h) There is no action, suit or proceeding pending or, to the best
knowledge of the Company after due inquiry, threatened against the Company
before any court or regulatory, governmental or administrative agency or body,
or arbitral forum, domestic or foreign, which might result in any material
adverse change in the business or condition (financial or otherwise),
properties, results of operation or prospects for the future of the Company,
except as set forth in the Registration Statement. The Company is not subject to
the provisions of any injunction, judgment, decree or order of any court,
regulatory body, administrative agency or other governmental body or arbitral
forum that would have a material adverse effect upon the business of the
Company. There are no labor disputes involving the Company that exist or are
imminent which could materially and adversely affect the conduct of the
business, property, operations, financial condition or earnings of the Company.
(i) The Company has good and marketable title to all of the
properties and assets reflected in either the financial statements or as
described in the Registration Statement, and such properties and assets are
subject to no lien, mortgage, security interest, pledge or encumbrance (other
than easements, if any) of any kind, except (i) those reflected in such
financial statements or as described in the Registration Statement; and (ii) for
such encumbrances that, individually or in the aggregate, would not have a
material adverse effect on the Company. The Company occupies its leased
properties under valid and binding leases conforming to the descriptions thereto
set forth in the Registration Statement.
(j) The Company has filed all federal, state, local and foreign
income tax returns which have been required to be filed and has paid all taxes
indicated by said returns and has paid all tax assessments received by it. There
is no income, sales, use, transfer or other tax deficiency or assessment which
has been or might reasonably be expected to be asserted or threatened against
the Company or any of its Subsidiaries which could materially adversely affect
the business operations or property or business prospects of the Company. The
Company has paid all sales, use, transfer and other taxes applicable to it and
its business.
(k) Except as described in the Registration Statement, since the
respective dates as of which information is given in the Registration Statement,
as it may be amended or supplemented, (i) there has not been any adverse change
or any development suggesting the likelihood of a future material adverse change
in or affecting the condition, financial or otherwise, of the Company or the
earnings, business affairs, management, properties or business prospects of the
Company, whether or not occurring in the ordinary course of business, (ii) there
has not been any transaction entered into by the Company, other than
transactions in the ordinary course of business, (iii) except in the ordinary
course of business, the Company has not incurred any material obligation,
contingent or otherwise, (iv) the Company has not sustained any material insured
or uninsured loss or interference with its businesses or properties from fire,
flood, windstorm, accident or other calamity, (v) the Company has not paid or
declared any dividends or other distributions with respect to its capital stock
and the Company is not in default in the payment of principal of or interest on
any outstanding debt obligations, (vi) there has not been any change in the
capital stock (other than the exercise of outstanding stock options pursuant to
the Company's stock option plans described in the Registration Statement) of the
Company or material increase in indebtedness of the Company, and (vii) the
Company has not issued any options, warrants, convertible securities or other
rights to purchase the capital stock of the Company.
(l) The Company is not, nor with the giving of notice or the
passage of time or both will be, in violation or default under any provision of
its certificate of incorporation or bylaws or any of its agreements, leases,
licenses, contracts, franchises, mortgages, permits, deeds of trust indentures
or other instruments or obligations to which it is a party or by which it or any
of its properties is bound or may be affected (collectively, "Contracts") ,
except where such violation or default would not have a material adverse effect
on the business or financial condition of the Company. Each Contract to which
reference is made in the Registration Statement or which was filed as an exhibit
to the Registration Statement has been duly and validly authorized, executed and
delivered by the Company, constitutes the legal, valid and binding agreement of
the Company and is enforceable in accordance with its terms.
(m) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute, either by itself or upon notice or the passage of
time or both, a default under, any Contract to which the Company is a party or
by which the Company or any of its property may be bound or affected, except
where such breach, violation or default would not have a material adverse effect
on the business or financial condition of the Company, or violate any of the
provisions of the certificate of incorporation or bylaws of the Company, or
violate any statute, rule or regulation applicable to the Company or violate any
order, judgment or decree of any court or of any regulatory, administrative or
governmental body or agency or arbitral forum having jurisdiction over the
Company or any of its property, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the assets of the Company. The Company
has no intention of exercising any right which it may have to cancel any of its
rights or obligations under any Contract or has any knowledge that any other
party to any Contract has any intention not to render full performance
thereunder.
(n) The Company has the legal right, corporate power and authority
to enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the Company
and is legally binding upon and enforceable against the Company in accordance
with its terms.
(o) Each approval, registration, qualification, license, permit,
consent, order, authorization, designation, declaration or filing by or with any
regulatory, administrative or other governmental body or agency necessary in
connection with the execution and delivery by the Company of this Agreement and
the consummation of the transactions herein contemplated (except such additional
steps as may be required by the National Association of Securities Dealers, Inc.
(the "NASD") or except as may be necessary to qualify the Units for public
offering under state securities or Blue Sky laws) has been obtained or made and
each is in full force and effect.
(p) The Company owns or possesses adequate and sufficient rights to
use all patents, patent rights, trade secrets, licenses or royalty arrangements,
trademarks and trademark rights, service marks, trade names, copyrights, know
how or proprietary techniques or rights thereto of others, and governmental,
regulatory or administrative authorizations, orders, permits, certificates and
consents necessary for the conduct of the business of the Company, except where
the failure to possess such would not have a material adverse effect on the
business or financial condition of the Company. The Company is not aware of any
pending or threatened action, suit, proceeding or claim by others, either
domestically or internationally, that alleges the Company is violating any
patents, patent rights, copyrights, trademarks or trademark rights, inventions,
service marks, trade names, licenses or royalty arrangements, trade secrets,
know how or proprietary techniques or rights thereto of others, or governmental,
regulatory or administrative authorizations, orders, permits, certificates and
consents. The Company is not aware, after due diligence, of any rights of third
parties to, or any infringement of, any of the Company's patents, patent rights,
trademarks or trademark rights, copyrights, licenses or royalty arrangements,
trade secrets, know how or proprietary techniques, including processes and
substances, or rights thereto of others, which could materially adversely affect
the use thereof by the Company or which would have a material adverse effect on
the Company. The Company is not aware, after due diligence, of any pending or
threatened action, suit, proceeding or claim by others challenging the validity
or scope of any of such patents, patent rights, trademarks or trademark rights,
copyrights, licenses or royalty arrangements, trade secrets, know how, or
proprietary techniques or rights thereto of others. The Company possesses those
patents that have been previously disclosed to you in writing, and such patents
remain in full force and effect.
(q) There are no Contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act which have not been described or filed as
required, and the exhibits which have been filed are complete and correct copies
of the documents of which they purport to be copies.
(r) The Company is conducting business in compliance with all
applicable laws, rules, regulations and orders of the jurisdictions in which it
is conducting business, including, without limitation, all applicable local,
state, federal and foreign environmental laws and regulations, except where the
failure to so comply would not have a material adverse effect on the business,
property, financial condition or prospects of the Company. The Company possesses
adequate licenses, certificates and permits issued by the appropriate federal,
state and local regulatory authorities necessary to conduct its business and to
retain possession of its properties. Except as set forth in the Prospectus, the
expiration, revocation or modification of any such license, certificate or
permit would not materially adversley affect the operations of the Company. The
Company has not received any notice of any proceeding relating to the revocation
or modification of any of these licenses, certificates or permits.
(s) All transactions among the Company and the officers, directors,
and affiliates of the Company have been accurately disclosed in the Prospectus,
to the extent required to be disclosed in the Prospectus in accordance with the
Act. As used in this Agreement, the term "affiliate" shall mean a person or
entity controlling, controlled by or under common control with any specified
person or entity, with the concept of control meaning the ability to direct,
directly or indirectly, the management or policies of the controlled person or
entity, whether through the ownership of voting securities, by contract,
positions of employment, family relationships, service as an officer, director
or partner of the person or entity, or otherwise.
(t) Neither the Company nor, to the knowledge of the Company, any
officers, directors, employees, or agents acting on behalf of the Company has,
directly or indirectly, at any time during the past five years (i) made any
unlawful contribution to any candidate for public office, or failed to disclose
fully any contribution in violation of law, (ii) made any payment to any
federal, state, local or foreign governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any other such
jurisdiction, (iii) made any payment outside the ordinary course of business to
any purchasing or selling agent or person charged with similar duties of any
entity to which the Company sells or from which the Company buys product for the
purpose of influencing such agent or person to buy products from or sell
products to the Company, or (iv) except as set forth in the Prospectus, engaged
in any transaction, maintained any bank account or used any corporate funds
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the Company. The
Company's internal accounting controls and procedures are sufficient to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(u) The Company maintains insurance of the types and in the amounts
which it deems adequate for its business and which is customary for companies in
its industry, including, but not limited to, general liability insurance and
insurance covering all real and personal property owned or leased by it against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(v) Thomas P. Monahan, C.P.A. who has certified the financial
statements filed with the Commission as part of the Registration Statement, is
an independent public accountant as required by the Act.
(w) The Company has taken all appropriate steps reasonably
necessary or appropriate to assure that no issuance, offering, sale or other
disposition of any capital stock of the Company will be made for a period of
thirteen (13) months after the date of this Agreement, directly or indirectly,
by the Company, otherwise than with your prior written consent or pursuant to
the exercise of outstanding stock options under the Company's stock option plans
described in the Registration Statement.
(x) The Company's Board of Directors consists of those persons
listed in the Prospectus. Except as disclosed in the Prospectus, none of such
persons is employed by the Company nor is any of them affiliated with the
Company, except for service on its Board of Directors.
(y) Except as provided for herein, no broker's or finder's fees or
commissions are due and payable by the Company, and none will be paid by it.
(z) The Company is eligible to use Form SB-2 for the registration
of the Units, Warrants and the securities underlying the Units and the Warrants.
(aa) Neither the Company nor, to its knowledge after due and
diligent inquiry, any person other than the Underwriter, has made any
representation, promise or warranty, whether verbal or in writing, to anyone,
whether an existing shareholder or not, that any of the Units will be reserved
for or directed to them during the proposed public offering.
(ab) Except as set forth in the Prospectus, the Company has not
established, contributed to or maintains any "employee benefit plan" as defined
in the Employment Retirement Income Security Act or in the Internal Revenue Code
of 1986, as amended.
(ac) The Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended.
(ad) Neither the Company nor, to its knowledge, any of its
officers, directors or affiliates (within the meaning of the Act) has taken,
directly or indirectly, any action designed to cause or result in, or which has
constituted the stabilization or manipulation of the price of the outstanding
Common Stock or any other outstanding securities of the Company to facilitate
the sale or resale of the Units other than in compliance with Commission Rule
10b-18.
2. Nature of the Offering.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, you will act
as the Company's exclusive underwriter (the "Underwriter" or "You") and will
assist the Company in offering 1,000,000 Units (the "Offering") on a "firm
commitment" basis.
(b) The offering shall commence on the date designated by the
Underwriter.
(c) The Underwriter and any dealers with whom the Underwriter may
associate shall deposit all funds received from purchasers of the Units into an
account with the Clearing Broker.
Such funds shall remain in said account until the Offering has been sold and
shall then be disbursed to the Company in accordance with the terms of this
Section 2.
(d) [Reserved]
(e) The Units are to be issued and sold at the gross price per
share indicated in the Prospectus (the "Initial Price") . The Underwriter may
from time to time thereafter change the offering price and other selling terms.
(f) If the Offering is sold, payment for the Units sold in the
Offering is to be made by the Clearing Broker by certified or bank cashier's
check(s) drawn to the order of the Company, or by wire transfer of funds as the
Representative shall elect, against delivery of such Units to the Underwriter.
Such payment and delivery are to be made at the offices of the Clearing Broker,
Jersey City, New Jersey time, on the fifth business day after the sale of the
Offering or the termination of this offering, whichever is sooner, or at such
other time, date and place not later than seven business days thereafter as the
Underwriter and the Company shall agree upon, such time and date being herein
referred to as the "Closing Date." The certificates for the Units shall be in
definitive form with engraved borders and shall be delivered in such
denominations and registered in such names as the Underwriter requests in
writing not later than the third full business day prior to the Closing Date,
and shall be made available for inspection by the Underwriter at least one
business day prior to the Closing Date at the offices of the Underwriter noted
above. (As used herein, "business day" means a day on which the New York Stock
Exchange, Inc. is open for trading and on which banks in New Jersey are open for
business and not permitted by law or executive order to be closed.)
(g) Provided the Offering is sold, the Underwriter shall be
entitled to a commission equal to ten percent (10%) of the gross amount raised
through the sale of the Units and, in addition thereto, a nonaccountable expense
allowance equal to three percent (3%) of the gross amount raised through the
sale of the Units. On the Closing Date, the Representative shall deduct the
commission, and the nonaccountable expense allowance from the proceeds received
from the sale of the Units prior to transmitting payment to the Company and
shall pay such amounts to the Underwriters by certified or bank cashier's
check(s) drawn to the order of the Underwriter, or by wire transfer of funds as
the Clearing Broker shall elect. To the date of this Agreement, the Company has
advanced to the Underwriter the amount of $20,000, which will be credited
against the nonaccountable expense allowance from the release of funds to the
Company at the Closing.
(h) The Underwriter shall have the right to associate with such
other underwriters and dealers as the Underwriter may determine and shall have
the right to grant to such persons such concessions out of the Underwriting
discount to be received by the Underwriter as the Underwriter may determine,
under and pursuant to a Master Selected Dealers Agreement in the form filed as
an exhibit to the Registration Statement.
3. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company (i) shall prepare and timely file with the
Commission under Rule 424(b) under the Act a prospectus containing information
previously omitted at the time of effectiveness of the Registration Statement in
reliance on Rule 430A under the Act and (ii) shall not file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously have been advised and furnished with a copy or to which you shall
have reasonably objected in writing or which is not in compliance with the Act.
The Company shall prepare and file, promptly upon your request, any amendments
of or supplements to the Registration Statement or Prospectus which you
reasonably deem necessary or advisable in connection with the transactions
contemplated by this Agreement.
(b) The Company shall advise you promptly and shall confirm such
advice in writing (i) when the Registration Statement has become effective, (ii)
of any request of the Commission for amendment of the Registration Statement or
for supplementation to the, Prospectus or for any additional information, and
(iii) of the issuance by the Commission or any state securities commission of
any stop order suspending the effectiveness of the Registration Statement or the
use of the Prospectus or of the institution of any proceedings for that purpose,
and the Company shall use its best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to obtain as
soon as possible the lifting thereof.
(c) The Company shall cooperate with you in endeavoring to qualify
the Units for sale under the securities laws of such jurisdictions as you may
have designated in writing and will make such applications, file such documents
and reports, and furnish such information as may be required for that purpose,
whether before, during or after the offering. The Company shall, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as you may request.
(d) The Company shall qualify the Units and the common stock for
trading on the National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") to be effective upon the Closing.
The Company shall make all filings required to obtain and maintain the listing
of the Units on the NASDAQ National Market System. The Company shall use its
best efforts (i) to be included in Standard & Poor's Corporations Manual and
Moody's Investors Services, Inc. Manual as soon as possible following the
Closing Date and (ii) to continue to be included in both such manuals for at
least five (5) years following the Closing Date.
(e) The Company shall deliver to you, or upon your order, from time
to time, as many copies of any Preliminary Prospectus as you may request. The
Company shall deliver to you, or upon your order, during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as you may
request. The Company shall deliver to you, at or before the Closing Date, five
signed copies of the Registration Statement and all amendments thereto including
all exhibits filed therewith, and shall deliver to you such number of copies of
the Registration Statement, without exhibits, but including any information
incorporated by reference, and of all amendments thereto, as you may request.
(f) If during the period in which a Prospectus is required by law
to be delivered by an Underwriter or dealer any event shall occur as a result of
which, in the judgment of the Company or in the opinion of counsel for the
Underwriter, it becomes necessary to amend or supplement the Prospectus in order
to make the statements therein not misleading, or, if it is necessary at any
time to amend or supplement the Prospectus to comply with any law, the Company
promptly shall prepare and file with the Commission an appropriate amendment to
the Registration Statement or supplement to the Prospectus so that the
Registration Statement including the Prospectus as so amended or supplemented
will not be misleading, or so that the Registration Statement, including the
Prospectus, shall comply with law.
(g) The Company shall make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the Effective Date of the Registration Statement an earnings
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 under the Act and will advise you in
writing when such statement has been so made available and shall furnish you
with a true and correct copy thereof.
(h) The Company shall, at its expense, for a period of five years
from the Closing Date, deliver to you copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as soon as they are
available. The Company shall deliver to you similar reports with respect to
significant subsidiaries, as that term is defined in the Act, which are not
consolidated in the Company's financial statements. The Company, at its expense,
shall furnish to its security holders an annual report (including financial
statements audited by independent public accountants) and, as soon as practical
after the end of each of the first three quarters of each fiscal year, a
statement of operations of the Company for such quarter (which may be in summary
form), all in reasonable detail. If and for long as the Company has an active
subsidiary or subsidiaries, the financial statements provided for in this
Section 4(h) will be on a consolidated basis to the extent the accounts of the
Company and its subsidiary or subsidiaries are consolidated in reports furnished
to its stockholders generally. The Company shall also use its best efforts to
cause its officers, directors and beneficial owners of ten percent (10%) or more
of any of its registered securities to deliver a copy of any of the Commission
Forms 3, 4 or 5 filed with the Commission to you and the Company shall deliver
copies of all such Forms received by it to you.
The Company shall maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i)the transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(j) The Company shall comply with all registration, filing and
reporting requirements of the Exchange Act which may from time to time be
applicable to the Company.
(k) The Company shall, at its expense, for a period of five years
from the Closing Date, deliver to you two copies of every press release and
every material news item and article in respect ot the Company and its affairs
at the time it is released by the Company, copies of transfer reports from its
transfer agents, and such additional documents and information with respect to
the Company and its affairs as you may from time to time reasonably request.
(l) After receipt of funds from the Clearing Broker, the Company
shall apply the net proceeds of the sale of the Units sold by it in accordance
with the statements under the caption "USE OF PROCEEDS" in the Prospectus. Prior
to the application of such net proceeds, the Company will invest or reinvest
such proceeds only in Eligible Investments. "Eligible Investments" shall mean
the following investments so long as they have maturities of one year or less:
(i) obligations issued or guaranteed by the United States or by any person
controlled or supervised by or acting as an instrumentality of the United States
pursuant to authority granted by Congress; (ii) obligations issued or guaranteed
by any state or political subdivision thereof rated either Aa or higher, or MIG
1 or higher, by Moody's Investors Service, Inc. or AA or higher, or an
equivalent, by Standard & Poor's Corporation, both of New York, New York, or
their successors; (iii) commercial or finance paper which is rated either
Prime-1 or higher or an equivalent by Moody's Investors Services, Inc. or A-1 or
higher or an equivalent by Standard & Poor's Corporation, both of New York, New
York or their successors; and (iv) certificates of deposit or time deposits of
banks or trust companies, organized under the laws of the United States, having
a minimum equity of $250,000,000. The Company shall file such reports with the
Commission with respect to the sale of the Units and the application of the
proceeds therefrom as may be required by Rule 463 under the Act.
(m)Until the date which is thirty (30) days after the Effective
Date of the Registration Statement, the Company shall not negotiate with any
other underwriter or other person relating to the possible public or private
offering or placement of its securities.
(n)The Company shall not, and has required each of its directors,
executive officers and affiliates to enter into agreements not to, offer, issue,
sell, transfer or otherwise dispose of, for value or otherwise, any shares of
the Company's capital stock for ninety (90) days after the Closing Date without
the prior written consent of the Underwriter, which consent may be withheld for
any reason. In addition, the Company has required each of its officers,
directors, shareholders holding in excess of five (5%) of the outstanding shares
of the Company's capital stock and all Class B Preferred stockholders who are
converting their shares into common stock to be registered in the Offering not
to offer, issue, sell, transfer or otherwise dispose of, for value or otherwise,
any shares of the Company's capital stock for twelve (12) months after the
Closing Date without the prior written consent of the Underwriter, which consent
may be withheld for any reason. The Company has furnished the Underwriter with
an executed copy of each such agreement.
(o)The Company shall make original documents and other
information relating to the affairs of the Company available upon request to the
Underwriter and to its counsel at the Company's office for inspection and copies
of any such documents will be furnished upon request to the Underwriter and to
its counsel. Included within the documents made available have been at least
true and complete copies of the articles of incorporation and all amendments
thereto of the Company (certified by the secretary of the Company) the bylaws
and all amendments thereto of the Company, minutes of all of the meetings of the
incorporators, directors and shareholders of the Company, all financial
statements of the Company and copies of all Contracts to which the Company is a
party or in which the Company has an interest.
(p)The Company has appointed American Registrar and Transfer
Company, as the Company's transfer agent. Unless you otherwise consent in
writing, the Company shall continue to retain a transfer agent reasonably
satisfactory to you for a period of three (3) years following the Closing. The
Company shall make arrangements to have available at the office of the transfer
agent sufficient quantities of the Company's Units and Common Stock certificates
as may be needed for the quick and efficient transfer of the Units as
contemplated hereunder and for the five (5) year period following the Closing.
(q)[Reserved]
(r)Except with your approval, which approval may be withheld for
any reason, the Company agrees that the Company shall not do any of the
following for ninety (90) days after Closing:
(i)Undertake or authorize any change in its capital structure or
authorize, issue or permit any public or private offering of additional
securities, except any currently outstanding options;
(ii) Authorize, create, issue or sell any funded obligations,
notes or other evidences of indebtedness, except in the ordinary
course of business;
(iii) Consolidate or merge with or into any other corporation or
effect a material corporate reorganization of the Company; or
(iv) Create any mortgage or any lien upon any of its properties
or assets, except in the ordinary course of its business.
(s)The Company agrees that neither it nor any of its directors or
officers will take, directly or indirectly, any action designed to or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Units or to facilitate the sale or resale of
the Units.
(t)The Company shall deliver to each Underwriter, at the Closing
warrants (the "Warrants") to purchase in the aggregate that number of Units (the
"Warrant Units") which is equal to ten percent (10%) of the number of Units sold
in the Offering, in the form attached hereto as Exhibit B. The Warrants shall be
issued for $.001 per Unit represented by such Warrants.
(u)At or prior to the Closing, the Company shall purchase key man
life insurance on the lives of Gerald Sugerman and Roger Fidler. The Company
shall maintain such life insurance for a period of at least five (5) years after
the Closing Date. In addition, at or prior to the Closing, the Company shall
enter into an employment with Gerald Sugerman and Roger Fidler, the terms of
which are satisfactory to the Underwriter.
4. Costs and Expenses. The Company shall pay all actual costs,
expenses and fees reasonably itemized in connection with the Offering or
incident to the performance of the obligations of the Company under this
Agreement, including, without limiting the generality of the foregoing, the
following: the fees and disbursements of the accountants for the Company; the
fees and disbursements of counsel for the Company; the Blue Sky fees of counsel
for you; the cost of printing and delivering to, or as requested by the
Underwriter certificates for the Units and copies of the Registration Statement
and exhibits thereto, Preliminary Prospectuses, the Prospectus, this Agreement,
the Selected Dealers Agreement, the Invitation Telecopy, the Blue Sky Memorandum
and any supplements or amendments thereto; the filing and listing fees of the
Commission, NASD, NASDAQ, and any other similar entity in connection with the
offering; Blue Sky and other regulatory filing fees; the fees and disbursements
of the transfer agent; the fees and disbursements of the Escrow Agent; the costs
of advertising in publications to be determined by agreement between the Company
and the Underwriter in an amount not to exceed $5,000, and any other advertising
undertaken at the Company's request, provided, however, that the Company shall
not unreasonably withhold its consent to any advertising proposed by you and
shall pay the costs of any such advertising to which the Company consents or to
which it unreasonably withholds its consent; and the costs of preparing,
printing and distributing three (3) bound volumes for you and your counsel. The
Company shall use a printer acceptable to you. Any transfer taxes imposed on
the, sale of the Units to the Underwriter shall be paid by the Company. Except
as provided in Section 2(g) with respect to the nonaccountable expense allowance
or in this Section 4, the Company shall not be required to pay for any of the
Underwriter's other expenses; provided, however, that if this Agreement shall
not be consummated because the conditions in Section 5 hereof are not satisfied,
because this Agreement is terminated by the Underwriter pursuant to Section 9
hereof, or because of any failure, refusal or inability on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement or
to comply with any of the terms hereof on its part to be performed, unless such
failure to satisfy said condition or to comply with said terms be due solely to
the default of the Underwriter, then in lieu of the foregoing provisions in this
Section 4 (and without prejudice to all other rights and remedies which the
Underwriter may have against the Company at law and in equity, and which are in
accordance with the NASD's Rules of Fair Practice) the Company shall reimburse
the Underwriter upon demand and on an accountable basis for all out-of-pocket
costs and expenses, including all fees and disbursements of counsel, actually
incurred by the Underwriter in connection with investigating, marketing and
proposing to market the Units or in contemplation of performing its obligations
hereunder, but excluding general overhead, salaries, supplies and similar
expenses incurred in the normal conduct of business.
5. Conditions of Obligations of the Underwriter. The Company's
right to receive payment and the obligations of the Underwriter hereunder are
subject to the accuracy, as of the Closing Date of the representations and
warranties of the Company contained in this Agreement, to the performance by the
Company of its covenants and obligations hereunder, and to the following
additional conditions:
(a)The Registration Statement shall have become effective and the
Underwriter shall have received notice thereof not later than 5:00 p.m., New
Jersey time, on the first business day following the date of this Agreement, or
such later date and time as may be consented to in writing by the Underwriter.
No stop order suspending the effectiveness of the Registration Statement, as
amended from time to time, shall have been issued and no proceedings for that
purpose shall have been taken or, to the best knowledge of the Company, after
due inquiry, shall be contemplated by the Commission or any state securities
commission. Any request by the Commission for additional information shall have
been complied with to the reasonable satisfaction of your counsel.
(b)You shall have received on the Closing Date the opinion of
Roger Fidler, Esq., counsel for the Company, dated the Closing Date, addressed
to you to the effect that:
(i)The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and corporate authority to own or lease
its properties and conduct its business as described in the Registration
Statement. The Company is duly qualified to transact business and in good
standing in all jurisdictions, in which the conduct of its business or the
location of the properties owned or leased by it requires such qualification,
except where the failure to qualify would not have a material adverse effect
upon the business properties, financial condition or prospects of the Company.
(ii) The Company has authorized, issued and outstanding capital
stock as set forth under the caption "Capitalization" in the Prospectus. The
outstanding shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with all federal and state securities laws, except where
noncompliance would not materially adversely affect the business or financial
condition or results of operation of the Company. All of the Units and Warrants
to be issued and sold by the Company pursuant to this Agreement and the
securities underlying such Units and Warrants have been duly authorized and,
when issued and paid for as contemplated herein, will be validly issued, fully
paid and nonassessable. To the best of such counsel's knowledge, no preemptive
rights of stockholders exist with respect to any of the Units or the issue and
sale thereof. To the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Units or the Warrants as
contemplated herein gives rise to any rights, other than those which have been
waived or satisfied, for or relating to the registration of any of the Company's
securities. To the best of such counsel's knowledge, no further approval or
authority of the stockholders or the Board of Directors of the Company is
required for the issuance and sale of the Units and Warrants to be sold by the
Company as contemplated herein or for the issuance and sale of the securities
underlying such Units and Warrants.
(iii) The certificates representing the Units to be delivered
hereunder are in due and proper form under Delaware law and the Units and the
Warrants conform in all material respects to the description thereof contained
in the Prospectus. The Warrants and the securities underlying the Warrants have
been duly authorized and reserved for issuance.
(iv) Except as specifically disclosed in the Registration
Statement and the financial statements of the Company, and the related notes
thereto, to the best of such counsel's knowledge, the Company does not have
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell shares of its capital stock or any
such options, rights, convertible securities or obligations. The descriptions of
the Company's stock option and other stock-based plans set forth in the
Prospectus are accurate summaries and fairly present the information required to
be shown with respect to such plans and rights in all material respects.
(v)The Registration Statement and all posteffective amendments
thereto have become effective under the Act and to the best of the knowledge of
such counsel no stop order proceedings with respect to the Registration
Statement have been instituted or are pending or threatened under the Act and
nothing has come to such counsel's attention to lead them to believe that such
proceedings are contemplated. Any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) under the Act has been made in the
manner and within the time period required by such Rule 424(b).
(vi) The Registration Statement, all Preliminary Prospectuses,
the Prospectus and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act (except that such counsel
need express no opinion as to the financial statements, schedules and other
financial and statistical information included therein).
(vii) To the best of such counsel's knowledge, there are no
Contracts or other documents required to be filed as exhibits to the
Registration Statement or described in the Registration Statement or the
Prospectus which are required to be filed or described, which are not so filed
or described as required, and such Contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.
(viii) To the best of such counsel's knowledge, there is no
action, suit or proceeding pending or threatened against the Company before any
court or regulatory, governmental or administrative agency or body or arbitral
forum, domestic or foreign, which questions the validity of the Units or the
Warrants or this Agreement or of any action to be taken by the Company pursuant
thereto, which is of a character required to be disclosed in the Prospectus
pursuant to the Act, or which might result in any material adverse change in the
business or condition (financial or otherwise), properties, results of
operations or prospects for the future of the Company, except as set forth in
the Prospectus. To the best of such counsel's knowledge, the Company is not a
party or subject to the provisions of any injunction, judgment, decree or order
of any court, regulatory body, administrative agency or other governmental body
or agency or arbitral forum except as disclosed in the Prospectus. During the
course of their ordinary due diligence, which does not include knowledge of the
Company's day-to-day operations, nothing has come to the attention of such
counsel that would suggest that the Company is not conducting business in
compliance with all applicable laws, statutes, rules, regulations and orders of
the United States of America on a federal level, and of each jurisdiction in
which it is conducting business, except where the failure to so comply would not
have a material adverse effect on the business, properties, financial condition
or prospects of the Company.
(ix) To the best of such counsel's knowledge, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute,
either by itself or upon notice or the passage of time or both, a default under,
any Contract to which the Company is a party or by which the Company or any of
its property may be bound or affected, which has been certified by the Company
to such counsel as instruments under which the Company enjoys substantial rights
and benefits (and counsel shall state that to the best of such counsel's
knowledge they know of no other such instruments to be in existence), except
where such breach, violation or default would not have a material adverse effect
on the business or financial condition of the Company or any of its
Subsidiaries, or violate any of the provisions of the certificate of
incorporation or bylaws of the Company, or, to the best of such counsel's
knowledge, violate any statute, rule or regulation known to such counsel or
violate any judgment, decree or order, of any court or of any governmental,
regulatory or administrative body or agency or arbitral forum having
jurisdiction over the Company or any of its property (other than as may be
required by state securities or Blue Sky laws as to which such counsel need
express no opinion) or, to the best of such counsel's knowledge, result in the
creation or imposition of any lien, charge or encumbrance upon any of the assets
of the Company.
(x) The Company is not, nor with the giving of notice or the
passage of time or both will be, in violation or default under any provision of
any of its certificate of incorporation or bylaws, and, to the best of such
counsel's knowledge, the Company is not in violation of or default under any
Contracts to which it is a party or by which it or any of its properties is
bound or may be affected that have been certified by the Company to such counsel
as instruments under which the Company enjoys substantial rights and benefits
(and such counsel shall state that to the best of such counsel's knowledge they
know of no other such instruments to be in existence) except where such
violation or default would not have a material adverse effect on the business or
financial condition of the Company.
(xi) The Company has the legal right, corporate power and
authority to enter into this Agreement on behalf of itself and perform the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company. This Agreement is the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to customary exceptions for bankruptcy, insolvency, and equitable
principles, except to the extent that the enforceability of the indemnification
provisions of this Agreement may be limited by consideration of public policy
under federal and state securities laws.
(xii) To the best of such counsel's knowledge, each approval,
consent, order, authorization, designation, registration, permit, qualification,
license, declaration or filing by or with any regulatory, administrative or
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD as to which such counsel
need express no opinion) has been obtained or made and each is in full force and
effect.
(xiii) To the best of such counsel's knowledge, the Company owns
or possesses adequate and sufficient rights to use all patents, patent rights,
trade secrets, licenses or royalty arrangements, trademarks and trademark
rights, service marks, trade names, copyrights, know how or proprietary
techniques, or rights thereto of others, and governmental, regulatory or
administrative authorizations, orders, permits, certificates and consents
necessary for the conduct of the business of the Company, except where the
failure to possess the same would not have a material adverse effect on the
business or financial condition of the Company. Such counsel is not aware of any
pending or threatened action, suit, proceeding or claim by others, either
domestically or internationally, that alleges the Company is violating any
patents, patent rights, copyrights, trademarks or trademark rights, service
marks, trade names, licenses or royalty arrangements, trade secrets, know how or
proprietary techniques, or rights thereto of others, or governmental, regulatory
or administrative authorizations, permits, orders, certificates or consents, the
existence of which would have a material adverse effect on the business or
financial condition of the Company. Such counsel is not aware of any rights of
third parties to, or any infringement of, any of the Company's patents, patent
rights, trademarks or trademark rights, copyrights, licenses or royalty
arrangements, trade secrets, know how or proprietary techniques, including
processes and substances, the existence of which would have a material adverse
effect on the business or financial condition of the Company. Such counsel is
not aware of any pending or threatened action, suit, proceeding or claim by
others challenging the validity or scope of any of such patents, patent rights,
trademarks or trademark rights, copyrights, licenses or royalty arrangements,
trade secrets, know how, or proprietary techniques or rights thereto of others,
the existence of which would have a material adverse effect on the business or
financial condition of the Company. The Company possesses licenses to those
patents that have been previously disclosed to you in writing, and, to the best
of counsel's knowledge, such licenses remain in full force and effect.
(xiv) To the best of such counsel's knowledge, no transfer taxes
are required to be paid under Delaware or New Jersey law in connection with the
sale and delivery of the Units or Warrants to the Underwriter hereunder.
(xv) The Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended.
(xvi) To the best of such counsel's knowledge, the offering and
sale of all securities of the Company made within the last three (3) years as
set forth in Item 15 of the Registration Statement were exempt from the
registration requirements of the Act pursuant to the provisions set forth in
such item. To the best of such counsel's knowledge, neither the offering nor
sale of such securities may be integrated with the offering or sale of any other
securities, including the Units, so as to cause the loss of such exemptions from
the registration requirements of the Act.
In rendering such opinion, Roger Fidler, Esq., may rely as to
matters governed by the laws of states other than Delaware and Federal laws of
the United States of America on local counsel in such jurisdictions, provided
that (a) Roger Fidler, Esq., shall state that it believes that it and the
Underwriter is justified in relying on such other counsel, (b) such other
counsel are acceptable to you, and (c) copies of the opinions of such other
counsel shall be attached to the opinion of Roger Fidler, Esq. As to factual
matters, Roger Fidler, Esq., may rely on certificates obtained from directors
and officers of the Company, its shareholders, and from public officials.
Matters stated to counsel's knowledge or to the best of such counsel's knowledge
shall be made after due and diligent inquiry, and the opinion shall so note that
requirement. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel which leads him to believe that the Registration Statement, or any
amendment thereto, at the time the Registration Statement or amendment became
effective, contained an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or the Prospectus or any amendment or supplement thereto,
at the time it was filed pursuant to Rule 424 (b) or at the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (except
that such counsel need express no view as to that portion of the Registration
Statement under the heading "UNDERWRITING, or as to the financial statements,
schedules and other financial information and statistical data and information
included in the Registration Statement).
(c)You and the Company shall have received at or prior to the
Closing Date from Roger L. Fidler, Esq., a memorandum or summary, in form and
substance satisfactory to you, with respect to the qualification for offering
and sale by the Underwriter of the Units under the state securities or Blue Sky
laws of such jurisdictions as you may have designated to the Company.
(d)You shall have received on the date hereof and on the Closing
Date a signed letter from Thomas P. Monahan, C.P.A dated the date hereof, and
the Closing Date, which shall confirm, on the basis of a review in accordance
with the procedures set forth in the letter signed by such person and dated and
delivered to you on the date noted above, the following matters:
(i)He is an independent public accountant with respect to the
Company as required by the Act.
(ii) The financial statements, the notes thereto and the related
schedules included in the Registration Statement and Prospectus covered by their
reports therein set forth comply as to form in all material respects with the
pertinent accounting requirements of the Act.
(iii) On the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of a reading
of the minutes of meetings and consents of the shareholders and boards of
directors of the Company and the committees of such boards subsequent to
September 30, 1995, as set forth in the minute books of the Company, inquiries
of officers and other employees of the Company who have responsibilities for
financial and accounting matters with respect to transactions and events
subsequent to September 30, 1995, and such other specified procedures and
inquiries to a date not more than five days prior to the date of such letter,
nothing has come to his attention which in his judgment would indicate that (A)
with respect to the period subsequent to September 30, 1995, there were, as of
the date of the most recent available monthly consolidated financial statements
of the Company and, as of a specified date not more than five days prior to the
date of such letter, any changes in the capital stock or long-term indebtedness
of the Company or payment or declaration of any dividend or other distribution,
or decrease in net current assets, total assets, or net stockholders' equity, in
each case as compared with the amounts shown in the most recent audited
consolidated financial statements included in the Registration Statement and the
Prospectus, except for changes or decreases which the Registration Statement and
the Prospectus disclose have occurred or may occur or which are set forth in
such letter or (B) during the period from September 30, 1995, to the date of the
most recent available monthly unaudited consolidated financial statements of the
Company and to a specified date not more than five days prior to the date of
such letter, there was any decrease, as compared with the corresponding period
in the prior fiscal year, in total revenues or total or per share net income,
except for decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur or which are set forth in such letter.
(iv) He has compared the information expressed in amounts, dollar
amounts, numbers of shares, and percentages derived therefrom and other
financial information pertaining to the Company set forth in the Registration
Statement and the Prospectus, which have been specified by you prior to the date
of this Agreement, to the extent that such amounts, dollar amounts, numbers and
percentages and information may be derived from the general accounting and
financial records of the Company or from schedules furnished by the Company, and
excluding any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified reasonings, inquiries and
other appropriate procedures specified by you (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in such letter heretofore delivered, and found them to be
in agreement.
(v)Such other matters as may be reasonably requested by the
Underwriter.
All such letters shall be in form and substance satisfactory to you and your
counsel and shall be addressed to the Underwriter.
(e)You shall have received on the Closing Date a certificate or
certificates of the Chief Executive Officer and the Chief Financial Officer of
the Company to the effect that, as of the Closing Date, each of them jointly and
severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for such purpose have been taken or are, to the
best of their knowledge, after due inquiry, contemplated or threatened by the
Commission or any state securities commissions.
(ii) They do not know of any investigation, litigation, or
proceeding instituted or threatened against the Company of a character required
to be disclosed in the Registration Statement which is not so disclosed. They do
not know of any Contract or other document required to be filed as an exhibit to
the Registration Statement which is not so filed. The representations and
warranties of the Company contained in Section I hereof are true and correct in
all material respects as of the Closing Date as if such representations and
warranties were made as of such date.
(iii) They have carefully examined the Registration Statement and
the Prospectus and, in their opinion, as of the Effective Date of the
Registration Statement, the statements contained in the Registration Statement
were and are correct, in all material respects, and such Registration Statement
and Prospectus do not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading and,
in their opinion, since the Effective Date of the Registration Statement, no
event has occurred which should be set forth in a supplement to or an amendment
of the Prospectus which has not been so set forth in such supplement or
amendment.
(iv) Each of the licenses to the patents described in the
Registration Statement is valid and enforceable, each of such licenses described
in the Registration Statement is in the name of the Company and the Company has
full right, title and interest in and to each of such licenses. To the best
knowledge of such officers, no third party has attacked or questioned the
validity of any such patents, none of such patents are infringed by any third
party, and none of the systems, devices or inventions claimed in any of such
patents and patent applications, if manufactured, sold or used, would infringe
on any patents issued to any third party.
(v)The Company shall have furnished to you such further
certificates and documents confirming the representations, warranties and
covenants contained herein and related matters as you may reasonably have
requested.
The opinions and certificates described in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in all
respects satisfactory to you and to Steven I. Gutstein, your counsel.
If any of the conditions hereinabove provided for in this Section
5 shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriter hereunder may be terminated by
notifying the Company of such termination in writing or by telegram at or prior
to the Closing Date. In such event, the Company and the Underwriter shall not be
under any obligation to each other (except to the extent provided in Sections 4
and 7 hereof).
6. Conditions to the Obligations of the Company. The obligations
of the Company to deliver the Units and Warrants required to be delivered as and
when specified in this Agreement are subject to the conditions that at the
Closing Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and in effect or proceedings therefor initiated
or threatened.
7. Indemnification.
(a)The Company agrees to indemnify and hold harmless the
Underwriter and its respective affiliates, directors, officers, partners,
employees, agents, counsel, and representatives, including the dealers who
execute the Selected Dealers Agreement (collectively, "Underwriter Parties"),
from and against any losses, claims, damages or liabilities to which such
Underwriter Parties or any one or more of them may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any
failure by the Company or any of its affiliates, directors, officers, employees,
agents, counsel, and representatives (collectively, the "Company Parties") to
perform any obligation hereunder or under any other agreement among any of the
Company Parties and any of the Underwriter Parties, (ii) 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 in any Blue Sky application or other document executed by
the Company specifically for that purpose or based upon written information
provided by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Units under the securities laws thereof, or (iii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and will reimburse each
Underwriter Party for any legal or other expenses incurred by such Underwriter
Party in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that (X) 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 reliance upon
and in conformity with written information furnished to the Company by or
through you specifically for use in the preparation thereof (which the parties
hereto agree is limited solely to that information contained in the section of
the Preliminary Prospectus entitled "UNDERWRITING"), and (Y) such indemnity with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter Party from whom the person asserting any such loss, claim, damage or
liability purchased the Units which are the subject thereof if such person did
not receive a copy of the Prospectus (or the Prospectus as amended or
supplemented) at or prior to the confirmation of the sale of such Units to such
person in any case where such delivery is required by the Act and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented). This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b)The Underwriter will indemnify and hold harmless the Company
Parties against any losses, claims, damages or liabilities to which the Company
Parties or any one or more of them may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any failure
by the Underwriter Parties to perform any obligations hereunder or under any
other agreement among any of the Underwriter Parties and any of the Company
Parties, (ii) 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 (iii) 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 the light of the
circumstances under which they were made, and will reimburse any legal or other
expenses reasonably incurred by the Company Parties in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that the Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Underwriter specifically
for use in the preparation thereof (which the parties hereto agree is limited
solely to that information contained on the cover page of the Prospectus or
Preliminary Prospectus and in the section thereof entitled "UNDERWRITING") .
This indemnity agreement will be in addition to any liability which the Company
Parties may otherwise have.
(c)In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 7, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 7 (a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 7(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was prejudiced by the failure to give such notice,
but the failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of the provisions of Section 7 (a)
or (b). In case any such proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood, however, that the indemnifying party shall not, in
connection with any proceeding or substantially similar or related proceedings
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 for all such indemnified parties, except as otherwise provided in
the next succeeding sentence. Such firm shall be designated in writing by you in
the case of parties indemnified pursuant to Section 7(a) and by the Company in
the case of parties indemnified pursuant to Section 7(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment.
(d)If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriter on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under Section 7(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Underwriter on the
other in connection with the statements or omissions which resulted in such
losses, claims damages or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriter on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting fees and commissions received by the Underwriter, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriter on the other and the parties, relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriter agree that it would not be just
and equitable if contributions pursuant to this Section 7(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 7(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this Section 7(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection 7(d), (i) the Underwriter shall not be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Units sold by the Underwriter pursuant to this Agreement, and
(ii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(e)In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 7 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon, him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
8. Notices. All communications hereunder shall be in writing and,
except as otherwise provided herein, will be mailed, delivered, telecopied, or
telegraphed and confirmed as follows: if to the Underwriter, to Kenneth Jerome &
Company, Inc., 247 Columbia Turnpike, Florham Park, New Jersey 07932 (201)
966-6669 Fax:(201) 966-6319 Attention: Mr. Robert Kaplon, with a copy to Steven
I. Gutstein, Esq., 276 Fifth Avenue, New York, New York 10001, (212) 725-7110
Fax (212) 725-7527; if to the Company, to PPA Technologies, Inc., 163 South
Street, Hackensack, New Jersey 07601 Attention: Gerald Sugerman, with a copy to:
The Law Offices of Roger Fidler, 163 South Street, Hackensack, New Jersey 07601,
(201) 457-1221 Fax: (201) 457-1331.
9. Termination. This Agreement may be terminated by you by notice
to the Company as follows:
(a)at any time prior to 11:30 A.M., New Jersey time, on the first
business day following the date of this Agreement;
(b)at any time prior to the Closing itself if any of the
following has occurred: (i) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company, or the
earnings, business affairs, management or business prospects of the Company,
whether or not arising in the ordinary course of business, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change on the financial markets or economic conditions would, in your
reasonable judgment, make the offering or delivery of the Units impracticable,
(iii) suspension of trading in securities on the New York Stock Exchange, Inc.
or the American Stock Exchange or limitation on prices (other than limitations
on hours or numbers of days of trading) for securities on either such Exchange,
(iv) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of any court or other governmental
authority which in your reasonable opinion materially and adversely affects or
will materially or adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by either federal or New Jersey
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
reasonable opinion has a material adverse effect on the securities markets in
the United States or the prospects of the Company; or
(c)as provided in Sections 5 of this Agreement.
10.Successors. This Agreement has been and is made solely for the
benefit of the Underwriter and the Company and their respective successors,
executors, administrators, heirs and assigns, and the Underwriter Parties and
Company Parties referred to herein, and no other person will have any right or
obligation hereunder. The term "successors" shall not include any purchaser of
the Units merely because of such purchase.
11.Miscellaneous. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations and
warranties in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter Party, or by or on behalf of any Company Party and (c)
delivery of and payment for the Units under this Agreement.
This Agreement and any notices delivered hereunder may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Agreement and any and all notices may be delivered by telecopy and shall be
effective upon receipt, with the original of such document to be deposited
promptly in the U.S. Mail.
This Agreement and all disputes and controversies relating hereto
or in connection with the transactions contemplated hereby shall be governed by,
and construed in accordance with, the laws of the State of New Jersey.
If the foregoing agreement is in accordance with your
understanding of our agreement, please sign and return to us the enclosed
duplicates hereof, whereupon it will become a binding agreement between the
Company and you in accordance with its terms.
Very truly yours,
PPA TECHNOLOGIES, INC.
By:
Roger L. Fidler
President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
KENNETH JEROME & COMPANY, INC.
BY:___________________
Robert Kaplon
President
KENNETH JEROME & CO., INC.
147 Columbia Turnpike
Florham Park, New Jersey 07932
SELECTED DEALERS AGREEMENT
Gentlemen:
Kenneth Jerome & Co., Inc. (the "Representative" or the
"Underwriter"), as representative for the underwriters ("Underwriters"),
proposes to offer on a firm commitment basis, 1,000,000 Units (the "Units" or
"Securities") of PPA Technologies, Inc., a New Jersey corporation, (the
"Company"). Such offer will be made pursuant to the terms and conditions of the
Underwriting Agreement between the Company and the Underwriters. The Units to be
offered for sale are more particularly described in the enclosed preliminary
Prospectus ("Prospectus"). We invite your participation, as a Selected Dealer,
on the terms and conditions stated herein.
1. Offering Price. The Units are to be reoffered to the public
at a price of not less than $6.00 per Unit and shall not be directly or
indirectly offered or sold to the public by Selected Dealers at any lower price
during the period this Agreement is in effect. The Company proposes to issue and
sell a 1,000,000 Units.
2. Selected Dealers. Members of the National Association of
Securities Dealers, Inc. (the "NASD") who shall agree to reoffer Units hereunder
(hereinafter referred to as "Selected Dealers" or "Participating Dealers") will
be allowed a selling concession of ______ percent (__%) payable as hereinafter
provided. No concession shall be earned or paid unless a Closing shall take
place prior to the "Termination Date" as defined in the Registration Statement
filed with the United States Securities and Exchange Commission. You agree that
in reoffering said securities, 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 Securities purchased by you remaining unsold and we shall
the right to repurchase such Securities upon demand at the public offering price
without payment of any concession with respect to any Securities so repurchased.
3. Subscriptions. The Underwriter reserves the right
to reject all offers to purchase, in whole or part, to make allotments and to
close the subscription books at any time without notice. The Units allotted to
you will be confirmed, subject to the terms and conditions of this Agreement.
Payments for Units purchased by you are to be made by check or money order only
and shall be made payable to the Representative as Agent or Trustee for the
Issuer. In respect of all Units purchased by you pursuant hereto, you will
promptly transmit (i.e., by no later than noon of the next business day
following receipt by you) to Herzog Heine Geduld, Inc. (the "Clearing Broker"),
having its principal office at 525 Washington Boulevard, Jersey City, New Jersey
0731, your certified check or cashier's check for payment for the full amount of
the Public offering Price for the number of Units purchased, without deduction
for any commission or concession, in compliance with the Securities Exchange Act
of 1934, as amended (the "1934 Act"). Your transmittal letter to the Escrow
Agent accompanying checks or money orders shall include a written account of
sale, which shall include each Purchaser's name and address, the number of Units
Purchased, the amount paid therefor, Social Security number, taxpayer
identification number, and whether the consideration received was in the form of
a check or money order. You shall concurrently send a copy of said transmittal
letter to us.
NO COMMISSIONS SHALL BE PAYABLE, AND ALL SUBSCRIPTIONS ARE SUBJECT TO
REJECTION BY THE UNDERWRITER, UNLESS AND UNTIL THE SELECTED DEALER HAS COMPLIED
WITH THE ABOVE UNDERLINED PROVISIONS.
Each sale shall be contingent upon the sale of 1,000,000 Units being
sold on or before the Termination Date, and upon the acceptance of such sale by
the undersigned. In the event any order submitted to you is not accepted, the
Representative will return all funds paid by the purchasers. Payment of the
selling concessions in respect of each such sale will be made to the Selected
Dealer, by the Underwriter when and only in the event that 1,000,000 Units are
sold by the Termination Date and the proceeds released by the Representative.
The offering is made subject to the issuance and delivery of the Units and the
acceptance hereof by the Underwriter, to the approval of legal matters by
counsel, and to the terms and conditions herein set forth.
If an offer to purchase is rejected or if a payment is received which
proves insufficient or worthless, any compensation paid to the Selected Dealer
shall be returned either by the Selected Dealer's remittances in cash or by a
charge against the account of the Selected Dealer, as the Underwriter may elect.
4. Offering to Public. Neither you nor any other person is, or has
been, authorized to give any information or to make any representations in
connection with the sale of the Units other than as contained in the Prospectus.
The Selected Dealer will not reoffer the Units pursuant to this Agreement unless
the Prospectus is furnished to the purchaser at least 48 hours prior to the
mailing of the confirmation of sale, or is sent to the person under such
circumstances that it would be received by him 48 hours prior to his receipt of
a confirmation of the sale. The Dealer understands that during the 90 day period
after the first date upon which the Units of the Company are bona fide offered
to the public, all Dealers effecting transactions in the Units shall be required
to deliver the Company's current Prospectus to any purchasers thereof prior to
or concurrent with the receipt of the confirmation of sale. Additional copies of
the then current Prospectus will be supplied by the Underwriter in reasonable
quantities upon request. No Selected Dealer is authorized to act as agent for
the undersigned in any respect.
5. Compliance with Securities Laws. Upon becoming a Selected Dealer,
and in purchasing and reoffering the Units, you agree to comply with all
applicable requirements of the Securities Act of 1933, as amended (the 111933
Act") , the 1934 Act, any applicable state securities or "Blue Sky" laws, and
the Rules of Fair Practice of the NASD, including, but not limited to, Article
III, Section I thereof, and the interpretations of said section promulgated by
the Board of Governors of such Association, including an Interpretation with
respect to free-riding and withholding dated November 1, 1970, and as thereafter
amended, and including information concerning the Board of Governor's
Interpretation thereof dated March 2, 1979, to NASD members. You also agree to
comply with Sections 8, 24, 25 and 36 of Article III of the Rules of Fair
Practice of the NASD. upon application, you will be informed as to the states in
which we have been advised by counsel to the Company or counsel to the
Underwriter that the Units have been qualified for sale under the respective
securities or Blue Sky Laws of such states, but we assume no obligation or
responsibility as to the right of any Selected Dealer to sell the Units in any
state or as to any sale therein.
By acceptance of this Agreement, you represent that you are a member in
good standing of the NASD.
By acceptance of this Agreement, each Selected Dealer has assumed full
responsibility for thorough and prior training of its representatives concerning
the selling methods to be used in connection with the offer and sale of the
Units, giving special emphasis to the NASD's principles of full and fair
disclosure to prospective investors, suitability standards and the prohibitions
against "Free-Riding and Withholding." .
Each Selected Dealer agrees to indemnify and hold harmless the
Underwriter, the Company and the other Selected Dealers against and from any
liability, loss, damage, or expense arising out of any failure by the Selected
Dealer to comply with the 1933 Act, the 1934 Act, applicable securities laws of
any state, the rules and regulations of the Securities and Exchange Commission
and the Rules of Fair Practice of the NASD, due to any act of omission by the
Selected Dealer.
By submitting an offer to purchase you confirm 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.
6. Prospectus and Offering. We have been advised by the Company that
the offering under the Registration Statement on Agreement, each Selected Dealer
acknowledges receipt of a copy of Form SB-2 (File No. )with respect to the
subject Units commenced on ___________________, 1997 . By signing this Agreement
each Selected Dealer acknowledges receipt of a copy of the Prospectus included
in said Registration Statement. Additional copies of the Prospectus will be
supplied to you in reasonable quantities upon request.
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 securities in the
open market or otherwise make a market in the Securities or otherwise attempt to
induce others to purchase the Securities in the open market. Nothing contained
in this paragraph shall however preclude you from acting as agent in the
execution of unsolicited orders of customers effectuated for them through a
market maker.
7. Liability, Nothing herein will constitute the Underwriter or the
Selected Dealers as an association, partnership or joint venture with each
other, or as an unincorporated business or other separate entity, but you will
be responsible for your share of any liability or expense based ode any claim to
the contrary. As the Underwriter, we shall have full authority to take such
action as we may deem advisable in all matters pertaining to the offering. The
Underwriter shall not be under any liability (except for its own want of good
faith) for or in respect of: the validity or value of, or title to any of the
Units or securities underlying the Units; the form of, or the statements
contained in, or the validity of the prospectuses or any amendment or supplement
thereto; any document incorporated by reference therein or any other instruments
executed by or on behalf of the Company or others; the form or validity of the
Underwriting Agreement or this Agreement; the delivery of the Units or the
securities underlying the Units; the performance by the Company of the Units or
the securities underlying the Units or others of any agreement on its or their
part; the qualifications of the Units or the securities underlying the Units for
sale or the legality of the Units and such securities for investment under the
laws of any jurisdiction; or any matter in connection with any of the foregoing;
provided, however that nothing in this paragraph shall be deemed to relieve the
Underwriter from any liability imposed by federal securities laws.
8. Communications. All communications from Selected Dealers should be
addressed to Kenneth Jerome & Co., Inc., P.. Box 38, 147 Columbia Turnpike,
Florham Park, New Jersey 07932, Attention: Robert Kaplon, President. Any notice
from the Underwriter to a Selected Dealer shall be deemed to have been duly
given if mailed, telecopied, or telegraphed to such Selected Dealer at the
address first appearing in this Agreement.
9. Amendment. This Agreement may be supplemented or amended by the
Underwriter by written notice thereof to you, and any such supplement or
amendment to this Agreement shall be effective after the date of such supplement
or amendment.
10. Governing Law. This Agreement shall be governed by the laws
of the State of New Jersey.
This Agreement supersedes any prior understanding you have with the
Underwriter with respect to the subject matter hereof. If the foregoing is
acceptable to you, please sign and return the enclosed copy of this Agreement.
Very truly yours,
KENNETH JEROME & CO., INC.
By:__________________________
Robert Kaplon, President
<PAGE>
OFFER TO PURCHASE
The undersigned does hereby offer to purchase (subject to the right to
revoke as set forth in the Agreement) _______________* Units in accordance with
the terms and conditions set forth above. We hereby acknowledge receipt of the
Prospectus referred to herein above relating to such Units. We further state
that in purchasing such Units we have relied upon such Prospectus and upon no
other statement whatsoever, written or oral.
- -------------------------------
(Name of Dealer)
By:_____________________________
Name:
Title:
Address:
Telephone:
Telecopy:
* If a number appears here which does not correspond with what you wish to
purchase, you may change the number by crossing of the number, and inserting a
different number and initializing the change.
CERTIFICATE OF INCORPORATION
OF
PPA TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT, there is hereby organized a
corporation under and by virtue of N.J.S.14A:l-l et seq.,
the "New Jersey Business Corporation Act."
1. The name of the corporation is PPA Technologies, Inc.
2.The address (and zip code) of this corporation's initial registered office is:
400 Grove Street
Glen Rock, New Jersey 07452
and the name of the corporation's initial registered agent at
such address is Roger L. Fidler.
3. The purposes for which this corporation is organized are:
To engage in any activity within the purposes for which corporations may be
organized under the "New Jersey Business Corporation Act." N.J.S. 14A:l-l et
seq.
4. The aggregate number of shares which the corporation shall have the
authority to issue is: 2,500 common shares, no par value.
5. The first Board of Directors of this corporation shall consist of one
Director and the name and address of such person who is to serve as such
Director is:
Name: Roger L. Fidler
Address: 400 Grove Street, Glen Rock, New Jersey 07452
Zip Code: 07452
6. The name and address of each incorporator is:
Name: Wanda L. Billet
Address: 400 Grove Street, Glen Rock, New Jersey
Zip Code: 07452
IN WITNESS WHEREOF, each individual incorporator, each being over the age
of eighteen years, has signed this Certificate; or if the incorporator be a
corporation, has caused this Certificate to be signed by its authorized
officers, this eighteenth day of July 1994.
/S/ Wand L. Billet
Wanda L. Billet
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
PPA Technologies, Inc.
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-2(4) and Section
14A:9-4(3), Corporations, General, of the New Jersey Statutes, the undersigned
corporation executes the following Certificate of Amendment to its Certificate
of Incorporation:
1. The name of the corporation is
PPA Technologies, Inc.
2. The following amendment to the Certificate of Incorporation was
approved by the directors and thereafter duly adopted by the shareholders of the
corporation on May 24, 1996.
RESOLVED, that paragraph FOURTH of the Certificate of Incorporation be
amended to read as follows:
"4. The aggregate number of shares which the corporation shall
have the authority to issue is 10,000,000 shares of common stock having no par
value and 1,000,000 shares of Preferred Stock having a par value of $100 per
share. The Preferred Stock may be issued in such classes and with such
preferences as the Board of Directors may, from time to time, decide in their
sole discretion."
3. Adoption was by a vote of the shareholders of the corporation taken
at a properly noticed meeting on May 24, 1996 at which a unanimous vote in favor
of the Amendment to the Articles of Incorporation was made in accordance with
the New Jersey Statutes.
Dated this 4th day of June, 1996.
BY: /S/ Roger L. Fidler
Roger L. Fidler, President
Attested: /S/ Gerald Sugerman
Gerald Sugerman
Corporate Secretary
BY-LAWS
OF
PPA TECHNOLOGIES, INC.
ARTICLE I - OFFICES
1. The registered office of the corporation shall be as designated in the
Certificate of Incorporation of PPA Technologies, Inc. (hereinafter referred to
as "PPA" or the "corporation"), unless changed by resolution of the
corporation's Board of Directors.
2. The corporation may also have offices at such other places as-the Board
of Directors may from time to time appoint or the business of the corporation
may require.
ARTICLE II - SEAL
1. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal, New
Jersey".
ARTICLE III - SHAREHOLDERS' MEETING
1. Meetings of the shareholders shall be held at the office of the
corporation at 400 Grove Street, Glen Rock, New Jersey, or at such other place
or places, either within or without the State of New Jersey, as may from time to
time be selected.
2. The annual meeting of the shareholders, shall be held on the second
Saturday of February in each year, if not a legal holiday, and if a legal
holiday, then on the next secular day following at 10:00 o'clock a.m. when they
shall elect a Board of Directors, and transact such other business as may
properly be brought before the meeting. If the annual meeting shall not be
called and held during any calendar year, any shareholder may call such meeting
at any time thereafter.
3. The presence, in person or by proxy, of shareholders entitled to cast at
least a majority of the votes which all shareholders are entitled to cast on the
particular matter shall constitute a quorum for the purpose of considering such
matter, and, unless otherwise provided by statute, the acts, at a duly organized
meeting, of the shareholders present, in person or by proxy, entitled to cast at
least a majority of the votes which all shareholders present are entitled to
cast shall be the acts of the shareholders. The shareholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum. Adjournment,
or adjournments, of any annual or special meeting may be taken but any meeting
at which directors are to be elected shall be adjourned only from day to day, or
for such longer periods not exceeding fifteen days each, as may be directed by
shareholders who are present in person or by proxy and who are entitled to cast
at least a majority of the votes which all such shareholders would be entitled
to cast at an election of directors until such directors have been elected. If a
meeting cannot be organized because a quorum has not attended, those present
may, except as otherwise provided by statute, adjourn the meeting to such time
and place as they may determine, but in the case of any meeting called for the
election of directors, those who attend the second of such adjourned meetings,
although less than a quorum, shall nevertheless constitute a quorum for the
purpose of electing directors.
4. Every shareholder entitled to vote at a meeting of shareholders, or
to express consent or dissent to corporate action in writing without a meeting,
may authorize another person or persons to act for him by proxy. Every proxy
shall be executed in writing by the shareholders, or by his duly authorized
attorney in fact, and filed with the Secretary of the corporation. A proxy,
unless coupled with an interest, shall be revocable at will, notwithstanding any
other agreement or any other provision in the proxy to the contrary, but the
revocation of a proxy shall not be effective until notice thereof has been given
to the Secretary of the corporation. No unrevoked proxy shall be valid after
eleven months from the date of its execution, unless a longer time is expressly
provided therein, but in no event shall a proxy, unless coupled with an interest
be voted on after three years from the date of its execution. A proxy shall not
be revoked by the death or incapacity of the maker unless before the vote is
counted or the authority is exercised, written notice of such death or
incapacity is given to the Secretary of the corporation. A shareholder shall not
sell his vote or execute a proxy to any person for any sum of money or anything
of value. A proxy coupled with an interest shall include an unrevoked proxy in
favor of a creditor of a shareholder and such proxy shall be valid so long as
the debt owed by him to the creditor remains unpaid. Elections for directors
need not be by ballot, except upon demand made by a shareholder at the election
and before the voting begins. Cumulative voting shall not be allowed. No share
shall be voted at any meeting upon which any installment is due and unpaid.
5. Written notice of the annual meeting shall be given to each shareholder
entitled to vote thereat, at least ten (10) days prior to the meeting.
6. In advance of any meeting of shareholders, the Board of Directors may
appoint judges of election, who need not be shareholders, to act at such meeting
or any adjournment thereof. If judges of election be not so appointed, the
chairman of any such meeting may, and on the request of any shareholder or his
proxy shall, make such appointment at the meeting. The number of judges shall be
one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares present and entitled to vote
shall determine whether one or three judges are to be appointed. On request of
the chairman of the meeting, or of any shareholder or his proxy, the judges
shall make a report in writing of any challenge or question or matter determined
by them, and execute a certificate of any fact found by them. No person who is a
candidate for office shall act as a judge.
7. Special meetings of the shareholders may be called at any time by the
President, or the Board of Directors, or shareholders entitled to cast at least
one-tenth of the votes which all shareholders are entitled to cast at the
particular meeting. At any time, upon written request of any person or persons
who have duly called a special meeting, it shall be the duty of the Secretary to
fix the date of the meeting, to be held not more than sixty days after the
receipt of the request, and to give due notice thereof. If the Secretary shall
neglect or refuse to fix the date of the meeting and give notice thereof, the
person or persons calling the meeting may do so.
8. Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all shareholders
entitled to vote are present and consent.
9. Written notice of a special meeting of shareholders stating the time and
place and object thereof, shall be given to each shareholder entitled to vote
thereat at least ten (10) days before such meeting, unless a greater period of
notice is required by statute in a particular case.
10. The officer or agent having charge of the transfer books shall make at
least ten days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
with the address of and the number of shares held by each, which list shall be
subject to inspection by any shareholder, at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting, and shall be subject to the inspection of any shareholder during
the whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in this state, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share ledger or transfer
book, or to vote in person or by proxy, at any meeting of shareholders.
ARTICLE IV - DIRECTORS
1. The business of this corporation shall be managed by its Board of
Directors, which shall initially be composed of a sole member, but which may be
increased up to eleven members. The directors need not be residents of this
state or shareholders in the corporation. They shall be elected by the
shareholders, at the annual meeting of shareholders of the corporation, and each
director shall be elected for the term of one year and until his successor shall
be elected and shall qualify. Whenever there are three or more shareholders,
there must be at least three directors. The number of directors may be increased
or decreased within the limits set forth hereinabove by majority vote of the
Board of Directors. In the event that a vacancy occurs on the Board of
Directors, the remaining directors may fill that vacancy by appointing by
majority vote a replacement director who shall serve until his successor is
elected and qualified.
2. In addition to the powers and authorities by these ByLaws expressly
conferred upon them, the Board may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the Articles
or by these ByLaws directed or required to be exercised or done by the
shareholders.
3. The meetings of the Board of Directors may be held at
such place within this state, or elsewhere, as a majority of the directors may
from time to time appoint, or as may be designated in the notice calling the
meeting.
4. Each newly elected Board may meet at either such place and time as shall
be fixed by the shareholders at the meeting at which such directors are elected
and no notice shall be necessary to the newly elected directors in order legally
to constitute the meeting, or they may meet at such place, and time as may be
fixed by the consent of a majority of the Board of directors.
5. Regular meetings of the Board shall be held without notice on the second
Saturday in February of each year at 10:30 a.m. at the registered office of the
corporation, or at such other time and place as shall be determined by the
Board.
6. Special meetings of the Board may be called by the President on five
days notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of a majority of the directors in
office.
7. A majority of the directors in office shall be necessary to constitute a
quorum for the transaction of business, and the Acts of a majority of the
directors present at a meeting at which a quorum is present shall be the acts of
the Board of Directors. Any action which may be taken at a meeting of the
directors may be taken without a meeting if a consent or consents in writing,
setting forth the action so taken, shall be signed by all of the directors and
shall be filed with the Secretary of the corporation..
8. Directors as such, shall receive such compensation for their services
as, by resolution of the Board, shall be set from time to time, PROVIDED, that
nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE V - OFFICERS
1. The executive officers of the corporation shall be chosen by the
directors and shall be a President, Secretary and Treasurer. The Board of
Directors may also choose a Vice President and such other officers and agents as
it shall deem necessary, who shall hold their offices for such terms and shall
have such authority and shall perform such duties as from time to time shall be
prescribed by the Board. Any number of offices may be held by the same person.
It shall not be necessary for the officers to be directors.
2. The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors. 3. The officers of the corporation shall
hold office for one year and until their successors are chosen and
have qualified. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board oi Directors whenever in its judgment the
best interests of the corporation will be served thereby.
4. The President shall be the chief executive officer of the corporation;
he shall preside at all meetings of the shareholders and directors; he shall
have general and active management of the business of the corporation, shall see
that all orders and resolutions of the Board are carried into effect, subject,
however, to the right of the directors to delegate any specific powers, except
such as may be by statute exclusively conferred on the President, to any other
officer or officers of the corporation. He shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the corporation. He shall be
EX-OFFICIO a member of all committees, and shall have the general powers and
duties of supervision and management usually vested in the office of President
of a corporation.
5. The Secretary shall attend all sessions of the Board and all meetings of
the shareholders and act as clerk thereof, and record all the votes of the
corporation and the minutes of all its transactions in a book to be kept for
that purpose; and shall perform like duties for all committees of the Board of
Directors when required. He shall give, or cause to be given, notice of all
meetings of the shareholders and of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or President,
and under whose supervision he shall be. He shall keep in safe custody the
corporate seal of the corporation, and when authorized by the Board, affix the
same to any instrument requiring it.
6. The Treasurer shall have custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation, and shall keep the moneys of the corporation in a
separate account to the credit of the corporation. He shall disburse the funds
of the corporation as may be ordered by the Board, taking proper vouchers for
such disbursements, and shall render to the President and directors, at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
ARTICLE VI VACANCIES
1. If the office of any officer or agent, one or more, becomes vacant for
any reason, the Board of Directors may choose a successor or successors, who
shall hold office for the unexpired term in respect of which such vacancy
occurred.
2. Vacancies in the Board of Directors, including vacancies resulting from
an increase in the number of directors, shall be filled by a majority of the
remaining members of the Board though less than a quorum, and each person so
elected shall be a director until his successor is elected by the shareholders,
who may make such election at the next annual meeting of the shareholders or at
any special meeting duly called for that purpose and held prior thereto.
ARTICLE VII INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. Every person who is or was a director, officer, employee or agent of
the Corporation, or of any corporation which he has served as such at the
request of the Corporation, shall be indemnified by the Corporation to the
fullest extent permitted by law against all expenses and liabilities reasonably
incurred by or imposed upon him, in connection with any proceeding to which he
may be made, or threatened to be made, a party, or in which he may become
involved by reason of his being or having been a director, officer, employee or
agent of the Corporation, or such other corporation, at the time the expense or
liabilities are incurred.
ARTICLE VIII CORPORATE RECORDS
1. There shall be kept at the registered office or prin-
cipal place of business of the corporation an, original or dupli-
cate record of the proceedings of the shareholders and of the directors, and the
original or a copy of its By-Laws, including all amendments or alterations
thereto to date, certified by the Secretary of the corporation. An original or
duplicate share register shall also be kept at the registered office or
principal place of business or at the office of a transfer agent or registrar,
giving the names of the shareholders, their respective addresses and the
number and classes of shares held by each.
2. Every shareholder shall, upon written demand under oath stating the
purpose thereof, have a right to examine, in person or by agent or attorney,
during the usual hours for business for any proper purpose, the share register,
books or records of account, and records of the proceedings of the shareholders
and directors, and make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a shareholder. In
every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the shareholder. The demand under oath shall be directed
to the corporation at or at its principal place of business.
ARTICLE IX - SHARE CERTIFICATES, DIVIDENDS, ETC.
1. The share certificates of the corporation shall be numbered and
registered in the share ledger and transfer books of the corporation as they
are issued. They shall bear the corporate seal and shall be signed by
the President and Secretary.
2. Transfers of shares shall be made on the books of the corporation upon
surrender of the certificates therefor, endorsed by the person named in the
certificate or by attorney, lawfully constituted in writing. No transfer shall
be made which is inconsistent with law.
3. The Board of Directors may fix a time, not more than fifty days, prior
to the date of any meeting of shareholders, or the date fixed for the payment of
any dividend or distribution, or the date for the allotment of rights, or the
date when any change or conversion or exchange of shares will be made or go into
effect, as a record date for the determination of the shareholders entitled to
notice of, or to vote at, any such meeting, or entitled to receive payment of
any such dividend or distribution, or to receive any such allotment of rights,
or to exercise the rights in respect to any such change, conversion, or exchange
of shares. In such case, only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to notice of, or to vote at, such
meeting or to receive payment of such dividend, or to receive such allotment of
rights, or, to exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after any record date
fixed as aforesaid. The Board of Directors may close the books of the
corporation against transfers of shares during the whole or any part of such
period, and in such case, written or printed notice thereof shall be mailed at
least ten days before the closing thereof to each shareholder of record at the
address appearing on the records of the corporation or supplied by him to the
corporation for the purpose of notice. While the stock transfer books of the
corporation are closed, no transfer of shares shall be made thereon. If no
record date is fixed for the determination of shareholders entitled to receive
notice of, or vote at, a shareholders' meeting, transferees of shares which are
transferred on the books of the corporation within ten days next preceding the
date of such meeting shall not be entitled to notice of or to vote at such
meeting.
4. In the event that a share certificate shall be lost, destroyed or
mutilated, a new certificate may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may prescribe.
5. The Board of Directors may declare and pay dividends upon the
outstanding shares of the corporation, from time to time and to such extent as
they deem advisable, in the manner and upon the terms and conditions provided by
statute and the Articles of Incorporation.
6. Before payment of any dividend there may be set aside out of the net
profits of the corporation such sum or sums as the directors, from time to time,
in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interests of the corporation, and the directors may
abolish any such reserve in the manner in which it was created.
ARTICLE X MISCELLANEOUS PROVISIONS
1. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers as the Board of Directors may from time to
time designate.
2. The fiscal year shall begin in the first day of June
each year.
3. Whenever written notice is required to be given to any person, it may
be given to such person, either personally or by sending a copy thereof through
the mail, or by telegram, charges prepaid, to his address appearing on the books
of the corporation, or supplied by him to the corporation for the purpose of
notice. If the notice is sent by mail or by telegraph, it shall be deemed to
have been given to the person entitled thereto when deposited in the United
States mail or with a telegraph office for transmission to such person. Such
notice shall specify the place, day and hour of the meeting and, in the case of
a special meeting of shareholders, the general nature of the business, to be
transacted.
4. Whenever any written notice is required by statute, or by the Articles
or By-Laws of this corporation, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice. Except
in the case of a special meeting of shareholders, neither the business to be
transacted at nor the purpose of the meeting need be specified in the waiver of
notice of such meeting. Attendance of a person, either in person or by proxy, at
any meeting shall constitute a waiver of notice of such meeting, except where a
person attends a meeting for the express purpose of objecting to the transaction
of any business because the meeting was not lawfully called or convened.
5. One or more directors or shareholders may participate in a meeting of
the Board, of a committee of the Board or of the shareholders, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
6. Except as otherwise provided in the Articles or ByLaws of this
corporation, any action which may be taken at a meeting of the shareholders or
of a class of shareholders may be taken without a meeting, if a consent or
consents in writing, setting forth the action so taken, shall be signed by all
of the shareholders who would be entitled to vote at a meeting for such purpose
and shall be filed with the Secretary of the corporation.
7. Any payments made to an officer or employee of the corporation such as a
salary, commission, bonus, interest, rent, or travel expense incurred by him,
which shall be disallowed in whole or in part as a deductible expense by the
Internal Revenue Service, shall be reimbursed by such officer or employee to the
corporation to the full extent of such disallowance. It shall be the duty of the
directors, as a Board, to enforce payment of each such amount disallowed. In
lieu of payment by the officer or employee, subject to the determination of the
directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the corporation has been recovered.
ARTICLE XI ANNUAL STATEMENT
1. The President and Board of Directors shall present at
each annual meriting a full and complete statement of the business and affairs
of the corporation for the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Detectors shall deem advisable and
need not be verified by a certified public accountant.
ARTICLE XII AMENDMENTS
1. These By-Laws may be amended or repealed by the vote of the directors
entitled to cast at least a majority of the votes which all directors are
entitled to cast thereon, at any regular or special meeting of the directors,
duly convened after notice to the directors of that purpose.
The By-Laws set forth hereinabove were adopted by the Board of
Directors of PPA Technologies, Inc. at its organizational meeting on August 4,
1994. I hereby certify that this is a true and exact copy of said By-Laws.
/S/ Gerald Sugerman
Gerald Sugerman
Corporate Secretary
No. __ ________ Shares
PPA TECHNOLOGIES, INC.
Incorporated Under the Laws of the State of New Jersey
10,000,000 SHARES COMMON STOCK
No Par Value Per Share
THIS CERTIFIES THAT __________ is the owner of
______________________________________(_______) shares of the COMMON STOCK of
PPA TECHNOLOGIES, INC., fully paid and non-assessable, transferable only on the
books of the corporation in person or by Attorney upon surrender of this
Certificate properly endorsed.
The Corporation will furnish to any shareholder, upon request and without
charge, a full statement of the designations, relative rights, preferences and
limitations of the shares of each class authorized to be issued.
IN WITNESS WHEREOF, the said corporation has caused this Certificate to be
signed by its duly authorized officers and its corporate seal to be hereto
affixed this ____ day of ______, 19___.
- ------------------------ -------------------------
Secretary President
<PAGE>
FOR VALUE RECEIVED, ________ hereby sell, assign and transfer unto
__________________________________________________(social security
or other identifying number of assignee___________________________)
_________________ Shares represented by the within Certificate, and
do hereby irrevocably appoint _____________________________________
Attorney to transfer the said Shares on the books of the within
named Corporation with full powers of substitution in the premises.
Dated: _______________, 19__
In presence of
- -------------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT MADE UNDER THE
SECURITIES ACT OF 1933 /THE "ACT") OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT.
PPA TECHNOLOGIES, INC.
UNDERWRITER'S WARRANT
PPA Technologies, Inc., a New Jersey corporation (the "Company"),
hereby certifies that, for an aggregate consideration of $ , (" ") is entitled,
subject to the terms set forth below, at any time or from time to time but not
earlier than twelve (12) months nor later than five (5) years from , 1998 (the
"Issue Date"), to purchase from the Company
, ( ) Units, each such Unit consisting of one share of Common Stock
(no par value) of the Company and one redeemable common stock purchase warrant,
exercisable into one share of Common Stock per warrant for a period of one year
from the date of the purchase from the Company of the Unit at the purchase price
per Unit of Seven Dollars ($7.20) (equal to 120% of the public offering price
per Unit) (the purchase price per unit, as adjusted from time to time pursuant
to the provisions hereunder set forth, being referred to herein as the "Exercise
Price") , all as described in the prospectus contained in the Company's
Registration Statement on Form SB-2 (File No. ) , as amended, which Registration
Statement was originally filed with the Securities and Exchange Commission on
, 1997 (the "Registration Statement"). The Issue Date shall be
the same date as the closing date of the public offering. Except as set forth
herein, the Units issuable upon exercise of this Underwriter's Warrant have the
same respective terms as the Units offered by the Registration Statement. This
Underwriter's Warrant and all rights hereunder, to the extent such rights shall
not have been exercised, shall terminate and become null and void to the extent
the holder fails to exercise any portion of this Underwriter's Warrant prior to
5:00 p.m., New Jersey time, on , 2003, or if the Transfer Agent (as defined in
Section 4 below) shall not regularly be open for business on that day, then on
the next such business day.
1. Registration.
a. The Company agrees for a period of four years commencing one year
after the Issue Date, that if during such four-year period, no current
registration statement by the Company is on file with the U.S. Securities and
Exchange Commission covering the securities underlying this Underwriter's
Warrant, upon receipt of a demand for registration in the form of a written
request from the holder of this Underwriter's Warrant or a majority of the
securities issued or issuable hereunder, it will prepare and file under the Act
one registration statement or Notification on Form 1-A, if then required, to
permit a public offering of this Underwriter's Warrant and the securities then
underlying this Underwriter's Warrant, and will use its best efforts to cause
such registration statement or notification to become effective at the earliest
possible date and to remain effective for a period not to exceed 90 days. The
Company will bear the cost of such registration statement, including but not
limited to counsel fees of the Company and disbursements, accountants' fees and
printing costs, if any, but excluding the fees of counsel and others hired by
the holder. The foregoing demand registration right by the Underwriter at the
expense of the Company shall be on a one-time request basis only.
b. Additionally, whenever during the four-year period commencing one year
after the Issue Date the Company or any successor proposes to file a
Notification on Form 1-A under the Act or a registration statement relating to a
public offering of its equity securities under the Act (whether for its own
benefit or for the holders of any of its equity securities or otherwise), but
not including a registration on Form S-8, it shall offer, upon 30 days' written
notice to the holder of this Underwriter's Warrant or the holders of the
underlying securities (the "Holders"), to include and shall include, at the
Holders' option(s), all or any portion of this Underwriter's Warrant and the
securities underlying this Underwriter's Warrant in such registration statement
at the expense of the Company, limited in the case of a Regulation A Offering to
the amount of the available exemption.
c. In connection with any registration statement or Notification on Form 1-A
pursuant to subsection a or b of this Section 1, the Company agrees that it will
furnish to you the representations and warranties and opinions of counsel to the
same effect as provided in Sections 1 and 5(b) of the Underwriting Agreement
entered into by the parties hereto on , 1997 (the "Underwriting Agreement"), to
the extent then applicable, except that such representations, warranties, and
opinions shall relate to the registration statement or Notification on Form 1-A
and to the securities which shall be offered thereby. The Company and you
further agree that as to such registration statement or Notification on Form
1-A, the provisions of Section 3 (but not including subsections (l), (m) or (n))
of the Underwriting Agreement, shall apply. The Company and you further agree
that the provisions of section 8 of the Underwriting Agreement shall apply, with
the holder having the rights and obligations afforded the Underwriter in that
section, and that such section shall apply with respect to that offering.
2. Exercise of Warrant.
a. This Underwriter's Warrant may be exercised in full or from time to time in
part by the Holder by surrendering it, with the form of subscription at the end
hereof duly executed by such holder, to the Company's transfer agent accompanied
by payment in full, in cash or by certified or official bank check, of the
Exercise Price payable in respect of all or part of this Underwriter's Warrant
being exercised.
b. Upon such surrender of this Underwriter's Warrant and payment of such
Exercise Price, the Company shall issue and cause to be delivered to or upon the
written order of the holder of this Underwriter's Warrant and in such name or
names as the Holder may designate a certificate or certificates for the number
of full Units so purchased, together with cash, as provided in Section 3 hereof,
in respect of any fractional Units otherwise issuable upon such surrender. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a Holder of
record of such Units as of the date of surrender of this Underwriter's Warrant
and payment of such Exercise Price notwithstanding that the certificate or
certificates representing such Units shall not actually have been delivered or
that the stock transfer books of the Company shall then be closed.
c. If less than the entire Underwriter's Warrant is exercised, the company
shall, upon such exercise, execute and deliver to the holder thereof a new
warrant in the same form as this Underwriter's Warrant evidencing that
Underwriter's Warrant to the extent not exercised.
d. The Company shall, at the time of any exercise of all or part of this
Underwriter's Warrant, upon the request of the Holder hereof, acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such Holders shall continue to be entitled after such exercise in accordance
with the provisions of this Underwriter's Warrant, provided that if the holder
of this Underwriter's Warrant shall fail to make any such request, such failure
shall not affect the continuing obligations of the Company to afford to such
Holder any such rights.
3. Fractional units. No fractional securities or scrip representing fractional
securities shall be issued upon the exercise of this Underwriter's Warrant. With
respect to any fraction of a Unit called upon any such 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 securities, determined
as follows:
a. If the security is listed on a national securities exchange or admitted to
unlisted trading privileges on such exchange, the current value shall be the
last reported sale price of the security on such exchange on the last business
day prior to the date of exercise of this Underwriter's Warrant, or if no such
sale is made on such day, the average closing bid and asked prices for such day
on such exchange; or
b. If the security is not listed or admitted to unlisted trading privileges,
the current value shall be the last reported sale price or the mean of the last
reported bid and asked prices reported by the National Association of Securities
Dealers Automated Quotation System (or, if not so quoted on NASDAQ, by the
National Quotation Bureau, Inc.) on the last business day prior to the date of
the exercise of this Underwriter's Warrant; or
c. If the security is not so listed or admitted to unlisted trading privileges
and prices are not reported on NASDAQ, the current value shall be an amount, not
less than the book value, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
4. Exchange, Assignment, or Loss of Warrant.
a. This Underwriter's Warrant is exchangeable, without expense, at the option
of the Holder, upon presentation and surrender hereof to the transfer agent for
other Underwriter's Warrants of different denominations entitling the Holder
thereof to purchase in the aggregate the same number of securities purchased
hereunder. This Underwriter's Warrant is restricted from sale, transfer,
assignment, or hypothecation except to the officers, principals and successors
of Kenneth Jerome & Co., Inc., and may be exercised in whole or in part at any
time and from time to time during the four (4) year period following the
expiration of one (1) year from the Issue Date. Any such assignment shall be
made by surrender of this Underwriter's Warrant to American Stock Transfer and
Registrar Co., Inc. or any successor transfer agent designated by the Company in
writing (the "Transfer Agent") with the Form of Assignment annexed hereto duly
executed and funds sufficient to pay any transfer tax, whereupon the Transfer
Agent shall, without charge, cause to be executed and delivered a new
Underwriter's Warrant in the name of the assignee named in such instrument or
assignment and this Underwriter's Warrant shall promptly be canceled. This
Underwriter's Warrant may be divided or combined with other Underwriter's
Warrants that carry the same rights upon presentation hereof to the office of
the Transfer Agent together with a written notice specifying the name and
denomination in which new Underwriter's Warrants are to be issued and signed by
the holder hereof. The term "Underwriter's Warrant" as used in this Warrant
includes any Underwriter's Warrants issued in substitution for or replacement of
this Underwriter's Warrant, or into which this Underwriter's Warrant may be
divided or exchanged.
b. Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Underwriter's Warrant, and, in the case
of loss, theft or destruction of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Underwriter's Warrant, if mutilated, the
Transfer Agent will cause to be executed and delivered a new Underwriter's
Warrant of like tenor and date. Any such new Underwriter's Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Underwriter's Warrant so lost, stolen,
destroyed, or mutilate
5. Rights of the Holder. The Holder of this Underwriter's Warrant shall not, by
virtue hereof, be entitled to any rights of a stockholder in the Company, either
at law or equity, and the rights of the holder are limited to those expressed in
this Underwriter's Warrant.
6. Adjustments.
a. In case the Company shall, while this Underwriter's Warrant remains in
force, effect a recapitalization of such character that the securities covered
hereby shall be changed into or become exchangeable for a larger or smaller
number of such securities, then thereafter, the number of securities of the
Company which the holder of this Underwriter's Warrant shall be entitled to
purchase hereunder, shall be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of shares of the
Company, by reason of such recapitalization, and the purchase price hereunder,
per Unit, shall in the case of an increase in the number of shares be
proportionately reduced, and in the case of a decrease in the number of share be
proportionately increased.
b. In case the Company shall, at any time prior to the
exercise of an Underwriter's Warrant, consolidate or merge with, or shall
transfer its property as an entirety to, or substantially as an entirety to, any
other corporation, the Holder of an Underwriter's Warrant who thereafter
exercises the same as herein provided shall be entitled to receive, for the
purchase price per Unit stated in this Underwriter's Warrant, that number of
shares or other securities or property of the corporation resulting from such
consolidation or merger or transfer to which each Unit deliverable upon exercise
of this Underwriter's Warrant would have been entitled, upon such consolidation
or merger or transfer, had the holder of such Underwriter's Warrant exercised
his right to purchase Units, and had such holder exercised the redeemable common
stock purchase warrant comprising a part of the Unit, and had said shares or
other securities been issued and outstanding, and had such holder been the
holder of record of such shares or other securities at the time of such
consolidation or merger or transfer.
c. In case the Company shall at any time prior to the exercise of an
Underwriter's Warrant make any distribution of its assets to holders of its
Common Stock by liquidating or partial liquidating dividend or by way of return
of capital, or other than as a dividend payable out of earnings or any surplus
legally available for dividends under the laws of the State of New Jersey, then
the Holder of an Underwriter's Warrant who thereafter exercises the same as
herein provided and the redeemable common stock purchase warrant comprising a
part of the Unit as therein provided after the date of record for the
determination of those Holders of Common Stock entitled to such distribution of
assets, shall be entitled to receive for the purchase price, in addition to each
Share, the amount of such assets (or at the option of the Company a sum equal to
the value thereof at the time of such distribution to holders of Common Stock as
such value is determined by the Board of Directors of the Company in good faith)
which would have been payable to such Holder had he been the holder of record of
such share receivable upon exercise of such Underwriter's Warrant and redeemable
common stock purchase warrant on the record date for the determination of those
entitled to such distribution.
d. In case of the dissolution, liquidation or winding-up of the Company, all
rights under this Underwriter's Warrant and the redeemable common stock purchase
warrants shall terminate on a date fixed by the Company, such date so fixed to
be not earlier than the date of the commencement of the proceedings for such
dissolution, liquidation or winding-up and not later than thirty days after such
commencement date. In any such case of termination of purchase rights the
Company shall give notice of such termination date to the registered holder of
this Underwriter's Warrant.
e. Upon any adjustment of the purchase price and/or any increase or decrease
in the number of securities purchasable upon the exercise of this Underwriters
Warrant or the redeemable common stock purchase warrant comprising a part of the
Unit, then, and in each case, the company, within 30 days thereafter, shall give
written notice thereof to the registered holder of this Underwriter's Warrant,
which notice shall state the adjusted purchase price and/or the increased or
decreased number of securities purchasable upon the exercise of this
Underwriter's Warrant or the redeemable common stock purchase warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
7. Notices of Record Dates, Etc. Upon the occurrence of any of the events listed
in subsections a to c below, the Company shall mail or cause to be mailed (on
the same date as the company informs its stockholders of such event) to the
Holder of this Underwriter's Warrant a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution or right and stating the amount and character of such dividend,
distribution or right, or (ii) the date on which a record is to be taken for the
purpose of voting on or approving such reorganization, recapitalization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up and the date on which such event is to take place and the time, if
any is to be fixed, as of which the holder of record of Common Stock (or any
other securities at the time deliverable on exercise of this Underwriter's
Warrant) shall be entitled to exchange its shares of Common Stock (or such other
securities) for securities or other property deliverable on such reorganization,
recapitalization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
a. The Company shall fix a record date of the holders of Common Stock (or
other securities at the time deliverable on exercise of this Underwriter's
Warrant) for the purpose of entitling or enabling them to receive any dividends
or other distribution, or to receive any right to subscribe for or purchase any
shares of any class or any securities, or to receive any other right
contemplated by section 6 or otherwise; or
b. Any reorganization or recapitalization of the Company, any reclassification
of the Capital stock of the Company, any consolidation or merger of the Company
with or into another corporation or any transfer of all or substantially all of
the assets of the Company to another entity; or
c. The voluntary or involuntary dissolution, liquidation or
winding up of the Company.
8. Reservation of the Units and Shares. The Company shall at all times reserve,
and the Transfer Agent shall be irrevocably authorized and directed at all times
to reserve, for the purpose of issuance on exercise of this Underwriter's
Warrant, such number of authorized Units and authorized shares of Common Stock
or such class or classes of capital stock or other securities as shall from time
to time be sufficient to comply with this Underwriter's Warrant, and the Company
shall promptly take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized and unissued Units and authorized and
unissued shares of Common Stock or such other class or classes of capital stock
or other securities to such number as shall be sufficient for that purpose. The
Company shall keep a copy of this Underwriter's Warrant on file with the
Transfer Agent. The Company shall supply the Transfer Agent with duly executed
stock and other certificates, as appropriate, for such purpose and shall provide
or otherwise make available any cash which may be payable as provided in section
3 hereof.
9. Approvals. The Company shall from time to time use its best efforts to obtain
and continue in effect any and all permits, consents, registrations,
qualifications and approvals of governmental agencies and authorities and to
make all filings under applicable securities laws that may be or become
necessary in connection with the issuance, sale, transfer and delivery of this
Underwriter's Warrant and the issuance of securities on any exercise hereof, and
if any such permits, consent, qualifications, registrations, approvals or
filings are not obtained or continued in effect as required, the Company shall
immediately notify the holder thereof. Nothing contained in this Section 9 shall
in any way expand, alter or limit the rights of the holder set forth in Section
1 hereof.
10. Survival. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Underwriter's Warrant and any
investigation at any time made by or on behalf of any parties hereto and the
exercise, sale and purchase of this Underwriter's Warrant (and any other
securities or property) issuable on exercise hereof.
11. Remedies. The company agrees that the remedies at law of the Holder of this
Underwriters Warrant, in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Underwriter's Warrant, are not adequate and such terms may, in addition to and
not in lieu of any other remedy, be specifically enforced by a decree of
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
12. Notices. All demands, notices, consents and other communications to be given
hereunder shall be in writing and shall be deemed duly given when delivered
personally or by telecopier or five days after being mailed by first class mail,
postage prepaid, properly addressed, if to the holder of this Underwriter's
Warrant, to Kenneth Jerome & Co., Inc., 247 Columbia Turnpike, Florham Park, New
Jersey 07932 (201) 966-6669 Fax:(201) 966-6319 Attention: Mr. Robert Kaplon,
with a copy to Steven I. Gutstein, Esq., 276 Fifth Avenue, New York, New York
10001 (212) 725-7110 Fax: (212) 725-7527; if to the Company, to PPA
Technologies, Inc., 163 South Street, Hackensack, New Jersey 07601 Attention:
Gerald Sugerman, with a copy to: Roger Fidler, Esq., 400 Grove Street, Glen
Rock, New Jersey 07452 (201) 457-1221 Fax: (201)457-1331. The Company and each
Holder may change such address at any time or times by notice hereunder to the
other.
13. Amendments; Waivers; Terminations; Governing Law; Headings. This
Underwriter's Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Underwriter's Warrant and any disputes arising hereunder shall be governed by
and construed and interpreted in accordance with the laws of the State of New
Jersey. The headings in this Underwriter's Warrant are for convenience of
reference only and are not part of this Underwriter's Warrant.
14. Payment of Taxes. The Company shall pay all taxes, if any, attributable to
the initial issuance of this Underwriter's Warrant and the Units and the
securities comprising the Units; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any secondary
transfer of this Underwriter's Warrant on the Units.
DATED: November 10, 1997
PPA TECHNOLOGIES, INC., a
New Jersey corporation
(CORPORATE SEAL)
By:
Roger Fidler
President
ATTEST:
By:
Corporate Secretary
<PAGE>
FORM OF ASSIGNMENT
(To be executed upon transfer of Warrant)
FOR VALUE RECEIVED, hereby
sells, assigns and transfers to the within Underwriter's Warrant together with
all rights, title and interest therein, and does hereby irrevocably constitute
and appoint attorney to transfer such Underwriter's Warrant on the warrant
register of the within named Company, with full power of substitution.
Signature:
Dated:
Signature Guarantee:
<PAGE>
SUBSCRIPTION
(To be completed and signed only upon an exercise of
the Underwriter's Warrant in whole or in part)
To:
as Transfer Agent for PPA Technologies, Inc.
The undersigned, the Holder of the attached Underwriter's Warrant, hereby
irrevocably elects to exercise the purchase right represented by the
Underwriter's Warrant for, and to purchase thereunder, Units (as such terms are
defined in the original Underwriter's Warrant dated , 1997, from PPA
Technologies, Inc.), and herewith makes payment of $ therefor in cash or by
certified or official bank check. The undersigned hereby requests that the
Certificate(s) for such securities be issued in the name(s) and delivered to the
address(es) as follows:
Name:
Address:
Deliver to:
Address:
(Attach additional sheets as necessary)
If the foregoing Subscription evidences an exercise of the Underwriter's
Warrant to purchase fewer than all of the Units (or other securities or
property) to which the undersigned is entitled under such Underwriter's Warrant,
please issue a new Underwriter's Warrant, of like tenor, for the remaining Units
(or other securities or property) in the name(s), and deliver the same to the
address(es), as follows:
Name:
Address:
(Attach additional sheets as necessary)
DATED:
(Name of Holder)
(Signature of Holder or Authorized Signatory)
(Social Security or Taxpayer Identification Number of
Holder)
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of _____________, 1997, (the "Agreement") between
PPA TECHNOLOGIES, INC., a New Jersey corporation (the "Company"), and LIBERTY
TRANSFER COMPANY, INC., the Company's transfer agent and warrant agent, (the
"Warrant Agent"), (the parties hereto hereinafter collectively referred to as
the "Parties").
WHEREAS, the offering 1,000,000 Units, each Unit consisting of one share of
common stock and one common stock purchase warrant ("Warrants"), each Warrant
entitling the holder to purchase one Share for a period of twelve (12) months
commencing the closing date of the offering (the "Final Closing Date") at an
exercise price of $7.00 pursuant to a registration statement on Form SB-2 (the
"Registration Statement") filed with the Securities and Exchange Commission; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
registration, transfer, exchange, replacement, and exercise of the Warrants and
the certificates evidencing the Warrants (the "Warrant Certificates") and other
matters as provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the Parties agree as follows:
1. Appointment of Warrant Agent.
The Company hereby appoints the Warrant Agent to act as agent for the
Company in accordance with the instructions set forth hereinafter and the
Warrant Agent accepts that appointment.
2. Form of Warrant Certificates.
The definitive Warrant Certificates to be delivered pursuant to the
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached.
3. Execution of Warrant Certificates.
The Warrant Certificates in definitive form shall be signed on behalf
of the Company, manually or by facsimile signature, by its Chairman of the Board
or President, and by its Secretary or an Assistant Secretary under its corporate
seal, and shall be manually countersigned by the Warrant Agent. Warrant
Certificates signed on behalf of the Company as aforesaid by an incumbent in
office at the time of signature shall be valid, and may be countersigned and
issued by the Warrant Agent, notwithstanding the fact that at the time of
countersignature and issuance by the Warrant Agent such signatory shall have
ceased to be the incumbent in such office. The Company's seal may be in the form
of a facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant Certificates. No Warrant Certificate shall be valid
for any purpose unless countersigned manually by the Warrant Agent. Warrant
Certificates shall be dated as of the date of countersignature by the Warrant
Agent.
4. Registered Owners.
The Company and the Warrant Agent may deem and treat the registered
holder of a Warrant Certificate as the absolute owner thereof (notwithstanding
any notation of ownership or other writing thereon made by anyone), for the
purpose of any exercise and any distribution to the holder thereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
5. Registration of Warrants, Transfers and Exchanges.
The Warrant Certificates shall be numbered and registered by the
Warrant Agent upon the records to be maintained by it for that purpose. The
Warrant Agent shall register the transfer of any outstanding Warrant upon
surrender of the Warrant Certificate accompanied (if required) by a written
instrument of transfer in form satisfactory to the Warrant Agent, duly executed
by the registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any registration
of transfer, a new Warrant Certificate shall be issued to the transferee and the
surrendered Warrant Certificate shall be canceled by the Warrant Agent. Canceled
Warrant Certificates shall be disposed of in a manner satisfactory to the
Company.
Warrants may be split up, combined or otherwise exchanged at the
holder's option, upon surrender of the Warrant Certificate to the Warrant Agent
at its office or agency maintained for the purpose of exchanging, transferring
or exercising the Warrant Certificate at 191 New York Avenue, Huntington, New
York 11743-2711 (such office being referred to herein as the "Warrant Agency
Office") for another Warrant Certificate or Certificates of like tenor and for
the purchase, in the aggregate, of a like number of Shares. Warrant Certificates
so surrendered shall be canceled by the Warrant Agent. Canceled Warrant
Certificates shall thereafter be disposed of by the Warrant Agent in a manner
satisfactory to the Company.
The Warrant Agent is hereby authorized to countersign, in accordance
with the provisions of paragraph 3 hereof, and deliver any new Warrant
Certificates required pursuant to the provisions of this paragraph 5.
6. Duration, Extension and Exercise of Warrants.
Each Warrant may be exercised during a period of twelve months from the
Final Closing Date as reflected on the Prospectus filed as part of the
Registration Statement, unless the exercise period shall be accelerated or
extended as herein provided (such date or such earlier or later expiration date
in the event of an extension as provided herein being referred to as the
"Expiration Date"). Each Warrant entitles the registered holder to purchase one
Share at an exercise price of $7.00, unless the Company reduces the exercise
price as herein provided.
The Company has the right to extend the period during which the
Warrants are exercisable or reduce the exercise price, upon notice of the new
expiration date and/or exercise price to the Warrant Agent and to
Warrantholders. Notice of expiration shall be effected as detailed in paragraph
19 herein. The Company shall not be under obligation to extend the exercise
period and gives no assurance that it will do so. Each Warrant may be exercised
on any business day prior to the close of business on the Expiration Date,
including any extensions thereto.
No fractional Shares shall be issued upon surrender of a Warrant
Certificate. In lieu of fractional Shares, there shall be paid to the registered
holder of a surrendered Warrant, as soon as practicable after the date of
surrender, an amount in cash equal to a fraction of the current market value of
a Share to which such Warrant related. As used herein, the current market value
of a Share shall be its closing price (as determined pursuant to the second
sentence of paragraph 12 (d) hereof) on the last trading day immediately prior
to the day on which that Warrant is exercised.
Subject to the provisions of the Agreement, the holder of a Warrant
shall have the right, at any time after issuance of the Warrant and for a period
of one year from the Final Closing Date, to purchase from the Company (and the
Company shall issue and sell to that holder) the number of fully paid and
non-assessable Shares set forth in the Warrant Certificate, at the exercise
price of $7.00 on any business day until 5:00 p.m. on the Expiration Date (the
number of Shares and Exercise Price being subject to adjustment as provided in
paragraph 12 hereof) upon the surrender of the Warrant Certificate to the
Warrant Agent at the office of the Warrant Agent, with the form of election to
purchase on the reverse thereof duly filled in and signed, and payment of the
exercise price in lawful money of the United States of America. The Warrants
shall be exercisable at any time prior to the close of business on the
Expiration Date, at the election of the registered holder thereof, either as an
entirety or in part. In the event that fewer than all the Shares purchasable
upon the exercise of a Warrant are purchased at any time prior to the close of
business on the Expiration Date, a new Warrant Certificate will be issued for
the remaining number of Shares purchasable upon the exercise of the Warrant so
surrendered. No adjustments shall be made for any cash dividends on Shares
issuable on the exercise of a Warrant. The exercise price (as may be adjusted
from time to time pursuant to the provisions of this paragraph and paragraph 13)
is herein called the "Exercise Price."
Subject to paragraph 8 hereof, upon surrender of a Warrant Certificate
and receipt of payment of the Exercise Price, the Warrant Agent shall
requisition from the Transfer Agent for issuance and delivery to or upon the
written order of the registered Warrantholder and in such name or names as the
registered holder may designate, the Shares issuable upon exercise. Shares shall
be deemed to have been issued and any person so designated to be named therein
shall be deemed to have become the holder of record of such Shares as of the
date of the surrender of the Warrant and upon payment of the appropriate
Exercise Price. The Warrant Agent is hereby authorized to countersign and
deliver, in accordance with the provisions of paragraph 3 hereof, any Warrant
Certificate required pursuant to the provisions of this paragraph.
7. Separate Transferability.
The Warrant will be separately tradable and transferable upon issue.
8. Payment of Taxes.
The Company will pay all documentary stamp taxes attributable to the
initial issuance of Shares upon the exercise of a Warrant prior to the close of
business on the Expiration Date; provided, however, that the Company shall not
be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of Shares in a name other than that of the
registered holder of the Warrant, and the Company shall not be required to issue
or deliver such Share Certificates or other certificates unless or until the
person or persons requesting such issuance shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
9. Redemption of Warrants.
The Warrants shall be subject to redemption by the Company at .05 per
Warrant, upon a minimum of thirty days' prior written notice of the date on
which the Warrants will be redeemed to the Warrantholders. During the period
after the notice of redemption but prior to 5 P.M. Eastern time on the date of
redemption, a Warrantholder may exercise or transfer some or all of his
Warrants. Notice of redemption shall be effected as detailed in paragraph 19
herein.
10. Mutilated or Missing Warrant Certificates.
If a Warrant Certificate shall be mutilated, lost, stolen or destroyed,
the Company may in its discretion issue, and the Warrant Agent shall countersign
and deliver, in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and for the purchase of a like number of Shares, but only upon receipt of
satisfactory indemnity or bond, if requested, and evidence satisfactory to the
Company and the Warrant Agent of loss, theft or destruction of the Warrant
Certificate. A Warrantholder requesting a substitute Warrant Certificate shall
comply with all other regulations and pay all other reasonable charges as the
Company or the Warrant Agent may prescribe.
11. Reservation of Shares.
The Company will at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued Shares, to enable it to
satisfy its obligation to issue Shares upon exercise of Warrants, through the
close of business on the Expiration Date, the number of Shares deliverable upon
the exercise of all outstanding Warrants, and the Transfer Agent shall at all
times reserve that number of authorized and unissued Shares as shall be
required. The Company will keep a copy of the Agreement on file with the
Transfer Agent. The Warrant Agent is hereby irrevocably authorized to
requisition from the Transfer Agent certificates for Shares issuable upon
exercise of Warrants, and the Company will supply duly executed certificates for
such purpose.
Before taking any action that would cause an adjustment to paragraph 13
hereof reducing the Exercise Price below the then par value (if any) of the
Shares issuable upon exercise of the Warrants, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
Shares at the Exercise Price as so adjusted.
The Company covenants that all Shares issued upon exercise of the Warrants
will, upon issuance in accordance with the terms of the Agreement, be fully paid
and non-assessable and free from all taxes, liens, charges and security
interests created by the Company with respect to the issuance thereof.
12. Obtaining of Governmental Approvals and Stock Exchange Listings.
The Company will take all action which may be necessary (a) to obtain
and keep effective any and all permits, consents and approvals of governmental
agencies and authorities and to make securities acts filings under federal and
state laws, which may be or become requisite in connection with the issuance,
sale, transfer, delivery or exercise of the Warrants, and the issuance, sale,
transfer and delivery of the Shares issuable upon exercise of the Warrants, and
(b) so that such Shares, immediately upon their issuance upon the exercise of
Warrants, will be listed or entitled to unlisted trading privileges on each
securities exchange, if any, on which all other Shares are then listed or
entitled to unlisted trading privileges and on an identical basis.
The Company will, as appropriate, furnish the Warrant Agent with
current Prospectuses meeting the requirements of the Act and all rules and
regulations thereunder in sufficient quantity to permit the Warrant Agent to
deliver a Prospectus (if required by the Act) to each holder of a Warrant upon
the exercise thereof. The Company agrees to pay all fees, costs and expenses in
connection with the preparation and delivery to the Warrant Agent of the
Prospectuses.
13. Adjustment of Exercise Price and Number of Shares Purchasable.
The Exercise Price and number of Shares purchasable upon the exercise
of each Warrant are subject to adjustment upon the occurrence of the events
enumerated in this paragraph 13.
(a) In case the Corporation shall, while this Warrant remains in force,
effect a recapitalization of such character that the Shares covered hereby shall
be changed into or become exchangeable for a larger or smaller number of Shares,
then thereafter, the number of Shares of the Corporation which the Holder hereof
shall be entitled to purchase hereunder, shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number of
Shares of the Corporation, by reason of such recapitalization, and the purchase
price hereunder, per Share, of such recapitalized Shares shall in the case of an
increase in the number of Shares be proportionately reduced, and in the case of
a decrease in the number of Shares be proportionately increased.
(b) In case the Corporation shall, at any time prior to the exercise of
a Warrant, consolidate or merge with, or shall transfer its property as an
entirety to, or substantially as an entirety to, any other corporation, the
Holder of a Warrant who thereafter exercises the same as herein provided shall
be entitled to receive, for the purchase price per Share stated in the Warrant,
that number of shares or other securities or property of the corporation
resulting from such consolidation or merger or transfer to which each Share
deliverable upon exercise of the Warrant would have been entitled, upon such
consolidation or merger or transfer, had the Holder of such Warrant exercised
his right to purchase and had said Share been issued and outstanding, and had
such Holder been the holder of record of such Share at the time of such
consolidation or merger or transfer.
(c) In case the Corporation shall at any time prior to the exercise of
a warrant make any distribution of its assets to holders of its Common Stock by
liquidating or partial liquidating dividend or by way of return of capital, or
other than as a dividend payable out of earnings or any surplus legally
available for dividends under the laws of the State of New York, then the Holder
of a warrant who thereafter exercises the same as herein provided after the date
of record for the determination of those holders of Common Stock entitled to
such distribution of assets, shall be entitled to receive for the purchase
price, in addition to each Share, the amount of such assets (or at the option of
the Corporation a sum equal to the value thereof at the time of such
distribution to holders of Common Stock as such value is determined by the Board
of Directors of the Corporation in good faith) which would have been payable to
such Holder had he been the holder of record of such Share receivable upon
exercise of such Warrant on the record date for the determination of those
entitled to such distribution.
(d) In case of the dissolution, liquidation or winding-up of the
Corporation, all rights under the Warrants shall terminate on a date fixed by
the Corporation, such date so fixed to be not earlier than the date of the
commencement of the proceedings for such dissolution, liquidation or winding-up
and not later than thirty days after such commencement date. In any such case of
termination of purchase rights the Corporation shall give notice of such
termination date to the registered Holder hereof.
14. Notices to Warrantholders.
Upon any adjustment of the Exercise Price pursuant to paragraph 13
hereof, the Company within 20 calendar days thereafter shall (i) cause to be
filed with the Warrant Agent a certificate signed by the accounting officer
setting forth the Exercise Price after the adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculations are based and setting forth the number of Shares purchasable upon
exercise of a Warrant after the adjustment in the Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein and (ii) cause to be given to the registered holders of
outstanding Warrants at their respective addresses appearing on the Warrant
register written notice of the adjustment by first-class mail, postage prepaid.
Where appropriate, the notice may be given in advance and included as a part of
the notice to be mailed under the other provisions of this paragraph 14.
Upon the fixing of an Expiration Date other than pursuant to paragraph 7
hereof, the Company shall cause written notice by first-class mail, postage
prepaid, of the Expiration Date to be given as soon as practicable to the
Warrant Agent and to the registered holders of the outstanding Warrants at their
respective addresses appearing on the Warrant register.
In case:
(a) the Company shall authorize the issuance to all holders of
Shares of rights or warrants to subscribe for or purchase
capital stock of the Company or of any other subscription
rights or warrants; or
(b) the Company shall authorize the distribution to all
holders of Shares of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out
of consolidated earnings or earned surplus or dividends
payable in Shares); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the
Company is required, or of the conveyance or transfer of the
properties and assets of the Company substantially as an
entirety, or of any capital reorganization or any
reclassification of the Shares (other than a change in par
value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination);
or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) the Company takes any other action which would require an
adjustment of the Exercise Price pursuant to paragraph 13
hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to the registered holders of the outstanding Warrants at their
respective addresses appearing on the Warrant register, by first-class mail,
postage prepaid, a written notice stating (i) the date as of which the holders
of record of Shares to be entitled to receive any rights, warrants or
distribution are to be determined or (ii) the date on which any consolidation,
merger, conveyance, transfer, reorganization, reclassification, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that record Shareholders shall be entitled to exchange the
Shares for securities or other property, if any, deliverable upon the
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up. Such notice shall be filed and mailed in
the case of a notice pursuant to clause (i) above at least 10 calendar days
before the record date specified, and, in the case of a notice pursuant to
clause (ii) above, at least 20 calendar days before the earlier of the dates
specified. The failure to give the notice required by this paragraph 14 or any
defect therein shall not affect the legality or validity of any distribution,
right, warrant, consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up or the vote upon such
action.
Nothing contained in the Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as Shareholders in respect of the
meetings of Shareholders or the election of directors of the Company or any
other matter, or any rights whatsoever as Shareholders.
15. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Warrant Agent shall be a party,
or any corporation succeeding to the corporate trust business of the Warrant
Agent, shall be the successor to the Warrant Agent hereunder without the
execution of the Parties, provided that such corporation would be eligible for
appointment as successor Warrant Agent under the provisions of paragraph 18
hereof. If at the time the successor to the Warrant Agent shall succeed under
the Agreement, any Warrant Certificates shall have been countersigned but not
delivered, the successor to the Warrant Agent may adopt the countersignature of
the Warrant Agent; and if at that time any Warrant Certificates shall not have
been countersigned, any successor to the Warrant Agent may countersign such
Warrant Certificates either in the name of the Warrant Agent or in its name, and
in all the foregoing cases, Warrants shall have the full force provided in the
Warrant Certificates and in the Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has changed may adopt the
countersignature under its prior name, and in case at that time any Warrant
Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrants shall have the full force provided in
the Warrants and in the Agreement.
16. Warrant Agent.
The Warrant Agent undertakes the duties and obligations imposed by the
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Warrants, by their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for their correctness, except such as describe the Warrant Agent
or action taken or to be taken by it. The Warrant Agent assumes no
responsibility with respect to the execution, delivery or distribution of the
Warrant Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained herein or in the Warrant
Certificates nor shall it at any time be under any duty or responsibility to any
Warrantholder to make or cause to be made any adjustment in the Exercise Price
(except as instructed by the Company), or to determine whether any facts exist
which may require any adjustments, or with respect to the nature or extent of or
method employed in making any adjustments when made.
(c) The Warrant Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of a Warrant in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of counsel.
(d) The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of a Warrant for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent hereunder, to
reimburse the Warrant Agent upon demand for all expenses, taxes and governmental
charges and other charges of any kind and nature incurred by the Warrant Agent
in the execution of its duties hereunder, and to indemnify the Warrant Agent and
save it harmless against any and all losses, liabilities and expenses, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent arising out of or in connection with the Agreement except as a result of
its negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceedings or to take any other action likely to involve
expense unless the Company or one or more registered holders of the Warrants
shall furnish the Warrant Agent with reasonable security and indemnity for any
costs and expenses which may be incurred. All rights of action under the
Agreement or under any of the Warrants may be enforced by the Warrant Agent
without the possession of any Warrant Certificates or the production thereof at
any trial or other proceeding relative thereto, and any action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrants, as their respective rights or interests
may appear.
(g) The Warrant Agent, and any Shareholder, director, officer or
employee thereof, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under the Agreement. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything it may do or refrain from doing
in connection with the Agreement except for its own negligence or bad faith.
(i) The Company will perform, execute, acknowledge and deliver or cause
to be performed, executed, acknowledged and delivered all further and other
acts, instruments and assurances as may reasonably be required by the Warrant
Agent for the carrying out or performing of the provisions of the Agreement.
(j) The Warrant Agent shall not be under any responsibility in respect
of the validity of the Agreement or the execution and delivery hereof (except
its countersignature thereof); nor shall the Warrant Agent by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of the Shares to be issued pursuant to the Agreement or any Warrant
or as to whether the Shares will when issued be validly issued, fully paid and
non-assessable or as to the Exercise Price or the number of Shares issuable upon
exercise of any Warrant.
(k) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, the Secretary or an Assistant Secretary of
the Company, and to apply to those officers for advice or instructions in
connection with its duties, and shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
of those officers or in good faith reliance upon any statement signed by any one
of those officers of the Company with respect to any fact or matter (unless
other evidence in respect thereof is herein.specifically prescribed) which may
be deemed to be conclusively proved and established by such signed statement.
17. Disposition of Proceeds from Exercise.
The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently transfer to the Company all checks received
by the Warrant Agent on the purchase of Shares through the exercise of Warrants.
18. Change of Warrant Agent.
If the Warrant Agent shall resign (such resignation to become effective
not earlier than thirty days after the giving of written notice thereof to the
Company and the registered holders of Warrants) or becomes incapable of acting
as Warrant Agent, or upon the election of the Company which may be made at any
time, the Company shall appoint a successor. If the Company shall fail to make
that appointment within a period of thirty days after it has been so notified in
writing by the Warrant Agent or by the registered holder of a Warrant (in the
case of incapacity), then the registered holder of any Warrant may apply to any
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor to the Warrant Agent, either
by the Company or by such a court, the duties of the Warrant Agent shall be
carried out by the Company. After appointment the successor warrant agent shall
be vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor warrant agent
any property at the time held by it hereunder and execute and deliver, at the
expense of the Company, any further assurance, conveyance, act or deed necessary
for the purpose. Failure to give any notice provided for in this paragraph 18,
however, or any defect therein, shall not affect the legality or validity or the
removal of the Warrant Agent or the appointment of a successor warrant agent, as
the case may be.
19. Notices to the Company, Warrant Agent and Warrantholder.
Any notice or demand authorized by the Agreement to be given or made by
the Warrant Agent or by the registered holder of any Warrant to or on the
Company shall be sufficiently given or made if sent by mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:
PPA TECHNOLOGIES, INC.
163 South St.,
Hackensack, NJ 07601
Should the Company fail to maintain that office or agency or fail to
give notice of the location or of any change in the location thereof,
presentations may be made and notices and demands may be served at the principal
office of the Warrant Agent.
Any notice pursuant to the Agreement to be given by the Company or by the
registered holder of a Warrant to the Warrant Agent shall be sufficiently given
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing by the Warrant Agent with the Company) to the Warrant Agent
as follows:
Liberty Transfer Co., Inc.
191 New York Avenue
Huntington, New York 11743
Any notice or demand authorized by the Agreement to be given or made by the
Warrant Agent or by the Company to any registered holder of any Warrant shall be
sufficiently given or made if sent by mail, first-class or registered, postage
prepaid, addressed to the Warrantholder at the address on file with the Warrant
Agent.
20. Supplements and Amendments.
The Company and the Warrant Agent may supplement or amend the Agreement
without the consent or concurrence of or notice to any holders of Warrants in
order to cure any ambiguity, manifest error or other mistake in the Agreement,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Warrant Agent may deem necessary or
desirable and which shall not adversely affect, alter or change the interests of
the holders of Warrants.
21. Successors.
All covenants and provisions the Agreement by or for the benefit of the
Company or the Warrant Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
22. Termination.
The Agreement shall terminate at the close of business ten days after
the Expiration Date of the Warrant. Notwithstanding the foregoing, the Agreement
will terminate on any earlier date if all Warrants have been exercised. The
provisions of paragraph 15 hereof shall survive that termination.
23. Governing Law.
The Agreement and each Warrant issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance therewith.
24. Benefits of the Agreement.
Nothing herein shall be construed to give to any person or corporation
other than the Company, the Warrant Agent and the registered holders of Warrants
any legal or equitable right, remedy or claim hereunder. The Agreement shall be
for the sole and exclusive benefit of the Company, the Warrant Agent and the
registered holders of Warrants.
25. Counterparts.
The Agreement may be executed in any number of counterparts and each of
the counterparts shall for all purposes be deemed to be an original, and all the
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have caused the Agreement to be duly
executed, as of the day and year first above written.
PPA TECHNOLOGIES, INC.
By:
Roger Fidler
President
LIBERTY TRANSFER CO., INC.
By:_________________________
EMPLOYMENT AGREEMENT
BETWEEN
PPA TECHNOLOGIES, INC.
AND
GERALD SUGERMAN
AGREEMENT dated this 6th day of May, 1995, between PPA TECHNOLOGIES, INC.,
a New Jersey corporation (hereinafter the "Company") having its principal place
of business at 400 Grove Street, Glen Rock, New Jersey 07452, and GERALD
SUGERMAN (hereinafter the "Employee").
WHEREAS, the Company desires to acquire the services of Employee
because of his special knowledge and skills; and,
WHEREAS, Employee desires to be employed by the Company;
NOW, THEREFORE, in consideration of the foregoing, ten dollars paid in
hand, and other good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the following is agreed:
1. DUTIES.
The Company hereby employs Gerald Sugerman as Vice President for Scientific
Affairs, having powers and duties in that capacity as set forth from time to
time by the Board of Directors (the "Board") in the By-Laws of the Company.
Employee shall devote his full time and best efforts to the Business of the
Company. All of Sugerman's business activities shall be owned by the Company
except those set forth in Exhibit A, attached hereto and incorporated by
reference herein in its entirety.
2. COMPENSATION.
As compensation for his services to the Company, in whatever capacity
rendered, the Company shall pay to Employee monthly $10,000(US) per month for
the rest of calendar year 1995. This salary shall be paid over the term of this
Agreement which is five years, with cost of living adjustments being made on the
first day of each calendar year. On a percentage basis this increase shall be
equal to the percentage of increase in the consumer price index for the New York
Metropolitan Area.
In addition, Employee shall be entitled to the following: 1)
company paid life insurance equal to twice Employee's annual salary;
2) medical insurance coverage, including major medical and dental
coverages equivalent to that provided to other key employees of the
Company; 3) such disability coverage as is maintained on other key
employees, and, 4) the Company will pay Employee at the rate of $0.30
per mile for Employee's use of his vehicle for Company's business.
Employee shall be entitled to four weeks of vacation per year, five sick
days and three personal days, all of which shall be accumulated if not taken. No
cash compensation shall be paid for sick or personal days not taken.
Additionally, Employee shall be entitled to all holidays provided to other key
employees of the Company.
Further, Employee shall receive incentive compensation in the form of a
royalty on net sales, paid no later than fourteen days after receipt of payment
in good funds, and equal to:
5% of net sales until Employee has received $350,000; 2% of net sales
thereafter.
3. EXPENSES
The Employee may incur reasonable expenses for promoting the business of
the Company, including expenses for travel, entertainment and similar items. The
Company will reimburse the Employee for all such expenses upon the presentation
by the Employee, from time to time, of an itemized account justifying such
expenditures. Such reimbursement shall be provided within 10 working days of
such presentation by Employee. To facilitate Employee's performance the Company
will issue to Employee a company credit card, when available.
4. INDEBTEDNESS TO EMPLOYEE
Employee and the Company hereby agree and acknowledge that the only
amounts owed to Employee as at the date of this Agreement are $100,000 for past
unpaid salary and about $47,000 for expenses, including an approximately $12,000
loan to the Company.
5. NOTICE
Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and by registered mail, and mailed to the parties
at the following addresses:
COMPANY: Roger L. Fidler 400 Grove Street
Glen Rock, New Jersey 07452
EMPLOYEE: at his last known residence.
6. RESERVED
7. TERMINATION
This Agreement may be terminated in any one of the following manners:
1. The death of Employee;
2. The failure of the Company, as evidenced by filing under the
Bankruptcy Act for liquidation, or the making of an assignment for the benefit
of creditors; or,
3. A material breach of the Assignment and Non-Disclosure Agreement
executed between the Company and the Employee.
8. APPLICABLE LAW
Except to the extent of that which must be governed by the General
Corporation Law of the State of New Jersey, this Agreement shall be governed by
the laws of the State of New Jersey and shall be enforceable only in the
Superior Court of New Jersey for Bergen County. If any provision of this
Agreement is declared void, such provision shall be deemed severed from this
Agreement, which shall otherwise remain in full force and effect.
9. BINDING EFFECT
This Agreement shall have binding effect upon the parties hereto, when
approved by the Board, and upon their respective personal representatives, legal
representatives, successors and assigns. Any waiver of any breach of this
Agreement shall be made in writing and shall be applicable only to such breach
and shall not be construed to waive any subsequent or prior breach other than
the specific breach so waived.
10. SUPERSEDES EARLIER AGREEMENTS
This Agreement supersedes all earlier agreements between the Employee and
the Company with respect to Employee's employment by the Company and monies owed
to Employee by the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
written above.
PPA TECHNOLOGIES, INC.
/s/ Gerald Sugerman By: /s/ Roger Fidler
Gerald Sugerman Roger L. Fidler, Director
<PAGE>
ASSIGNMENT, NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
AGREEMENT made this 6th day of May, 1995, by and between PPA TECHNOLOGIES,
INC. AND/OR ITS ASSIGNEES (the "Company") and GERALD SUGERMAN, (the "Recipient"
or "Employee").
WHEREAS, the Company is and has been induced to deliver to Recipient
certain proprietary information, because of his special skills and knowledge in
areas of importance to the Company; and,
WHEREAS, the Recipient has had and desires to have access, on a
confidential basis, to such information, and has and will develop through his
employment by OR consultation with the Company certain additional information
which will become the Company's property; and,
WHEREAS, Recipient has and will come into possession of, and has and may
develop, information which may be disclosed to and used by the Company in its
business which includes the skills, techniques, knowledge and information which
the consultant will acquire as a result of his contact with the Company; and,
WHEREAS, the Recipient desires to maintain and to continue to maintain the
confidentiality of all such information related to the businesses of the Company
including such prior knowledge as is relevant to the Company's business and the
Company desires to acquire such information and to place the Recipient in a
position in which he may receive or contribute to the Company's success;
NOW, THEREFORE, in consideration of the foregoing, the relationship of the
Recipient and the Company, other benefits conferred upon the Recipient by virtue
of his relationship with the Company, and other good and valuable consideration,
receipt AND sufficiency of which are hereby acknowledged, the following is
agreed:
1. Disclosure of the Information
Recipient is obligated to maintain absolute confidentiality with respect to all
information which is not in the public domain, including without limitation,
unique and proprietary information, all ideas, discoveries, concepts,
inventions, devices or improvements, products, methods of production,
processes,, formulas, techniques, and services, including information relating
to research, development, inventions, manufacturing, purchasing, accounting,
engineering, marketing, merchandising and selling, including the Company's
proposed and present business and its products, processes, methods of
production, formulas, and services whether patentable or not, which has been
disclosed to the Recipient, alone or with others, intentionally or
unintentionally, except as otherwise provided herein. The Recipient agrees to
maintain and make adequate and current written records of all Information, to
the extent practical, in the form of notes,
sketches, drawings, procedures, laboratory reports or notebooks relating
thereto, which shall be and shall remain the property of the Company and shall
be available to the Company at all times.
2. Assignment of the Information
a. The Recipient is obligated to assign and agrees to assign, transfer, convey
and deliver to the Company and hereby does assign, transfer and convey to the
Company, all right, title and interest in and to all Information required to be
disclosed by the Recipient to the Company under paragraph 1 of this Agreement
and all patents and patent applications (including continuations,
continuations-in-part, divisions, reissues, renewals and extensions) for all
countries relating to such Information, provided that such assignment does not
apply to any such information developed by Recipient outside the scope of his
employment. Further, if the Recipient violates the law or breaches any contract
as a result of signing this agreement or working for the Company the Recipient
will indemnify the Company for any damages resulting therefrom.
b. At the request of the Company, the Recipient will assist the Company or any
person or persons from time to time designated by the Company, to obtain the
grant of patents in the United States and/or in such other country or countries
as may be designated by the Company covering the Information and will in
connection therewith execute such applications, statements or other documents,
furnish such information and data and take all such other action (including
without limitation, the giving of testimony) as the Company may from time to
time reasonably request.
3. Non-Disclosure of Information
a. The Recipient will not, without prior written approval from the
Company's Board of Directors, use, disclose, disseminate, publish or lecture on
any Information.
b. The Recipient will not, without prior written approval from the
Company's Board of Directors, at any time or manner, make or cause to be made,
any copies, pictures, duplicates, facsimiles or other reproductions or
recordings or any abstracts or summaries of any laboratory reports, studies,
memoranda, procedures, correspondence, manuals, customer lists, records,
formulas, plans, or other written, printed or otherwise recorded material of any
kind or of any equipment or facilities belonging to or in the possession of the
Company, which may be produced or created by or come into the possession of the
Recipient in the course of his employment with the Company, or which relates in
any manner to the present business of the Company.
4. RESTRICTIVE COVENANTS
(a) During the term of his Employment the Employee shall devote his best
efforts and full time to advance the interests of the Company.
(b) During the tern of employment, Employee shall not compete with the
Company directly or indirectly, as a partner, proprietor, stockholder, officer,
director, principal, agent, employee or consultant, with respect to any person,
firm, corporation or other organization, or engage in any business which is the
same as, similar to, or in general competition with the business conducted by
the Company, except as provided hereinafter, if at all.
In furtherance of, and without in any way limiting the contents of this
restrictive clause, the Employee shall not, directly or indirectly, during the
term of his employment with the Company:
(i) request any Company customer to curtail or cancel their present or
future business with the Company; or
(ii) solicit, canvas or accept, or authorize any other person to solicit,
canvas or accept, from any past, or present customers of the Company any
business for any other person, firm or corporation engaged in any business which
is the same as, similar to or in general competition with the business of the
Company;
(c) The Employee shall have no right, title or interest in any copies,
pictures, duplicates, facsimiles or other reproductions or recordings or any
abstracts or summaries of any reports, studies, memoranda, correspondence,
manuals, customer lists, records, formulas, plans or other written, printed or
otherwise recorded material of any kind whatever related to the business of the
Company or any equipment or facilities belonging to the Company, which may be
produced or created by or come into the possession of the Employee in the course
of his employment with the Company. The Employee further agrees that without the
prior written consent of the Company's Board he will not remove or cause to be
removed any such material except personal material unrelated to the business of
the Company from any premises of the Company, and that he will surrender all
such material to the Company immediately upon the termination of his employment
or at any time prior thereto upon request of the Company, except material which
is not proprietary or unique or having only nominal value.
(d) The Employee will promptly disclose and assign to the Company any and
all unique and proprietary information and improvements, discoveries, ideas and
inventions (whether or not patentable) made or conceived or possessed by the
Employee while employed by the Company, either alone or in conjunction with
others, whether or not made or conceived at the request of or upon the
suggestion of the Company, which directly relates to the Company's business.
However, any monies received from publications, honors or prizes shall be
retained by Employee, his heirs or assigns, provided that such publications do
not violate this Agreement.
(e) The Employee will not, without the prior written approval of the Board
of Directors, which shall not be unreasonably withheld, directly or indirectly,
use, disseminate, disclose, lecture upon, or publish articles concerning the
company's present or proposed products or projects, trade practices or any other
unique or proprietary information which presently exists or is established or
developed hereafter by the Company.
(f) Nothing herein shall be construed in a manner which limits action taken
by Employee in the normal and proper execution of his duties.
5. Termination of Relationship
a. Upon termination of his relation as Recipient under this
agreement with the Company, all documents, records, notebooks and similar
repositories containing Information which constitute part of the Company's
business and which are in Recipient's possession, whether prepared by him or
others, shall be and shall remain the property of the Company and shall be left
with the Company or turned over to the Company.
b. Upon termination the Recipient shall disclose all information relevant to the
Company's business or proposed or existing products of the Company but which may
not be described in subsection (a) above.
c. Termination of this relationship shall not release the Recipient from:
i. any obligation under this Agreement as to any Information which the
Recipient has a duty to disclose to the Company under paragraph 1 of this
Agreement; and,
ii. any obligation in paragraph 3 of this Agreement relating to
non-disclosure for a period of two (2) years after termination, for any reason,
of the Recipient's employment with the Company, provided that the Recipient
shall keep confidential all information unique or proprietary, or which pertains
to product knowledge and trade practices of the Company, and shall not for a
period of 10 years from termination, directly or indirectly, use, disseminate,
disclose, lecture upon, or publish articles concerning such confidential
information. Except that Employee shall have no residual obligations to the
Company in the event that termination results from the failure of the Company to
honor its obligations under Employee's employment agreement.
6. Warranty
The Recipient represents that he has no prior agreements or obligations which
conflict with the Company's rights under this Agreement.
7. Enforceability
The Recipient acknowledges and accepts the conditions imposed on his employment
by this Agreement and the Company shall be entitled to preliminary and permanent
injunctive relief as well as an equitable accounting of all earnings, profits,
and other benefits arising from such violation, which rights shall be cumulative
and in addition to any other rights or remedies to which the Company may be
entitled. In the event that the Recipient shall disclose any information during
the two (2) year period in which his use of such information is restricted, the
restriction period shall be extended for a period of time equal to that period
beginning when such violation commenced and ending when the activities
constituting such violation shall have been finally terminated in good faith. If
the scope of the restrictions contained herein are too broad to permit
enforcement of such restrictions to the full extent, then such restrictions
shall be enforced to the maximum extent permitted by law and the Company and
Recipient hereby consent and agree that such scope may be judicially or
otherwise modified accordingly in any forum having jurisdiction of the subject
matter and in any proceeding which may be brought to enforce such restrictions.
8. Binding Effect
a. This Agreement shall be binding upon and inure to the benefit of the Company,
its affiliates, subsidiaries, successors and assigns and may not be changed or
modified, or released, discharged, abandoned or otherwise terminated, in whole
or in part, except by a written instrument signed by the Board of Directors.
b. This Agreement shall be binding upon the Recipient, his heirs, executors,
administrators, guardians, or other legal representative, successors or assigns.
Recipient acknowledges receipt of a copy of this Agreement.
9. Applicable Law
This Agreement shall be governed for all purposes by the laws of the State of
New Jersey and shall be enforceable only in the Superior Court of New Jersey for
Bergen County. If any provision of this Agreement is declared void, such
provision shall be deemed severed from this Agreement, which shall otherwise
remain in full force and effect.
10. Supersedes Earlier Agreements
This Agreement supersedes any and all earlier agreements made between the
Recipient and the Company relating to the assignment and non-disclosure of such
Information.
11. Subsequent Employment
Notwithstanding any provision in this Contract, Employee shall
not be prevented upon termination of this Contract from obtaining employment or
conducting business in the chemical industry, or a similar industry, so long as
proprietary information belonging to the Company is not divulged or practiced
except as allowed by law and personnel and business are not diverted away from
the Company by the Employee. Thus, Section 5 above remains in full force and
effect, except that the employment by Employee in the chemical industry will not
operate as an automatic breach of said Section 5. Employee will however be in
breach of such agreement if he uses knowledge gained from PPA Technologies, Inc.
either before the execution of this Agreement, or, of course, during the period
of his employment with the Company to assist in any fashion a subsequent
employer or in Employee's own business commenced after the termination of his
employment by the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PPA TECHNOLOGIES, INC.
BY: /s/ Roger Fidler
Roger L. Fidler
President
/s/ Gerald Sugerman
Gerald Sugerman
EMPLOYMENT AGREEMENT
BETWEEN
PPA TECHNOLOGIES, INC.
AND
ROGER FIDLER
AGREEMENT dated this 8th day of February, 1996, between PPA TECHNOLOGIES,
INC., a New Jersey corporation (hereinafter the "Company") having its principal
place of business at 8 Cambridge Drive, Allendale, N.J. 07401 and Roger L.
Fidler residing at 400 Grove Street, Glen Rock, New Jersey 07452 (hereinafter
the "Employee").
WHEREAS, the Company desires to acquire the services of Employee
because of his special knowledge and
skills; and,
WHEREAS, Employee desires to be employed by the Company;
NOW, THEREFORE, in consideration of the foregoing, ten dollars paid in
hand, and other good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the following is agreed:
1. DUTIES.
The Company hereby employs Roger Fidler as President and Director of
Marketing, having powers and duties in that capacity as set forth from time to
time by the Board of Directors (the "Board") in the By-Laws of the Company.
Employee shall devote such time as may be needed, in Employee's sole discretion,
and best efforts to the Business of the Company. The Company recognizes and
accepts that Fidler is engaged in the practice of law and other business
ventures which have and will continue to consume most of his time.
2. COMPENSATION.
As compensation for his services to the Company, the Company shall pay to
Employee the following:
A. Services rendered as President - The Company shall pay Employee such
amount monthly as the Board of Directors may determine from time to time.
Employee understands that until the Company is either financed or generates net
profits no such compensation will be paid. Such compensation shall not limit the
commissions payable under Section 2. B. of this Agreement. However, Employee
shall receive the greater of Section 2.B.
compensation or this Section 2.A. compensation.
B. Services for Sales and Marketing - Employee shall receive commission
or incentive compensation in the form of a percentage of gross sales made by
Employee, paid no later than ten business days after the date upon which payment
in good funds are cleared, and equal to:
15% of sales of coupling agents, ink and paint vehicles; and 10% of
hard resin sales.
Enviro Ink, Inc. has an exclusive in the province of Quebec,
Canada for ink, and sales for ink cannot be made in that
territory.
Commissions on other products sold through the efforts of Employee will be
negotiated in good faith from time to time, but shall be based upon the above
scale as modified for differences in the costs of production of the goods sold.
The commissions shall be paid only on accounts opened by Employee, but said
commission shall be paid for the term of the contract, and for one year after
termination. Commissions shall not be paid on existing customers for the
purchase of products presently being purchased by them.
C. Benefits - Upon the successful conclusion of a financing in excess
of $500,000 or sales of $2,000,000 per annum, whichever shall occur first,
Employee shall be entitled to the following: 1) company paid life insurance
equal to twice Employee's annual salary; 2) medical insurance coverage,
including major medical and dental coverages equivalent to that provided to
other key employees of the Company; 3) such disability coverage as is maintained
on other key employees, and, 4) the Company will pay Employee for the use of a
vehicle at the rate of $.30 per mile for miles traveled on Company business.
3. EXPENSES
Until the Company obtains financing in an amount exceeding $500,000 no
expenses will be reimbursed. After such financing is obtained or an equal amount
of retained earnings is achieved then expenses will be paid as set forth herein
after for all Company business excluding those related to commissionable sales
by Employee. The Employee may incur reasonable expenses for promoting the
business of the Company, including expenses for travel, entertainment and
similar items. The Company will reimburse the Employee for all such expenses
upon the presentation by the Employee, from time to time, of an itemized account
justifying such expenditures. Such reimbursement shall be provided within 10
working days of such presentation by Employee. To facilitate Employee's
performance the Company will issue to Employee a company credit card, when
available.
4. STOCK OPTIONS
[RESERVED]
5. NOTICE
Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and by registered mail, and mailed to the parties
at the following addresses:
EMPLOYEE: Roger L. Fidler 400 Grove Street
Glen Rock, New Jersey 07452
COMPANY: Gerald Sugerman
8 Cambridge Drive
Allendale, NJ 07401
6. RESERVED
7. TERMINATION
This Agreement may be terminated in any one of the following manners:
1. The death of Employee;
2. The failure of the Company, as evidenced by filing under the
Bankruptcy Act for liquidation, or the making of an assignment for the benefit
of creditors; or,
3. A material breach of the Assignment and Non-Disclosure Agreement
executed between the Company and the Employee.
4. Upon the Employee attaining the Company's retirement age of not less
than 65 years of age.
8. APPLICABLE LAW
Except to the extent of that which must be governed by the General
Corporation Law of the State of New Jersey, this Agreement shall be governed by
the laws of the State of New Jersey and shall be enforceable only in the
Superior Court of New Jersey for Bergen County. If any provision of this
Agreement is declared void, such provision shall be deemed severed from this
Agreement, which shall otherwise remain in full force and effect.
9. BINDING EFFECT
This Agreement shall have binding effect upon the parties hereto, when
approved by the Board, and upon their respective personal representatives, legal
representatives, successors and assigns. Any waiver of any breach of this
Agreement shall be made in writing and shall be applicable only to such breach
and shall not be construed to waive any subsequent or prior breach other than
the specific breach so waived.
10. SUPERSEDES EARLIER AGREEMENTS
This Agreement supersedes all earlier agreements between the Employee and
the Company with respect to Employee's employment by the Company and monies owed
to Employee by the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
written above.
PPA TECHNOLOGIES, INC.
/s/ Roger Fidler By: /s/ Gerald Sugerman
Roger Fidler Gerald Sugerman
Vice President
<PAGE>
ASSIGNMENT, NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
AGREEMENT made this 8th day of February, 1996, by and between PPA
TECHNOLOGIES, INC. AND/OR ITS ASSIGNEES (the "Company") and ROGER FIDLER, (the
"Recipient" or "Employee").
WHEREAS, the Company is and has been induced to deliver to Recipient
certain proprietary information, because of his special skills and knowledge in
areas of importance to the Company; and,
WHEREAS, the Recipient has had and desires to have access, on a
confidential basis, to such information, and has and will develop through his
employment by OR consultation with the Company certain additional information
which will become the Company's property; and,
WHEREAS, Recipient has and will come into possession of, and has and may
develop, information which may be disclosed to and used by the Company in its
business which includes the skills, techniques, knowledge and information which
the consultant will acquire as a result of his contact with the Company; and,
WHEREAS, the Recipient desires to maintain and to continue to maintain the
confidentiality of all such information related to the businesses of the Company
including such prior knowledge as is relevant to the Company's business and the
Company desires to acquire such information and to place the Recipient in a
position in which he may receive or contribute to the Company's success;
NOW, THEREFORE, in consideration of the foregoing, the relationship of the
Recipient and the Company, other benefits conferred upon the Recipient by virtue
of his relationship with the Company, and other good and valuable consideration,
receipt AND sufficiency of which are hereby acknowledged, the following is
agreed:
1. Disclosure of the Information
Recipient is obligated to maintain absolute confidentiality with respect to all
information which is not in the public domain, including without limitation,
unique and proprietary information, all ideas, discoveries, concepts,
inventions, devices or improvements, products, methods of production,
processes,, formulas, techniques, and services, including information relating
to research, development, inventions, manufacturing, purchasing, accounting,
engineering, marketing, merchandising and selling, including the Company's
proposed and present business and its products, processes, methods of
production, formulas, and services whether patentable or not, which has been
disclosed to the Recipient, alone or with others, intentionally or
unintentionally, except as otherwise provided herein. The Recipient agrees to
maintain and make adequate and current written records of all Information, to
the extent practical, in the form of notes, sketches, drawings, procedures,
laboratory reports or notebooks relating thereto, which shall be and shall
remain the property of the Company and shall be available to the Company at all
times.
2. Assignment of the Information
a. The Recipient is obligated to assign and agrees to assign, transfer, convey
and deliver to the Company and hereby does assign, transfer and convey to the
Company, all right, title and interest in and to all Information required to be
disclosed by the Recipient to the Company under paragraph 1 of this Agreement
and all patents and patent applications (including continuations,
continuations-in-part, divisions, reissues, renewals and extensions) for all
countries relating to such Information, provided that such assignment does not
apply to any such information developed by Recipient outside the scope of his
employment. Further, if the Recipient violates the law or breaches any contract
as a result of signing this agreement or working for the Company the Recipient
will indemnify the Company for any damages resulting therefrom.
b. At the request of the Company, the Recipient will assist the Company or any
person or persons from time to time designated by the Company, to obtain the
grant of patents in the United States and/or in such other country or countries
as may be designated by the Company covering the Information and will in
connection therewith execute such applications, statements or other documents,
furnish such information and data and take all such other action (including
without limitation, the giving of testimony) as the Company may from time to
time reasonably request.
3. Non-Disclosure of Information
a. The Recipient will not, without prior written approval from the
Company's Board of Directors, use, disclose, disseminate, publish or lecture on
any Information.
b. The Recipient will not, without prior written approval from the
Company's Board of Directors, at any time or manner, make or cause to be made,
any copies, pictures, duplicates, facsimiles or other reproductions or
recordings or any abstracts or summaries of any laboratory reports, studies,
memoranda, procedures, correspondence, manuals, customer lists, records,
formulas, plans, or other written, printed or otherwise recorded material of any
kind or of any equipment or facilities belonging to or in the possession of the
Company, which may be produced or created by or come into the possession of the
Recipient in the course of his employment with the Company, or which relates in
any manner to the present business of the Company.
4. RESTRICTIVE COVENANTS
(a) During the term of his Employment the Employee shall devote his best
efforts and such time to advance the interests of the Company as required by his
Employment Agreement.
(b) During the tern of employment, Employee shall not compete with the
Company directly or indirectly, as a partner, proprietor, stockholder, officer,
director, principal, agent, employee or consultant, with respect to any person,
firm, corporation or other organization, or engage in any business which is the
same as, similar to, or in general competition with the business conducted by
the Company, except as provided hereinafter, if at all.
In furtherance of, and without in any way limiting the contents of this
restrictive clause, the Employee shall not, directly or indirectly, during the
term of his employment with the Company:
(i) request any Company customer to curtail or cancel their present or
future business with the Company; or
(ii) solicit, canvas or accept, or authorize any other person to solicit,
canvas or accept, from any past, or present customers of the Company any
business for any other person, firm or corporation engaged in any business which
is the same as, similar to or in general competition with the business of the
Company;
(c) The Employee shall have no right, title or interest in any copies,
pictures, duplicates, facsimiles or other reproductions or recordings or any
abstracts or summaries of any reports, studies, memoranda, correspondence,
manuals, customer lists, records, formulas, plans or other written, printed or
otherwise recorded material of any kind whatever related to the business of the
Company or any equipment or facilities belonging to the Company, which may be
produced or created by or come into the possession of the Employee in the course
of his employment with the Company. The Employee further agrees that without the
prior written consent of the Company's Board he will not remove or cause to be
removed any such material except personal material unrelated to the business of
the Company from any premises of the Company, and that he will surrender all
such material to the Company immediately upon the termination of his employment
or at any time prior thereto upon request of the Company, except material which
is not proprietary or unique or having only nominal value.
(d) The Employee will promptly disclose and assign to the Company any and
all unique and proprietary information and improvements, discoveries, ideas and
inventions (whether or not patentable) made or conceived or possessed by the
Employee while employed by the Company, either alone or in conjunction with
others, whether or not made or conceived at the request of or upon the
suggestion of the Company, which directly relates to the Company's business.
However, any monies received from publications, honors or prizes shall be
retained by Employee, his heirs or assigns, provided that such publications do
not violate this Agreement.
(e) The Employee will not, without the prior written approval of the Board
of Directors, which shall not be unreasonably withheld, directly or indirectly,
use, disseminate, disclose, lecture upon, or publish articles concerning the
company's present or proposed products or projects, trade practices or any other
unique or proprietary information which presently exists or is established or
developed hereafter by the Company.
(f) Nothing herein shall be construed in a manner which limits action taken
by Employee in the normal and proper execution of his duties.
5. Termination of Relationship
a. Upon termination of his relation as Recipient under this
agreement with the Company, all documents, records, notebooks and similar
repositories containing Information which constitute part of the Company's
business and which are in Recipient's possession, whether prepared by him or
others, shall be and shall remain the property of the Company and shall be left
with the Company or turned over to the Company.
b. Upon termination the Recipient shall disclose all information relevant to the
Company's business or proposed or existing products of the Company but which may
not be described in subsection (a) above.
c. Termination of this relationship shall not release the Recipient from:
i. any obligation under this Agreement as to any Information which the
Recipient has a duty to disclose to the Company under paragraph 1 of this
Agreement; and,
ii. any obligation in paragraph 3 of this Agreement relating to
non-disclosure for a period of two (2) years after termination, for any reason,
of the Recipient's employment with the Company, provided that the Recipient
shall keep confidential all information unique or proprietary, or which pertains
to product knowledge and trade practices of the Company, and shall not for a
period of 10 years from termination, directly or indirectly, use, disseminate,
disclose, lecture upon, or publish articles concerning such confidential
information. Except that Employee shall have no residual obligations to the
Company in the event that termination results from the failure of the Company to
honor its obligations under Employee's employment agreement.
6. Warranty
The Recipient represents that he has no prior agreements or obligations which
conflict with the Company's rights under this Agreement.
7. Enforceability
The Recipient acknowledges and accepts the conditions imposed on his employment
by this Agreement and the Company shall be entitled to preliminary and permanent
injunctive relief as well as an equitable accounting of all earnings, profits,
and other benefits arising from such violation, which rights shall be cumulative
and in addition to any other rights or remedies to which the Company may be
entitled. In the event that the Recipient shall disclose any information during
the two (2) year period in which his use of such information is restricted, the
restriction period shall be extended for a period of time equal to that period
beginning when such violation commenced and ending when the activities
constituting such violation shall have been finally terminated in good faith. If
the scope of the restrictions contained herein are too broad to permit
enforcement of such restrictions to the full extent, then such restrictions
shall be enforced to the maximum extent permitted by law and the Company and
Recipient hereby consent and agree that such scope may be judicially or
otherwise modified accordingly in any forum having jurisdiction of the subject
matter and in any proceeding which may be brought to enforce such restrictions.
8. Binding Effect
a. This Agreement shall be binding upon and inure to the benefit of the Company,
its affiliates, subsidiaries, successors and assigns and may not be changed or
modified, or released, discharged, abandoned or otherwise terminated, in whole
or in part, except by a written instrument signed by the Board of Directors.
b. This Agreement shall be binding upon the Recipient, his heirs, executors,
administrators, guardians, or other legal representative, successors or assigns.
Recipient acknowledges receipt of a copy of this Agreement.
9. Applicable Law
This Agreement shall be governed for all purposes by the laws of the State of
New Jersey and shall be enforceable only in the Superior Court of New Jersey for
Bergen County. If any provision of this Agreement is declared void, such
provision shall be deemed severed from this Agreement, which shall otherwise
remain in full force and effect.
10. Supersedes Earlier Agreements
This Agreement supersedes any and all earlier agreements made between the
Recipient and the Company relating to the assignment and non-disclosure of such
Information.
11. Subsequent and Current Employment
Notwithstanding any provision in this Contract, Employee shall
not be prevented upon termination of this Contract from obtaining employment or
conducting business in the chemical industry, or a similar industry, so long as
proprietary information belonging to the Company is not divulged or practiced
except as allowed by law and personnel and business are not diverted away from
the Company by the Employee. Thus, Section 5 above remains in full force and
effect, except that the employment by Employee in the chemical industry will not
operate as an automatic breach of said Section 5. Employee will however be in
breach of such agreement if he uses knowledge gained from PPA Technologies, Inc.
either before the execution of this Agreement, or, of course, during the period
of his employment with the Company to assist in any fashion a subsequent
employer or in Employee's own business commenced after the termination of his
employment by the Company.
Employee is also not bound by any term of this Agreement which would
cause a conflict with any obligation which the Employee's present occupation
and/or other businesses do or would in the future impose upon him.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PPA TECHNOLOGIES, INC.
BY: /s/ Gerald Sugerman
Gerald Sugerman
Vice President
/s/ Roger Fidler
Roger Fidler
This Lease Agreement, made the 13th day of March 1997,
Landlord
Between: ARCHIE SCHWARTZ CO./ BELL HOLDING CO.
c/o Mandelbaum
residing or located at: 80 Main Street in the Town of West Orange in the County
of Essex and State of New Jersey, herein designated as the Landlord, and
Tenant
PPA TECHNOLOGIES, INC.. residing or located at #8 Cambridge Drive in the Boro.
of Allendale in the County of Bergen and State of New Jersey, herein designated
as the Tenant; Witnesseth that, the Landlord does hereby lease to the Tenant and
the Tenant does hereby rent from the Landlord, the following described premises:
Premises
#163 SOUTH STREET, HACKENSACK, NEW JERSEY
Term
for a term of four (4) years commencing on April 1st 1997, and ending on March
31st, 2001 to be used and occupied only and for no other purpose than
Use
distribution of environmentally friendly products which has an ISRA Code number
of 5099-42/43. Tenant agrees to comply with zoning ordinances and other rules
and regulations of the City of Hackensack, County of Bergen, State of New
Jersey.
Upon the following Conditions and Covenants:
Payment of Rent
1st: The Tenant covenants and agrees to pay to the Landlord, as rent for and
during the term hereof, the sum of See Exhibit "A"-Rent Clause in the following
manner:
Repairs and Care
2nd: The Tenant has examined the premises and has entered into this lease
without any representation on the part of the Landlord as to the condition
thereof. The Tenant shall take good care of the premises and shall at the
Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice.
<PAGE>
Glass, etc. Damage Repairs
3rd: In case of the destruction of or any damage to the glass in the leased
premises, or the destruction of or damage of any kind whatsoever to the said
premises, caused by the carelessness, negligence or improper conduct on the part
of the Tenant or the Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors, the Tenant shall repair the said damage or
replace or restore any destroyed parts of the premises, as speedily as possible,
at the Tenant's own cost and expense.
Alterations/Improvements
4th: No alterations, additions or improvements shall be made, and no climate
regulating, air conditioning, cooling, heating or sprinkler systems, television
or radio antennas, heavy equipment, apparatus and fixtures, shall be installed
in or attached to the leased premises, without the written consent of the
Landlord. Unless otherwise provided herein, all such alterations, additions or
improvements and systems, when made, installed in or attached to the said
premises, shall belong to and become the property of the Landlord and shall be
surrendered with the premises and as part thereof upon the expiration or sooner
termination of this lease, without hindrance, molestation or injury.
Signs
5th: The Tenant shall not place nor allow to be placed any signs of any kind
whatsoever, upon, in or about the said premises or any part thereof, except of a
design and structure and in or at such places as may be indicated and consented
to by the Landlord in writing. In case the Landlord or the Landlord's agents,
employees or representatives shall deem it necessary to remove any such signs in
order to paint or make any repairs, alterations or improvements in or upon said
premises or any part thereof, they may be so removed, but shall be replaced at
the Landlord's expense when the said repairs, alterations or improvements shall
have been completed. Any signs permitted by the Landlord shall at all times
conform with all municipal ordinances or other laws and regulations applicable
thereto.
Utilities
6th: The Tenant shall pay when due all the rents or charges for water or other
utilities used by the Tenant, which are or may be assessed or imposed upon the
leased premises or which are or may be charged to the Landlord by the suppliers
thereof during the term hereof, and if not paid, such rents or charges shall be
added to and become payable as additional rent with the installment of rent next
due or within 30 days of demand therefor, whichever occurs sooner.
Compliance with Laws etc.
<PAGE>
7th: The Tenant shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the Federal, State and Municipal
Governments or Public Authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for the correction, prevention and abatement of nuisances, violations
or other grievances in, upon or connected with the said premises, during the
term hereof: and shall promptly comply with all orders, regulations,
requirements and directives of the Board of Fire Underwriters or similar
authority and of any insurance companies which have issued or are about to issue
policies of insurance covering the said premises and its contents, for the
prevention of fire or other casualty, damage or injury, at the Tenant's own cost
and expense.
Liability Insurance
8th: The Tenant, at Tenant's own cost and expense, shall obtain or provide and
keep in full force for the benefit of the Landlord, during the term hereof,
general public liability insurance, insuring the Landlord against any and all
liability or claims of liability arising out of, occasioned by or resulting from
any accident or otherwise in or about the leased premises, for injuries to any
person or persons, for limits of not less than $1,000,0000 for injuries to one
person and $1,000,000 for injuries to more than one person, in any one accident
or occurrence, and for loss or damage to the property of any person or persons,
for not less than $250,000.
Indemnification
The policy or policies of insurance shall be of a company or companies
authorized to do business in this State and shall be delivered to the Landlord,
together with evidence of the payment of the premiums therefor, not less than
fifteen days prior to the commencement of the term hereof or of the date when
the Tenant shall enter into possession, whichever occurs sooner. At least
fifteen days prior to the expiration or termination date of any policy, the
Tenant shall deliver a renewal or replacement policy with proof of the payment
of the premium therefor. The Tenant also agrees to and shall save, hold and deep
harmless and indemnify the Landlord from and for any and all payments, expenses,
costs, attorney fees and from and for any and all claims and liability for
losses or damage to property or injuries to persons occasioned wholly or in part
by or resulting form any acts or omissions by the tenant or the Tenant's agents,
employees, guests, licensees, invites, subtenants, assignees or successors, or
for any cause or reason whatsoever arising out of or by reason of the occupancy
by the Tenant and the conduct of the Tenant's business.
Assignment
9th: The Tenant shall not, without the written consent of the Landlord, assign,
mortgage or hypothecate this lease, nor sublet or sublease the premises or any
part thereof.
Restriction of use
10th: The Tenant shall not occupy or use the leased premises or any part
thereof, nor permit or suffer the same to be occupied or used for any purposes
other than as herein limited, nor for any purpose deemed unlawful, disreputable,
or extra hazardous, on account of fire or other casualty.
Mortgage Priority
11th: This lease shall not be a lien against the said premises in respect to any
mortgages that may hereafter be placed upon said premises. The recording of such
mortgage or mortgages shall have preference and precedence and be superior and
prior in lien to this lease, irrespective of the date of recording and the
Tenant agrees to execute any instruments, without cost, which may be deemed
necessary or desirable, to further effect the subordination of this lease to any
such mortgage or mortgages. A refusal by the Tenant to execute such instruments
shall entitle the Landlord to the option of canceling this lease and the term
hereof expressly limited accordingly.
<PAGE>
Condemnation Eminent Domain
12th: If the land and premises leased herein, or of which the leased premises
are a part, or any portion thereof, shall be taken under eminent domain or
condemnation proceedings, or if suit or other action shall be instituted for the
taking or condemnation thereof, or if in lieu of any format condemnation
proceedings or actions, the Landlord shall grant an option to purchase and or
shall sell and convey the said premises or any portion thereof, to the
governmental or other public authority, agency, body or public utility, seeking
to take said land and premises or any portion thereof, than this lease, at the
option of the Landlord, shall terminate, and the term hereof shall end as of
such date as the Landlord shall fix by notice in writing; and the Tenant shall
have no claim or right to claim or be entitled to any portion of any amount
which may be awarded as damages or paid as the result of such condemnation
proceedings or paid as the purchase price for such option, sale or conveyance in
lieu of formal condemnation proceedings; and all rights of the Tenant to
damages, if any, are hereby assigned to the Landlord. The Tenant agrees to
execute and deliver any instruments, at the expense of the Landlord, as may be
deemed necessary or required to expedite any condemnation proceedings or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the said
lands and premises or any portion thereof. The Tenant covenants and agrees to
vacate the said premises, remove all the Tenant's personal property therefrom
and deliver up peaceable possession thereof to the Landlord or to such other
party designated by the Landlord in the aforementioned notice. Failure by the
Tenant to comply with any provisions in this clause shall subject the Tenant to
such costs, expenses, damages and losses as the Landlord may incur by reason of
the Tenant's breach hereof.
Fire and other Casually
13th: In case of fire or other casualty, the Tenant shall give immediate notice
to the Landlord. If the premises shall be partially damaged by fire, the
elements or other casualty, the Landlord shall repair the same as speedily as
practicable, but the Tenant's obligation to pay the rent hereunder shall not
cease. If, in the opinion of the Landlord, the premises be so extensively and
substantially damaged as to render them untenantable, then the rent shall cease
until such time as the premises shall be made tenantable by the Landlord.
However, if, in the opinion of the Landlord, the premises be totally destroyed
or so extensively and substantially damaged as to require practically a
rebuilding thereof, then the rent shall be paid up to the time of such
destruction and then from thenceforth this lease shall come to an end. In no
event however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the result of the
carelessness, negligence or improper conduct of the Tenant or the Tenant's
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors. In such case, the Tenant's liability for the payment of the rent and
the performance of all the covenants, conditions and terms hereof on the
Tenant's part to be performed shall continue and the Tenant shall be liable to
the Landlord for the damage and loss suffered by the Landlord. If the Tenant
shall have been insured against any of the risks herein covered, then the
proceeds of such insurance shall be paid over to the Landlord to the extent of
the Landlord's costs and expenses to make the repairs hereunder, and such
insurance carriers shall have no recourse against the Landlord for
reimbursement.
<PAGE>
Reimbursement of Landlord
14th: If the Tenant shall fail or refuse to comply with and perform any
conditions and covenants of the within lease, the Landlord may, if the Landlord
so elects, carry out and perform such conditions and covenants, at the cost and
expense of the Tenant, and the said cost and expense shall be payable on demand,
or at the option of the Landlord shall be added to the instalment of rent due
immediatley thereafter but in no case later than one month after such demand,
whichever occurs sooner, and shall be due and payable as such. This remedy shall
be in addition to such other remedies as the Landlord may have hereunder by
reason of the breach by the Tenant of any of the covenants and conditions in
this lease contained.
Inspection and Repair
15th: The Tenant agrees that the Landlord and the Landlord's agents, employees
or other representatives, shall have the right to enter into and upon the said
premises or any aprt thereof, at all reasonable hours, for the purpose of
examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs.
Right to Exhibit
16th: The Tenant agrees to permit the Landlord and the Landlord's agents,
employees or other representatives to show the premises to persons wishing to
rent or purchase the same, and Tenant agrees that on and after ninety (90) days
next preceding the expiration of the term hereof, the Landlord or the Landlord's
agents, employees or other representatives shall have the right to place notices
on the front of said premises or any part thereof, offering the premises for
rent or for sale; and the Tenant hereby agrees to permit the same to remain
thereon without hindrance or molestation.
Increase of Insurance Rates
17th: If for any reason it shall be impossible to obtain fire and othe hazard
insurance on the buildings and improvements on the leased premises, in an amount
and in the form and in insurance companies acceptable to the Landlord, the
Landlord may, if the Landlord so elects at any time thereafter, terminate this
lease and the term hereof, upon giving to the Tenant fifteen days notice in
writing of the Landlord's intention so to do, and upon the giving of such
notice, this lease and the term thereof shall terminate. If by reason of the use
to which the premises are put by the Tenant or character of or the manner in
which the Tenant's business is carried on, the insurance rates for fire and
other hazards shall be increased, the Tenant shall upon demand, pay to the
Landlord, as rent, the amounts by which the premiums for such insurance are
increased. Such payment shall be paid with the next installment of rent but in
no case later than one month after such demand, whichever occurs sooner.
Removal of Tenant's Property
<PAGE>
18th: Any equipment, fixtures, goods or other property of the Tenant, not
removed by the Tenant upon the termination of this lease, or upon any quitting,
vacating or abandonment of the premises by the Tenant, or upon the Tenant's
eviction, shall be considered as abandoned and the Landlord shall have the
right, without any notice to the Tenant, to sell or otherwise dispose of the
same, at the expense of the Tenant, and shall not be accountable to the Tenant
for any part of the proceeds of such sale, if any.
Remedies upon Tenant's Default
19th: If there should occur any default on the part of the Tenant in The
performance of any conditions and covenants herein contained, or if during the
term hereof the premises or any part thereof shall be or become abandoned or
deserted, vacated or vacant, or should the Tenant be evicted by summary
proceedings or otherwise, the Landlord, in addition to any other remedies herein
contained or as may be permitted by law, may either by force or otherwise,
without being liable for prosecution therefor, or for damages, re-enter the said
premises and the same have and again possess and enjoy; and as agent for the
Tenant or otherwise, re-let the premises and receive the rents therefor and
apply the same, first to the payment of such expenses, reasonable attorney fees
and costs, as the Landlord may have been put to in re-entering and repossessing
the same and in making such repairs and alterations as may be necessary; and
second to the payment of the rents due hereunder. The Tenant shall remain liable
for such rents as may be in arrears and also the rents as may accrue subsequent
to the re-enter by the Landlord, to the extent of the difference between the
rents reserved hereunder and the rents, if any, received by the Landlord during
the remainder of the unexpired term hereof, after deducting the aforementioned
expenses, fees and costs; the same to be paid as such deficiencies arise and are
ascertained each month.
Termination on Default
20th: Upon the occurrence of any of the contingencies set forth in the preceding
clause, or should the Tenant be adjudicated a bankrupt, insolvent or placed in
receivership, or should proceedings be instituted by or against the Tenant for
bankruptcy, insolvency, receivership, agreement of composition or assignment for
the benefit of creditors, or if this lease or the estate of the Tenant hereunder
shall pass to another by virtue of any court proceedings, writ of execution,
levy, sale, or by operation of law, the Landlord may, if the Landlord so elects,
at any time thereafter, terminate this lease and the term hereof, upon giving to
the Tenant or to any trustee, receiver, assignee or other person in charge of or
acting as custodian of the assets or property of the Tenant, five days notice in
writing, of the Landlord's intention so to do. Upon the giving of such notice,
this lease and the term hereof shall end on the date fixed in such notice as if
the said date was the date originally fixed in this lease for the expiration
hereof; and the Landlord shall have the right to remove all persons, goods,
fixtures and chattels therefrom, by force or otherwise, without liability for
damages.
Non-Liability of Landlord
<PAGE>
21st: The Landlord shall not be liable for any damage or injury which may be
sustained by the Tenant or any other person, as a consequence of the failure,
breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or
soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or
of the electrical, gas, power, conveyor, refrigeration, sprinkler,
airconditioning or heating systems, elevators or hoisting equipment; or by
reason of the elements; or resulting from the carelessness, negligence or
improper conduct on the part of any other Tenant or of the Landlord or the
Landlord's or this or any other Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control of the
landlord, of any services to be furnished or supplied by the Landlord.
Non-Waiver by Landlord
22nd: The various rights, remedies, options and elections of the Landlord,
expressed herein, are cumulative, and the failure of the Landlord o enforce
strict performance by the Tenant of the conditions and covenants of this lease
or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Landlord of any installment of
rent after any breach by the Tenant, in any one or more instances, shall not be
construed or deemed to be a waiver or a relinquishment for the future by the
Landlord or any such conditions and covenants, options, elections or remedies,
but the same shall continue in full force and effect.
Non-Performance by Landlord
23rd: This lease and the obligation of the Tenant to pay the rent hereunder and
to comply with the covenants and conditions hereof, shall not be affected,
curtailed, impaired or excused because of the Landlord's inability to supply any
service or material called for herein, by reason of any rule, order, regulation
or preemption by any governmental entity, authority, department, agency or
subdivision or for any delay whcih may arise by reason of negotiations for the
adjustment of any fire or other casualty loss or because of strikers or other
labor trouble or for any cause beyond the control of the Landlord.
Validity of Lease
24th: The terms, conditions, covenants and provisions of this lease shall be
deemed to be severable. If any clause or provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
Notices
25th: All notices required under the terms of this lease shall be given and
shall be complete by mailing such notices by certified or registered mail,
return receipt requested, to the address of the parties as shown at the head of
this lease, or to such other address as may be designated in writing, which
notice of change of adcress shall be given in the same manner.
Title and Quiet Enjoyment
26th: The Landlord covenants and represents that the Landlord is the owner of
the premises herein leased and has the right and authority to enterinto, execute
and deliver this lease; and does further covenant that the Tenant on paying the
rend and performing the ocnditions and covenants herein contained, shall and may
peaceably and quietly have, hold and enjoy the leased premises for the term
aforementioned.
Entire Contract
<PAGE>
27th: This lease contians the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
Tax Increase
28th: See Rider Para. #32
Mechanics' Liens
29th: If any mechanics' or other liens shall be created or filed against the
leased premises by reason of labor performed or materials furnished for the
Tenant in the erection, construction, completion, alteration, repair or addition
to any building or improvement, the Tenant shall upon demand, at the Tenant's
own cost and expense, cause such lien or liens to be satisfied and discharged of
record together with any Notices of Intention that may have been filed. Failure
so to do, shall entitle the Landlord to resort to such remedies as are provide
herein in the case of any default of this lease, in addition to such as are
permitted by law.
Waiver of Subrogation Rights
30th: The Tenant waives all rights of recovery against the Landlord or
Landlord's agents, employees or other representatives, for any loss, damages or
injury of any nature whatsoever to property or persons for which the Tenant is
insured. The Tenant shall obtain from Tenant's insurance carriers and will
deliver to the Landlord, waivers for the subrogation rights under the respective
policies.
Security
31st: The Tenant has this day deposited with the Landlord the sum of (2) months
rent as security for the payment of the rent hereunder and the full and faithful
performance by the Tenant of the covenants and conditions on the part of the
Tenant to be performed. Said sum shall be returned to the Tenant, without
interest, after the expiration of the term hereof, provided that the Tenant has
fully and faithfully performed all such covenants and conditions and is not in
arrears in rent During the term hereof, the Landlord may, if the Landlord so
elects, have recourse to such security, to make good any default by the Tenant,
in which event the Tenant shall, on demand, promptly restore said security to
its original amount. Liability to repay said security to the Tenant shall run
with the reversion and little to said premises, whether any change in ownership
thereof be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings, or the exercise of a right of taking or entry
by any mortgagee. The Landlord shall assign or transfer said security, for the
benefit of the Tenant, to any subsequent owner or holder of the reversion or
title to said premises, in which case the assignee shall become liable for the
repayment thereof as herein provided, and the assignor shall be deemed to be
released by the Tenant from all liability to return such security. This
provision shall be applicable to every alienation or change in title and shall
in no wise be deemed to permit the Landlord to retain the security after
termination of the Landlord's ownership of the reversion or title. The Tenant
shall not mortgage, encumber or assign said security without the written consent
of the Landlord.
See Exhibits A,B, and C attached hereto and made a part hereof.
See Rider attached hereto and made a part hereof.
<PAGE>
Conformation with Laws and Regulations
The Landlord may pursue the relief or remedy sought in any invalid
clause, by conforming the said clause with the provisions of the statutes or the
regulations of any governmental agency in such case made and provided as if the
particular provisions of the applicable statutes or regulations were set forth
herein at length.
In all references herein to any parties, persons, entities or
corporations the use of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the text of the
within instrument may require. All the terms, covenants and conditions herein
contained shall be for and shall inure to the benefit of and shall bind the
respective parties hereto, and their heirs, executors, administrators, personal
or legal representatives, successors and assigns.
In Witness Whereof, the parties hereto have hereunto set their hands
and seals, or caused these presents to be signed by their proper corporate
officers and their proper corporate seal to be hereto affixed, the day and year
first above written.
Signed, Sealed and Delivered ARCHIE SCHWARTZ CO./BELL HOLDING CO
in the presence of
or Attested by /S/ David Mandelbaum
David Mandelbaum Landlord
PPA TECHNOLOGIES, INC.
Tenant
/S/ Gerald Sugerman/ Secretary /S/ Roger L. Fidler
Gerald Sugerman Roger L. Fidler
CONSENT OF CERTIFIED PUBLIC ACCOUNTANT
The undersigned, Thomas P. Monahan, the certified public accountant who
audited the financial statements of PPA Technologies, Inc. for the years ending
June 30, 1996 and 1997, hereby consents to the use of his accountant's report,
and related statements in the registration statement of PPA Technologies, Inc.
filed herewith.
/S/ Thomas P. Monahan
Thomas P. Monahan, C.P.A.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the six month period ended October 31, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001041178
<NAME> PPA Technologies, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1998
<CASH> 84,608
<SECURITIES> 0
<RECEIVABLES> 4,442
<ALLOWANCES> 0
<INVENTORY> 37,648
<CURRENT-ASSETS> 126,698
<PP&E> 154,242
<DEPRECIATION> (17,515)
<TOTAL-ASSETS> 269,775
<CURRENT-LIABILITIES> 407,201
<BONDS> 0
0
296,600
<COMMON> 51,750
<OTHER-SE> (485,776)
<TOTAL-LIABILITY-AND-EQUITY> 269,775
<SALES> 33,285
<TOTAL-REVENUES> 33,285
<CGS> 10,837
<TOTAL-COSTS> 127,812
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,637
<INCOME-PRETAX> (105,364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (105,364)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (115,001)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
