As filed with the Securities and Exchange Commission on November 7, 1997
Registration No. 333-
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
GALACTICOMM TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 7373 65 0624233
- ---------------------------- ---------------------------- -------------------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
or organization) Classification Code No.) Identification No.)
4101 S.W. 47TH AVENUE
SUITE 101
FT. LAUDERDALE, FLORIDA 33314
(954) 583-5990
----------------------------------------
(Address of principal executive offices)
PETER BERG, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GALACTICOMM TECHNOLOGIES, INC.
4101 S.W. 47TH AVENUE
SUITE 101
FT. LAUDERDALE, FLORIDA 33314
(954) 583-5990
---------------------------------------
(Name and address of agent for service)
Copies to:
LESLIE J. CROLAND, ESQ. PHILLIP B. SCHWARTZ, ESQ.
JEFF T. MIHM, ESQ. STEWART H. LAPAYOWKER, ESQ.
LUCIO, MANDLER, CROLAND, STEELE, BRONSTEIN, AKERMAN, SENTERFITT & EIDSON, P.A.
GARBETT, STIPHANY & MARTINEZ, P.A. ONE S.E. 3RD AVENUE, 28TH FLOOR
701 BRICKELL AVENUE, SUITE 2000 MIAMI, FLORIDA 33131-1704
MIAMI, FLORIDA 33131 (305) 374-5600
(305) 579-0012 (305) 374-5095 (FAX)
(305) 579-4722 (FAX)
Approximate date of proposed sale to the public: AS SOON AS REASONABLY
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) or
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units(2)(3)......... $ $10,350,000 $3,136.36
- ---------------------------------------------------------------------------------------------------
Units underlying
Representative Unit
Purchase Option..... $ $ 1,080,000 $ 327.27
- ---------------------------------------------------------------------------------------------------
Common Stock, par
value $.0001, included --- --- ---
in Units(2)(4)......
- ---------------------------------------------------------------------------------------------------
Common Stock Purchase
Warrants(2)(5)...... --- --- ---
- ---------------------------------------------------------------------------------------------------
Common Stock, par
value $.0001, underlying
Warrants(2)(6)...... $ $ 6,750,000 $2,045.45
- ---------------------------------------------------------------------------------------------------
Common Stock, par
value $.0001, underlying
Bridge Warrants(7).. $ 3,591,000 $1,088.18
- ---------------------------------------------------------------------------------------------------
Total............... $21,771,000 $6,597.26
===================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes Units subject to the Underwriters' over-allotment option.
(3) Each Unit contains one share of common stock, par value $.0001 per share
("Common Stock"), and one Common Stock Purchase Warrant. No portion of the
offering price is attributable to the Warrants.
(4) Represents Common Stock within the Units, including the Units underlying the
Representative Unit Purchase Option. The registration fee for such Common
Stock is included within the Units.
(5) Represents Warrants within the Units, including the Units underlying the
Representative Unit Purchase Option.
(6) Issuable upon exercise of the Warrants, together with such indeterminable
number of shares of Common Stock as may be issuable by reason of the
anti-dilution provisions contained therein. The exercise of two warrants is
required to purchase one share of Common Stock, subject to adjustment.
(7) Issuable upon exercise of the Bridge Warrants, together with such
indeterminable number of shares of Common Stock as may be issuable by reason
of the anti-dilution provisions contained therein.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: (i) one to be
used in connection with the offer of Units by the Company (the "Prospectus");
and (ii) the other to be used in connection with the offer of an aggregate of
957,600 shares of Common Stock by certain selling shareholders (the "Selling
Shareholder Prospectus") underlying warrants (the "Bridge Warrants") issued in
October 1997 in connection with a bridge financing by the Company. The Bridge
Warrants are exercisable until October 27, 2000 to purchase an aggregate of
957,600 shares of Common Stock at an exercise price of $3.75 per share. See
"Recent Financings." The Prospectus and the Selling Shareholder Prospectus will
be identical in all respects except for the alternate pages for the Selling
Shareholder Prospectus included herein which are labeled "Alternate."
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1997
UNITS
GALACTICOMM TECHNOLOGIES, INC.
EACH UNIT CONTAINS ONE SHARE OF COMMON STOCK
AND ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT
Galacticomm Technologies, Inc. (the "Company") hereby offers ______ units
("Units"), each Unit consisting of one share of common stock, par value $.0001
per share (the "Common Stock"), and one Redeemable Common Stock Purchase Warrant
(the "Warrant") of the Company. Two Warrants will entitle the holder to purchase
one share of Common Stock at a price equal to 120% of the initial public
offering price of the Units, during the period commencing (the "First Exercise
Date") 90 days after the date of this Prospectus, or on such earlier date as may
be determined by the Company and First Equity Corporation of Florida (the
"Representative") as the representative of the several Underwriters named herein
("Underwriters") and ending on the third anniversary of the date of this
Prospectus. No fractional shares will be issued upon exercise of the Warrants.
Outstanding Warrants are redeemable by the Company commencing 30 days after the
First Exercise Date upon 30 days prior written notice to the holders thereof, if
the average closing bid and asked price of the Common Stock for a period of 20
consecutive trading days is at least equal to 150% of the exercise price of the
Warrants. The Common Stock and Warrants will be detachable from the Units and
separately transferable commencing on the First Exercise Date. The number of
shares underlying the Warrants and the exercise price thereof is subject to
adjustment in certain circumstances.
Prior to this offering, there has been no public market for the Units, the
Common Stock or the Warrants. The Company has applied to list the Units, the
Common Stock and the Warrants on the Nasdaq SmallCap Stock Market ("Nasdaq")
under the symbols "GCOMU," "GCOM," and "GCOMW," respectively. There can be no
assurance that such securities will be accepted for listing or, if accepted,
that an active trading market will develop or be sustained. It is currently
anticipated that the initial public offering price for the Units will be between
$ _____ and $ _____ per Unit. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE CONSIDERED ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6 AND "DILUTION"
ON PAGE 14.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)(3)
- --------------------------------------------------------------------------------
Per Unit ........... $_______ $_______ $_______
- --------------------------------------------------------------------------------
Total .............. $_______ $_______ $_______
================================================================================
(1) The Company has agreed to: (i) pay the Representative a non-accountable
expense allowance equal to 3% of the gross proceeds of the sale of the
Units; (ii) sell to the Representative, for nominal consideration, four-year
options (exercisable commencing one year after the date of this Prospectus)
to purchase up to Units at an exercise price equal to 120% of the public
offering price of the Units offered hereby; and (iii) indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933 (the "Securities Act"). See "Underwriting."
(2) Before deducting offering expenses payable by the Company estimated to be
approximately $375,000 and the Representative's 3% non-accountable expense
allowance payable by the Company in connection with this offering.
(3) The Company has granted the Underwriters an option exercisable within 45
days after the date hereof to purchase up to additional Units on the same
terms set forth above, solely for the purpose of covering over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
THE UNITS ARE BEING OFFERED BY THE UNDERWRITERS ON A "FIRM COMMITMENT" BASIS
SUBJECT TO PRIOR SALE, RECEIPT AND ACCEPTANCE BY THE UNDERWRITERS, APPROVAL OF
CERTAIN MATTERS BY COUNSEL, AND CERTAIN OTHER CONDITIONS. THE UNDERWRITERS
RESERVE THE RIGHT TO WITHDRAW OR CANCEL SUCH OFFER AND TO REJECT ANY OFFER, IN
WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE CERTIFICATES FOR THE
SECURITIES OFFERED HEREBY WILL BE MADE AGAINST PAYMENT THEREFOR ON OR ABOUT
__________, 1997.
FIRST EQUITY CORPORATION
The date of this Prospectus is __________, 1997
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, COMMON
STOCK OR WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
All trademarks, service marks, tradenames and related products referred to
in this Prospectus, other than as they relate directly to the Company's products
and services, are the property of their respective owners and the Company
disclaims ownership of same.
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
IN NOVEMBER 1996, THE COMPANY MERGED WITH TESSIER TECHNOLOGIES, INC. ("TTI") AND
ACQUIRED GALACTICOMM, INC., ITS OPERATING SUBSIDIARY. UNLESS THE CONTEXT
OTHERWISE REQUIRES OR UNLESS OTHERWISE NOTED: (I) ALL REFERENCES TO THE
"COMPANY" THROUGHOUT THIS PROSPECTUS REFER TO THE COMBINED OPERATIONS OF THE
COMPANY, GALACTICOMM, INC. AND TTI; (II) ALL FINANCIAL DATA IN THIS PROSPECTUS
REFLECTS THE PRO FORMA COMBINED OPERATIONS OF THE COMPANY, GALACTICOMM, INC. AND
TTI AS IF THE COMPANY HAD ACQUIRED SUCH COMPANIES ON JANUARY 1, 1995 OR 1996;
AND (III) ALL INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO A 4.061771824 TO
ONE REVERSE STOCK SPLIT WHICH OCCURRED IN SEPTEMBER 1997. SEE "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--INTRODUCTION."
THE COMPANY
Galacticomm Technologies, Inc. (the "Company") develops, markets, licenses
and supports software that enables users to communicate and conduct business
over the Internet, intranets, or other online communications systems. The
majority of the Company's software products are derived from the Company's
flagship product, Worldgroup v3.0 for Windows NT and Windows 95, which is an
integrated suite of five communications programs (E-mail, Polls and
Questionnaires, Newsgroups, Shared File Libraries and Chat) that enables an
individual or enterprise to establish an online system, an intranet or website.
Scheduled for release in December 1997, Worldgroup v3.1 will offer complete
access to a Worldgroup server using only a standard browser, such as Microsoft's
Internet Explorer or Netscape's Navigator, through the World Wide Web. The
Company estimates that Worldgroup and its predecessor product, Major BBS, have
been installed on more than 10,000 online systems worldwide, including systems
currently operated by Fortune 500 companies, financial institutions and
government agencies.
Worldgroup features an open (non-proprietary) set of interfaces, which allow
Worldgroup to serve as the software platform for specific communication
solutions for a variety of businesses and industries. In conjunction with third
party developers, the Company has designed intranets and other online systems
for specific projects relating to education, trading, online gaming, virtual
office and home television. In addition, over 200 independent software
developers have designed more than 500 available products that enhance online
systems which utilize the Worldgroup software. Worldgroup software is currently
available in 10 languages.
The Company has recently released or has under development for release
during 1997 several products, including:
WEBCAST. Released in March 1997, WebCast allows users to make live audio
and visual broadcasts, and broadcast prerecorded videos on demand, over the
Internet to viewers who need only use a standard web browser to receive the
broadcast. The Company markets WebCast directly to individual consumers and to
businesses through computer catalogs, retail outlets and bundling agreements
with camera manufacturers. The Company has recently entered into strategic
alliances to bundle WebCast with cameras and other hardware recently introduced
by Eastman Kodak, Boca Research, Specom Technologies, Best Data Products and
Aztech New Media Corp.
WORLDLINK. Scheduled for release by December 1997, Worldlink allows a
Worldgroup community to link with other Worldgroup systems. The Company believes
that the future development and organization of online communities will result
in additional Worldgroup systems and present opportunities to introduce new
products for Worldgroup system users. Worldlink with a graphical interface for
users is currently being beta-tested.
ACTIBASE. Scheduled for release in December 1997, Actibase is an
Internet database connectivity program that is fully integrated with the
Worldgroup server database. Actibase enables a company to publish any of its
databases directly onto the Worldwide Web, with only limited knowledge of
computer database programming. Actibase will be offered as a stand-alone product
as well as an add-on product to Worldgroup and WebCast. Actibase is currently
being beta-tested.
NETDISC. NetDisc is an advertising vehicle that uses the Internet and a
CD Rom disc to promote products to a specifically targeted market of consumers.
The Company's netDisc technology incorporates advertising video clips and
website links to advertisers' web pages. NetDisc's game format allows users to
win promotional prizes. In conjunction with advertising agencies and magazine
publishers, the Company intends to insert the netDisc in magazines, the first
installment of which is anticipated to be the April 1998 issue of MOTOR TREND
magazine.
The Company's objective is to become a leading developer of communications
software for the Internet, intranet and other online communications systems. The
Company intends to achieve its objective by: (i) developing customized intranets
and other applications using Worldgroup as the software foundation; (ii)
continually upgrading Worldgroup and other programs and offering new programs
that deliver customers high levels of performance, ease of use and security; and
(iii) establishing strategic alliances to increase sales and facilitate market
acceptance of the Company's products.
3
<PAGE>
The Company's executive offices are located at 4101 S.W. 47th Avenue, Suite 101,
Fort Lauderdale, Florida 33314. The Company can be reached by telephone at (954)
583-5990 or through its website at http:/www.gcomm.com.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
THE SECURITIES OFFERED.............. Units at an estimated offering price of between $ and
$ for each Unit.
THE UNITS........................... Each Unit contains one share of Common Stock and one
Redeemable Common Stock Purchase Warrant. The Common Stock and the Warrants
will be detachable from the Units commencing on the First Exercise Date
(as defined immediately below).
THE WARRANTS........................ Two Warrants entitle a holder to purchase one share of Common
Stock at an exercise price per share equal to 120% of the initial
offering price of a Unit. The Warrants will be exercisable
during the period commencing ("First Exercise Date") 90 days
after the date of this Prospectus, or on such earlier date as may
be determined by the Company and the Representative, and
ending on the third anniversary of the date of this Prospectus.
The Warrants will be redeemable by the Company, commencing
30 days after the First Exercise Date upon 30 days written
notice, if the average of the closing bid and asked price of the
Common Stock for 20 consecutive trading days ending three
trading days prior to the date of the redemption notice is at least
equal 150% of the exercise price of the Warrants. The Warrants
are subject to adjustment under certain circumstances. See
"Description of Securities--Warrants."
COMMON STOCK OUTSTANDING PRIOR
TO THE OFFERING.................. 4,367,245 shares(1)
COMMON STOCK OUTSTANDING AFTER
THE OFFERING..................... shares (1)(2)
USE OF PROCEEDS .................... The Company intends to use the proceeds from this offering for:
(i) advertising and marketing programs, (ii) repayment of
indebtedness; (iii) research and development; (iv) working
capital; and (v) capital expenditures. See "Use of Proceeds."
PROPOSED NASDAQ SMALLCAP
MARKET SYMBOLS.................... Units -- "GCOMU"
Common Stock -- "GCOM"
Warrants -- "GCOMW"
RISK FACTORS........................ The securities offered hereby are speculative and involve a high
degree of risk and immediate, substantial dilution and should not
be purchased by investors who cannot afford the loss of their
entire investment. Prospective investors are urged to carefully
review the "risk factors" starting on page 6 before making an
investment decision.
<FN>
- --------------
(1) Includes 537,337 shares of Common Stock underlying two convertible
promissory notes that will be automatically converted on the effective date of
this Prospectus. See "Certain Transactions--Wallenberg Trust and UA Partners
Investments." Does not include: (i) 370,000 shares of Common Stock under the
Company's 1997 Stock Option Plan, of which options to purchase 164,337 shares of
Common Stock are currently outstanding; (ii) 363,143 shares of Common Stock
reserved for issuance upon the exercise of outstanding options outside the 1997
Stock Option Plan; (iii) 173,482 shares of Common Stock reserved for issuance
upon the exercise of two warrants; and (iv) 957,600 shares of Common Stock
reserved for issuance upon the exercise of the warrants (the "Bridge Warrants")
issued in connection with the Company's October 1997 Bridge Financing. See
"Management--Stock Option Plan," "Management--Stock Option Plan,"
"Management--Employment Agreement," "Recent Financings," and "Certain
Transactions."
(2) Does not include: (i) shares of Common Stock reserved for issuance upon the
exercise of the over-allotment option and the Warrants included as part of the
over-allotment option; (ii) shares of Common Stock issuable upon exercise of the
Warrants included as part of the Units offered hereby; (iii) shares of Common
Stock reserved for issuance upon the exercise of the Representative Unit
Purchase Option ("UPO") and the Warrants included as part of the UPO.
</FN>
</TABLE>
4
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
Set forth below is summary historical financial data of the Company for
the year ended December 31, 1996 and for the six month periods ended June 30,
1996 and 1997. The summary financial information should be read in conjunction
with the Company's consolidated financial statements and related notes and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" section contained herein.
YEAR ENDED SIX MONTHS ENDED
----------- --------------------------
12/31/96 6/30/96 6/30/97
----------- ---------- -----------
STATEMENT OF OPERATIONS DATA:
Revenues ........................ $ 1,692,743 $ 312,736 $ 1,787,879
Total operating expense ......... 2,673,699 438,921 2,842,814
Loss from operations ............ (980,956) (126,185) (1,054,935)
Other expense, net .............. (60,312) (4,268) (24,922)
----------- ----------- -----------
Net loss ........................ $(1,041,268) $ (130,453) $(1,079,857)
=========== =========== ===========
Net loss per share .............. $ (0.36) $ (0.05) $ (0.25)
Shares used in computing net loss
per share(1) .................. 2,885,273 2,671,268 4,401,502
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------------------------------
PRO FORMA
12/31/96 6/30/97 PRO FORMA(2) AS ADJUSTED(3)
----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash ............................... $ 1,466,392 $ 410,951 $ 1,866,876 $
Working capital (deficiency) ....... (475,580) (638,076) 1,016,424
Goodwill, net of amortization ...... 2,079,334 2,017,476 2,017,476
Total assets ....................... 4,434,020 3,608,881 5,437,806
Short-term obligations ............. 343,575 198,575 --
Long-term obligations .............. 1,393,999 1,386,166 3,394,862
Shareholders' equity ............... $ 949,566 $ 793,759 $ 885,063 $
<FN>
- --------------
(1) Certain common stock and common stock equivalents issued by the Company
within 12 months of the date of this Prospectus have been included in the
calculation of number of shares used in calculating net loss per share
(using the treasury stock method).
(2) Pro forma balance sheet data gives effect to the Company's receipt in
October 1997 of loans aggregating $2,100,000 which are being used by the
Company to fund its operations pending completion of this offering (the
"Bridge Financing") and the application of the net proceeds therefrom. See
"Recent Financings."
(3) Adjusted to give effect to the sale of ______ Units offered hereby at an
assumed initial offering price of $______ per share and the application of
net proceeds therefrom after deduction of underwriting discounts and
commissions and estimated expenses of the offering. See "Use of Proceeds."
</FN>
</TABLE>
SUMMARY PRO FORMA FINANCIAL DATA
Set forth below is summary pro forma financial data which gives effect
to the Company's November 1996 acquisition of Galacticomm, Inc. and merger with
Tessier Technologies, Inc. ("TTI") as if such transactions were consummated on
January 1, 1995 or 1996. The pro forma data is unaudited and is not necessarily
indicative of the results of operations of the Company had the Company acquired
Galacticomm, Inc. and TTI on January 1, 1995 or 1996.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------- ----------------
12/31/95 12/31/96 6/30/96
----------- ----------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .......................... $ 9,211,139 $ 6,189,505 $ 3,447,553
Cost of revenues .................. 2,897,036 2,515,462 1,396,703
Total operating expense ........... 6,986,378 7,240,672 3,412,375
----------- ----------- -----------
Loss from operations .............. (672,275) (3,566,629) (1,361,525)
Other expense, net ................ (354,329) (655,321) (79,466)
----------- ----------- -----------
Net loss .......................... $(1,026,604) $(4,221,950) $(1,440,991)
=========== =========== ===========
Net loss per share ................ $ (.24) $ (.98) $ (.33)
Shares used in computing net loss
per share(1) .................... 4,328,705 4,328,705 4,328,705
<FN>
- --------------
(1) Certain common stock and common stock equivalents issued by the Company
within 12 months of the date of this Prospectus have been included in the
calculation of number of shares used in calculating net loss per share
(using the treasury stock method).
</FN>
</TABLE>
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE UNITS OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY REVIEW THE FOLLOWING RISKS BEFORE MAKING AN
INVESTMENT IN THE UNITS OFFERED HEREBY. THIS INVESTMENT IS NOT RECOMMENDED FOR
THOSE WHO CANNOT BEAR THE RISKS DESCRIBED BELOW.
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING" STATEMENTS. FORWARD LOOKING
STATEMENTS ARE STATEMENTS ABOUT EVENTS THAT HAVE NOT OCCURRED. THEY INCLUDE
STATEMENTS ABOUT THE COMPANY'S FUTURE PLANS, GROWTH STRATEGIES AND INDUSTRY
TRENDS. THEY ALSO INCLUDE STATEMENTS WITH WORDS SUCH AS "ANTICIPATE," "INTEND,"
"BELIEVE," "PLAN," "ESTIMATE," AND "EXPECT." THESE FORWARD LOOKING STATEMENTS
ARE BASED LARGELY ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF
RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD LOOKING STATEMENTS AS A
RESULT OF THE FACTORS DESCRIBED IN THE FOLLOWING SECTION AS WELL AS ELSEWHERE IN
THIS PROSPECTUS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO
ASSURANCE THAT THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PROSPECTUS WILL
IN FACT TRANSPIRE OR PROVE TO BE ACCURATE.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT
The Company was incorporated in December 1995 and therefore has only a
limited operating history. Although the Company's operating subsidiary,
Galacticomm, Inc., has conducted operations since 1985, Galacticomm, Inc.'s
business and operations have only been operated by the Company and its
management team since November 1996. Furthermore, the Company's business plan is
significantly different from and larger in scope than Galacticomm, Inc.'s
historic business. Accordingly, the Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new and
rapidly evolving markets, such as computer software and the Internet. To address
these risks, the Company must, among other things, respond to competitive
developments, endeavor to attract, retain and motivate qualified persons, and
continue to upgrade its technologies and commercialize products and services
incorporating such technologies. There can be no assurance that the Company will
be successful in addressing such risks. The Company has incurred net losses
since inception. As of June 30, 1997, the Company had an accumulated deficit of
approximately $2,140,226. Pursuant to its business strategy, the Company expects
to continue to make expenditures on new product introductions, marketing, and
research and development, all of which will adversely affect operating results
until revenues from sales of such products reach a level at which these costs
are supported. There can be no assurance that the Company will achieve or
sustain profitability.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly operating results have varied significantly in the
past and the Company expects that they will continue to vary in the future.
Sales in any one quarter may fluctuate based upon a number of factors,
including: (i) the timing of the release of new products or product upgrades by
the Company or its competitors, (ii) the size and timing of individual orders by
customers, (iii) deferral of orders by customers in anticipation of new products
or product upgrades, (iv) technological changes in the operating systems upon
which the Company's products run, and (v) changes in the Internet or other
networking technology. Fluctuations in operating results may increase as a
result of the Company's business strategy to develop and sell customized
applications to larger customers to meet their specific requirements. See
"--Length of Sales Cycles." The Company believes it will be difficult to predict
the timing of these types of sales because they are subject to both designing
the solution to meet the customer's needs and convincing the customer to
purchase the products, and other risks over which the Company has little or no
control. The Company's expenses for each quarter are generally fixed and the
Company is generally unable to adjust its spending quickly enough to compensate
for unexpected shortfalls in sales. Consequently, a significant shortfall in
revenues in any quarter could immediately harm the Company's operating results.
As a result, the Company believes that period-to-period comparisons of its
operating results will not necessarily be meaningful and should not be relied
upon as an indication of future performance.
PRODUCT CONCENTRATION
Revenues from Worldgroup comprise a substantial portion of the Company's
revenues. Although the Company has recently introduced several new software
products in an effort to, among other things, diversify its sources of revenues,
the Company expects that sales of and licenses for the use of Worldgroup (and
other software products which are based on the Worldgroup platform) will
continue to account for a significant portion of the Company's revenues.
Consequently, declines in demand for Worldgroup and related products, whether as
a result of competition, technological change or otherwise, will have a material
adverse effect on the Company's business, operating results and financial
condition.
6
<PAGE>
NEW PRODUCT DEVELOPMENT AND RAPID TECHNOLOGICAL CHANGE
The market for the Company's software and services is characterized by
rapidly changing technology and industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards can
quickly render existing software obsolete and unmarketable. The Company's future
success will depend in part on its ability to enhance existing products and
services and to develop and introduce new products and services to meet changing
customer demands. Specifically, the Company's new products (and enhancements)
must: (i) incorporate new and evolving industry standards, (ii) continue to
offer improved performance and features, (iii) respond to evolving customer
needs, and (iv) achieve market acceptance. The development of new products and
services or enhanced versions of existing products and services entails
significant technical risks. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new services and
products that respond to technological change or evolving industry standards,
that the Company will not experience difficulties that could delay or prevent
the successful development, introduction and marketing of these services or
products, or that its new services and products will adequately meet the
requirements of the marketplace and achieve market acceptance. If the Company is
unable, for technological or other reasons, to develop and introduce new
services or products in a timely and cost-effective manner or to address
compatibility, inoperability or other issues raised by technological changes or
new industry standards, the Company's business, operating results and financial
condition could be materially and adversely affected.
COMPETITION
The Company faces intense and increasing competition from other software
companies. The Company's Worldgroup line of products faces competition from a
number of products that permit information exchange in ways similar to
Worldgroup, including: (i) Microsoft Back Office; (ii) Lotus Domino, and (iii)
Novell's Intranet Ware. WebCast, the Company's web broadcast software, competes
with products offered by, among others, White Pine Software, Inc., Progressive
Networks, Xing Technology Corporation, NetSpeak, VocalTec, Vivo Software, Inc.
and VDOnet Corporation. Many of the Company's competitors are substantially
larger than the Company, have greater financial resources and name recognition
than the Company, and longer operating histories in the Internet and intranet
markets and greater technical and marketing resources than the Company. As a
result, such competitors may have a competitive advantage over the Company in
that such companies may be able to respond more quickly than the Company to new
or emerging technologies and changes in customer needs, or to devote greater
resources than the Company to the development, promotion and sale of their
products. The Company competes on the basis of: (i) price, (ii) ease of use and
performance of its products and (iii) responsive and reliable service. There can
be no assurance that the Company will be able to successfully compete against
its current or future competitors.
LENGTH OF SALES CYCLES
The Company must successfully develop new sales methods and adjust to longer
sales cycles. A component of the Company's current business strategy is to
develop customized applications using its Worldgroup technology as a platform
for such applications. The Company intends to develop customized products on its
own or with third party software developers and then sell these products to
companies, government agencies or other organizations. These types of customers
tend to carefully review their software purchases and require the software
seller to educate them about how the product works. Consequently, sales to these
customers generally take longer to complete. Furthermore, the final sale to
these customers often requires approval of the chief executive officer (for
companies) or a review board (for government agencies). The Company expects to
invest a significant amount of time and resources in the sales process for these
types of customers before it completes any such sales. Thus, the Company's
revenues for a particular period may be impacted if sales to such customers
forecasted to close in that period are delayed by reason of the education or
approval process, or otherwise. In addition, the Company's financial condition
could be harmed if a number of these types of customers eventually decide not to
purchase the Company's products.
UNCERTAINTY REGARDING TRADEMARK PROTECTION
Although the Company has several pending trademark applications with the
United States Patent and Trademark Office (the "PTO"), the Company has only one
federal registration, for the trademark "Galacticomm." No assurance can be given
that the PTO will grant registrations for the Company's pending trademark
applications. Among other things, it is possible that the Company's trademarks,
including "WebCast," could be deemed to be generic by the PTO, in which case
neither the Company nor any third party could claim exclusive rights to such
term. In such event, the Company intends to associate the generic term with
registrable or registered trademarks or logos in order to gain trademark
protection over the resulting composite mark.
7
<PAGE>
In July 1997, the Company became aware of the existence of a third party
which may claim a prior right in the trademark "Worldgroup." The Company and the
third party are presently discussing a co-existence arrangement whereby the
Company would have the right, without the payment of a royalty, to continue to
use the trademark "Worldgroup" on its present products and services. Although
the third party does not presently distribute products that compete with the
Company's products, the licensing arrangement presently under discussion would
not preclude the third party from using the "Worldgroup" trademark in
competition with the Company. Also in July 1997, the Company became aware that
several other third parties filed applications for registration for the
trademark "WebCast," before the Company filed its application. If "WebCast" is
determined not to be generic and one of the third party applications matures
into a registration, then such third party will have superior rights to the
Company.
If a third party has superior rights to any of the Company's trademarks, the
Company believes that when the Company first commenced use of its trademarks, it
acted innocently, unintentionally, and without knowledge of the existence of any
third party's purported rights in such marks. Furthermore, if the third party
user of "Worldgroup" decides to enforce its trademark rights through an
infringement action, the Company believes that valid defenses exist with respect
to any such action, including, without limitation, waiver, estoppel and laches
and that as a result thereof, any liability of the Company should be limited to
injunctive relief prohibiting the Company from future use of such mark.
Trademark litigation is expensive and complex and the outcome of such litigation
is difficult to predict. Generally, if a court were to find that the Company
unintentionally infringed a third party's mark, the Company's liability would be
limited to its actual net profit from the sale of infringing products, the third
party's actual damages, and injunctive relief. On the other hand, if a court
were to find that the Company has wilfully infringed a third party's trademark,
the Company could be enjoined from further use of the trademark and could be
liable, under the federal Lanham Act, for the lesser of: (i) the Company's net
profit stemming from the sale of infringing products and (ii) the third party's
actual damages, plus three times the greater of: (a) the Company's profit from
the sale of the infringing product, and (b) the third party's actual damages,
plus prejudgment interest, attorneys' fees, and the cost of litigation.
OTHER INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company regards its software as proprietary and attempts to protect it
with copyrights, restrictions on disclosure, copying and transferring title, and
enforcement of trade secret laws. Despite these precautions, it is possible for
unauthorized third parties to copy the Company's products and it may be possible
for them to obtain and use information that the Company regards as proprietary.
Although the Company has filed a federal patent application with respect to
netDisc, no assurance can be given as to the issuance of a patent or as to the
breadth or degree of protection any issued patent may afford. In addition,
existing copyright laws give only limited protection to its software and some
foreign countries' laws do not protect proprietary rights to the same extent as
United States laws. Consistent with the general practice of software developed
for retail sale, the Company licenses its products primarily under "shrink wrap"
license agreements that are not signed by licensees and therefore may be
unenforceable under the laws of certain jurisdictions. Except to the extent
noted above with respect to certain trademark matters, the Company is not aware
that it is infringing or violating any proprietary rights of any third party
relating to the Company or the Company's products. The computer software market
is characterized by frequent and substantial intellectual property litigation
and it is possible that third parties might assert infringement claims against
the Company in the future. If this occurs, the Company might be forced into
costly litigation or have to obtain a license to the intellectual property
rights of others. It is possible that such licenses may not be available on
reasonable terms, or at all. The Company currently licenses some of its
technology from third parties. In the future, these third party technology
licenses may not be available to the Company on commercially reasonable terms,
if at all. If the Company cannot maintain any of these technology licenses, it
is possible that product shipments could be delayed and the Company's financial
condition could be harmed.
DEPENDENCE ON THE INTERNET
The success of the Company's products and services depends on the continued
development and growth of the Internet and on the need of businesses and other
organizations to continue to develop private intranets. The Internet is new and
evolving and may not develop into the large commercial marketplace that many
predict. The following factors could slow the growth of the Internet: (i)
inadequate development of the necessary infrastructure (e.g., reliable network
backbone), (ii) untimely development of affordable complementary products,
(e.g., high speed modems), (iii) delays in the development or adoption of new
standards to handle increased levels of Internet activity, or (iv) increased
government regulation. The number of Internet and intranet users has grown
significantly over the last few years and is expected to continue to grow. See
"Business--Industry Background." No assurance can be given that the Internet
infrastructure will continue to support the demands placed on it by this
continued growth. The Company's financial condition could be harmed if the
Internet does not become a viable commercial marketplace.
8
<PAGE>
POTENTIAL FOR UNDETECTED ERROR
The Company's software may contain undetected errors or "bugs" when first
introduced or when new versions are released. To prevent defects, the Company
seeks to test its products before they are commercially released. Despite its
quality control efforts, it is possible that the Company may release new
products (or upgrades of existing products) that contain bugs. The Company's
inadvertent release of products containing bugs could result in: (i) revenue
loss, (ii) delay in market acceptance of the product, (iii) increased service
costs, and (iv) damage to the Company's reputation.
DEPENDENCE ON KEY EMPLOYEES
The Company's success depends on the performance of the senior management,
particularly the Chief Executive Officer, Peter Berg, and the President, Yannick
Tessier. See "Management." Mr. Berg and Mr. Tessier are also two of the largest
shareholders of the Company. See "Principal Shareholders." Although the Company
has entered into employment agreements with each of Mr. Berg and Mr. Tessier
which do not expire until November 20, 1999, such employment agreements may be
terminated by the employee upon notice for any reason. The Company's success
also depends on its ability to retain and motivate other key employees,
particularly software developers, software programmers and customer support
personnel. Competition for these types of employees is intense and no assurance
can be given that the Company will be able to attract or retain satisfactory
personnel. The loss of the services of Mr. Berg, Mr. Tessier or other key
employees could harm the Company's prospects for success.
MANAGEMENT OF A GROWING BUSINESS
The Company intends to expand its business and operations by continuing to
improve Worldgroup, its flagship communications software product, developing new
products, designing customized applications for customers, and creating a global
network of Worldgroup communities. This growth strategy will place significant
demands on the Company's executive officers and financial resources. To be
successful, the Company must continue to implement and improve its operational
and financial systems and to expand, train and manage its employee base. No
assurance can be given that management will be able to successfully manage a
rapidly growing business as will be required to fully exploit the market for the
Company's products and services. Furthermore, the Company may acquire new
companies or products in the future, although the Company does not presently
have any understandings, commitments or agreements with respect to any
acquisition. Acquisitions involve many unique risks including assimilating
acquired operations and products and the diversion of management's attention
from the Company's primary business.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation and Bylaws contain provisions that
may have the effect of discouraging certain transactions involving an actual or
threatened change of control of the Company. See "Description of
Securities--Certain Provisions of the Articles and Bylaws." Furthermore, the
Company's Articles of Incorporation authorizes the issuance of 1,000,000 shares
of "blank check" preferred stock with such designation, rights and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
the Board of Directors is empowered, without shareholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
that could materially adversely affect the voting power or other rights of the
holders of the Common Stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging, delaying,
or preventing a change in control of the Company. Although the Company has no
present intention to designate a series or issue any shares of its preferred
stock, there can be no assurance that the Company will not do so in the future.
To the extent takeover attempts are discouraged by the foregoing provisions,
temporary fluctuations in the market price of the Common Stock, which may result
from actual or rumored takeover attempts, may be inhibited.
ABSENCE OF DIVIDENDS
The Company has not paid any dividends and does not expect to pay any
dividends in the foreseeable future and intends to retain earnings, if any, to
provide funds for general corporate purposes and the implementation of the
Company's business plan.
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchase price of the Units substantially exceeds the tangible book
value of the Common Stock. Assuming a $ offering price per Unit, Purchasers will
experience immediate and substantial dilution in the adjusted net tangible book
value per share after this offering in the amount of $ ____ per share or ____ %
of the offering price per Unit. In addition, the
9
<PAGE>
Company may issue a substantial number of additional shares of Common Stock in
the future upon the exercise of options and warrants having an exercise price
below the initial public offering price of the Units. The issuance of a material
number of such shares may have the effect of increasing the dilution to new
investors in this offering. See "Dilution."
DETERMINATION OF OFFERING PRICE AND EXERCISE PRICE; NO ASSURANCE OF PUBLIC
MARKET
Prior to this offering, there has been no public market for the Units, the
Warrants or the Common Stock. The Company has applied to list the Units, the
Warrants, and the Common Stock for quotation on the NASDAQ SmallCap Market. No
assurance can be given that such securities will be accepted for listing, or, if
accepted, that a trading market for such securities will develop, or be
sustained. The initial public offering price of the Units and the exercise price
and other terms of the Warrants have been determined by negotiation between the
Company and the Representative and may not be indicative of the market price for
the securities after the offering. The market prices for securities of emerging
companies, especially those involved in computers and high technology, have
historically been highly volatile and may be unrelated or disproportionate to
the operating performance of such companies. Future announcements concerning the
Company or its competitors, including technological innovations or new
commercial products, may have a significant impact on the market price of the
Company's securities. See "Underwriting."
CURRENT PROSPECTUS AND STATE REGISTRATION NEEDED TO EXERCISE WARRANTS
The Warrants may only be exercised if a current prospectus relating to the
Common Stock is then in effect under the Securities Act. While the Company will
use its best efforts to maintain the effectiveness of a current prospectus, the
Company cannot guarantee that it will be able to do so. After a registration
statement becomes effective, it may require continuous updating by the filing of
post-effective amendments. A post-effective amendment is required (i) when, for
a prospectus that is used more than nine months after the effective date of the
registration statement, the information contained therein (including the
certified financial statements) is as of a date more than 16 months prior to the
use of the prospectus, (ii) when facts or events have occurred which represent a
fundamental change in the information contained in the registration statement,
or (iii) when any material change occurs in the information relating to the plan
of distribution of the securities registered by such registration statement.
Furthermore, the Warrants may only be exercised if the Common Stock is qualified
for sale or exempt from qualification in the state where the holder of the
Warrant resides. The Warrants may have no value if the Common Stock underlying
the Warrants is not qualified or exempt from qualification in a particular
state, or if a prospectus is not kept current.
REDEMPTION OF WARRANTS
The Warrants are subject to redemption by the Company, at any time
commencing 30 days after the First Exercise Date upon 30 days' prior written
notice to the holders thereof, if the average of the closing bid and asked price
for the Common Stock for a period of 20 consecutive trading days ending three
trading days prior to the date of the redemption notice is at least equal to
150% of the exercise price of the Warrants. In the event that the Warrants are
called for redemption by the Company, Warrant holders will have 30 days during
which they may exercise their rights to purchase shares of Common Stock. In the
event a current prospectus is not available, the Warrants may not be exercised
and the Company will be precluded from redeeming the Warrants. If holders of the
Warrants elect not to exercise them upon notice of redemption, and the Warrants
are subsequently redeemed prior to exercise, the holders would lose the benefit
of the difference between the market price of the underlying Common Stock as of
such date and the exercise price of such Warrants, as well as any possible
future price appreciation in the Common Stock. As a result of an exercise of the
Warrants, existing shareholders would be diluted and the market price of the
Common Stock may be adversely affected. See "Description of Securities -
Warrants."
ADJUSTMENTS TO WARRANT EXERCISE PRICE AND EXERCISE DATE AND IMPACT OF WARRANT
EXERCISE ON MARKET
The Company, in its sole discretion, and in accordance with the terms of the
Warrant Agreement with the Warrant Agent, may reduce the exercise price of the
Warrants and extend the time within which the Warrants may be exercised,
depending on such things as current market conditions, the market price of the
Common Stock and the Company's need for additional capital. Further, in the
event that the Company issues certain securities or makes certain distributions
to the holders of its Common Stock, the exercise price of the Warrants (and the
shares of Common Stock issuable on exercise thereof) may be proportionately
reduced. Any such price reductions (assuming exercise of the Warrants) will
provide less money for the Company and could possibly adversely affect the
market price of the Company's securities. Furthermore, if a substantial number
of Warrants are exercised within a reasonably short period of time after the
right to exercise commences, the resulting increase in the amount of Common
Stock of the Company in the trading market could substantially affect the market
price of the Common Stock. See "Description of Securities - Warrants."
10
<PAGE>
EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS
In addition to the _________ Warrants to be issued in connection with this
offering ( Warrants if the over-allotment option is exercised in full), the
Company, upon completion of this offering, will sell the Representative Unit
Purchase Option ("UPO"), which will entitle the Representative to purchase
_______ Representative Units. See "Underwriting." The Company has also issued
Bridge Warrants to purchase an aggregate of 957,600 shares of Common Stock at an
exercise price of $3.75 per share until October 27, 2000. See "Recent
Financings." The shares of Common Stock underlying the UPO and Bridge Warrants
have been included in the Registration Statement of which this Prospectus forms
a part. See "Description of Securities--Registration Rights and Sales by Selling
Shareholders." Furthermore, the Company has 164,337 outstanding options under
the Company's 1997 Stock Option Plan with an exercise price of $6.50 per share
and options and warrants to purchase an aggregate of 536,625 shares of Common
Stock outside the Company's 1997 Stock Option Plan, that are exercisable at
prices below the estimated initial offering price of the Units offered hereby.
See "Description of Securities--Outstanding Option and Warrants." It may be
expected that the such options and warrants will be exercised only if it is
advantageous to the holders thereof. Therefore, during the period in which such
options and warrants may be exercised, the holders thereof are given the
opportunity to profit from a rise in the market price of the Common Stock. To
the extent that such options and warrants are exercised, dilution to the
interests of the Company's shareholders will occur. Further, the terms upon
which the Company will be able to obtain additional capital may be adversely
affected since the holders of such options and warrants can be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than those
provided by such options and warrants.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
following this offering could adversely affect the market price for the Common
Stock. Prior to this offering, there are 4,367,245 shares of Common Stock issued
and outstanding. Of such amount, shareholders owning an aggregate of ______
shares of Common Stock have agreed not to sell or otherwise dispose of their
shares of Common Stock for a period of one year from the date of this Prospectus
without the prior written consent of the Representative. Subject to such lock-up
period, the outstanding shares of Common Stock may be sold without registration
under the Securities Act in compliance with Rule 144. In general, under Rule
144, a person who has satisfied a one-year holding period may under certain
circumstances sell, within any three-month period, a number of shares which does
not exceed the greater of 1% of the outstanding shares of Common Stock or the
reported average weekly trading volume in the four weeks preceding the sale.
Rule 144 also permits, under certain circumstances, the sale of shares without
any quantity limitation by a person who is not an affiliate of the company and
who has satisfied a two year holding period. See "Description of
Securities--Shares Eligible for Future Sale." In addition, the Company has
granted certain demand and registration rights with respect to _______ shares of
issued and outstanding Common Stock and ________ shares of Common Stock
underlying the Bridge Warrants, the UPOs and other options and warrants. The
shares of Common Stock underlying the Bridge Warrants have been included in the
Registration Statement of which this Prospectus forms a part, although such
shares may not be sold prior to six months from the date of this Prospectus,
unless otherwise agreed to by the Representative. The exercise of registration
rights would permit a large number of shares to become freely tradeable without
restriction (subject to any lock-up arrangements) under the Securities Act
immediately upon effectiveness of such registration. See "Description of
Securities--Registration Rights and Sales by Selling Shareholders."
POSSIBLE DELISTING OF SECURITIES FROM NASDAQ AND RISKS OF COMMON STOCK TRADING
BELOW $5.00 PER SHARE.
Upon consummation of this offering, the Common Stock, the Warrants and the
Units (collectively the "Securities") are expected to be listed on the NASDAQ
SmallCap Market. In order to qualify for continued listing on the SmallCap
Market, the Company will be subject to compliance with maintenance and corporate
governance requirements, including: (i) net tangible assets of at least $2
million, market capitalization of $35,000,000, or net income of $500,000; (ii) a
public float of at least 500,000 shares valued at $1 million or more; (iii) at
least two market makers; (iv) at least 300 shareholders; and (v) a minimum bid
price of $1.00 per share. The corporate governance requirements for the SmallCap
Market require distribution of annual and interim reports to shareholders, a
minimum of two independent directors, an audit committee comprised of a majority
of independent directors, an annual shareholder meeting, a quorum requirement,
solicitations of proxies, review of conflicts of interest, shareholder approval
for certain corporate actions and voting rights protection. In the event that
the Company is unable to satisfy the requirements for continued quotation on
NASDAQ, trading in the Securities would be conducted in the over-the-counter
market in what are commonly referred to as the "pink sheets" or on the NASD
Electronic Bulletin Board. As a result, an investor may find it more difficult
to dispose of or obtain accurate quotations as to the price of the Securities.
In addition, if the Securities are suspended or terminated from NASDAQ and at
such time has a market price of less than $5.00 per share, then the sale of the
Common Stock would become subject to certain "penny stock" regulations adopted
by the Securities and Exchange Commission which impose sales practice
11
<PAGE>
requirements on broker-dealers. For example, broker-dealers selling the
Securities would, prior to effecting the transaction, be required to provide
their customers with a document which discloses the risks of investing in the
Securities. Furthermore, if the person purchasing the Securities is someone
other than an accredited investor or an established customer of the
broker-dealer, the broker-dealer must also approve the potential customer's
account by obtaining information concerning the customer's financial situation,
investment experience and investment objectives. The broker-dealer must also
make a determination whether the transaction is suitable for the customer and
whether the customer has sufficient knowledge and experience in financial
matters to be reasonably expected to be capable of evaluating the risk of
transactions in the Securities. Accordingly, if the listing of the Securities is
suspended or terminated from NASDAQ and is trading for less than $5.00 per
share, the penny stock regulations may restrict the ability of broker-dealers to
sell the Securities and may affect the ability of purchasers in this offering to
sell the Securities in the secondary market.
USE OF PROCEEDS
The net proceeds that the Company will receive from the sale of the
___________ Units offered hereby, based upon an assumed offering price of $
_____ per Unit and after deduction of underwriting discounts, the
non-accountable expense allowance and other offering expenses, will be
approximately $6,933,000 ($8,029,200 if the over-allotment option is exercised
in full). The Company intends to use such proceeds as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPLICATION OF PROCEEDS DOLLAR AMOUNT PERCENTAGE
----------------------- ------------- ----------
<S> <C> <C>
Advertising and Marketing Programs(1) $2,750,000 39.7%
Repayment of Bridge Notes(2) $2,150,000 31.0%
Repayment of Indebtedness to Shareholders(3) $ 200,000 2.8%
Research and Development(4) $ 800,000 11.5%
Working Capital and General Corporate Purposes(5) $ 608,000 8.8%
Capital Expenditures(6) $ 425,000 6.2%
<FN>
- --------------
(1) Includes expenditures for trade shows, product catalogs, print advertising,
cooperative dealer advertising, public relations and the hiring of sales and
marketing personnel.
(2) Repayment of principal and estimated interest under the Bridge Notes sold in
connection with the Bridge Financing. The Bridge Notes bear interest at a
rate of 10% per year and are due and payable at the closing of this
offering. See "Recent Financings."
(3) Repayment of a non-interest bearing note in the amount of $50,000 to Yannick
Tessier which is payable by the Company by no later than December 31, 1997
and repayment of interest (estimated at approximately $150,000) accrued
under the 10% Wallenberg Trust Note and UA Partners Note, which interest is
due and payable within five days of the effective date of this Prospectus.
See "Certain Transactions."
(4) Includes the hiring of research and development personnel and purchase of
software development tools and related equipment. See "Business--Research
and Development."
(5) Proceeds from the exercise of the over-allotment option, if any, will be
added to working capital.
(6) For leasehold improvements, office furniture and modules and computer
equipment.
</FN>
</TABLE>
The foregoing represents the Company's best estimate of its allocation of
the net proceeds from this offering based upon the current state of the
Company's business operations, its current plans and current economic
conditions. Based on the Company's current proposed plans and assumptions
relating to the implementation of its business strategy, the Company anticipates
that net proceeds from this offering will be sufficient to satisfy its
contemplated cash requirements for at least 18 months following the consummation
of this offering. Future events, including the problems, delays, expenses and
complications frequently encountered by software companies as well as changes in
regulatory, political and competitive conditions affecting the Company's
business and the success or lack thereof of the Company's business strategy, may
necessitate shifts in the allocation of funds. The Company also reserves the
right to allocate the net proceeds for acquisitions. The Company does not have
any present understandings, commitments or agreements with respect to an
acquisition. Pending use of the proceeds of this offering, the Company may
invest such funds in interest bearing accounts, certificates of deposit, money
market funds or similar short-term investments.
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<PAGE>
CAPITALIZATION
The left hand column of the following table presents the actual
capitalization of the Company as of June 30, 1997. The middle column of this
table presents the pro forma capitalization of the Company at June 30, 1997,
after giving effect to the Bridge Financing and the application of the proceeds
therefrom. See "Recent Financings." The right hand column has been adjusted to
give effect to: (i) the sale of the Units offered hereby (based upon an assumed
offering price of $ per share) and the application of the proceeds therefrom;
and (ii) the issuance immediately prior to the date of this Prospectus of
537,337 shares of Common Stock upon the conversion of two convertible promissory
notes in the principal amount of $1,375,000. This table should be read in
conjunction with the Company's financial statements and notes beginning on page
F-1 of this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED)
------------------------------------------------
ACTUAL PRO FORMA AS ADJUSTED(1)
---------- ----------- --------------
<S> <C> <C> <C>
Notes Payable and Short-Term
Borrowings.......................... $ 198,575 $ --- $
Notes Payable - Shareholder............ 80,000 80,000
Long-term Debt......................... 1,386,166 1,386,166
Bridge Notes (all long-term debt)...... --- 2,008,696
Shareholders' Equity:
Preferred Stock, par value $.001
per share, 1,000,000 shares
authorized; none outstanding......... --- ---
Common Stock, par value $.0001 per
share; 20,000,000 shares authorized;
3,725,805 shares issued and
outstanding actual and pro forma
and shares as adjusted.......... 373(2) 373(2)
Additional Paid-in Capital............. 3,107,770 3,199,074
Accumulated Deficit ................... (2,140,226) (2,140,226)
---------- ----------- ----------
967,917 1,059,221
Subscription Receivable(3)............. (174,158) (174,158)
---------- ---------- ----------
Total Shareholders' Equity............. 793,759 885,063
---------- ----------- ----------
Total Capitalization ................ $2,458,500 $ 4,359,925 $
========== =========== ==========
<FN>
- --------------
(1) Assumes an initial public offering price of $ per Unit, and no exercise of:
(i) the Warrants, (ii) the Underwriter's over-allotment option and (iii) the
Representative Unit Purchase Option.
(2) Excludes: (i) 370,000 shares of Common Stock reserved for issuance upon the
exercise of stock options under the Company's 1997 Stock Option Plan, of
which 164,337 options are presently issued and outstanding; (ii) 363,143
shares of Common Stock which may be acquired upon the exercise of options
granted outside the 1997 Stock Option Plan; (iii) 173,482 shares of Common
Stock which may be acquired upon the exercise of two warrants; (iv) 537,337
shares of Common Stock underlying two convertible promissory notes which
will be automatically converted into shares on the effective date of this
offering; and (v) 957,600 shares of Common Stock reserved for issuance upon
the exercise of the Bridge Warrants.
(3) Represents the balance due to the Company for subscriptions in connection
with the Company's June 1997 private placement, pursuant to which the
Company sold an aggregate of 259,802 shares of Common Stock to nine persons
for aggregate consideration of $970,762. Subsequent to June 30, 1997, the
full amount of such subscription receivable was received by the Company.
</FN>
</TABLE>
13
<PAGE>
DIVIDEND POLICY
Holders of the Common Stock are entitled to cash dividends when, as and if
declared by the Board of Directors out of funds that are legally available for
such dividends. The Company does not anticipate the declaration or payment of
any dividends in the foreseeable future. The Company intends to retain earnings,
if any, to finance the development and expansion of its business. Future
dividend policy will be subject to the discretion of the Board of Directors and
will be contingent upon future earnings, if any, the Company's financial
condition, capital requirements, general business conditions and such other
factors as the Board of Directors deems relevant. Future dividends may also be
subject to covenants contained in loan agreements, other financing documents or
the terms of any preferred stock. Therefore, there can be no assurance that cash
dividends of any kind will ever be paid.
DILUTION
Dilution is the difference between the price paid for the Units and the
"net tangible book value" per share of the Company's Common Stock before this
offering. Net tangible book value per share represents the amount of the
Company's tangible assets less the amount of its liabilities, divided by the
number of the Company's outstanding securities.
At June 30, 1997, the Company had a negative net tangible book value of
($1,470,330), or ($.39) per share. On a pro forma basis, after giving effect to
the Bridge Financing, the Company would have had a negative net tangible book
value of ($1,204,913), or approximately ($0.32) per share. See "Recent
Financings."
After giving effect to the sale of ___________ Units offered hereby at an
assumed price of $ _____ per share and the Company's receipt of the net proceeds
from this offering less underwriting discounts, the non-accountable expense
allowance and other estimated offering expenses, and without giving effect to
the Underwriter's over-allotment option, the Representative Unit Purchase Option
or the exercise of the Warrants or any other outstanding options or warrants,
the pro forma net tangible book value of the Company as adjusted at June 30,
1997 would be approximately $ _________ , or $ _____ per share. Accordingly, the
cash investment by investors in this offering of $ _____ per share will be
diluted immediately by approximately $ _____ per share or ______ %. The
aggregate increase in the net tangible book value to the present shareholders,
at no additional cost to them, will be approximately $ _____ per share. The
following table illustrates the per share dilution effect:
Public offering price per share........................ $
Pro Forma Net tangible book value per
share before offering ............................... $(.32)
Increase per share attributable to
payments by public investors.........................
-----
Adjusted pro forma net tangible book value
per share after offering.............................
-----
Dilution of net tangible book value
per share to public investors ....................... $
=====
The foregoing assumes no exercise of the Underwriter's over-allotment
option. If the Underwriter's over-allotment option is exercised in full, the net
tangible book value per share at June 30, 1997, as adjusted for this offering,
would be $ , and dilution of net consolidated tangible book value per share to
public investors would be $ ____ or _____ %.
The following table summarizes the difference between public investors and
current shareholders of the Company with respect to the number of shares
purchased from the Company, the total consideration paid to the Company (based
upon an assumed exercise price of $ _____ per Unit and before deduction of
underwriting discounts, the non-accountable expense allowance and other
estimated offering expenses) and the applicable average purchase price per
share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ -------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
--------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Public Investors........... % $ % $
Current Shareholders....... 4,367,245 % $4,574,437 % $1.05
--------- -----
Total...................... 100% $ 100%
========= ===== ========== ====
</TABLE>
14
<PAGE>
The foregoing table gives effect to the automatic conversion of two
promissory notes into 537,337 shares of Common Stock on the effective date of
this Prospectus, but assumes no exercise of: (i) 164,337 shares of Common Stock
which may be acquired upon the exercise of outstanding options under the
Company's 1997 Stock Option Plan; (ii) 363,143 shares of Common Stock which may
be acquired upon the exercise of options granted outside the 1997 Stock Option
Plan; (iii) 173,482 shares of Common Stock which may be acquired upon exercise
of two warrants; (iv) 957,600 shares of Common Stock which may be acquired upon
the exercise of the Bridge Warrants; (v) _________ shares of Common Stock
reserved for issuance upon the exercise of the over-allotment option and the
Warrants included as part of the over-allotment option; (vi) __________ shares
of Common Stock issuable upon exercise of the Warrants included as part of the
Units offered hereby; and (vii) __________ shares of Common Stock reserved for
issuance upon the exercise of the Representative Unit Purchase Option ("UPO")
and the Warrants included as part of the UPO. See "Management--Stock Option
Plan," "Management--Employment Agreements," "Certain Transactions" and "Recent
Financings." To the extent that the foregoing options and warrants are
exercised, there will be further dilution to new investors.
RECENT FINANCINGS
In October 1997, the Company issued and sold 42 bridge units ("Bridge
Units"), each Bridge Unit consisting of an unsecured non-negotiable promissory
note in the principal amount of $50,000 ("Bridge Note") and a warrant ("Bridge
Warrant") to purchase 19,000 shares of Common Stock (collectively, the "Bridge
Financing"). The Bridge Notes, which bear interest at a rate of 10% per year,
are due and will be paid at the closing of this offering from the proceeds of
this offering. See "Use of Proceeds." The Bridge Warrants entitle the holders
thereof to purchase one share of Common Stock at a price of $3.75 per share
until October 27, 2000. The holders of the Bridge Warrants have agreed not to
transfer the Bridge Warrants or the shares of Common Stock underlying such
warrants for a period of 180 days following this offering. An aggregate of
957,600 shares of Common Stock underlying the Bridge Warrants (including the
159,600 shares underlying the Warrants issued to the Representative, as noted
below) have been included in the registration statement of which this Prospectus
forms a part. See "Description of Securities--Registration Rights and Sales by
Selling Shareholders." In exchange for serving as the placement agent for the
Bridge Financing, the Company paid the Representative: (i) cash compensation
equal to 10 percent of the principal amount of the Bridge Notes; (ii) a
non-accountable expense allowance equal to three percent of the principal amount
of the Bridge Notes and certain accountable expenses totaling $10,000; and (iii)
warrants to purchase 159,600 shares on terms substantially the same as the
Bridge Warrants. After deducting these and other expenses of the Bridge
Financing, the Company received net proceeds of approximately $1,692,000 from
the Bridge Financing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Liquidity and Capital Resources."
In June 1997, the Company completed a private placement (the "Private
Placement") of an aggregate of 259,802 shares of Common Stock to nine persons
for an aggregate consideration of $970,762 or $3.74 per share.
15
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
Set forth below is selected historical financial data of: (i) the Company
for the year ended December 31, 1996 and for the six month periods ended June
30, 1997 and 1996; and (ii) Galacticomm, Inc. for the year ended December 31,
1995 and the ten month period ended October 31, 1996. The financial data as of
and for the six month periods ended June 30, 1997 and 1996 has not been audited,
but, in the opinion of management, such consolidated financial statements
include all material adjustments necessary for a fair presentation. The
following selected financial information should be read in conjunction with the
Company's consolidated financial statements and related notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operation."
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC. GALACTICOMM, INC.
----------------------------------------------- --------------------------
TEN MONTHS
YEAR ENDED SIX MONTHS ENDED YEAR ENDED ENDED
12/31/96 6/30/96 6/30/97 12/31/95 10/31/96
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .......................... $ 1,692,743 $ 312,736 $ 1,787,879 $ 7,487,983 $ 3,293,876
Cost of revenues .................. 758,050 245,629 502,310 1,737,170 1,005,595
Selling, general and administrative 1,531,130 182,901 1,318,222 3,602,809 2,382,613
Depreciation ...................... 47,533 10,005 78,891 131,713 150,185
Goodwill amortization ............. 38,665 386 321,179 -- --
Compensation expense on warrants .. -- -- 113,760 443,242 529,139
Customer support .................. 72,772 -- 205,934 425,924 387,797
Research and development .......... 225,549 -- 302,518 1,034,174 638,200
----------- ----------- ----------- ----------- -----------
Total operating expense ........... 2,673,699 438,921 2,842,814 7,375,032 5,093,529
----------- ----------- ----------- ----------- -----------
Profit (loss) from operations ..... (980,956) (126,185) (1,054,935) 112,951 (1,799,653)
Other expense, net ................ (60,312) (4,268) (24,922) (198,025) (468,153)
----------- ----------- ----------- ----------- -----------
Net loss .......................... $(1,041,268) $ (130,453) $(1,079,857) $ (85,074) $(2,267,806)
=========== =========== =========== =========== ===========
Net loss per share ................ $ (0.36) $ (0.05) $ (0.25)
Shares used in computing net loss
per share ....................... 2,885,273(1) 2,671,268(1) 4,401,502(1)
</TABLE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
JUNE 30, 1997
-----------------------------------------------------------------
PRO FORMA
12/31/96 6/30/97 PRO FORMA(2) AS ADJUSTED(3)
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash.............................. $ 1,466,392 $ 410,951 $ 1,866,876 $
Working capital (deficiency)...... (475,580) (638,076) 1,016,424
Goodwill, net of amortization .... 2,079,334 2,017,476 2,017,476
Total assets...................... 4,434,020 3,608,881 5,437,806
Short-term obligations............ 343,575 198,575 ---
Long-term obligations............. 1,393,999 1,386,166 3,394,862
Shareholders' equity ............. $ 949,566 $ 793,759 $ 885,063 $
<FN>
- --------------
(1) All common stock and common stock equivalents issued by the Company within
twelve months of the date of this Prospectus have been included in the
calculation of number of shares used in calculating net loss per share
(using the treasury stock method).
(2) Pro forma balance sheet data gives effect to the Bridge Financing and the
application of the net proceeds therefrom. See "Recent Financings."
(3) Adjusted to gives effect to the sale of __________ Units offered hereby at
an assumed initial offering price of $____ per share and the application of
net proceeds therefrom after deduction of underwriting discounts and
commissions and estimated expenses of the offering. See "Use of Proceeds."
</FN>
</TABLE>
16
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
Set forth below is selected pro forma financial data which gives effect to
the Company's November 1996 acquisition of Galacticomm, Inc. and merger with
Tessier Technologies, Inc. ("TTI") as if such transactions were consummated on
January 1, 1995 or 1996. The pro forma data is unaudited but, in the opinion of
management, such financial statements include all material adjustments necessary
for a fair presentation. The pro forma data is not necessarily indicative of the
results of operations of the Company had the Company acquired Galacticomm, Inc.
and TTI on January 1, 1995 or 1996.
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------------
YEAR ENDED SIX MONTHS ENDED
--------------------------- ----------------
12/31/95 12/31/96 6/30/96
------------ ------------ ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 9,211,139 $ 6,189,505 $ 3,447,553
Cost of revenues............... 2,897,036 2,515,462 1,396,703
Selling, general and
administrative............... 4,514,023 4,381,252 2,211,777
Depreciation and amortization.. 569,015 1,005,963 596,440
Compensation expense on
warrants..................... 443,242 529,139 -
Customer support............... 425,924 460,569 226,902
Research and development....... 1,034,174 863,749 377,256
------------ ----------- -----------
Total operating expense........ 6,986,378 7,240,672 3,412,375
------------ ----------- -----------
Loss from operations........... (672,275) (3,566,629) (1,361,525)
Other expense, net............. (354,329) (655,321) (79,466)
------------ ----------- -----------
Net loss....................... $ (1,026,604) $(4,221,950) $(1,440,991)
============ =========== ===========
Net loss per share............. $ (.24) $ (.98) $ (.33)
Shares used in computing net
loss per share(1)............ 4,328,705 4,328,705 4,328,705
<FN>
- --------------
(1) All common stock and common stock equivalents issued within twelve months of
the date of this Prospectus have been included in the calculation of number
of shares used in calculating net loss per share (using the treasury stock
method).
</FN>
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company was incorporated in December 1995 under the name i-View
Software, Inc. and acquired its primary operating subsidiary, Galacticomm, Inc.,
on November 21, 1996. In April 1997, the Company changed its name to Galacticomm
Technologies, Inc.
Galacticomm, Inc. was formed in 1985 as an online service offering
multiplayer games. In 1986, Galacticomm, Inc. developed Major BBS, a
character-based computer bulletin board software product which allowed users in
different locations access to a common operating environment. In 1995,
Galacticomm, Inc. shifted its primary focus from the BBS market to the
significantly larger Internet and intranet market through the development and
release of Worldgroup 1.0, a client/server software program with an easy to use,
Windows-based graphic user interface. See "Business--Worldgroup."
The Company acquired Galacticomm, Inc. through the issuance of an aggregate
of 271,291 shares of Common Stock and $755,915 in cash. The acquisition was
financed through the sale of Common Stock and the issuance of convertible notes
to Union Atlantic Partners I Limited ("UA Partners") and Hemingfold Investments
Limited ("Hemingfold"), which has transferred its interest in such notes to the
Peder Sager Wallenberg Charitable Trust (the "Wallenberg Trust"), an affiliate
of Hemingfold. See "Certain Transactions--Wallenberg Trust and UA Partners
Investment." Immediately prior to the Company's acquisition of Galacticomm,
Inc., the Company acquired Tessier Technologies, Inc. ("TTI") by merger. Prior
to such merger, TTI was a leading value added reseller of Major BBS and
Worldgroup that had developed over 20 add-on products for these platforms. Prior
to the acquisition of Galacticomm, Inc., the Company designed, developed and
licensed i-View, a turnkey software package developed on the Worldgroup platform
that enables the creation, operation and administration of an online
subscription service with real time audio and video to subscribers through
several connectivity methods. Using the i-View software, the Company, prior to
the acquisition of Galacticomm, Inc., offered adult entertainment subscription
services to third parties, although, as a condition to the investment by the
Wallenberg Trust and UA Partners in the Company in November 1996, the Company
divested itself of all adult-entertainment business.
The Company's revenues and operating results have varied substantially from
period to period, are likely to continue to vary in the future and should not be
relied upon as an indication of future results. See "Risk Factors--Fluctuations
in Quarterly Results." The Company has historically operated with no significant
backlog. The Company's quarterly results may be affected by the Company's focus
on customized software for use by specific customers or specific industries. See
"Business--Worldgroup Customized Applications."
At December 31, 1996, the Company had a net goodwill balance of $2,079,334
as a result of the merger with TTI and the acquisition of Galacticomm, Inc. The
goodwill associated with the TTI merger (approximately $190,000 at December 31,
1996) is being amortized over a three year period. The goodwill balance
associated with the Galacticomm, Inc. acquisition is being amortized over a five
year period. Consequently, annual earnings of the Company will be negatively
effected by approximately $425,000 per year until 2001.
RESULTS OF OPERATIONS
The results of operations set forth below for the six months ended June 30,
1996 and the years ended December 31, 1996 and 1995 reflect the operations of
the Company combined with the operations of Galacticomm, Inc. and TTI as if the
Company had acquired such companies on January 1, 1995 or 1996. The Company has
not provided a comparative discussion with respect to the historic results of
the Company, since it does not believe that such comparisons are meaningful. The
pro forma financial information included herein is unaudited and is not
necessarily indicative of the results that would have actually occurred had the
Company acquired Galacticomm, Inc. and TTI at January 1, 1995 or 1996, nor is it
necessarily indicative of future results of operations. Among other things,
prospective investors should be aware that the cost structure of the pro forma
combined companies for the six month period ended June 30, 1996 was
significantly different than the cost structure of the Company on a historical
basis for the six month period ended June 30, 1997, including significant
differences between such periods in the number of persons employed, occupancy
costs and sales and marketing strategies. Consequently, reductions in the
Company's expenses between such periods are not necessarily indicative of
efficiencies achieved by the Company in the 1997 period.
SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED WITH PRO FORMA SIX MONTHS ENDED JUNE
30, 1996 (ASSUMES THE ACQUISITION OF GALACTICOMM, INC. AND TTI HAD OCCURRED ON
JANUARY 1, 1996)
Net revenues for the six month period ended June 30, 1997 decreased 48% from
$3,447,553 for the six month period ended June 30, 1996 to $1,787,879 for the
comparable period in 1997. The decrease in revenue was primarily attributable to
reduced software
18
<PAGE>
product revenues as a result of: (i) increased competition from other software
companies in connection with the emergence of Internet-based standards and
technologies in the market for the Company's products; and (ii) to a lesser
extent, the Company's decision to de-emphasize the sale of modems and certain
other hardware products in late 1996. In response to the competitive pressure
and rapid technological change in the market for the Company's products, the
Company has recently redesigned Worldgroup to be compatible with the evolving
standards of the Internet. In December 1996, the Company introduced Worldgroup
v3.0 for Windows NT with Active HTML interface for several Worldgroup
applications. The Company expects to release Worldgroup v3.1 in December 1997,
offering all applications in Active HTML interface. See "Business--Worldgroup."
The Company has additionally recently released or has under development for
release several additional Internet-based products, including WebCast, Actibase
and netDisc. See "Business--Worldgroup."
For the six month period ended June 30, 1997, the consolidated revenues of
the Company were derived 79% from software related products, royalties and
licensing fees, 11% from hardware product sales, and 8% from billing and
collection services provided to Worldgroup communities for collecting fees
charged to customers for membership and Internet access. See
"Business--Services." The Company anticipates that, as a percentage of net
revenues, software revenues will increase as the Company implements its business
strategy, and that, as a percentage of net revenues, revenues from the sale of
hardware will decrease in the future. Revenues from billing and collection
services, as a percentage of net revenues, are expected to remain constant in
the near term.
Cost of revenues consists primarily of direct hardware and software product
costs. For the six month period ended June 30, 1997, cost of revenues decreased
64% from $1,396,703 in the 1996 period to $502,310 in the 1997 period. This
decrease was primarily attributed to lower hardware related product costs and
lower costs for billing and collection services as a result of lower component
revenues for the period.
Gross profit for the six month period ended June 30, 1997 decreased 37% from
$2,050,850 in the 1996 period to $1,285,569 in the 1997 period. As a percentage
of revenues, gross profit increased by 22% from 59% for the six month period
ended June 30, 1996 to 72% for the comparable period in 1997. The Company
expects gross profits from period to period to fluctuate based on the mix of
distribution channels used by the Company, the mix of products sold during that
period, and the mix of product revenues versus service revenues. Generally, the
Company realizes higher gross profits on direct product sales than on product
sales through distributors, resellers and other indirect channels and higher
gross profits on product revenues than on service revenues. The increase in
gross profits for the six months ended June 30, 1997 resulted from the Company's
decision to focus on software sales and other higher margin products and on
selling products through direct versus indirect channels of distribution. The
Company expects to continue to realize higher gross profits as a percentage of
revenue by increasing the mix of software products, royalty and licensing
revenues, although this increase may be offset by the distribution of the
Company's products through indirect channels.
Selling, general, and administrative ("SG&A") expenses for the six month
period ended June 30, 1997 decreased 40% from $2,211,777 in 1996 to $1,318,222
in 1997. SG&A expenses consist primarily of employee compensation, trade show
expenses, professional services and office expenses.
Depreciation and amortization for the six month period ended June 30, 1997
decreased 33% from $596,440 in 1996 to $400,070 in 1997. Depreciation expense
decreased $221,907 due to the change in the depreciable life of computer
equipment from 5 years to 3 years and the resultant full depreciation of certain
assets during 1996. Amortization of intangibles, which represent the
amortization of goodwill resulting from the Company's acquisitions, have been
amortized over periods of three to five years.
Stock-related compensation expense for the six month period ended June 30,
1997 amounted to $113,760 as a result of the issuance of warrants by two of the
Company's officers, directors and stockholders to another stockholder of the
Company. See "Certain Transactions," and Note 12(c) to the consolidated
financial statements of the Company included elsewhere in this Prospectus.
Stock-related compensation expenses related to such warrants is not expected to
recur in future periods. There were no stock-related compensation expenses for
the six month period ended June 30, 1996.
Customer support expenses for the six month period ended June 30, 1997
decreased 9% from $226,902 in 1996 period to $205,934 in 1997 period. This
decrease was primarily caused by lower telecommunications costs in the 1997
period.
Research and development expenses for the six month period ended June 30,
1997 decreased 20% from $377,256 to $302,518 in 1997. The Company expects that
research and development expenses will increase in the future as the Company
expands its product development activities. See "Business--Research and
Development."
Other expenses, net of other income, for the six month period ended June 30,
1997 decreased 69% from $79,466 in 1996 to $24,922 in 1997. Proceeds received
from a business interruption insurance claim (approximately $39,000) plus
interest income on working capital funds during the 1997 period resulted in this
decrease.
19
<PAGE>
As a result of the foregoing factors, net loss for the six month period
ended June 30, 1997 decreased $361,134 from $1,440,991 in 1996 to $1,079,857 in
1997.
PRO FORMA YEAR ENDED DECEMBER 31, 1996 AS COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1995 (ASSUMES IN BOTH CASES THAT THE ACQUISITION OF GALACTICOMM,
INC. AND TTI HAD OCCURRED ON JANUARY 1, 1995 OR 1996, RESPECTIVELY)
Net revenues for the year ended December 31, 1996 decreased 33% from
$9,211,139 in 1995 to $6,189,505 in 1996. The release of Worldgroup 1.0 in the
second quarter of 1995 generated revenues in 1995 which were not matched in
1996, during which year revenues from software sales suffered as a result of the
Company's delay in upgrading Worldgroup to be fully compatible with the evolving
standards of the Internet. In addition, Galacticomm, Inc. curtailed its Network
Integration Service division ("NIS") and discontinued the development of
software products based on the UNIX operating system in 1996 and instead focused
its efforts on the development of a Worldgroup version operating on the Windows
NT platform. The discontinuation of the NIS and UNIX operating divisions in 1996
reduced revenues by approximately $794,000 in 1996. During the year ended
December 31, 1996 consolidated revenues of the Company were derived 68% from
software related products, royalties and licensing fees, 14% from hardware
sales, and 17% from billing and collection services.
Cost of revenues for the year ended December 31, 1996 decreased 13% from
$2,897,036 in 1995 to $2,515,462 in 1996. The decrease in cost of revenues for
1996 was due to lower 1996 software product revenues.
Gross profit for the year ended December 31, 1996 decreased 42% from
$6,314,103 in 1995 to $3,674,043 in 1996. The 1996 gross profit decrease of
$2,640,060 is primarily the result of lower software sales in 1996. As a
percentage of revenue, gross profit decreased 14% from 69% in 1995 to 59% in
1996.
Selling general, and administrative expenses for the year ended December 31,
1996 decreased 3% from $4,514,023 in 1995 to $4,381,252 in 1996. As a percentage
of revenue, SG&A increased 47% from 49% in 1995 to 72% in 1996. In November
1996, the new management of the Company adopted new business strategies which
modified systems and procedures to better monitor and budget SG&A expenses for
the future.
Depreciation and amortization for the year ended December 31, 1996 increased
77% from $569,015 in 1995 to $1,005,963 in 1996. Such increase resulted from the
amortization of intangible assets resulting from the Company's acquisitions in
1996, and the change in depreciation from five years to three years of the
depreciable useful life of the Company's technology and equipment.
Stock related compensation expense for the year ended December 31, 1996
increased 16% from $443,242 in 1995 to $529,139 in 1996. The 1995 expense
related to premature exercises of certain stock options by a former employee of
Galacticomm, Inc. and the 1996 expense related to the conversion by former
employees of Galacticomm, Inc. of phantom stock units into shares of common
stock.
Customer support expenses for the year ended December 31, 1996 increased 8%
from $425,924 in 1995 to $460,569 in 1996. The increase during 1996 resulted
from the introduction of Worldgroup 1.0 in the second quarter of 1995.
Research and development expenses for the year ended December 31, 1996
decreased 16% from $1,034,174 in 1995 to $863,749 in 1996. The discontinuance of
the NIS and UNIX divisions in 1996 was, in part, responsible for this decrease.
Other expense, net of other income, for the year ended December 31, 1996
increased $300,992 from $354,329 in 1995 to $655,321 in 1996. The Company's
decision in November 1996 to terminate its lease obligation for the rental of a
new operating facility was the primary cause for this increase. The cost of
lease termination ($380,040) is non recurring, and is shown as part of other
expenses for 1996.
As a result of the foregoing, net loss for the year ended December 31, 1996
increased $3,195,344 from $1,026,604 in 1995 to $4,221,948 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company financed the acquisition of Galacticomm, Inc. in November 1996
and has financed its operations since such time primarily through the sale of
debt and equity securities in private transactions as described below.
The Company acquired 99.9 percent of the outstanding common stock of
Galacticomm, Inc. in November 1996 and February 1997 through the issuance of an
aggregate of 271,291 shares of Common Stock and $755,915 in cash consideration.
The acquisition of Galacticomm, Inc. was financed through investments in the
Company by the Wallenberg Trust and UA Partners, pursuant to which
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the Company received net proceeds of $2,610,641 from the sale of 537,337 shares
of Common Stock and the issuance of secured convertible promissory notes in the
aggregate principal amount of $1,375,000, which will be automatically converted
on the effective date of this offering into 537,337 shares of Common Stock. See
"Certain Transactions."
In June 1997, the Company received net proceeds of $844,553 from the sale of
259,802 shares of Common Stock to nine persons in a private transaction. The
Company used $100,000 of the proceeds to pay down its existing credit facility
with a financial institution and allocated the balance of such funds for working
capital and general corporate purposes. In October 1997, the Company completed
the Bridge Financing, pursuant to which the Company issued and sold $2,100,000
principal amount of Bridge Notes and Bridge Warrants to purchase an aggregate of
957,600 shares of Common Stock. The Company will pay all principal and interest
(at a rate of 10 percent per year) outstanding on the Bridge Notes from the
proceeds of this offering. See "Use of Proceeds." The Company used approximately
$272,500 from the proceeds of the Bridge Financing to repay certain
indebtedness, including approximately $200,000 of outstanding amounts under the
Company's line of credit with a financial institution. Approximately $107,000 of
the proceeds from the Bridge Financing were allocated to build out and make
improvements to the Company's office space, and the balance was allocated for
working capital and general corporate purposes.
The Company has been approved for the continuation of its $200,000 line of
credit with a financial institution which line of credit will be guaranteed by
Galacticomm, Inc. and Messrs. Berg and Tessier. Such line of credit will bear
interest at an annual rate of 1.5% above the applicable prime rate.
Giving pro forma effect to the Bridge Financing and the application of the
proceeds therefrom, the Company had, as of June 30, 1997, cash and cash
equivalents of approximately $1,866,676 and a working capital surplus of
$1,016,424. The Company anticipates, based on its currently proposed plans and
assumptions relating to operations, that the net proceeds from the sale of the
Units offered hereby, together with projected cash flow from operations, will be
sufficient to satisfy its contemplated cash requirements for at least 18 months
from the date hereof.
The Company has no material commitments other than the lease of a T-3
fiberoptic digital circuit for $17,500 per month until April 15, 2000 and the
lease of its office space. See "Business--Facilities." The Company intends to
use approximately $425,000 of the proceeds from this offering to build out and
make improvements to its office space and for office furniture and modules and
computer equipment.
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BUSINESS
INTRODUCTION
The Company develops, markets, licenses and supports software that enables
users to communicate and conduct business over the Internet, intranets, or other
online systems. The majority of the Company's software products are derived from
the Company's flagship product, Worldgroup v3.0 for Windows NT and Windows 95,
which is an integrated suite of five communications programs (E-mail, Polls and
Questionnaires, Newsgroups, Shared File Libraries and Chat) that enables an
individual or enterprise to establish an online system, an intranet or website.
Scheduled for release in December 1997, Worldgroup v3.1 will offer complete
access to a Worldgroup server using only a standard browser, such as Microsoft's
Internet Explorer or Netscape's Navigator, through the World Wide Web. The
Company estimates that Worldgroup and its predecessor product, Major BBS, have
been installed on more than 10,000 online systems worldwide, including systems
currently operated by Symantec Corporation, General Electric, U.S. Robotics,
Citibank, the U.S. Air Force and the National Weather service.
Worldgroup features an open (non-proprietary) set of interfaces, a scalable
infrastructure that can grow with a company's needs, and multiple means of
connectivity, including the Internet. Such features allow Worldgroup to serve as
the software platform for specific communication solutions for a variety of
businesses and industries. In conjunction with third party developers, the
Company has designed intranets and other online systems for specific projects
relating to education, trading, online gaming, virtual office and home
television. Worldgroup's open set of interfaces has allowed third party
developers to design and sell add-ons that supplement Worldgroup's standard
features. As a result, over 200 independent software developers have designed
more than 500 available products that enhance online systems which utilize the
Worldgroup software. Worldgroup software is currently available in 10 languages.
The Company has recently released or has under development for release
during 1997 several products, including:
WEBCAST. Released in March 1997, WebCast allows users to make live audio
and visual broadcasts, and broadcast pre-recorded videos on demand, over the
Internet to viewers who need only use a standard web browser to receive the
broadcast. The Company markets WebCast directly to individual consumers and to
businesses through computer catalogs, retail outlets and bundling agreements
with camera manufacturers. The Company has recently entered into strategic
alliances to bundle WebCast with cameras and other hardware recently introduced
by Eastman Kodak, Boca Research, Specom Technologies, Best Data Products and
Aztech New Media Corp.
WORLDLINK. Scheduled for release by December 1997, Worldlink allows a
Worldgroup community to link with other Worldgroup systems. The Company believes
that the future development and organization of online communities will result
in additional Worldgroup systems and present opportunities to introduce new
products for Worldgroup system users. Worldlink with an Active HTML interface is
currently being beta-tested.
ACTIBASE. Scheduled for release in December 1997, Actibase is an
Internet database connectivity program that is fully integrated with the
Worldgroup server database. Actibase enables a company to publish any of its
databases directly onto the Worldwide Web, with only limited knowledge of
computer database programming. Actibase will be offered as a stand-alone product
as well as an add-on product to Worldgroup and WebCast. Actibase is currently
being beta-tested.
NETDISC. NetDisc is an advertising vehicle that uses the Internet and a
CD Rom disc to promote products to a specifically targeted market of consumers.
The Company's netDisc technology incorporates advertising video clips and
website links to advertisers' web pages. NetDisc's game format allows users to
win promotional prizes. In conjunction with advertising agencies and magazine
publishers, the Company intends to insert the netDisc in magazines, the first
installment of which is anticipated to be the April 1998 issue of MOTOR TREND
magazine.
The Company's objective is to become a leading developer of communications
software for the Internet, intranet and other online communications systems. The
Company intends to achieve its objective by: (i) developing customized intranets
and other applications using Worldgroup as the software foundation; (ii)
continually upgrading Worldgroup and other programs and offering new programs
that deliver customers high levels of performance, ease of use and security; and
(iii) establishing strategic alliances to increase sales and facilitate market
acceptance of the Company's products.
The Company's executive offices are located at 4101 S.W. 47th Avenue,
Suite 101, Fort Lauderdale, Florida 33314. The Company can be reached by
telephone at (954) 583-5990 or through its website at http:/www.gcomm.com.
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INDUSTRY BACKGROUND
THE INTERNET AND THE WORLDWIDE WEB
Online communication has grown dramatically since 1987, when the Company
first began offering communications software. It is currently estimated that
over 40 million people exchange information and communicate electronically using
personal computers. By the year 2000, this number is expected to increase to
over 200 million.
The convergence of communications and computers was greatly accelerated in
the 1990s by the market acceptance and commercialization of the Internet, a
global web of computer networks. Developed in 1969, this "network of networks"
allows any computer connected to the Internet to communicate with any other
computer using a common telecommunication protocol. Originally subsidized by the
United States government, funding for the Internet infrastructure and backbone
operations shifted to the private sector in the 1990s as the number of
commercial entities relying on the Internet for business communications and
commerce increased. The rapid growth of the Internet has been caused by the
emergence of a network of servers and information available on the Internet
called the World Wide Web (the "Web"). The Web, which is based on a
client-server model and a set of standards for information access and
navigation, can be accessed using software that allows non-technical users to
exploit the capabilities of the Internet. Electronic documents are published on
Web servers in a common format called the Hypertext Markup Language ("HTML").
Web client software (known as browsers) can retrieve these documents across the
Internet by making requests using a standard protocol called Hypertext Transfer
Protocol ("HTTP"). The most common commercial browsers currently in use are
Microsoft Internet Explorer and Netscape Navigator.
The explosive growth of online communications has created increasing demand
for software solutions that enable users to interact and communicate more
efficiently and effectively. Forrester Research, Inc. estimates that the
combined Internet and intranet worldwide software market will increase from $382
million in 1996 to $8.5 billion in 1999. Uses for such software include the
following:
INTRANETS AND OTHER ONLINE SYSTEMS
Businesses and other enterprises use personal computers to help their
employees communicate and collaborate with each other. Organizations have
developed Bulletin Board Systems ("BBSs"), local area networks (LANs) and Wide
Area Networks (WANs) and other closed systems (collectively, "Online Systems")
to electronically connect their employees as well as their customers. In
addition, the technology and protocols of the Internet have been applied to
expand the use of private data networks through the development of intranets. An
intranet is a network using the TCP/IP protocol of the Internet that connects an
organization's computers in a way that makes information more accessible and
facilitates navigation through all the resources and applications of the
organization's computing environment. In many instances, the same software
applications in use on the Internet and Online Systems can be applied to
intranets, thereby broadening the market for such software applications. See
"Business--Worldgroup Customized Applications."
ONLINE COMMERCE
Commercial uses of the Internet and Online Systems include
business-to-business and business-to-consumer transactions, product marketing,
advertising, entertainment, electronic publishing, electronic services and
customer support. This new medium offers innovative opportunities for retail and
mail order businesses to target and manage a wider customer base. Companies from
many industries are using the Web to publish product and company information,
provide customer support, allow customers to buy products online, and to collect
customer feedback and demographic information interactively. The Company, as
well as other software companies make use of the Internet and Online Systems to
offer technical support for products and save shipping costs by making software
updates available electronically through copying or "downloading" procedures.
Other businesses, such as financial institutions and brokerage firms, are also
appearing online as the Internet provides access to a growing base of home,
business and education customers. International Data Corporation has predicted
that the amount of commerce conducted over the Web will increase from $2.6
billion in 1996 to more than $220 billion during 2001.
ONLINE COMMUNITIES
Online "communities" are one of the fastest growing areas of the Internet,
according to a recent report by BUSINESS WEEK. An online community is a network
of users that communicate with one another via computer. Online communities may
be commercial or private, small or large. Prior to the advent of the Internet,
online communities existed through Bulletin Board Systems, which consist of a
personal computer running a software program onto which users would typically
connect through a standard telephone line. Many applications that are now
standard on the Internet such as newsgroups, file transfers and E-mail were
initially introduced on BBSs. Pioneering software that enabled the creation of
online communities included the Company's Major BBS software, which the Company
offered from 1987 until 1995, when the Company introduced Worldgroup. The
Company believes that Major BBS, the predecessor to Worldgroup, was, by 1994,
the industry leader in the corporate market segment for BBS software.
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Until recently, online communities were primarily organized for
non-commercial purposes. The attraction to members of these communities is the
ability to interact with users with similar interests locally or worldwide.
Members engage in real-time conversation in chat rooms, post messages on a
variety of topics in newsgroups or on bulletin boards or play interactive games,
known as MUDs. Increasingly, businesses are creating online communities to
attract and make sales to consumers. The premise behind these commercial online
communities is that consumers will visit and stay longer at a website or Online
System where they can interact with others who share a common interest. To
encourage interaction between consumers and to retain users at their site,
businesses have added online chat rooms, bulletin boards, e-mail and other
software applications to their commercial website or Online System.
WORLDGROUP
The Company's communication software products are designed to connect people
and information over the Internet, Intranets and Online Systems. The majority of
the Company's software products are based on the Company's flagship product,
Worldgroup, a comprehensive client/server software and development tool that
allows users in different locations to exchange ideas and information using a
variety of connection methods, including the Internet, dial up modem, LANs,
WANs, integrated services digital network (ISDN) and serial connection. Using
Worldgroup, businesses can establish an interactive web site (or improve an
existing website), organizations can establish intranets and exchange data with
remote employees, suppliers and customers, and entrepreneurs can create their
own online community similar to services such as America Online as well as offer
their customers access to the Internet. The Company estimates that the
Worldgroup software and its predecessor, Major BBS, have been installed on over
10,000 online servers worldwide, including systems currently operated by
Symantec Corporation, General Electric, U.S. Robotics, Citibank, the United
States Air Force and the National Weather Service. These servers reach an
estimated 1.1 million end-users who use and interact with the Company's
software. Worldgroup software is currently available in 10 languages.
Worldgroup is both an out-of-the-box product and a software platform that
can be configured to provide communications solutions for different businesses
and industries. Out of the box, Worldgroup is a suite of popular client/server
applications, including:
ELECTRONIC MAIL. Electronic mail or E-mail allows users to deliver a private
message to others who need not be there when the message arrives.
Worldgroup's E-mail has the following features: file attachments, carbon
copies, mail forwarding, distribution lists, offline filing cabinets, "new
mail" notification, and return receipt.
POLLS AND QUESTIONNAIRES. This feature allows the Worldgroup system operator
or administrator ("Worldgroup Administrator") to create questionnaires,
application forms or opinion polls to ascertain market research and other
information about customers and other users.
FORUMS. Popularly known as newsgroups, forums allow users to post messages
and respond to messages posted by others. A Worldgroup Administrator can
configure up to 10,000 separate forums for online discussions.
TELECONFERENCING. Popularly known as chat, the teleconference application
allows users to establish real-time conversations. Teleconferencing enables
group meetings where participants can exchange files in real time with other
users while continuing the conversation. The Worldgroup Administrator can
create up to 65,535 different channels, each with its own moderator and
topic.
FILE LIBRARIES. File Libraries allow users to share program and document
files. Users can search files by library, category, file names, file date,
descriptive words, and popularity. A Worldgroup Administrator can limit user
access to particular files or programs.
With the release of Worldgroup v3.0 for Windows NT/95 in December 1996, the
Company introduced Active HTML interfaces which permit access to a Worldgroup
server using only a standard Web browser. This "thin client" access, where there
is no need to download client software or employ other controls, makes access to
a Worldgroup system as convenient as accessing any website. Currently, both the
Sign-Up and File Libraries applications of Worldgroup have been converted to
Active HTML. The Company is in the process of converting other applications
(including Registry, Polls & Questionnaires, Account Display/Edit,
Teleconference and forums) to Active HTML for inclusion in Worldgroup v3.1,
which is scheduled for release in December 1997.
In addition to its thin client capabilities, all Worldgroup applications
continue to be available using the Company's proprietary client software,
Worldgroup Manager. The use of Worldgroup Manager has many practical advantages
over current thin client technology, including reduced bandwidth needs, greater
real time interactivity between users, and the ability to compute "offline". The
Company's client software is offered at no cost and can be launched from the Web
directly through the Worldgroup plug-in for Netscape Navigator, Microsoft
Internet Explorer and Oracle Power Browser.
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Worldgroup has been designed for multiple connectivity. Users can access a
Worldgroup system through dial-up modems, ISDN, Novell-based networks (SPX), and
packet-switched X.25 networks as well as the Internet and TCP/IP based networks.
Multiple connectivity has several advantages over Internet-only connectivity,
including enabling fixed bandwidth connections, alternative access routes if the
primary route is "down" or otherwise not available, and better security for
private transactions. Worldgroup v3.0 is designed to run on DOS, as well as the
Windows NT and Windows 95 operating systems.
In addition to being an out-of-the-box product, Worldgroup is a development
platform. The Company believes that one of Worldgroup's key strengths is its
standard set of interfaces or open architecture. Through Worldgroup's
application programming interfaces (APIs) and development kits, over 200
independent software vendors have developed and market applications that can be
easily added on to an Internet or Online System using Worldgroup's software.
This allows Worldgroup users to pick and choose additional applications for a
Worldgroup system depending on their needs. For example, if a group
calendar/scheduling program is desired, an add-on application entitled Community
Calendar can be seamlessly integrated into the Worldgroup system. The Company
and independent software vendors currently offer over 500 add-on applications
for Worldgroup, including add-ons that allow a Worldgroup system to offer: (i)
outgoing online fax service; (ii) an online shopping mall; (iii) form templates
for workflow environments; (iv) video conferencing with point-to-point,
broadcast, and theater-replay video; (v) group scheduling; (vi) online
publishing; and (vii) SLIP/PPP Internet access to users and optional support for
Radius security and accounting protocol for terminal server equipment. Several
of these add-on applications are embedded in the Worldgroup software and
therefore can be electronically distributed to and immediately launched by the
users upon payment. To allow independent software vendors, system operators and
system integrators to create such add-ons as well as other customize client-side
applications, the Company offers a Worldgroup developer kit for $699, which
contains the source code for the five core Worldgroup applications and in-depth
developer information. Additional "extended" source suites and application
option source packages are available with a wide range of prices.
The Company believes that significant opportunities exist for the sale of
Worldgroup into emerging markets. It is estimated that 80% of the total demand
for Internet access originates in the United States. One of the primary reasons
for the lack of Internet access in other countries is cost. In certain Eastern
European, Asian and Latin American countries which do not have an established
telecommunications infrastructure, the cost of access to high speed Internet
networks can be as much as 10 times the cost in the United States. Consequently,
the Company believes that the Worldgroup product operating as a bulletin board
using existing telephone systems (as opposed to high speed Internet networks)
offers an attractive and economically feasible solution in emerging markets. The
Company's strategy is to develop a loyal customer base in such markets. The
Company currently sells its products in 29 countries.
Worldgroup's ability to offer advanced communications technology to third
world countries has been recognized by the United Nations Development Programme
Global Technology Group, which, in January 1997, selected Worldgroup to the
United Nations Flag Technology Program.
The suggested retail price for Worldgroup v3.0 for access by eight
simultaneous users is $699. The number of simultaneous users can be increased to
up to 256 simultaneous users through the purchase of additional user packs, at
prices ranging from $55 to $65 per additional user connection.
WORLDGROUP CUSTOMIZED APPLICATIONS
Using Worldgroup as the foundation, the Company, working in conjunction with
third party developers, has designed intranets and other communications systems
for a number of industries and customers, including the following:
REAL-TIME GLOBAL TRADING SOLUTIONS
The Company is targeting manufacturers and distributors of commodities
worldwide to utilize its software for real-time trading and consolidating of
commodities. The Company has entered into a venture with World Commerce Online
("World Commerce") which has launched Floraplex, a private extranet for the
floral industry that allows growers, importers, exporters, wholesalers and mass
merchandisers to execute purchases over the Internet from any place in the
world. The system also provides for the payment of purchases and helps in the
consolidation of freight and other shipping items. The Company receives a
portion of the monthly service fee income generated by World Commerce, in
addition to up front revenues for license of its Worldgroup server software.
World Commerce is expected to attempt to offer this solution to a variety of
other commodity-based organizations worldwide, although no assurances can be
given that World Commerce will be successful in selling this software product to
other industries.
ONLINE GAMING
Worldgroup is currently being utilized in the development of on-line casino
games for both the entertainment and casino marketplace. The Company sells its
software to Atlantic Entertainment which offers a program called I.C.E.
(Internet Casino
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Extension). I.C.E. is marketed to domestic and international casinos who want to
provide a non-monetary form of casino gaming to their casino customers to
encourage patronage. The Company itself has no intent to offer such gaming
activities online.
EDUCATION
The Company has designed software which is a ready to use classroom intranet
designed to connect teachers, student, parents and administrators online. This
software offers "managed" Internet access to schools, enabling students to
browse the Worldwide Web, but only to sites approved by teachers and school
administrators.
TELEVISION SET-TOP INTERNET CONNECTIVITY
The Worldgroup client/server software has been configured to allow
manufacturers of set-top terminals to provide Internet access to the home
television set and to provide e-mail and other communications programs to the
end consumer. The Company licenses its software to Intercon P/C, Inc. who is
installing Worldgroup software as the foundation of its set-top box called
"Spider."
NEW PRODUCTS
The Company has recently released or has under development for release
during 1997 the following products:
WEBCAST
Introduced in March 1997, WebCast is an Internet multi-media software
product which enables websites to broadcast live or prerecorded audio and video
over the Internet to viewers who need only use a standard web browser to receive
the broadcast. Business and other applications of WebCast include: (i) the
ability to have customer service representatives or technicians talking live
with customers, (ii) the ability to have staff meetings with remote offices, and
(iii) parents away from home checking on their children or other family members.
WebCast v2.0, offering video on demand and clientless audio capabilities, was
released by the Company in October 1997.
The Company currently offers three WebCast products--WebCast Personal,
WebCast ProServer and WebCast Lite. WebCast Personal is designed for individual
users and allows up to 4 simultaneous viewers. In addition to its audio and
video capabilities, WebCast Personal provides teleconferencing, caller ID, call
blocking, password authorization and an address book. The suggested retail price
of WebCast Personal is $49.95.
WebCast ProServer is designed for commercial applications and allows up to
255 simultaneous viewers. WebCast is built upon the Worldgroup v3.0 platform and
therefore offers, in addition to audio and video, all of the standard and add-on
features available for Worldgroup, such as E-mail, teleconference, file
libraries and polling. The suggested retail price of WebCast ProServer is $995,
with each additional video stream retailing for $100.
The Company also offers at no cost WebCast Lite, a promotional version of
WebCast that permits users the opportunity to try the WebCast product. The
Company has entered into bundling agreements with a number of manufacturers of
web cameras, pursuant to which WebCast Lite has been incorporated into their
respective products. After demonstrating WebCast Lite, users may then purchase
WebCast Personal or WebCast ProServer from the Company. See "Sales, Marketing
and Distribution."
In August 1997, the Company entered into a licensing agreement with Boca
Research, Inc., pursuant to which the Company has granted Boca Research a
license to include WebCast Lite and related technology in their modems, video
conferencing and other hardware products, in exchange for royalty payments that
are determined based on the amount and type of product sold by Boca Research. If
Boca Research fails to pay royalties of at least $100,000 in any quarter or at
least $120,000 in two consecutive quarters, the Company has the right to
renegotiate the terms of such license agreement.
NETDISC
NetDisc is a CD-ROM and Internet game developed by the Company that allows
advertising agencies and others to simultaneously promote several products or
companies to a targeted market of consumers. Each netDisc CD-Rom contains video
clips from an advertiser and links to an advertiser's web page. The Company's
netDisc CD-ROM will be distributed through direct marketing or in magazines
aimed at a particular market segment. Buyers of such magazines are presented
with the opportunity to win prizes in the netDisc game by viewing the various
advertisers' videos on the CD-ROM and by visiting such advertisers web site. For
each such visit, buyers earn Galact-a-Buck $ game scrip that can be redeemed for
prizes. The Company is in discussions with Peterson Publishing, pursuant to
which it is anticipated that the first installment of netDisc will be inserted
in the April 1998 issue of MOTOR
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TREND magazine. The Company has filed a patent application with respect to
netDisc. See "--Proprietary Rights and Intellectual Property."
ACTIBASE
Actibase is an ODBC compliant database connectivity program which is fully
integrated with the Worldgroup server database. Actibase enables a company to
publish any of their databases directly onto the Worldwide Web, with only
limited knowledge of computer programming or HTML. Actibase features include
dynamically generated SQL and HTML Code, a drag and drop form editor and
security options. Actibase, as a stand alone product, will include support for
eight simultaneous users with user count upgrades available. Actibase will also
be fully integrated into the Company's other product lines as an add-on to
Worldgroup and WebCast. Actibase is currently being beta tested and is scheduled
for release in December 1997.
WORLDLINK
There are approximately 500 Worldgroup communities operating with the
Company's Worldgroup and/or Major BBS software. Unlike larger Online Systems,
such as America Online and Microsoft Network, Worldgroup communities are
typically formed by users and entrepreneurs with a common interest in a
particular subject (e.g. horse racing) or by users who are located in the same
geographic area. The Company believes that localized service is attractive to
users in much the same way that a local newspaper appeals to many readers over a
national one. One of the drawbacks to local Online Systems, however, is the need
for users traveling outside their local area to make a long-distance telephone
call to connect into their local system.
To meet this need, the Company has created Worldlink, an add-on application
to Worldgroup designed to connect Worldgroup systems to each other to create a
global network of Worldgroup communities. Worldlink has been developed to act as
a central hub that enables users of a Worldgroup system in one location to
interact and communicate with users of a different Worldgroup system. Worldlink
presently operates in terminal mode and is capable of connecting up to 250
systems operating on Worldgroup v.1 or v.2. The Company is in the process of
upgrading Worldlink to: (i) operate in client/server mode as well as terminal
mode; (ii) connect up to 60,000 Worldgroup systems and 16 million simultaneous
users; and (iii) include Worldgroup v.3's thin client access via Active HTML.
The Company's objective is to ultimately create a global network of Worldgroup
communities. The ability of the Company to successfully launch a global network
of Worldgroup communities is subject to a number of risks, many of which (such
as the participation of individual Worldgroup communities) are beyond the
control of the Company. No assurance can be given that the Company will be
successful in developing a global community of Worldgroup systems.
SALES, MARKETING AND DISTRIBUTION
The Company markets and distributes its products through distributors and
resellers, as well as directly to end-users. Historically, the Company has
relied on its distribution network for a substantial portion of its sales. The
Company's primary distributors in the United States are Ingram Micro Inc. and
DistribuPro, Inc. Internationally, the Company distributes its products through
Sisnet, S.A. and a network of 30 resellers located in 29 countries. In addition,
the Company has established a network of preferred distributors, identified as
Ambassador Dealers, many of whom also act as system integrators and value added
resellers. The Company provides its Ambassador Dealers with special training
programs, promotional incentives and marketing programs. Although the Company
uses these and other means to encourage its distributors to focus primarily on
the promotion and sale of the Company's products, the Company's distributors may
also represent other lines of products that compete with the Company's products
and no assurance can be given that these distributors will not give higher
priority to the sale of competing products.
The Company has recently increased its efforts to make direct sales to
end-users in an effort to increase gross profits. Direct sales by the Company
are made by mail order to end users who are solicited through catalogs such as
CDW, PC Zone, Tiger Direct, MicroWarehouse and PC Connections. In addition,
direct sales are made through the Company's direct mailing and telesales efforts
aimed at Internet service providers and other end-users. The Company publishes a
magazine, VISIONS, aimed at educating end-users about the capabilities of the
Company's products. VISIONS, which includes articles about the Company, its
recent product releases and development efforts, is distributed to the Company's
installed customer base, as well as to the Company's Ambassador Dealers and
other distributors of the Company's products. The Company also markets its
products on its Web site, which contains demonstrations, free downloads of
certain products and significant other information regarding the Company's
products and services.
The Company intends to increase the sales and distribution of WebCast and
its other products by incorporating promotional versions of the Company's
software into computer hardware, such as web cameras and modems, that are
manufactured and marketed by other companies. Through these bundling
arrangements, end purchasers of the computer hardware have an opportunity to try
the Company's software and, if desired, to purchase a fully-functional version
of the Company's software. These arrangements generally provide that the
Company's software is, at no cost to the Company, advertised on the package for
the hardware product and that the hardware manufacturer receives a percentage of
the purchase price of any software purchased from the Company as a result of
such
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arrangement. To date, the Company has entered into agreements with Eastman
Kodak, Boca Research, Aztech New Media Corp., Best Data and Specom to bundle
WebCast Lite with computer hardware products offered by such companies.
The Company's marketing and sales efforts are supported by a sales and
marketing force of 10 people operating from the Company's headquarters in Fort
Lauderdale, Florida. The Company intends to add five more employees in marketing
and sales following the closing of this offering. There can be no assurance that
such expansion will be successfully completed, or that the cost of such
expansion will not exceed the revenues generated.
RESEARCH AND PRODUCT DEVELOPMENT
The market for the Company's products is characterized by rapidly changing
technology and frequent new product introductions. The Company's future success
depends on its ability to enhance its existing products and to develop new
products that: (i) incorporate new and evolving industry standards, (ii) respond
to evolving customer requirements, and (iii) achieve market acceptance. The
primary aim of the Company's research and development efforts is to identify
emerging online communications technology and standards and develop products
that address evolving market needs. Specifically, the Company intends to improve
and upgrade its existing product, and to develop and introduce new products that
deliver customers high levels of performance, ease of use and security.
The Company has incurred significant research and development costs over the
past two years to convert the Company's software to the Internet and intranet
markets. Research and development costs, on a combined pro forma basis, were
$863,749 and $1,034,174 for the fiscal years ended December 31, 1996 and 1995,
respectively, and $302,518 for the six month period ended June 30, 1997. The
Company believes that significant research and development costs will continue
to be incurred in the future to successfully implement the Company's business
strategy.
SERVICES
SUPPORT PROGRAMS
The Company has made a commitment to provide timely, high quality technical
support to meet the diverse needs of its customers and partners and to
facilitate the purchase and use of its products. Presently included at no
additional charge with each purchase of Worldgroup v3.0 NT/95 is 120 minutes of
technical support through the Company's toll-free telephone number. Additional
support is available at the cost of $2.00 per minute, although the Company
offers reduced rates through prepaid support plans. Customer support is also
available at no cost to customers through a number of additional means,
including E-mail and facsimile responses. The Company also publishes a list of
answers to frequently asked questions and hosts a customer support forum on its
website.
Using the Company's own WebCast product, the Company recently began offering
live video customer service through the Company's website at
http://www.gcomm.com. This service allows the Company's customers to see a live
image of and speak to the Company's customer support personnel. The Company
believes it is one of only a very few companies in the world offering live video
customer service.
TRAINING
The Company offers several different training courses to system operators,
integrators and resellers. Topics covered in these courses include system
installation, configuration, administration, security and troubleshooting.
Prices for the two to three day courses range from $595 to $995 per person.
WORLDGROUP BILLING SERVICES
The Company offers Worldgroup communities a 900 telephone number collection
service as an alternative means to credit cards and direct billing to collect
the fees they charge customers for membership and Internet access. The 900
telephone number collection service allows an end user to obtain and pay for
membership and internet access provided by a particular Worldgroup community by
dialing a 900 number. Such fees are paid by the end user to the telephone
company as part of monthly phone bills and remitted to the Company after
deducting telephone company and service bureau collection fees. The Company in
turn remits such membership and internet access fees to the Worldgroup community
after deducting a service fee of approximately 10 percent.
COMPETITION
The communications software industry is intensely competitive. Many of the
Company's competitors are substantially larger and have much greater financial
resources and name recognition than the Company. They also have longer operating
histories in the Internet and intranet markets and greater technical and
marketing resources than the Company. To maintain or increase its position
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in the industry, the Company will need to continually enhance its current
product line, and introduce new products and services. There can be no
assurance, however, that the Company will be able to compete successfully in the
future, or that competition will not have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's Worldgroup product faces competition from a number of products
that permit information exchange in ways similar to Worldgroup, including: (i)
Microsoft Back Office; (ii) Lotus Domino, (iii) Novell's Intranet Ware; and (iv)
Netscape's SuiteSpot. While these and other competitive products offer features
similar to Worldgroup, the Company believes that Worldgroup maintains a
competitive advantage over these products in terms of price, availability of
add-on applications, ease of use and administration.
WebCast, the Company's software for Web cameras, competes with products
offered by White Pine Software, Inc., Progressive Networks, Vxtreme, Inc., Xing
Technology Corporation, NetSpeak, VocalTec, Vivo Software, Inc. and VDOnet
Corporation. Actibase, the Company's Internet database connectivity program,
competes with, among others, Claris' Filemaker Pro, Microsoft's InterDev and
Topspeed's Clarion. The Company competes against these products in terms of
price and the fact that no special client software, other than Netscape
Navigator 2.0 or above or Microsoft's Internet Explorer 4.0 or above web
browser, is required to view the WebCast video or audio stream. See
"--Products-WebCast."
Actibase, the Company's Internet database connectivity program, competes
with, among others, Claris' Filemaker Pro, Microsoft's InterDev and Topspeed's
Clarion.
PROPRIETARY RIGHTS AND INTELLECTUAL PROPERTY
The Company regards its software as proprietary and attempts to protect it
with copyrights, trademarks, restrictions on disclosure, copying and
transferring title and enforcement of trade secret laws. Despite these
precautions, it is possible for unauthorized third parties to copy the Company's
products and it may be possible for them to obtain and use information that the
Company regards as proprietary. Although the Company has filed a federal patent
application with respect to netDisc, no assurance can be given as to the
issuance of a patent or as to the breadth or degree of protection any issued
patent may afford. In addition, existing copyright laws give only limited
protection to its software and some foreign countries' laws do not protect
proprietary rights to the same extent as United States laws. Consistent with the
general practice of software developed for retail sale, the Company licenses its
products primarily under "shrink wrap" license agreements that are not signed by
licensees and therefore may be unenforceable under the laws of certain
jurisdictions. Although the Company has several pending trademark applications
with the United States Patent and Trademark Office (the "PTO"), the Company has
only one federal registration, for the trademark "Galacticomm." No assurance can
be given that the PTO will grant registrations for the Company's pending
trademark applications. Among other things, it is possible that the Company's
trademarks, including "WebCast," could be deemed to be generic by the PTO, in
which case neither the Company nor any third party could claim exclusive rights
to such term. In such event, the Company intends to associate the generic term
with registrable or registered trademarks or logos in order to gain trademark
protection over the resulting composite mark.
In July 1997, the Company became aware of the existence of a third party
which may claim a prior right in the trademark "Worldgroup." The Company and the
third party are presently discussing a co-existence arrangement whereby the
Company would have the right, without the payment of a royalty, to continue to
use the trademark "Worldgroup" on its present products and services. Although
the third party does not presently distribute products that compete with the
Company's products, the licensing arrangement presently under discussion would
not preclude the third party from using the "Worldgroup" trademark in
competition with the Company. Also in July 1997, the Company became aware that
several other third parties filed applications for registration for the
trademark "WebCast," before the Company filed its application. If "WebCast" is
determined not to be generic and one of the third party applications matures
into a registration, then such third party will have superior rights to the
Company.
If a third party has superior rights to any of the Company's trademarks, the
Company believes that when the Company first commenced use of its trademarks, it
acted innocently, unintentionally, and without knowledge of the existence of any
third party's purported rights in such marks. Furthermore, if the third party
user of "Worldgroup" decides to enforce its trademark rights through an
infringement action, the Company believes that valid defenses exist with respect
to any such action, including, without limitation, waiver, estoppel and laches
and that as a result thereof, any liability of the Company should be limited to
injunctive relief prohibiting the Company from future use of such mark.
Trademark litigation is expensive and complex and the outcome of such litigation
is difficult to predict. Generally, if a court were to find that the Company
unintentionally infringed a third party's mark, the Company's liability would be
limited to its actual net profit from the sale of infringing products, the third
party's actual damages, and injunctive relief. On the other hand, if a court
were to find that the Company has wilfully infringed a third party's trademark,
the Company could be enjoined from further use of the trademark and could be
liable, under the federal Lanham Act, for the lesser of: (i) the Company's net
profit stemming from the sale of infringing products and (ii) the third party's
actual damages, plus three times the greater of: (a) the Company's profit from
the sale of the infringing product, and (b) the third party's actual damages,
plus prejudgment interest, attorneys' fees, and the cost of litigation.
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Except to the extent noted above with respect to certain trademarks, the
Company does not believe that its products infringe on the rights of third
parties. The computer software market is characterized by frequent and
substantial intellectual property litigation and it is possible that third
parties might assert infringement claims against the Company in the future. If
this occurs, the Company might be forced into costly litigation or have to
obtain a license to the intellectual property rights of others. It is possible
that such licenses may not be available on reasonable terms, or at all. The
Company currently licenses some of its technology from third parties. In the
future, these third party technology licenses may not be available to the
Company on commercially reasonable terms, if at all. If the Company cannot
maintain any of these technology licenses, it is possible that product shipments
could be delayed and the Company's financial condition could be harmed.
GOVERNMENT REGULATIONS
The Company does not believe that its business activities are currently
subject to direct regulation by any government agency, other than regulations
applicable to business generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet.
However, due to the increasing popularity and use of the Internet, it is
possible that laws and regulations may be adopted with respect to the Internet,
covering issues such as user privacy, pricing and characteristics and quality of
products and services. For example, Congress recently passed the Communications
Decency Act of 1996 prohibiting the distribution of obscene or indecent material
over the Internet, although this law was recently held unconstitutional by the
United States Supreme Court. The adoption of any such laws or regulations may
decrease the growth of the Internet, which could in turn decrease the demand for
the Company's products and increase the Company's cost of doing business or
otherwise have an adverse effect on the Company's business, operating results or
financial condition.
Furthermore, the application of existing laws governing issues such as
property ownership, libel and personal privacy on the Internet is uncertain.
Because material may be downloaded by an online or Internet service facilitated
by the Company, there is a potential risk that claims may be made against the
Company for defamation, negligence, copyright or trademark infringement or other
theories based on the nature and content of such materials. Although the Company
carries general liability insurance, the Company's insurance may not cover
potential claims of this type, or may not be adequate to indemnify the Company
for all liability that may be imposed. Any imposition of liability that is not
covered by insurance or is in excess of insurance coverage could have a material
adverse effect on the Company's business, results of operations and financial
condition.
FACILITIES
The Company leases 11,129 square feet of office space for its corporate
headquarters in Fort Lauderdale, Florida, including approximately 2,000 of
square feet that the Company commenced occupying in September 1997. The monthly
rent under this lease is $9 per square foot (plus applicable taxes), which
amount increases annually by four percent. The Company has options to extend the
lease for up to an additional six years past its present expiration date in
2001. The Company also has an option to lease approximately 6,000 square feet of
adjacent office space should the Company need additional space. The Company
intends to use a portion of the proceeds from this offering to build out and
improve its leasehold. See "Use of Proceeds."
EMPLOYEES
As of the date of this Prospectus, the Company employs 33 persons, including
15 in engineering and support, 10 in sales and marketing, 1 in production and 7
in administration and accounting. None of its employees are currently
represented by a union or any other form of collective bargaining unit. The
Company regards its relations with employees as good.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding.
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MANAGEMENT
DIRECTORS AND OFFICERS OF THE COMPANY
The following table sets forth certain information concerning the directors
and executive officers of the Company:
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Peter Berg 42 Chairman, Chief Executive Officer and Secretary
Yannick Tessier 29 President and Director
Timothy Mahoney 41 Director
Claus Stenbaek 36 Director
T. Michael Love 32 Chief Financial Officer
PETER BERG has served as the Chairman of the Board, Chief Executive Officer
and Secretary of the Company since November 1996 when the Company acquired
Galacticomm, Inc. See "Certain Transactions." From December 1995 to November
1996, Mr. Berg was the President and Secretary of the Company. Prior to founding
the Company, Mr. Berg was, since May 1992, the Sr. Vice President of Marketing
of Integrated Communications Network, Inc. (and its predecessor company Visions
Communications, Inc.), a direct response marketing firm. Mr. Berg received his
bachelor of science degree, MAGNA CUM LAUDE, from Florida State University.
YANNICK TESSIER has served as the President of the Company since November
1996 when Tessier Technologies, Inc. was merged into the Company. See "Certain
Transactions." Prior to joining the Company, Mr. Tessier was the Chief Executive
Officer of TTI, which he founded in 1989. Mr. Tessier has over 12 years of
experience in online software development, systems integration and product
distribution. Mr. Tessier has an associates degree in accounting.
TIMOTHY MAHONEY has served as a director of the Company since January 1997.
Mr. Mahoney has over 15 years of experience with the operations and management
of technology companies. He founded and served as the president of the consumer
products business for SyQuest Technology, a manufacturer of removable cartridge
disk drives from 1991 to 1994. He also founded and served as the president of
Rodime Systems, a computer disk-drive sub-system manufacturer from 1986 to 1991.
Mr. Mahoney has, since 1994, served as a managing member of Union Atlantic L.C.,
a consulting firm specializing in emerging technology companies and presently
serves as Union Atlantic's designee to the Board. See "Certain Transactions."
Mr. Mahoney received an Masters of Business Administration degree from George
Washington University.
CLAUS STENBAEK has served as a director of the Company since January 1997.
Since 1995, Mr. Stenbaek has been the Managing Director of Rohenise Ltd, a
financial and business advisory firm to companies specializing in information
technology, distribution, real estate and finance. From 1991 to 1995, Mr.
Stenbaek was the finance director of F.L. Smidth & Cia, an engineering company
involved in cement machinery and minerals processing. Prior thereto, Mr.
Stenbaek was, among other things, a senior management consultant with Andersen
Consulting in their London office. Mr. Stenbaek received his bachelor of science
degree in management accounting from Copenhagen Business School and an Executive
Masters of Business Administration from Institute of Business, Madrid, Spain.
Mr. Stenbaek is the designee of the Wallenberg Trust to the Board, pursuant to
the Wallenberg Trust Stock Purchase Agreement, as amended. See "Certain
Transactions."
T. MICHAEL LOVE has served as the Company's Chief Financial Officer since
August 1997. Prior to joining the Company, Mr. Love was, since January 1995,
Director of Mergers and Acquisitions at Blockbuster Entertainment Group, a
division of Viacom, Inc., where he was responsible for its global acquisition
efforts in the consolidating video industry as well as other acquisition, sale
and joint venture transactions. From January 1988 through January 1995, Mr. Love
was a member of KPMG Peat Marwick's financial services audit practice, where,
since 1992, he served as Manager and then Senior Manager. Mr. Love received his
bachelor of science degree in accounting and finance from Florida State
University.
OTHER KEY EMPLOYEES
PAUL ROUB, age 30, has served as the Company's Director of Engineering since
March, 1997. Prior to becoming the Director of Engineering, Mr. Roub was a
programmer with the Company specializing in server-side 32-bit development. From
1993 to 1996, Mr. Roub was a programmer with Equitrac Corporation and, from 1990
to 1993, he was a programmer with PC's & Programs.
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RICHARD SKURNICK, age 33, has been employed by the Company since 1989 and,
for the past three years, has served as the Company's Management Information
Systems manager. Mr. Skurnick, who has significant programming experience,
served as the Project Manager for Worldgroup v3.0 and developed the Company's
customer database program.
MANUEL RODRIGUEZ, age 36, has served as the Company's Director of
International Sales since August 1997. Since 1996, Mr. Rodriguez served as the
Territory Manager - Latin America at Madge Networking. From 1994 to 1996, he was
National Corporate Network Sales Manager at Best Internet Communications and
from 1992 to 1994, he was an account executive at Swift Software, a software
bundling company. Mr. Rodriguez works directly with Robert O'Brien, a marketing
consultant to the Company. For information with respect to Mr. O'Brien, see
"Certain Transactions--Consulting Agreements with Union Atlantic."
COMPENSATION OF DIRECTORS
The Company does not presently pay any cash compensation to the directors of
the Company for serving on the board. On January 14, 1997, the Company granted
Mr. Stenbaek an immediately exercisable three year option to purchase 6,155
shares of Common Stock at an exercise price of $2.56 per share as consideration
for serving on the board.
COMMITTEES OF THE BOARD AND INDEPENDENT DIRECTORS
The Company has established a compensation committee and intends to
establish an audit committee of the Board of Directors. The compensation
committee, which is comprised of Messrs. Mahoney and Stenbaek, is responsible
for the review and approval of the compensation of the Company's employees, the
administration of the 1997 Stock Option Plan and related compensation matters.
The Company intends to add at least two independent directors to its Board.
SUMMARY COMPENSATION TABLE
The following table provides the cash and other compensation paid or
accrued by Galacticomm Technologies, Inc. to its Chief Executive Officer since
inception.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND FISCAL LONG TERM ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- ------------------ ------ ------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Peter Berg, 1996 $73,461 ---- ------- ------
Chief Executive Officer 1995 $0 ---- ------- ------
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with each of Peter
Berg, the Chairman and Chief Executive Officer of the Company, and Yannick
Tessier, the President of the Company. The employment agreements provide for an
annual salary of $175,000 for each officer, which salary will increase each
contract year by 10 percent of the prior year's salary. Messrs. Berg and Tessier
are also eligible to receive an annual cash bonus at the discretion of the
Compensation Committee of the Board of Directors. Pursuant to their respective
employment agreements, Messrs. Berg and Tessier have each been granted options
to purchase 177,263 shares of Common Stock at an exercise price of $3.74 per
share. Such options vest one-third on November 21, 1997, one-third on November
21, 1998 and the final one-third on November 21, 1999. Pursuant to the terms of
their respective employment agreements, the Company provides Messrs. Berg and
Tessier with an automobile allowance of $600 per month and a term life insurance
policy in the amount of $1,000,000.
The employment agreements provide for a three-year term that expires
November 20, 1999, which term may be terminated earlier by the Company with or
without cause (as defined in the employment agreements). Such employment
agreements may be terminated earlier by the employee with or without "good
reason," which is defined to include: (i) a significant decrease in the
employee's responsibilities; (ii) a material change in the employee's position;
(iii) a reduction in the employee's salary; or (iv) a change in the location of
the Company's executive offices outside of Broward, Palm Beach or Dade County,
Florida or a requirement that employee change his permanent residence outside of
Broward, Palm Beach or Dade County, Florida. If such employment agreement is
terminated for any reason, other than by the Company for cause, death or
disability or by the employee without good reason, then
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the employee is entitled to receive his salary under the employment agreement
for the greater of the remaining term of the agreement or 12 months from the
date of termination. Such employment agreement also contains certain non-compete
and non-disclosure provisions.
Pursuant to the employment agreements, the Company has agreed to indemnify
each of Messrs. Berg and Tessier to the fullest extent permitted by law for any
action related to his employment with the Company or for serving as a director
of the Company.
The Company has also entered into a two-year employment agreement, dated
August 25, 1997, with T. Michael Love, the Company's Chief Financial Officer,
pursuant to which Mr. Love receives an annual salary of $120,000 and has been
granted options under the Company's 1997 Stock Option Plan to purchase 34,468
shares of Common Stock at an exercise price of $6.50 per share. See "--Stock
Option Plan". The Company may terminate Mr. Love's employment with the Company
with cause, as such term is defined in his employment agreement. If the Company
terminates such employment without cause, Mr. Love will receive his salary for a
six month period following the date of termination and stock options which would
have vested at the end of the vesting period then in effect shall automatically
vest. The employment agreement also contains certain non-compete and
non-disclosure provisions.
STOCK OPTION PLAN
The Company has adopted the 1997 Stock Option Plan (the "1997 Plan").
Pursuant to the 1997 Plan, options to acquire a maximum of 370,000 shares of
Common Stock may be granted to directors, executive officers, employees
(including employees who are directors), independent contractors and consultants
of the Company. Options to purchase 164,337 shares at an exercise price of $6.50
per share are presently outstanding under the 1997 Plan, none of which are
currently exercisable.
The 1997 Plan is administered by the Compensation Committee of the Board
of Directors. The Compensation Committee determines which persons will receive
options and the number of options to be granted to such persons. The
Compensation Committee also interprets the provisions of the 1997 Plan and makes
all other determinations that it may deem necessary or advisable for the
administration of the 1997 Plan. No more than 37,000 options may be granted to a
single person in any fiscal year.
Pursuant to the 1997 Plan, the Company may grant ISOs (Incentive Stock
Options) and NQSOs (Non-Qualified Stock Options). The price at which the Common
Stock may be purchased upon the exercise of ISOs granted under the 1997 Plan are
required to be at least equal to the per share fair market value of the Common
Stock on the date particular options are granted. Options granted under the 1997
Plan may have maximum terms of not more than 10 years and are not transferable,
except by will or the laws of descent and distribution. None of the ISOs under
the 1997 Plan may be granted to an individual owning more than 10 percent of the
total combined voting power of all classes of stock issued by the Company unless
the purchase price of the Common Stock under such option is at least 110 percent
of the fair market value of the shares issuable on exercise of the option
determined as of the date the option is granted, and such option is not
exercisable more than five years after the grant date. ISOs granted under the
1997 Plan are subject to the restriction that the aggregate fair market value
(determined as of the date of grant) of options which first become exercisable
in any calendar year cannot exceed $100,000. Generally, options granted under
the 1997 Plan may remain outstanding and may be exercised at any time up to six
months after the person to whom such options were granted is no longer employed
or retained by the Company or serving on the Company's Board of Directors.
Pursuant to the 1997 Plan, unless otherwise determined by the Compensation
Committee, one-fourth of the options granted to an individual are exercisable 90
days after grant, one-fourth are exercisable on the first anniversary of such
grant, one-fourth are exercisable on the second anniversary and the final
one-fourth are exercisable on the third anniversary of such grant. However,
one-half of all outstanding options under the 1997 Plan shall become immediately
exercisable upon a "change in control" of the Company. The remaining one-half of
the outstanding options shall become exercisable upon the first anniversary of a
"change in control" of the Company. A "change in control" is generally deemed to
occur when: (i) any person (other than Messrs. Berg or Tessier) becomes the
beneficial owner of or acquires voting control with respect to more than 50
percent of the Common Stock, (ii) a change occurs in the composition of a
majority of the Company's Board of Directors during a two-year period, provided
that a change with respect to a member of the Company's Board of Directors shall
be deemed not to have occurred if the appointment of a member of the Company's
Board of Directors is approved by a vote of at least 75 percent of the
individuals who constitute the then existing Board of Directors, or (iii) the
approval by the shareholders of the Company of the sale of all or substantially
all of the assets of the Company.
The 1997 Plan provides for appropriate adjustments in the number and type
of shares covered by the 1997 Plan and options granted thereunder in the event
of any reorganization, merger, recapitalization or certain other transactions
involving the Company.
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INDEMNIFICATION PROVISIONS
Pursuant to the Company's Articles of Incorporation and Bylaws, officers
and directors of the Company are entitled to be indemnified by the Company to
the fullest extent allowed under Florida law for claims brought against them in
their capacities as officers and directors. Indemnification is allowed if the
officer or director acts in good faith and, in the case of conduct in his
official capacity, in a manner reasonably believed to be in the best interests
of the Company, or in all other cases, with a reasonable belief that his conduct
was at least not opposed to the Company's best interests. In the case of
criminal proceedings, it is necessary that an officer or director have no
reasonable cause to believe his conduct was unlawful. In addition, the Company
has agreed to indemnify Messrs. Berg and Tessier pursuant to their employment
agreements with the Company. See "--Employment Agreements." Accordingly, it is
possible that indemnification may occur for liabilities arising under the
Securities Act. The Underwriting Agreement also contains provisions under which
the Company and the Underwriters have agreed to indemnify each other (including
officers and directors) against certain liabilities under the Securities Act.
See "Underwriting." Insofar as indemnification for liabilities arising under the
Securities Act may be permitted for directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
CERTAIN TRANSACTIONS
TESSIER TRANSACTION
Pursuant to a Stock Issuance Agreement, dated August 26, 1996, among the
Company, Peter Berg and Yannick Tessier, the Company agreed to issue to Mr.
Tessier shares of the Company's Common Stock equal to the number of shares of
Common Stock held by Peter Berg. Such shares were thereafter issued to Mr.
Tessier in connection with an Agreement and Plan of Merger ("Merger Agreement"),
dated November 20, 1996, pursuant to which the Company acquired Tessier
Technologies, Inc. ("TTI"), a company controlled by Mr. Tessier. In connection
with such transaction, Mr. Tessier received 1,215,749 shares of Common Stock and
two former shareholders of TTI received an aggregate of 66,434 shares of Common
Stock in exchange for their shares of TTI common stock. Mr. Tessier was elected
to the Board of Directors of the Company and was appointed the President of the
Company upon completion of such transaction. A Worldgroup online community
operated by Tessier that was initially excluded from the assets acquired by the
Company in the November 20, 1996 transaction was subsequently acquired by the
Company in June 1997 for $30,000, payable in 12 equal monthly installments. Mr.
Tessier advanced $50,000 to TTI in 1996 to fund operations and was issued a
non-interest bearing note in the amount of $50,000, which is payable by the
Company no later than December 31, 1997.
WALLENBERG TRUST AND UA PARTNERS INVESTMENTS
Effective November 21, 1996, the Company raised a total of $2,750,000 from
the sale of shares of Common Stock and convertible notes to Hemingfold
Investments, Ltd. ("Hemingfold") and Union Atlantic Partners I Limited ("UA
Partners"). On November 21, 1996, the Company used approximately $698,978 of
such proceeds to acquire substantially all of its interests in the shares of
Galacticomm, Inc. See "--Acquisition of Galacticomm, Inc." The remaining
proceeds of this funding were allocated to working capital. See "Management's
Discussion and Analysis of Financial Condition and Results of Operation."
In September 1997, Hemingfold transferred all of its rights and interests
in the agreements described below to Kenworthy International, Limited, a
wholly-owned subsidiary of the Peder Sager Wallenberg Charitable Trust (the
"Wallenberg Trust"), an affiliate of Hemingfold. Accordingly, references to the
Wallenberg Trust below and elsewhere in this Prospectus refer to Hemingfold for
all periods prior to such transfer.
In connection with the transaction with the Wallenberg Trust, the Company
entered into a Stock Purchase Agreement (the "Wallenberg Trust Stock Purchase
Agreement"), whereby the Wallenberg Trust received 488,488 shares of Common
Stock in exchange for $1,250,000 in cash or $2.56 per share. Pursuant to the
Wallenberg Trust Stock Purchase Agreement, the Wallenberg Trust was originally
granted the following rights with respect to such shares of Common Stock: (i)
piggyback registration rights ("Piggyback Registration Rights") for up to four
registrations; (ii) demand registration rights ("Demand Registration Rights")
for one registration; (iii) tag-along rights ("Tag Along Rights") that require
that such shares be included on a pro rata basis in certain sales of Common
Stock by either Peter Berg or Yannick Tessier; and (iv) bring along rights
("Bring Along Rights") that require that such shares be included on a pro rata
basis in certain offers for the purchase of the Common Stock of either Peter
Berg or Yannick Tessier for a three year period ending November 20, 1999. The
Wallenberg Trust Stock Purchase Agreement originally provided that the shares
acquired
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by the Wallenberg Trust would additionally be granted: (x) certain anti-dilution
rights if the Company issued securities below $2.56 per share; (y) preemptive
rights for any future issuance of the Company's securities; and (z) certain
rachet rights which would have entitled the Wallenberg Trust to receive
approximately 247,077 shares of Common Stock if the Company's after tax earnings
for the year ended December 31, 1997 were less than $1,000,000 and approximately
123,538 shares of Common Stock if the Company's after tax earnings for such
period were between $1,000,000 and $1,500,000. By letter agreement, dated
September 8, 1997, the ratchet rights were waived and, upon the effective date
of this offering the anti-dilution rights and preemptive rights will be waived
in exchange for the Company's September 1997 issuance of 73,859 shares of Common
Stock to the Wallenberg Trust. Messrs. Berg and Tessier have, for so long as the
Wallenberg Trust beneficially owns more than 20 percent of the outstanding
Common Stock, agreed to vote their shares in favor of one person nominated by
the Wallenberg Trust to the Board of Directors of the Company, and, after the
effective date of this Prospectus, two persons nominated by the Wallenberg
Trust. The current nominee of the Wallenberg Trust is Claus Stenbaek. See
"Management--Directors and Officers of the Company."
Simultaneous with the Wallenberg Trust Stock Purchase Agreement, the
Wallenberg Trust loaned the Company $1,250,000 and received a Convertible
Promissory Note (the "Wallenberg Trust Note"), dated November 21, 1996. The
Wallenberg Trust Note bears interest at a rate of 10 percent per year, payable
quarterly. As amended by a letter agreement, dated September 8, 1997, between
the Company and the Wallenberg Trust, the outstanding principal of the
Wallenberg Trust Note will be automatically converted into 488,488 shares of
Common Stock (based upon a conversion price of $2.56 per share) on the effective
date of this offering. Interest accrued on such note will be paid from the
proceeds of this offering. See "Use of Proceeds." Upon issuance, such shares
will have the same Piggyback Registration, Demand Registration, Tag Along and
Bring Along Rights as those granted in connection with the Wallenberg Trust
Stock Purchase Agreement. The Wallenberg Trust Note (and the UA Partners Note
discussed below) is secured by, among other things, the accounts, inventory,
equipment and general intangibles of the Company, which security interest will
terminate upon conversion of such Notes and the payment of all accrued interest.
On November 21, 1996, the Company entered into a Stock Purchase Agreement
(the "UA Partners Stock Purchase Agreement") with UA Partners, pursuant to which
UA Partners acquired 48,849 shares of Common Stock for cash consideration of
$125,000 or $2.56 per share and loaned the Company $125,000. In exchange for the
loan, the Company issued a Convertible Promissory Note ("UA Partners Note") to
UA Partners. Other than the number of shares purchased and amount loaned, the
terms of the UA Partners Stock Purchase Agreement and the UA Partners Note are
identical in all material respects to the Wallenberg Trust Stock Purchase
Agreement and the Wallenberg Trust Note. By letter agreement, dated September 8,
1997, UA Partners waived the ratchet rights and, effective upon the effective
date of this offering, has agreed to waive the anti-dilution rights and
preemptive rights originally set forth in the UA Partners Stock Purchase
Agreement in exchange for the Company's September 1997 issuance of 7,386 shares
of Common Stock. The outstanding principal of the UA Partners Note will be
automatically converted into 48,849 shares of Common Stock (based upon a
conversion price of $2.56 per share) on the effective date of this offering.
In connection with their loans to the Company, the Wallenberg Trust and UA
Partners entered into an Intercreditor Agreement with the Company and Union
Atlantic L.C. ("Union Atlantic"). Pursuant to this agreement, the Wallenberg
Trust and UA Partners have appointed Union Atlantic to serve as their collateral
agent with respect to the loans made to the Company under the Wallenberg Trust
Note and the UA Partners Note and have agreed that, in the event of default by
the Company under such notes, the parties will share any payments in proportion
to the amount outstanding under their respective notes from the Company.
The Wallenberg Trust purchased 66,902 shares of Common Stock in the
Private Placement and 10 Bridge Units in the Bridge Financing. UA Partners
purchased two Bridge Units in the Bridge Financing. See "Recent Financings."
CONSULTING AGREEMENTS WITH UNION ATLANTIC
The Company has engaged the services of Union Atlantic since November
1996. Union Atlantic is a consulting firm specializing in emerging technology
companies. Timothy Mahoney, who is a managing member of Union Atlantic, is also
a director of the Company. See "Management--Directors and Officers of the
Company" for additional information regarding Mr. Mahoney's experience with
respect to the operations and management of technology companies. Pursuant to
one of two consulting agreements that the Company has entered into with Union
Atlantic, Union Atlantic is entitled to receive a monthly fee of $10,000 until
June 30, 2001 for providing consulting services with respect to the Company's
operations, administration, corporate development and marketing and distribution
strategies. Union Atlantic owns all of the outstanding voting securities of
Union Atlantic Partners I Limited ("UA Partners"), which acquired 48,849 shares
of Common Stock and the UA Partners Note in November 1996. See "--Wallenberg
Trust and UA Partners Investments." In connection with the UA Partners'
investment, the Company paid Union Atlantic the following amounts for
identifying the Wallenberg Trust to the Company: (i) cash compensation of
$375,500; (ii) a three-year warrant to purchase
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<PAGE>
139,708 shares of Common Stock at an exercise price of $2.56 per share with
Demand and Piggyback Registration Rights; and (iii) 78,133 shares of Common
Stock. Similarly, the Company paid Union Atlantic the following amounts for
identifying investors in the June 1997 Private Placement: (y) cash compensation
of $126,209; and (z) a three-year warrant to purchase 33,774 shares of Common
Stock at an exercise price of $3.74 per share with Demand and Piggyback
Registration Rights. Pursuant to the consulting agreement between Union Atlantic
and the Company, Union Atlantic has designated Mr. Mahoney as its representative
to the Company's Board of Directors.
Pursuant to its second consulting agreement with the Company, Union
Atlantic is providing the Company with the services of Robert O'Brien, a sales
and marketing specialist with over 25 years experience, including positions with
Truevision Corporation, Ulsi Systems, Inc., Softsmith Corporation, and Gap
Stores, Inc. The Company pays Union Atlantic a fee of $7,000 per month for Mr.
O'Brien's services and has agreed to reimburse Mr. O'Brien for business expenses
approved by the Company. Pursuant to such consulting agreement, the Company has
granted Mr. O'Brien an immediately exercisable, three year option to purchase
2,462 shares of Common Stock at an exercise price of $2.56 per share. The shares
of Common Stock underlying such option have been granted Demand and Piggyback
Registration Rights. Mr. O'Brien has also been granted an option to purchase
7,386 shares of Common Stock at a per share price of $6.50 under the Company's
1997 Stock Option Plan.
ACQUISITION OF GALACTICOMM, INC.
The Company owns 99.9 percent of Galacticomm, Inc.'s common stock. In
November 1996, the Company acquired 8,037,203 shares of the common stock of
Galacticomm, Inc. (representing approximately 96% of Galacticomm, Inc.'s then
issued and outstanding shares of common stock) in exchange for the issuance of
228,396 shares of Common Stock and cash of $698,978. In February 1997, the
Company acquired an additional 848,404 shares of the common stock of
Galacticomm, Inc. in exchange for the issuance of 42,895 shares of Common Stock
and cash consideration of $56,937.
BERG AND TESSIER GRANT OF WARRANTS TO THE WALLENBERG TRUST
Peter Berg, Yannick Tessier and a third minority shareholder of the
Company have granted the Wallenberg Trust the right to purchase an aggregate of
615,496 shares of Common Stock from them at an exercise price of $3.25 per
share, pursuant to three warrants, dated March 15, 1997 (the "Private
Warrants"). On October 17, 1997, the parties agreed to extend the expiration
date of the Private Warrants from December 31, 1997 to March 31, 1998, as a
result of which the Company will recognize an expense of approximately $30,000
in the fourth quarter of 1997. The Wallenberg Trust may exercise the Private
Warrants at any time prior to March 31, 1998 and will be deemed to have
exercised the Private Warrants automatically on the effective date of this
offering. To guarantee the Wallenberg Trust's payment of the exercise price for
the Private Warrants, the parties have entered into an escrow agreement (the
"Warrant Escrow"), pursuant to which certificates representing an aggregate of
615,496 shares of Common Stock underlying the Private Warrants (the "Escrowed
Shares") and the $2,000,000 aggregate exercise price (the "Escrowed Funds") have
been placed in escrow. On October 17, 1997, the escrow agreement was amended by
the parties to direct the escrow agent to use $500,000 of the Escrowed Funds to
purchase 10 Bridge Units in the name of the Wallenberg Trust. See "Recent
Financings." Such Bridge Units have been placed in the Warrant Escrow. If the
Private Warrants are exercised prior to March 31, 1998, the escrow agent will
distribute to the Wallenberg Trust the Escrowed Shares and the Bridge Warrants
included in such Bridge Units and will distribute to the three shareholders the
Escrowed Funds and the Bridge Notes included in such Bridge Units. If the
Private Warrants are not exercised by the Wallenberg Trust prior to March 31,
1998, the Escrowed Funds and Units will be returned to the Wallenberg Trust and
the Escrowed Shares will be returned to the three shareholders. A total of
$200,000 of the Escrowed Funds was loaned to the Company, which amount was
repaid to the Warrant Escrow at the closing of the Bridge Financing.
In consideration for the payment of $50,000 to the Company by the
Wallenberg Trust, the Company has granted the Wallenberg Trust the same
Piggyback Registration Rights and Demand Registration Rights with respect to the
shares of Common Stock underlying the Private Warrants as have been granted
under the Wallenberg Trust Stock Purchase Agreement. See "--Wallenberg Trust and
UA Partners Investments." The Company will not receive any of the proceeds from
the exercise of the Private Warrants.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth with respect to: (i) each person (or group)
who is known by the Company to own beneficially more than 5% of the Common
Stock, (ii) each of the Company's directors, (iii) each of the named executive
officers, and (iv) all directors and executive officers of the Company as a
group, certain information with respect to the beneficial ownership of the
Company's outstanding Common Stock as of the date of this Prospectus and as
adjusted to reflect: (a) the sale by the Company of the Units offered hereby;
and (B) the automatic exercise of the Private Warrants upon the effective date
of this offering. See "Certain Transactions--Berg and Tessier Grant of Warrants
to the Wallenberg Trust." Unless otherwise specified, the address of each
shareholder is the address of the Company set forth herein.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED(1)
SHARES BENEFICIALLY --------------------------------
NAME OF BENEFICIAL OWNER OWNED(2) BEFORE OFFERING AFTER OFFERING
- ------------------------ ------------------- --------------- --------------
<S> <C> <C> <C>
Peter Berg................................ 1,215,749(3) 27.8% %
Yannick Tessier........................... 1,215,749(4) 27.8% %
Peder Sager Wallenberg Charitable Trust... 1,923,233(5) 42.2% %
Bayard Trust Company, Limited............. 1,923,233(5) 42.2% %
Mees Pierson Management (Guernsey) Limited 1,923,233(5) 42.2% %
Timothy Mahoney........................... 236,803(6) 5.3% %
Claus Stenbaek............................ 6,155(7) * *
All directors and executive officers as
a group (four persons).................... 2,674,456 60% %
<FN>
- --------------
(1) Percentage of ownership is based on 4,367,245 shares of Common Stock
outstanding immediately prior to this offering and shares of Common Stock
outstanding immediately after this offering. All such amounts include 537,337
shares of Common Stock underlying the Wallenberg Trust Note and the UA Partners
Note that will be automatically converted on the effective date of this
Prospectus. See "Certain Transactions--Wallenberg Trust and UA Partners
Investments." An asterisk in the foregoing table indicates beneficial ownership
of less than one percent.
(2) Calculated pursuant to Rule 13d-3(d)1 of the Exchange Act. Shares not
outstanding that are subject to options or other rights exercisable by the
holder thereof within 60 days of the date of this Prospectus are deemed
outstanding for the purposes of calculating the number and percentage owned by
such shareholder and all directors and officers as a group, but not deemed
outstanding for the purpose of calculating the percentage owned by each other
shareholder listed.
(3) Includes 295,438 shares of Common Stock over which Mr. Berg has granted the
Wallenberg Trust an option to purchase such shares at a per share exercise price
of $3.25, which options will be exercised automatically upon the effective date
of this offering. Also includes 36,902 shares of Common Stock over which Mr.
Berg has granted options to a total of nine persons to purchase such shares at a
per share exercise price of $3.05. Does not include options granted to Mr. Berg
to purchase an aggregate of 177,263 shares of Common Stock which are not
exercisable within 60 days of the date hereof. Such options were granted in
connection with Mr. Berg's employment agreement with the Company.
(4) Includes 295,438 shares of Common Stock over which Mr. Tessier has granted
the Wallenberg Trust an option to purchase such shares at a per share exercise
price of $3.25, which options will be automatically exercised upon the effective
date of this offering. Also includes 36,957 shares of Common Stock over which
Mr. Tessier has granted options to a total of five persons to purchase such
shares at a per share exercise price of $3.05. Does not include options granted
to Mr. Tessier to purchase an aggregate of 177,263 shares of Common Stock which
are not exercisable within 60 days of the date hereof. Such options were granted
in connection with Mr. Tessier's employment agreement with the Company.
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<PAGE>
(5) Includes: (i) an aggregate of 615,496 shares of Common Stock which will be
acquired by the Wallenberg Trust on the effective date of this Prospectus upon
the automatic exercise of options granted by Messrs. Berg and Tessier and
another stockholder of the Company; (ii) 488,488 shares of Common Stock which
will be acquired upon the automatic conversion of Wallenberg Trust Note on the
effective date of this offering; and (iii) 190,000 shares of Common Stock
underlying Bridge Warrants. See "Certain Transactions." The trustees of the
Wallenberg Trust are Bayard Trust Company Limited ("Bayard") and Mees Pierson
Management (Guernsey), Limited ("Mees Pierson"). Bayard has designated two of
its directors -- Martyn D. Crespel and John B. Wilson -- to act on behalf of
Bayard. Mees Pierson has designated two of its directors -- Paul Backhouse and
Julie Scott -- to act on behalf of Mees Pierson. Peder Sager Wallenberg
disclaims any beneficial ownership of the shares of Common Stock owned
beneficially or of record by the Wallenberg Trust. The address of such persons
is c/o Bayard, 2nd Floor, Queen's House, Don Road, St.Helier Jersey JEI 4HP,
Channel Islands, Great Britain.
(6) Represents: (i) warrants to purchase an aggregate of 57,827 shares of Common
Stock distributed by Union Atlantic, L.C. ("Union Atlantic") to Mr. Mahoney, a
managing member of Union Atlantic; (ii) 26,044 shares of Common Stock
distributed by Union Atlantic to Mr. Mahoney; (iii) 48,849 shares of Common
Stock, issuable to Union Atlantic Partners I, Limited ("UA Partners") upon
conversion of the UA Partners Note; (iv) 58,697 shares of Common Stock owned by
UA Partners; (v) 7,386 shares issued to UA Partners to cancel certain ratchet
and other rights; and (vi) 38,000 shares of Common Stock underlying Bridge
Warrants. See "Certain Transactions."
(7) Represents warrants to purchase 6,155 shares of Common Stock. Mr. Stenbaek,
who serves on the Board of Directors of the Company as a representative of the
Wallenberg Trust, disclaims any beneficial ownership of the Common Stock owned
beneficially or of record by the Wallenberg Trust.
</FN>
</TABLE>
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<PAGE>
DESCRIPTION OF SECURITIES
The following section does not purport to be complete and is qualified in
its entirety by reference to the detailed provisions of the Company's Articles
of Incorporation and Bylaws, copies of which have been incorporated by reference
in the Registration Statement on Form SB-2 filed with the Securities and
Exchange Commission, of which this Prospectus forms a part.
The Company's authorized capital consists of 20,000,000 shares of Common
Stock, par value $.0001 per share, and 1,000,000 shares of preferred stock, par
value $.001 per share (the "Preferred Stock").
COMMON STOCK
Upon completion of this offering, there will be _________ shares of Common
Stock issued and outstanding. Each outstanding share of Common Stock is entitled
to one vote, either in person or by proxy, on all matters that may be voted upon
by the owners thereof at meetings of the shareholders. The holders of Common
Stock: (i) have equal ratable rights to dividends from funds legally available
therefor, when, as and if declared by the Board of Directors of the Company,
(ii) 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, (iii) do not have preemptive,
subscription or conversion rights, or redemption or sinking fund provisions
applicable thereto, and (iv) are entitled to one non-cumulative vote per share
on all matters on which shareholders may vote at all meetings of shareholders.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any series of preferred
stock that may be issued in the future, including voting, dividend, and
liquidation rights.
The holders of shares of Common Stock of the Company do not have
cumulative voting rights, which means that the holders of more than 50% of such
outstanding shares, voting for the election of directors, can elect all of the
directors of the Company if they so choose and, in such event, the holders of
the remaining shares will not be able to elect any of the Company's directors.
UNITS
Each of the Units offered hereby consists of one share of Common Stock and
one Warrant. Neither the Common Stock nor the Warrants included in the Units may
be separately traded or transferred until the First Exercise Date.
WARRANTS
The Warrants will be issued in registered form pursuant to the terms of a
Warrant Agreement (the "Warrant Agreement") between the Company and Continental
Stock Transfer & Trust Co., New York, New York, as warrant agent (the "Warrant
Agent").
The Company has authorized the issuance of up to ___________ Warrants to
purchase an aggregate of _________ shares of Common Stock (exclusive of
securities issuable pursuant to the Representative Unit Purchase Option) and has
reserved an equivalent number of shares of Common Stock for issuance upon
exercise of such Warrants. None of the Warrants are currently issued and
outstanding.
For every two Warrants, the holder is entitled to purchase one share of
Common Stock upon payment of the exercise price set forth on the cover page of
this Prospectus, subject to adjustment. The Warrants are exercisable at any time
commencing (the "First Exercise Date") 90 days after the date of this
Prospectus, or on such earlier date as may be determined by the Company and the
Representative, and ending on the third anniversary of the date of this
Prospectus, provided that at such time a current prospectus relating to the
Common Stock is in effect and the Common Stock is qualified for sale or exempt
from qualification under applicable state securities laws. The Warrants are not
transferrable separately from the Common Stock issued with such Warrant as part
of the Units until the First Exercise Date.
The Company may, at its option redeem all, but not less than all,
outstanding Warrants, commencing 30 days after the First Exercise Date upon not
less than 30 days prior notice to the registered holders of the Warrants for a
redemption price of $.05 for each share of Common Stock to which the Warrant
holder would then be entitled upon exercise of the Warrants being redeemed, in
the event that: (i) there exists a current prospectus relating to the Common
Stock issuable upon exercise of the Warrants under an effective registration
statement filed with the Securities and Exchange Commission and the issuance of
the Common Stock upon exercise of the Warrants has been qualified for sale or
exempt from qualification under applicable state securities laws, and (ii) the
shares of Common Stock of the Company have had an average closing bid and asked
price of not less than 150% of the Warrant exercise price
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<PAGE>
for a period of 20 consecutive trading days ending three trading days prior to
the date of the redemption notice. Holders of Warrants will automatically
forfeit their rights to purchase the shares of Common Stock issuable upon
exercise of such Warrants unless the Warrants are exercised before 5:00 p.m.
(Miami time) on the date set for redemption. All of the outstanding Warrants may
be affected. A notice of any redemption of the redemption date is required to be
mailed to each of the registered holders of the Warrants by first class mail,
postage prepaid, 30 days before the date fixed for redemption. The notice of
redemption is required to specify the date fixed for redemption, and the right
to exercise the Warrants shall terminate at 5:00 p.m. (Miami time) on the
redemption date.
The Warrants may be exercised upon surrender of the certificates therefor
on or prior to the final exercise date (as explained above) at the offices of
the Warrant Agent with the "Subscription Form" on the reverse side of the
certificate(s) completed and executed as indicated, accompanied by payment (in
the form of certified or cashier's check payable to the order of the Company) of
the full exercise price for the number of Warrants being exercised.
The holders of the Warrants will not have any of the rights or privileges
of shareholders of the Company (except to the extent they own Common Stock of
the Company) prior to the exercise of the Warrants. The exercise price of the
Warrants and the number of shares of Common Stock issuable upon the exercise
thereof are subject to adjustment upon the occurrence of certain evens such as
stock splits, stock dividends or the like, as set forth in the Warrant
Agreement.
In the event of a capital reorganization of the Company, reclassification
of the Common Stock or a consolidation or merger of the Company with or into, or
a disposition of substantially all of the Company's properties and assets to,
any other corporation, the Warrants then outstanding will thereafter be
exercisable into the kind and amount of shares of stock or other securities or
property (including cash) to which the holders thereof would have been entitled
if they had exercised such Warrants and received shares of Common Stock
immediately prior to such reorganization, reclassification, consolidation,
merger or disposition, consistent with the requirements for exercise set forth
in the Warrant Agreement.
For the life of the Warrants, the Warrant holders have the opportunity to
profit from a rise in the market price of the Common Stock without assuming the
risk of ownership of the shares of Common Stock issuable upon the exercise of
the Warrants, with a resulting dilution in the interest of the Company's
shareholders by reason of exercise of Warrants at a time when the exercise price
is less than the market price for the Common Stock. Further, the terms on which
the Company could obtain additional capital during the life of the Warrants may
be adversely affected as a result of the Warrants being outstanding. The Warrant
holders may be expected to exercise their Warrants at a time when the Company
would, in all likelihood, be able to obtain any needed capital by an offering of
Common Stock on terms more favorable than those provided for by the Warrants.
For a holder to exercise the Warrants there must be a current registration
statement in effect with the Securities and Exchange Commission and registration
or qualification with, or approval from, various state securities agencies with
respect to the shares or other securities underlying the Warrants. The Company
has agreed to use its best efforts to cause a registration statement with
respect to such securities under the Securities Act to continue to be effective
during the term of the Warrants and to take such other actions under the laws of
various states as may be required to cause the sale of Common Stock upon
exercise of Warrants to be lawful, unless such action would cause the Company to
be subject to general service of process or require it to amend its charter
documents or any action taken by the Company's board of directors. However, the
Company will not be required to honor the exercise of Warrants if, in the
opinion of the Company's Board of Directors upon advice of counsel, the sale of
securities upon exercise would be unlawful.
The Company is not required to issue fractional shares of Common Stock,
and in lieu thereof will make a cash payment based upon the current market value
of such fractional shares. A holder of the Warrants will not possess any voting
or any other rights as a shareholder of the Company unless he or she exercises
the Warrants.
The Warrant exercise price was arbitrarily determined by negotiation
between the Company and the Representative. The Company may reduce the exercise
price of the Warrants or extend the warrant expiration date upon notice to
Warrant holders. The foregoing is merely a summary of the rights and privileges
of the holders of Warrants, and is qualified in its entirety by reference to the
Warrant Agreement.
OUTSTANDING OPTIONS AND WARRANTS
On the effective date of this Prospectus, the following options and
warrants (exclusive of the Warrants) will be outstanding: (i) 370,000 shares of
Common Stock reserved for issuance upon the exercise of stock options under the
Company's 1997 Stock Option Plan, of which 164,337 options are presently issued
and outstanding; (ii) 363,143 shares of Common Stock; (iii) 173,482 shares of
40
<PAGE>
Common Stock which may be acquired upon the exercise of two warrants; (iv)
537,337 shares of Common Stock underlying two convertible promissory notes which
notes will be automatically converted on the effective date of this offering;
and (v) 957,600 shares of Common Stock reserved for issuance upon the exercise
of the Bridge Warrants, which amount includes warrants to purchase 159,600
shares of Common Stock granted to the Representative for serving as the
placement agent of the Bridge Financing. See "Recent Financings."
REGISTRATION RIGHTS AND SALES BY SELLING SHAREHOLDERS
The Company has granted Demand Registration Rights and Piggyback
Registration Rights to the Wallenberg Trust, UA Partners, Union Atlantic and
Robert O'Brien with respect to an aggregate of 1,947,359 shares of Common Stock
held by them and/or issuable to them upon conversion or exercise of promissory
notes or warrants held by them. See "Certain Transactions." The Demand
Registration Rights are limited to one registration and may not be exercised
until the earlier of November 20, 1999 or the date the Company's equity
securities are publicly traded. The Piggyback Registration Rights provide that
if the Company proposes to register any of its securities under the Act, the
holders of such rights are entitled to include shares of Common Stock in the
registration. Such registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of a registered offering
to limit the number of shares included in such registration.
Pursuant to the terms of the UPOs sold to the Representative in connection
with this offering, the Company has agreed that, for a period of four years
beginning on the first anniversary of this offering, that upon written demand of
the holders of a majority of the UPOs it will, on one occasion, register for
sale in a public offering under the Securities Act all or any portion of the
securities issuable upon exercise of the UPOs. See "Underwriting." Any such
registration would be at the Company's expense. The Company has also agreed to
include such underlying securities in any appropriate registration statement
which is filed by the Company during the four years beginning one year from the
date of this Prospectus.
In connection with the Bridge Financing, the Company agreed to register
the shares of Common Stock underlying the Bridge Warrants in a registration
statement for an initial public offering of the Company's securities. See
"Recent Financings." Accordingly, an aggregate of 957,600 shares of Common Stock
underlying the Bridge Warrants have been included in the registration statement
of which this Prospectus forms a part. Such registration includes 159,600 shares
of Common Stock underlying Bridge Warrants granted to the Representative for
serving as the placement agent of the Bridge Financing. The Bridge Warrants are
exercisable at price of $3.75 per share until October 27, 2000. Holders of the
Bridge Warrants have agreed not to sell or transfer the shares of Common Stock
underlying the Bridge Warrants for a six-month period following the date of this
Prospectus, unless otherwise agreed to by the Representative. Sales of Common
Stock after the expiration of the six month period by such selling shareholders
or even the potential of such sales will likely have an adverse effect on the
market prices of the Units, Common Stock and the Warrants.
PREFERRED STOCK
The Company's Board of Directors has the authority to issue 1,000,000
shares of Preferred Stock, $.001 par value, none of which is issued and
outstanding, in one or more series and to fix, by resolution, conditional, full,
limited or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, if any,and the qualifications,
limitations or restrictions thereof, if any, including the number of shares in
such series (which the Board may increase or decrease as permitted by Florida
law), liquidation preferences, dividend rates, conversion or exchange rights,
redemption provisions of the shares constituting any series, and such other
special rights and protective provision with respect to any class or series as
the Board may deem advisable without any further vote or action by the
shareholders. Any shares of Preferred Stock so issued would have priority over
the Common Stock with respect to dividend or liquidation rights or both and
could have voting and other rights of shareholders. The issuance of Preferred
Stock with voting or conversion rights may adversely affect the voting rights of
the holders of Common Stock. The Company has no present plans to issue shares of
Preferred Stock.
CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
GENERAL. A number of provisions of the Articles of Incorporation
("Articles") and Bylaws ("Bylaws") of the Company concern matters of corporate
governance and the rights of shareholders. Certain of these provisions, as well
as the ability of the Board of Directors to issue shares of Preferred Stock and
to set the voting rights, preferences and other terms thereof, may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors (including takeovers which certain
shareholders may deem to be in their best interests). To the extent takeover
attempts are discouraged, temporary fluctuations
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<PAGE>
in the market price of the Common Stock, which may result from actual or rumored
takeover attempts, may be inhibited. These provisions, together with the ability
of the Board to issue Preferred Stock without further shareholder action, also
could delay or frustrate the removal of incumbent Directors or the assumption of
control by shareholders, even if such removal or assumption would be beneficial
to shareholders of the Company. These provisions also could discourage or make
more difficult a merger, tender offer or proxy contest, even if they could be
favorable to the interests of shareholders, and could potentially depress the
market price of the Common Stock. The Board of Directors believes that these
provisions are appropriate to protect the interests of the Company and all of
its shareholders.
MEETINGS OF SHAREHOLDERS. The Bylaws provide that a special meeting of
shareholders may be called by the Board of Directors or the holders of not less
than 10% of the outstanding Common Stock entitled to vote at such a meeting
unless otherwise required by law. The Company's Bylaws provide that only those
matters set forth in the notice of the special meeting may be considered or
acted upon at that special meeting, unless otherwise provided by law. In
addition, the Bylaws set forth certain advance notice and informational
requirements and time limitations on any director nomination or any new business
which a shareholder wishes to propose for consideration at an annual meeting of
shareholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Articles provide that
directors, officers and employees and agents of the Company shall be indemnified
by the Company to the fullest extent authorized by Florida law, as it now exists
or may in the future be amended, against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of the Company. The
Articles also provide that the right of directors and officers to
indemnification shall not be exclusive of any other right possessed or hereafter
acquired under any bylaw, agreement, vote of shareholders or otherwise.
AMENDMENT OF BYLAWS. The Articles provide that the Bylaws may be amended
or repealed by the Board of Directors or by the shareholders. Such action by the
Board of Directors requires the affirmative vote of a majority of the directors
then in office. Such action by the shareholders requires the affirmative vote of
the holders of at least two-thirds of the total votes eligible to be cast by
holders of voting stock with respect to such amendment or repeal at an annual
meeting of shareholders or a special meeting called for such purposes.
SHARES ELIGIBLE FOR FUTURE SALE
After completion of this offering, the Company will have __________ shares
of Common Stock outstanding assuming no exercise of the Warrants, the Bridge
Warrants, the Underwriters' over-allotment option, the Representative Unit
Purchase Option or any other outstanding options or warrants. Of these shares,
all of the shares of Common Stock included in the Units offered hereby will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company, as that term is
defined in Rule 144. The remaining 4,367,245 shares of Common Stock were issued
and sold by the Company in private transactions and are eligible for public sale
only if registered under the Securities Act, sold in accordance with Rule 144
thereunder or pursuant to an exemption from registration.
In general, under Rule 144 under the Securities Act as currently in
effect, any affiliate of the Company or any person (or persons whose shares are
aggregated in accordance with the Rule) who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the outstanding shares of Common Stock or the reported average weekly trading
volume in the over-the-counter market for the four weeks preceding the sale.
Sales under Rule 144 are also subject to certain manner of sale restrictions and
notice requirements and to the availability of current public information
concerning the Company. Persons who have not been affiliates of the Company for
at least three months and who have held their shares for more than two years are
entitled to sell restricted securities without regard to the volume, manner of
sale, notice and public information requirements of Rule 144.
The Company, its executive officers, directors and shareholders (other
than those noted below) have agreed that for a period of one year from the date
of this Prospectus, they will not, without the prior written consent of the
Representative, offer, sell, contract to sell, or otherwise dispose of, any
shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock. See "Underwriting." Such lock-up does
not apply to the following securities:
. The Representative, in its sole discretion at any time and
without notice, may release any and all shares from the lock-up agreement and
permit holders of the shares to resell all or any portion of their shares prior
to the expiration of the one-year lock-up period.
42
<PAGE>
Prior to this offering, there has been no market for the Company's
securities and no prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale will
have on the market prices prevailing from time to time. The possibility that
substantial amounts of shares of Common Stock may be sold in the public market
may adversely affect prevailing market prices for the shares of Common Stock
and/or may impair the Company's ability to raise equity capital in the future.
TRANSFER AGENT AND WARRANT AGENT
The transfer agent for the Common Stock and the Warrant Agent for the
Warrants is Continental Stock Transfer & Trust Co., New York, New York.
UNDERWRITING
The Underwriters named below, for whom First Equity Corporation of Florida
is acting as Representative, have severally agreed, subject to the terms and
conditions of the Underwriting Agreement (a copy of which is an exhibit to the
Registration Statement filed with the Commission of which this Prospectus is a
part) to purchase and pay for the number of Units from the Company set forth
opposite their respective names below:
UNDERWRITERS NUMBER OF UNITS
- ------------ ---------------
First Equity Corporation of Florida.........................
Total.......................................................
The Units are being sold on a firm commitment basis. The Underwriting
Agreement provides, however, that the obligations of the several Underwriters to
purchase and pay for the Units are subject to certain conditions precedent,
including approval of certain legal matters by counsel. The Underwriters are
committed to purchase all of the Units offered hereby if any are purchased. The
Units are being offered by the Underwriters, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters.
The Representative has advised the Company that the Underwriters propose
initially to offer the Units to the public at the public offering price set
forth on the cover page of this Prospectus. The Underwriters may allow to
certain dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD") concessions not to exceed $____ per Unit, of which amount
a sum not in excess of $.____ per Unit may be re-allowed by such dealers to
other dealers who are members of the NASD. After the initial public offering,
the public offering price, the concessions and the reallowances may be changed
by the Representative.
The Company has granted to the Underwriters an option, exercisable not
later than 45 days after the date of this Prospectus, to purchase from the
Company at the public offering price, less underwriting discounts and the
non-accountable expense allowance, up to ________ additional Units. The
Underwriters may exercise this option in whole or, from time to time, in part,
for the sole purpose of covering over-allotments, if any, made in connection
with the sale of the Units offered hereby. To the extent the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase that number of the additional Units.
The Company has agreed to pay the Representative a non-accountable
expense allowance equal to 3% of the gross proceeds of this offering (including
the sale of any Units subject to the over-allotment option), of which $25,000
has been paid as of the date of this Prospectus. The Company has also agreed to
pay all expenses in connection with qualifying the Units offered hereby for sale
under the laws of such states as the Representative may designate, including
fees and expenses of counsel (up to $25,000) retained for such purposes by the
Representative and the costs and disbursements in connection with qualifying the
offering with the NASD.
43
<PAGE>
The Company has agreed, upon closing of this offering, to sell to the
Representative and its designees, for $75.00, Representative Unit Purchase
Options ("UPOs") which entitle the Representative to purchase Units (the
"Representative Units"), exclusive of Units sold under the Underwriters'
over-allotment option. The UPOs will be exercisable for a four-year term,
commencing one year from the effective date of the offering, at an exercise
price equal to $ __________ (120% of the public offering price of the Units
offered hereby). The Representative Units, issuable upon exercise of the UPOs,
consist of one share of Common Stock and a non-redeemable Warrant. The UPOs will
be restricted from sale, transfer, assignment or hypothecation (other than to
officers and partners of the Representative or to other NASD members
participating in the offering or their officers or partners) for one year
following the date of this Prospectus. The number of Units covered by the UPOs
and the exercise price are subject to adjustment upon the subdivision,
combination or reclassification of the Common Stock, or certain mergers and
consolidations.
It may be expected that the UPOs will be exercised only if it is
advantageous to the Representative. Therefore, during the period in which the
UPOs may be exercised, the holders thereof are given, at a nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock. To
the extent that the UPOs are exercised, dilution to the interests of the
Company's shareholders will occur. Further, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected since
the holders of the UPOs can be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable to the Company than those provided in the UPOs. Any gain from the
sale of the shares issued upon exercise of the UPOs or the underlying
Representative Warrants or the shares underlying the Representative Warrants may
be deemed additional underwriter compensation to the Representative. The Company
has granted the Representative certain registration rights with respect to the
securities underlying the UPOs. See "Description of Securities -- Registration
Rights and Sales by Selling Shareholders."
The Company has also granted to the Representative the right, for a period
of three years after the date of this Prospectus, to nominate a designee of the
Representative for election to the Board of Directors of the Company. The
Company's officers, directors and shareholders (other than _______ ) have agreed
to vote their shares of Common Stock in favor of such designee. The
Representative has not yet exercised its right to designate such a person. In
addition, the Company has granted to the Representative for a period of two
years after the date of this Prospectus the right to represent the Company in
connection with any merger or acquisition involving the Company for which the
Company intends to use the services of an investment banker or a financial
advisor and a right of first refusal to manage any public or private offering of
the Company's securities. The Company does not presently anticipate incurring
any expenses related to these arrangements with the Representative.
The Representative acted as placement agent for the Company in connection
with the Bridge Financing and was paid a placement fee equal to: (i) cash
compensation equal to 10 percent of the principal amount of the Bridge Notes;
(ii) a non-accountable expense allowance equal to 3 percent of the principal
amount of the Bridge Notes and certain accountable expenses totaling $10,000;
and (iii) warrants to purchase 159,600 shares of Common Stock on substantially
the same terms as the Bridge Warrants, which shares have been included in the
registration statement of which this Prospectus forms a part. See "Description
of Securities -- Registration Rights and Sales by Selling Shareholders."
The holders of an aggregate of _______ shares of Common Stock ( _____ % of
the outstanding shares of the Company's Common Stock after giving effect to this
offering, but without giving effect to the issuance, if any, of shares pursuant
to the over-allotment option), consisting of all the officers and directors of
the Company, and all shareholders of the Company (other than ___________ ), have
agreed not to sell, transfer or otherwise dispose of any beneficial interest in
any Common Stock owned by them, other than gifts and intra-family transfers (so
long as the holders remain subject to the restrictions), for a period of 12
months following the date of this Prospectus, without the prior written consent
of the Representative.
Prior to this offering there has been no public trading market for the
Units, the Common Stock of the Warrants. Consequently, the initial public
offering price of the Units and the exercise price of the Warrants have been
determined by negotiation between the Company and the Representative, do not
necessarily bear any relationship to the Company's assets, book value, revenues
or other established criteria of value, and should not be considered indicative
of the actual value of the Company's securities. Factors considered in
determining such public offering price, 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, its past and
present operations, the prospects of the Company, market prices of similar
securities of comparable publicly-traded companies, the general condition of the
securities market and such other factors as were deemed relevant.
44
<PAGE>
In connection with this offering, the Underwriters may over-allot or
effect transactions which stabilize or maintain the market price of the shares
at a level above that which might otherwise prevail in the open market. Such
transactions may be effected in the over-the-counter market or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make.
The Representative has informed the Company that it does not expect sales
to discretionary accounts by the Underwriters to exceed 5% of the total number
of Units offered hereby. See "Principal Shareholders."
The foregoing includes a summary of the principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the form of Underwriting Agreement filed as an exhibit to the
Company's Registration Statement of which this Prospectus forms a part.
LEGAL MATTERS
The validity of the issuance of the securities being offered hereby will
be passed upon for the Company by Lucio, Mandler, Croland, Bronstein, Garbett,
Stiphany & Martinez, P.A., Miami, Florida. Akerman, Senterfitt & Eidson, P.A,
Miami, Florida is acting as counsel for the Underwriter in connection with this
offering.
EXPERTS
The consolidated financial statements of the Company as of and for the
year ended December 31, 1996 and the financial statements of Galacticomm, Inc.
for the year ended December 31, 1995 and the ten months ended October 31, 1996
have been included herein and in the registration statement in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein and upon the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form
SB-2 filed by the Company with the Securities and Exchange Commission under the
Securities Act with respect to the Units offered hereby. This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and related exhibits and
schedules for further information with respect to the Company and the Common
Stock offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and in each such instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits and schedules forming a
part thereof can be inspected and copies at the public reference facilities
maintained by the Securities and Exchange Commission at Room 124, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be
available for inspection and copying at the following regional offices of the
Securities and Exchange Commission: 7 World Trade Center, Suite 1300, New York,
New York 10007; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained from
the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Registration Statement may also be obtained from the Securities and Exchange
Commission's website on the Internet, the address of which is
http://www.sec.gov. Consistent with the requirements for continued inclusion on
the NASDAQ Stock Market, the Company intends to furnish its shareholders with
annual reports containing financial statements certified by independent auditors
and quarterly reports for the first three quarters of each year containing
unaudited financial statements.
45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
Report of Independent Auditors.................................................. F-2
Consolidated Balance Sheets as of December 31, 1996
and (Unaudited) for the six months ended June 30, 1997.......................... F-3
Consolidated Statements of Operations for the year ended December 31, 1996 and
(Unaudited) for each of the six months ended June 30, 1997 and 1996............. F-4
Consolidated Statements of Shareholders' Equity for the year ended December 31,
1996 and (Unaudited) June 30, 1997.............................................. F-5
Consolidated Statements of Cash Flows for the year ended December 31, 1996 and
(Unaudited) for the six months ended June 30, 1997 and 1996..................... F-6
Notes to Consolidated Financial Statements...................................... F-7
GALACTICOMM, INC.
Report of Independent Auditors.................................................. F-21
Statements of Operations for the year ended December 31, 1995 and for the ten
months ended October 31, 1996................................................... F-22
Statements of Cash Flows for the year ended December 31, 1995 and for the ten
months ended October 31, 1996................................................... F-23
Notes to Financial Statements................................................... F-24
PRO FORMA
Unaudited Pro Forma Consolidated Statement of Operations of Galacticomm
Technologies, Inc. for the year ended December 31, 1996......................... F-30
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Galacticomm Technologies, Inc.
and Subsidiary
We have audited the accompanying consolidated balance sheet of Galacticomm
Technologies, Inc. and subsidiary as of December 31, 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Galacticomm
Technologies, Inc. and subsidiary as of December 31, 1996 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
September 9, 1997, except as to the last paragraph of note 1 and notes 12(a)
and 12(c) which are as of October 28, 1997.
/s/ KPMG Peat Marwick, LLP
---------------------------
KPMG Peat Marwick, LLP
F-2
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
ASSETS 1996 1997
------------- -----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 1,466,392 410,951
Accounts receivable, net of allowance of
$90,363 in 1996 and $148,602 in 1997 31,762 123,183
Inventories 83,730 133,409
Prepaid expenses and other current assets 32,991 123,337
----------- -----------
Total current assets 1,614,875 790,880
Property and equipment, net 544,569 485,244
Goodwill, net 2,079,334 2,017,476
Deferred debt issuance 139,359 95,806
Deferred offering costs 10,000 150,807
Other assets 45,883 68,668
----------- -----------
Total assets $ 4,434,020 3,608,881
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 395,994 274,902
Notes payable and short-term borrowings 343,575 198,575
Notes payable-shareholder 50,000 80,000
Deferred revenues 305,145 158,021
Accrued expenses 921,678 673,767
Other current liabilities 74,063 43,691
----------- -----------
Total current liabilities 2,090,455 1,428,956
Convertible promissory notes 1,375,000 1,375,000
Other liabilities 18,999 11,166
----------- -----------
Total liabilities 3,484,454 2,815,122
----------- -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock; $.001 par value; 1,000,000
shares authorized; none issued -- --
Common stock; $.0001 par value; 20,000,000
shares authorized; 3,423,108 shares issued
and outstanding December 31, 1996; 3,725,805
shares issued and outstanding June 30, 1997
342 373
Additional paid-in capital 2,009,593 3,107,770
Accumulated deficit (1,060,369) (2,140,226)
----------- -----------
949,566 967,917
Less stock subscriptions receivable -- (174,158)
----------- -----------
Total shareholders' equity 949,566 793,759
----------- -----------
Total liabilities and shareholders' equity $ 4,434,020 3,608,881
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ------------------------
1996 1997 1996
------------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Revenue:
Licensing fee and royalties $ 1,482,510 247,591 312,736
Product sales 210,233 1,540,288 --
----------- ---------- ----------
Total revenue 1,692,743 1,787,879 312,736
Operating costs and expenses:
Cost of revenue 758,050 502,310 245,629
Selling, general and administrative 1,531,130 1,318,222 182,901
Depreciation 47,533 78,891 10,005
Amortization of intangibles 38,665 321,179 386
Compensation expense on warrants -- 113,760 --
Research and development 225,549 302,518 --
Customer support 72,772 205,934 --
----------- ---------- ----------
Total costs and expenses 2,673,699 2,842,814 438,921
----------- ---------- ----------
Loss from operations (980,956) (1,054,935) (126,185)
Other income (expense):
Interest expense (91,217) (84,759) (4,268)
Other income, net 30,905 59,837 --
----------- ---------- ----------
(60,312) (24,922) (4,268)
----------- ---------- ----------
Net loss $(1,041,268) (1,079,857) (130,453)
=========== ========== ==========
Net loss per share $ (0.36) (0.25) (0.05)
=========== ========== ==========
Number of shares used in calculating net
loss per share 2,885,273 4,401,502 2,671,268
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year ended December 31, 1996 and
six months ended June 30, 1997
COMMON STOCK ADDITIONAL STOCK
NUMBER OF PAR PAID-IN ACCUMULATED SUBSCRIPTIONS
SHARES VALUE CAPITAL DEFICIT RECEIVABLE TOTAL
---------- -------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,375,192 $ 137 19,863 (19,101) -- 899
Capital contributions -- -- 29,684 -- -- 29,684
Stock issued to acquire Tessier 1,282,183 128 194,967 -- -- 195,095
Stock issued in private placement
(net of $139,359 of issuance costs) 537,337 54 1,235,587 -- -- 1,235,641
Stock issued to acquire Galacticomm 228,396 23 529,492 -- -- 529,515
Net loss for the year ended
December 31, 1996
-- -- -- (1,041,268) -- (1,041,268)
--------- -------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 3,423,108 342 2,009,593 (1,060,369) -- 949,566
Stock issued to acquire Galacticomm
(unaudited)
42,895 4 139,891 -- -- 139,895
Warrants issued (unaudited) -- -- 113,760 -- -- 113,760
Stock issued in private placement
(net of $126,209 of issuance costs)
(unaudited)
259,802 27 844,526 -- (174,158) 670,395
Net loss for the six months ended
June 30, 1997 (unaudited) -- -- -- (1,079,857) -- (1,079,857)
--------- -------- ---------- ---------- ---------- ----------
Balance, June 30, 1997 (unaudited) 3,725,805 $ 373 3,107,770 (2,140,226) (174,158) 793,759
========= ======== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997 1996
------------ ---------- ---------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,041,268) (1,079,857) (130,453)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 86,198 400,070 10,391
Loss on sale of property and equipment 10,373 2,083 --
Compensation expense on warrants -- 113,760 --
Changes in assets and liabilities, net
of effects of purchase business
combinations:
Accounts receivable 65,692 (91,421) (30,771)
Inventories 8,046 (49,679) --
Prepaid expenses and other current
assets
13,372 (90,346) (17,732)
Other assets (33,571) (11,721) --
Accounts payable and accrued expenses 525,744 (369,003) 7,281
Deferred revenue (50,383) (147,124) --
Other liabilities (37,963) (38,205) --
----------- ----------- -----------
Net cash used in operating
activities (453,760) (1,361,443) (161,284)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (150,220) (21,649) (117,435)
Proceeds from the sale of property and equipment 65,000 -- --
Acquisitions, net of cash acquired (548,911) (56,937) --
----------- ----------- -----------
Net cash used in investing
activities (634,131) (78,586) (117,435)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from notes payable 80,000 -- 306,455
Proceeds from convertible promissory notes 1,375,000 -- --
Repayments on notes payable (35,000) (145,000) --
Net proceeds from the sale of common stock 1,235,641 670,395 --
Debt issuance costs (139,359) -- --
Offering costs (10,000) (140,807) --
Additional capital contributions 29,684 -- --
----------- ----------- -----------
Net cash provided by investing
activities 2,535,966 384,588 306,455
----------- ----------- -----------
Net increase (decrease) in cash 1,448,075 (1,055,441) 27,736
Cash, beginning of period 18,317 1,466,392 23,286
----------- ----------- -----------
Cash, end of period $ 1,466,392 410,951 51,022
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 12,016 68,750 768
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and (unaudited) June 30, 1997
(1) THE COMPANY AND LIQUIDITY
Galacticomm Technologies, Inc. and subsidiary (the "Company") develops
and licenses computer software applications and tools. The Company was
incorporated in December 1995 under the name of Iview Software, Inc.
("Iview"), and changed its name to Galacticomm Technologies, Inc. after
acquiring Galacticomm, Inc. ("Galacticomm") in November 1996 (see note
2). The Company was originally incorporated with 5,000,000 authorized
shares, par value $.001. At that time, 687,596 shares were issued of
which 607,875 were owned by the Chairman and Chief Executive Officer.
The consideration paid for these founders shares was $20,000. During
1996 the founding shareholders contributed an additional $29,684
bringing the per share price for the founders shares to $.036 per
share. On November 19, 1996, the Board of Directors approved the
recapitalization of the Company which increased the authorized shares
of common stock from 5,000,000 shares to 20,000,000, reduced the par
value from $.001 per share to $.0001 per share and effected a 2 for 1
split of the Company's common stock. In September 1997, the Company
effected a 4.061771824 for one reverse split of the Company's common
stock. The par value of each common share remained $0.0001 and a total
of $1,048 was reclassified from common stock to additional paid-in
capital. All share and per share amounts have been restated to
retroactively reflect the reverse stock split. In addition, the
Company's Board of Directors recommended and the shareholders approved
the authorization of 1,000,000 shares of preferred stock, par value
$0.001 per share.
Prior to the acquisition of Galacticomm, Iview developed, marketed and
supported software that enabled individuals to broadcast and receive
video and audio signals over the Internet and on dial-up networks and
offered online subscription services using such software. Galacticomm
was incorporated in July 1985 and develops and sells network-centric
software applications and tools. Its primary product, Worldgroup, a
client-server software, is a platform that merges Bulletin Board
Systems, E-Mail, and Worldgroup functions that enable enterprises to
provide client/server applications over the Internet and Intranet and
secure external data exchanges with customers, field agents, suppliers,
and others. On November 21, 1996, the Company merged with Tessier
Technologies, Inc. (see note 2). Tessier specialized in the on-line
software industry selling platform software from Galacticomm. Tessier
also developed its own line of software as add-ons to the baseline
products in both business and entertainment.
At December 31, 1996, the Company's current liabilities exceeded its
current assets by $475,580. Additionally, the Company incurred a net
loss of $1,041,268 for the year ended December 31, 1996. The
accompanying unaudited June 30, 1997 financial statements indicate that
these situations are continuing as current liabilities exceeded current
assets by $638,076 at June 30, 1997 and a net loss of $1,079,857 was
incurred for the six months ended June 30, 1997. Pursuant to its
business strategy, the Company expects to continue making expenditures
on new product introductions, marketing, research and development. As
such, the Company expects to incur a loss in 1997 and does not expect
to generate cash flow from operating activities during 1997 sufficient
to offset such expenditures. The Company's losses have been funded
through the sale of debt and equity securities and during October 1997,
the Company completed a bridge loan financing. The Company also plans
to raise additional capital through an initial public offering
[see note 12(a)]. The net proceeds of the bridge loan financing will
enable the Company to remain liquid for the remainder of 1997 and
through at least June 1998. The foregoing calculation gives no
effect to any proceeds from the planned offering discussed in note
12(a).
(Continued)
F-7
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) ACQUISITIONS
On August 26, 1996 the Company entered into an agreement with the
principal and controlling shareholder of Tessier to issue him shares of
the Company's common stock such that he would have the same percentage
interest in the Company as that of the then current controlling
shareholder (36 percent). On November 20, 1996, this agreement was
consummated as part of a merger between the Company and Tessier. Under
the plan of merger the Company acquired Tessier in exchange for
1,282,183 shares of the Company's common stock valued at $195,095.
On November 21, 1996, the Company acquired 96 percent of the
outstanding common stock of Galacticomm in exchange for 228,396 shares
of the Company's common stock valued at $529,515 and $698,978 in cash.
Such amounts include $287,522 of acquisition costs consisting of
$87,502 in cash and 78,133 shares of common stock valued at $2.56 per
share (see note 8). Certain shares of the Galacticomm common stock
acquired by the Company on November 21, 1996 were subject to a stock
purchase warrant (the "Galacticomm Warrant") that had been granted to
certain third parties by the previous owner of such Galacticomm common
stock. In connection with the cancellation of the Galacticomm Warrant,
the two majority shareholder's of the Company granted such holders
73,859 warrants (the "New Warrants") to purchase shares of the
Company's common stock. The New Warrants bear an exercise price of
$3.05 per warrant and may be exercised at any time through November 21,
1999. The fair value of the New Warrants was immaterial to the
Company's acquisition of Galacticomm.
The above transactions were recorded under the purchase method of
accounting. Accordingly, the results of operations of Tessier and
Galacticomm for the period from October 31, 1996 to December 31, 1996
have been included in the accompanying consolidated financial
statements. The operations from October 31, 1996 to November 20, 1996
for Tessier and to November 21, 1996 for Galacticomm, are not material
to the consolidated financial statements. The purchase prices have been
allocated to assets acquired and liabilities assumed based on the fair
market values at the dates of acquisition. The fair value of assets
acquired and liabilities assumed is as follows:
GALACTICOMM TESSIER
------------ -------
Current assets $ 347,136 44,360
Property and equipment 451,113 66,141
Goodwill 1,911,431 206,627
Current liabilities (1,452,338) (38,114)
Long-term liabilities (28,849) (83,919)
---------- -------
$ 1,228,493 195,095
=========== =======
The following unaudited pro forma financial information for the Company
for the year ended December 31, 1996 gives effect to the Tessier and
Galacticomm acquisitions as if they had occurred on January 1, 1996,
after including the impact of certain adjustments, such as amortization
of goodwill and interest expense related to financings obtained to fund
the acquisitions. In management's opinion, the unaudited pro forma
combined results of
(Continued)
F-8
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
operations are not necessarily indicative of the actual results that
would have occurred had the acquisition been consummated at January 1,
1996, or of future operations of the acquired companies under the
ownership and management of the Company.
Revenues, net $ 6,189,505
============
Net loss $ (4,221,950)
============
Net loss per share $ (.98)
============
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of June 30, 1997,
and the unaudited consolidated statements of operations and cash
flows for the six months ended June 30, 1997 and 1996 and the
unaudited consolidated statement of shareholders' equity for the
six months ended June 30, 1997 include, in the opinion of
management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's
consolidated financial position, results of operations and cash
flows. Operating results for six months ended June 30, 1997 are
not necessarily indicative of the results that may be expected
for the year ending December 31, 1997.
(B) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of
Galacticomm Technologies, Inc. and its wholly-owned subsidiary,
Galacticomm Inc. All intercompany transactions and accounts have
been eliminated in consolidation.
(C) CASH FLOWS
The Company considers investments with maturities of three
months or less, when purchased, to be cash equivalents.
(D) ACCOUNTS RECEIVABLE
Accounts receivable are principally from distributors and
end-users of the Company's products. The Company performs
periodic credit evaluations of its customers and has recorded an
allowance for potential credit losses and product returns of
$124,363 at December 31, 1996. The Company is subject to rapid
changes in technology and shifts in consumer demand which could
result in credit losses and product returns in excess of the
Company's reserves at December 31, 1996.
(E) INVENTORIES
Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out ("FIFO") method.
The Company's inventories consist primarily of software media,
manuals and related packaging materials and hardware and
hardware components which are subject to rapid technological
obsolescence or reduction in value as a result of new products
developed by competitors or as a result of normal competitive
pressures. The Company periodically estimates an allowance for
obsolete inventory based on current market conditions. Changes
in the marketplace may significantly affect management's
estimates.
(Continued)
F-9
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(F) LONG-LIVED ASSETS
Property and equipment are stated at cost less accumulated
depreciation. Property and equipment are depreciated using the
straight-line method over the estimated useful lives of the
assets. Maintenance and repairs are charged to expense as
incurred; betterments are capitalized. Upon the sale or
retirement of assets, the related cost and accumulated
depreciation are removed from the assets and any gain or loss is
recognized.
Goodwill, which represents the excess of purchase price over
fair value of net assets acquired, is amortized on a
straight-line basis over the expected periods to be benefited,
generally three to five years. During 1996 approximately $38,000
was recorded as goodwill amortization expense.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,"
effective January 1, 1996. The Company reviews its long-lived
assets (property, plant and equipment, and related intangible
assets that arose from business combinations accounted for under
the purchase method) for impairment whenever events or
circumstances indicate that the carrying amount of an asset may
not be recoverable. If the sum of the expected cash flows,
undiscounted and without interest, is less than the carrying
amount of the asset, an impairment loss is recognized as the
amount by which the carrying amount of the assets exceeds its
fair value. The adoption of Statement No. 121 had no impact on
the Company's financial position or results of operations.
(G) REVENUE RECOGNITION
Sales are recognized at the time the product is shipped, in
accordance with the provisions of American Institute of
Certified Public Accountants Statement of Position 91-1,
"Software Revenue Recognition." While the Company has no
obligations to perform future services subsequent to shipment,
the Company provides telephone customer support as an
accommodation to purchasers of its products. Costs associated
with this effort are not significant and are expensed as
incurred. Sales to distributors are subject to agreements
allowing limited rights of return and price protection. The
Company provides reserves for estimated future returns,
exchanges and price protection. The Company offers distributors
co-op funds that are used to promote the Company's products.
These funds are generally paid as a credit against outstanding
invoices and are included in marketing expense during the period
in which the revenue is recognized.
At December 31, 1996 the Company had deferred revenues recorded
in the accompanying balance sheet related to customer
subscriptions paid in advance.
(H) SOFTWARE LICENSING AGREEMENTS
During February and April 1996 the Company entered into service
agreements with two marketing and sales companies ("Sales
Companies"). Under these agreements there were various
compensation arrangements for sales services. For prepaid
services the Company received 45 percent of the prepaid amount.
In November 1996, the Company terminated these agreements and
entered into new licensing agreements with the two Sales
Companies to use the Company's service mark. These agreements
(Continued)
F-10
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
require royalties of 12 percent of the licensee's gross revenue
and expire in 1999. The revenue is recognized as the gross
revenue is reported by the licensees. During 1996 the revenue
from all the above agreements was approximately $1,480,000.
(I) SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs under
Statement of Financial Accounting Standards No. 86, "Accounting
for Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed" ("FAS 86"). Under FAS 86, the costs associated with
software development are required to be capitalized after
technological feasibility has been established. Costs incurred
by the Company subsequent to the establishment of technological
feasibility have been insignificant and, as a result, the
Company has not capitalized any development costs.
(J) INCOME TAXES
The Company elected S corporation status effective upon
inception and maintained that status until October 29, 1996,
when it became a taxable corporation. Under S corporation
status, each shareholder is individually responsible for
reporting their share of taxable income or loss. Accordingly,
through October 29, 1996, no provision for Federal income taxes
has been reflected in the accompanying consolidated financial
statements. A provision for state income taxes is made where
applicable. Given that the Company has incurred net losses since
inception, had the Company been a taxable corporation prior to
October 30, 1996, no provision for income taxes would have been
recorded.
Beginning October 30, 1996, the Company follows the asset and
liability method of accounting for income taxes in accordance
with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement 109). Under Statement
109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date.
(K) STOCK OPTION PLAN
The Company accounts for its stock option plan (see note 12(d))
in accordance with the provisions of SFAS No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, which permits entities to
recognize as expense over the vesting period the fair value of
all stock-based awards on the date of grant. Alternatively, SFAS
No. 123 also allows entities to apply the provisions of
Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES and provide pro forma net income
and pro forma earnings per share disclosures for employee stock
option grants as if the fair-value-based method defined in SFAS
No. 123 had been applied. Under APB Opinion No. 25, compensation
expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the
exercise price. The Company has elected to apply the provisions
of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
(Continued)
F-11
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(L) NET LOSS PER SHARE
Net loss per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding
during the period. In accordance with a Securities and Exchange
Commission (SEC) Staff Accounting bulletin, certain common stock
and common stock equivalents issued within a 12-month period
prior to the initial filing of a registration statement relating
to an initial public offering are treated as outstanding for the
entire period (using the treasury stock method).
(M) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and notes payable approximates fair
value because of the short maturity of these instruments.
The fair value of each of the Company's long-term debt
instruments is based on the amount of future cash flows
associated with each instrument discounted using the Company's
current borrowing rate for similar debt instruments of
comparable maturity. The carrying amounts approximate the
estimated fair value at December 31, 1996.
(N) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the 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 to prepare
these financial statements in conformity with generally accepted
accounting principles. Significant estimates are primarily
related to provisions for sales returns, bad debt and obsolete
inventory. Actual results could materially differ from these
estimates.
(4) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996
ESTIMATED
USEFUL LIFE
-----------
Equipment $ 464,023 5 years
Furniture and fixtures 105,875 7 years
Software 13,464 3 years
--------
583,362
Less accumulated depreciation
and amortization 38,793
--------
$ 544,569
(Continued)
F-12
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) INCOME TAXES
Income tax expense for the year ended December 31, 1996 was $0, and
differed from the amounts computed by applying the United States
federal income tax rate of 34 percent to pretax losses as a result of
the following:
Computed "expected" tax benefit $ 354,031
Increase (reduction) in income taxes resulting from:
State income tax benefit, net of federal 35,439
Various non-deductible expenses (3,928)
S-corporation earnings from January 1, 1996
to October 29, 1996 not subject to corporate tax (54,716)
Increase in the valuation allowance for deferred
tax assets
(330,826)
---------
$ -
=========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31,
1996 are presented below:
Deferred tax assets:
Allowances for returns and bad debts $ 9,143
Net operating loss carryforwards 339,730
Goodwill 8,852
Accrued expenses 5,303
---------
Total gross deferred tax assets 363,028
Less valuation allowance (330,826)
---------
Total deferred tax asset 32,202
Deferred tax liabilities:
Property and equipment 32,202
---------
Net deferred tax asset $ -
=========
Realization of deferred tax assets associated with net operating loss
carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. Management believes that there is a risk
that these net operating loss carryforwards may expire unused and,
accordingly has established a valuation allowance for the deferred tax
asset.
The Company's net operating loss carry forward of $902,817 expires in
the year 2011.
(6) DEBT
At December 31, 1996, debt consisted of the following:
(A) NOTES PAYABLE
The Company's subsidiary has a line of credit with a bank for
$300,000 which bears interest at the bank's prime rate plus 1
percent. During May 1997, the Company repaid
(Continued)
F-13
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$100,000 of the outstanding amount on the line of credit and
entered into a $200,000 line of credit due on demand with a
final maturity of September 30, 1997. At December 31, 1996,
$298,575 was outstanding under the line of credit agreement. The
line is secured by the Company's accounts receivable, inventory
and other assets, and is personally guaranteed by an officer of
the Company. (See note 12(a))
The Company issued five notes payable in the original total
amount of $80,000, each due on demand, with interest rates of 12
percent per annum. At December 31, 1996 the total unpaid
principal balance was $45,000. These notes were repaid during
January 1997.
Under the terms of the notes, the Company is obligated to pay a
royalty ("Royalty") to the creditors equivalent to a certain
percentage (ranging from 1.0 percent to 2.0 percent) of the
Company's gross revenues while the notes are outstanding.
Additionally, after the notes are repaid, the Company is
obligated to pay a royalty to the creditors equivalent to a
certain percentage (ranging from 0.5 percent to 1.5 percent) of
the Company's net revenue (the "Additional Royalty").
During August 1997 the Company terminated the Royalty and
Additional Royalty obligation by issuing 22,857 shares of the
Company's common stock and paying $72,500 of accrued royalties
to such creditors. In connection with the issuance of such
common stock, the Company will recognize related expense of
approximately $86,000, representing the fair value of the common
stock.
(B) CONVERTIBLE PROMISSORY NOTES
On November 21, 1996, the Company received proceeds in the
amount of $1,375,000 from the issuance of secured convertible
promissory notes payable to two shareholders of the Company.
These notes are secured by all of the Company's tangible and
intangible assets. Each note bears interest at a rate of 10
percent per annum and interest is payable quarterly. The notes
each mature at the earliest to occur of:
(I) November 21, 1998;
(II) The completion of a private placement offering by the
Company greater than $3,000,000; or
(III) The completion of an IPO of equity or debt securities by
the Company.
In addition, upon (a) written demand of the creditors or (b)
written demand of the Company on or before April 15, 1998, if
the Company's audited financial statements for the year ended
December 31, 1997 show after tax earnings greater than
$1,000,000, all principal and accrued interest due and payable
under these notes may be converted into shares of the Company's
common stock equal to the unpaid outstanding amount of the notes
divided by the conversion price of $2.56 per share, the fair
value of the Company's common stock on the date of the debt
issuance.
(Continued)
F-14
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On September 8, 1997, the convertible notes were amended such
that upon the occurrence of any of the following events all
principal due under the notes shall be converted into that
number of shares of common stock equal to the outstanding
principal balance divided by the conversion price of $2.56 per
share and all accrued interest shall be paid by the Company:
(I) Upon the occurrence of events (a) or (b) as detailed in
the preceding paragraph or
(II) On the date that the Company's IPO is declared effective
by the SEC.
During 1997, the Company did not make the quarterly interest
payments due on March 31, June 30 and (unaudited) September 30.
The Company has obtained a waiver from the holders of the
convertible promissory notes waiving all such interest payments
until December 31, 1997.
(C) NOTE PAYABLE-SHAREHOLDER
At December 31, 1996, note payable - shareholder includes a
non-interest bearing note payable totaling $50,000, with
repayment due in December 1997.
(7) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 1996:
Salaries, wages and other compensation $ 307,306
Professional fees 115,620
Rent 138,953
Interest 80,000
Sales returns 34,000
Other 245,799
-------
$ 921,678
=======
(8) SHAREHOLDERS' EQUITY
On November 21, 1996 the Company completed a private placement for
$1,375,000 in convertible notes payable (see note 6(b)) and 537,337
shares of its common stock at $2.56 per share. Under the terms of the
stock-purchase agreement for the sale of the 537,337 shares, the buyers
of such shares were granted piggy-back, demand registration and
antidilution rights and certain other rights. On September 8, 1997, the
Company issued such buyers 81,245 shares of the Company's common stock
in exchange for the buyers retraction of certain rights which were in
the original stock purchase agreement.
In connection with the private placement and the acquisition of
Galacticomm, the Company issued the following consideration in exchange
for consulting and advisory services with respect to the Company's
finances to a consultant who is a current shareholder of the Company:
(i) a warrant to purchase 139,708 shares of the Company's common stock
at an exercise price of $2.56 per warrant having an approximate fair
value of $28,000, (ii) 78,133 shares of the Company's common stock
having an approximate fair value of $200,000, and (iii) cash of
$357,500. Accordingly, of the total consideration, (i) approximately
$140,000 was allocated as a direct cost of the common stock issued in
the private placement, (ii)
(continued)
F-15
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
approximately $140,000 was allocated to the convertible debt issued in
the private placement and such amount was capitalized as a deferred
financing cost and (iii) approximately $300,000 was allocated to the
Company's acquisition of Galacticomm and such amount was included in
the Company's purchase price of Galacticomm.
(9) 401(K) RETIREMENT PLAN
The Company's subsidiary, Galacticomm, maintains a 401(k) retirement
plan. All of Galacticomm's employees who have attained the age of 21
and completed one year of service are eligible. The plan allows vesting
at 20 percent per year beginning in the second year of service.
Participants can contribute up to 15 percent of their annual
compensation and Galacticomm may make discretionary contributions.
Galacticomm made no contributions during 1996.
On April 1, 1997 and effective January 1, 1997, the 401(k) retirement
plan was amended to allow eligibility for employees after having
completed 6 months of service and vesting at 25 percent per year
beginning in the first year of service.
(10) COMMITMENTS AND CONTINGENCIES
(A) LEASES
The Company leases its main administrative office and warehouse
premises under a lease which expires on May 13, 1997. On July
21, 1997, the Company entered into a new lease agreement for
such premises which runs through October 2001. The Company also
leases office equipment under operating leases. The following
summarizes future minimum obligations under non-cancelable
operating leases:
DECEMBER 31
-----------
1997 $ 99,135
1998 101,198
1999 104,858
2000 109,010
2001 93,850
---------
$ 508,051
=========
Total rent expense under operating leases was $31,045 for the
year ended December 31, 1996.
(B) EMPLOYMENT AGREEMENTS
On November 21, 1996, the Company entered into employment
contracts through November 20, 1999 with two of its officers
that include commitments for a base salary plus bonuses (at the
discretion of the Compensation Committee of the Board of
Directors). The base salary commitment for each officer for the
years ended December 31, 1997, 1998 and 1999 is approximately
$175,000, $195,000 and $195,000, respectively. In addition, on
June 30, 1997, each officer was granted stock options for
177,263 shares of common stock with an exercise price of $3.74
per share. One-third
(Continued)
F-16
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the options vests on November 21, 1997 and an additional
one-third vests each year thereafter. The options expire five
years from the respective vesting dates and any non-vested
options shall be forfeited upon termination of employment.
On August 25, 1997 the Company entered into an employment
contract through August 24, 1999 with its chief financial
officer that includes a commitment for an annual base salary of
$120,000 and the granting of 34,468 stock options with an
exercise price of $6.50 under the Company's 1997 Stock Option
Plan (see note 12(d)).
(C) CONSULTING AGREEMENT
On November 20, 1996, the Company entered into a consulting
agreement with a shareholder to perform consulting and advisory
services with respect to the operations and finances of the
Company. The consulting fee under this agreement is $10,000 per
month until June 30, 2001. Other than the monthly fee, no
material commitments exist under the Company's agreement with
such consultant.
On January 15, 1997 the Company entered into a second consulting
agreement with such shareholder pursuant to which the Company
engages the services of an employee of such shareholder to
develop the Company's sales and marketing strategies. The fee
under this agreement for the services of such employee is $7,000
per month and the agreement expires December 31, 1997. Under
such consulting agreement, the Company also issued an option to
such employee to acquire 2,462 shares of the Company's common
stock at a per share price of $2.56. Such option is immediately
exercisable and has a three year life. In addition, such
employee has been granted options to purchase 7,386 shares of
common stock under the Company's 1997 Stock Option Plan at an
exercise price of $6.50 per share. The fair value of such
options are immaterial to the consolidated financial statements.
(D) PAYROLL TAXES
During August 1997, the Company reached a settlement with the
IRS relating to payroll taxes due for 1996 employee wages. The
amount of such settlement was $89,000 and is reflected as an
accrued expense at December 31, 1996.
(E) OTHER
In July 1997, the Company became aware of the existence of a
third party which may claim a prior right in the trademark name
"Worldgroup" (the name of a product of the Company). The Company
and the third party are presently discussing a coexistence
agreement whereby the Company would have the right, without
payment of a royalty, to continue to use the trademark
"Worldgroup" on its present products and services. Management
believes that the Company will be able to come to such an
agreement with the third party.
In July 1997, the Company became aware that several other third
parties filed applications for registration of "WebCast" (the
name of a product of the Company), before the Company filed its
application. If "WebCast" is not determined to be generic and
one of the third party applications matures into registration,
then such third party will have superior rights to the Company.
If a third party has superior rights to any of
(Continued)
F-17
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Company's trademarks and such third party decides to enforce
its trademark rights through an infringement action, management
believes that the Company has valid defenses with respect to any
such action.
The Company is subject to certain legal matters arising in the
ordinary course of business which, in the opinion of management,
based on the advice of its legal counsel, will not have a
material effect on the financial position and results of
operations of the Company.
(11) VALUATION ACCOUNTS
The following summarizes the changes in the Company's valuation
accounts for the year ended December 31, 1996:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF END OF
DESCRIPTION PERIOD ADDITIONS DEDUCTIONS PERIOD
------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts and
sales returns $ - 124,363 - 124,363
Inventory reserve $ - 18,191 - 18,191
</TABLE>
(12) SUBSEQUENT EVENTS
(A) PLANNED PUBLIC OFFERING
In April 1997, the Company signed a nonbinding letter of intent
with an investment banking firm to underwrite, on a
firm-commitment basis, an initial public offering of the
Company's securities. Pursuant to the terms of the letter of
intent, the Company in October 1997 completed a bridge loan
financing of 42 bridge units, each of which consists of a
$50,000 promissory note and a three year warrant to purchase
19,000 shares of the Company's common stock at an exercise price
of $3.75 per share. The total principal amount of the promissory
notes of $2,100,000 bears interest of 10 percent per year.
Accrued interest is due semi-annually and the note will mature
upon the earlier of January 4, 1999 or the completion of an
initial public offering. After deducting fees and expenses paid
to the investment banking firm of $273,000, and $135,000 for
other expenses related to the bridge loan financing, net
proceeds of the bridge financing were approximately $1,692,000.
Additionally, in connection with the bridge financing, the
Company issued 159,600 warrants to the investment banking firm
with terms similar to the aforementioned bridge warrants. With
a portion of the proceeds of the bridge loan, all amounts under
the Company's line of credit were repaid.
(B) SALE OF COMMON STOCK
In June 1997, the Company sold an aggregate of 259,802 shares of
its common stock at 3.74 per share. Net proceeds to the Company
after deducting a $126,209 fee paid to a shareholder of the
Company were $844,553. Of such net proceeds all cash was
received by June 30, 1997, except for $174,158 which was
received in July 1997. In connection with such sale of common
stock, the Company issued, to a shareholder of the Company, a
three year warrant to purchase 33,774 shares of the Company's
common stock at an exercise price of $3.74 per share. The fair
value of such warrants was immaterial to such sale of common
stock.
(Continued)
F-18
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(C) WARRANTS
On March 14, 1997, two principal shareholders of the Company
issued warrants for 615,496 shares of the Company's common stock
to another shareholder of the Company at an exercise price of
$3.25 per share. This warrant is automatically exercisable upon
completion of an IPO. The Company recognized a related expense
of $113,760 representing the fair value of the warrants issued.
Additionally, on September 8, 1997, in consideration of the
payment of $50,000, the Company permitted the common stock
underlying such warrants to have certain registration rights. On
October 17, 1997, the warrants were amended to extend the
expiration date to March 31, 1998. As a result of this
amendment, related incremental expense of approximately $30,000
was recognized as of October 17, 1997.
(D) STOCK OPTION PLAN
On September 4, 1997 the Company adopted the 1997 Stock Option
Plan (the "Plan"). Pursuant to the Plan, the Company's board of
directors may grant incentive or non-qualified stock options to
employees or service providers. Under the Plan, 370,000 shares
of the Company's common stock are reserved for issuance and
options granted shall vest 25 percent 180 days after issuance
and then 50 percent, 75 percent and 100 percent over the first,
second and third anniversaries of the grant date, respectively.
The Plan has a ten year term and no options granted under the
Plan shall have a life greater than ten years. In addition to
the stock option grants under the Plan discussed in notes 10(b)
and 10(c), during September 1997, the Company granted 122,483
options under the Plan to various employees with an exercise
price of $6.50 per option.
(13) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997 the FASB issued Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS No. 130").
SFAS No. 130 is effective for fiscal years beginning after December 15,
1997 and establishes standards for reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 130 requires all items to be
recognized under accounting standards as components of comprehensive
income to be reported in a separate financial statement. The Company
does not believe that the adoption of SFAS No. 130 will have a
significant impact on the Company's financial reporting.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION" ("SFAS No. 131"). SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports
issued to shareholders. The Company does not believe that the adoption
of SFAS No. 131 will have a significant impact on the Company's
financial reporting.
(Continued)
F-19
<PAGE>
GALACTICOMM TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128),
EARNINGS PER SHARE. SFAS 128 specifies new standards designed to
improve the earnings per share ("EPS") information provided in
financial statements by simplifying the existing computational
guidelines, revising the disclosure requirements and increasing the
comparability of EPS data on an international basis. Some of the
changes made to simplify the EPS computations include (i) eliminating
the presentation of primary EPS and replacing it with basic EPS, (ii)
eliminating the modified treasury stock method and the three percent
materiality provision and (iii) revising the contingent share
provisions and the supplemental EPS data requirements. SFAS 128 also
makes a number of changes to existing disclosure requirements. SFAS 128
is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. The Company does not
believe that the adoption of SFAS 128 in 1997 will have a significant
impact on the Company's reported EPS.
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Galacticomm, Inc.
Fort Lauderdale, Florida:
We have audited the accompanying statements of operations and cash flows of
Galacticomm, Inc. for the year ended December 31, 1995 and the ten months ended
October 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion of these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of Galacticomm, Inc.'s operations and cash
flows for the year ended December 31, 1995 and the ten months ended October 31,
1996 in conformity with generally accepted accounting principles.
August 22, 1997
/s/ KPMG Peat Marwick, LLP
--------------------------
KPMG Peat Marwick, LLP
F-21
<PAGE>
GALACTICOMM, INC.
STATEMENTS OF OPERATIONS
TEN MONTHS
YEAR ENDED ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
Revenue $7,487,983 3,293,876
Operating costs and expenses:
Cost of revenue 1,737,170 1,005,595
Selling, general and administrative 3,602,809 2,382,613
Depreciation and amortization 131,713 150,185
Compensation expense related to phantom units -- 529,139
Compensation expense on option exercise 443,242 --
Research and development 1,034,174 638,200
Customer support 425,924 387,797
---------- ----------
Total operating costs and expenses 7,375,032 5,093,529
---------- ----------
Operating profit (loss) 112,951 (1,799,653)
Other income (expense):
Lease termination -- (380,040)
Interest income 33,042 10,760
Realized loss on short-term investments (225,818) --
Other expense, net (5,249) (98,873)
---------- ----------
Total other expense (198,025) (468,153)
---------- ----------
Net loss $ (85,074) (2,267,806)
========== ==========
See accompanying notes to financial statements.
F-22
<PAGE>
<TABLE>
<CAPTION>
GALACTICOMM, INC.
STATEMENTS OF CASH FLOWS
TEN MONTHS
YEAR ENDED ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (85,074) (2,267,806)
Adjustments to reconcile net loss to net cash
provided by (used in) perating activities:
Depreciation and amortization 131,713 150,185
Loss on disposal of equipment 10,000 24,582
Bad debt and product return provisions 16,786 80,065
Compensation expense related to phantom units -- 529,139
Compensation expense on stock option exercise 443,242 --
Realized loss on short-term investments 225,818 --
Interest income on subscription notes receivable (1,393) (1,874)
Changes in assets and liabilities:
Accounts receivable (51,108) 270,956
Inventories (77,593) 195,869
Prepaid expenses and other assets (171,711) 230,264
Accounts payable 111,153 (69,701)
Deferred revenue 105,034 150,031
Accrued expenses 142,028 227,860
---------- ----------
Net cash provided by (used in) operating
activities 798,895 (480,430)
---------- ----------
Cash flows used in investing activities:
Capital expenditures (164,129) (19,815)
---------- ----------
Cash flows from financing activities:
Net proceeds from notes payable -- 298,575
Payments on capital lease obligations (23,952) (24,515)
Dividends to stockholders (775,261) (28,295)
Net proceeds from the exercise of stock options
and sale of common stock 23,277 --
---------- ----------
Net cash (used in) provided by financing
activities (775,936) 245,765
---------- ----------
Net decrease in cash and cash equivalents (141,170) (254,480)
Cash and cash equivalents-beginning of period 504,347 363,177
---------- ----------
Cash and cash equivalents-end of period $ 363,177 108,697
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and October 31, 1996
(1) THE COMPANY AND BASIS OF PRESENTATION
Galacticomm, Inc. (the "Company") develops and sells network-centric
software applications and tools. The Company's primary product,
Worldgroup, a client/server software, is a platform that merges
Bulletin Board Systems, E-mail, and workgroup functions and enables
enterprises to provide client/server applications over the Internet and
intranets and secure external data exchanges with customers, field
agents, suppliers, and others.
Substantially all of the Company's revenue is derived from sales of the
Worldgroup software product and related hardware, documentation and
training manuals, and royalties. The Company operates in a highly
competitive industry characterized by rapidly changing technology which
could adversely affect the Company's revenues and the related results
of operations.
On November 21, 1996, 8,037,203 of the issued and outstanding common
shares of the Company, representing a 96 percent ownership of the
Company, were purchased by Galacticomm Technologies, Inc., (formerly
Iview Software, Inc.) in exchange for $.094 in cash and .0644 shares of
Galacticomm Technologies, Inc. for each share of the Company's common
stock.
The accompanying financial statements were prepared for inclusion in a
registration statement of Galacticomm Technologies, Inc. The separate
audited balance sheets of the Company are not presented at December 31,
1995 and October 31, 1996 as the fair value of the acquired assets and
assumed liabilities has been included in the December 31, 1996
consolidated balance sheet of Galacticomm Technologies, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ACCOUNTS RECEIVABLE
Accounts receivable are principally from distributors and
end-users of the Company's products. The Company performs
periodic credit evaluations of its customers and has recorded an
allowance for potential credit losses and product returns of
$85,680 and $110,428 at December 31, 1995 and October 31, 1996,
respectively. The Company is subject to rapid changes in
technology and shifts in consumer demand which could result in
credit losses and product returns in excess of the Company's
reserves.
(B) INVENTORIES
Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out ("FIFO") method.
The Company's inventories consist primarily of software media,
manuals and related packaging materials and hardware and
hardware components which are subject to rapid technological
obsolescence or reduction in value as a result of new products
developed by competitors or as a result of normal competitive
pressures. The Company periodically estimates an allowance for
obsolete inventory based on current market conditions. Changes
in the marketplace may significantly affect management's
estimates.
F-24
<PAGE>
(C) LONG-LIVED ASSETS
The Company presents its property and equipment at cost less
accumulated depreciation. Property and equipment are depreciated
using the straight-line method over the estimated useful lives
of the assets. Maintenance and repairs are charged to expense
when incurred; betterments are capitalized. Upon the sale or
retirement of assets, the cost and accumulated depreciation are
removed from the account and any gain or loss is recognized.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,"
effective January 1, 1996. The Company reviews its long-lived
assets for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. If
the sum of the expected cash flows, undiscounted and without
interest, is less than the carrying amount of the asset, an
impairment loss is recognized as the amount by which the
carrying amount of the asset exceeds its fair value. The
adoption of Statement No. 121 had no impact on the Company's
results of operations.
(D) REVENUE RECOGNITION
Sales are recognized at the time the product is shipped, in
accordance with the provisions of American Institute of
Certified Public Accountants Statement of Position 91-1,
"Software Revenue Recognition". While the Company has no
obligations to perform future services subsequent to shipment,
the Company provides telephone customer support as an
accommodation to purchasers of its products. Costs associated
with this effort are not significant and are expensed as
incurred. Sales to distributors are subject to agreements
allowing limited rights of return and price protection. The
Company provides reserves for estimated future returns,
exchanges and price protection. The Company offers distributors
co-op funds that are used to promote the Company's products.
These funds are generally paid as a credit against outstanding
invoices and are included in marketing expense during the period
in which the revenue is recognized.
The Company has various contracts which require the Company to
provide consulting services, custom systems integration and
training at specified contractual rates. Such contracts are
short-term in nature. The Company records as deferred revenue,
all payments received on each contract until the contract is
completed.
Deferred revenues are recorded for short-term contracts and
customer subscriptions paid in advance.
(E) ROYALTIES
The Company licenses software used to develop components of
Worldgroup. Royalties are payable to developers of the software
at various rates and amounts, generally based on unit sales.
Royalty expense was approximately $7,000 and $46,000 for the
year ended December 31, 1995 and the ten months ended October
31, 1996, respectively. Such costs are included as a component
of cost of revenues in the accompanying statements of
operations.
F-25
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
(F) SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs under
Statement of Financial Accounting Standards No. 86, "Accounting
for Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed" ("FAS 86"). Under FAS 86, the costs associated with
software development are required to be capitalized after
technological feasibility has been established. Costs incurred
by the Company subsequent to the establishment of technological
feasibility have been insignificant and, as a result, the
Company has not capitalized any research and development
expenses.
(G) INCOME TAXES
Prior to the sale to Galacticomm Technologies, Inc. (see note 1)
the Company was an S corporation for federal income tax
purposes. As such, the income tax effects of the results of
operations of the Company accrued directly to its stockholders.
Accordingly, the accompanying financial statements do not
include a provision for income taxes.
(H) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the 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 to prepare
these financial statements in conformity with generally accepted
accounting principles. Significant estimates are primarily
related to provisions for sales returns, bad debt and obsolete
inventory. Actual results could materially differ from these
estimates.
(3) INVESTMENT ACTIVITY
The Company's short-term investments consisted of various call options
which were indexed to interest rates on thirty-year U.S. treasury
instruments and expired between January and December 1995. In December
1995, the final call option expired and had a zero fair value,
resulting in the Company realizing an investment loss of $225,818 for
the year ended December 31, 1995. The Company has no other short-term
investments at December 31, 1995 or October 31, 1996.
(4) LINE OF CREDIT
The Company had a line of credit with a bank for $300,000 which bears
interest at prime plus 1 percent and is collateralized by the Company's
accounts receivable, inventory and property and equipment. This line of
credit expired January 9, 1997. As of October 31, 1996, the Company had
borrowed $298,575 under the line of credit agreement.
F-26
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
(5) INCENTIVE STOCK OPTION PLAN
The Company has reserved 3,000,000 shares of its common stock for
issuance under its 1987 Incentive Stock Option Plan (the "Plan"). Under
the Plan, options may be granted to purchase common stock at exercise
prices not less than fair market value at the date of grant, as
determined by the Board of Directors. During August 1996, the Board of
Directors approved the conversion of all stock options outstanding, on
a one-for-one basis, into phantom units under the Company's phantom
stock plan, and changed the number of shares of common stock reserved
for issuance under the Plan to 500,000. All options expire on the date
specified in the option agreement and in no event later than the tenth
anniversary of the date on which the option was granted. A summary of
incentive stock option activity is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTIONS PRICE
---------- ------------
<S> <C> <C>
Options outstanding, December 31, 1994 1,220,050 $ .30 - 2.85
Options granted 50,000 3.18
Options canceled (65,000) 1.46 - 3.18
Options exercised (283,765) 1.23 - 1.85
----------
Options outstanding, December 31, 1995 921,285 .30-3.18
Converted to phantom units (921,285) .30-3.18
---------- -----------
Options outstanding, October 31, 1996 - $ -
========== ===========
</TABLE>
On November 21, 1996 the Plan was canceled.
In 1994, the Company exchanged 83,620 shares of common stock for
$122,492 in promissory notes issued by two directors. Also in 1994, a
director of the Company exercised 187,760 options and issued a
promissory note of $56,328 as consideration thereof.
The promissory notes referred to above bear interest at rates ranging
from 4.00 -5.86 percent and mature in September 1996 through January
1997 and are collateralized by common stock of the Company held by the
two directors. During 1996, such notes were repaid with 563,536 shares
of the Company's common stock.
The non-cash option transactions described above have been excluded
from the accompanying statements of cash flows.
F-27
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
During 1995, a former employee of the Company exercised 279,000 options
to acquire shares of common stock. The exercise price for the first
1,864 options exercised was funded by an exchange of 1,000 shares of
common stock held by the former employee. Such common shares exchanged
had been held by the former employee greater than six months.
Subsequent to the initial exercise, the former employee immediately
used the shares of common stock acquired under option to satisfy the
exercise price for additional shares under the same option (the
"Pyramiding Exercise"), until the former employee's remaining 277,136
options were exercised.
The shares of common stock used in the Pyramiding Exercise were
considered "immature" as they were held less than six months by the
former employee. Accordingly, the Company recognized $443,242 in
compensation expense in 1995.
(6) PHANTOM STOCK PLAN
In July 1994, the Company's Board of Directors authorized the
Galacticomm, Inc. Phantom Stock Plan. The purpose of the plan is to
provide equity-based compensation to certain employees and directors
through the awarding of rights or "units" associated with the common
stock of the Company. These units entitle the holder to receive bonus
compensation and an election may be made by the holder to receive the
common stock of the Company based on the occurrence of certain events.
A summary of the Phantom Stock Plan's activity is as follows:
Units outstanding, December 31, 1994 98,296
Units granted 89,675
Units canceled (15,361)
---------
Units outstanding, December 31, 1995 172,590
Units granted 4,009,947
Units canceled (64,729)
Units converted to common stock (3,625,429)
---------
Units outstanding, October 31, 1996 492,379
=========
During August 1996, the Board of Directors approved the increase of
phantom units that may be issued under the Phantom Stock Plan to
4,500,000. As a result of the purchase by Galacticomm Technologies,
Inc. (see note 1) of 8,037,203 of the issued and outstanding common
shares of the Company, certain provisions in the Phantom Stock Plan
were met and triggered the conversion into common stock feature of all
currently outstanding phantom units. As such, all phantom unit holders
at October 31, 1996 had the option to convert each phantom unit held
into a common share of the Company. Accordingly, $529,139 of
compensation expense was recorded, representing the fair value of the
Company's common stock underlying all phantom units outstanding on
October 31, 1996. On November 21, 1996 the Phantom Stock Plan was
canceled.
F-28
<PAGE>
GALACTICOMM, INC.
NOTES TO FINANCIAL STATEMENTS
(7) LEASE TERMINATION
On June 8, 1996, the Company entered into a third amendment to a
certain 10-year office space lease agreement, under which the Company
stipulated that the Company did not desire to take occupancy of the
subject property. As of October 31, 1996 the Company has recorded a
lease termination expense of $380,040 representing lost security
deposits and future lease payments.
(8) COMMITMENTS
The Company leases its main office and warehouse premises under an
operating lease which expires on May 13, 1997. The Company also leases
office equipment under operating leases. The following summarizes
future minimum leases under non-cancelable operating leases as of
October 31, 1996:
1997 $ 76,192
1998 4,531
-------
$ 80,723
=======
Rent expense under operating leases for the year ended December 31,
1995 and the ten months ended October 31, 1996 amounted to $78,857 and
$96,671, respectively.
The Company also leases certain computer equipment under capital
leases. The annual maturities of these capital lease obligations are as
follows:
OCTOBER 31,
-----------
1997 $ 33,092
1998 23,361
1999 5,488
-------
$ 61,941
=======
F-29
<PAGE>
GALACTICOMM TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma consolidated statement of operations of
Galacticomm Technologies Inc. for the year ended December 31, 1996 gives
effect to the following pro forma events, as if such events had occurred on
January 1, 1996: (i) the inclusion of the results of operations of Galacticomm,
Inc. and Tessier Technologies, Inc. for the year ended December 31, 1996 as if
such acquisitions were consummated on January 1, 1996; (ii) the elimination of
intercompany transactions between Galacticomm Technologies, Inc., Galacticomm,
Inc. and Tessier Technologies, Inc. for the year ended December 31, 1996
assuming these entities reported on a consolidated basis; (iii) an increase of
amortization of goodwill as a result of the acquisitions of Galacticomm, Inc.
and Tessier Technologies, Inc. assuming such acquisitions were consummated on
January 1, 1996; and (iv) an increase of interest expense due to the financings
obtained to fund the acquisitions of Galacticomm, Inc. and Tessier Technologies,
Inc. assuming such acquisitions were consummated on January 1, 1996.
These unaudited pro forma consolidated statements of operations should be
read in conjunction with the audited consolidated financial statements of
Galacticomm Technologies, Inc. The unaudited pro forma data are not necessarily
indicative of the results of oeprations ofd Galacticomm Technologies, Inc. that
would have occurred if the pro forma events had been in effect at the beginning
of the periods presented, nor are they necessarily indicative of future results
of operations.
<TABLE>
<CAPTION>
PRO FORMA
GTI TESSIER GALACTICOMM(7) COMBINED ADJUSTMENTS PRO FORMA
--- ------- -------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $1,692,743 $1,350,204 $3,293,876 $ 6,336,823 $ (147,318) (1,2) $ 6,189,505
Cost of revenues 758,050 865715 1005595 2,629,360 -113898 (1,2) 2515462
--------------------------------------------------------------------- --------------
Gross profit 934,693 484489 2288281 3707463 -33420 3674043
Selling, general and admistrative 1531130 472729 2196421 4200280 180972 (3,4) 4381252
Depreciation 47,533 31542 336377 415452 415452
Amortization of intangibles 38,665 - - 38665 551846 (5) 590511
Compensation expense on warr - - 529139 529139 529139
Customer support 72,772 - 387797 460569 460569
Research and development 225,549 - 638200 863749 863749
--------------------------------------------------------------------- --------------
Total operating expenses 1915649 504271 4087934 6507854 732818 7240672
--------------------------------------------------------------------- --------------
Income (loss) from operations -980956 -19782 -1799653 -2800391 -766238 -3566629
Other income (expense) -60312 - -468153 -528465 -126856 (6) -655321
--------------------------------------------------------------------- --------------
Loss before income taxes -1041268 -19782 -2267806 -3328856 -893094 -4221950
Income taxes - - - - - -
Net loss $(1,041,268) $ (19,782) $(2,267,806) $(3,328,856) $ (893,094) $ (4,221,950)
Net loss per share $ (.98)
Shares used in computing net
loss per share 4,328,705
</TABLE>
(1) Adjustment reflects elimination of intercompany sales from Galacticomm,
Inc. to Tessier Technologies, Inc.
(2) Adjustment reflects the remaining portion of the elimination of
intercompany sales.
(3) Adjustment reflects additional officers salaries as if officers employment
agreements were effective January 1, 1996.
(4) Adjustment reflects additional consulting fees to a stockholder of the
company as if the related consulting agreement had been entered into on
January 1, 1996.
(5) Adjustment reflects an additional ten months goodwill amortization related
to the Galacticomm, Inc. and Tessier Technologies, Inc. acquisitions.
(6) Adjustment reflects additional interest expense on debt incurred to
finance the acquisition of Galacticomm and Tessier as if the acquisitions
were consummated on January 1, 1996.
F-30
<PAGE>
================================================================================
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or by an Underwriter. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any security other than the Shares offered by this Prospectus, nor does
it constitute an offer to sell or a solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstance create any implication that information contained herein is correct
as of any date subsequent to its date.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary..........................................................
Risk Factors................................................................
Use of Proceeds ............................................................
Capitalization .............................................................
Dividend Policy ............................................................
Dilution....................................................................
Recent Financings ..........................................................
Selected Historical Financial Data .........................................
Selected Pro Forma Financial Data...........................................
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ................................................
Business ...................................................................
Management .................................................................
Certain Transactions........................................................
Principal Shareholders .....................................................
Description of Securities ..................................................
Underwriting ...............................................................
Legal Matters ..............................................................
Experts ....................................................................
Additional Information .....................................................
Index to Financial Statements ...........................................F-1
------------------
Until ____________ , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
================================================================================
GALACTICOMM TECHNOLOGIES, INC.
UNITS, EACH UNIT
CONSISTING OF ONE SHARE OF
COMMON STOCK AND ONE REDEEMABLE
COMMON STOCK PURCHASE WARRANT
--------
PROSPECTUS
--------
FIRST EQUITY CORPORATION
_____________, 1997
================================================================================
<PAGE>
ALTERNATE
PROSPECTUS
GALACTICOMM TECHNOLOGIES, INC.
957,600 SHARES OF COMMON STOCK
This Prospectus relates to 957,600 shares of the common stock, par value
$.0001 per share (the "Common Stock") of Galacticomm Technologies, Inc. (the
"Company"). The Common Stock offered by this Prospectus has been or may be
acquired by certain selling shareholders (the "Selling Shareholders") of the
Company upon the exercise of warrants (the "Bridge Warrants") issued by the
Company in connection with a bridge financing in October 1997. See "Recent
Financings." The Bridge Warrants are exercisable at a price of $3.75 per share
until October 27, 2000. The shares of Common Stock underlying the Bridge
Warrants may be sold from time to time by the Selling Shareholders, or by their
transferees, upon exercise of the Bridge Warrants, commencing six months from
the date of this Prospectus, or earlier with the consent of First Equity
Corporation of Florida, the underwriter of a concurrent public offering of the
Company's securities.
No underwriting arrangements have been entered into by the Selling
Shareholders. The distribution of the Common Stock by the Selling Shareholders
may be effected in one or more transactions that may take place on the
over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more dealers for
resale of such shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Shareholders in connection with sales of
such Common Stock.
The Selling Shareholders and intermediaries through whom such securities
are sold may be deemed "underwriters" within the meaning of the Securities Act
of 1933, (the "Securities Act"), with respect to the securities offered, and any
profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling Shareholders
against certain liabilities, including liabilities under the Act.
The Company will not receive any of the proceeds from the sale of
securities by the Selling Shareholders although it will receive approximately
$3,591,000 upon exercise of the Bridge Warrants in full. Expenses of this
offering, estimated at approximately $______ , are payable by the Company.
Application has been made to list the Common Stock on the NASDAQ SmallCap
Market under the symbol GCOM.
On the date of this Prospectus a registration statement under the
Securities Act with respect to an underwritten public offering of ___________
Units by the Company was declared effective by the Securities and Exchange
Commission. The Units are comprised of a total of ___________ Common Stock and
Warrants to purchase a total of 600,000 Common Stock (without giving effect to
the over-allotment option granted to the underwriter of the offering). Sales
pursuant to the offering of Units by the Company and of Common Stock by security
holders of the Company other than the Selling Shareholders or even the potential
of such sales may have an adverse effect on the market price of the Common
Shares.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE CONSIDERED ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ALT.1
<PAGE>
The date of this Prospectus is ___________________, 1997
ALTERNATE
SELLING SHAREHOLDERS
The table below sets forth certain information with respect to the Selling
Shareholders. The 957,600 shares of Common Stock registered for the account of
the Selling Shareholders may be acquired upon the exercise of the Bridge
Warrants. See "Recent Financings." Except as set forth below with respect to the
Wallenberg Trust, Union Atlantic Partners I Limited and First Equity
Corporation, none of the Selling Shareholders has ever held any position with
the Company or had any other material relationship with the Company. The Company
will not receive any proceeds from sales of Common Stock by the Selling
Stockholders, although the Company will receive approximately $3,591,000 upon
exercise of the Bridge Warrants in full. Expenses of this offering, estimated at
approximately $_______ , are payable by the Company.
<TABLE>
<CAPTION>
SHARES OWNED BNEEFICIALLY SHARES OWNED BENEFICIALLY
BEFORE OFFERING(1) AFTER OFFERING(1)
------------------------- SHARES BEING -------------------------
SELLING SECURITY HOLDER NUMBER PERCENT(2) OFFERED NUMBER PERCENT
- ----------------------- ---------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Steven Adelman ......... 19,000 * 19,000 0 *
Ronald Alsheimer ....... 38,000 * 38,000 0 *
Richard A. Belgard and
Debra O. Belgard ..... 9,500 * 9,500 0 *
Jerry Bengis ........... 9,500 * 9,500 0 *
Caledonian Securities
Ltd .................. 95,000 * 95,000 0 *
The Cascade Trust ...... 22,880 * 9,500 13,380 *
The Coach Trust ........ 111,854 38,000 73,854 1.1%
William C. Cook, Jr .... 9,500 * 9,500 0 *
Gilbert Drozdow and
Linda Drozdow ........ 9,500 * 9,500 0 *
Dynamic Value Partners,
Ltd .................. 19,000 * 19,000 0 *
First Equity
Corporation(3) ....... 159,600
Charles Flaxman ........ 9,500 * 9,500 0 *
Scott Goldberg and
Lisa Goldberg ........ 9,500 * 9,500 0 *
Allan F. Greenberg and
Rita H. Greenberg .... 9,500 * 9,500 0 *
The Hive Trust ......... 122,478 2.1% 57,000 65,478 1.0%
Joseph Kerman .......... 4,750 * 4,750 0 *
Lewis H. Kerman ........ 1,900 * 1,900 0 *
Max Kerman ............. 4,750 * 4,750 0 *
David Levine ........... 7,600 * 7,600 0 *
Levine Family
Partnership .......... 19,000 * 19,000 0 *
John McClure ........... 9,500 * 9,500 0 *
Pacifica Capital Group . 19,000 * 19,000 0 *
L. Grant Peeples Defined
Benefit Plan ......... 9,500 * 9,500 0 *
Longman Investments
Limited .............. 9,500 * 9,500 0 *
Perycom Management B.V . 24,215 * 9,500 14,715 *
Joanne S. Roberts ...... 4,750 * 4,750 0 *
Selma Roberts .......... 14,250 * 14.250 0 *
Oleg Selawry and
Helena Selawry ....... 9,500 * 9,500 0 *
Seventh Investment
Bancing Corp. ........ 9,500 * 9,500 0 *
ALT.2
<PAGE>
Steven Sheinman........ 9,500 * 9,500 0 *
Ellen Dee Silvers...... 9,500 * 9,500 0 *
Isaac Sklar and
Rebeca Sklar......... 4,750 * 4,750 0 *
Ruben Sklar............ 4,750 * 4,750 0 *
Paul U. Skoric, IRA 19,000 * 19,000 0 *
Harry B. Smith......... 19,000 * 19,000 0 *
Samuel S. Smith and
Susan E. Smith....... 9,500 * 9,500 0 *
Eric Stein............. 9,500 * 9,500 0 *
Shirley Suskind........ 9,500 * 9,500 0 *
Union Atlantic Partners
I Limited(4)......... 152,932 2.7% 38,000 114,932 1.7%
The Wallenberg Trust(5) 1,923,233 34.4% 190,000 1,733,233 26.6%
<FN>
- --------------
(1) Percentage of ownership is based on ___________ shares of Common Stock
outstanding immediately prior to this offering (which amount includes
___________ shares of Common Stock underlying the Units) and ___________
shares of Common Stock outstanding immediately after this offering (which
amount assumes the exercise in full of the Bridge Warrants). An asterisk in
the foregoing table indicates beneficial ownership of less than one percent.
(2) Calculated pursuant to Rule 13d-3(d)1 of the Exchange Act. Shares not
outstanding that are subject to options or other rights exercisable by the
holder thereof within 60 days of the date of this Prospectus are deemed
outstanding for the purposes of calculating the number and percentage owned
by such shareholder and all directors and officers as a group, but not
deemed outstanding for the purpose of calculating the percentage owned by
each other shareholder listed.
(3) Represents: (i) 159,600 shares of Common Stock underlying warrants issued to
the Representative for serving as the Placement Agent of the Bridge
Financing; and (ii) shares of Common Stock underlying the Representative
Unit Purchase Option. For additional information regarding such person, see
"Underwriting."
(4) Represents 48,849 shares of Common Stock issuable to Union Atlantic Partners
I, Limited ("UA Partners") upon conversion of the UA Partners Note; (iv)
58,697 shares of Common Stock owned by UA Partners; (v) 7,386 shares issued
to UA Partners to cancel certain ratchet and other rights; and (vi) 38,000
shares of Common Stock underlying Bridge Warrants. For additional
information with respect to UA Partners, see "Certain Transactions."
(5) For information with respect to the Wallenberg Trust and its beneficial
ownership of shares of Common Stock, see "Principal Shareholders" and
"Certain Transactions."
</FN>
</TABLE>
ALT.3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to the provisions of Section 607.0850(1) of the Florida Business
Corporation Act, the Company has the power to indemnify any person who is or was
a party to any proceeding (other than an action by, or in the right of, the
Company), because such person is or was a director, officer, employee, or agent
of the Company (or is or was serving at the request of the Company under
specified capacities) against liability incurred in connection with such
proceeding provided such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interest of the
Company (and with respect to any criminal action or proceeding, such person had
no reasonable cause to believe such person's conduct was unlawful).
With respect to a proceeding by or in the right of the Company to procure
a judgment in its favor, Section 607.085(2) of the Florida Business Corporation
Act provides that the Company shall have the power to indemnify any person who
is or was a director, officer, employee, or agent of the Company (or is or was
serving at the request of the Company under specified capacities) against
expenses and amounts paid in settlement not exceeding, in the judgment of the
Board of Directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding provided such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interest of the Company, except that no indemnification shall be made in a case
in which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the court in which the proceeding was brought, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses.
Indemnification as described above shall only be granted in a specific
case upon a determination that indemnification is proper under the circumstances
using the applicable standard of conduct which is made by (a) a majority of a
quorum of directors who were not parties to such proceeding, (b) if such a
quorum is not attainable or by majority vote of a committee designated by the
Board of Directors consisting of two or more directors not parties to the
proceeding, (c) by independent legal counsel selected by the Board of Directors
described in the foregoing parts (a) and (b), or if a quorum cannot be obtained,
then selected by a majority vote of the full Board of Directors, or (d) by the
shareholders by a majority vote of a quorum consisting of shareholders who are
not parties to such proceeding.
Section 607.0850(12) of the Florida Business Corporation Act permits the
Company to purchase and maintain insurance on behalf of any director, officer,
employee or agent of the Company (or is or was serving at the request of the
Company in specified capacities) against any liability asserted against such
person or incurred by such person in any such capacity whether or not the
Company has the power to indemnify such person against such liability.
ARTICLES OF INCORPORATION
The Articles of Incorporation of the Company (the "Articles") provide for
the indemnification of directors and officers of the Company to the fullest
extent permitted by Section 607.0850 of the Florida Business Corporation Act.
The Articles of Incorporation further provide that the indemnification provided
for therein shall not be exclusive of any rights to which those indemnified may
be entitled under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise.
The Articles also contain a provision that eliminates the personal
liability of the Company's directors for monetary damages unless the director
has breached his or her fiduciary duty and such breach constitutes or includes
certain violations of criminal law, a transaction from which the director
derived an improper personal benefit, certain unlawful distributions or certain
other reckless, wanton or wilful acts or misconduct. This provision does not
alter a director's liability under the federal securities laws. In addition,
this provisions does not affect the availability of equitable remedies, such as
an injunction or rescission, for breach of fiduciary duty.
II-1
<PAGE>
SECURITIES AND EXCHANGE COMMISSION POLICY
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company,
the Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance of the securities
being registered are as follows:
SEC Registration Fee* .........................................$ 6,597.26
NASD Filing Fee* ..............................................$ 2,677.10
NASDAQ Listing Fee* ...........................................$ 10,000
3% Non-Accountable Expenses ...................................$ 252,000
Printing Expenses .............................................$ 55,726
Accounting Fees and Expenses ..................................$ 100,000
Legal Fees and Expenses .......................................$ 125,000
Blue Sky Fees and Expenses ....................................$ 50,000
Transfer and Warrant Agent Fees and Expenses ..................$ 15,000
Miscellaneous .................................................$ 10,000
-----------
Total.......................................................$627,000.36
- --------------
*Actual amount.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is certain information regarding sales of securities by
the Company without registration under the Securities Act. Such information
gives retroactive effect to the Company's November 1996 1 for 2 forward stock
split of the Common Stock and the Company's September 1997 4.061771824 for 1
reverse stock split of the Common Stock. Except as otherwise noted below, each
of the following transactions was considered exempt from the registration
requirements of the Securities Act in reliance on Section 4(2) of the Securities
Act.
On December 4, 1995, the Company issued an aggregate of 1,375,192 shares
of Common Stock to Peter Berg, Lorraine Gouger and Mitch Segal as consideration
for their services in founding the Company.
On November 20, 1996, the Company issued an aggregate of 66,434 shares of
Common Stock to two persons in connection with the merger of TTI with and into
the Company. The Company, on November 20, 1996, also issued 1,215,749 shares of
Common Stock to Yannick Tessier, pursuant to the Stock Issuance Agreement, dated
August 26, 1996.
On November 21, 1996, the Company issued to the Wallenberg Trust and UA
Partners: (i) an aggregate of 537,377 shares of Common Stock in exchange for
aggregate consideration of $1,375,000; and (ii) promissory notes convertible
into an aggregate of 537,377 shares of Common Stock. As consideration for its
services in connection with such transaction, the Company granted Union Atlantic
a three-year warrant to purchase 139,708 shares of common Stock at an exercise
price of $2.56 per share and issued 78,133 shares of Common Stock. The offer and
sale of such securities to the Wallenberg Trust was made in reliance on
Regulation S of the Securities Act.
On November 21, 1996, the Company acquired from eight persons an aggregate
of 8,037,203 shares of the common stock of Galacticomm, Inc. (representing
approximately 96 percent of the then issued and outstanding shares of the common
stock of Galacticomm, Inc.) in exchange for the issuance of an aggregate of
228,396 shares of Common Stock and the aggregate cash payment of $698,978. The
offer and sale of such securities was made in reliance on Rule 504 of Regulation
D promulgated under the Securities Act.
On January 14, 1997, the Company granted Claus Stenbaek a three-year
option to purchase 6,155 shares of Common Stock at an exercise price of $2.56
per share as consideration for serving on the Company's board of directors.
II-2
<PAGE>
On January 14, 1997, the Company granted Robert O'Brien a three-year
option to purchase 2,462 shares of Common Stock at an exercise price of $2.56
per share in exchange for consulting services rendered to the Company.
In February 1997, the Company acquired from 34 persons an additional
848,404 shares of the common stock of Galacticomm, Inc. in exchange for the
issuance of an aggregate of 42,895 shares of Common Stock and the aggregate cash
payment of $56,937. The offer and sale of such securities was made in reliance
on Rule 504 of Regulation D promulgated under the Securities Act.
In June 1997, the Company issued 259,802 shares of Common Stock to nine
persons for aggregate consideration of $970,762. As consideration for its
services in connection with such transaction, the Company granted Union Atlantic
three-year warrants to purchase 33,774 shares of Common Stock at an exercise
price of $3.74 per share. The offer and sale of such securities was made in
reliance on Rule 506 of Regulation D promulgated under the Securities Act.
On June 30, 1997, the Company granted options to purchase an aggregate of
354,526 shares of Common Stock at an exercise price of $3.74 per share to
Messrs. Berg and Tessier pursuant to the terms of their respective employment
agreements with the Company.
In August 1997, the Company issued an aggregate of 22,857 shares of Common
Stock to five persons, pursuant to the terms of five Agreements to Distribute
Proceeds entered into between December 1995 and February 1997.
In September 1997, the Company granted options to purchase an aggregate of
194,496 shares of Common Stock at an exercise price of $6.50 per share to 36
employees of the Company pursuant to the Company's 1997 Stock Option Plan. The
offer and sale of such securities was made in reliance on Rule 701 of the
Securities Act.
On September 8, 1997, the Company issued an aggregate of 81,245 shares of
Common Stock to the Wallenberg Trust and UA Partners as consideration for
relinquishing certain contractual rights.
On October 28, 1997, the Company issued to 39 persons 42 units, each unit
consisting of a promissory note in the principal amount of $50,000 and three
year warrants to purchase 19,000 shares of Common Stock at an exercise price of
$3.75 per share. Such offering was made in reliance on Rule 506 of Regulation D
promulgated under the Securities Act. As consideration for serving as the
placement agent for such offering, the Company paid the Representative a
placement fee equal to: (i) cash compensation of $210,000; (ii) a
non-accountable expense allowance of $63,000 and accountable expenses totaling
$10,000; and (iii) warrants to purchase 159,600 shares on terms substantially
the same as the Bridge Warrants.
ITEM 27. EXHIBITS
(A) EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1. Form of Underwriting Agreement between the Company and the
Underwriters.
3.1 Articles of Incorporation of the Company as filed with the Secretary
of State on December 4, 1995.
3.2 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on November 19, 1996.
3.3 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on May 1, 1997.
3.4 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on September 9, 1997.
3.5 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on dated September 30, 1997.
II-3
<PAGE>
3.6 Articles of Merger of the Company as filed with the Florida Secretary
of State on November 21, 1996.
3.7 Bylaws of the Company.
3.8 Amendment to the Bylaws of the Company dated as of November 19, 1996.
4.1 Form of Common Stock Certificate.*
4.2 Form of Warrant Agreement.
4.3 Form of Warrant Certificate.*
4.4 Form of Representative Unit Purchase Option.
4.5 Form of Representative Common Stock Purchase Warrant.
4.6 Form of Representative Purchase Option Certificate.
5 Opinion of Lucio, Mandler, Croland, Bronstein, Garbett, Stiphany &
Martinez, P.A.*
10.1 Stock Purchase Agreement, dated November 21, 1996, among the Company,
Peter Berg ("Berg"), Yannick Tessier ("Tessier") and Hemmingfold
Investments Ltd. ("Hemmingfold").
10.2 Letter Agreement, dated September 8, 1997, by and among the Company,
Berg, Tessier and Hemmingfold amending the Stock Purchase Agreement
dated November 21, 1996.
10.3 Secured Convertible Promissory Note, dated November 21, 1996, from the
Company in favor of Hemmingfold.
10.4 Letter Agreement, dated September 8, 1997, by and between the Company
and Hemmingfold amending the Secured Convertible Promissory Note,
dated November 21, 1996.
10.5 Stock Purchase Agreement, dated November 21, 1996, among the Company,
Berg, Tessier and Union Atlantic Partners I Limited ("UA Partners").
10.6 Letter Agreement, dated September 8, 1997, by and among the Company,
Berg, Tessier and UA Partners amending the Stock Purchase Agreement,
dated November 21, 1996.
10.7 Secured Convertible Promissory Note, dated November 21, 1996, from the
Company in favor of UA Partners.
10.8 Letter Agreement, dated September 8, 1997, by and between the Company
and Union Atlantic Partners amending the Secured Convertible
Promissory Note, dated November 21, 1996.
10.9 Warrant dated November 21, 1996, between Company and Union Atlantic,
L.C. ("Union Atlantic")
10.10 1997 Stock Option Plan.
10.11 Form of Bridge Note.
10.12 Form of Bridge Warrant.
10.13 Form of Bridge Registration Rights Agreement.
10.14 Agreement and Plan of Merger between Company and Tessier Technologies,
Inc. dated November 20, 1996.*
10.15 Lease Agreement to lease office space between Galacticomm, Inc. and
New Town Commerce Center, Ltd., dated July 21, 1997.*
II-4
<PAGE>
10.16 Agreement to lease T-3 Fiber Optic Digital Equipment between AT&T and
the Company, dated December 26, 1996.*
10.17 Letter Agreement to acquire Galacticomm, Inc. between Company and
Galacticomm, Inc. dated October 29, 1996.
10.18 Amended and Restated Consulting Agreement, dated July 1, 1997, between
the Company and Union Atlantic.
10.19 Consulting Agreement dated January 15, 1997, by and among the Company,
Union Atlantic and Robert J. O'Brien.
10.20 Amended and Restated Employment Agreement, dated June 30, 1997,
between the Company and Berg.
10.21 Amended and Restated Employment Agreement, dated June 30, 1997,
between the Company and Tessier.
10.22 Employment Agreement, dated August 25, 1997, between the Company and
T. Michael Love.
10.23 Stock Option and Agreement between the Company and Berg.
10.24 Stock Option and Agreement between the Company and Tessier.
10.25 Stock Issuance Agreement among the Company, Berg and Tessier dated
August 26, 1996.
10.26 Promissory Note from Galacticomm, Inc. in favor of Capital Bank.*
10.27 Promissory Note, dated April 2, 1996, from the Company in favor of
Skyline, Inc.
10.28 Promissory Note, dated August 3, 1996, from Tessier Technologies, Inc.
in favor of Yannick Tessier.
10.29 Promissory Note Extension, dated December 31, 1996 in favor of Yannick
Tessier by the Company.
10.30 Bundling Agreement with Authorization to Replicate Products between
Eastman Kodak Company and Galacticomm, Inc. dated May 29, 1997.
10.31 Agreement between Majorware Inc., and Galacticomm, Inc. dated April
30, 1997.
10.32 Sale of High Society BBS to Galacticomm, Inc. Agreement dated June 10,
1997.
10.33 Galacticomm Agreement between the Company and Specom Technologies
Corp., dated May 8, 1997.
10.34 Letter of Permission to Distribute Software between Galacticomm, Inc.
and Aztech New Media Corp., dated May 21, 1997.*
10.35 Software Distribution License between Galacticomm, Inc. and Digital
Vision, Inc. dated May 30, 1997.
10.36 Software Distribution License between Best Data Products and
Galacticomm, Inc. dated May 30, 1997.
10.37 Letter Agreement between Galacticomm, Inc. and DataSafe Publications,
Inc. dated October 28, 1997.
10.38 Restated Software License Agreement between Galacticomm, Inc. and LEAD
Technologies, Inc. dated September 29, 1995.
10.39 Annual Source Support and Maintenance Agreement between Galacticomm,
Inc. and Pacific Software, Inc. dated September 14, 1995.
10.40 Software Source Code and Software Binary Distribution License
Agreement between Galacticomm, Inc. and Pacific Software, Inc. dated
April 14, 1995.*
10.41 License Agreement between Crown Communications, Inc. and the Company
dated November 18, 1996.*
II-5
<PAGE>
10.42 Renewal and Modification Agreement to Distribution Agreement between
Tech Data Corporation and Galacticomm, Inc. dated October 8, 1995.
10.43 Start-Up Agreement between Galacticomm, Inc. and Ingram Micro, Inc.
dated April 9, 1997.
10.44 Reseller Agreement between Galacticomm, Inc. and World Commerce
Online, Inc. dated March 27, 1997.
10.45 Distribution Agreement between Galacticomm, Inc. and DistribuPro dated
February 10, 1994.*
10.46 Web Hosting Agreement between Galacticomm, Inc. and Horst
Entertainment, Inc. dated September 9, 1997.
11. Statement re: Computation of per share loss.
21. Subsidiaries of the Company: Galacticomm, Inc., a corporation
organized under the laws of the State of Florida.*
23. Consent of KPMG Peat Marwick LLP.
24. Power of Attorney (included in the Signature Page of the Registration
Statement).
27. Financial Data Schedule (for SEC purposes only).
- --------------
*To be filed by amendment
ITEM 28. UNDERTAKINGS.
(a) The undersigned small business issuer hereby undertakes to provide to
the underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer of controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-6
<PAGE>
(i) To include any prospectus required by Section 10(a(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or together, represent a fundamental
change in the information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of Prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of
Florida, on the 7th day of November 1997.
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ PETER BERG
-------------------------------------
Peter Berg, Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Galacticomm Technologies, Inc., and
each person whose signature appears below, constitutes and appoints Peter Berg
and Yannick Tessier, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him and in his
name or in the name of the Company and in any and all capacities, to sign any
and all amendments to the Form SB-2 Registration Statement under the Securities
Act of 1933 and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto each said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises as full to all items and purposes as they might or could do
in person, hereby ratifying and confirming all that each said attorney-in-fact
and agent or his substitute or substitutes may lawfully do or cause top be done
by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PETER BERG Chairman of the Board and Chief November 7, 1997
- ------------------------- Executive Officer (Principal Executive
Peter Berg Officer)
/s/ YANNICK TESSIER President and Director November 7, 1997
- -------------------------
Yannick Tessier
/s/ T. MICHAEL LOVE Chief Financial Officer (Principal November 7, 1997
- ------------------------- Financial and Accounting Officer)
T. Michael Love
/s/ TIMOTHY MAHONEY Director November 7, 1997
- -------------------------
Timothy Mahoney
/s/ CLAUS STENBAEK Director November 7, 1997
- -------------------------
Claus Stenbaek
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1. Form of Underwriting Agreement between the Company and the
Underwriters.
3.1 Articles of Incorporation of the Company as filed with the Secretary
of State on December 4, 1995.
3.2 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on November 19, 1996.
3.3 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on May 1, 1997.
3.4 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on September 9, 1997.
3.5 Articles of Amendment to Articles of Incorporation of the Company as
filed with the Florida Secretary of State on dated September 30, 1997.
3.6 Articles of Merger of the Company as filed with the Florida Secretary
of State on November 21, 1996.
3.7 Bylaws of the Company.
3.8 Amendment to the Bylaws of the Company dated as of November 19, 1996.
4.1 Form of Common Stock Certificate.*
4.2 Form of Warrant Agreement.
4.3 Form of Warrant Certificate.*
4.4 Form of Representative Unit Purchase Option.
4.5 Form of Representative Common Stock Purchase Warrant.
4.6 Form of Representative Purchase Option Certificate.
5 Opinion of Lucio, Mandler, Croland, Bronstein, Garbett, Stiphany &
Martinez, P.A.*
10.1 Stock Purchase Agreement, dated November 21, 1996, among the Company,
Peter Berg ("Berg"), Yannick Tessier ("Tessier") and Hemmingfold
Investments Ltd. ("Hemmingfold").
10.2 Letter Agreement, dated September 8, 1997, by and among the Company,
Berg, Tessier and Hemmingfold amending the Stock Purchase Agreement
dated November 21, 1996.
10.3 Secured Convertible Promissory Note, dated November 21, 1996, from the
Company in favor of Hemmingfold.
10.4 Letter Agreement, dated September 8, 1997, by and between the Company
and Hemmingfold amending the Secured Convertible Promissory Note,
dated November 21, 1996.
10.5 Stock Purchase Agreement, dated November 21, 1996, among the Company,
Berg, Tessier and Union Atlantic Partners I Limited ("UA Partners").
10.6 Letter Agreement, dated September 8, 1997, by and among the Company,
Berg, Tessier and UA Partners amending the Stock Purchase Agreement,
dated November 21, 1996.
10.7 Secured Convertible Promissory Note, dated November 21, 1996, from the
Company in favor of UA Partners.
10.8 Letter Agreement, dated September 8, 1997, by and between the Company
and Union Atlantic Partners amending the Secured Convertible
Promissory Note, dated November 21, 1996.
10.9 Warrant dated November 21, 1996, between Company and Union Atlantic,
L.C. ("Union Atlantic")
10.10 1997 Stock Option Plan.
10.11 Form of Bridge Note.
10.12 Form of Bridge Warrant.
10.13 Form of Bridge Registration Rights Agreement.
10.17 Letter Agreement to acquire Galacticomm, Inc. between Company and
Galacticomm, Inc. dated October 29, 1996.
10.18 Amended and Restated Consulting Agreement, dated July 1, 1997, between
the Company and Union Atlantic.
10.19 Consulting Agreement dated January 15, 1997, by and among the Company,
Union Atlantic and Robert J. O'Brien.
10.20 Amended and Restated Employment Agreement, dated June 30, 1997,
between the Company and Berg.
10.21 Amended and Restated Employment Agreement, dated June 30, 1997,
between the Company and Tessier.
10.22 Employment Agreement, dated August 25, 1997, between the Company and
T. Michael Love.
10.23 Stock Option and Agreement between the Company and Berg.
10.24 Stock Option and Agreement between the Company and Tessier.
10.25 Stock Issuance Agreement among the Company, Berg and Tessier dated
August 26, 1996.
10.26 Promissory Note from Galacticomm, Inc. in favor of Capital Bank.*
10.27 Promissory Note, dated April 2, 1996, from the Company in favor of
Skyline, Inc.
10.28 Promissory Note, dated August 3, 1996, from Tessier Technologies, Inc.
in favor of Yannick Tessier.
10.29 Promissory Note Extension, dated December 31, 1996 in favor of Yannick
Tessier by the Company.
10.30 Bundling Agreement with Authorization to Replicate Products between
Eastman Kodak Company and Galacticomm, Inc. dated May 29, 1997.
10.31 Agreement between Majorware Inc., and Galacticomm, Inc. dated April
30, 1997.
10.32 Sale of High Society BBS to Galacticomm, Inc. Agreement dated June 10,
1997.
10.33 Galacticomm Agreement between the Company and Specom Technologies
Corp., dated May 8, 1997.
10.35 Software Distribution License between Galacticomm, Inc. and Digital
Vision, Inc. dated May 30, 1997.
10.36 Software Distribution License between Best Data Products and
Galacticomm, Inc. dated May 30, 1997.
10.37 Letter Agreement between Galacticomm, Inc. and DataSafe Publications,
Inc. dated October 28, 1997.
10.38 Restated Software License Agreement between Galacticomm, Inc. and LEAD
Technologies, Inc. dated September 29, 1995.
10.39 Annual Source Support and Maintenance Agreement between Galacticomm,
Inc. and Pacific Software, Inc. dated September 14, 1995.
10.42 Renewal and Modification Agreement to Distribution Agreement between
Tech Data Corporation and Galacticomm, Inc. dated October 8, 1995.
10.43 Start-Up Agreement between Galacticomm, Inc. and Ingram Micro, Inc.
dated April 9, 1997.
10.44 Reseller Agreement between Galacticomm, Inc. and World Commerce
Online, Inc. dated March 27, 1997.
10.46 Web Hosting Agreement between Galacticomm, Inc. and Horst
Entertainment, Inc. dated September 9, 1997.
11. Statement re: Computation of per share earnings.
23. Consent of KPMG Peat Marwick LLP.
24. Power of Attorney (included in the Signature Page of the Registration
Statement).
27. Financial Data Schedule (for SEC purposes only).
EXHIBIT 1
GALACTICOMM TECHNOLOGIES, INC.
[ ] Units
UNDERWRITING AGREEMENT
As of ________ , 1998
First Equity Corporation of Florida
201 South Biscayne Boulevard
1400 Miami Center
Miami, Florida 33131
____________________
____________________
____________________
Gentlemen:
Galacticomm Technologies, Inc., a Florida corporation (the "Company")
confirms its agreement with First Equity Corporation of Florida, Inc., a Florida
corporation ("First Equity"), and _________________ , a ___________corporation
(collectively, the "Representatives") as representatives and members of the
group of several underwriters, if any, named in Schedule I attached hereto (the
"Underwriters" or "you", and if there is no Schedule I attached, all references
in this Agreement to the "Underwriters" or "you" shall be deemed to refer only
to the Representatives) as follows:
1. THE UNITS. Subject to the terms and conditions set forth herein, the
Company proposes to sell to you on a "firm commitment" basis an aggregate of
[_________________ ] Units (sometimes collectively referred to herein as the
"Firm Units"), each Unit consisting of one share (a "Share") of the Company's
authorized but unissued common stock, par value $.0001 per share (the "Common
Stock"), and one Redeemable Common Stock Purchase Warrant (the "Warrants"), each
Warrant entitling the holder thereof to purchase one-half share of Common Stock
(a minimum of two Warrants will be required to purchase a share of Common Stock;
no fractional shares will be issued) on the basis of an exercise price of
$___________ [120% of the offering price of a Unit] per share pursuant to a
warrant agreement (the "Warrant Agreement") between the Company and Continental
Stock Transfer & Trust Company ("Warrant Agent"). The Company also proposes to
grant to you an option to purchase up to an additional [_______________ ] Units
for the sole purpose of covering over-allotments, if any (the "Option Units").
The shares of Common Stock issuable upon exercise of the Warrants are sometimes
collectively referred to herein as the "Warrant Shares". The Firm Units and the
Shares and Warrants underlying the Firm Units are sometimes collectively
referred to herein as the "Firm Securities"; the Option Units and the Shares and
Warrants underlying the Option Units are sometimes collectively referred to
herein as the "Option Securities". The Firm
<PAGE>
Securities and the Option Securities are more fully described in the
Registration Statement and the Prospectus referred to herein and are hereinafter
sometimes collectively referred to as the "Securities."
2. REGISTRATION STATEMENT AND PROSPECTUS. A registration statement on
Form SB-2 (File No. 333- __________ ) together with exhibits and including a
preliminary form of prospectus for the registration of the Securities and the
Warrant Shares, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended, and all applicable
instructions, rules and regulations (collectively, the "Securities Act") of the
Securities and Exchange Commission (the "Commission"), and has been filed with
the Commission. There have been delivered to you copies of each Preliminary
Prospectus and the Final Prospectus. Such registration statement, including the
Prospectus, Part II, any documents incorporated by reference therein and all
financial schedules and exhibits thereto, as amended at the time when it shall
become effective, is herein referred to as the "Registration Statement," and the
prospectus included as part of the Registration Statement on file with the
Commission when it shall become effective or, if the procedure in Rule 430A of
the Rules and Regulations (as defined below) is followed, the prospectus that
discloses all the information that was omitted from the prospectus on the
effective date of the Registration Statement pursuant to such rule, and in
either case, together with any changes contained in any prospectus filed with
the Commission by the Company with your consent after the effective date of the
Registration Statement, is herein referred to as the "Final Prospectus." If the
procedure in Rule 430A is followed, the prospectus included as part of the
Registration Statement on the date when the Registration Statement became
effective is referred to herein as the "Effective Prospectus." Any prospectus
included in the Registration Statement of the Company and in any amendments
thereto prior to the effective date of the Registration Statement is referred to
herein as a "Pre- Effective Prospectus." For purposes of this Agreement, "Rules
and Regulations" mean the rules and regulations adopted by the Commission under
either the Securities Act or the Securities Exchange Act of 1934 (the "Exchange
Act"), as applicable.
3. AGREEMENTS TO SELL AND PURCHASE.
a. FIRM SECURITIES. The Company agrees to sell to you, and upon the
basis of the representations, warranties and agreements of the Company herein
contained and subject to the terms and conditions hereof, you shall, severally
but not jointly, purchase from the Company, at a purchase price of $_________
per Firm Unit. This purchase price of the Units represents the public offering
price of such securities, less a discount, equaling ten percent (10%), that the
Company has agreed to allow the Underwriters. All or any portion of such
discount may be reallowed by you for sales through licensed securities dealers
who are members of the National Association of Securities Dealers, Inc. (the
"NASD").
b. OPTION SECURITIES. The Company also grants you an option to pur
chase, upon your written notice to the Company, the Option Units for the sole
purpose of covering over-allotments, if any, at the purchase price and on the
same terms as set forth in the preceding paragraph. The Option Units may be
purchased, in whole or in part, at any time for a period of forty-
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five (45) days following the effective date of the Registration Statement. The
notice from you to the Company shall specify the number of Option Units to be
purchased and the date and time of pay ment and delivery thereof (the "Option
Closing Date"). You, as the Underwriters, in your sole discretion, shall
determine the number of Option Units, if any, to be purchased as provided
herein. Such over-allotment option shall not be exercised more than on one
occasion.
c. UNDERWRITER'S PURCHASE OPTION. On the Closing Date (as defined
herein) for the Firm Securities, the Company shall further issue and sell to
[First Equity, individually and not as a Representative,] or, at its direction,
to its bona fide officers and directors and/or employees, an option (the
"Underwriter's Purchase Option") pursuant to the Purchase Option Agreement to
purchase [ ____________ ] Units (such Units, the "Underwriter's Units", the
Shares and Warrants underlying the Underwriter's Units, the "Underwriter's
Shares" and the "Underwriter's Warrants", respectively) for an aggregate
purchase price of $75.00. The Underwriter's Purchase Option shall be exercisable
at any time during the four year period commencing one-year after the effective
date of the Registration Statement (the "Term"), at a price per Unit equal to
120% of the public offering price of a Unit. For a period of one (1) year after
the effective date of the Registration Statement, the Underwriter's Purchase
Option (and the Purchase Option Securities, as hereinafter defined) may not be
sold, assigned, transferred, pledged or hypothecated except to officers and
partners of First Equity or members of the selling group (and their officers or
partners). Such transfers will only be made if they do not violate the
registration provisions of the Securities Act. The Underwriter's Purchase Option
and the Purchase Option Securities shall be transferable after one year from the
effective date of the Registration Statement pursuant to available exemptions
from registration (if not otherwise covered by an effective registration
statement) under the Securities Act, provided, however, that the Underwriter's
Purchase Option may not be transferred to a direct competitor of the Company
without the Company's prior written consent. Except as otherwise set forth in
the Purchase Option Agreement, you may designate that the Underwriter's Purchase
Option be issued in varying amounts directly to your officers or partners and
not the Underwriters, and to other underwriters, if any, and their designees.
Such designation will be made by you only if you determine that such issuances
would not violate the interpretation of the Board of Governors of the NASD
relating to the review of corporate financing arrangements. The Underwriter's
Units and the Underwriter's Shares and Underwriter's Warrants underlying the
Underwriter's Units (collectively sometimes referred to herein as the "Purchase
Option Securities") shall be entitled to piggyback and demand registration
rights acceptable to you and your counsel and as set forth in the Purchase
Option Agreement.
4. DELIVERY AND PAYMENT. Delivery of and payment for the Firm
Securities shall be made at 10:00 A.M., Miami Time, on _____________ , 1998
(such time and date are referred to herein as the "Closing Date") at the offices
of Akerman, Senterfitt & Eidson, P.A., SunTrust International Center, 28th
Floor, One Southeast 3rd Avenue, Miami, Florida 33131. The Closing Date and the
time and the place of delivery of and payment for the Firm Securities may be
varied by agreement between you and the Company.
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If you elect to purchase and take delivery of any Option Securities,
delivery of and payment for such Option Securities shall be made at said office
or at such place as may be agreed upon in writing by you and the Company, on the
Option Closing Date, which may be the same as the Closing Date but shall in no
event be earlier than the Closing Date or earlier than one or later than ten
business days after the giving of the written notice referenced in Section 3
hereof from you to the Company of the determination to purchase a number,
specified in said notice, of Option Securities. Such notice may be given by you
to the Company at any time within forty-five (45) days after the date of the
Final Prospectus. The Option Closing Date may be varied by agreement between you
and the Company. On the Option Closing Date, if any, there shall be delivered to
you supplemental opinions and certificates, dated such Option Closing Date, to
the same effect as those required to be delivered on the Closing Date pursuant
to Section 8 hereof. The Closing Date and the Option Closing Date are heretofore
and hereinafter collectively referred to as the "Closing Date."
Delivery of certificates for the shares of Common Stock which comprise
the Shares and the certificates for the Warrants (in definitive form and
registered in such names and in such denominations as you shall request prior to
the Closing Date) shall be made to you against payment of the purchase price for
the Units by certified or official bank check or wire transfer of immediately
available funds payable to the order of the Company in the aggregate amount of
$_________________ (less all amounts payable to the Underwriters under this
Agreement and any agreement referred to herein). For the purpose of expediting
the checking and packaging of certificates for the Shares and the Warrants, the
Company agrees to make such certificates available for inspection at least 24
hours prior to the Closing Date. Time shall be of the essence and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Underwriter.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company further
covenants and agrees with you as follows:
a. FILING OF REGISTRATION STATEMENT. The Company shall use its best
efforts to cause the Registration Statement to become effective or, if the
procedure in Rule 430A of the Rules and Regulations is followed, comply with the
provisions of and make all requisite filings with the Commission pursuant to
such Rules and Regulations. The Company will give you advance notice of its
intention to file or make any amendment or post-effective amendment to the
Registration Statement or any amendment or supplement to the Prospectus and will
submit all such amendments or supplements to you and to your counsel as soon as
possible, but not later than five (5) business days before the Company proposes
to file such amendments or supplements with the Commission. The Company will not
file any such amendment or supplement to which you shall reasonably object in
writing within a reasonable time after being furnished copies thereof. The
Company will not allow the Registration Statement to be declared effective by
the Commission without your approval.
b. NOTICE TO UNDERWRITERS. The Company will advise you promptly and
confirm that advice in writing (i) when any post-effective amendment to the
Registration Statement shall have become effective, (ii) of the mailing or the
delivery to the Commission for filing of any
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<PAGE>
amendment or post-effective amendment to the Registration Statement or any
amendment or supplement to the Prospectus, (iii) of any request by the
Commission for amendment or supplement to the Registration Statement or the
Prospectus, or for additional information, immediately supplying you with copies
of all comment letters and all other correspondence with the Commission, (iv) of
the issuance by the Commission of any stop order suspending effectiveness of the
Registration Statement or of the suspension of the qualification of the
Securities or Warrant Shares for offering or sale in any jurisdiction, or of the
initiation or threat of any proceeding for any such purpose, (v) of the issuance
by any state securities commission or other regulatory authority of any order
suspending the qualification or the exemption from qualification of the
Securities or Warrant Shares under state securities or Blue Sky laws or the
initiation or threat of any proceedings for that purpose and (vi) of the
happening of any event during the period mentioned in Section 5.d hereof that
makes any statement made in the Registration Statement or the Prospectus untrue
in any material respect or which requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements therein
not misleading in any material respect. The Company will use its best efforts to
prevent the issuance of any stop order or suspension order and to obtain the
withdrawal of any such stop order or suspension order at the earliest possible
moment.
c. NASDAQ LISTING. On the effective date of the Registration
Statement, the Units and the Common Stock (including the Warrant Shares) and
Warrants comprising the Units shall each be listed for quotation on the NASDAQ
SmallCap Market, and the Company shall use its best efforts to maintain such
listing for not less than five (5) years, provided, however, that the Company
may withdraw the listing of its securities on the NASDAQ if the Company lists
the Units, the Common Stock (including the Warrant Shares) and the Warrants on
the NASDAQ National Market System or on the New York or American Stock Exchange.
In addition to the foregoing, the Company shall, pursuant to Schedule D of the
NASD By-Laws, prepare and file with NASD any required notification along with
applicable fees to list the Securities on the NASDAQ system. The Company shall,
as required, prepare and file as promptly as practicable a Report by Issuer of
Securities Quoted on NASDAQ Interdealer Quotation System on Form 10-C (or any
successor form) with respect to the shares of Common Stock and the Warrants.
d. POST-EFFECTIVE AMENDMENT. Within the time during which a Final
Prospectus relating to the Securities is required to be delivered under the
Securities Act, the Company shall comply with all requirements imposed upon it
by the Securities Act and by the Rules and Regulations, as from time to time in
force, so far as is necessary to permit the continuance of sales of or dealings
in the Securities as contemplated by the provisions hereof and the Final
Prospectus. If at any time when a prospectus relating to the Securities is
required to be delivered under the Securities Act, any event occurs as a result
of which, in the judgment of the Company and its counsel, the Prospectus as then
amended or supplemented would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which made, not misleading in any material
respect, or if it is necessary at any time to amend or supplement the Prospectus
to comply with the Securities Act or any other applicable law, the Company will
promptly notify you, and the Company shall promptly prepare and file with the
Commission an amendment or supplement to the Registration Statement which will
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<PAGE>
correct such statement or omission, or an amendment or supplement which will
effect such compliance, and deliver to you in connection therewith such
prospectus or prospectuses in such quantity as may be necessary to permit
compliance with the requirements of the Securities Act.
e. BLUE SKY QUALIFICATION. Prior to any public offering of the
Securities by you, the Company will endeavor in good faith, using your counsel,
and in cooperation with you and your counsel in taking such action as may be
necessary to register or qualify the Securities for offer and sale under the
applicable securities or Blue Sky laws of any states or jurisdictions of the
United States as you may reasonably designate and will maintain such
qualifications in effect for so long as may be required for the distribution of
the Securities. The foregoing shall be subject to the reasonable consent of the
Company as to any state or jurisdiction that seeks to impose an escrow
requirement with respect to insiders' shares or some other restrictive condition
upon the Company that exceeds the insiders lock-up provision of Section 5.k
(other than because no escrow is required herein) or a comparable condition
contained herein. Copies of all applications and related documents for the
registration or qualification of securities (except for the Registration
Statement and Prospectus) filed with the various states shall be sent to the
Company's counsel not later than the next business day following their
transmission to the various states, and copies of all comments and orders
received from the various states shall be made available to the Company's
counsel. As information is received from various states and immediately prior to
the effective date of the Registration Statement, counsel for the Underwriters
shall advise counsel for the Company in writing of all states where the offering
has been registered or qualified for sale or has been canceled, withdrawn or
denied, the date(s) of such event(s), and the number of Securities (and amount
of other securities, if any) registered or qualified for sale in each state. The
Company shall be responsible for the cost of state registration filing fees and
legal fees and expenses of Underwriter's counsel in connection with such
filings, which filing fees shall be paid to Underwriter's counsel in advance of
such filings. The Underwriter's counsel's legal fees with respect to blue sky
filing shall be $2,000 for each state in which application for registration or
qualification is made, up to an aggregate of $25,000 for all states combined.
All outstanding fees and expenses of the Underwriter's counsel solely with
respect to Blue Sky matters shall be paid by the Company on or prior to the
Closing Date.
f. STANDARD AND POOR'S. The Company shall, as soon as practicable
after the Closing Date, apply for listing in Standard and Poor's Stock Guide and
use its best efforts to effect and maintain such listing for at least five (5)
years.
g. INVESTOR RELATIONS. The Company further agrees, no later than the
25 days after the Closing Date, to engage the services of an investor relations
firm (which firm shall also be qualified to act and shall serve as the financial
publicist of the Company) reasonably acceptable to the Representatives and to
maintain such services from the date of engagement for two (2) years following
the Closing Date.
h. ISSUANCES OF ADDITIONAL SECURITIES. Except as provided in this
Agreement and except for options granted pursuant to the Company's 1997 Stock
Option Plan (the
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<PAGE>
"Plan") and other convertible securities outstanding on the effective date of,
and as described in, the Registration Statement, the Company will not sell,
offer to sell, solicit an offer to buy, contract to sell or otherwise dispose of
any Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or grant any options or warrants to purchase
Common Stock, for a period of 180 days after the effective date of the
Registration Statement, without the consent of the Representatives. The
Underwriters acknowledge that the Company intends to file a Form S-8
registration statement with respect to the granting of the stock options to be
issued under the Plan and the sale of the shares of Common Stock underlying such
options.
i. INFORMATION TO THE UNDERWRITERS. The Company will deliver to you,
for a period of at least five (5) years (or such earlier date if the
Underwriter's Purchase Option and the Underwriter's Warrant have been exercised
in full) from the Closing Date: (i) as soon as practicable, but in any event
within ninety-five (95) days after the close of each fiscal year of the Company,
or as soon thereafter as practicable, a financial report of the Company and its
subsidiaries, if any, on a consolidated basis, and a similar financial report of
all unconsolidated subsidiaries, if any, all such reports to include a balance
sheet as of the end of the preceding fiscal year, a statement of operations, a
statement of changes in financial condition and a statement of shareholders'
equity covering such fiscal year, and all to be in reasonable detail and
certified by independent public accountants who may, however, be the regularly
employed independent public accountants of the Company; (ii) within one hundred
and five (105) days after the end of each quarterly fiscal period of the
Company, other than the last quarterly fiscal period in any fiscal year, or as
soon thereafter as practicable, copies of the consolidated statement of
operations, the statement of shareholders' equity and statement of changes in
financial condition for that period, and the balance sheet as of the end of that
period of the Company and its subsidiaries, if any, the statement of operations,
the statement of shareholders' equity and statement of changes in financial
condition and the balance sheet of each unconsolidated subsidiary, if any, of
the Company for that period, all subject to year-end adjustment, certified by
the principal financial or accounting officer of the Company; (iii) copies of
all other statements, documents, or other information which the Company shall
mail or otherwise make available to any class of its security holders, to the
financial press or to the public, or shall file with the Commission, including,
but not limited to periodic reports required to be filed under Sections 13 and
15 of the Exchange Act, in particular Forms 10-KSB, 10-QSB and 8-K (which shall
be provided within the same period such reports are required to be filed with
the Commission); (iv) a copy of each "weekly position sheet" generated by the
Depository Trust Corporation pursuant to a subscription for such service that
the Company shall maintain at its expense; and (v) upon request in writing, such
other information as may reasonably be requested with reference to the property,
business, shareholders and affairs of the Company and its subsidiaries, if any.
j. SECTION 11(a) EARNINGS STATEMENT. The Company will, as promptly
as possible after the close of each fiscal year of the Company, prepare and
distribute reports to its shareholders which will include audited statements of
its operations and changes of financial position during such period and its
balance sheet as of the end of such period. The Company will make generally
available to its shareholders and will deliver to you, as soon as practicable,
but in no event later than the first day of the 15th full calendar month
following the effective date of the
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Registration Statement, an earnings statement (which need not be audited but
which will satisfy the provisions of Section 11(a) of the Securities Act)
covering a period of at least twelve (12) months beginning after the effective
date of the Registration Statement.
k. LOCK-UP AGREEMENTS. The Company will cause each of its officers,
directors, holders of the Company's Common Stock, any other persons deemed to be
"affiliates" as defined in Rule 144 under the Securities Act immediately prior
to the effective date of the Registration Statement, to agree in writing (the
"Lock-Up Agreement") that: (i) such person shall not sell, including a short
sale or sale against the box, or otherwise dispose of any shares of the Common
Stock owned directly, indirectly, or beneficially (as defined by the Exchange
Act and the Rules and Regulations) by him, her or it (including shares of Common
Stock hereinafter acquired through the exercise or conversion of derivative
securities or otherwise) for a period of twelve (12) months from the effective
date of the Registration Statement ("Lock-Up Period") without the
Representatives' prior written consent; and (ii) such person will permit all
certificates evidencing his, her or its shares of Common Stock, Warrants,
Options or Notes to be affixed with an appropriate restrictive legend, and will
cause the transfer agent for the Company to note such restrictions on the
transfer books and records of the Company. Notwithstanding the foregoing, (i)
such person may sell or otherwise dispose of such shares in a privately
negotiated transaction, provided that: (a) the purchaser agrees in advance in
writing with the Underwriters to the restrictions on transfer of securities as
set forth herein and to vote the Common Stock as set forth in the Lock-Up
Agreements and (b) the disposition is otherwise in accordance with the federal
securities and other laws, and (ii) such person may make gifts and transfers of
Common Stock to the undersigned's immediate family (as such term is defined in
rules promulgated under the Securities Exchange Act of 1934, as amended). On or
before the effective date, the Company shall have furnished to the
Representatives the Lock-Up Agreements, which shall be in a form reasonably
acceptable to the Representatives and which shall be duly executed, and shall be
valid and binding obligations of such persons enforceable against such persons
in accordance with their respective terms.
l. PRESS RELEASES. For a period commencing on the date hereof and
ending two years after the date of the Prospectus, neither the Company nor any
of its officers or directors will issue news releases or permit other such
publicity about the Company regarding the financial condition or any significant
event of the Company without the approval of the Company's legal counsel named
in the Prospectus under the heading "Legal Opinions," or such other counsel as
may be approved by you. During such period, the Company will deliver to you
copies of such news releases or other publicity about the Company promptly after
distribution thereof.
m. UNDERWRITERS' COPIES. The Company will promptly deliver to you,
without charge: (i) two complete copies (one of which is manually signed) of the
Registration Statement, as originally filed, and of each amendment thereto, and
of each post-effective amendment thereto filed at any time when a prospectus
relating to the Securities is required to be delivered under the Securities Act,
in each such case manually executed by the proper officers and a majority of the
directors of the Company (or, in case of amendments, by their duly constituted
attorneys-in-fact) and including signed copies of each consent of experts named
in the Registration Statement and all
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<PAGE>
financial statements, schedules and exhibits filed therewith (including those
incorporated by reference to the extent not previously furnished to you), and
(ii) such number of conformed copies of the Registration Statement, as
originally filed, and of each amendment and post-effective amendment thereto (in
each such case excluding exhibits), as you may reasonably require. The Company
will promptly deliver, without charge, to you or such others whose names and
addresses are designated by you as soon as possible after the effective date of
the Registration Statement, and thereafter from time to time during the period
when delivery of a prospectus relating to the Securities is required by the
Securities Act, as many printed copies as you may reasonably request of the
Final Prospectus and of any amended or supplemented prospectus. The Company will
promptly deliver, without charge, as soon as practicable following the public
offering or sale of the Securities, and thereafter from time to time for such
period as delivery of a prospectus or any amendment or supplement thereto may be
required, to you or any dealers to whom Securities may be issued, as many copies
as you reasonably request of the Prospectus and any amendment or supplement
thereto.
n. NASD MATTERS. The Company shall supply your counsel with the
following as appropriate to satisfy the NASD filing requirements: (i) such
copies of any amendment or supplement to the Registration Statement and the
preliminary prospectus or Final Prospectus; and (ii) the statutory filing fee in
the form of a certified or cashier's check. The Company shall further supply to
your counsel, no later than one (1) week before the effective date of the
Registration Statement, a written representation as to: (i) the existence or
nonexistence of any NASD affiliation or association of any officer, director, or
five percent (5%) or greater shareholder of the Company, and, if a shareholder
of the Company is a corporation, the existence or nonexistence of any direct or
indirect NASD affiliation or association of any officer, director, or five
percent (5%) or greater shareholder of such corporation, (ii) whether or not any
unregistered securities of the Company have been acquired by any NASD affiliated
persons during the twelve (12) month period prior to filing the Registration
Statement, and (iii) whether or not key-man life insurance has been or will be
provided for any officer or director of the Company by any NASD affiliate.
o. EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is terminated,
the Company shall bear all costs and expenses incident to the issuance, offer,
sale, and delivery of the Securities, including, but not limited to, stock
transfer taxes, all expenses and fees incident to the filing of the Registration
Statement and the registration statements with the Commission pursuant to the
Securities Act and the Exchange Act, the costs, filing fees and (subject to
Section 1.e. hereof) counsel fees related to qualification under state
securities laws, fees and disbursements of counsel and accountants for the
Company, NASD filing fees, NASDAQ system fees, costs of preparing and printing
the Registration Statement and as many copies of the preliminary prospectus and
Prospectus as you may reasonably deem necessary, including all amendments and
supplements to the Registration Statement, and the printing, delivery, and
shipping of this Agreement and other underwriting documents, including
Underwriter's questionnaires, Underwriter's powers of attorney, Blue Sky
memoranda, and selected dealers' agreements, the cost of printing certificates
representing the Shares and the Warrants, the costs and charges of the Transfer
Agent and Warrant Agent, and all other costs and expenses incident to the
performance of its obligations hereunder which are not
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otherwise provided for in this Agreement. The Company shall also bear all costs
of holding informational meetings and "road shows" to acquaint securities
dealers with the affairs of the Company, provided that the Company shall not be
responsible for any Representatives' travel, meals and/or lodging expenses in
the continental United States. The Company, at its sole expense, shall make a
representative of its management available at the offices of the Underwriters,
at mutually convenient times, prior to the effective date of the Registration
Statement and shall likewise make representatives available at the Company for
due diligence or other informational meetings. The Company will also pay the
reasonable out-of-pocket travel expenses of the Underwriters and their counsel
or the professionals designated by the Underwriters to visit the Company's
facilities (as well as those of any significant supplier to, or customer of, the
Company) for purposes of discharging their due diligence responsibilities. The
Prospectus (preliminary and definitive) shall be printed by a financial printer
selected by the Company and approved by the Underwriters. The Company agrees to
supply the Underwriters (within ten weeks of the Closing Date) at the Company's
sole cost and expense up to five (5) bound volumes of all the documents, papers
and exhibits, correspondence and records forming the materials included in the
public offering. In addition, the Company agrees to pay for all pre- and
post-closing advertisements relating to the public offering.
In addition to the foregoing, the Company shall reimburse you for your
expenses on the basis of a nonaccountable expense allowance in the amount of 3%
of the gross offering proceeds, including over-allotment proceeds, less, as to
First Equity, the sum of Twenty Five Thousand Dollars ($25,000) previously paid
to it; all of your costs in excess of the nonaccountable expense allowance shall
be paid by you. Expenses to which the allowance shall be applied include,
without limitation, fees of your counsel, but shall not include the following:
fees of the Company's counsel; Commission or state filing fees; Blue Sky counsel
fees (subject to Section 1.e. hereof) and expenses (as described herein); NASD
filing fees; NASDAQ listing fees; printing; tombstone advertisements; and any
and all other expenses customarily paid by the issuer in a public offering. The
Company represents that such payment will be made in full through a deduction
from the payment by the Underwriters for the Units on each Closing Date.
Notwithstanding any other provisions of this Agreement, if (i) (a)
there is a material adverse change in the business or financial condition of the
Company, (b) there exists any material misrepresentation of the Company
contained herein or otherwise, (c) you discover in the course of your due
diligence examination of the Company facts which you determine, in your sole
discretion, could materially adversely affect the sale of the Securities, or (d)
market conditions, in your sole judgment, do not justify an offering on the
terms set forth in the Registration Statement, and in any such event you elect
to terminate the underwriting, (ii) there is any judicial, administrative or
other regulatory or governmental judgment, decree, order, injunction or similar
action or proceeding enjoining, suspending, prohibiting, limiting or otherwise
restricting you from engaging in underwrit ing activities or sales of
securities, and in any such event you elect to terminate the underwriting, or
(iii) if the transactions contemplated by this Agreement or related thereto are
not consummated because the Company decides not to proceed with the offering,
the Company agrees that in addition to paying the Company's own expense, you
will be entitled to be reimbursed by us, on an accountable basis, for all of its
reasonable accountable out-of-pocket costs incurred in connection
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with the offering of securities contemplated by the Registration Statement
(including, as to First Equity, the Twenty Five Thousand Dollars ($25,000)
previously paid to it). Furthermore, if the Company should fail to pay the
agreed upon amounts set forth above to you, your successors or assigns, the
Company, shall, furthermore, be liable to you for reasonable attorney's fees and
costs incurred in the collection of said amounts.
p. TRANSFER SHEETS. The Company shall furnish to you a list of the
names and addresses of all shareholders subsequent to the Closing Date and shall
cause the Transfer Agent to furnish to you a copy of all transfer sheets for a
period of three years from the later of the Closing Date or the Option Closing
Date.
q. UNDERTAKINGS AND USE OF PROCEEDS. The Company will comply with
all of the undertakings contained in the Registration Statement and shall apply
the net proceeds of the sale of the Securities substantially in accordance with
the description set forth in the Prospectus.
r. RIGHT OF FIRST REFUSAL. The Company hereby grants to First
Equity, for a period of two years from the effective date of the Registration
Statement: (i) the right to represent the Company in connection with any merger
or acquisition involving the Company and for which the Company intends to engage
an investment banker or financial advisor, which shall be upon terms reasonably
acceptable to First Equity and the Company; and (ii) a right of first refusal to
manage (or act as placement agent in respect of) any public offering or private
placement of securities of the Company or its subsidiaries. If the Company or a
subsidiary of the Company seeks to effect a public or private offering of its
securities, the Company shall consult with First Equity and in the case of any
such offering of securities of the Company or a subsidiary of the Company, the
Company agrees to offer to First Equity the opportunity, on terms no more
favorable to the Company or its subsidiary than it or they can secure elsewhere,
the opportunity to act as the managing underwriter (or placement agent, as
applicable) for such offering. Notwithstanding the foregoing, the Company shall
have the right to select a "lead managing" underwriter for any such public
offering if such underwriter is a "higher bracket" underwriter than First Equity
and, if the terms of engagement of such "higher bracket" underwriter are
acceptable to First Equity in its reasonable discretion.
s. EXCHANGE ACT REGISTRATION. The Company shall prepare and file a
registration statement with the Commission pursuant to Section 12(g) of the
Exchange Act. Such registration statement under the Exchange Act shall be
declared effective contemporaneously with the effectiveness of the Registration
Statement. The Company shall comply with the Securities Act, the Exchange Act
and the Rules and Regulations, the applicable rules and regulations of the NASD
and applicable states securities laws so as to permit the continuance of sales
of and dealings in the Securities in compliance with applicable provisions of
such laws, rules, and regulations, including the filing with the Commission and
the NASD of all reports required to be so filed by each, and the Company will
deliver to the holders of the shares all reports required to be provided to such
holders pursuant to such laws, rules, or regulations. The Company will use its
best efforts to maintain its registration under the Exchange Act in effect for a
period of five (5) years from the Closing Date.
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t. STOCK OPTION PLANS. The Company shall not amend any of its stock
option plans to increase the number of shares of Common Stock available for
grant under any of such option plans by more than 10%, in the aggregate, for a
period of two years from the effective date of the Registration Statement
without the prior written consent of the Representatives.
u. REDEMPTION AND DIVIDENDS. For a period of two years from the
Closing Date, the Company shall not, either directly or through a subsidiary,
(i) redeem or purchase any of its securities outstanding as of the Closing Date,
other than redemptions of the Warrants as permitted by the Warrant Agreement, or
that may be required in connection with possible termination of employment with
the Company under the terms of employment agreements in effect on the Closing
Date, or redemptions as otherwise provided for herein, or (ii) pay any
dividends, or make any other cash distribution in respect of its securities, in
excess of the amount of the Company's current or retained earnings derived after
the Closing Date, without the prior written consent of the Representatives,
which consent may be withheld for any reason. The Representatives shall either
approve or disapprove, in writing of such contemplated stock redemption or
dividend or distribution within five (5) business days after the date the
Representatives receive written notice of the proposed action. Failure by the
Representatives to provide a response to within such five (5) day period shall
be deemed to be an approval of the redemption or dividend.
v. DESIGNATION OF DIRECTORS AND ATTENDANCE AT BOARD MEETINGS. [First
Equity] [Each Representative] shall have the right, for the three (3) year
period following the Closing Date, to designate a nominee (the "Nominees") for
election to the Company's Board of Directors. The officers, directors, and
principal shareholders of the Company shall agree in writing at or prior to the
Closing Date to vote all shares of voting capital stock owned by them (or over
which they have the power to direct the vote) during such three-year period in
favor of the election of the Nominee[s] designated by [each of the
Representatives] and shall solicit proxies in support of such nomination. If
[the Representative] shall not have designated a Nominee at the time of any
meeting of the Board or such person shall not have been elected or shall be
unavailable to serve, the Company shall notify [the Representative] of each
meeting of the Board. If a Nominee is not serving on the Board, an individual
selected by [the Representative] shall be permitted to attend all meetings of
the Board and to receive all notices and other correspondence and communications
sent by the Company to members of the Board. The Company shall reimburse [the
Representative's] Nominee (or attendee) for his or her out-of-pocket expenses
reasonably incurred in connection with his or her attendance of Board meetings.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to you that:
a. CONDITIONS FOR USE OF A REGISTRATION STATEMENT ON FORM SB-2. The
conditions for use of a registration statement on Form SB-2 set forth in the
General Instructions to Form SB-2 have been satisfied with respect to the
Company, the transactions contemplated herein and in the Registration Statement.
The Company has prepared in conformity with the requirements of the Securities
Act and the Rules and Regulations and filed with the Commission the Registration
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Statement. Each Preliminary Prospectus was endorsed with the legend required by
Item 501(a)(5) of Regulation S-B of the Rules and Regulations, including, if
applicable, Rule 430A thereof.
b. ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. To its
knowledge, neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any preliminary prospectus or
Prospectus, no proceedings for that purpose have been threatened or instituted
and each preliminary prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto or filed pursuant to Rule
424 under the Securities Act in all material respects, at the time of the filing
thereof, complied with the Securities Act and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; when the
Registration Statement becomes effective, and when the Prospectus is filed with
the Commission, and at all times subsequent thereto up to and including the
Closing Date and the Option Closing Date, or for such longer period as the
Prospectus is required under the Securities Act to be delivered in connection
with sales by you or a dealer selected by you, the Registration Statement and
the Prospectus and any amendments or supplements thereto will comply with the
Securities Act; when the Registration Statement becomes effective, the
Registration Statement will contain all statements required to be stated therein
in accordance with the Securities Act and will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and when the
Prospectus is filed with the Commission, it will contain all statements required
to be stated therein in accordance with the Securities Act and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in 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 or the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information (or oral information to the extent
such information relates to the private ongoing investigation of you by the
Commission) furnished to the Company with respect to you by or on behalf of you
expressly for use with reference to you (or any person who may be deemed to be
affiliated with you or an associated person of yours) in connection with the
preparation thereof.
c. ORGANIZATION AND GOOD STANDING. The Company and each of its
subsidiaries are Florida corporations duly organized, validly existing and in
good standing under the laws of the State of Florida, with full power and
authority, corporate and other, to own or lease and operate their respective
properties and to conduct their business as described in the Registration
Statement and in the Prospectus. The Company and the Subsidiary (hereinafter
defined) are duly qualified to do business as foreign corporations and are in
good standing in all jurisdictions where such qualification is necessary and
where failure to so qualify could have a material adverse effect on the
financial condition, results of operations, business or properties of the
Company or the Subsidiary. The Company has one subsidiary, Galacticomm, Inc., a
Florida corporation (the "Subsidiary") of which it owns 8,885,607 of the
Subsidiary's 10,000,000 shares of outstanding
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capital stock. No changes will be made in the Articles of Incorporation or
bylaws of the Company or any subsidiary subsequent to the date hereof and prior
to the Closing Date or the Option Closing Date without the prior written consent
of the Representatives.
d. CORPORATE AUTHORIZATION. The Company has full power and
authority, corporate and other, to execute, deliver and perform this Agreement,
the Warrant Agreement, the Underwriter's Purchase Option, and the Purchase
Option Agreement, and to consummate the transactions contemplated hereby and
thereby. This Agreement has been, and the Warrant Agreement, Warrants,
Underwriter's Purchase Option, and the Purchase Option Agreement will be on the
Closing Date, duly executed and delivered by the Company and, as to this
Agreement, constitutes, and, as to the Warrant Agreement, the Warrants (when
sold to and paid for by you), the Purchase Option Agreement and the
Underwriter's Purchase Option (when sold to and paid for by you), will
constitute, as applicable, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, or other similar laws or arrangements affecting creditors' rights
generally and the discretion of courts in granting equitable remedies and except
that enforceability of the indemnification provisions and the contribution
provisions set forth herein may be limited by federal or state securities laws
or public policy underlying such laws. The execution, delivery and performance
by the Company of this Agreement, the Warrant Agreement, the Underwriter's
Purchase Option and the Purchase Option Agreement, the consummation by the
Company of the transactions herein and therein contemplated, the issuance and
sale of the Securities, the Warrant Shares and the Purchase Option Securities
and the compliance by the Company with the terms of such agreements have been
duly authorized by all necessary corporate action and do not and will not, with
or without the giving of notice or the lapse of time, or both: (i) result in any
violation of the Articles of Incorporation or Bylaws of the Company; (ii) result
in a material breach of or conflict with any of the terms or provisions of, or
constitute a default under, or result in the modification or termination of, or
result in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to any
indenture, mortgage, note, contract, commitment or other agreement or instrument
to which the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or any of their respective properties or assets are or may be bound
or affected; (iii) violate in any material respect any existing applicable law,
rule or regulation, or any judgment, order or decree of any governmental agency
or court, domestic or foreign, having jurisdiction over the Company or the
Subsidiary or any of their respective properties or business; or (iv) have any
material effect on any permit, certification, registration, approval, consent,
license or franchise necessary for the Company or the Subsidiary to own or lease
and operate their prospective properties and to conduct their business or the
ability of the Company or the Subsidiary to make use thereof.
e. CONSENTS. No authorization, approval, consent, order,
registration, license or permit of any court or governmental agency or body, is
required for the valid authorization, issuance, sale and delivery of the
Securities, the Underwriter's Purchase Option and Purchase Option Securities or
in connection with the consummation of the other transactions contemplated by
this Agreement, the Warrant Agreement and the Purchase Option Agreement, other
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than under the Securities Act, the Rules and Regulations, and the rules and
regulations of the state securities laws of the states in which offers or sales
will be made in connection with the purchase and distribution of the Securities
by you and the purchase of the Underwriter's Purchase Option and Purchase Option
Securities.
f. CAPITALIZATION - THE COMPANY. The duly authorized, issued and
outstanding capital stock of the Company and the Subsidiary conforms to the
description thereof in the Registration Statement and in the Prospectus. Except
as set forth in the Registration Statement and the Prospectus, there are no
outstanding options to purchase, warrants, or other rights to subscribe for
securities, or any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of the Company's capital stock or any
such warrants, convertible securities or obligations. Except as set forth in the
Registration Statement and the Prospectus, no holder of any of the Company's
securities has any rights, "demand", "piggyback" or otherwise, to have such
securities registered under the Securities Act.
g. CAPITALIZATION - THE SUBSIDIARY. The Subsidiary has on the date
hereof 10,000,000 shares of Common Stock, par value $.01, duly authorized of
which 8,891,207 are issued and outstanding. There are no outstanding options to
purchase, warrants, or other rights to subscribe for securities, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of the Subsidiary's capital stock (including, without
limitation, rights pursuant to any phantom stock or stock option plan) or any
such warrants, convertible securities or obligations. No holder of any of the
Subsidiary's securities has any rights, "demand", "piggyback" or otherwise, to
have such securities registered under the Securities Act.
h. MATERIAL CONTRACTS. The descriptions in the Registration
Statement and in the Prospectus of contracts and other agreements of the Company
or the Subsidiary are accurate in all material respects and present fairly the
information required to be disclosed, and there are no material contracts or
other agreements which have not been so described.
i. FINANCIAL STATEMENTS. The financial statements and schedules and
the notes thereto included in the Registration Statement and in the Prospectus
comply as to form in all material respects with the requirements of the
Securities Act and fairly present the financial position of the Company as of
the dates thereof, and the results of operations and changes in financial
position and cash flows of the Company and its subsidiaries for the periods
indicated therein, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods. The pro forma
financial statements included in the Registration Statement and the Prospectus
and any amendment or supplement thereto, have been prepared on a basis
consistent with such historical financial statements, except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly the financial position and results of
operations of the Company at the dates and for the periods specified therein.
The other financial and statistical data included in the Registration Statement
and in the Prospectus, historical and pro forma, are, in all material respects,
fairly presented and prepared on a basis consistent with such financial
statements and the books and records of the entities covered thereby. The
selected financial
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data set forth in the Registration Statement and in the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited and unaudited financial statements included
in the Registration Statement and in the Prospectus.
j. ACCOUNTING CONTROLS. The books, records and accounts of the
Company and its subsidiaries, if any, accurately reflect, in reasonable detail,
the transactions and dispositions of the assets of the Company and its
subsidiaries, as the case may be. The Company and its subsidiaries maintained,
and the Company and its subsidiaries maintains, a system of internal accounting
controls sufficient to provide reasonable assurances that: (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
difference.
k. ACCOUNTANTS. The accountants, KPMG Peat Marwick LLP (the
"Accountants"), who have audited the financial statements filed with the
Commission as a part of the Registration Statement and the Prospectus are
independent accountants with respect to the Company as required by the
Securities Act.
l. COMPLIANCE WITH DOCUMENTS AND LAWS. Neither the Company nor the
Subsidiary is in violation of its respective Articles of Incorporation, Bylaws,
or other governing documents, or, except as disclosed in the Registration
Statement and the Prospectus, in material default in the due performance of any
material obligation, lease or other material contract, indenture, mortgage, deed
of trust, note, loan, or other material agreement or instrument to which the
Company or the Subsidiary, as applicable, is a party or by which it, or any of
its properties or businesses is subject or any applicable material license,
franchise, certificate, permit, authorization, statute, rule or regulation of or
from any public, regulatory, or governmental agency or authority having
jurisdiction over the Company or the Subsidiary or any of their respective
properties or assets, or any approval, consent, order, judgment or decree,
except such as could not reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), earnings, business, assets,
results of operations of the Company and, to the knowledge of the Company after
reasonable investigation, there exists, and through the Closing Date and the
Option Closing Date, if any, there shall exist, no condition which, with the
passage of time or otherwise, would constitute a default under any of the
foregoing or result in the imposition of any penalty or acceleration of any
indebtedness.
m. TAXES. The Company and the Subsidiary have filed with the
appropriate federal, state and local governmental agencies, and all foreign
countries and political subdivisions thereof, all tax returns, including
franchise tax returns, which are required to be filed or have duly obtained
extensions of time for the filing thereof and have paid all taxes shown on such
returns and all assessments received by them to the extent that the same have
become due; and the
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provisions for income taxes payable, if any, shown on the financial statements
included as part of the Registration Statement and in the Prospectus are
sufficient for all accrued and unpaid foreign and domestic taxes, whether or not
disputed, and for all periods to and including the dates of such financial
statements. Except as disclosed in the Registration Statement and in the
Prospectus , (i) neither the Company nor the Subsidiary have executed or filed
with any taxing authority, foreign or domestic, any agreement extending the
period for assessment or collection of any income taxes and neither is a party
to any pending action or proceeding by any foreign or domestic governmental
agency for assessment or collection of taxes; and (ii) no claims for assessment
or collection of taxes have been, or to its knowledge might be, asserted against
the Company or the Subsidiary.
n. AUTHORIZATION OF OUTSTANDING SECURITIES - THE COMPANY. The
outstanding Common Stock and outstanding options and warrants to purchase Common
Stock of the Company have been duly authorized and validly issued. The
outstanding Common Stock is fully paid and non-assessable. The outstanding
options and warrants to purchase Common Stock, all as described in the
Registration Statement and in the Prospectus, constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. None of
the outstanding Common Stock options or warrants to purchase Common Stock have
been issued in violation of the preemptive rights of any shareholder of the
Company. None of the holders of the outstanding Common Stock are subject to
personal liability solely by reason of being such a holder. The offers and sales
of such outstanding shares of Common Stock, and outstanding options, warrants
and other securities to purchase Common Stock were at all relevant times either
registered under the Securities Act and the applicable state securities or Blue
Sky laws, or exempt from such registration or prospectus filing requirements.
The authorized Common Stock and outstanding options and warrants to purchase
Common Stock and all promissory notes conform to the descriptions thereof
contained in the Registration Statement and in the Prospectus.
o. AUTHORIZATION OF OUTSTANDING SECURITIES - THE SUBSIDIARY. The
outstanding capital stock (and previously issued but no longer outstanding
options and warrants to purchase capital stock) of the Subsidiary have been duly
authorized and validly issued. The outstanding capital stock is fully paid and
non-assessable. None of the outstanding capital stock of the Subsidiary (and
previously issued but no longer outstanding options or warrants to purchase
capital stock) has been issued in violation of the preemptive rights of any
shareholder of the Subsidiary. None of the holders of the outstanding capital
stock of the Subsidiary are subject to personal liability solely by reason of
being such a holder. The offers and sales of such outstanding shares of capital
stock (and previously issued but no longer outstanding options, warrants and
other securities to purchase capital stock of the Subsidiary) were at all
relevant times either registered under the Securities Act and the applicable
state securities or Blue Sky laws, or exempt from such registration or
prospectus filing requirements.
p. AUTHORIZATION OF THE OFFERED SECURITIES. The Securities, the
Warrant Shares, the Underwriter's Purchase Option and the Purchase Option
Securities have been duly authorized. The Securities, when sold and paid for in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable and free of preemptive and, with the exception
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of the Warrants, redemption rights, and holders thereof will not be subject to
personal liability solely by reason of being such holders. The Warrant Shares,
when paid for in accordance with the terms of the Warrants, will be validly
issued, fully paid and non-assessable and free of preemptive and redemption
rights. The Underwriter's Purchase Option and Purchase Option Securities, when
sold to and paid for by you, will be validly issued, and, when issued upon
exercise of the Underwriter's Purchase Option and the Underwriter's Warrant in
accordance with the terms at the price therein provided, will be validly issued,
fully paid and non-assessable and free of preemptive and redemption rights. The
Securities and the Underwriter's Purchase Option and the Purchase Option
Securities conform to the descriptions thereof contained in the Registration
Statement and in the Prospectus. The Company has reserved for issuance the
number of shares of Common Stock issuable upon exercise of the Warrants and the
Underwriter's Purchase Option and the Purchase Option Securities issuable upon
exercise of the Underwriter's Purchase Option and the Underwriter's Warrant.
q. CONSENTS, ETC. Each of the Company and the Subsidiary owns,
possesses or has obtained all material governmental and other (including those
obtainable from third parties) licenses, permits, certifications, registrations,
approvals or consents and other authorizations necessary to own or lease, as the
case may be, and to operate its properties, whether tangible or intangible, and
to conduct any of the business or operations of the Company or the Subsidiary,
as applicable, as presently conducted and all such licenses, permits,
certifications, registrations, approvals, consents and other authorizations are
in full force and effect, the Company and the Subsidiary are in material
compliance therewith and there are no proceedings pending or, threatened, or any
basis therefor, seeking to cancel, terminate or limit such licenses, permits,
certifications, registrations, approvals or consents or other authorizations.
r. LITIGATION. Except as set forth in the Registration Statement and
in the Prospectus, there are no pending actions, suits, proceedings,
arbitrations, and the Company is not aware of any pending or threatened claims,
investigations or inquiries, before any governmental agency, court or tribunal,
domestic or foreign, or before any private arbitration tribunal against the
Company or the Subsidiary or involving their respective properties or business
that, if determined adversely to the Company or the Subsidiary, would,
individually or in aggregate, result in any materially adverse change in the
financial condition, shareholders' equity, results of operations, properties,
business, management, or affairs of the Company or the Subsidiary or that relate
to environmental matters or discrimination on the basis of age, sex, religion,
race or national origin or that question the validity of the capital stock of
the Company or the Subsidiary or this Agreement or of any action taken or to be
taken by the Company or the Subsidiary pursuant to, or in connection with, this
Agreement; there is no basis for any such action, suit, proceeding, arbitration,
claim, investigation or inquiry. There are no outstanding orders, judgments or
decrees of any court, governmental agency or other tribunal naming the Company
or the Subsidiary and enjoining the Company or the Subsidiary from taking, or
requiring the Company or the Subsidiary to take, any action, or to which the
Company or the Subsidiary, their respective properties or businesses are bound
or subject. Except as set forth in the Registration Statement and in the
Prospectus, there is not now pending or, to the knowledge of the Company,
threatened, any material contingent liability.
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s. FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor the
Subsidiary nor any of their respective directors or officers acting in any
capacity on behalf of the Company or the Subsidiary nor any of the Company's or
the Subsidiary's foreign sales agents, directly or indirectly, has used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
t. CERTAIN PERSONS. Neither the Company, the Subsidiary nor any of
their respective directors, officers or beneficial owners of ten percent or more
of any class of its equity securities:
(1) Has filed a registration statement which is the subject of a
currently effective order denying, suspending or revoking effectiveness of the
registration statement, which order has been entered pursuant to any state's law
within five years prior to the date of this Agreement;
(2) Was, or was named as an underwriter of any securities (A)
covered by any registration statement which is the subject of any pending
proceeding or examination under Section 8 of the Securities Act, or is the
subject of any refusal order or stop order entered thereunder within five years
prior to the date of this Agreement, or (B) covered by any filing which is
subject to any pending proceeding under Rule 261 of Regulation A promulgated
under the Securities Act relating to the temporary or permanent suspension of an
exemption from registration or any similar rule adopted under Section 3(b) of
the Securities Act, or an order entered thereunder within five years prior to
the date of this Agreement;
(3) Has been convicted or has pleaded nolo contendere prior to
the date of this Agreement of any felony or misdemeanor in connection with the
offer, purchase or sale of any franchise or commodity or any felony involving
fraud, deceit or intentional wrongdoing, including but not limited to forgery,
embezzlement, obtaining money under false pretenses, larceny, theft or
conspiracy to defraud;
(4) Has been convicted within five years prior to the date of
this Agreement of any felony or misdemeanor of which fraud is an essential
element, or which is a violation of the securities laws or regulations of any
state or of the United States or any foreign jurisdiction, or which is a crime
involving moral turpitude, or which is a criminal violation of statutes designed
to protect investors or consumers against unlawful practices involving
insurance, securities, commodities or commodities futures, real estate,
franchises, business opportunities, consumer goods or other goods and services;
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(5) Has been convicted or pleaded nolo contendere within ten
years prior to the date of this Agreement of any felony or misdemeanor (A) in
connection with the offer, purchase or sale of any security, (B) involving the
making of any false filing with the Commission or any state or (C) arising out
of the conduct of the business of an underwriter, broker, dealer, municipal
securities dealer or investment adviser;
(6) Has been or is currently subject to any order or judgment
(including an injunction) entered or obtained by the Commission or any state
securities commission or administrator within five years prior to the date of
this Agreement; or (B) has been or is currently subject to any administrative
order or judgment (including an injunction) issued by state or federal
authorities within five years prior to the date of this agreement which order or
judgment (1) includes or is based upon a finding or stipulation of fraud,
fraudulent conduct, deceit (including the making of any untrue statement of a
material fact or omitting to state a material fact) or intentional wrongdoing,
(2) has the effect of enjoining such person from activities subject to federal
or state statutes designed to protect investors or consumers against unlawful or
deceptive practices involving securities, insurance, commodities or commodities
futures, real estate, franchises, business opportunities, consumer goods or
other goods and services;
(7) Is subject to any judgment, order or decree of any court
entered within five years prior to the date of this Agreement which (A)
temporarily or permanently restrains or enjoins such person from engaging in or
continuing any conduct or practice (1) in connection with the offer, purchase or
sale of any security or commodity, (2) involving the making of any false filing
with the Commission or any state, or (3) arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer or
investment adviser, or (B) restrains or enjoins such person from activities
subject to federal or state statutes designed to protect consumers against
unlawful or deceptive practices involving insurance, commodities or commodities
futures, real estate, franchises, business opportunities, consumer goods or
other goods and services;
(8) Is currently subject to any order or judgment entered or
obtained by any federal or state authority which prohibits, denies or revokes
the use of any exemption from registration in connection with the offer,
purchase or sale of any security;
(9) Is suspended or expelled from membership in, or suspended
or barred from association with a member of, an exchange registered as a
national securities exchange pursuant to Section 6 of the Exchange Act, an
association registered as a national securities association under Section 15A of
the Exchange Act, or a Canadian securities exchange or association for any act
or omission to act constituting conduct inconsistent with just and equitable
principles of trade;
(10) Is subject to a United States Postal Service false
representation order entered under Section 3005 of title 39, United States Code,
within five years prior to the date of this agreement, or is subject to a
restraining order or preliminary injunction entered under Section
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3007 of title 39, United States Code, with respect to conduct alleged to have
violated Section 3005 of title 39, United States Code; or
(11) Has experienced a personal bankruptcy, or been an officer,
director, or key employee of any company that during their tenure with such
company experienced any bankruptcy other than as disclosed in the Registration
Statement and in the Prospectus as required, or had any trustee, receiver, or
conservator appointed with respect to its business or assets.
u. PRIOR SALES. No securities of the Company have been sold by the
Company or by, or on behalf of, or for the benefit of the Company within three
years prior to the date hereof, except as set forth in the Registration
Statement and in the Prospectus.
v. EXHIBITS. There are no material contracts, agreements or other
documents required to be described in the Registration Statement or in the
Prospectus or to be filed as exhibits to the Registration Statement by the
Securities Act which have not been described or filed as required, and neither
the Company nor its subsidiaries is in material violation of, and no material
default exists in the performance, observance or fulfillment of, any material
obligation, agreement, covenant or condition contained in any of such contracts,
agreements or documents except as disclosed in the Registration Statement and
the Prospectus.
w. EMPLOYMENT AGREEMENTS. The employment agreements between the
Company and its officers described in the Registration Statement are valid,
binding and enforceable obligations upon the respective parties thereto in
accordance with their respective terms, subject to the effect of bankruptcy or
similar proceedings and the effect and application of general principles of
equity.
x. LIQUIDATION. The Company's articles of incorporation provide that
(A) any liquidation of the Company, or (B) any business combination in which the
Company is not the surviving corporation or any sale of all or substantially all
of its assets (which combination or sale occurs during the five-year period
immediately following the Closing Date): (i) must be approved by a vote of the
holders of a majority of the outstanding shares of the capital stock entitled to
vote; and (ii) all "affiliates," as such term is defined in Rule 144 promulgated
under the Securities Act, of the Company on the Closing Date shall agree to
vote, during the two-year period immediately following the closing date of the
Public Offering, all shares of voting capital stock of the Company owned by them
(or over which they have the power to direct the vote) in the same proportion as
the votes cast by non-affiliates voting shares of the same class or series, with
respect to the above-referenced matters on which a vote of shareholders is
taken.
y. FINDER OR BROKER. The Company has not retained or dealt with any
broker or finder with respect to the transactions contemplated hereby, and the
Company knows of no outstanding claims for services in the nature of a finder's
fee or origination fee with respect to the sale of the Securities. The Company
will indemnify and hold harmless the Underwriters with respect to any claim for
a finder's fee by any party claiming to be owed such fee based on contacts,
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conversations or arrangements with the Company. Furthermore, except as set forth
in the Registration Statement and in the Prospectus, the Company has no
management or financial consulting agreement with anyone. Except as set forth in
the Registration Statement and in the Prospectus or otherwise disclosed to you
in writing prior to the date hereof, no promoter, officer, director or five
percent or greater shareholder of the Company is, directly or indirectly,
associated with an NASD member broker/dealer.
z. STABILIZATION. Neither the Company, its subsidiaries, nor any
of their respective officers, directors or affiliates (as defined under the
Securities Act) has taken, directly or indirectly, any action to cause or result
in, or which has constituted, or might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or the resale thereof, within the meaning of the Securities Act or the
Exchange Act.
aa. NASDAQ LISTING. The Units, the Common Stock (including the
Warrant Shares) and Warrants comprising the Units have been approved for listing
on the NASDAQ SmallCap Market.
bb. NO ADVERSE CHANGE. Except as reflected in the Registration
Statement and in the Prospectus or any amendment or supplement thereto, since
the respective dates as of which information is given in the Registration
Statement and in the Prospectus or any amendment or supplement thereto and prior
to the Closing Date, or Option Closing Date, as the case may be, the Company and
the Subsidiary have each conducted its respective business in substantially the
same manner as of November __, 1997, neither the Company nor the Subsidiary has
incurred, or will have incurred, any material liability or obligation, direct or
contingent, or entered into any material transaction, whether or not in the
ordinary course of business, nor has or will have sustained any material loss or
interference with its business from fire, storm, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; and there have not been, and
prior to the Closing Date or Option Closing Date, as the case may be, there will
not be, any changes in the capital stock or any material increases in the
long-term or short-term debt of the Company or the Subsidiary or any materially
adverse change in or affecting the general affairs, management, financial
condition, shareholders' equity, results of operations or prospects of the
Company, and no event has occurred concerning the Company or its subsidiaries
and which might result in a material adverse change or effect in or on the
general affairs, management, financial condition, shareholders' equity, results
of operations or prospects of the Company or the Subsidiary, except as disclosed
in the Registration Statement.
cc. TITLE TO PROPERTIES. Each of the Company and the Subsidiary
has good title to all property (tangible and intangible) and assets owned by it,
free and clear of all security interests, charges, mortgages, liens,
encumbrances and defects, except as are described in the Registration Statement
and in the Prospectus and except those which are not material in amount and do
not adversely affect the use made and proposed to be made of such property by
the Company or the Subsidiary. Each of the Company and the Subsidiary owns or
leases all such properties, real, personal and mixed, tangible and intangible,
as are necessary to carry on its operations as heretofore
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conducted and, except as otherwise stated in the Registration Statement and in
the Prospectus, as proposed to be conducted, as set forth in the Registration
Statement and in the Prospectus. The leases, licenses or other contracts or
instruments under which the Company or the Subsidiary leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws or arrangements
affecting creditors' rights generally and subject to principles of equity and
public policy considerations. All rentals, royalties or other payments accruing
thereunder that became due prior to the date of this Agreement have been duly
paid, and neither the Company nor, to the Company's knowledge, any other party
is in default thereunder and, to the Company's knowledge, no event has occurred
that, with the passage of time or the giving of notice, or both, would
constitute a default thereunder. Neither the Company nor the Subsidiary is in
violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties material to the conduct of its
business and has not received any notice of an alleged violation. Each of the
Company and the Subsidiary has adequately insured its properties against loss or
damage by fire or other casualty and maintains, in adequate amounts, such other
insurance as is usually maintained by companies engaged in the same or similar
businesses located in its geographical area.
dd. ENFORCEABILITY OF CONTRACTS. Each material contract or other
instrument (however characterized or described) to which the Company and/or the
Subsidiary is a party or by which its property or business is or may be bound or
affected has been duly and validly executed, is in full force and effect in all
material respects and is enforceable against the parties thereto in accordance
with its terms, and none of such contracts or instruments has been assigned by
the Company and/or the Subsidiary and, except as disclosed in the Registration
Statement and in the Prospectus, neither the Company, the Subsidiary nor, to the
Company's knowledge, any other party is in default thereunder, and no event has
occurred that, with the lapse of time or the giving of notice, or both, would
constitute a default thereunder. None of the material provisions of such
contracts or instruments violates any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court having
jurisdiction over the Company or the Subsidiary or any of their respective
assets or businesses.
ee. EMPLOYEE BENEFIT PLANS. Except as set forth in the
Registration Statement and in the Prospectus, neither the Company nor the
Subsidiary has any employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
ff. LABOR RELATIONS. No labor problem exists with any of the
Company's or the Subsidiary's employees or is imminent, which labor problem
could materially and adversely affect the Company or the Subsidiary, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or its Subsidiary's principal suppliers, contractors or
customers that could be expected to materially adversely affect the condition
(financial or otherwise), earnings, business affairs or business prospects of
the Company or the Subsidiary.
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gg. RELATED PARTY TRANSACTIONS. Except as disclosed in the
Registration Statement and in the Prospectus, no present officer or director of
the Company or the Subsidiary or any related party or affiliate of any such/
person, (i) has any material direct or indirect interest in (A) any entity which
does any material business with the Company or the Subsidiary, or (B) any
material property, asset or right which is used in the conduct of the Company's
or the Subsidiary's business, or (ii) has any material contractual relationship
with the Company or the Subsidiary other than such relationship as attaches to
being an officer or director of the Company or the Subsidiary.
hh. INTELLECTUAL PROPERTY. The Company and the Subsidiary own or
possess all patents, trademarks, trademark registrations, service marks, service
mark registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Registration Statement and in the Prospectus as
being owned by them or any of them or necessary for the conduct of their
respective businesses and, except as disclosed in the Registration Statement and
in the Prospectus, the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and the Subsidiary
with respect to the foregoing.
ii. INVESTMENT COMPANY. Neither the Company nor any of its
subsidiaries is now, or after the sale of the securities hereunder and
application of the net proceeds from such sale as described in the Registration
Statement and in the Prospectus will be, and will not be operated so as to
become, an "investment company" or a person "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
jj. BUSINESS WITH CUBA. As of the date hereof, the Company is in
compliance with all provisions of Florida Statutes, Section 517.075, relating to
issuers doing business with Cuba.
kk. ENVIRONMENTAL LAWS; HEALTH AND SAFETY. The Company and the
Subsidiary are: (i) in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) in receipt of all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company and
the Subsidiary. Neither the Company nor the Subsidiary has been named as a
"potentially responsible party" under the Comprehensive Environmental
Compensation Liability Act of 1980, as amended.
ll. DUE DILIGENCE MATERIALS. The Company has provided Akerman,
Senterfitt & Eidson, P.A., the Representatives' counsel, all agreements,
certificates, correspondence and other items, documents and information
requested by such counsel's due diligence review memorandum.
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Any certificate signed by an officer of the Company and delivered to
you or to your or the Representatives' counsel shall be deemed to be a
representation and warranty by the Company to you as to the matters covered
thereby.
7. INDEMNIFICATION.
a. BY COMPANY. The Company agrees to indemnify and hold harmless you
and each person, if any, who controls you within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, from and against any
and all losses, liabilities, claims, damages and expenses (including but not
limited to reasonable attorneys' fees and any and all reasonable expenses
incurred in investigating, preparing or defending against any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which you or they or any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, as originally filed or
any amendment thereof, or any related preliminary prospectus or the Prospectus,
or in any supplement thereto or amendment thereof, or in any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any
state or other jurisdiction in order to qualify any or all of the Securities
under the securities laws thereof (any such application, document or information
being hereinafter called a "Blue Sky Application") or arise out of or are based
upon any 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 any material respect, or arise out of or are based upon any failure of the
Company to comply with any provision of this Underwriting Agreement resulting in
a claim or loss to the Underwriters. Notwithstanding the preceding sentence, the
Company will not be liable in any such case to the extent, but only to the
extent that, any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of you expressly for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have, including under this Agreement. The Company agrees
to pay any reasonable legal or other expenses for which it is liable under this
subsection from time to time (but not more frequently than monthly) within 30
days after its receipt of a bill therefor; and further provided, however, that
the foregoing provisions are subject to the condition that, insofar as they
relate to any untrue statement, alleged untrue statement, omission or alleged
omission made in any Preliminary Prospectus but eliminated or remedied in the
Prospectus, such indemnity provision shall not inure to you or any person who
controls you within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act if a copy of the Prospectus was not sent or given to
such person with or prior to the written confirmation of sale of such Securities
to such person. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
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b. BY UNDERWRITERS. You agree to indemnify and hold harmless the
Company, each of the officers of the Company who shall have signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, from and against any and all losses, liabilities, claims, damages
and reasonable expenses whatsoever (including but not limited to attorneys' fees
and any and all reasonable expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, as originally filed or
any amendment thereof, or any related preliminary prospectus or the Prospectus,
or in any amendment thereof or supplement thereto, or in any Blue Sky
Application, or arise out of or are based upon 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 each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by you expressly for use
therein; PROVIDED, HOWEVER, that in no case shall you be liable or responsible
for any amount in excess of the underwriting discounts and commissions received
by you, as set forth on the cover page of the Prospectus. You agree to pay any
legal or other expenses for which you are liable under this subsection (b) from
time to time (but not more frequently than monthly) within 30 days after receipt
of a bill therefor. This indemnity agreement will be in addition to any
liability which you may otherwise have.
c. PROCEDURES IN CASE OF INDEMNIFICATION. Promptly after receipt by
an indemnified party under subsection (a) or (b) above of notice of the
commencement of any action or proceeding (including any governmental
investigation), such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying party shall
not relieve it from any liability which it may have under this Section 7 except
to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may have otherwise). In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all expenses. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by one of the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
the indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably
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concluded and have been so advised in a written opinion from counsel that there
may be defenses available to it or them which are different from or additional
to those available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any settlement of any claim or action effected without its written
consent; PROVIDED, HOWEVER, that such consent was not unreasonably withheld.
d. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7.a and b
hereof is for any reason held to be unavailable from the Company, or you, or is
insufficient to hold harmless a party indemnified thereunder, in lieu of
indemnifying such indemnified party, the Company, and you shall contribute to
the aggregate losses, claims, damages, liabilities and reasonable expenses of
the nature contemplated by such indemnification provisions (including any
investigation, legal and other reasonable expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting in the case of losses, claims, damages,
liabilities and reasonable expenses suffered by the Company or you any
contribution received by the Company or you from persons who may also be liable
for contribution, including persons who control the Company or you within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, officers of the Company who signed the Registration Statement and directors
of the Company) to which the Company or you may be subject, in such proportions
as is appropriate to reflect the relative benefits received by the Company and
by you from the offering of the Securities or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 7.d
hereof in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and you in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and by
you shall be deemed to be in the same proportion as (a) the total proceeds from
the offering (before deducting expenses) received by the Company bear to (b) the
total underwriting discounts and commissions received by you in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company and of you 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 or by you or any agent expressly authorized by you to
supply such information and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and you agree that it would not be just and equitable if
contribution 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. Notwithstanding the provisions of
this Section 7.d, (i) in no case shall you be liable or responsible for any
amount in excess of the underwriting discount applicable to the Securities
purchased hereunder and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any
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person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7.d, each person, if any, who controls an underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as you, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of this Section 7.d. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 7.d, notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under Section
7.d or otherwise. No party shall be liable for contribution with respect to any
action or claim settled without its consent; PROVIDED, HOWEVER, that such
consent was not unreasonably withheld. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force and effect
regardless of (A) any investigation made by or on behalf of you or any person
controlling you or by or on behalf of the Company, (B) acceptance of any of the
Securities and payment therefore or (C) any termination of this Agreement. A
successor to the Company, its directors or officers or any person controlling
the Company or to the Underwriter, shall be entitled to the benefits of the
indemnity, contribution, and reimbursement agreements contained in this Section
7.
8. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. Your obligation to
purchase and pay for the Firm Securities on the Closing Date shall be subject to
the accuracy of and compliance with the representations and the warranties of
the Company herein contained and in each certificate and document contemplated
to be delivered to you hereunder as of the date hereof and the Closing Date, to
the performance by the Company of its obligations herein contained and to the
following additional terms and conditions:
a. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective not later than 5:00 P.M., Miami time, on the date of
this Agreement, or at such later time or on such later date as you may agree to
in writing and any and all filings required by Rule 424 and Rule 430A of the
Rules and Regulations shall have been made. At or prior to the Closing, no stop
order suspending the effectiveness of the Registration Statement or the
qualification or registration of the Securities under the Blue Sky laws of any
jurisdiction (whether or not a jurisdiction which you shall have specified)
shall have been issued and no proceeding for that purpose shall have been
initiated or shall be threatened by the Commission or the authorities of any
such jurisdiction. Any request for additional information on the part of the
Commission or any such authorities shall have been complied with to the
satisfaction of the Commission or such authorities and counsel for you. The
NASD, upon review of the terms of the public offering of the Securities, shall
not have objected to such offering, such terms, or your participation in the
same. After the date hereof no amendment or supplement shall have been filed to
the Registration Statement or the Prospectus without your prior written consent.
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b. ACCURACY OF REGISTRATION STATEMENT. No person shall have
discovered and advised the Company prior to the Closing Date that the
Registration Statement or Prospectus or any amendment or supplement thereto
contains an untrue statement of material fact which, in your opinion, is
material, or that the Registration Statement or any amendment or supplement
thereto omits to state a fact which, in your opinion after consultation with
legal counsel, is material and is required to be stated therein or is necessary
to make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
c. LITIGATION. Between the time of the execution and delivery of
this Agreement and the Closing, there shall be no material litigation instituted
against the Company, any of its subsidiaries or any of their respective officers
or directors, and between such dates there shall be no proceeding instituted or
threatened against the Company, any of its subsidiaries or any of their
respective officers or directors before or by any Federal, state, county or
local commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding could materially adversely affect the Company, any
of its subsidiaries or their respective businesses, business prospects,
properties, financial conditions or results of operations.
d. REVIEW BY UNDERWRITER'S COUNSEL. The authorization and
issuance of the Securities, the sale and delivery thereof, the Registration
Statement, the Prospectus and all other documents and corporate proceedings
incident thereto shall be satisfactory in all material respects to you and your
counsel, and your counsel shall be furnished on the Closing Date with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the matters referred to in this Section 8.
e. TENDER. There shall have been tendered to the Representatives
certificates representing the Firm Securities to be sold on the Closing Date in
accordance with the terms and provisions of this Agreement.
f. STANDARD & POOR'S/MOODY'S. The Company shall have registered
with (a) the Corporation Records Service published by Standard & Poor's
Corporation or (b) Moody's Industrial Manual (excluding Moody's OTC Industrial
Manual).
g. INDEPENDENT DIRECTORS. The Company shall have serving on its
Board of Directors at least two (2) persons who satisfy the criteria for
"independent director" set forth in Rule 4460(c) of the NASD rules.
h. OPINION OF LEGAL COUNSEL. You shall have received an opinion
dated the effective date of the Registration Statement, and an updated version
of such opinion dated the Closing Date, satisfactory in form and substance to
you and your counsel, from Lucio, Mandler,
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<PAGE>
Croland, Bronstein, Garbett, Stiphany & Martinez, P.A., counsel for the Company,
in the form of Exhibit "A" hereto.
In giving such opinion, such counsel may rely as to matters of fact
upon statements and certifications of officers of the Company or public
officials as to matters of fact of which the maker of such certificate has
knowledge, and as to matters of law of jurisdictions other than Florida, such
counsel may rely on opinions of local counsel acceptable to you, copies of which
opinions shall be attached to the said opinion, provided, however, that such
counsel may not rely on an opinion if he has actual knowledge that such opinion
is not correct or knows that the facts or law on which the opinion of local
counsel is based are not correct.
i. PRESIDENT'S CERTIFICATE. The Company shall have furnished to you
on the Closing Date a certificate of its President, or other principal executive
officer of the Company dated as of the Closing Date, to the effect that:
(1) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such purpose
have been commenced or are, to the knowledge of each signer of such
certificate, threatened or contemplated by the Commission; no stop order
suspending the qualification or registration of any of the Securities under
the Blue Sky laws of any jurisdiction (whether or not a jurisdiction you
shall have specified) has been issued, and no material proceedings for such
purpose have been commenced or are, to the knowledge of each signer of such
certificate after reasonable investigation, threatened or contemplated by
any jurisdiction; and the conditions, separately set forth in such
certificate, contained in Section 8 hereof have been complied with in all
material respects.
(2) The respective signers and each other member of the Company's
Board of Directors have each read the Registration Statement and Prospectus
and any amendments and supplements thereto, and the Registration Statement
and the Prospectus and any amendments and supplements thereto and all
statements contained therein are true and correct in all material respects,
and neither the Registration Statement nor Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or
omits to state any material fact re quired to be stated therein or
necessary to make the statements therein not misleading and, since the
effective date of the Registration Statement, they are not aware of any
event required to be set forth in an amendment to the Registration
Statement or a supplement to the Prospectus which has not been so set
forth.
(3) Except as reflected in the Registration Statement and
Prospectus or any amendment or supplement thereto, since the respective
dates as of which information is given in the Registration Statement and
Prospectus or any amendment or supplement thereto and prior to the date of
such certificate, (a) there
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<PAGE>
has not been any material adverse change, financial or otherwise, in the
affairs or condition of the Company and of its subsidiaries taken as a
whole, and (b) the Company has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, otherwise than in the ordinary course of business.
(4) There are no legal proceedings pending or, to the knowledge
of the Company after reasonable investigation, threatened against the
Company or any of its subsidiaries, of a character affecting the validity
of this Agreement or required to be disclosed in the Prospectus which are
not disclosed therein; there are no material transactions or contracts
which are required to be sum marized therein which are not so summarized;
and there are no material contracts or documents required to be filed as
exhibits to the Registration Statement which are not so filed.
(5) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, no dividends or
distribution whatever have been declared and/or paid on or with respect to
any securities of the Company.
(6) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or damage to its property, whether or not
insured.
(7) At and as of the Closing Date, the representations and
warranties contained in Section 6 of this Agreement are true and correct in
all material respects; the Company has complied with all the agreements and
has satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date, and the matters set forth in Section 8 of
this Agreement have been satisfied and/or complied with, as applicable.
(8) The Company and each of its subsidiaries has such licenses,
registrations, permits, approvals, qualifications and certificates of
authority from the appropriate regulatory authorities as are necessary to
transact its business as described in the Registration Statement and in the
Prospectus in the jurisdictions in which the Company and each of its
subsidiaries transacts its business or owns or leases property, and in
which the failure to have such licenses, registrations, permits, approvals,
qualifications and certificates could have a material adverse effect on the
business, properties or results of operation of the Company and its
subsidiaries taken as a whole.
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<PAGE>
j. CHIEF FINANCIAL OFFICER'S CERTIFICATE. The Company shall have
furnished to you on the Closing Date a certificate of its Chief Financial
Officer, or other principal executive financial officer or accounting
officer of the Company, dated as of the Closing Date, to the effect that:
(1) To the knowledge of such officer after reasonable inquiry no
stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for such purpose have been commenced or
are, to the knowledge of each signer of such certificate, threatened or
contemplated by the Commission; no stop order suspending the qualification
or registration of any of the Securities under the Blue Sky laws of any
jurisdiction (whether or not a jurisdiction you shall have specified) has
been issued, and no proceedings for such purpose have been commenced or
are, to the knowledge of each signer of such certificate, threatened or
contemplated by any jurisdiction; and the conditions contained in Section 8
of this Agreement have been satisfied and/or complied with, as applicable.
(2) The Prospectus and any amendments and supplements thereto and
all statements contained therein are true and correct, and to his
knowledge, after reasonable inquiry, neither the Registration Statement nor
Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration Statement, he
is not aware of any event required to be set forth in an amendment to the
Registration Statement or a supplement to the Prospectus which has not been
so set forth.
(3) Except as reflected in the Registration Statement and
Prospectus or any amendment or supplement thereto, since the respective
dates as of which information is given in the Registration Statement and
Prospectus or any amendment or supplement thereto and prior to the date of
such certificate, (a) there has not been any material adverse change,
financial or otherwise, in the affairs or condition of the Company or any
of its subsidiaries taken as a whole, and (b) the Company has not incurred
any material liabilities or obligations, direct or contingent, or entered
into any material transactions, otherwise than in the ordinary course of
business.
(4) There are no material legal proceedings pending or to his
knowledge after reasonable inquiry, threatened against the Company or any
of its subsidiaries, of a character affecting the validity of this
Agreement or required to be disclosed in the Prospectus which are not
disclosed therein; there are no transactions or contracts which are
required to be summarized therein which are not so summarized; and there
are no material contracts or documents required to be filed as exhibits to
the Registration Statement which are not so filed.
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<PAGE>
(5) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, no dividends or
distribution whatever have been declared and/or paid on or with respect to
any securities of the Company.
(6) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or damage to its property, whether or not
insured.
(7) At and as of the Closing Date, to his knowledge after
reasonable inquiry, the representations and warranties contained in Section
6 of this Agreement are true and correct; the Company has complied with all
the agreements and has satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date, and the conditions
set forth in Section 8 of this Agreement have been satisfied and/or
complied with, as applicable.
k. ACCOUNTANT'S LETTER. You shall have received from the independent
certified public accountants that audited the financial statements of the
Company included in the Registration Statement, at least two letters each
addressed to you, substantially in the form heretofore approved by you, one
dated the effective date of the Registration Statement and the second, the
Closing Date.
l. UNDERWRITER'S PURCHASE OPTION. The Company shall have executed
the Purchase Option Agreement and shall have delivered properly executed
Underwriter's Option Certificates to you simultaneously with the closing of the
sale of the Firm Securities.
m. LOCK-UP AGREEMENTS. You shall have received the executed
"lock-up" letters described in Section 5.k of this Agreement.
n. NASDAQ LISTING. The Units, the Common Stock (including the
Warrant Shares) and Warrants were each qualified for listing on the Nasdaq
SmallCap Market on the effective date of the Registration Statement and continue
to be so qualified.
o. BLUE SKY QUALIFICATION. The Securities and Warrant Shares shall
be qualified in such states as determined under Section 5.e above and each
qualification shall be in effect and not subject to an stop order or other
proceeding on the Closing Date.
All such opinions, certificates, letters and documents delivered
pursuant to this Agreement will be in compliance with the provisions of this
Section 8 only if they are reasonably satisfactory to you and your counsel. The
Company shall furnish to you such conformed copies of such opinions,
certificates, letters and documents in such quantities as you shall reasonably
request.
If any of the conditions hereunder to be satisfied at or prior to the
Closing Date are not so satisfied, or subsequently waived, you may terminate
this Agreement without liability on your part
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<PAGE>
or on the part of the Company, except for the expenses to be paid or reimbursed
by the Company pursuant to Section 5.o of this Agreement and except for any
liability under Section 7 of this Agreement.
Your obligation to purchase and pay for all or any portion of the
Option Securities on the Option Closing Date upon the exercise of the option
contained in Section 3 hereof shall be subject to the accuracy of and compliance
with the representations and the warranties of the Company herein contained as
of the date hereof and the Closing Date and Option Closing Date, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(A) You shall have purchased the Firm Securities from the Company
(which purchase may occur simultaneously with the purchase of the Option
Securities from the Company).
(B) The conditions set forth in paragraphs a., b. and c. of this
Section 8 shall be satisfied as of the Option Closing Date.
(C) There shall have been tendered for delivery in accordance
with the terms and provisions of this Agreement the Option Securities being
purchased on the Option Closing Date from the Company.
(D) You shall have received an opinion of counsel for the
Company, dated the Option Closing Date, confirming their opinion delivered
pursuant to Section 8.h hereof as of the Option Closing Date. In each instance
in which the opinion referred to in Section 8.h refers to the Firm Securities,
the opinion delivered pursuant hereto shall also refer to the Option Securities.
(E) You shall have received from the independent certified public
accountants the audited financial statements of the Company included in the
Registration Statement, a letter addressed to you, substantially in the form
heretofore approved by you, dated the Option Closing Date.
(F) You shall have received a certificate, dated the Option
Closing Date, of the Company, confirming the matters stated in the certificate
delivered pursuant to Section 8.i hereof as of the Option Closing Date and
stating further that the Company has performed or a waiver has been given for
all or a part of the agreements herein contained to be performed on its part at
or prior to such Option Closing Date.
(G) You shall have received a certificate, dated the Option
Closing Date, of the Company, confirming the matters stated in the certificate
delivered pursuant to Section 8.j hereof as of the Option Closing Date and
stating further that the Company has performed or a waiver has been given for
all or a part of the agreements herein contained to be performed on its part at
or prior to such option Closing Date.
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<PAGE>
9. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
a. This Agreement shall become effective when you and the Company
shall have received notification of the effectiveness of the Registration
Statement.
b. This Agreement may be terminated at any time prior to the
Closing Date by you by written notice to the Company if in your judgment it is
impracticable to offer for sale or to enforce contracts made by you for the
resale of the Securities agreed to be purchased hereunder by reason of (i) the
Company or its subsidiaries having sustained a loss by reason of fire, flood,
accident or other calamity, which, in your opinion, substantially affects the
value of the properties of the Company or its subsidiaries or which materially
interferes with the operation of the business of the Company or any of its
subsidiaries regardless of whether such loss shall have been insured, (ii) the
existing financial, political or economic conditions in the United States or
elsewhere having undergone such material change as in your opinion would make it
inadvisable to proceed with the offering, sale and delivery of the Securities on
the terms contemplated by the Prospectus, (iii) a banking moratorium shall have
been declared by either federal or New York authorities, (iv) a war involving
the United States or other national calamity shall have occurred, (v) any
material adverse change in the condition or obligations of the Company and any
of its subsidiaries taken as a whole or in the earnings, operations, management
or business prospects of the Company and any of its subsidiaries taken as a
whole, (vi) any action, suit or proceeding shall be threatened or pending, at
law or in equity, against the Company and any of its subsidiaries taken as a
whole, by any Federal, state or other commission, board or agency, which is not
disclosed in the Prospectus and in which an unfavorable result or decision could
materially adversely affect the business, prospects, property, financial
condition or income or earnings of the Company and any of its subsidiaries taken
as a whole, (vii) an action, suit or proceeding that is threatened or pending,
which has been previously disclosed in the Prospectus, shall have worsened in
any way such that an unfavorable result or decision could materially adversely
affect the business, prospects, property, financial condition or income or
earnings of the Company and/or any of its subsidiaries, or (viii) during the
course of your due diligence investigation of the Company, facts arise which
vary materially in an adverse manner from representations which have been
previously made concerning the Company's business and financial condition. In
addition, this Agreement may be terminated by you by prompt written notice to
the Company (i) at any time before it becomes effective or (ii) in the event
that the Company shall have failed to comply with any of the provisions of this
Agreement to be performed by it at or prior to any Closing Date which have not
been waived by you, or if any of the representations, warranties, covenants,
agreements or conditions of, or applicable to, the Company herein contained
shall not have been complied with or satisfied within the time specified unless
waived by you.
c. At any time after the Closing Date, if you should (i) cease to
be a broker-dealer registered with the Commission, (ii) be suspended from such
registration for any period of time in excess of 30 days, (iii) cease to be a
member of the NASD or other self-regulatory organization or (iv) become subject
to a proceeding, action or notification under Section 6 of the Securities
Investor Protection Act of 1970, the obligations of the Company under this
Agreement shall cease without any liability on the part of the Company.
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<PAGE>
10. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES AND
COVENANTS. The respective indemnities of the Company and the Underwriters and
the respective representations, warranties and covenants of the Company and the
Underwriters set forth in this Agreement will remain in full force and effect,
regardless of any investigations made by or on behalf of the Company or the
Underwriters or any of their respective officers, directors, partners or any
controlling person, and will survive delivery of and payment for the Securities
or termination of this Agreement pursuant to Section 9 hereof as the case may
be.
11. MISCELLANEOUS.
a. This Agreement shall inure to the benefit of the Company and
the Underwriters, the officers and directors of such parties, each controlling
person referred to in Section 8 hereof and their respective successors. Nothing
in this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. The term
"successor" as used in this Agreement shall not include any purchaser of any
Securities from the Underwriter.
b. This Agreement constitutes the entire agreement among the
parties concerning the subject matter hereof and supersedes all prior agreements
and understandings.
c. All notices and other communications hereunder (unless
otherwise expressly provided for herein) shall be in writing and shall be deemed
given when delivered in person on the business (before 5:00 P.M.) sent by
facsimile transmission, or on the date indicated on the return receipt if sent
registered or certified mail return receipt requested) to the party to receive
the same at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Company: Galacticomm Technologies, Inc.
4101 S.W. 47th Avenue, Suite 101
Ft. Lauderdale, Florida 33314
Attn: Peter Berg, Chairman
Facsimile: (954) 587-1417
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<PAGE>
With a Copy to: Lucio, Mandler, Croland, Bronstein, Garbett,
Stiphany & Martinez, P.A.
Barnett Bank Tower
701 Brickell Avenue, 20th Floor
Miami, Florida 33131
Attn: Leslie J. Croland, Esq.
Facsimile: (305) 375-8075
If to the Underwriters: First Equity Corporation of Florida
201 South Biscayne Boulevard
1400 Miami Center
Miami, Florida 33131
Attn: William R. Fusselmann,
Senior Vice President
Facsimile: (305) 372-0861
____________________________
____________________________
____________________________
____________________________
Attn:_______________________
Facsimile: (___) ___________
With a Copy to: Akerman, Senterfitt & Eidson, P.A.
SunTrust International Center, 28th Floor
One Southeast Third Avenue
Miami, Florida 33131-1704
Attn: Philip Schwartz, Esq.
Facsimile: (305) 374-5095
d. This Agreement was executed and delivered in, and its validity,
interpretation and construction shall be governed by the internal laws of, the
State of Florida appli cable to agreements made and to be performed wholly
within such State. This Agreement may be executed in any number of counterparts.
Each counterpart, when executed and delivered, shall be an original contract,
but all counterparts, when taken together, shall constitute one and the same
Agreement.
e. The Company hereby acknowledges that the breach of material terms
contained in this Agreement (whether or not specifically designated as such)
would cause irreparable damage and substantial prejudice to your rights.
Accordingly, the Company agrees that in the event of any such breach or
threatened breach, you shall have, in addition to its and your legal remedies,
the right to injunctive or other equitable relief, as permitted by law, to
prevent the Company's violation of their obligations hereunder.
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<PAGE>
f. Titles and headings to sections herein are inserted for the
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
g. Any consent or approval of the Underwriters required hereunder to
any action of the Company shall not be unreasonably withheld, and
notwithstanding any other provisions hereof, such consent or approval shall not
be required if the Company obtains an opinion from counsel acceptable to the
Underwriters that the requirement of such consent or approval constitutes an
abrogation of the Board of Directors' duties under the corporate law of such
jurisdiction.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
you and us in accordance with its terms.
Very truly yours,
Galacticomm Technologies, Inc.
By:
---------------------------
Peter Berg, Chairman and
Chief Executive Officer
Accepted and agreed to as of
the date first above written:
First Equity Corporation of Florida
By:
--------------------------------
William R. Fusselmann,
Senior Vice President
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<PAGE>
SCHEDULE I
UNDERWRITERS
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<PAGE>
EXHIBIT A
OPINION OF
LUCIO, MANDLER, CROLAND, BRONSTEIN,
GARBETT, STIPHANY & MARTINEZ
A-1
EXHIBIT 3.1
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of
Incorporation of I-VIEW SOFTWARE, INC., a Florida corporation, filed on December
4, 1995, as shown by the records of this office.
The document number of this corporation P95000091794.
GIVEN UNDER MY HAND AND THE
GREAT SEAL OF THE STATE OF FLORIDA
TALLAHASSEE, THE CAPITAL, THIS THE
FOURTH DAY OF DECEMBER, 1995
[SEAL] /s/ SANDRA B. MORTHAM
CR2E022(1-95) ----------------------------
Sandra B. Mortham
Secretary of State
<PAGE>
I-VIEW SOFTWARE, INC.
ARTICLE I - NAME AND ADDRESS
The name, address and principal place of business of this corporation is:
I-VIEW SOFTWARE, INC.
15050 S.W. 10th Street
Sunrise, Florida 33326
ARTICLE II - PURPOSE
This corporation is organized for the purpose of transacting any or all
lawful business for which corporations may be organized under the laws of the
United States and the Florida Business Corporation Act and to engage in any
business or transaction deemed necessary, convenient or incidental to carrying
out any of such business within or without the United States.
ARTICLE III - CAPITAL STOCK
This corporation is authorized to issue 5,000,000 shares of common
stock, par value $0.001 (the "Common Stock"). The Board of Directors may
authorize the issuance of the Common Stock to such persons upon such terms and
for such consideration in cash, property or services as the Board of Directors
may determine and as may be allowed by law. The just valuation of such property
or services shall be fixed by the Board of Directors. All of the Common Stock,
when issued, shall be fully paid and exempt from assessment.
ARTICLE IV - INITIAL REGISTERED OFFICE AND AGENT
The street address of the initial registered office of this corporation is:
701 Brickell Avenue
Suite 2000
Miami, Florida 33131
and the name of the initial registered agent of this corporation at such address
is WLMC REGISTERED AGENTS, INC.
ARTICLE V - INCORPORATOR
The name and address of the initial incorporator of this corporation is:
Peter Berg
15050 S.W. 10th Street
Sunrise, Florida 33326
<PAGE>
ARTICLE VI - BOARD OF DIRECTORS
The number of directors may be either increased or decreased from time
to time as provided in the By-Laws but shall never be less than one.
ARTICLE VII - INDEMNIFICATION
SECTION 1 - RIGHT TO INDEMNIFICATION. The corporation hereby indemnifies each
person (including the heirs, executors, administrators, or estate of such
person) who is or was a director, officer, employee or agent of the corporation
to the fullest extent permitted or authorized by current or future legislation
or by current or future judicial or administrative decision (but, in the case of
any future legislation or decision, only to the extent that it permits the
corporation to provide broader indemnification rights than permitted prior to
the legislation or decision), against all fines, liabilities, costs and
expenses, including attorneys' fees, asserted against him or incurred by him in
his capacity as a director, officer, agent, employee, or representative, or
arising out of his status as a director, officer, agent, employee or
representative. The foregoing right of indemnification shall not be exclusive of
other rights to which those seeking an indemnification may be entitled. The
corporation may maintain insurance, at its expense, to protect itself and all
officers, directors, employees and agents against fines, liabilities, costs and
expenses, whether or not the corporation would have the legal power to indemnify
them directly against such liability.
SECTION 2 - ADVANCES. Costs, charges and expenses (including attorneys' fees)
incurred by a person referred to in Section 1 of this Article in defending a
civil or criminal suit, action or proceeding shall be paid by the corporation in
advance of the final disposition thereof upon receipt of an undertaking to repay
all amounts advanced if it is ultimately determined that the person is not
entitled to be indemnified by the corporation as authorized by this Article, and
upon satisfaction of other conditions required by current or future legislation
(but, with respect to future legislation, only to the extent that it provides
conditions less burdensome than those previously provided).
SECTION 3 - SAVINGS CLAUSE. If this Article or any portion of it is invalidated
on any ground by a court of competent jurisdiction, the corporation nevertheless
indemnifies each person described in Section 1 of this Article to the fullest
extent permitted by all portions of this Article that has not been invalidated
and to the fullest extent permitted by law.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation this 1st day of December, 1995.
1995.
/s/ PETER BERG
-------------------------
Peter Berg
Incorporator
2
<PAGE>
ACCEPTANCE OF REGISTERED AGENT
Having been named to accept service of process for I-VIEW SOFTWARE,
INC. at the place designated in the Articles of Incorporation, the undersigned,
on behalf of WLMC Registered Agents, Inc., hereby agrees to act in this
capacity, and agrees to comply with the provisions of Section 607.0505 Fla.
Stat. (1993).
Dated this 1st day of December, 1995.
WLMC REGISTERED AGENTS, INC.
By: /s/ LESLIE J. CROLAND
-------------------------
Leslie J. Croland
Authorized Representative
EXHIBIT 3.2
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of
Amendment, filed on November 19, 1996 to Articles of Incorporation for
I-VIEW SOFTWARE, INC., a Florida corporation, as shown by the records of
this office.
I further certify the document was electronically received under FAX audit
number H96000016192. This certificate is issued in accordance with
section 15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P95000091794.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Nineteenth day of November, 1996
Authentication Code: 896A00052637-111996-P95000091794-1/1
[SEAL] /s/ SANDRA B. MORTHAM
---------------------------
Sandra B. Mortham
Secretary of State
CR2E022(1-95)
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
I-VIEW SOFTWARE, INC.
The Articles of Incorporation of I-View Software, Inc., a Florida
corporation (the "Corporation"), are hereby amended as follows:
Article III is deleted in its entirety and substituted by the
following:
ARTICLE III - CAPITAL STOCK
This corporation is authorized to issue 20,000,000 shares of
common stock par value $.0001 (the "Common Stock"). The
Board of Directors may authorize the issuance of the
Common Stock to such persons upon such terms and for such
consideration in cash, property or services as the Board of
Directors may determine and as may be allowed by law. The
just valuation of such property or services shall be fixed by
the Board of Directors. All of the Common Stock, when
issued, shall be fully paid and exempt from assessment.
The foregoing was adopted by the written consent of the sole director
and all of the shareholders of the Corporation on November 15, 1996 pursuant to
Section 607.0821 and 607.0704, Florida Statutes.
Dated as of November 15, 1996.
/s/ PETER BERG
-------------------------
Peter Berg, Chief Executive Officer
Fax Audit No. H9600001619 2 2
Kipnis Tescher Lippman Valinsky & Kain
One Financial Plaza, Suite 2308
Ft. Lauderdale, Fl 33394
(954) 467-1964
Jay Valinsky, Esq. FLA BAR NO. 625019
EXHIBIT 3.3
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on May 1, 1997, to Articles of Incorporation for I-VIEW SOFTWARE, INC.
which changed its name to GALACTICOMM TECHNOLOGIES, INC., a Florida
corporation, as shown by the records of this office.
The document number of this corporation is P95000091794.
GIVEN UNDER MY HAND AND THE
GREAT SEAL OF THE STATE OF FLORIDA,
AT TALLAHASSEE, THE CAPITAL, THIS THE
FIRST DAY OF MAY, 1997
[SEAL] /s/ SANDRA B. MORTHAM
CR2E022(2-95) -----------------------
Sandra B. Mortham
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
I-VIEW SOFTWARE, INC.
1. The name of the Corporation is I-VIEW SOFTWARE, INC. (the
"Company").
2. Article 1 of the Company's Articles of Incorporation is hereby
amended to read as follows:
ARTICLE I - NAME AND ADDRESS
The name, address and principal place of business of this corporation is:
GALACTICOMM TECHNOLOGIES, INC.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
3. This Amendment was approved on April 28, 1997 by the holders of a
majority of the Company's issued and outstanding shares of Common Stock, which
is the only class of the Company's stock entitled to vote on the Amendment, and
the number of votes in favor of the Amendment was sufficient for approval.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment this day of 29th day of April, 1997.
/s/ YANNICK TESSIER
-----------------------
Yannick Tessier
President
EXHIBIT 3.4
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on September 9, 1997, to Articles of Incorporation for GLACTICOMM
TECHNOLOGIES, INC. a Florida corporation, as shown by the records of this
office.
The document number of this corporation is P95000091794.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Ninth Day of September, 1997
[SEAL] /s/ SANDRA B. MORTHAM
CR2E022(2-95) -----------------------
Sandra B. Mortham
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GALACTICOMM TECHNOLOGIES, INC.
Pursuant to the provisions of Section 607.1006, Florida Statutes, this
corporation adopts the following articles of amendment to its articles of
incorporation:
1. The following articles amend the articles of incorporation:
A) Article III of the Company's Articles of Incorporation is hereby deleted
in its entirety and replaced by the following:
ARTICLE III - CAPITAL STOCK
The total number of shares of capital stock which this corporation
shall have the authority to issue is 21,000,000 of which (i) 20,000,000
shares shall be Common Stock, par value $0.0001 per share (the "Common
Stock"), and (ii) 1,000,000 shares shall be Preferred Stock, par value
$0.001 per share (the "Preferred Stock").
The number of authorized shares of the class of Preferred Stock may be
increased or decreased (but not below the number of shares outstanding) by
the affirmative vote of the holders of a majority of the Common Stock,
without a vote of the holders of the Preferred Stock, pursuant to the
resolution or resolutions establishing the class of Preferred Stock or these
Articles of Incorporation, as it may be amended from time to time.
The designations, powers, preferences and rights of, and the qualifications,
limitations and restrictions upon, each class of series of stock shall be
determined in accordance with, or as set forth below.
A. COMMON STOCK
Section 1. GENERAL. Except as otherwise expressly provided herein, all
shares of Common Stock shall be identical and shall entitle the holders
thereof to the same rights and privileges.
Section 2. VOTING. Each holder of record of Common Stock shall be
entitled to one non-cumulative vote for each share of Common Stock standing
in his or her name on the books of this corporation.
<PAGE>
Section 3. DIVIDENDS. Subject to applicable law, the holders of Common
Stock shall be entitled to receive dividends out of funds legally available
therefor at such times and in such amounts as this corporation's board of
directors (the "Board of Directors") may determine in its sole discretion,
with each share of Common Stock sharing equally, share for share, in such
dividends.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding up
of this corporation, whether voluntary or involuntary (a "Liquidation
Event") after the payment or provision for payment of all debts and
liabilities of this corporation and all preferential amounts to which the
holders of Preferred Stock are entitled with respect to the distribution of
assets in liquidation, the holders of Common Stock shall be entitled to
share ratably in the remaining assets of this corporation available for
distribution.
B. PREFERRED STOCK
Subject to any limitations prescribed by law, the Board of Directors of
this corporation or any authorized committee thereof is expressly authorized
to provide for the issuance of the shares of Preferred Stock in one or more
series of such stock, and by filing a certificate pursuant to applicable law
of the State of Florida, to establish or change from time to time the number
of shares to be included in each such series, and to fix the designations,
powers, preferences and the relative, participating, optional or other
special rights of the shares of each series and any qualifications,
limitations and restrictions thereof. Any action by the Board of Directors
or any authorized committee thereof under this Article III to fix the
designations, powers, preferences and the relative, participating, optional
or other special rights of the shares of a series of Preferred Stock and any
qualifications, limitations and restrictions thereof shall require the
affirmative vote of a majority of the Directors then in office or a majority
of the members of such committee. The Board of Directors or any authorized
committee thereof shall have the right to determine or fix one or more of
the following with respect to each series of Preferred Stock to the extent
permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates of the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such
shares may
<PAGE>
be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of this corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of such fund and the manner
of its application, including the price or prices at which such shares may
be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of this
corporation and, if so convertible or exchangeable, the conversion price or
prices, or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Preferred Stock
(or series thereof) and whether such shares may be reissued as shares of the
same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications, limitations
and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
B) Article VII of the Company's Articles of Incorporation is hereby
deleted in its entirety and replaced by the following:
ARTICLE VII - INDEMNIFICATION
Section 1. LEGAL PROCEEDINGS. The corporation shall indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in
the right of, the corporation), by reason of the fact that he or she is or
was a director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and
<PAGE>
reasonably incurred by him or her in connection with such action, suit or
proceeding, including any appeal thereof, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation shall indemnify
any person who was or is a party, or is threatened to be a party, to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
or she is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys'
fees, actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit, including any appeal thereof,
if he or she acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation, except that
no indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the corporation unless,
and only to the extent that, the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such
court shall deem proper.
Section 3. EXPENSES. To the extent that a director, officer, employee
or agent of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in Section 1 or
Section 2, or in defense of any claim, issue or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
Section 4. DETERMINATION TO INDEMNIFY. Any indemnification under
Section 1 or Section 2, unless pursuant to a determination by a court, shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 1 or Section 2. Such determination
shall be made:
(a) By the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two or
more directors not at the time parties to the proceeding;
<PAGE>
(c) By independent legal counsel:
(1) Selected by the board of directors prescribed in Section 4(a)
or the committee prescribed in Section 4(b) of this Article; or
(2) If a quorum of the directors cannot be obtained for such
Section 4(a) and the committee cannot be designated under such Section 4(b),
selected by majority vote of the full board of directors (in which directors
who are parties may participate); or
(d) By the a majority vote of a quorum of stockholders, consisting of
stockholders who were not parties to such action, suit or proceeding.
Section 5. ADVANCE OF EXPENSES. Expenses, including attorneys' fees,
incurred in defending a civil or criminal action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon a preliminary determination following one of the
procedures set forth in Section 4 that the director, officer, employee or
agent met the applicable standard of conduct set forth in Section 1 or
Section 2 as authorized by the Board of Directors in the specific case and,
in either event, upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
Section 6. OTHER INDEMNIFICATION. The stockholders may make any other
or further indemnification of any of its directors, officers, employees or
agents, under any agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, to the
greatest extent permitted under these Articles or Incorporation or permitted
under Florida law, as amended from time to time.
Section 7. CONTINUATION. Indemnification as provided in this Article
shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 8. INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
any liability asserted against him or her and incurred by him or her in any
such capacity or arising out of his or her status as such, whether or not
the corporation would have the power to indemnify him or her against such
liability under the provisions of this Article.
<PAGE>
Section 9. NOTICE TO STOCKHOLDERS. If any expenses or other amounts are
paid by way of indemnification otherwise than by court order or action by
the stockholders or by an insurance carrier pursuant to insurance maintained
by the corporation, the corporation shall, not later than the time of
delivery to stockholders of written notice of the next annual meeting of
stockholders, unless such meeting is held within three months from the date
of such payment, and, in any event, within 15 months from the date of such
payment, deliver either personally or by mail to each stockholder of record
at the time entitled to vote for the election of directors a statement
specifying the persons paid, the amounts paid, and the nature and status at
the time of such payment of the litigation or threatened litigation.
C) The following Article is hereby added to the Articles of
Incorporation:
ARTICLE VIII - REVERSE STOCK SPLIT
On the effective date of this amendment to this corporation's Articles
of Incorporation (the "Effective Date"), the Common Stock will be reverse
split on a 4.061771824 for 1 basis, without any further action on the part
of the holders thereof or this corporation. No fractional shares shall be
issued. All fractional shares for one-half share or more shall be increased
to the next higher whole number of shares and all fractional shares of less
than one-half shares shall be decreased to the next lower number of shares.
2. The date of the amendment's adoption was September 8, 1997.
3. The amendment was approved by the shareholders. The number of votes cast
for the amendment were sufficient for approval.
Signed this 8th day of September, 1997.
/s/ YANNICK TESSIER
-------------------------
By: Yannick Tessier, President
EXHIBIT 3.5
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on September 30, 1997, to Articles of Incorporation for GALACTICOMM
TECHNOLOGIES, INC., a Florida corporation, as shown by the records of this
office.
The document number of this corporation is P95000091794.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
First day of October, 1997
[SEAL] /s/ SANDRA B. MORTHAM
CR2E022(2-95) -----------------------
Sandra B. Mortham
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION, AS AMENDED
OF
GALACTICOMM TECHNOLOGIES, INC.
Pursuant to the provisions of Section 607.1006, Florida Statutes and in
order to correct certain scrivener's error to Articles of Amendment to the
Articles of Incorporation previously filed on September 9, 1997, this
corporation adopts the following articles of amendment to its articles of
incorporation:
1. The following articles amend the articles of incorporation:
A) Article III of the Company's Articles of Incorporation is hereby deleted
in its entirety and replaced by the following:
ARTICLE III - CAPITAL STOCK
The total number of shares of capital stock which this corporation
shall have the authority to issue is 21,000,000 of which (i) 20,000,000
shares shall be Common Stock, par value $0.0001 per share (the "Common
Stock"), and (ii) 1,000,000 shares shall be Preferred Stock, par value
$0.001 per share (the "Preferred Stock").
The number of authorized shares of the class of Preferred Stock may
be increased or decreased (but not below the number of shares outstanding)
by the affirmative vote of the holders of a majority of the Common Stock,
without a vote of the holders of the Preferred Stock, pursuant to the
resolution or resolutions establishing the class of Preferred Stock or
these Articles of Incorporation, as it may be amended from time to time.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class of series of
stock shall be determined in accordance with, or as set forth below.
A. COMMON STOCK
Section 1. GENERAL. Except as otherwise expressly provided herein, all
shares of Common Stock shall be identical and shall entitle the holders
thereof to the same rights and privileges.
Section 2. VOTING. Each holder of record of Common Stock shall be
entitled to one non-cumulative vote for each share of Common Stock standing
in his or her name on the books of this corporation.
<PAGE>
Section 3. DIVIDENDS. Subject to applicable law, the holders of Common
Stock shall be entitled to receive dividends out of funds legally available
therefor at such times and in such amounts as this corporation's board of
directors (the "Board of Directors") may determine in its sole discretion,
with each share of Common Stock sharing equally, share for share, in such
dividends.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding up
of this corporation, whether voluntary or involuntary (a "Liquidation
Event") after the payment or provision for payment of all debts and
liabilities of this corporation and all preferential amounts to which the
holders of Preferred Stock are entitled with respect to the distribution of
assets in liquidation, the holders of Common Stock shall be entitled to
share ratably in the remaining assets of this corporation available for
distribution.
B. PREFERRED STOCK
Subject to any limitations prescribed by law, the Board of Directors of
this corporation or any authorized committee thereof is expressly
authorized to provide for the issuance of the shares of Preferred Stock in
one or more series of such stock, and by filing a certificate pursuant to
applicable law of the State of Florida, to establish or change from time to
time the number of shares to be included in each such series, and to fix
the designations, powers, preferences and the relative, participating,
optional or other special rights of the shares of each series and any
qualifications, limitations and restrictions thereof. Any action by the
Board of Directors or any authorized committee thereof under this Article
III to fix the designations, powers, preferences and the relative,
participating, optional or other special rights of the shares of a series
of Preferred Stock and any qualifications, limitations and restrictions
thereof shall require the affirmative vote of a majority of the Directors
then in office or a majority of the members of such committee. The Board of
Directors or any authorized committee thereof shall have the right to
determine or fix one or more of the following with respect to each series
of Preferred Stock to the extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates of the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
<PAGE>
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of this corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of such fund and the manner
of its application, including the price or prices at which such shares may
be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of this
corporation and, if so convertible or exchangeable, the conversion price
or prices, or the rate or rates of exchange, and the adjustments thereof,
if any, at which such conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Preferred Stock
(or series thereof) and whether such shares may be reissued as shares of
the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications, limitations
and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
B) Article VII of the Company's Articles of Incorporation is hereby
deleted in its entirety and replaced by the following:
ARTICLE VII - INDEMNIFICATION
Section 1. LEGAL PROCEEDINGS. The corporation shall indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in
the right of, the corporation), by reason of the fact that he or she is or
was a director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director officer, employee
or agent of another corporation,
<PAGE>
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding, including any appeal thereof, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation shall indemnify
any person who was or is a party, or is threatened to be a party, to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses, including
attorneys' fees, actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit, including
any appeal thereof, if he or she acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his or her
duty to the corporation unless, and only to the extent that, the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
Section 3. EXPENSES. To the extent that a director, officer, employee
or agent of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in Section 1 or
Section 2, or in defense of any claim, issue or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
Section 4. DETERMINATION TO INDEMNIFY. Any indemnification under
Section 1 or Section 2, unless pursuant to a determination by a court,
shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or Section 2. Such
determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors (in
which directors
<PAGE>
who are parties may participate) consisting solely of two or more directors
not at the time parties to the proceeding;
(c) By independent legal counsel:
(1) Selected by the board of directors prescribed in Section 4(a) or
the committee prescribed in Section 4(b) of this Article; or
(2) If a quorum of the directors cannot be obtained for such Section
4(a) and the committee cannot be designated under such Section 4(b),
selected by majority vote of the full board of directors (in which
directors who are parties may participate); or
(d) By the a majority vote of a quorum of stockholders, consisting of
stockholders who were not parties to such action, suit or proceeding.
Section 5. ADVANCE OF EXPENSES. Expenses, including attorneys' fees,
incurred in defending a civil or criminal action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon a preliminary determination following one of the
procedures set forth in Section 4 that the director, officer, employee or
agent met the applicable standard of conduct set forth in Section 1 or
Section 2 as authorized by the Board of Directors in the specific case and,
in either event, upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
Section 6. OTHER INDEMNIFICATION. The stockholders may make any other
or further indemnification of any of its directors, officers, employees or
agents, under any agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, to the
greatest extent permitted under these Articles or Incorporation or
permitted under Florida law, as amended from time to time.
Section 7. CONTINUATION. Indemnification as provided in this Article
shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 8. INSURANCE. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise
against any liability asserted against him or her and incurred by him or
her in any such capacity or arising out of his or her status as such,
<PAGE>
whether or not the corporation would have the power to indemnify him or
her against such liability under the provisions of this Article.
Section 9. NOTICE TO STOCKHOLDERS. If any expenses or other amounts
are paid by way of indemnification otherwise than by court order or action
by the stockholders or by an insurance carrier pursuant to insurance
maintained by the corporation, the corporation shall, not later than the
time of delivery to stockholders of written notice of the next annual
meeting of stockholders, unless such meeting is held within three months
from the date of such payment, and, in any event, within 15 months from
the date of such payment, deliver either personally or by mail to each
stockholder of record at the time entitled to vote for the election of
directors a statement specifying the persons paid, the amounts paid, and
the nature and status at the time of such payment of the litigation or
threatened litigation.
C) The following Article is hereby added to the Articles of
Incorporation:
ARTICLE VIII - REVERSE STOCK SPLIT
On the effective date of this amendment to this corporation's Articles
of Incorporation (the "Effective Date"), the Common Stock will be reverse
split on a 4.061771824 for 1 basis, without any further action on the part
of the holders thereof or this corporation. No fractional shares shall be
issued. All fractional shares for one-half share or more shall be increased
to the next higher whole number of shares and all fractional shares of less
than one-half shares shall be decreased to the next lower number of shares.
2. The date of the amendments' adoption was September 8, 1997.
3. The amendment to Article VIII of the Articles of Incorporation does not
adversely affect the rights or preferences of the holders of outstanding shares
of any class or series and does not, in and of itself and without giving effect
to the amendment made hereby to Article III of the Articles of Incorporation,
result in the percentage of authorized shares that remain unissued after the
division or combination exceeding the percentage of authorized shares that were
unissued before the division or combination.
4. The Amendment to Article VIII applies to 15,226,214 shares of Common
Stock issued and outstanding as of the date hereof. Immediately after giving
effect to the amendment to Article VIII, there will be 3,748,663 shares of
Common Stock issued and outstanding and, as a result of the amendment made
hereby to Article III, 20,000,000 shares of Common Stock authorized.
<PAGE>
5. The amendments were approved by the shareholders. The number of votes
cast for the amendments were sufficient for approval.
Signed this 29 day of September, 1997.
/s/ PETER BERG
-----------------------------
By: Peter Berg, Chief Executive Officer
EXHIBIT 3.6
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Merger,
filed on November 21, 1996 for I-VIEW SOFTWARE, INC., the surviving Florida
corporation, as shown by the records of this office.
I further certify the document was electronically received under FAX audit
number H96000016423. This certificate is issued in accordance with
section 15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is P95000091794.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Twenty-first day of November, 1996
Authentication Code: 996A00053006-112196-P95000091794-1/1
[SEAL] /s/ SANDRA B. MORTHAM
---------------------------
Sandra B. Mortham
Secretary of State
CR2E022(1-95)
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ARTICLES OF MERGER
OF
I-VIEW SOFTWARE, INC.,
a Florida corporation
AND
TESSIER TECHNOLOGIES, INC.,
a Florida corporation
Pursuant to the provision of the Florida Business Corporation Act, the domestic
corporations herein named do hereby adopt the following articles of merger.
1. The following, annexed hereto and made a part hereof, is the
Agreement and Plan of Merger for merging Tessier Technologies, Inc., a Florida
corporation with and into I-View Software, Inc., a Florida corporation, as
approved and adopted by written consent of the shareholders of I-View Software,
Inc. entitled to vote thereon given on November 20, 1996, in accordance with the
provisions of Section 607.0704 of the Florida Business Corporation Act, and as
approved and adopted by written consent of the shareholders of Tessier
Technologies, Inc. entitled to vote thereon given on November 20, 1996, in
accordance with the provisions of Section 607.0704 the Florida Business
Corporation Act.
2. I-View Software, Inc. will continue its existence as the surviving
corporation under its present name pursuant to the provisions of the Florida
Business Corporation Act.
Executed on November 20, 1996.
I-VIEW SOFTWARE, INC.
By: /s/ PETER BERG
---------------------------
Peter Berg,
Chief Executive Officer
TESSIER TECHNOLOGIES, INC.
By: /s/ YANNICK TESSIER
---------------------------
Yannick Tessier, President
EXHIBIT 3.7
BYLAWS OF
I-VIEW SOFTWARE, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be at 15050 S.W. 10th
Street, Sunrise, Florida 33326, or at such other place as the Board of Directors
may from time to time direct.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the stockholders of the
corporation for the election of Directors and for the transaction of such other
business as may properly come before such meeting shall be held on a day and at
a time and place designated from time to time by the Board of Directors,
provided, however, that there shall be an annual meeting every calendar year.
Section 2. Special Meetings. A special meeting of the stockholders may be
called at any time by the President or the Board of Directors, and shall be
called by the President upon the written request of stockholders of record
holding in the aggregate ten percent (10%) of the outstanding shares of the
capital stock of the corporation entitled to vote, such written request to state
the purpose or purposes of the meeting and to be delivered to the President.
Section 3. Place of Meetings. The meetings of the stockholders of the
corporation shall be held in the State of Florida, or any place in the world, as
from time to time may be designated by the Board of Directors.
Section 4. Notice of Meetings and Record Date. Except as otherwise
required by statute, notice of each meeting of the stockholders, whether annual
or special, shall be in writing over the name of the President or the Secretary.
Such notice shall state the purpose or purposes for which the meeting is called
and the time and place where it is to be held, and a copy thereof shall be
served, either personally or by mail, upon each stockholder of record entitled
to vote at such meeting not less than ten (10) or more than sixty (60) days
before such meeting. If mailed, it shall be directed to a stockholder at his or
her address as it appears on the stock books of the corporation unless he or she
shall have filed with the Secretary of the corporation a written request that
notices intended for him or her be mailed to some other address, in which case
it shall be mailed to the address designated in such request. If any stockholder
in person or by attorney thereunto authorized shall waive in writing notice of
any meeting, notice thereof need not be given to him or her.
Section 5. Quorum. At all meetings of the stockholders the presence in
person or by proxy of the holders of record of a majority of the shares then
issued and outstanding
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and entitled to vote shall be necessary and sufficient to constitute a quorum
for the transaction of business. In the absence of a quorum, a majority in
interest of the stockholders entitled to vote, present in person or by proxy,
or, if no stockholder entitled to vote is present in person or by proxy, any
officer entitled to preside at or act as secretary of such meeting, may adjourn
the meeting from time to time.
Section 6. Notice of Adjourned Meeting. Notice need not be given of any
adjourned meeting of stockholders if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. Any
business may be transacted at the adjourned meeting that might have been
transacted on the original date of the meeting. If, however, after the
adjournment, the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given as provided in Section
4 of this Article II to each stockholder of record on the new record date
entitled to vote at such meeting.
Section 7. Inspectors of Election. The Board of Directors shall appoint at
each annual meeting two persons, who need not be stockholders, to act as
Inspectors of Election at all meetings of the stockholders until the close of
the next annual meeting. No candidate for the office of director shall act as
Inspector of Election. If there be a failure to appoint Inspectors, or if any
inspector appointed be absent or refuse to act, or if his or her office becomes
vacant, the Board of Directors present at the meeting may choose temporary
Inspectors of the number required. The Inspectors appointed to act at any
meeting of the Board, before entering upon the discharge of their duties, shall
be sworn faithfully to execute the duties of Inspectors at such meeting with
strict impartiality, and according to the best of their ability.
Section 8. Voting. Each outstanding share entitled to vote shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. In case the transfer books have not been closed, and no date has
been fixed as a record date for the determination of the stockholders entitled
to vote, no share of stock shall be voted on at any election of directors which
has been transferred on the books of the corporation within twenty days next
preceding such election of directors. Any stockholder entitled to vote may vote
by proxy, provided that the instrument authorizing such proxy to act shall have
been executed in writing (which shall include telegraphing or cabling) by the
stockholder himself or herself or by his or her duly authorized attorney and
filed with the Secretary of the corporation. The President, a Vice President and
the Secretary of the corporation shall constitute a Credentials committee and
shall pass upon the validity of all proxies submitted for use at any meeting. No
proxy shall be valid after 11 months from the date of the proxy unless otherwise
provided in the proxy. The decision of the Credentials Committee upon the
validity of the proxies shall be conclusive. At all meetings of the
stockholders, except as otherwise required by statute, the Article of
Incorporation or these Bylaws, all matters shall be decided by the vote of a
majority in interest of the stockholders entitled to vote present in person or
by proxy. Election for directors need not be by ballot.
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Section 9. List of Stockholders. The directors shall cause the Secretary,
or other officer designated by them who has charge of the transfer books and the
stock books, to make at least ten days before every election a full, true and
complete list, in alphabetical order, of all the stockholders entitled to vote
at the ensuing election, and the post office address and the number of shares
held by each. The Board of Directors shall produce such books and list at the
time and place of election, to remain there during the election.
Section 10. Waiver of Irregularities. All informalities and irregularities
in calls, notices of meeting and in the manner of voting, form of proxy,
credentials, and methods of ascertaining those present, shall be deemed waived
if no objection is made thereto at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers and Qualifications. The property, affairs and
business of the corporation shall be managed under the direction of the Board of
Directors. The Board of Directors may exercise all of the powers of the
corporation, except such as are by law or by the Articles of Incorporation or by
these Bylaws expressly conferred upon or reserved to the stockholders.
Section 2. Number, Election and Term of Office. The number of directors
shall be at least one, which number may be increased or decreased from time to
time by resolution of the Board of Directors, but shall not be less than one nor
more than ten (10). Subject to the provisions of the Articles of Incorporation
and Section 6 of this Article III, the directors shall be elected annually by
the stockholders entitled to vote at the annual meeting of stockholders, by a
plurality of the votes at such election. Each director (whether elected at an
annual meeting or to fill a vacancy or otherwise) shall continue in office until
the annual meeting of stockholders held next after his or her election and until
his or her successor shall have been elected and qualified or until his or her
death, resignation or removal in the manner hereinafter provided.
Section 3. Meetings. A meeting of the Board of Directors shall be held for
organization, for the election of officers and for the transaction of each such
other business as properly may come before the meeting, within thirty days after
each annual election of directors upon the notice hereinafter provided for a
special meeting. The directors, however, may hold such meeting, without notice,
at the place where the annual meeting of stockholders is held, immediately
following such meeting.
The Board of Directors by resolution may provide for the holding of
regular meetings, with or without notice, and may fix the times and places at
which such meetings shall be held.
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Special meetings of the Board of Directors may be called by the President,
any Vice President or by a majority of the members of the Board of Directors.
Notice of each special meeting shall be mailed to each director, addressed to hi
m or her at his or her address as it appears upon the records of the
corporation, at least one day before the day on which the meeting is to be held,
or shall be sent to him or her at such place by telegraph, radio or cable, or
telephoned or delivered to him or her personally, not later than the day before
the day on which the meeting is to be held. Such notice shall state the time and
place (which may be within or outside the State of Florida) of such meeting, but
unless otherwise required by statute, the Articles of Incorporation or these
Bylaws, need not state the purposes thereof. Notice of any meeting need not be
given to any director, however, if waived by him or her, before or after such
meeting, in writing or by telegraph, radio or cable. No notice need be given of
any meeting at which every member of the Board of Directors shall be present.
Members of the Board of Directors may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 4. Quorum. The presence, at any meeting, of a majority of the
total number of directors constituting the entire Board of Directors shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and except as otherwise required by statute, the Articles of Incorporation or
these Bylaws, the act of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum, a majority of the directors present at the time and place
of any meeting may adjourn such meeting from time to time until a quorum is
present. Notice of any adjourned meeting need not be given.
Section 5. Resignation and Removal. Any director may resign at any time by
giving written notice of such resignation to either the Board of Directors, the
President, a Vice President, the Secretary or an Assistant Secretary of the
corporation. Unless otherwise specified therein, such resignation shall take
effect upon receipt thereof by the Board of Directors or by any such officer.
Section 6. Vacancies. If any vacancy shall occur among the directors by
reason of death, resignation, disqualification, removal or otherwise, such
vacancy may be filled by a majority vote of the remaining directors, though less
than a quorum. Any such vacancy may also be filled by a majority of the
stockholders present and entitled to vote at any meeting held during the
existence of such vacancy, provided that the filling of such vacancy is included
in the corporation's proxy material for the meeting. If a vacancy shall occur by
an increase in the number of directors, the additional directors authorized by
such increase shall be elected by the vote of a majority of the directors in
office at the time of such increase.
Section 7. Compensation. Directors may be compensated for services as
directors and as members of Committees of the Board of Directors. Nothing herein
contained
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shall prevent any director from serving the corporation in any other capacity
and receiving compensation therefor.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section 1. Powers. Except as otherwise provided by statute or these
Bylaws, all of the powers of the Board of Directors may be vested, to the extent
from time to time determined by the Board of Directors, in an Executive
Committee and any other Committee established for specific purposes, the members
of which shall be appointed in accordance with Section 2 of this Article.
Section 2. Appointment, Qualification and Term of Office. The Board of
Directors, by the affirmative vote of a majority of the whole Board, may appoint
from among its members an Executive Committee consisting of the President and
two or more additional members, and a Budget Committee, consisting of the
President and one or more additional members, and any other Committee with
membership determined by the Board of Directors. The Board of Directors may
designate as Chairman of the Executive Committee, the Budget Committee and other
Committees one of the members so appointed. Each member of each Committee shall
continue in office until the first meeting of the Board of Directors held after
the annual meeting of stockholders next following his or her election and until
his or her successor is appointed and qualifies or until his or her death,
resignation or removal in the manner hereinafter provided, or until he shall
cease to be a director. The Chairman of each Committee shall preside at all
meetings of the Committee at which he or she shall be present.
Section 3. Meetings. Each Committee, by resolution, may provide for the
holding of regular meetings, with or without notice, and may fix the time and
place (within or outside the State of Florida) at which such meetings shall be
held. Special meetings of each Committee may be called from time to time by any
member of the Committee. Notice of each special meeting shall be mailed to each
member of the Committee addressed to him or her at his or her address as it
appears upon the records of the corporation, at least two days before the day on
which the meeting is to be held, or shall be sent to him or her at such place by
telegraph, radio or cable, or telephoned or delivered to him or her personally,
not later than the day before the day on which such meeting is to be held. Such
notice shall state the time and place (which may be within or outside the State
of Florida) but, unless otherwise required by statute, the Articles of
Incorporation or these Bylaws, need not state the purpose of such meeting.
Notice of any meeting need not be given to any member of a Committee, however,
if waived by him or her, before or after such meeting, in writing or by
telegraph, radio or cable. Any meeting of a Committee shall be a legal meeting
without any notice or waiver of notice thereof having been given if all the
members of the Committee shall be present thereat.
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Section 4. Resignations and Removal. Any member of a Committee may resign
at any time by giving written notice of such resignation to either the Board of
Directors, the President, a Vice President, the Secretary or an Assistant
Secretary of the corporation. Unless otherwise specified therein, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by any such officer.
Any member of a Committee may be removed either with or without cause at
any time by the affirmative vote of a majority of the directors then in office,
given at a meeting of the Board of Directors called for the purpose.
Section 5. Vacancies. If the office of any member of a Committee becomes
vacant by reason of death, removal or otherwise, the Board of Directors may
appoint one of the directors as a member of the Committee to fill such vacancy.
Section 6. Quorum. The presence, at any meeting of a Committee, of a
majority of the members then in office shall constitute a quorum for the
transaction of business. A majority of such quorum may decide any questions that
may come before such meeting.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the corporation shall be a Chief
Executive Officer, President, one or more Vice Presidents (one or more of whom
may be designated as an Executive or a Senior Vice President), a Secretary, a
Treasurer, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article V.
Section 2. Election, Term of Office and Qualifications. Each officer
specifically designated in Section 1 of this Article V shall be chosen by the
Board of Directors and shall hold his or her office until his or her successor
shall have been duly chosen and qualified or until his or her death or until he
or she shall resign or shall have been removed in the manner provided in Section
4 of this Article V.
Section 3. Subordinate Officers. The Board of Directors from time to time
may appoint other officers or agents, including one or more Assistant Treasurers
and one or more Assistant Secretaries, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in these
Bylaws or as the Board of Directors from time to time may determine. The Board
of Directors may delegate to any officer or committee the power to appoint any
such subordinate officers or agents and to prescribe their respective
authorities and duties.
Section 4. Removal. Any officer may be removed either with or without
cause by a majority of the total number of directors constituting the entire
Board of Directors.
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Section 5. Resignations. Any officer may resign at any time by giving
written notice of such resignation to the Board of Directors or to the
President, a Vice President, the Secretary or an Assistant Secretary. Unless
otherwise specified therein, such resignation shall take effect upon receipt
thereof by the Board of Directors or by the President, a Vice President, the
Secretary or an Assistant Secretary.
Section 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed by these Bylaws for
the regular election or appointment to such office.
Section 7. The Chairman of the Board of Directors. The Board of Directors
may elect one of the members of the Board of Directors as Chairman of the Board
of Directors. The Chairman of the Board of Directors, if appointed, shall
preside at all meetings of the Board of Directors and shall do and perform such
other duties and may exercise such other powers as from time to time may be
assigned to him or her by the Board of Directors.
Section 8. Vice Chairman of the Board of Directors. The Board of Directors
may elect one of the members of the Board of Directors as Vice Chairman of the
Board of Directors. The Vice Chairman of the Board of Directors. if appointed,
shall, in the absence or disability of the Chairman of the Board of Directors,
do and perform all of the duties of the Chairman of the Board of Directors, and
when so acting, shall have all of the powers of the Chairman of the Board of
Directors, and shall do and perform such other duties and may exercise such
other powers as from time to time may be assigned to him or her by the Chairman
of the Board of Directors.
Section 9. The Chief Executive Officer. The Board of Directors shall elect
a person as the Chief Executive Officer of the corporation. The Chief Executive
Officer of the corporation, subject to the control of the Board of Directors,
shall have general charge of the business, affairs and property of the
corporation as well as control over its several officers.
Section 10. The President. The Board of Directors shall elect a person as
the President of the corporation. The President shall preside at all meetings of
the stockholders if the Chairman of the Board is unable to do so. The President
shall also do and perform such other duties and may exercise such other powers
as from time to time may be assigned to him or her by the Chief Executive
Officer of the corporation.
Section 11. The Vice Presidents. At the request of the President or in his
or her absence or disability, the Vice President, or in the case there shall be
more than one Vice President, the Vice President designated by the President (or
in the absence of such designation, the Vice President designated by the Board
of Directors or by the Executive Committee) shall perform all the duties of the
President, and when so acting, shall have
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all the powers of, and be subject to all the restrictions upon, the President.
Any Vice President shall perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her by these Bylaws or by
the Board of Directors or the President.
Section 12. The Secretary. The Secretary shall:
(a) be sworn to the faithful discharge of his or her duty;
(b) keep the minutes of and record all the votes of the meetings of the
stockholders, the Board of Directors and Executive Committee, in books to be
kept for that purpose;
(c) make or cause to be made, at least ten days before each meeting of the
stockholders, a full, true and complete list, in alphabetical order, of all the
stockholders entitled to vote at such meeting, and the post office address and
the number of shares held by each;
(d) see that all notices are duly given in accordance with the provisions
of these Bylaws or as required by statute;
(e) be custodian of the records of the corporation, the Board of Directors
and the Executive Committee, and of the seal of the corporation, and see that
the seal is affixed to all documents the execution of which, on behalf of the
corporation under its seal, shall have been duly authorized;
(f) see that all lists, books, reports, statements, certificates and the
other documents and records required by law to be kept or filed are properly
kept or filed; and
(g) in general, perform all duties and have all powers incident to the
office of Secretary and perform such other duties and have such other powers as
from time to time may be assigned to him or her by these Bylaws or by the Board
of Directors.
Section 13. The Treasurer. Subject to the order of the Board of Directors
and to any arrangements which may be made for an outside custodian of the
corporation's portfolio and similar securities, the Treasurer shall:
(a) have supervision over the funds, securities, receipts and
disbursements of the corporation;
(b) cause all monies and other valuable effects to be deposited in the
name and to the credit of the corporation, in such banks or trust companies or
with such bankers or other depositories as shall be selected by the Board of
Directors or pursuant to authority conferred by the Board of Directors;
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(c) cause the funds of the corporation to be disbursed by checks or drafts
upon the authorized depositaries of the corporation;
(d) cause to be taken and preserved proper vouchers for all monies
disbursed;
(e) cause to be kept at the principal office of the corporation correct
books of account of all its business and transactions;
(f) render to the President, the Board of Directors or the Executive
Committee, whenever requested, an account of the financial condition of the
corporation and of his or her transactions as Treasurer;
(g) be empowered, from time to time, to require from the officers or
agents of the corporation reports or statements giving such information as he or
she may desire with respect to any and all financial transactions of the
corporation; and
(h) in general, perform all duties and have all powers incident to the
office of Treasurer and perform such other duties and have such other powers as
from time to time may be assigned to him or her by these Bylaws or by the Board
of Directors.
The Treasurer may be required to give the corporation a bond in such sum,
with such surety or sureties, as shall be satisfactory to the Board of
Directors, for the faithful discharge of his or her duty.
Section 14. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries and Assistant Treasurers shall have such duties as from time to time
may be assigned to them by the Board of Directors or by the President.
Section 15. Salaries. The salaries or other compensation of the officers
shall be fixed from time to time by the Board of Directors, and no officer shall
be prevented from receiving such salary or other compensation by reason of the
fact that he or she is also a director of the corporation.
ARTICLE VI
EXECUTION OF INSTRUMENTS
All documents, instruments or writings of any nature shall be signed,
executed, verified, acknowledged and delivered by such officers, agents or
employees of the corporation as may be determined from time to time by the Board
of Directors.
ARTICLE VII
CAPITAL STOCK
Section 1. Certificates of Stock. Every stockholder shall have a
certificate, signed by the President or a Vice President, and either the
Treasurer or an Assistant Treasurer,
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or the Secretary or an Assistant Secretary, certifying the number of shares
owned by him or her in the corporation. When the certificate is signed by a
transfer agent or an assistant transfer agent or by a transfer clerk on behalf
of the corporation and a registrar, the signatures of the President, Vice
President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may
be facsimiles. Certificates for shares of the stock of the corporation shall be
in such form as shall be approved by the Board of Directors, and the seal of the
corporation shall be affixed thereto. There shall be entered upon the stock
books of the corporation the number of each certificate issue, the name of the
person owning the shares represented hereby, the number of shares and the date
thereof.
Section 2. Lost or Destroyed Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the corporation, alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to have been lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate, or his or her legal representatives, to advertise the same in such
manner as it shall require or to give the corporation a bond sufficient to
indemnify the corporation on account of the alleged loss of any such certificate
or the issuance of such new certificate.
Section 3. Rights and Liabilities of Stockholders of Record. The
corporation shall be entitled to treat the holder of record of any share or
shares of stock as the owner thereof and shall not be bound to recognize any
legal, equitable or other claims to or interest in such share or shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise expressly provided by the laws of the State of
Florida.
Section 4. Regulations. The Board of Directors may make such rules and
regulations as it may deem expedient concerning the issuance and transfer of
certificates for shares of the stock of the corporation, including the issuance
of new certificates to replace lost or destroyed certificates, and may appoint
transfer agents or registrars or both of any class of stock of the corporation.
Section 5. Closing of Transfer Books and Taking of Record. The Board of
Directors may close the stock transfer books of the corporation for a period not
exceeding 60 days preceding the date of any meeting of stockholders or the date
for payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall into
effect. In lieu of so closing the stock transfer books, the Board of Directors
may fix, in advance, a date, not exceeding 60 days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such
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meeting, or entitled to receive payment of any such dividend, or any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock. In such case only stockholders of
record on the date so fixed shall be entitled to such notice of, and to vote at,
such meeting, or to receive payment of such dividend, or allotment of rights or
exercise of such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
ARTICLE VIII
CORPORATE SEAL
The corporate seal shall be in the form of a circle and shall bear the
name of the corporation and year of its incorporation and shall indicate its
formation under the laws of the State of Florida; provided, that the form of
such seal shall be subject to alteration from time to time by the Board of
Directors.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall end on December 31 in each year
or on such other date as may be determined by the Board of Directors.
ARTICLE X
CONTROL-SHARE ACQUISITIONS
Section 607.0902 of the Florida General Corporation Act shall not apply to
control-share acquisitions of securities of the corporation.
ARTICLE XI
AMENDMENTS
These Bylaws have been adopted by the Board of Directors and may be
repealed, altered or amended by a majority of the Board of Directors to the full
extent permitted by law and may also be repealed, altered or amended by the
affirmative vote of the holders of more than fifty percent (50%) of the
outstanding voting stock of the corporation present in person or by proxy at any
meeting of the stockholders called for that purpose.
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EXHIBIT 3.8
AMENDMENT TO THE BY-LAWS
OF
I-VIEW SOFTWARE, INC.
The By-laws of I-View Software, Inc., a Florida corporation (the
"Corporation"), are hereby amended as follows:
Article XII is added as follows:
ARTICLE XII
AFFILIATED TRANSACTIONS
Section 607.0901 of the Florida General Corporation Act shall
not apply to affiliated transactions of the Corporation.
Dated as of November 19, 1996.
EXHIBIT 4.2
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of ___________, 199__ between Galacticomm
Technologies, Inc., a Florida corporation, having its principal place of
business at 4101 S.W. 47th Ave., Suite 101, Ft. Lauderdale, FL 33314, (the
"Company") and Continental Stock Transfer & Trust Company, a New York
corporation, having its principal place of business at 2 Broadway, New York, New
York 10004 (the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue and sell to the public in an
initial public offering (the "IPO") ______________________ Units, each Unit
consisting of one (1) share of the Company's Common Stock, par value $.0001 per
share ("Shares"), and one (1) Redeemable Common Stock Purchase Warrant (the
"Public Warrants") (plus an additional _____________ Units to cover
overallotments);
WHEREAS, the Company also proposes to issue and sell to First Equity
Corporation of Florida (the "Underwriter") in the IPO an option to purchase
___________________ Units (the Warrants underlying such Units, the "Underwriter
Warrants" and together with the Public Warrants sometimes hereinafter referred
to as the "Warrants");
WHEREAS, the Warrants shall be evidenced by certificates substantially in
the form of Exhibit A annexed hereto (the "Warrant Certificate"), with two (2)
Warrants entitling the holder thereof to purchase one (1) share of Common Stock;
WHEREAS, the Warrants will have an exercise price on the basis of $_____
[120% of the offering price of the Units] per share of Common Stock, subject to
certain adjustments (the "Warrant Price"), will be exercisable commencing 90
days after the effective date of the IPO, or such earlier date as may be
determined by the Company and the Representatives (as such term is defined in
the Underwriting Agreement in connection with the IPO) ("First Exercise Date"),
until a date which is the third anniversary of the effective date of the IPO
("Last Exercise Date"), unless extended by the Company, and, except for the
Underwriter's Warrants, will be exercisable during any period of time fixed for
that Warrant's redemption in a Redemption Notice (hereinafter defined in
Section 2.03), which period of time will terminate on a stated Redemption
Date (hereinafter defined in Section 2.03);
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, registration, transfer, exchange and replacement of the Warrant
Certificates and exercise of the Warrants; and
WHEREAS, the Company and the Warrant Agent desire to set forth in this
Agreement the terms and conditions upon which the Warrant Certificates shall be
issued, transferred, exchanged and placed and the Warrants exercised, and to
provide for the rights of the holders of the Warrants;
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NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and the respective undertakings herein below set forth, the
Company and the Warrant Agent agree as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
SECTION 1.01 The Company hereby appoints the Warrant Agent to act on
behalf of the Company in accordance with the terms and conditions herein set
forth, and the Warrant Agent hereby accepts such appointment and agrees to
perform the same in accordance with such provisions.
SECTION 1.02 The Warrant Certificates for the Warrants shall be issued in
registered form only. The text of the Warrant Certificate, including the form of
assignment and subscription printed on the reverse side thereof, shall be
substantially in the form of Exhibit A annexed hereto, which text is hereby
incorporated in this Agreement by reference as though fully set forth herein and
to whose terms and conditions the Company and the Warrant Agent hereby agree.
Each Warrant Certificate shall evidence the right, subject to the provisions of
this Agreement and of such Warrant Certificate, to purchase the number of
validly issued, fully paid and non-assessable shares of Common Stock, as that
term is defined in Section 1.05 of this Agreement, stated therein, free of
preemptive rights, subject to adjustment as provided in Article III of
this Agreement.
SECTION 1.03 Upon the written order of the Company, signed by the
President, the Chief Executive Officer or any Vice President, and the Secretary,
Treasurer, Assistant Secretary or Assistant Treasurer of the Company, the
Warrant Agent shall issue and register Warrants in the names and denominations
specified in that order, and will countersign and deliver Warrant Certificates
evidencing the same in accordance with that order. Each Warrant Certificate
shall be dated the date of its countersignature. Each Warrant Certificate shall
be executed on behalf of the Company by the manual or facsimile signature of the
President or any Vice President of the Company, under its corporate seal,
affixed or facsimile, attested by the manual or facsimile signature of the
Secretary of the Company and shall be countersigned manually by the Warrant
Agent. The Warrant Certificates shall not be valid for any purpose unless so
countersigned. In case any officer whose facsimile signature has been placed
upon any Warrant Certificate shall have ceased to be such before such Warrant
Certificate is issued, it may be issued with the same effect as if such officer
had not ceased to be such on the date of issuance.
SECTION 1.04 Except as otherwise expressly stated herein, all terms used
in the Warrant Certificate have the meanings provided in this Agreement.
SECTION 1.05 As used herein, the term "Common Stock" shall mean the
aggregate number of shares of common stock that the Company, by its Articles of
Incorporation, as from time to time amended, is authorized to issue, which are
not limited by its Articles of Incorporation to a fixed sum or percentage of the
book value in respect of the rights of the holders thereof to participate
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in dividends or in distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding up the Company.
SECTION 1.06 The Warrant Agent understands and agrees that the Shares and
the Public Warrants are being issued in the IPO as a Unit and will be detachable
and separately transferable on the First Exercise Date.
ARTICLE II
WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS, CALL OF
WARRANTS AND TRADING OF WARRANTS
SECTION 2.01
(a) Two (2) Warrants shall entitle the person in whose name at the
time the Warrant shall be registered upon the books to be maintained by the
Warrant Agent for that purpose (the "Warrant Holder"), subject to the provisions
of the Warrant Certificates and of this Agreement, to purchase from the Company
any time on or after the First Exercise Date but at or before the Last Exercise
Date, one (1) share of Common Stock, as adjusted, at the Warrant Price in effect
at such date, payable in full at the time of purchase in the manner provided in
Section 2.02 of this Agreement.
(b) Each Warrant shall be exercisable in accordance with the terms
herein and in the Warrant Certificate which, among other things, contains
certain terms as to the Warrant Price.
SECTION 2.02
(a) The Warrant Holder may exercise Warrants in denominations of two
or whole number multiples thereof, by surrender of the Warrant Certificate, with
the form of subscription thereon duly executed by the Warrant Agent at its
corporate office, together with the Warrant Price for each share of Common Stock
to be purchased in lawful money of the United States, or by certified check,
bank draft, or postal or express money order payable in United States Dollars to
the order of the Company. If Warrants in denominations other than two or whole
number multiples thereof shall be exercised at one time by the same Warrant
Holder, the number of full shares of Common Stock which shall be issuable upon
exercise thereof, shall be computed on the basis of the aggregate number of full
shares of Common Stock issuable upon such exercise.
(b) Upon receipt of a Warrant Certificate with the form of election
to purchase thereon duly executed and accompanied by payment of the aggregate
Warrant Price for the shares of Common Stock for which Warrants are then being
exercised, the Warrant Agent shall requisition from the transfer agent
certificates for the total number of the shares of Common Stock for which the
Warrants are being exercised in such names and denominations as are required for
delivery to the Warrant Holder, and the Warrant Agent shall thereupon deliver
such certificates to or in
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accordance with the instructions of the Warrant Holder. The Company covenants
and agrees that it has duly authorized and directed its transfer agent (and will
authorize and direct all its future transfer agents) to comply with all such
requests of the Warrant Agent.
(c) In case any Warrant Holder shall exercise this Warrant with
respect to less than all of the shares of Common Stock that may be purchased
under the Warrant, a new Warrant Certificate for the balance shall be
countersigned and delivered to or upon the order of the Warrant Holder.
(d) The Company covenants and agrees that it will pay when due and
payable any and all taxes which may be payable in respect to the issuance of
Warrants, or the issuance of any shares of Common Stock upon the exercise of
Warrants. However, neither the Company nor the Warrant Agent shall be required
to issue or deliver any Warrant Certificate or shares of Common Stock in a name
other than that of the Warrant Holder at the time of surrender if any tax is
payable in respect of such transfer until the person requesting the same has
paid to the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid or shall not be due and payable. In the
event that any transfer tax is due and payable, the Warrant Agent shall be under
no obligation to issue or deliver any Warrant Certificate or shares of Common
Stock in a name other than that of the Warrant Holder until the Company has
notified the Warrant Agent that the transfer tax, if any, has been paid, or in
the alternative, that no transfer tax is due and payable by reason of an
exemption.
(e) The Warrant Agent shall account promptly to the Company with
respect to two or more Warrants exercised and concurrently account to the
Company for all moneys received by the Warrant Agent for the purchase of shares
of Common Stock upon the exercise of Warrants.
(f) The Warrant Agent covenants and agrees that upon the exercise of
any of the Warrants, the Warrant Agent shall provide written notice to the
Company and to the Underwriter at the addresses set forth in Section 6.09
hereof, the expense of which notice shall be borne by the Company. Each notice
shall contain the name of the exercising Warrant Holder, the number of shares of
Common Stock that the Warrant Holder has elected to purchase, the purchase price
paid on a per share basis and the cumulative number of Warrants exercised by all
of the Warrant Holders as of the date of the transaction which is the subject of
the aforesaid notice. Such notice shall be made no later than two (2) business
days following the date of the exercise of the Warrant. Nothing contained herein
shall be construed so as to prevent the Warrant Agent from providing the
information required in this Section 2.02 (f) in a consolidated or tabular form,
provided that all other provisions of this Section are complied with.
(g) The Warrant Agent covenants and agrees that it shall provide a
list of each and every holder of the Warrants to the Company and the Underwriter
at such time or from time to time as shall be required by the Company or the
Underwriter, but in no event shall such a list be provided less frequently than
once per annum at a date as shall be determined by the Company.
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SECTION 2.03
(a) Commencing thirty (30) days after the First Exercise Date, the
Company may, subject to the conditions set forth herein, redeem all, but not
less than all, the Warrants then outstanding upon not less than thirty (30) days
prior written notice (the "Redemption Notice") to the holders thereof provided
that the average closing price of the Common Stock for the 20 consecutive
trading days ending three (3) trading days prior to the date of the Redemption
Notice is at least 150% (currently, $________) of the then effective exercise
price of the Warrants, subject to adjustment for stock dividends, stock splits
and other anti-dilution provisions as provided for under Article III herein. For
purposes of this Section 2.03, "closing price" at any date shall be deemed to
be: (i) the last sale price regular way as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or (ii) if the Common Stock is not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices regular way
for the Common Stock as reported by the Nasdaq National Market or Nasdaq Small
Cap Market of the Nasdaq Stock Market, Inc. ("NASDAQ") or (iii) if the Common
Stock is not listed or admitted for trading on any national securities exchange,
and is not reported by NASDAQ, the average of the closing bid and asked prices
in the over-the-counter market as furnished by the National Quotation Bureau,
Inc. or if no such quotation is available, the fair market value of the Common
Stock as determined in good faith by the Board of Directors of the Company. The
Redemption Notice shall be deemed effective upon mailing and the time of mailing
is the "Effective Date of the Notice". The Redemption Notice shall state a
redemption date not less than thirty (30) days from the Effective Date of the
Notice (the "Redemption Date") . No Redemption Notice shall be mailed unless all
funds necessary to pay for redemption of all Warrants then outstanding shall
have first been set aside by the Company in trust with the Warrant Agent for the
benefit of all Warrant Holders so as to be and continue to be available
therefor. The redemption price to be paid to the Warrant Holders will be $.05
(or fraction thereof) for each share (or fraction thereof) of the Common Stock
of the Company to which the Warrant Holder would then be entitled upon exercise
of the Warrant(s) being redeemed, as adjusted from time to time as provided
herein (the "Redemption Price"). In the event the number of shares of Common
Stock issuable upon exercise of the Warrant being redeemed are adjusted pursuant
to Article III hereof, then upon each such adjustment the Redemption Price will
be adjusted by multiplying the Redemption Price in effect immediately prior to
such adjustment by a fraction, the numerator of which is the number of shares of
Common Stock issuable upon exercise of the Warrant being redeemed immediately
prior to such adjustment and the denominator of which is the number of shares of
Common Stock issuable upon exercise of such Warrant being redeemed immediately
after such adjustment. The Warrants may only be redeemed if the Company has in
effect a current Registration Statement or post-effective amendment covering the
shares underlying the Warrants. The Warrant Holders may exercise their Warrants
between the Effective Date of the Notice and the Redemption Date, such exercise
being effective if done in accordance with Section 2.02 (a), and if the Warrant
Certificate, with form of election to purchase duly executed and the Warrant
Price, as applicable for such Warrant subject to redemption for each share of
Common Stock to be purchased is actually received by the Warrant Agent at its
office located at 2 Broadway, New York, New York 10004, no later than 5:00 P.M.
Miami, Florida time on the Redemption Date.
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(b) If any Warrant Holder does not wish to exercise any Warrant being
redeemed, the Warrant Holder should mail such Warrant to the Warrant Agent at
its office located at 2 Broadway, 19th Floor, New York, New York 10004, after
receiving the Redemption Notice required by this Section. If such Redemption
Notice shall have been so mailed, and if on or before the Effective Date of the
Notice all funds necessary to pay for redemption of all Warrants then
outstanding shall have been set aside by the Company in trust with the Warrant
Agent for the benefit of all Warrant Holders so as to be and continue to be
available therefor, then, on and after said Redemption Date, notwithstanding
that any Warrant subject to redemption shall not have been surrendered for
redemption, the obligation evidenced by all Warrants not surrendered for
redemption or effectively exercised shall be deemed no longer outstanding, and
all rights with respect thereto shall forthwith cease and terminate, except only
the right of the holder of each Warrant subject to redemption to receive the
Redemption Price (or fraction thereof) for each share of Common Stock (or
fraction thereof) to which he would be entitled if he exercised the Warrant upon
receiving the Redemption Notice of the Warrant subject to redemption held by the
Holder hereof.
(c) Notwithstanding anything contained in this Article II, the
Underwriter's Warrants shall not be eligible for redemption by the Company.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF WARRANT PRICE
SECTION 3.01 In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the outstanding Common Stock in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Warrant
Price, and the number and kind of shares of Common Stock receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of shares which
if such Warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
SECTION 3.02 In case the Company after the date hereof shall issue rights,
options, or warrants to all holders of Common Stock entitling them to subscribe
for or purchase Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share (or having a conversion price per share, if a
security convertible into or exchangeable for Common Stock) less than the
"current market price" (as defined in Section 3.04 hereof) per share of Common
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Stock on the record date established for the issuance of such rights, options or
warrants, then, in such case, the Warrant Price shall be adjusted by multiplying
the Warrant Price in effect on the record date of such issuance by a fraction,
of which the numerator shall be the number of shares of Common Stock outstanding
on the record date for such issuance plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so to be issued (or the aggregate initial conversion price of the convertible
securities to be issued or sold) would purchase at such "current market price"
and of which the denominator shall be the number of shares of Common Stock
outstanding on the record date for such issuance plus the number of additional
shares of Common Stock to be issued (or into which the convertible or
exchangeable securities to be issued or sold are initially convertible or
exchangeable). Such adjustment shall become effective at the close of business
on such record date; provided, however, that, to the extent the shares of Common
Stock (or securities convertible to or exchangeable for shares of Common Stock)
are not delivered, the Warrant Price shall be readjusted after the expiration of
such rights, options, or warrants (but only with respect to Warrants exercised
after such expiration), to the Warrant Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made upon
the basis of delivery of only the number of shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock actually issued. In
case any subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
Notwithstanding the foregoing, no adjustment in the Warrant Price or
the number of shares of Common Stock issuable upon exercise of the Warrants
shall be made upon (i) the issuance of options (or upon exercise thereof) by the
Company pursuant to its Stock Option Plans, (ii) the issuance of the
Underwriter's Warrants, or (iii) any other options and warrants outstanding as
of the date hereof.
SECTION 3.03 In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the shareholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other than cash
dividends distributions and dividends payable in shares of Common Stock),
subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding those referred to in Section 3.02 hereof), then, in each case,
the Warrant Price shall be adjusted by multiplying the Warrant Price in effect
immediately prior to the record date for the determination of shareholders
entitled to receive such distribution by a fraction of which the numerator shall
be the "current market price" per share of Common Stock on such record date,
less the fair market value (as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error) of the portion of the evidences of indebtedness or assets so to
be distributed, or of such subscription rights, options, or warrants,
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock, applicable to the share, and of which
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the denominator shall be such "current market price" per share of Common Stock.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of such distribution retroactive to the record date
for the determination of shareholders entitled to receive such distribution.
SECTION 3.04 For the purpose of any computation under sections 3.02 and
3.03 hereof, the "current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 20
consecutive trading days ending three (3) days prior to such date. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price as furnished by NASDAQ. If on any such date the
Common Stock is not quoted on NASDAQ or any such organization, the closing price
shall be deemed to be the average of the closing bid and asked prices in the
over-the-counter market as reported by the National Quotation Bureau or if no
such quotation is available, the fair value of the Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error.
SECTION 3.05 No adjustment in the Warrant Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 3.05 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Article III shall be made to the nearest cent or to the nearest one-thousandth
of a share, as the case may be.
SECTION 3.06 In any case in which this Article III shall require that an
adjustment in the Warrant Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the holder of any Warrant exercised after such record date,
the shares, if any, issuable upon such exercise over and above the shares, if
any, issuable upon such exercise on the basis of the Warrant Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
SECTION 3.07 Upon each adjustment of the Warrant Price as a result of the
calculations made in Section 3.01, 3.02, or 3.03 hereof, each Warrant
outstanding prior to the making of the adjustment in the Warrant Price shall
thereafter evidence the right to purchase, at the adjusted Warrant Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of a Warrant prior to adjustment of the number of shares by the Warrant
Price in effect prior to adjustment of the Warrant Price by (B) the Warrant
Price in effect after such adjustment of the Warrant Price.
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SECTION 3.08 In case of any capital reorganization of the Company, or of
any reclassification of the Common Stock (other than a reclassification of the
Common Stock referred to in Section 3.01 hereof), or in the case of the
consolidation of the Company with or the merger of the Company into any other
corporation or of the sale, transfer, or lease of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation or
other entity, each Warrant shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger, sale, transfer, or
lease, be exercisable, on the same terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, assets, or
cash to which a holder of the number of shares purchasable (at the time of such
capital reorganization, reclassification of Common Stock, consolidation, merger,
sale, transfer, or lease) upon exercise of such Warrant would have been entitled
upon such capital reorganization, reclassification of Common Stock,
consolidation, merger, sale, transfer, or lease; and in any such case, if
necessary, the provisions set forth in this Article III with respect to the
rights and interests thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock, other securities, assets, or cash thereafter deliverable
on the exercise of the Warrants. The subdivision or combination of shares of
Common Stock at any time outstanding into a greater or lesser number of shares
shall not be deemed to be a reclassification of the Common Stock for the
purposes of this subsection. The Company shall not effect any such
consolidation, merger, transfer, or lease, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the Corporation
purchasing, receiving, or leasing such assets or other appropriate corporation
or entity shall expressly assume, by written instrument in form satisfactory to
the Underwriter, the obligation to deliver to the holder of each Warrant such
shares of stock, securities, or assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase and to perform the other
obligations of the Company under this Agreement.
SECTION 3.09 The Company may make such reductions in the Warrant Price, in
addition to those required by this Article III, as it shall, in it sole
discretion, determine to be advisable.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF
WARRANT HOLDERS
SECTION 4.01 No Warrant Holder, as such, shall be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purposes, nor shall anything contained in any Warrant Certificate be construed
to confer upon any Warrant Holder, as such, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any action by
the Company, whether upon any recapitalization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise, receive dividends or
subscription rights, or otherwise, until in connection with the exercise of any
Warrant, such Warrant shall have been surrendered and the purchase price or the
shares of Common Stock for which such Warrant is being
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exercised shall have been received by the Warrant Agent; provided, however, that
any such surrender and payment on any date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose name or
names the certificate or certificates for those shares of Common Stock are to be
issued as the record holder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open and the Warrant surrendered shall not be deemed to have been exercised, in
whole or in part, as the case maybe, until such next succeeding day on which
stock transfer books are open.
SECTION 4.02 The Company covenants and agrees that it shall
contemporaneously provide to all Warrant Holders of record any publication,
mailing or notice of an event which it shall provide to all of its shareholders
of record and which event shall result in the adjustment to the Warrant Price as
provided in Article III hereof. For purposes of this Section 4.02, the Warrant
Holders of record shall be those Warrant Holders who are of record on a date
even with the date chosen by the Company for the purpose of determining the
shareholders of record who shall be entitled to receive such publication,
mailing or notice.
SECTION 4.03 If any Warrant Certificate is lost, stolen, mutilated or
destroyed, the Company and the Warrant Agent may, on such terms as to indemnity
or otherwise as they may in their discretion reasonably impose, which shall, in
the case of a mutilated Warrant Certificate, include the surrender thereof,
issue a new Warrant Certificate of like denomination and tenor as, and in
substitution for, the Warrant Certificate so lost, stolen mutilated or
destroyed.
SECTION 4.04
(a) The Company covenants and agrees that at all times it shall
reserve and keep available for the exercise of outstanding Warrants such number
of authorized shares of Common Stock and the aggregate number and kind of any
other securities which the Warrants are exercisable for, pursuant to the
provisions of Article III hereof, as are sufficient to permit the exercise in
full of such Warrants and that it will make available to the Warrant Agent from
time to time a number of duly executed certificates representing shares of
Common Stock and other securities, sufficient therefor.
(b) The Company shall use its best efforts to secure the listing,
upon official notice of issuance, of the shares of Common Stock issuable upon
exercise of Warrants upon any securities exchange upon which the Common Stock
becomes listed.
(c) The Company covenants that all shares of Common Stock issued on
exercise of Warrants shall be validly issued, fully paid, non-assessable and
free of preemptive rights.
(d) The Company has filed a Registration Statement on Form SB-2
(Registration No. 333-_____) for the registration of, among other things, the
sale of the Warrants and the shares of Common Stock issuable upon exercise
thereof under the Securities Act of 1933, as amended (the "Act"). The Company
shall use its best efforts to secure the effectiveness of the Registration
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Statement under the Act, and to register or qualify such Warrants and shares of
Common Stock under the laws of any states in which the sale of the Warrants and
shares of Common Stock was registered or qualified at the time of the IPO and
shall use its reasonable good faith efforts to register and qualify such
Warrants and shares of Common Stock in such additional states and jurisdictions
as the holders of such Warrants shall reasonably request, provided that no such
qualification will be required in any jurisdiction where, solely as a result
thereof, the Company would be subject to (i) general service of process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction or (ii) qualification requirements which would require the Company
to (A) amend its Articles of Incorporation or Bylaws or (B) rescind, modify or
amend any action taken by the Board of Directors of the Company in accordance
with their fiduciary obligations to the Company and its shareholders; provided,
however, that the Company will make a good faith effort to obtain a waiver of
any such requirement. The Company further agrees to use its best efforts to
maintain the effectiveness of such Registration Statement and such state
qualifications, as aforesaid, by the filing of any and all amendments to the
Registration Statement and such state qualifications as may be required from
time to time under the Act or the laws of the various states until the
expiration or termination of all the Warrants in accordance herewith.
(e) The Company will furnish to the Warrant Agent, upon request, an
opinion of counsel satisfactory to the Warrant Agent to the effect that (i) a
Registration Statement under the Act is then in effect with respect to the
Warrants and shares of Common Stock issuable upon the exercise of the Warrants
and that the prospectus included therein complies as to form in all material
respects, (except as to financial statements, including schedules, and other
accounting and financial data, as to which such counsel need express no
opinion), with the requirements of the Act and the rules and regulations of the
Commission thereunder; or a Registration Statement under the Act with respect to
said shares of Common Stock is not required. In the event that said opinion
states that such a Registration Statement is in effect, the Company will from
time to time furnish the Warrant Agent with current prospectuses meeting the
requirements of the Act and such rules and regulations in sufficient quantity to
permit the Warrant Agent to deliver a prospectus ("Prospectus") to each Warrant
Holder upon exercise thereof. The Company further agrees to pay all fees, costs
and expenses in connection with the preparation and delivery to the Warrant
Agent of the foregoing opinions and Prospectuses and the above mentioned
registrations and other actions, and to immediately notify the Warrant Agent in
the event that (i) the Commission shall have issued or threatened to issue any
order preventing or suspending the use of any Prospectus; (ii) at any time any
Prospectus shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; or (iii) for any reason it shall be necessary
to amend or supplement any Prospectus in order to comply with the Act.
SECTION 4.05 Whether or not the number of shares purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 3.07 hereof, the
Company shall not be required to issue fractions of shares upon exercise of the
Warrants or to distribute share certificates which evidence fractional shares.
In lieu of fractional shares, the Company, in its sole discretion, may pay to
the registered holders of Warrant Certificates at the time such Warrants are
exercised as herein
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provided an amount in cash equal to the same fraction of the current market
value of a share. For purposes of this Section 4.05, the current market value of
a share issuable upon the exercise of a Warrant shall be the closing price of a
share of Common Stock, as determined pursuant to the second and third sentences
of Section 3.04, for the trading day immediately prior to the date of such
exercise.
SECTION 4.06 The holder of a Warrant by the acceptance thereof expressly
waives his right to receive any fractional warrant or any fractional Shares upon
exercise of a Warrant.
ARTICLE V
TREATMENT OF WARRANT HOLDERS
SECTION 5.01 Prior to due presentment for registration of transfer of any
Warrant, the Company and the Warrant Agent may deem and treat the Warrant Holder
as the absolute owner of such warrant, notwithstanding any notation of ownership
or other writing thereon, for the purpose of any exercise thereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
ARTICLE VI
CONCERNING THE WARRANT AGENT
AND OTHER MATTERS
SECTION 6.01 The Company will from time to time promptly pay, subject to
the provisions of Section 2.02 (d) of this Agreement, all taxes and charges that
may be imposed upon the Company or the Warrant Agent in respect of the issuance
or delivery of shares of Common Stock upon the exercise of Warrants.
SECTION 6.02
(a) The Warrant Agent may resign and be discharged from its duties
under this Agreement upon sixty (60) days notice in writing, mailed to the
Company by registered or certified mail, and to each Warrant Holder. The Company
may remove the Warrant Agent or any successor warrant agent upon sixty (60) days
notice in writing, mailed to the Warrant Agent or successor Warrant Agent, as
the case may be, by registered or certified mail, and to each Warrant Holder;
provided, however, the Company shall appoint a new Warrant Agent as hereinafter
provided and such removal shall not become effective until a successor Warrant
Agent has been appointed and has accepted such appointment. If the Warrant Agent
shall resign or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of sixty (60) days after it has been notified in
writing of such resignation or incapability by the Warrant Agent by a Warrant
Holder, who shall, with such notice, submit his Warrant Certificate for
inspection by the Company, then any Warrant Holder may
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apply to any court of competent jurisdiction for the appointment of a successor
to the Warrant Agent. Any successor Warrant Agent, whether appointed by the
Company or by such a court shall be a registered transfer agent, bank or trust
company, subject to the terms and conditions of this Section 6.02, in good
standing and incorporated under the laws of any State of the United States,
having its principal office in the United States of America. 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. 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 any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
(b) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
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 or filing of any
paper or any further act on the part of any of the parties hereto. In case at
the time such successor to the Warrant Agent shall succeed to the agency created
by this Agreement, any of the Warrant Certificates shall have been countersigned
but not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
Certificates so countersigned, and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificate in its own name or in the name of
the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and this
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 may adopt the countersignature under this
prior name and deliver Warrant Certificates so countersigned; and in case at
that time any of the 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 Warrant Certificates shall
have the full force provided in the Warrant Certificates and in this Agreement.
SECTION 6.03 The Company agrees to pay the Warrant Agent a reasonable fee
for all services rendered by it hereunder. The Company also agrees to indemnify
the Warrant Agent for, and to hold it harmless against, any loss, liability or
expense, incurred without gross negligence, willful misconduct or bad faith on
the part of the Warrant Agent, arising out of or in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
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SECTION 6.04 The Company covenants and agrees that it shall, at the
Company's expense, provide to the Warrant Agent copies of its current
prospectus, if any, in such quantity as to enable the Warrant Agent to deliver
one copy of such current prospectus to such Warrant Holder who shall exercise
his rights under a Warrant. Notwithstanding anything else contained in this
Section 6.04, the Company shall not be obligated to provide copies of its
current prospectus for the purpose of allowing the Warrant Agent to deliver such
copies to any Warrant Holder who delivers all of his redeemable warrants for
redemption pursuant to Section 2.03 or who shall notice the Company of his
intent to permit redemption of all of his Warrants pursuant to Section 2.03
herein or to any person who shall hold any Warrant subject to the terms of this
Agreement after the earlier of the Redemption Date or the Last Exercise Date of
the Warrants.
SECTION 6.05 The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrant certificates, by their acceptance
thereof, shall be bound:
(a) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, that fact or matter, unless other evidence in respect thereof be
herein specifically prescribed, may be deemed to be conclusively proved and
established by a certificate signed by the President or the Secretary of the
Company and delivered to the Warrant Agent. That certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon that
certificate.
(b) The Warrant Agent shall be liable hereunder only for its own
gross negligence, willful misconduct or bad faith.
(c) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Warrant
Certificates, except its countersignature thereof, or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(d) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof,
except the due execution hereof by the Warrant Agent, or in respect of the
validity or execution of any Warrant Certificate, except its countersignature
thereof; nor shall it be responsible for any Warrant Certificate; nor shall it
be responsible for the adjustment of the Warrant Price or the making of any
change in the number of shares of Common Stock required under the provisions of
Article III of this Agreement or responsible for the manner, method or amount of
any such change or the ascertaining of the existence of facts that would require
any such adjustment or change except with respect to the exercise of Warrant
Certificates after actual notice of any adjustment of the Warrant Price; nor
shall it by any act under this Agreement be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any
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Warrant Certificate or as to whether any share of Common Stock will when issued
be validly issued, fully paid, non-assessable and free of preemptive rights.
(e) The Warrant Agent and any shareholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrant
Certificates or other securities of the Company to retain a pecuniary interest
in any transaction in which the Company may be interested or contract with or
lend money to or otherwise act as fully and freely as though it was not the
Warrant Agent or subject to this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any other
legal entity.
(f) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
officer or assistant officer of the Company, and to apply to any such officer or
assistant officer 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 such officer or assistant officer.
(g) The Warrant Agent may consult with its counsel or other counsel
satisfactory to it, including counsel for the Company, and the opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, offered, or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(h) The Warrant Agent shall incur no liability to the Company or to
any holder of any Warrant for any action taken by it in reliance upon any
Warrant Certificate or certificate for Common Stock, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed, and where necessary, certified or
acknowledged, by the proper person or persons.
SECTION 6.06 The Warrant Agent may, without the consent or concurrence of
the Warrant Holders, by supplemental agreement or otherwise, concur with the
Company in making any changes or corrections in this Agreement that (i) it shall
have been advised by counsel, who may be counsel for the Company, are required
to cure any ambiguity or to correct any defective or inconsistent provision or
clerical omission or mistake or manifest error herein contained, or (ii) as
provided in Section 3.09, the Company deems necessary of advisable and which
shall not be inconsistent with the provisions of the Warrant Certificates,
provided such changes or corrections do not adversely affect the privileges or
immunities of the Warrant Holders.
SECTION 6.07 All the covenants and provisions of this 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.
SECTION 6.08 Forthwith upon the appointment after the date thereof of any
transfer agent for the Common Stock, or of any subsequent transfer agent for the
Common Stock, the
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Company will file with the Warrant Agent a statement setting forth the name and
address of such transfer agent.
SECTION 6.09 Notice or demand pursuant to this Agreement to be given or
made by the Warrant Agent or by any Warrant Holder to or on the Company shall be
sufficiently given or made and effective on the third business day after posting
thereof, unless otherwise provided in this Agreement, if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Company with the Warrant Agent) as follows:
Galacticomm Technologies, Inc.
4101 S.W. 47th Ave.
Suite 101
Ft. Lauderdale, FL 33314
Attn: Mr. Peter Berg
With a copy to:
Lucio, Mandler, Croland, Bronstein,
Garbett, Stephany & Martinez, P.A.
Barnett Bank Tower
701 Brickell Avenue, 20th Floor
Miami, FL 33131
Attn: Leslie J. Croland, Esq.
notice or demand pursuant to this Agreement to be given or made by the Company
or any Warrant Holder to or on the Warrant Agent shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Warrant
Agent with the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, NY 10004
Attn: Compliance Department
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on the Underwriter shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Underwriter
with the Company) as follows:
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<PAGE>
First Equity Corporation of Florida
201 South Biscayne Boulevard
1400 Miami Center
Miami, FL 33131
Attn: William R. Fusselmann, Senior Vice President
____________________________________
____________________________________
____________________________________
Attn: _____________________________
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on any Warrant Holder shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed to such Warrant Holder at his last known address as it shall
appear in the records of the Company, if such notice shall be given by the
Company, or, if such notice shall be given by the Warrant Agent, as it shall
appear on the register maintained by the Warrant Agent.
A copy of any Notice or demand given or made pursuant to this
Agreement on the Warrant Agent, Company or Underwriter shall be promptly
forwarded by the recipient thereof to each of the Company, Warrant Agent or
Underwriter who shall not have received or made such demand or Notice.
SECTION 6.10 The validity, interpretation and performance of this
Agreement and the Warrants shall be governed by the law of the State of Florida.
SECTION 6.11 Nothing in this Agreement shall be construed to give to any
person or corporation other than the parties hereto and the Warrant Holders any
right, remedy or claim under promise or agreement hereof. All covenants,
conditions, stipulations, promises and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the Company and the Warrant Agent
and their successors and of the Warrant Holders, and their heirs,
representatives, successors, assigns and transferees.
SECTION 6.12 A copy of this Agreement shall be available for inspection by
any Warrant Holder during the regular business hours and at the corporate office
of the Warrant Agent in New York, New York, at which time the Warrant Agent may
require any Warrant Holder to submit his Warrant Certificate for inspection by
it.
SECTION 6.13 This Agreement shall terminate on the Last Exercise Date, or
such earlier date upon which all Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company pursuant to Section
2.02 (e) of this Agreement for all cash held by it. The provisions of Section
6.03, 6.04 and 6.05 of this Agreement shall survive such termination.
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SECTION 6.14 The Article headings in this Agreement are for convenience
only and are not part of this Agreement and shall not affect the interpretation
thereof.
SECTION 6.15 This Agreement may be executed in any number counterparts,
each of which is so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same agreement.
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<PAGE>
ATTEST: GALACTICOMM TECHNOLOGIES, INC.
______________________________
By:___________________________________
Peter Berg, Chairman and
Chief Executive Officer
ATTEST: CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
_______________________________
By: ______________________________
Name: ___________________________
Title:___________________________
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EXHIBIT A
Form of Warrant
EXHIBIT 4.4
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (REGISTRATION NO. 333-________). HOWEVER, NEITHER THE
OPTIONS NOR SUCH SECURITIES CAN BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) A
POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THE TRANSFER OF THIS OPTION IS
RESTRICTED AS DESCRIBED HEREIN.
GALACTICOMM TECHNOLOGIES, INC.
PURCHASE OPTION AGREEMENT
______ Units
THIS CERTIFIES that, for receipt in hand of $75.00 and other value
received, First Equity Corporation of Florida, 201 South Biscayne Blvd., 1400
Miami Center, Miami, Florida 33131 and [_________________________________]
(hereinafter collectively referred to as the "Holder" or "Underwriter") is
entitled to subscribe for and purchase from GALACTICOMM TECHNOLOGIES, INC., a
Florida corporation (the "Company"), upon the terms and conditions set forth
herein, at any time or from time to time after [one year after the effective
date of the registration statement] and before 5:00 P.M. on ___________ [5 years
after the effective date of the registration statement], New York time (the
"Exercise Period"), ________________ Units, each Unit consisting of one share of
the Company's Common Stock, par value $.0001 per share (the "Shares"), and one
Common Stock Purchase Warrant ("Underwriter's Warrants"), at a price of $_______
per Unit [120% of the public offering price of a Unit]. This Option may not be
sold, transferred, assigned or hypothecated, until ________, 199 _____ [one year
after the effective date of the registration statement] except that it may be
transferred in whole or in part, to: (i) [either] party who is a "Holder" or one
or more officers or partners of the Holder (or the officers or partners of any
such person) or NASD members participating in the Company's initial public
offering (or the officers or partners of any such person); (ii) a successor to
the Holder, or the officers or partners of such successor; (iii) a purchaser of
substantially all of the assets of the Holder; or (iv) by operation of law. The
term "Holder" as used herein shall include any transferee to whom this Option
has been transferred in accordance with the above. As used herein the term "this
Option" shall mean and include this Option and any option or options hereafter
issued as a consequence of the exercise or transfer of this Option in whole or
part.
The shares of Common Stock issuable upon exercise of the Underwriter's
Warrants are referred to as the "Warrant Shares". Each Underwriter's Warrant
shall be identical in all respects to the Warrants (the "Public Warrants"),
issued pursuant to the Warrant Agreement, dated
<PAGE>
___________, 1997 (the "Warrant Agreement"), between the Company and Continental
Stock Transfer and Trust Co., as Warrant Agent; provided, however, the
Underwriter's Warrants shall not be subject to redemption by the Company under
any circumstances.
1. TERM OF EXERCISE.
(a) This Option may be exercised during the Exercise Period as to the
whole or any lesser number of Shares and Underwriter's Warrants, by the
surrender of this Option (with the election at the end hereof duly executed) to
the Company at its offices at 4101 S.W. 47th Avenue, Suite 101, Ft. Lauderdale,
FL 33314 or such other place as is designated in writing by the Company,
together with a certified or official bank check in New York Clearing House
Funds payable to the order of the Company in an amount equal to the aggregate
Exercise Price (per Unit) multiplied by the number of Units for which this
Option is being exercised.
(b) For purposes of this Option, the term "Current Market Price" at any
date shall be deemed to be: (i) the average of the daily closing prices of the
Common Stock or the Public Warrants, as the case may be, for the 20 consecutive
trading days immediately preceding such date in reported sales price, or (ii) in
case no such reported sale takes place on such date, the last sales price
regular way in either case as reported on the principal national securities
exchange on which the Units, Common Stock or the Public Warrants, as the case
may be, is listed or admitted to trading, or (iii) if the Units, Common Stock or
the Public Warrants, as the case may be, is not listed or admitted to trading on
any national securities exchange, the average of the closing bid and asked
prices regular way for the Common Stock or the Public Warrants, as the case may
be, on the Nasdaq National Market System or Nasdaq SmallCap Market of the Nasdaq
Stock Market, Inc. (together referred to as "Nasdaq") or (iv) if the Units,
Common Stock or the Public Warrants, as the case may be, is not listed or
admitted for trading on any national securities exchange and is not reported on
NASDAQ or any similar organization, the average of the closing bid and asked
prices in the over-the-counter market as furnished by the National Quotation
Bureau, Inc. or if no such quotation is available, the fair market value as
determined by the Board of Directors in good faith.
2. DELIVERY OF CERTIFICATES TO REGISTERED HOLDER. Upon each exercise of
this Option, the Holder shall be deemed to be the holder of record of the Shares
and Underwriter's Warrants underlying the Units issuable upon such exercise
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Shares or Underwriter's Warrants shall not then
have been actually delivered to the Holder. As soon as practicable after each
such exercise of this Option, the Company shall issue and deliver to the Holder
a certificate or certificates for the Shares and a certificate or certificates
for the Underwriter's Warrants registered in the name of the Holder or its
designee. If this option should be exercised in part only, the Company shall,
upon surrender of this Option for cancellation, execute and deliver a new Option
evidencing the right of the Holder to purchase the balance of the Units (or
portions thereof) subject to purchase hereunder.
3. OPTION REGISTER. Any Option issued upon the transfer or exercise in
part of this Option shall be numbered and shall be registered in an Option
Register as they are issued. The
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Company shall be entitled to treat the registered holder of any Option on the
Option Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Option on
the part of any other person, and shall not be liable for any registration or
transfer of Options which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or participation therein amounts to bad faith. The Options shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer in all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence his or its
authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new option or options to the holder thereof, for another Option,
or other options of different denominations, of like tenor and representing in
the aggregate the right to purchase a like number of Units upon surrender to the
Company or its duly authorized agent. Notwithstanding the foregoing, the Company
shall have no obligation to cause this Option to be transferred on its books to
any person if, in the opinion of counsel to the Company, such transfer does not
comply with the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations thereunder.
4. RESERVATION OF COMMON STOCK. The Company shall at all times reserve and
keep available out of its authorized and unissued Common Stock, solely for the
purpose of providing for the exercise of this Option and the Underwriter's
Warrants, such number of shares of Common Stock as shall, from time to time, be
sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Option and the Underwriter's Warrants when paid
for in accordance with the respective terms thereof, shall be validly issued,
fully paid and nonassessable by the Company.
5. ANTI-DILUTION; ADJUSTMENTS TO EXERCISE PRICE.
(a) Upon the occurrence of any event (an "Event") as a result of which
an adjustment is made to the exercise price (the "Public Exercise Price") of any
of the Public Warrants, the number of Shares issuable thereafter upon exercise
of this Option shall be adjusted to equal the number of Shares issuable prior to
such Event multiplied by a fraction, the numerator of which shall be the Public
Exercise Price in effect prior to such Event and the denominator of which shall
be the Public Exercise Price subsequent to such Event.
(b) Upon each adjustment of the number of Shares issuable upon exercise
of this Option pursuant to subparagraph 5(a) above, this Option shall thereupon
evidence the right to purchase such number of Shares at the Exercise Price per
Share obtained by (1) multiplying the Exercise Price per share in effect
immediately prior to the triggering Event by the number of shares then
purchasable upon exercise of this Option and (2) dividing the product so
obtained by the number of Shares purchasable upon exercise of this Option
subsequent to the triggering Event.
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<PAGE>
(c) Notwithstanding any other provision of this Option, any adjustment
of the exercise price, and/or the number of Warrant Shares purchasable upon the
exercise of the Underwriter's Warrants shall be determined solely by the
antidilution and other adjustment provisions contained in the Warrant Agreement
(which provisions are incorporated herein by reference) as if such Underwriter's
Warrants were and had been outstanding on and from ______________, 1997.
(d) Whenever there shall be an adjustment as provided in this paragraph
5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its principal office, which
notice shall be accompanied by an officer's certificate setting forth the number
and Exercise Price per Share and per Warrant of the Shares and Underwriter's
Warrants issuable upon exercise of this Option and the exercise price per
Warrant Share and the number of Warrant Shares purchasable upon the exercise of
the Underwriter's Warrants after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof.
(e) All calculations under this paragraph 5 shall be made to the
nearest cent or to the nearest one-thousandth of a share, as the case may be.
(f) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of Options.
If any fraction of a share would be issuable on the exercise of any Option (or
specified portions thereof), the Company, in its sole discretion, shall purchase
such fraction for an amount in cash equal to the same fraction of the Current
Market Price of such share on the date of exercise of the Option.
6. REORGANIZATION/RECLASSIFICATION.
(a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the holder shall have the right thereafter to receive upon
exercise of this Option solely the kind and amount of shares of stock and other
securities, property, cash or any combination thereof receivable upon such
consolidation, merger, sale, lease or conveyance by a Holder of the number of
shares of Common Stock and the Underwriter's Warrants for which this Option
might have been exercised immediately prior to such consolidation, merger, sale,
lease or conveyance, and (ii) make effective provision in order to effect such
agreement. Such agreement shall provide for adjustment which shall be as nearly
equivalent as practicable to the adjustments for which paragraph 5 provides.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Option (other than a change in par value or
from par value to no par value, or as a result of a subdivision or combination,
but including any change in the shares into two or more classes or series of
shares), or in case of any consolidation or merger of another corporation
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<PAGE>
into the Company in which the Company is the continuing corporation and in which
there is a reclassification or change (including a change to the right to
receive cash or other property) of the shares of Common Stock (other than a
change in par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in the shares into two or
more classes or series of shares), the Holder shall have the right thereafter to
receive upon exercise of this Option solely the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
upon such reclassification, change, consolidation or merger by a holder of the
number of shares of Common Stock and the Underwriter's Warrants for which this
Option might have been exercised immediately prior to such reclassification,
change, consolidation or merger. Thereafter, appropriate provision shall be made
for adjustments which shall be as nearly equivalent as practicable to the
adjustments for which paragraph 5 above provides.
(c) The above provisions of this paragraph 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases or conveyances similar to
those described in paragraphs 6(a) and (b).
7. NOTICE OF DIVIDENDS/DISTRIBUTIONS. If, in case at any time the Company
shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants or other securities to all holders of
Common Stock or Public Warrants entitling them to purchase any additional shares
of Common Stock or any other rights, warrants or other securities; or
(c) to effect any reclassification or change or outstanding shares of
Common Stock, or any consolidation, merger, sale, lease or conveyance of
property, described in paragraph 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
exercise price of the Public Warrants; then, and in any one or more of such
cases, the Company shall give written notice thereof, by registered mail,
postage prepaid, to the Holder at the Holder's address as it shall appear in the
Option Register, mailed at least 15 days prior to: (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
dividend, distribution, rights, warrants or other securities are to be
determined; (ii) the date on which any such reclassification, change of
outstanding shares of Common Stock, consolidation, merger, sale, lease,
conveyance of property, liquidation, dissolution, or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of shares of Common Stock or Public Warrants, as the case may be, shall be
entitled to exchange their shares or warrants for securities or other property,
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if any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the date of such action which would require
an adjustment to the Public Exercise Price.
8. PAYMENT OF TAXES. The issuance of any Shares or Underwriter's Warrants
or other securities upon the exercise of this Option, and the delivery of
certificates or other instruments representing such shares of Common Stock,
Warrants or other securities, shall be made without charge to the Holder for any
tax or other charge in respect of such issuance. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the Holder and the Company shall not be required to issue or deliver any such
certificate unless and until person or persons requesting the issue thereof
shall have paid the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid or is not due and
payable.
9. REGISTRATION RIGHTS. (a) If, at any time after _____________ [one year
after the effective date of the registration statement], and before ___________
[five years after the effective date of the registration statement], the Company
shall file a registration statement (other than on Form S-8, or any successor
form) with the Securities and Exchange Commission (the "Commission") while
Shares or Underwriter's Warrants underlying Units are available for purchase
upon exercise of this Option or while any Shares, Underwriter's Warrants or
Warrant Shares (which have not been so registered) are outstanding, the Company
shall give the Holder and all the then registered holders of such Shares,
Underwriter's Warrants or Warrant Shares at least 30 days prior written notice
of the filing of such registration statement. If requested by the Holder or by
any such holder in writing within 10 days after receipt of any such notice, the
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for the Holder or such holder and the underwriting
discounts and commissions, if any, payable in respect of the Warrants, Shares,
Underwriter's Warrants and Warrant Shares sold by the Holder or any such
holder), use its best efforts to register or qualify the Shares, Underwriter's
Warrants and Warrant Shares (collectively, the "Underwriter's Securities") of
the Holder or any such holders who shall have made such request concurrently
with the registration covering such other securities, all to the extent
requisite to permit the public offering and sale of the Underwriter's Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors and counsel to cause such registration statement to become
effective as promptly as practicable. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Underwriter's
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, the
Underwriter's Securities shall not be included in such registration statement or
such registration statement shall include only so many of the Underwriter's
Securities as will not have such an effect, provided that if any securities of
the Company are included in such registration statement for the account of any
person other than the Company and the Holder or any such holder, the securities
included in such registration statement for such other person shall have been
reduced pro rata to the reduction of the Underwriter's Securities which were
requested to be included in such registration.
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(b) If at any time after _______________ [one year after the effective
date of the registration statement], and before _____________ [five years after
the effective date of the registration statement], the Company shall receive a
written request from holders of Underwriter's Securities who, in the aggregate,
own (or upon exercise of all Warrants and Underwriter's Warrants, will own) a
majority of the total number of shares of Common Stock issued or issuable upon
exercise of the Warrants and the Underwriter's Warrants, the Company shall, as
promptly as practicable, prepare and file with the Commission a registration
statement sufficient to permit the public offering and sale of the Underwriter's
Securities through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its officers,
directors, auditors and counsel to cause such registration statement to become
effective as promptly as practicable; PROVIDED HOWEVER, that the Company shall
only be obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Holder or such holders and underwriting
discounts and commissions, if any, payable in respect of the Underwriter's
Securities sold by the Holder or any such holder) shall be borne by the Company
and one additional such registration statement for which all such expenses shall
be paid by the Holder and such holders.
(c) In the event of a registration pursuant to the provisions of this
paragraph 5, the Company shall use its best efforts to cause the Underwriter's
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder or such holders
may reasonably request; PROVIDED, HOWEVER, that no such qualification will be
required in any jurisdiction where, solely as a result thereof, the Company
would be subject to (i) general service of process or to taxation or
qualification as a foreign corporation doing business in such jurisdiction or
(ii) qualification requirements which would require the Company to (A) amend its
Articles of Incorporation or Bylaws or (B) rescind, modify or amend any action
taken by the Board of Directors of the Company in accordance with their
fiduciary obligations to the Company and its shareholders; provided, however,
that the Company will make a good faith effort to obtain a waiver of any such
requirement.
(d) The Company shall keep effective any registration or qualification
contemplated by this paragraph 9 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document and communication for such period of time as
shall be required to permit the Holder or such holders to complete the offer and
sale of the Underwriter's Securities covered thereby. The Company shall in no
event be required to keep any such registration or qualification effect for a
period in excess of nine months from the date on which the Holder and such
holders are first free to sell such Underwriter's Securities; PROVIDED, HOWEVER,
that if the Company is required to keep any such registration or qualification
in effect with respect to securities other than the Underwriter's Securities
beyond such period, the Company shall keep such registration or qualification in
effect as it relates to the Underwriter's Securities for so long as such
registration or qualification remains or is required to remain in effect in
respect of such other securities.
(e) In the event of a registration pursuant to the provisions of this
paragraph 9, the Company shall furnish to each of the five largest holders of
any Underwriter's Securities included
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therein such amendment and supplement thereto (in each case, including all
exhibits), such reasonable number of copies of each prospectus contained in such
registration statement and each supplement or amendment thereto (including each
preliminary prospectus), all of which shall conform to the requirements of the
Act and the rules and regulations thereunder, and such other documents, as the
Holder or such holders may reasonably request in order to facilitate the
disposition of the Underwriter's Securities included in such registration.
(f) In the event of a registration pursuant to the provisions this
paragraph 9, the Company shall furnish to each holder of any Underwriter's
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Holder) to the effect that (i) the registration statement has become
effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Securities and Exchange
Commission (the "Commission") or any state securities authority instituted or
threatened to institute any proceedings with respect to such an order, (ii) the
registration statement and each prospectus forming a part thereof (including
each preliminary prospectus), and any amendment or supplement thereto,
materially complies as to form with the Act and the rules and regulations
thereunder (except as to financial statements, including schedules, and other
accounting and financial data, as to which counsel need express no opinion), and
(iii) such counsel has no knowledge or reason to know of any material
misstatement or omission in such registration statement or any prospectus, as
amended or supplemented.
(g) The Company agrees that until all the Underwriter's Securities have
been sold under a registration statement or pursuant to Rule 144 under the Act,
it shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Underwriter's
Securities to sell such securities under Rule 144.
10. INDEMNIFICATION.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holder, any holder of any of the Underwriter's
Securities, their officers, directors, partners, employees, agents and counsel,
and each person, if any, who controls any such person within the meaning of
Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), from and against any and all loss, liability,
charge, claim, damage and expense whatsoever (which shall include, for all
purposes of this paragraph 10, but not be limited to, reasonable attorneys' fees
and any and all expense whatsoever reasonably incurred, and any and all amounts
paid in settlement of any claim or litigation), as and when incurred, arising
out of, based upon, or in connection with (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any registration statement,
preliminary prospectus or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or (B) in any application
or other document or communication (in this paragraph 10 collectively called an
"application") executed by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Underwriter's Securities under the
securities or blue sky laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a
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material fact required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company with
respect to the Holder or any holder of any of the Underwriter's Securities by or
on behalf of such Holder or Holders, or such other Holder, exclusively for
inclusion in any such preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant or agreement of the
Company to indemnify, which shall be in addition to any liability the Company
may otherwise have, including liabilities arising under this Option. However,
the indemnity agreement by the Company set forth in this Section 10(a) shall not
inure to the benefit of the Holder or any holder of the Underwriter's Securities
(or their respective controlling persons), if the Holder any other such holder
failed to send or give a copy of the final prospectus or any amendment or
supplement thereto to the purchaser of such securities as required by applicable
law and such prospectus did not contain any untrue statement or alleged untrue
statement or omission or alleged omission giving rise to such purchaser's claim,
damage or cause of action.
If any action is brought against the Holder or any holder of any of the
Underwriter's Securities or any of its officers, directors, partners, employees,
agents or counsel, or any controlling persons of such person (an "indemnified
party") in respect of which indemnity may be sought against the Company pursuant
to the foregoing paragraph, such indemnified party or parties shall promptly
notify the Company in writing of the institution of such action (but the failure
so to notify shall not relieve the Company from any liability it may have other
than pursuant to this paragraph 10(a) except to the extent that it has been
prejudiced in any material respect by such failure) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or in addition to those available to the Company, in any of which
events the reasonable fees and expenses of one such counsel for all indemnified
parties (unless there shall be differences in the relative rights and interests
of the indemnified parties in which case each indemnified party may retain its
own counsel which) shall be borne by the Company and the Company shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties. Anything in this paragraph 10 (a) to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent.
(b) The Holder and any other holder of Underwriter's Securities agree
to indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall have signed any registration statement covering
Underwriter's Securities held by the Holder and such other holder and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the
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foregoing indemnity from the Company to the Holder and such other holder in
paragraph 10(a), but only with respect to statements or omissions, if any, made
in any registration statement, preliminary prospectus, or final prospectus (as
from time to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to the Holder or such other
holder by or on behalf of the Holder or such other holder expressly for
inclusion in any such registration statement, preliminary prospectus, or final
prospectus, or any amendment or supplement thereto, or in any application, as
the case may be. If any action shall be brought against the Company or any other
person so indemnified based on any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, and in respect of which indemnity may be sought against the
Holder pursuant to this paragraph 10(b), the Holder and such other holder shall
have the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of paragraph 10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph 10(a)
or 10(b) (subject to the limitations thereof) but is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, or (ii) any indemnified or indemnifying party seeks
contribution under the Act, the Exchange Act or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement and any controlling person of the Company), as one
entity, and the Holder and any holder of any of the Underwriter's Securities
included in such registration in the aggregate (including for this purpose any
contribution by or on behalf of an indemnified party), as a second entity, shall
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may be subject, on the basis of relevant equitable
considerations such as the relative fault of the Company and the Holder or any
such holder in connection with the facts which resulted in such losses,
liabilities, claims, damages and expenses. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged omission, shall
be determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company, by
the Holder or by any holder of Underwriter's Securities included in such
registration, and the parties relative intent, knowledge, access to information
and opportunity to correct or prevent such statement, alleged statement,
omission or alleged omission. The Company and the Holder agree that it would be
unjust and inequitable if the respective obligations of the Company and the
Holder or any such other holder of the Underwriter's Securities for contribution
were determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this paragraph 10(c). No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this paragraph 10(c), each person, if any,
who controls the Holder or any holder of any of the Underwriter's Securities
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent and counsel of each such
person,
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shall have the same rights to contribution as such person and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent and counsel of each such person, shall have the same rights to
contribution as such person and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed any such registration
statement, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
paragraph 10(c). Anything in this paragraph 10(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
paragraph 10(c) is intended to supersede any right to contribution under the
Act, the Exchange Act or otherwise.
(d) The provisions of this paragraph 10 shall survive regardless of the
expiration, exercise or surrender of this Option.
11. LEGEND. The securities issued upon exercise of this Option shall be
subject to a stop transfer order and, when Company's counsel deems appropriate,
the certificate or certificates evidencing any such securities shall bear the
following legend:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS CERTIFICATE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. HOWEVER, SUCH SHARES [OR OTHER SECURITIES]
CANNOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE
AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
12. LOST CERTIFICATES. If this Option is lost, stolen, mutilated or
destroyed, the Company shall, on such reasonable terms as to indemnity or
otherwise as it may impose (which shall, in the case of a mutilated Option,
include the surrender thereof), issue a new Option of like date, denomination
and tenor as, and in substitution for, this Option, which shall thereupon become
void. Any such new Option shall constitute an independent contractual obligation
of the Company, whether or not the Option so lost, stolen, destroyed or
mutilated shall at any time be enforceable by anyone.
13. NO RIGHTS AS SHAREHOLDER. No Holder of any Option shall have, solely
on account of such status, any rights of a shareholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Option.
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14. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered holder of this Option, to the address of such
holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Paragraph l(a) of
this Option;
or
(c) if to the Holder, to the address set forth on the first page of
this Option.
15. GOVERNING LAW. This Option shall be construed in accordance with the
laws of the State of Florida, without giving effect to conflict of laws.
Dated: ________________, 199
GALACTICOMM TECHNOLOGIES, INC.
By: ____________________________________
Peter Berg, Chairman and
Chief Executive Officer
[Seal]
______________________________
Secretary
EXHIBIT 4.5
THESE SECURITIES MAY NOT BE PUBLICLY OFFERED OR SOLD UNLESS AT THE TIME OF SUCH
OFFER OR SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS
MEETING THE REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933, AS
AMENDED, FORMING A PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT
THERETO, WHICH IS EFFECTIVE UNDER SAID ACT, OR UNLESS IN THE OPINION OF COUNSEL
TO THE CORPORATION, SUCH OFFER AND SALE IS EXEMPT FROM THE APPLICABLE PROVISIONS
OF SECTION 5 OF SAID ACT.
UNDERWRITER'S COMMON STOCK PURCHASE WARRANT
For the purchase of shares of common stock,
par value $.0001 per share
of
GALACTICOMM TECHNOLOGIES, INC.
Incorporated Under the Laws of the
State of Florida
Void After 5 P.M. Miami, Florida time
on _______________, ____
No. ______________ _________ Warrants to Purchase _______ Shares
THIS IS TO CERTIFY, that, for value received, ______________, a
__________corporation (the "Underwriter"), or its registered assigns, is
entitled, subject to the terms and conditions hereinafter set forth on or after
___________, ____, and at any time prior to 5 P.M., Miami, Florida time on
___________, ____, but not thereafter, to purchase the number of shares set
forth above (the "Shares") of common stock, par value $.0001 per share ("Common
Stock"), of GALACTICOMM TECHNOLOGIES, INC., a Florida corporation (the
"Corporation"), from the Corporation upon payment to the Corporation of $____
per share of Common Stock (the "Purchase Price"), if and to the extent this
Warrant is exercised, in whole or in part, during the period this Warrant
remains in force, subject in all cases to adjustment as provided in Article II
hereof, and to receive certificates representing the Common Stock so purchased,
upon presentation and surrender to the Corporation of this Warrant, with the
form of subscription attached hereto duly executed, and accompanied by payment
of the Purchase Price of each share of Common Stock purchased as provided
herein. Two Warrants are exercisable to purchase one Share, subject to
adjustment as provided herein.
ARTICLE I
TERMS OF THE WARRANT
SECTION 1.01 Subject to the provisions of Sections 1.05 and 3.01 hereof,
this Warrant may be exercised at any time and from time to time after 9:00 A.M.,
Miami, Florida time, on ___________, ____ (the "Exercise Commencement Date"),
but no later than 5:00 P.M., Miami,
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Florida time on ___________, ____ (the "Expiration Time"). If ___________, ____
is a day on which banking institutions are authorized by law to close, then the
date on which this Warrant shall expire shall be the next succeeding day which
shall not be such a day. If this Warrant is not exercised on or before the
Expiration Time it shall become void, and all rights hereunder shall thereupon
cease.
SECTION 1.02
(1) The holder of this Warrant (the "Holder") may exercise Warrants in
denominations of two or whole number multiples thereof, upon surrender of this
Warrant with the form of subscription attached hereto duly executed, to the
Corporation at its corporate office located at 4101 S.W. 47th Avenue, Suite 101,
Fort Lauderdale, Florida 33314, together with the full Purchase Price for each
share of Common Stock to be purchased in lawful money of the United States, or
by check, bank draft or postal or express money order payable in United States
dollars to the order of the Corporation, and upon compliance with and subject to
the conditions set forth herein. If Warrants in denominations other than two or
whole number multiples thereof shall be exercised at one time by the same
Holder, the number of full shares of Common Stock which shall be issuable upon
exercise thereof shall be computed on the basis of the aggregate number of full
shares of Common Stock issuable upon such exercise.
(2) Upon receipt of this Warrant with the form of subscription duly
executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, together with all taxes
applicable upon such exercise, the Corporation shall cause to be issued
certificates for the total number of whole shares of Common Stock for which this
Warrant is being exercised in such denominations as are required for delivery to
the Holder, and the Corporation shall thereupon deliver such certificates to the
Holder or its nominee.
(3) In case the Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Corporation shall execute a new Warrant for the balance of the shares of
Common Stock that may be purchased upon exercise of this Warrant and deliver
such new Warrant to the Holder.
(4) The Corporation covenants and agrees that it will pay when due and
payable any and all taxes that may be payable in respect of the issue of this
Warrant, or the issue of any shares of Common Stock upon the exercise of this
Warrant. The Corporation shall not, however, be required to pay any tax that may
be payable in respect of any transfer involved in the issuance or delivery of
this Warrant or of the shares of Common Stock in a name other than that of the
Holder at the time of surrender, and until the payment of such tax the
Corporation shall not be required to issue such shares of Common Stock.
SECTION 1.03 This Warrant may be split-up, combined or exchanged for
another warrant or warrants of like tenor to purchase a like aggregate number of
shares. If the Holder desires to split-up, combine, or exchange this Warrant, he
shall make such request in writing delivered to the
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Corporation at its corporate office and shall surrender this Warrant and any
other Warrants to be so split-up, combined or exchanged at such office. Upon any
such surrender for a split-up, combination or exchange, the Corporation shall
execute and deliver to the person entitled thereto a Warrant or Warrants, as the
case may be, as so requested. The Corporation shall not be required to effect
any split-up, combination or exchange that will result in the issuance of a
Warrant entitling the Holder to purchase upon exercise a fraction of a share of
Common Stock. The Corporation may require the holder to pay a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
split-up, combination or exchange of Warrants.
SECTION 1.04 Prior to due presentment for registration or transfer of this
Warrant, the Corporation may deem and treat the Holder, as registered on the
books of the Corporation maintained for that purpose, as the absolute owner of
this Warrant (notwithstanding any endorsement or notation of ownership or other
writing hereon) for the purpose of any exercise hereof and for all other
purposes and the Corporation shall not be affected by any notice to the
contrary.
SECTION 1.05 This Warrant may be sold, hypothecated, exercised, assigned,
or transferred in accordance with and subject to the provisions of the
Securities Act of 1933, as amended (the "Act").
SECTION 1.06 Any assignment permitted hereunder shall be made by surrender
of this Warrant to the Corporation at its principal office with the form of
assignment attached hereto duly executed and funds sufficient to pay any
transfer tax. In such event, the Corporation shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other Warrants that carry the same rights upon
presentation thereof at the corporate office of the Corporation together with a
written notice signed by the Holder, specifying the names and denominations in
which such new Warrants are to be issued.
SECTION 1.07 Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Corporation. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
(a) the Corporation shall declare any dividend payable in stock to
the holders of its Common Stock or make any other distribution in property other
than cash to the holders of its Common Stock; or
(b) the Corporation shall offer to the holders of its Common Stock
rights to subscribe for or purchase any shares of any class of stock or any
other purchase any shares of any class of stock or any other rights or options
or securities exchangeable for or convertible into shares of any class of stock;
or
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(c) the Corporation shall effect any reclassification of its Common
Stock (other than a reclassification involving merely the subdivision or
combination of outstanding shares of Common Stock) or any capital
reorganization, or any consolidation or merger (other than a merger in which no
distribution of securities or other property is made to holders of Common
Stock), or any sale, transfer or other disposition of its property, assets and
business substantially as an entirety, or the liquidation, dissolution or
winding up of the Corporation; or
(d) the Corporation shall issue any shares of Common Stock in
exchange for shares of preferred stock or indebtedness of the Corporation, other
than upon conversion of such shares of preferred stock or indebtedness; then, in
each such case, the Corporation shall cause notice of such proposed action to be
mailed to the Holder. Such notice shall specify (i) the date on which the books
of the Corporation shall close, or a record be taken, for determining holders of
Common Stock entitled to receive such stock dividend or other distribution or
such rights or options, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, dissolution, winding up or exchange shall take place or commence,
as the case may be, (ii) the date as of which it is expected that holders of
record of Common Stock shall be entitled to receive securities or other property
deliverable upon such action, if any such date has been fixed (on such date in
the event of a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, the right to exercise this Warrant shall terminate), and
(iii) such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Purchase Price and the
kind and amount of the Common Stock and other securities and property
deliverable upon exercise of this Warrant. Such notice shall be mailed in the
case of any action covered by Subsection 1.07(a) and 1.07(b) above, at least ten
(10) days prior to the record date of determining holders of the Common Stock
for purposes of receiving such payment or offer, and in the case of any action
covered by Subsection 1.07(c) above or this 1.07(d), at least ten (10) days
prior to the earlier of the date upon which such action is to take place or any
record date to determine holders of Common Stock entitled to receive such
securities or other property.
Without limiting the obligation of the Corporation to provide notice
to the Holder of actions hereunder, it is agreed that failure of the Corporation
to give notice shall not invalidate such action of the Corporation.
SECTION 1.08 If this Warrant is lost, stolen, mutilated or destroyed, the
Corporation shall, on such reasonable terms as to indemnity or otherwise as it
may impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant, which shall thereupon become void. Any such
new Warrant shall constitute an independent contractual obligation of the
Corporation, whether or not the Warrant so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
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<PAGE>
SECTION 1.09
(1) The Corporation covenants and agrees that at all times it shall
reserve and keep available for the exercise of this Warrant such number of
authorized shares of Common Stock as are sufficient to permit the exercise in
full of this Warrant.
(2) Prior to each issuance of any shares of Common Stock upon exercise of
this Warrant, the Corporation shall secure the registration of such shares and
listing upon any securities exchange (including NASDAQ) upon which the shares of
the Corporation's Common Stock may at the time be listed for trading, if any.
(3) The Corporation covenants that all shares of Common Stock when issued
upon the exercise of this Warrant will be validly issued, fully paid,
nonassessable and free of preemptive rights.
ARTICLE II
ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON
STOCK PURCHASABLE UPON EXERCISE
SECTION 2.01 Subject to the provisions of this Article II, the Purchase
Price in effect from time to time shall be subject to adjustment as follows:
(1) In the case the Corporation shall (i) declare a dividend or make a
distribution on the outstanding shares of its Common Stock in shares of its
Common Stock, (ii) subdivide the outstanding shares of its Common Stock into a
greater number of shares, (iii) combine the outstanding shares of its Common
Stock into a smaller number of shares, (iv) issue any shares of its Common Stock
shares, (iv) issue any shares of its Common Stock by reclassification of the
Common Stock, then in each case the Purchase Price in effect immediately after
the record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such dividend,
distribution, subdivision, combination or reclassification, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, subdivision, combination or
reclassification. Any shares of Common Stock of the Corporation issuable in
payment of a dividend shall be deemed to have been issued immediately prior to
the record date for such dividend.
(2) All calculations under this Section 2.01 shall be made to the nearest
whole cent.
SECTION 2.02 Upon each adjustment of the Purchase Price pursuant to
Subsection 2.01(1) each Warrant shall thereupon evidence the right to purchase
the number of shares of Common Stock (calculated to the nearest whole share)
obtained by multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment by the Purchase Price in effect immediately
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<PAGE>
prior to such adjustment and dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment.
SECTION 2.03 In case of any capital reorganization, other than in the
cases referred to in Section 2.01 hereof, or the consolidation or merger of the
Corporation with or into another corporation (other than a merger or
consolidation in which the Corporation is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of the outstanding shares of Common Stock into shares of
other stock or other securities or property), or the sale of the property of the
Corporation as an entirety or substantially as an entirety, or the conversion,
however effected, of the Corporation into another form of entity (collectively
such actions being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant in lieu of the shares of
Common Stock theretofore deliverable upon the Warrant's exercise) the number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock that would otherwise have been deliverable upon the
exercise of such Warrant would have been entitled upon such Reorganization if
such Warrant had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Corporation, shall be
made in the application of the provisions herein set forth with respect to the
rights and interests of Warrant holders so that the provisions set forth herein
shall thereafter be applicable, as nearly as possible without change, to any
shares or other property thereafter deliverable upon exercise of the Warrant.
The Corporation shall not effect any such Reorganization, unless upon or prior
to the consummation thereof the successor entity, or if the Corporation shall be
the surviving entity in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer shall assume by written instrument the obligation to deliver to the
Holder such shares of stock, securities, cash or other property as the Holder
shall be entitled to purchase in accordance with the foregoing provisions. In
the event of a sale or conveyance or other transfer of all or substantially all
of the assets of the Corporation as a part of a plan for liquidation of the
Corporation, all rights to exercise any Warrant shall terminate on the date such
sale or conveyance or other transfer is to be consummated.
SECTION 2.05 The Corporation may select a firm of independent certified
public accountants acceptable to the Holder hereof, which selection may be
changed from time to time, to verify the computations made in accordance with
this Article II. The certificate, report or other written statement of any such
firm shall be conclusive evidence of the correctness of any computation made
under this Article II.
SECTION 2.06 Irrespective of any adjustments pursuant to this Article II,
Warrants theretofore or thereafter issued need not be amended or replaced, but
certificates thereafter issued shall bear an appropriate legend or other notice
of any adjustments.
SECTION 2.07 The Corporation shall not be required upon the exercise of
any Warrant to issue fractional shares of Common Stock that may result from
adjustments in accordance with this
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<PAGE>
Article II to the Purchase Price or number of shares of Common Stock purchasable
under each Warrant. If more than one Warrant is exercised at one time by the
same Holder, the number of full shares of Common Stock that shall be deliverable
shall be computed based on the number of shares of Common Stock deliverable in
exchange for the aggregate number of Warrants exercised. With respect to any
final fraction of a share called for upon the exercise of any Warrant or
Warrants, the Corporation shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the market value of a share
of Common Stock on the business day next preceding the date of such exercise.
The Holder, by his acceptance of the Warrant, shall expressly waive any right to
receive any fractional share of Common Stock upon exercise of the Warrants. For
the purposes of this Section 2.07, the market price per share of Common Stock at
any date shall mean the last reported sale price regular way or, in case no such
reported sale takes place on such date, the average of the last reported bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed if that is
the principal market for the Common Stock or if not listed or admitted to
trading on any national securities exchange or if such national security
exchange is not the principal market for the Common Stock, the closing bid price
(or closing sales price, if reported) as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or its successor, if any. If
the price of the Common Stock is not so reported, then such market price shall
mean the last known price paid per share by a purchaser of such stock in an
arms' length transaction. All calculations under this Section 2.07 shall be made
to the nearest 1/100th of a share.
SECTION 2.08 In no event shall the Purchase Price be adjusted below the
par value per share of the Common Stock.
ARTICLE III
REGISTRATION UNDER THE SECURITIES ACT OF 1933
SECTION 3.01 The shares of Common Stock issuable upon exercise of this
Warrant have been registered under the Act on Form SB-2, SEC File No. 333-_____
(the "Registration Statement") as part of the Underwriters' Purchase Option
Agreement.
Upon exercise, in part or in whole, of this Warrant, the certificates
representing the Shares then issued shall bear the following legend if, in the
opinion of Corporation's legal counsel, such legend is then applicable:
"The shares represented by this certificate have been registered under the
Securities Act of 1933, as amended, solely for sale by the holder of a
warrant to purchase such shares, which holder may be deemed to be an
underwriter of such shares within the provisions and for purposes only of
the Securities Act of 1933, as amended. The issuer of these shares will
agree to a transfer hereof only if (1) an amended or supplemented
prospectus setting forth the terms of the offer has been filed as part of
a post-effective amendment to the Registration Statement under which these
shares are registered or as part of a new registration statement, if then
required, and such
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<PAGE>
post-effective amendment or new registration statement has become
effective under the Securities Act of 1933, as amended, or (2) counsel to
the issuer is reasonably satisfied that no such post-effective amendment
or new registration statement is required."
SECTION 3.02 The Corporation understands and agrees that if at any time
during the period referred to above it should file a registration statement or
offering statement pursuant to the Act for a public offering of securities, the
Corporation, at its own expense, will offer to the Holder the opportunity to
register or qualify the offering and sale of any or all of the Shares.
Registration Rights set forth in Section 9 of the Underwriters' Purchase Option
are incorporated by reference and made a part hereof. This paragraph is not
applicable to a registration statement filed with the Commission on Form S-4 or
S-8, or any successor forms.
SECTION 3.03 In connection with any registration under Section 3.02
hereof, the Corporation covenants and agrees as follows:
(a) The Corporation shall use its best efforts to have any
post-effective amendment or new registration statement declared effective at the
earliest possible time, and shall furnish such number of prospectuses as shall
reasonably be requested by the Holder.
(b) The Corporation shall pay all costs, fees, and expenses in
connection with all post-effective amendments or new registration statements
under Section 3.02 hereof including, without limitation, the Corporation's legal
and accounting fees, printing expenses, blue sky fees and expenses, except that
the Corporation shall not pay any of the following costs, fees or expenses: (i)
underwriting discounts and commissions allocable to the Shares, (ii) state
transfer taxes, (iii) brokerage commissions and (iv) fees and expenses of
counsel and accountants for the holders of the Warrants, and/or Shares.
(c) The Corporation will take all necessary action to qualify or
register the Shares included in a post-effective amendment or new registration
statement for offering and sale under the securities or blue sky laws of such
states as are requested by the holders of such securities, provided that the
Corporation shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the law of any such jurisdiction.
(d) The Holder shall be entitled to pay the Purchase Price for the
shares out of the proceeds of any sale of the securities purchasable upon their
exercise, provided such exercise and sale occur simultaneously.
SECTION 3.04
(1) The Corporation shall indemnify and hold harmless each person
registering the sale of securities pursuant to this Article III (the "Seller")
and each underwriter, within the meaning of the Act, who may purchase from or
sell for any Seller any of the Shares from and against any and
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<PAGE>
all losses, claims, damages and liabilities (collectively, "Liabilities") caused
by any untrue statement or alleged untrue statement of a material fact contained
in any post-effective amendment or new registration statement or any
supplemented prospectus under the Act included therein required to be filed or
furnished by reason of Section 3.02, or caused by any omission or alleged
omission to state therein or necessary to make the statements therein not
misleading, except insofar as such Liabilities are caused by any such untrue
statement or alleged untrue statement or omission or alleged omission based upon
information furnished or required to be furnished in writing to the Corporation
by such Seller or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any such Seller or underwriter
within the meaning of the Act; provided, however, that the indemnity agreement
by the Corporation set forth in this Section 3.04 with respect to any prospectus
that shall be subsequently amended or supplemented prior to the written
confirmation of the sale of any securities shall not inure to the benefit of any
Seller or underwriter from whom the person asserting such Liabilities purchased
securities that are the subject thereof (or to the benefit of any person
controlling such Seller or underwriter), if such Seller or underwriter failed to
send or give a copy of the prospectus as amended or supplemented to such person
at or prior to written confirmation of the sale of such securities to such
person and if such amended or supplemented prospectus did not contain any untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such Liability.
(2) Each Seller that avails itself of the procedures under Article III
shall indemnify, and secure the agreement of any underwriter which the Seller
employs to indemnify, the Corporation, its directors, each officer signing the
related post-effective amendment or registration statement and each person, if
any, who controls the Corporation within the meaning of the Act from and against
any and all Liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any post-effective amendment or
registration statement or any prospectus required to be filed or furnished by
reason of Section 3.02, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as such Liabilities are caused by any
untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished in writing to the Corporation by any such
Seller or underwriter expressly for use therein.
SECTION 3.05 The provisions of this Article III shall continue in effect
regardless of the expiration, exercise or surrender of this Warrant.
ARTICLE IV
OTHER MATTERS
SECTION 4.01 The Corporation will from time to time promptly pay, subject
to the provisions of paragraph (4) of Section 1.02 hereof, all taxes and charges
that may be imposed upon the Corporation in respect of the issuance or delivery
of this Warrant or the shares of Common Stock purchasable upon the exercise of
this Warrant.
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<PAGE>
SECTION 4.02 All the covenants and provisions of this Warrant by or for
the benefit of the Holder or the Corporation shall bind and inure to the benefit
of their respective successors and permitted assigns hereunder.
SECTION 4.03 Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Corporation shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, until another address is designated in writing by the
Corporation, as follows:
Galacticomm Technologies, Inc.
4101 S.W. 47th Ave.
Suite 101
Ft. Lauderdale, Florida 33314
Attention: Chief Executive Officer
With a copy to:
Lucio, Mandler, Croland, Bronstein, Garbett,
Stiphany & Martinez, P.A.
Barnett Bank Tower
701 Brickell Avenue, 20th Floor
Miami, Florida 33131
Attn: Leslie J. Croland, Esq.
Facsimile: (305) 375-8075
Notices to the Holder provided for in this Warrant shall be deemed given
or made by the Corporation if sent by certified or registered mail, return
receipt requested, postage prepaid, and addressed to the Holder at his last
known address as it shall appear on the books of the Corporation.
SECTION 4.04 THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS WARRANT
SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF FLORIDA AND WITHOUT
REGARD TO CONFLICTS OF LAWS.
SECTION 4.05 Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Corporation
and the Holder any right, remedy or claim under promise or agreement hereof, and
all covenants, conditions, stipulations, promises and agreements contained in
this Warrant shall be for the sole and exclusive benefit of the Corporation and
its successors and of the Holder, its successors and permitted assigns.
SECTION 4.06 The headings herein are for convenience only and are not part
of this Warrant and shall not affect the interpretation thereof.
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<PAGE>
IN WITNESS WHEREOF, this, Warrant has been duly executed by the
Corporation under its corporate seal as of the ____ day of __________, 1997.
GALACTICOMM TECHNOLOGIES, INC.
By:______________________
Name:____________________
Title:___________________
[CORPORATE SEAL]
Attest:
_____________________________
Secretary
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<PAGE>
GALACTICOMM TECHNOLOGIES, INC.
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the right to purchase
shares of Common Stock evidenced by the foregoing Warrant.)
Galacticomm Technologies, Inc.
4101 S.W. 47th Ave.
Suite 101
Ft. Lauderdale, FL 33314
The undersigned hereby irrevocably subscribes for the purchase of _____
share(s) of your Common Stock pursuant to and in accordance with the terms and
conditions of this Warrant No. _________, and herewith makes payment, covering
the purchase of such shares. Certificates for the shares of Common Stock should
be delivered to the undersigned at the address stated below. If such number of
shares of Common Stock shall not be all of the shares purchasable hereunder,
please deliver a new Warrant of like tenor for the balance of the remaining
shares purchasable hereunder to the undersigned at the address stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such shares of Common Stock being purchased
hereunder unless either (a) a registration statement, or post-effective
amendment thereto, covering the sale of such shares of Common Stock has been
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Act"), and such sale, transfer or other disposition is
accompanied by a prospectus meeting the requirements of Section 10 of the Act
forming a part of such registration statement, or post-effective amendment
thereto, which is in effect under the Act covering the sale of the shares of
Common Stock to be sold, transferred or otherwise disposed of, or (b) counsel
acceptable to Galacticomm Technologies, Inc. and satisfactory to the undersigned
has rendered an opinion acceptable to the Company in writing and addressed to
the Company that such proposed offer, sale, transfer or other disposition of the
shares of Common Stock is exempt from the provisions of Section 5 of the Act in
view of the circumstances of such proposed offer, sale, transfer or other
disposition; (2) the Company may notify the transfer agent for its Common Stock
that the certificates for the Common Stock acquired by the undersigned pursuant
hereto are not to be transferred unless the transfer agent receives notice from
the Company that at least one of the conditions referred to in (1)(a) and (1)(b)
above has been satisfied; and (3) the Company may affix the legend set forth in
Section 3.01 of the Warrant to the certificates for shares of Common Stock
hereby subscribed for, if such legend is applicable.
Dated:_________________ Signed:______________________________
Signature guaranteed: Address______________________________
______________________________
______________________________
<PAGE>
GALACTICOMM TECHNOLOGIES, INC.
ASSIGNMENT FORM
(To be executed by the registered holder to effect assignment of the
foregoing Warrant)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns and
transfers unto _________________________________ the right to purchase ______
shares of Common Stock, par value $ _____ per share of the Corporation
purchasable pursuant to the within Warrant No. _______, on the terms and
conditions set forth therein, and does hereby irrevocably constitute and appoint
_____________________________________ and/or its transfer agent Attorney, to
transfer on the books of the Corporation Warrants representing such rights, with
full power of substitution.
Dated:__________________
Signed:______________________________
Signature guaranteed:
__________________________
EXHIBIT 4.6
THE UNDERWRITER'S OPTION REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S OPTIONS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S PURCHASE OPTION
AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., MIAMI, FLORIDA TIME,___________________
No. U.0.1 Underwriters' Option
UNDERWRITERS' PURCHASE OPTION CERTIFICATE
This Underwriters' Purchase Option Certificate certifies that First Equity
Corporation of Florida or registered assigns (the "Holder" or "Holders"), is the
registered holder of options ("Underwriters' Options") under an Underwriters'
Purchase Option Agreement (the "Underwriters' Purchase Option") dated as of
______________________________ between Galacticomm Technologies, Inc. (the
"Company"), First Equity Corporation of Florida and ___________________________,
to purchase initially, at any time from ___________________________ until 5:00
p.m. Miami, Florida time on ("Expiration Date"), up to 120,000 Units of the
Company, each Unit consisting of one (1) share of Common Stock of the Company,
par value $.0001 per share, and one (1) Common Stock Purchase Warrant, at a
price of $ ____________ per unit (the "Exercise Price"), upon surrender of this
Underwriters' Option Certificate and payment of the aggregate amount of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Underwriters' Purchase Option. Payment of
the Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company.
No Underwriters' Option may be exercised after 5:00 p.m. Miami, Florida
time, on the Expiration Date, at which time all Underwriters' Options evidenced
hereby, unless exercised prior thereto, shall thereafter be void.
The Underwriters' Options evidenced by this Underwriters' Purchase Option
Certificate are part of a duly authorized issue of warrants pursuant to the
Underwriters' Purchase Option, which Underwriters' Purchase Option is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the Holders.
<PAGE>
The Underwriters' Purchase Option provides that upon the occurrence of
certain events the Exercise Price and number of Units issuable upon execution
thereof, may, subject to certain conditions, be adjusted. In such event, the
Company will, at the request of the Holder, issue a new Underwriters' Purchase
Option Certificate evidencing the adjustment in the exercise price and the
number and/or type of securities issuable upon the exercise of the Underwriters'
Purchase Options; provided, however, that the failure of the Company to issue
such new Underwriters' Purchase Option Certificates shall not in any way change,
alter or otherwise impair, the rights of the holder as set forth in the
Underwriters Purchase Option.
Upon due presentment for registration of transfer of this Underwriters'
Purchase Option Certificate at an office or agency of the Company, a new
Underwriters' Purchase Option Certificate or Certificates of like tenor and
evidencing in the aggregate a like number of Underwriters' Options shall be
issued to the transferees in exchange for this Underwriters' Purchase Option
Certificate, subject to the limitations provided herein and in the Underwriters'
Purchase Option, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise or transfer of less than all of the Underwriters'
Purchase Options evidenced by this Certificate, the Company shall forthwith
issue to the Holder hereof a new Underwriters' Purchase Option Certificate
representing such number unexercised and nontransferred Underwriters' Purchase
Options.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Underwriters' Purchase Option Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
All defined terms used in this Underwriters' Purchase Option Certificate
which are variously defined in the Underwriters' Purchase Option shall herein
have the meanings assigned to them.
IN WITNESS WHEREOF, the Company has caused this Underwriters' Purchase
Option Certificate to be duly executed under its corporate seal.
Dated as of____________________
GALACTICOMM TECHNOLOGIES, INC.
[SEAL]
Attest: By:_____________________________
Name:___________________________
Title:__________________________
_________________________________
Secretary
2
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Underwriters' Purchase Option Certificate, to purchase
________ Units and herewith tenders in payment for such securities a certified
or official bank check payable in New York Clearing House Funds to the order of
Galacticomm Technologies, Inc. in the amount of $_________, all in accordance
with the terms hereof. The undersigned requests that a certificate for such
securities be registered in the name of ____________________
_________________________ whose address is_____________________________________
_______________________________________________________________________________.
Dated:
___________________________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
the Underwriters' Purchase Option
Certificate.)
___________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
3
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AMONG
I-VIEW SOFTWARE, INC.,
AS SELLER,
PETER BERG,
YANNICK TESSIER
AND
HEMINGFOLD INVESTMENTS, LTD.,
AS PURCHASER
NOVEMBER 21, 1996
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated November 21, 1996 among
I-VIEW SOFTWARE, INC., a Florida corporation (the "Company"), Peter Berg
("Berg"), Yannick Tessier ("Tessier"), and HEMINGFOLD INVESTMENTS, LTD.
("Purchaser").
RECITALS:
A. The Company wishes to issue 1,984,127 shares (the "Shares") of its
common stock, par value $0.0001 per share, (the "Common Stock") to Purchaser at
a price of $0.63 per share, in exchange for aggregate consideration in the
amount of $1,250,000, (the "Purchase Price")
B. Purchaser wishes to purchase the Shares in accordance with the terms
and conditions contained herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Adult Entertainment" means entertainment which contains sexually
explicit content.
1.2 "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
Controls, is controlled by, or is under common control with, such specified
Person.
1.3 "Assets" means all the properties and assets used or intended to be
used or required by the Company and each Subsidiary in the conduct of the
Business or a Subsidiary's business and which are material and, with respect to
contract rights, is a party to and enjoys the right to the benefits of all
material contracts and agreements used and/or intended to be used by the Company
or a Subsidiary or required in or relating to the conduct of the Business
1.4 "Bankruptcy" means: (a) an adjudication of bankruptcy under the U.S.
Bankruptcy Reform Act of 1978, as amended, or any successor statute; (b) the
specified Person stops payment of, is deemed unable, or otherwise admits
inability to pay, its debts or becomes or is deemed to be insolvent; (c) the
presentation of a petition for or the making of a winding up or administration
order in respect of the specified Person; (d) an assignment for the benefit of
creditors; (e) the specified Person either does, resolves to do or commences
negotiations with a view to doing any of the following: (i) makes a general or
special arrangement or composition (whether voluntary or compulsory) with its
creditors or any class of creditors, (ii) declares or agrees to a moratorium, or
(iii) issues a notice convening a meeting to resolve to do any of the foregoing;
(f) the filing of a voluntary petition in bankruptcy, winding-up or
reorganization or the passing of a resolution for voluntary liquidation,
reconstruction or winding up; or (g) the
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failure to vacate the appointment of a receiver, trustee, provisional liquidator
or administrative receiver for any part or all of the assets or property of a
party within 60 days from the date of such appointment.
1.5 "Board" means the Board of Directors of the Company.
1.6 "Business" means the development, production and distribution of
computer software and hardware, as well as related peripherals.
1.7 "Business Day" means any day that is not a Saturday or a Sunday and on
which banks are open for the conduct of normal banking business in the city of
Miami, Florida.
1.8 "Confidential Information"of any party means all data, reports,
interpretations, forecasts and records containing or otherwise reflecting
information concerning the transactions contemplated hereby which is of a
confidential nature, not available to the general public and which such party
provides or has previously provided to the other party at any time pursuant to
or in connection with this Agreement. "Confidential Information" includes any
information obtained by a meeting with personnel or a representative of a party
or its subsidiaries, together with analyses, compilations, studies or other
documents prepared by the party obtaining the information, which contain the
Confidential Information. However, "Confidential Information" does not include
any information which: (a) at the time of disclosure or thereafter is available
to the public (other than as a result of a disclosure by a party or its
Representative in violation of the terms of this Agreement); or (b) was or
becomes available to a party or its Representatives (collectively, the "Informed
Party") from a source other than the other party, unless the Informed Party
knows that the source is bound by the terms of a confidentiality agreement with
the other party.
1.9 "Control" (including the terms "controlling," "controlled by" and
"under common control with"), with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
1.10 "Current Number" shall have the meaning set forth in Section
8.2(a)(ii) hereof.
1.11 "Demand Registrable Securities" means, the Shares and any other
shares of Common Stock received by Purchaser as a result of the preemption,
anti-dilution and ratchet rights contained herein. However, any such shares
shall be "Demand Registrable Securities" only so long as they are "Restricted
Securities". Any share or other security shall be deemed a "Restricted Security"
until such time as such share or other security: (a) has been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement
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covering it; or (b) has been sold pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
1.12 "Demand Registration" shall have the meaning set forth in Section
6.2(a) hereof.
1.13 "Dilution Shares" means, collectively, the Dilutive Shares, the
Dilutive Rights Shares and Excess Existing Rights Shares.
1.14 "Dilutive Rights Shares" has the meaning set forth in Section
1.16(a)(ii) hereof.
1.15 "Dilutive Shares" has the meaning set forth in Section 1.16(a)(i)
hereof
1.16 "Dilutive Issuance" means the occurrence of:
(a) any sale or issuance by the Company, at any time, or the entering
into by the Company of any agreement, arrangement or understanding (whether
conditional or unconditional) for the sale or issuance by the Company of:
(i) any shares ("Dilutive Shares") of Common Stock for
consideration per share (the "Issue Price") of less than the Per Share Purchase
Price, other than (A) the issuance of Existing Rights Shares upon the exercise
of Existing Rights; (B) any sale or issuance to Purchaser pursuant to Section
8.1 or (C) any issuance as a dividend upon or by reason of a split-up of the
Common Stock in which Purchaser participates on the same basis as all other
holders of Common Stock receiving such dividend or shares on consummation of
such split-up;
(ii) any Rights to acquire (conditionally or unconditionally) any
shares ("Dilutive Rights Shares") of Common Stock where the sum (the "Rights
Issue Price") of (A) the consideration paid or payable for any such Right
entitling the holder thereof to acquire one share of Common Stock, plus (B) such
additional consideration paid or payable upon exercise of such Right to acquire
on share of Common Stock, is less than the Per Share Purchase Price; or
(b) any sale or issuance by the Company, at any time, of any Excess
Existing Rights Shares for consideration per share (the "Excess Existing Rights
Exercise Price") of less than the Per Share Purchase Price.
For purposes of this Agreement, (a) each Dilutive Issuance of Common
Stock shall be deemed to involve the issuance of the maximum number of Dilutive
Shares which are sold or issued in such Dilutive Issuance or which are the
subject of the agreement, arrangement, or understanding for sale or issuance
involved in such Dilutive Issuance, regardless of whether all or any of such
shares are actually sold or issued and regardless of whether such agreement is
legally binding and enforceable; (b) each Dilutive Issuance of Rights shall be
deemed to involve the issuance of the maximum number of Dilutive Rights Shares
issuable upon exercise of such Rights (regardless of whether such Rights are
presently exercisable or are ever exercised or of the existence of any
provisions for adjustment in the number of shares of Common Stock issuable
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upon exercise of such Rights or in the applicable Rights Issue Price); and (c)
the date of occurrence of any Dilutive Issuance shall be the date of the sale or
issuance or the entering into of the agreement, arrangement or understanding for
the sale or issuance of the shares of Common Stock or Rights involved.
1.17 "Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, option, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
1.18 "Environmental Laws" means any foreign, federal, state or local
statute, code, ordinance, rule, regulation, permit, consent, approval, license,
judgment, order, writ, judicial decision, common law rule, decree, agency
interpretation, injunction or other authorization or requirement whenever
promulgated, issued, or modified, including the requirement to register
underground storage tanks, relating to:
(a) emissions, discharges, spills, releases or threatened releases of
pollutants, contaminants, Hazardous Substances (as hereinafter defined),
materials containing Hazardous Substances, or hazardous or toxic materials or
wastes into ambient air, surface water, groundwater, watercourses, publicly or
privately owned treatment works, drains, sewer systems, wetlands, septic systems
or onto land;
(b) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Substances, materials containing
Hazardous Substances or hazardous and/or toxic wastes, material, products or
by-products (or of equipment or apparatus containing Hazardous Substances) as
defined in or regulated under the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.,
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. ss. 9601
et seq., and/or the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
each as amended from time to time; or
(c) otherwise relating to pollution or the protection of human health
or the environment.
1.19 "Excess Existing Rights Shares" means either:
(a) the number of shares (if any) of Common Stock issuable upon
exercise of an Existing Right after a Modification, which are in excess of the
number of share issuable upon exercise of a an Existing Right without such
Modification; or
(b) the number of shares (if any) of Common Stock issuable upon the
exercise of an Existing Right after a Modification, where the consideration per
share at which the shares
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of Common Stock are issuable, is less than the consideration per share at which
the shares would have been issued without such Modification.
1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.21 "Existing Right" means any of the Rights set forth on SCHEDULE 1.21
hereto.
1.22 "Existing Rights Shares" means, as of any time, the shares of Common
Stock issuable at such time upon exercise of any of the Existing Rights pursuant
to the terms of such Existing Rights as in effect on the date hereof. .
1.23 "GAAP" means United States generally accepted accounting principles
and practices as in effect during the relevant period and applied consistently
throughout the periods involved.
1.24 "Governmental Authority" means any federal, state or local, or
foreign government, governmental, regulatory or administrative authority (or
subdivision thereof) and any agency or commission or any court, tribunal or
judicial or arbitral body that has jurisdiction over Purchaser, the Business,
the "Company" or their respective assets.
1.25 "Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
1.26 "Intellectual Property" means: (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications; (b) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications; (c) national and multinational statutory invention registrations,
patents, patent registrations and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations)
and all rights therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application; (d) trademarks, service marks, trade dress, logos, trade names and
corporate and partnership names, whether or not registered, including all common
law rights, and registrations and applications for registration thereof; (e)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by international treaties
or conventions; (f) moral rights (including, without limitation, rights of
paternity and integrity), and waivers of such rights by others; (g) trade
secrets and confidential, technical and business information; (h) copies and
tangible embodiments of all the foregoing, in whatever form or medium; (i) all
rights to obtain and rights to apply for patents, and to register trademarks and
copyrights; (j) all rights to sue or recover and retain damages and costs and
attorneys' fees for present and past infringement of any of the foregoing; and
(k) all goodwill associated with the foregoing.
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1.27 "Issue Price" has the meaning set forth in Section 1.16(a)(i) hereof.
1.28 "Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law
issued by any Governmental Authority.
1.29 "Material Adverse Effect" means any circumstance, change in, or
effect on the business of any party hereto that could reasonably be expected to
have a materially adverse effect on the business, operations, assets or
liabilities, results of operations or the financial condition of such party.
1.30 "Merger" means the merger of the Company and Tessier Technologies,
Inc.
1.31 "Modification" means the amendment, modification, supplementation,
extension, renewal or replacement of Existing Rights, at time after the date
hereof.
1.32 "Per Share Purchase Price" shall have the meaning set forth in
Section 8.2(a)(ii).
1.33 "Person" means any individual, partnership, firm, corporation,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
1.34 "Piggyback Registrable Securities" means the Shares and any other
shares of Common Stock received by Purchaser as a result of the preemption,
anti-dilution and ratchet rights contained herein. However, any such shares
shall be "Registrable Securities" only so long as they are "Restricted
Securities". Any share or other security shall be deemed a "Restricted Security"
until such time as such share or other security (i) has been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering it, or (ii) has been sold pursuant to Rule 144
(or any similar provision then in force) under the Securities Act.
1.35 "Piggyback Registration" shall have the meaning set forth in Section
6.1(a) hereof.
1.36 "Purchase Price" shall have the meaning set forth in Recital A
hereof.
1.37 "Receivables" means any and all accounts, notes and other receivables
of the Company or a Subsidiary from third parties, including, without
limitation, customers, arising from the conduct of the Business or otherwise
before the date hereof, whether or not in the ordinary course, together with all
unpaid financing charges accrued thereon.
1.38 "Registration Expenses" shall have the meaning set forth in Section
6.3(d) hereof.
1.39 "Representative" means, with respect to a party hereto, such party's
directors, officers, employees or attorneys, accountants and other agents and
representatives who have need
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to know Confidential Information of the other party hereto, in order to perform
their duties or services.
1.40 "Request Securities" shall have the meaning set forth in Section 6.3
hereof.
1.41 "Rights" means any options, warrants or other agreements for the
purchase of Voting Stock.
1.42 "Rights Issue Price" shall have the meaning set forth in Section
1.16(a)(ii).
1.43 "SEC" means the United States Securities and Exchange Commission.
1.44 "Securities Act" means the Securities Act of 1933, as amended.
1.45 "Shares" shall have the meaning set forth in Recital A hereof.
1.46 "Subsidiary" means a Person which is Controlled by the Company
1.47 "Tax" or "Taxes" means any and all taxes, stamp duties, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs duties, tariffs, and
similar charges.
1.48 "Voting Stock" means any class of capital stock of the Company with
general voting rights for the election of directors.
1.49 "Weighted Average Price" means, when used in any calculation herein,
the quotient obtained by dividing:
(a) the sum of (i) the aggregate Issue Price of all Dilutive Shares,
if any, issued in a Dilutive Issuance and in all prior Dilutive Issuances (if
any) plus (ii) the aggregate Rights Issue Price of all Dilutive Rights Shares,
if any, issued in such Dilutive Issuance and in all prior Dilutive Issuances (if
any) plus (iii) the aggregate Excess Existing Rights Exercise Price of all
Excess Existing Rights Shares, if any, issued in a Dilutive Issuance and in all
prior Dilutive Issuances (if any) ; by
(b) the aggregate number of Dilutive Shares (if any) and Dilutive
Rights Shares (if any) issued in such Dilutive Issuance and in all prior
Dilutive Issuances (if any)
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ARTICLE II
PURCHASE AND SALE
Based upon the representations and warranties, set forth herein, Purchaser
hereby purchases from the Company, and the Company hereby sells and issues to
Purchaser, the Shares free and clear of any and all Encumbrances other than
those restrictions imposed by this Agreement or by applicable United States
federal and state securities laws. In consideration of and in full payment for
the Shares, Purchaser hereby pays the Purchase Price to the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, BERG AND TESSIER
As of the date hereof, each of Berg (solely with regard to the Company, as
in existence immediately prior to the Merger), Tessier (solely with regard to
Tessier Technologies, Inc. ("TTI"), as in existence immediately prior to the
Merger) and the Company severally, represent and warrant to Purchaser, as
follows:
3.1 ORGANIZATION, QUALIFICATION, ETC. OF THE COMPANY. Each of the Company
and each Subsidiary is a duly organized and validly existing corporation under
the Laws of the State of Florida and have all necessary corporate power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it has been, is currently and is
anticipated to be conducted. The Company and each Subsidiary are duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the properties owned or leased by them or the operation of their
respective businesses makes such licensing or qualification necessary, except
where the failure to be so licensed, qualified or in good standing does not have
a Material Adverse Effect. All material corporate actions taken by the Company
and each Subsidiary have been duly authorized and neither the Company nor any
Subsidiary has taken any action that in any respect conflicts with, constitutes
a default under or results in a violation of any provision of their respective
Articles of Incorporation or Bylaws (collectively, the "Articles of
Incorporation").
3.2 AUTHORITY OF THE COMPANY. The Company has all necessary power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and (assuming due authorization,
execution and delivery by Purchaser) constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforcement may be subject to (a) Bankruptcy or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
3.3 NO CONFLICT. The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby do
not and will not: (a)
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conflict with or violate any Law or Governmental Order applicable to the Company
or a Subsidiary, which violation or conflict would, individually or in the
aggregate, have a Material Adverse Effect on the Company or a Subsidiary, the
Business or on the transactions contemplated hereby; or (b) conflict with,
result in any breach of, constitute a default (or an event which with the giving
of notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Company or
a Subsidiary, or the Business pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument, agreement or arrangement to which the Company or a Subsidiary
is a party or by which any of such assets or properties is bound or affected,
which conflict or violation would, individually or in the aggregate, have a
Material Adverse Effect on the ability of the Company to consummate the
transactions contemplated hereby or on a Subsidiary or the Business.
3.4 CAPITALIZATION OF THE COMPANY. SCHEDULE 3.4 accurately sets forth the
names of the holders of: (a) all of the outstanding capital stock of the Company
and the number of shares owned by each such stockholder; (b) all Rights relating
to the issuance of capital stock of the Company. SCHEDULE 3.4 also sets forth
the material terms of each of the Rights. Each outstanding share of capital
stock of the Company has been duly and validly authorized and issued and is
fully paid and owned, beneficially and of record, by the stockholder(s) listed
on SCHEDULE 3.4.
3.5 THE SHARES. All of the Shares are duly authorized and validly issued,
fully paid, non-assessable, with all documentary stamp taxes of any kind prepaid
and free and clear of all Encumbrances, other than those restrictions imposed by
this Agreement or by applicable United States federal and state securities laws.
3.6 REGISTRATION OF SHARES. Assuming that Purchaser's representations and
warranties contained herein are true and correct, the offering, issuance, sale
and delivery of the Shares are and shall be exempt from the registration
requirements of the Securities Act.
3.7 SUBSIDIARIES. SCHEDULE 3.7 is a true and complete list of all of the
Company's Subsidiaries. For each Subsidiary, SCHEDULE 3.7 sets forth: (a) the
Subsidiary's name; (b) the Subsidiary's jurisdiction of incorporation; (c) the
Subsidiary's principal office address; (d) the Subsidiary's principal business;
and (d) the percentage of the Subsidiary owned by the Company.
3.8 TITLE TO THE ASSETS. The Company, TTI and each Subsidiary has good
title to or, in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all of their respective Assets, free and clear of all
Encumbrances. All the Assets are in good operating condition and repair,
ordinary wear and tear excepted, and are suitable for the purposes for which
they are used and intended.
3.9 CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by the Company do not and will not require any consent, approval,
authorization or
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other order of, action by, filing with or notification to any Governmental
Authority or any third party.
3.10 FINANCIAL INFORMATION. All balance sheets, profit and loss accounts
and all other financial information of which have been made available to
Purchaser by or on behalf of the Company, TTI and each Subsidiary for the
purposes of or in connection with this Agreement or any transaction contemplated
hereby have been prepared in accordance with GAAP, consistently applied
throughout the periods involved (except as disclosed therein) and give a true
and fair view of the state of affairs of the Company, TTI and each Subsidiary as
of the dates thereof and the results of its operations for the periods then
ended, subject to year-end adjustments consisting only of normal recurring
accruals.
3.11 BOOKS AND RECORDS. The books of account and other financial records
of the Company, TTI and each Subsidiary: (a) reflect all items of income and
expense and all assets and liabilities required to be reflected therein, except
to the extent that the omission to reflect such items could not, individually or
in the aggregate, have a Material Adverse Effect on the Business or the business
of TTI or a Subsidiary; (b) are complete and correct, not misleading and do not
contain or reflect any inaccuracies or discrepancies; and (c) have been
maintained in accordance with good business and accounting practices.
3.12 RECEIVABLES. All Receivables reflected on the most recent balance
sheets of the Company, each Subsidiary and TTI arose from, and the Receivables
existing as of the date hereof have arisen from, the sale of services to persons
not Affiliated with the Company, Berg or Tessier and in the ordinary course of
its business consistent with past practice and constitute or will constitute, as
the case may be, only valid, undisputed claims of the Company, each Subsidiary
and TTI, respectively, not subject to valid claims of set-off, off-set or other
defenses or counterclaims. The financial statements of the Company, each
Subsidiary and TTI make full provision for all doubtful debts and all bad debts
have been written off.
3.13 LITIGATION. There are no actions, disputes or claims being brought or
threatened by or against the Company, TTI or any Subsidiary (or any of the
directors, officers, employees or agents of the Company, TTI or any Subsidiary),
or affecting any of the Assets which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect. None of the Company, TTI, any
Subsidiary or the Assets are subject to any Law or Governmental Order which has
or could reasonably be expected to have a Material Adverse Effect.
3.14 CONDUCT OF BUSINESS IN THE ORDINARY COURSE. The Company, TTI and each
Subsidiary have conducted the Business only in the ordinary course and
consistent with past practice.
3.15 COMPLIANCE WITH LAWS. The Company, TTI and each Subsidiary have
conducted and continue to conduct their respective businesses in all material
respects in accordance with all Laws and all Governmental Orders entered by or
with any Governmental Authorities, and the Company, TTI and each Subsidiary are
in compliance with all such Laws or Governmental Orders.
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3.16 ENVIRONMENTAL COMPLIANCE. The Company, TTI and each Subsidiary and
the Real Property (as hereinafter defined) are, and at all times have been, in
compliance with all applicable Environmental Laws.
3.17 CONTRACTS.
(a) The Company has, or has caused to be, made available to Purchaser
for review and duplication, correct and complete copies (or in the case of oral
contracts, summaries thereof) of all of the following contracts and agreements
of the Company and each Subsidiary, together with all material contracts,
agreements, leases and subleases to which the Company and each Subsidiary is a
party concerning the management or operation of any real property and all
material agreements relating to Intellectual Property (such material contracts
and agreements, listed on SCHEDULE 3.17(A), collectively, "Material Contracts"):
(i) each contract and agreement for the purchase of inventory or
personal property with any supplier or for the furnishing of services to the
Company or a Subsidiary, or otherwise related to the Business under the terms of
which the Company or a Subsidiary; (A) is reasonably anticipated to pay or
otherwise give consideration of more than $5,000 in the aggregate over the
remaining term of such contract or (B) cannot cancel without penalty or further
payment and without more than 30 days' notice;
(ii) each contract and agreement for the sale of inventory or
other personal property or for the furnishing of services by the Company or a
Subsidiary which: (A) is reasonably anticipated to involve consideration of more
than $5,000 in the aggregate during the fiscal year ending December 31, 1996 or
in any fiscal year thereafter, (B) is reasonably anticipated to involve
consideration of more than $5,000 in the aggregate over the remaining term of
the contract or (C) cannot be cancelled by the Company or a Subsidiary without
penalty or further payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research, marketing,
consulting and advertising contracts and agreements to which the Company or a
Subsidiary is a party;
(iv) all management contracts and contracts with independent
contractors, consultants or other persons (including Affiliates) (or similar
arrangements) involving exclusive rights or requiring payments in excess of
$5,000 individually to which the Company or a Subsidiary is a party and which
are not cancelable without penalty or further payment on 30 days' or less
notice;
(v) all contracts and agreements relating to indebtedness of the
Company or a Subsidiary in excess of $5,000 individually or $5,000 in the
aggregate;
(vi) all contracts and agreements with any Governmental Authority
to which the Company or a Subsidiary is a party;
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(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or a Subsidiary to compete in any line of business,
or with any person, or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among the Company
or a Subsidiary on the one hand and any Affiliate of the Company or a Subsidiary
on the other hand;
(ix) all leases and subleases for tangible personal property
having a value in excess of $5,000; for purposes of this Agreement, the term
"lease" shall include any and all leases, subleases, sale/leaseback agreements
or similar arrangements;
(x) all contracts relating to Intellectual Property and all
contracts relating to real property owned, leased or used by the Company or a
Subsidiary; and
(xi) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to the Company, a Subsidiary
or the conduct of the Business.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated hereby shall continue in full
force and effect without penalty or other adverse consequence. Neither the
Company nor any Subsidiary is, and no other party to any Material Contract is,
in breach of or default under any Material Contract, which breach or default
would have a Material Adverse Effect on the Company or any Subsidiary.
(c) There is no contract, agreement or other arrangement granting any
person any preferential right to purchase, other than in the ordinary course of
Business consistent with past practice, any of the properties, assets or
services of the Company or any Subsidiary.
(d) There is not now outstanding any guarantee or agreement for
indemnity or for suretyship either given by or for the benefit of the Company or
any Subsidiary.
3.18 INTELLECTUAL PROPERTY.
(a) The Company has heretofore made available to Purchaser a true and
complete list of all Intellectual Property which the Company and each Subsidiary
own or have the right to use. The Company and each Subsidiary have full
ownership thereof or the right to use all such rights, in each case except to
the extent heretofore disclosed in writing to Purchaser, and the Company has no
knowledge that the conduct of the Business and the business of each Subsidiary
as now operated, as of the date hereof, conflicts with, misappropriates or
infringes, or has been alleged to infringe, any Intellectual Property rights or
franchises of any person (including patents, trade secrets or other proprietary
rights of any third party). The Company has heretofore made available to
Purchaser a true and complete copy of every material license or
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other material agreement, including all amendments thereto, pursuant to which
the Company or any Subsidiary agreed to grant or has granted rights with respect
to the Intellectual Property, or pursuant to which the Company or any Subsidiary
enjoys rights in any Intellectual Property of any person. No current or former
consultant, employee or Affiliate of the Company or any Subsidiary, or any of
their respective shareholders, officers or directors has any right, title or
interest in any of the Intellectual Property used and/or owned by the Company or
any Subsidiary.
(b) None of the Intellectual Property owned by or licensed to the
Company or any Subsidiary is being infringed by any person.
(c) The Intellectual Property heretofore disclosed in writing to
Purchaser comprises all of the Intellectual Property required to enable the
Company and each Subsidiary to lawfully carry on their respective businesses, as
now conducted.
3.19 REAL PROPERTY. The particulars of the real property set forth on
SCHEDULE 3.19 attached hereto (the "REAL PROPERTY") are true and correct in all
respects and the Company and each Subsidiary have good and marketable title to
their respective Real Property free from Encumbrances and other adverse rights.
The Real Property comprises all the real property owned, used or occupied by the
Company and each Subsidiary in connection with their respective businesses and
neither the Company nor any Subsidiary has ever owned any interest in any other
real property other than the Real Property. There is no violation of any Law
(including, without limitation, any building, planning, zoning law or
environmental law) or any covenants, stipulations or conditions relating to any
of the Real Property and the Company and each Subsidiary are in peaceful and
undisturbed possession of each parcel of Real Property. There are no contractual
or legal restrictions that preclude or restrict in any material manner the
ability to use any of the Real Property in the manner in which they are
currently being used and the Real Property has all rights and easements
reasonably necessary for their use and enjoyment for the purposes of the
Business. Neither the Company nor any Subsidiary is leasing or subleasing and
has not leased or sublet any parcel or any portion of any parcel of Real
Property to any other Person, nor has the Company or any Subsidiary assigned its
interest under any lease or sublease for any leased Real Property to any third
party. There are no outstanding material disputes with any Person relating to
the Real Property or its use and no notices have been given or received by the
Company or any Subsidiary which would adversely affect the use and enjoyment of
the Real Property.
3.20 TAXES.
(a) Except as disclosed on SCHEDULE 3.20(A): (i) all returns and
reports in respect of all Taxes required to be filed with respect to the
Company, TTI and each Subsidiary and the Business have been timely filed; (ii)
all Taxes required to be shown on such returns and reports or otherwise due have
been timely paid; (iii) all such returns and reports are true, correct and
complete; (iv) no adjustment relating to such returns has been proposed by any
tax authority and no basis exists for any such adjustment; (v) there are no
pending or threatened actions or proceedings for the assessment or collection of
Taxes against the Company, TTI or any
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Subsidiary; (vi) there are no Encumbrances on any Assets; (vii) none of the
Company, TTI or any Subsidiary has been at any time a member of any partnership
or joint venture or the holder of a beneficial interest in any trust for any
period for which the statute of limitations for any Tax has not expired; and
(viii) all Taxes required to be withheld, collected or deposited by or with
respect to the Company, TTI, each Subsidiary and the Business have been timely
withheld, collected or deposited, as the case may be, and, to the extent
required, have been paid to the relevant taxing authority.
(b) Except as disclosed on SCHEDULE 3.20(B): (i) there are no
outstanding waivers or agreements extending the statute of limitations for any
period with respect to any Tax to which the Company, TTI or any Subsidiary may
be subject; (ii) there are no proposed reassessments of any property owned by
the Company, TTI or any Subsidiary or other proposals that could increase the
amount of any Tax to which the Company, TTI or any Subsidiary would be subject;
and (iii) no power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect the Company, TTI or
any Subsidiary.
(c) The Company has made available to Purchaser correct and complete
copies of all federal, state and foreign income, franchise and similar tax
returns of the Company, TTI and each Subsidiary since 1993, and correct and
complete summaries of all examination reports, and statements of deficiencies
assessed against or agreed to by the Company, TTI and each Subsidiary since
1993.
3.21 DIVESTMENT OF ADULT ENTERTAINMENT BUSINESS. Each of the Company,
Berg, Tessier and their respective Affiliates have divested themselves of any
legal or beneficial interest in any business which is involved in Adult
Entertainment.
3.22 MERGER WITH TESSIER TECHNOLOGIES. The Company and TTI have completed
the Merger.
3.23 BROKERS. Except as disclosed on SCHEDULE 3.23, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement or
the Concurrent Transactions based upon arrangements made by or on behalf of the
Company.
3.24 FULL DISCLOSURE. No representation or warranty with respect to the
Company contained in this Agreement and no written statement contained in any
financial or operating data or certificate furnished to Purchaser pursuant to
this Agreement, or in connection with the transactions contemplated by this
Agreement (including the Concurrent Transactions), contains any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date hereof, Purchaser represents and warrants to the Company,
as follows:
4.1 ORGANIZATION, QUALIFICATION, ETC. OF PURCHASER. If not an individual,
Purchaser is duly organized and validly existing company under the Laws of its
place of incorporation and has all necessary corporate power and authority to
own, operate or lease the properties and assets now owned, operated or leased by
it and to carry on its business as it has been, is currently and is anticipated
to be conducted. If not an individual, Purchaser is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing does not have, or could not reasonably
be expected to have, a Material Adverse Effect.
4.2 AUTHORITY OF PURCHASER. If not an individual, Purchaser has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. If not an individual, the execution and delivery of this Agreement by
Purchaser, the performance by Purchaser of its obligations hereunder and the
consummation by Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and (assuming due
authorization, execution and delivery by the Company) constitutes the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforcement may be subject to: (a)
Bankruptcy or other similar laws now or hereafter in effect relating to
creditors' rights generally; and (b) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
4.3 NO CONFLICT. The execution, delivery and performance of this Agreement
by Purchaser and the consummation of the transactions contemplated hereby do not
and will not: (a) if not an individual, violate, conflict with or result in the
breach of any provision of Purchaser's organizational documents; or (b) conflict
with or violate any Law or Governmental Order applicable to Purchaser, which
violation or conflict could, individually or in the aggregate, have a Material
Adverse Effect on Purchaser.
4.4 CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by Purchaser do not and will not require any consent, approval,
authorization or other order of, action by, filing with, or notification to, any
Governmental Authority or any third party.
4.5 INVESTOR STATUS. Purchaser is a sophisticated investor and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Company represented by
the Shares. Purchaser is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
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4.6 INVESTMENT INTENT AND RESTRICTION ON TRANSFER. Purchaser is acquiring
the Shares for its own account and for investment and not with a view towards,
or for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the Shares. However, the Company, Berg and
Tessier understand that the disposition of any of Purchaser's property is within
its discretion, subject to compliance with federal and state securities laws and
the restrictions contained herein.
4.7 NON U.S. PERSON. Purchaser is not a U.S Person ("U.S. Person"), as
such term is defined in Rule 902(o) under Regulation S promulgated under the
Securities Act.
4.8 OFFSHORE TRANSACTION. No offer of the Shares was made to Purchaser in
the United States. At the time the offer for the Shares was made, Purchaser was
located outside the United States.
4.9 RESTRICTIONS ON TRANSFER. Purchaser understands that the Shares have
not been registered under the Securities Act. During the period commencing on
the date hereof and terminating one (1) year after the date hereof (the
"Restricted Period"), Purchaser shall not offer or sell the Shares in the United
States, to a U.S. Person or for the account or benefit of a U.S. Person. After
the expiration of the Restricted Period, Purchaser may offer, sell, pledge or
otherwise transfer the Shares only if registered under the Securities Act or if,
in the opinion of counsel reasonably satisfactory to the Company, an exemption
from registration is available.
4.10 NO SCHEME TO AVOID REGISTRATION. The transactions contemplated by
this Agreement: (i) have not been pre-arranged with a purchaser that is located
in the United States or is a U.S. Person; and (ii) are not part of a plan or
scheme to evade the registration provisions of the Securities Act.
4.11 BROKERS. Except as disclosed on SCHEDULE 4.11 hereto, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Purchaser.
ARTICLE V
LEGEND
Purchaser understands that a legend, in substantially the following form,
will be placed on the certificate representing the Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). PRIOR TO THE EXPIRATION OF
THE ONE (1) YEAR RESTRICTED PERIOD (AS DEFINED BY RULE 902(m) ADOPTED
UNDER REGULATION S OF THE ACT), THESE SECURITIES CANNOT BE OFFERED OR SOLD
IN THE UNITED STATES OR TO U.S. PERSONS (AS
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DEFINED BY RULE 902(o) ADOPTED UNDER REGULATION S OF THE ACT), UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT, OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. PRIOR TO THE EXPIRATION
OF THE ONE (1) YEAR RESTRICTED PERIOD, THE PURCHASER OF THE SECURITIES
(WHO IS NOT A DISTRIBUTOR, DEALER, OR SUBUNDERWRITER) MAY RESELL THE
SHARES ONLY IN A TRANSACTION EFFECTED OUTSIDE OF THE UNITED STATES AND
PROVIDED THE PURCHASER DOES NOT SOLICIT PURCHASERS IN THE UNITED STATES OR
OTHERWISE ENGAGE IN SELLING EFFORTS IN THE UNITED STATES. AFTER THE ONE
YEAR RESTRICTED PERIOD EXPIRES, THE SECURITIES CAN BE SOLD IN THE UNITED
STATES ONLY IF REGISTERED OR IF, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
ARTICLE VI
REGISTRATION RIGHTS
6.1 PIGGYBACK REGISTRATION RIGHTS.
(a) RIGHT TO PIGGYBACK. Subject to the limitations set forth in
Section 6.1(e) hereof, whenever the Company, in its sole discretion, proposes to
file a registration statement (a "Proposed Registration") under the Securities
Act with respect to any equity security (as defined in the Securities Act)
(other than a registration statement on Form S-4, Form S-8 or any successor form
for the registration of securities to be offered in a transaction subject to
Rule 145 under the Securities Act or to employees of, and/or consultants and
advisors to, the Company and/or its subsidiaries pursuant to any "employee
benefit plan," as such term is defined in Rule 405 promulgated under the
Securities Act) and the registration form to be used may be used for the
registration (a "Piggyback Registration") of Piggyback Registrable Securities,
the Company will give written notice (the "Piggyback Notice") to Purchaser as
soon as practicable (but in no event less than thirty days) before the initial
filing with the Securities and Exchange Commission (the "Commission") of such
registration statement, which notice will (i) specify the kind and number of
securities proposed to be registered and the proposed offering price or prices
and distribution arrangements; (ii) include such other information that at the
time and under the circumstances would be appropriate to include in such notice;
and (iii) subject to the provisions of this Section 6.1(a), offer Purchaser the
opportunity to include in such filing all Piggyback Registrable Securities which
Purchaser may request in accordance with subsection 6.1(b) below.
(b) REQUESTS TO PIGGYBACK. Purchaser shall advise the Company in
writing (a "Piggyback Registration Request") within twenty days after the date
of receipt of the Piggyback Notice of the number or amount of each class or
series of Piggyback Registrable Securities which Purchaser desires to have
registered.
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(c) SELECTION OF UNDERWRITERS. If the Piggyback Registration is an
underwritten offering, the Board of Directors of the Company will select a
managing underwriter or underwriters to administer the offering.
(d) PIGGYBACK EXPENSES. Subject to the limitations set forth in
Section 6.1(e) hereof, all Registration Expenses of the Piggyback Registration
will be paid solely by the Company.
(e) LIMITATIONS ON PIGGYBACK RIGHTS. Purchaser will be entitled to
request four (4) Piggyback Registrations. A registration will not count as the
permitted Piggyback Registrations until it has become effective, and no
registration will count as the permitted Piggyback Registration unless Purchaser
is able to register and sell at least 55% of the Piggyback Registration
Securities requested to be included in such registration. The exercise of a
Piggyback Registration shall not affect Purchaser's Demand Registration rights
under Section 6.2 hereof. Purchaser shall not be permitted to exercise its
Piggyback Registration rights with regard to any underwritten Piggyback
Registration where a first or second tier underwriter, or underwriters, provides
Purchaser with a reasonable determination, in writing that the amount or kind of
Purchaser's Shares to be included in such offering would materially and
adversely affect the success of all securities proposed to be distributed for
the account of the Company in such offering.
6.2 DEMAND REGISTRATION RIGHTS.
(a) REQUESTS FOR REGISTRATION. Subject to the limitations set forth
in Section 6.2(d) hereof, Purchaser may request registration under the
Securities Act of all or part of its Demand Registrable Securities on Form S-1
or any other registration form available for use by the Company (a "Demand
Registration"). The request for a Demand Registration shall specify the number
of Demand Registrable Securities requested to be registered and the anticipated
per share price range for such offering. However, the Company may postpone, for
a reasonable period of time not to exceed 90 days (but in any event not to
extend beyond the date of public disclosure of the information, or the date of
abandonment or termination of the transactions or negotiations, hereinafter
referred to), the filing of a registration statement otherwise required to be
prepared and filed by it pursuant to this subsection 6.2(a) if: (i) at the time
the Company receives a registration request, the Board determines, in good faith
and in its reasonable business judgment, that (A) such Demand Registration would
require the public disclosure of material non-public information concerning any
pending or ongoing material transaction or negotiations involving the Company
which, in the opinion of the Company's outside legal counsel, is not yet
required to be publicly disclosed, and (B) such disclosure would materially
interfere with such transaction or negotiations or have a Material Adverse
Effect on the Company, and (ii) the Company diligently and in good faith
continues to pursue such transaction or negotiations throughout the period of
such postponement.
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(b) SELECTION OF UNDERWRITERS. If the Demand Registration is for or
includes an underwritten offering, Purchaser shall select the managing
underwriter or underwriters to administer such offering, who shall be reasonably
satisfactory to the Company.
(c) DEMAND EXPENSES. Subject to the limitations set forth in Section
6.3(d) hereof, the Company shall pay for all Registration Expenses relating to
the Demand Registration.
(d) LIMITATIONS ON DEMAND RIGHTS. Purchaser may only request one (1)
Demand Registration. A registration will not count as the permitted Demand
Registration: (a) until it has become effective; and (b) unless Purchaser is
able to register and sell at least 55% of the Demand Registrable Securities
requested to be included in such registration. After the Demand Registrable
Securities have been registered, Purchaser shall have no obligation to sell any
or all of such securities. For a period of three (3) years from the date hereof,
Purchaser may not request a Demand Registration if, at the time of such request,
none of the Company's equity securities are publicly traded. However, after the
period ending three (3) years from the date hereof, Purchaser may request a
Demand Registration at any time, even if none of the Company's equity securities
are then publicly traded.
6.3 PROCEDURE. With respect to any Piggyback Registration or Demand
Registration, the Company shall use its best efforts to effect the registration
of all the Piggyback Registrable Securities or Demand Registrable Securities, as
the case may be (collectively, the Request Securities"), which Purchaser has
requested to be included therein, as quickly as practicable. In connection with
any such request, the Company shall do the following as expeditiously as
possible:
(i) prepare and file with the Commission a registration statement
on any form for which the Company then qualifies and which is available for the
registration of the Request Securities;
(ii) include in the registration on such form all the Request
Securities and use its best efforts to cause such registration statement to
become effective; PROVIDED, HOWEVER, that at least ten days before filing such
registration statement or any prospectus or any amendment or supplement thereto,
including documents to be incorporated by reference upon or after the initial
filing of such registration statement, the Company will furnish to Purchaser
copies of all such documents proposed to be filed (including documents to be
incorporated by reference therein), which documents will be subject to the
reasonable review and comments of Purchaser;
(iii) unless the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect, prepare and file with the
Commission such amendments and post-effective amendments and supplements to the
registration statement or any prospectus as may be necessary to keep the
registration statement effective for a period of not more than one hundred and
eighty (180) days and comply with the provisions of the Securities Act
applicable to the Company with respect to the disposition of all the Request
Securities, covered by such registration statement or any supplement to any such
prospectus;
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(iv) if the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect and if the Company receives a
request for a Demand Registration, prepare and file with the Commission such
registration statement to permit the offering of the Demand Registrable
Securities to be made on a continuous basis pursuant to Rule 415 (or any similar
rule that may be adopted by the Commission) under the Securities Act (a "Shelf
Registration") and keep the Shelf Registration current and continuously
effective until Purchaser can sell all of the Demand Registrable Securities;
(v) furnish to Purchaser such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement and such other documents as Purchaser
may reasonably request;
(vi) use its best efforts to register or qualify such Request
Securities under such other securities or blue sky laws of such jurisdiction as
Purchaser reasonably requests and do any and all other acts and things which may
be reasonably necessary or advisable to enable Purchaser to consummate the
disposition in such jurisdiction (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(vii) notify Purchaser at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
Purchaser, the Company will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to subsequent purchasers of such Request
Securities, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(viii) cause all such Request Securities, to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on one of the following (in order of
priority and assuming that the Company qualifies for such listing): (A) the New
York Stock Exchange, (B) the American Stock Exchange; (C) the NASDAQ National
Market System; or (D) the NASDAQ SmallCap Market System;
(ix) provide a transfer agent and registrar for all such Request
Securities, not later than the effective date of such registration statement;
(x) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as Purchaser or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Request Securities, (including, without limitation,
effecting a stock split or a combination of shares);
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(xi) make available for inspection by Purchaser, any underwriter
participating in any distribution pursuant to such registration statement and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") to the extent reasonably
necessary to enable such person to exercise their due diligence responsibilities
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement. Records and other information which the Company determines, in good
faith, to be confidential and of which determination Purchaser is notified shall
not be disclosed by Purchaser unless (i) the disclosure of such Records or other
information, in the opinion of counsel reasonably acceptable to the Company, is
necessary to avoid or correct a misstatement or omission in the registration
statement, any preliminary prospectus, any prospectus or prospectus supplement,
or (ii) the release of such Records or other information is ordered pursuant to
subpoena, court order or request by a governmental authority or otherwise is
required by applicable law or (iii) the information in such Records or such
other information is generally available to the public. Purchaser shall, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction or by governmental authority, give notice to the Company and allow
the Company, at the expense of the Company, to undertake appropriate action to
prevent disclosure of the Records deemed confidential;
(xii) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, use its reasonable best efforts promptly to obtain the withdrawal
of such order;
(xiii) use its best efforts to obtain a "cold comfort" letter
from the independent public accountants of the Company which is addressed to
Purchaser and any underwriters and contains such matters of the type customarily
covered by "cold comfort" letters; and
(xiv) use its best efforts to obtain an opinion from counsel for
the Company which is addressed to Purchaser and underwriter and contains such
matters of the type customarily covered by counsel for the issuer of securities.
(a) AFFIDAVITS OF PURCHASER. With respect to any Piggyback
Registration or Demand Registration, Purchaser shall furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with the registration of the Request Securities.
(b) PUBLIC SALE BY PURCHASER. Purchaser shall not effect any public
sale or distribution of Request Securities, of any class or series being
registered in a Demand Registration or Piggyback Registration for offering to
the public, any similar security issued by
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the issuer ofsuch class or series or any security exchangeable or exercisable
for or convertible into any such class or series of any such Request Securities
or any such similar security, including a sale pursuant to Rule 144 (or any
similar rule then in force) under the Securities Act, during, in the case of a
Piggyback Registration, the fourteen (14) days prior to, and during the ninety
(90) day period beginning on, the effective date of the Piggyback Registration
(except as part of such registration or pursuant to registrations on Form S-4 or
S-8 or any successor form to either such form) and, in the case of any Demand
Registration, the period commencing on the date of filing the Demand
Registration and ending on the 120th day following the effective date of the
Demand Registration (except as part of such Demand Registration), if and to the
extent requested by the Company, in the case of a non-underwritten public
offering, or if and to the extent requested by the managing underwriter or
underwriters, in the case of an underwritten public offering.
(c) PUBLIC SALE BY THE COMPANY AND OTHERS. Neither the Company nor
any of its Affiliates (other than Purchaser, if deemed to be an Affiliate) will
effect any public sale or distribution of any securities of any class or series
being registered in a Piggyback Registration or Demand Registration for offering
to the public, any similar security issued by the issuer of such class or series
or any security convertible into or exchangeable or exercisable for any such
security during, in the case of a Piggyback Registration, the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the effective date
of the Piggyback Registration (except as part of such registration or pursuant
to registrations on Form S-4 or S-8 or any successor form to either such form)
and, in the case of any Demand Registration, the period commencing on the date
of filing the Demand Registration and ending on the 120th day following the
effective date of the Demand Registration.
(d) REGISTRATION EXPENSES. The Company shall pay for all costs and
expenses ("Registration Expenses") of each registration hereunder, including,
but not limited to, the following: (i) registration and filing fees, (ii) fees
and expenses relating to the Company's compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications), (iii) expenses incident to the preparation, printing
and filing of the registration statement, each preliminary prospectus and
definitive prospectus and each amendment or supplement to any of the foregoing
and copies thereof, (iv) internal expenses (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties), (v) fees and expenses incurred in connection with the
listing of the Request Securities, (vi) fees and disbursements of counsel for
the Company and fees and expenses of independent certified public accountants
retained by the Company, (vii) fees and expenses of any special experts retained
by the Company in connection with such registration, (viii) fees and expenses
associated with any filings with or submission to the NASD (including, if
applicable, the fees and expenses of any "qualified independent underwriters,"
as such term is defined in Schedule E of the By-laws of the NASD, and its
counsel), (ix) fees of each investment banking firm required to be retained or
consulted pursuant to the terms hereof; and (x) fees and disbursements of one
law firm for the underwriters, in any underwritten offering. The Company shall
not have any obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Request Securities, as the
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case may be, by Purchaser, or, except as otherwise provided in the immediately
precedingsentence, any out-of-pocket expenses of Purchaser (or any agents who
manage their accounts) or fees and disbursements of any counsel for Purchaser.
6.4 INDEMNIFICATION REGARDING REGISTRATION RIGHTS.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify
Purchaser and, if applicable, its officers and directors and each Person who
controls Purchaser (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, preliminary prospectus or definitive prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by Purchaser specifically for
use in the preparation thereof or by Purchaser's failure, if required, to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished Purchaser with a sufficient
number of copies of the same.
(b) INDEMNIFICATION BY PURCHASER. In connection with any registration
statement in which Purchaser is participating, Purchaser shall indemnify the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, preliminary prospectus
or definitive prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in information furnished by
Purchaser to the Company specifically for use in the preparation of such
registration statement or prospectus.
(c) PROCEDURE. Any Person entitled to indemnification hereunder will:
(a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification, provided that the failure of any
indemnified party to give notice shall not relieve the indemnifying party of its
obligations hereunder except to the extent the indemnifying party is actually
prejudiced by such failure; and (b) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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(d) SURVIVAL. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of securities.
(e) CONTRIBUTION. If the indemnification provided for in this Section
6.4 from the indemnifying party is unavailable to the indemnified party, then
the indemnifying party, instead of indemnifying the indemnified party, shall
contribute to and pay the amount paid or payable by such indemnified party as a
result of the loss, claim, damage, liability or expenses (collectively, the
"Claim") giving rise to indemnification hereunder in such proportion as is
appropriate to reflect the relative fault of the indemnifying and indemnified
party in connection with the actions which gave rise to the Claim. The relative
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the action in question has been made
by, or relates to, information supplied by such indemnifying party or
indemnified party, and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such action. The Company and
Purchaser agree that it would not be just and equitable if contribution and
payment pursuant to this Section 6.4 were determined by pro rata allocation or
by any other allocation method which does not take into account the equitable
considerations referred to in the preceding sentence. The amount paid or payable
as a result of a Claim shall include any legal or other fees and expenses
reasonably incurred by such party in connection with such Claim. However, no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contributions and payment from
any Person who was not guilty of such fraudulent misrepresentation.
6.5 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate
in any underwritten registration hereunder unless such Person: (a) agrees to
sell its securities on the basis provided in any underwriting arrangements
reasonably approved by the Persons entitled hereunder to approve such
arrangements; and (b) accurately completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customarily required under the terms of such underwriting arrangements.
6.6 RULE 144. The Company shall file, on a timely basis, any reports
required to be filed by it under the Securities Act and the Exchange Act so as
to enable a Purchaser to sell the Piggyback Registrable Securities and Demand
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by: (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time; or (b) any similar rule adopted
by the Commission.
ARTICLE VII
TAG ALONG RIGHTS AND BRING ALONG RIGHTS
7.1 TAG ALONG RIGHT. With respect to any proposed transfer of shares of
Common Stock by Berg or Tessier to a third party (the "Third Party"), Berg and
Tessier shall not be
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permitted to effect such a transfer without first offering Purchaser the right
to sell its shares of Common Stock, pro rata with Berg and/or Tessier, to the
Third Party, at the same price per share and upon the same terms and conditions
of the proposed transfer by Berg or Tessier. However the "tag along" rights
granted under this Section 7.1 shall not apply to: (a) the first 800,000 shares
of Common Stock which are sold by Berg and/or Tessier after the date hereof; (b)
shares of Common Stock which are sold by Berg and/or Tessier after the date
hereof in accordance with Rule 144 promulgated under the Securities Act, unless
such shares are sold in a block (as such term is defined in Rule 10b-18
promulgated under the Exchange Act. In this regard, each of Tessier and Berg
shall promptly notify Purchaser of any such disposition of shares which is not
subject to the "tag along" rights granted hereunder pursuant to subsection (a)
of the preceding sentence. Furthermore, Purchaser shall not be able to exercise
its rights under this Section 7.1 with regard to any of its shares of Common
Stock, if such shares are not registered with the SEC and Purchaser previously
failed to exercise its right to register such shares in a Piggyback
Registration.
7.2 BRING ALONG RIGHT. If Berg or Tessier, or both (collectively, the
"Principals") receive a bona fide offer from an unaffiliated third party (the
"Third Party Offer") to purchase (for cash or securities) all of the then
outstanding shares of Common Stock and the Principals wish to accept such offer,
then the Principals shall, within ten (10) days of accepting the Third Party
Offer, notify Purchaser, in writing, of such offer. Upon receipt of such notice,
Purchaser shall then sell shares of Common Stock, pro rata with Berg and/or
Tessier, at the same price per share and upon the same terms and conditions of
the Third Party Offer. However, the bring along rights granted hereunder shall
not be available to Berg or Tessier unless, the exercise of such right, would
cause the Purchaser to receive an amount from the unaffiliated party equal to at
least four (4) times the Purchase Price. The "bring along" rights granted in
this Section 7.2 shall expire on the third anniversary hereof.
ARTICLE VIII
PREEMPTIVE RIGHTS AND ANTI DILUTION RIGHTS
8.1 PREEMPTIVE RIGHTS.
(a) GRANT OF RIGHT. If the Company proposes to and does issue (the
"Third Party Issuance") additional shares of Voting Stock or any Rights to
acquire Voting Stock, to any Person, other than Purchaser or its respective
Affiliates, then Purchaser shall have the right (the "Preemptive Right") to
purchase shares of Voting Stock or Rights, as the case may be, so that,
immediately after such purchase and the Third Party Issuance, Purchaser shall
own the same percentage of shares of the Company's issued and outstanding Voting
Stock (or the right to own such percentage), as it had owned prior to the
proposed Third Party Issuance.
(b) PROCEDURE. The Company shall give Purchaser ten (10) Business
Day's prior written notice of any proposed issuance of Voting Stock or Rights
which would entitle Purchaser to exercise the Preemptive Right. Upon receipt of
such notice, Purchaser shall have ten (10) Business Days (the "Exercise Period")
to exercise the Preemptive Right. If by the
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expiration of the Exercise Period, Purchaser notifies the Company that it does
not wish to exercise the Preemptive Right or has failed to give a notice to the
Company, then the Company may continue with and effect the proposed Third Party
Issuance. If Purchaser chooses to exercise the Preemptive Right during the
Exercise Period, the Company shall take all actions reasonably necessary to
issue such Voting Shares or Rights to Purchaser in accordance with this Section,
and may continue with and effect the proposed Third Party Issuance.
(c) EXERCISE PRICE. In connection with the exercise of the Preemptive
Right: (i) the exercise price shall be the same price at which the shares of
Voting Stock or Rights are being issued pursuant to the Third Party Issuance;
and (ii) the terms and conditions of the purchase shall be, as nearly as
reasonably practicable, the same as the terms and conditions of the Third Party
Issuance. If all or part of the Third Party Issuance offering price consists of
any consideration other than cash, then the per share, or per Right, price at
which Purchaser is offered the Preemptive Right shall be the amount determined
by dividing the total number of Voting Stock or Rights which are the subject of
the Third Party Issuance into the sum of (i) the aggregate amount of cash, if
any, proposed to be paid for such securities; and (ii) the aggregate fair market
value of the non-cash consideration proposed to be paid for such securities
(taking into account, in determining such fair market value, any liabilities
associated with such non-cash consideration).
(d) EXCEPTIONS. If the Third Party Issuance involves the borrowing of
money from the proposed purchaser, then Purchaser shall not have the Preemptive
Right with regard to such Third Party Issuance unless Purchaser agrees to
participate in such debt financing, on a pro rata basis and pursuant to the same
terms and conditions. Furthermore, the Preemptive Rights shall not apply to any
public offering of securities by the Company which is registered with the SEC.
8.2 ANTI-DILUTION RIGHTS.
(a) RIGHT. Promptly after each Dilutive Issuance, the Company shall
issue to Purchaser without the payment of any additional consideration by
Purchaser, the aggregate number of shares of Common Stock calculated by:
(i) multiplying (A) the Weighted Average Price, calculated after
giving effect to such Dilutive Issuance, by (B) the lesser of (x) the aggregate
number of Dilution Shares, if any, issued, or deemed to be issued, in such
Dilutive Issuance and in all prior Dilutive Issuances (if any) and (y) the
number of shares issued to Purchaser on the date hereof (the "Current Number");
(ii) adding to the resulting product, the product of (A) $0.63
(the "Per Share Purchase Price") multiplied by (B) either (x) if the number of
Dilution Shares issued, or deemed to be issued, in such Dilutive Issuance and in
all prior Dilutive Issuances (if any) is less than the Current Number, the
excess of the Current Number over the number of Dilution
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Shares; or (y) if the number of Dilution Shares is equal to, or greater than,
the Current Number, zero (0);
(iii) dividing the resulting sum by the Current Number;
(iv) dividing the Purchase Price by the quotient resulting from
the division referred to in (iii); and
(v) subtracting from the resulting quotient the sum of (A) the
Current Number plus (B) the number of shares of Common Stock, if any previously
issued to Purchaser pursuant to this Section 8.2.
(b) ISSUANCES IN CONNECTION WITH OTHER ISSUANCES. If the Company
issues shares of Common Stock or Rights for shares of Common Stock in connection
with the issue or sale of other securities of the Company or in connection with
the delivery by the Company of any other property or assets, which together
comprise one integral transaction in which no specific consideration is
allocated to such shares or Rights, then such shares or Rights shall be deemed
to have been issued without consideration.
(c) ISSUANCES FOR CASH. If the Company issues, for cash, any shares
of Common Stock or any Rights for shares of Common Stock, the consideration
received shall be deemed to be the net amount received by the Company therefor,
after deduction of any accrued interest, dividends or any expenses incurred in
any underwriting commissions or concessions paid or allowed by the Company in
connection therewith.
(d) ISSUANCES FOR NON-CASH CONSIDERATION. If the Company issues, for
non-cash consideration, any shares of Common Stock or any Rights for shares of
Common Stock, the amount of the non-cash consideration shall be deemed the fair
market value of such non-cash consideration on the date of issue of the
securities, as reasonably determined by the Board, less any expenses or
liabilities incurred by the Company in connection therewith.
(e) ISSUANCES IN CONNECTION WITH MERGERS OR CONSOLIDATIONS. If the
Company issues any shares of Common Stock or any Rights for shares of Common
Stock, in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration shall be deemed to be the
fair market value of the portion of the assets and business of the non-surviving
corporation acquired in connection with such merger or consolidation, as
reasonably determined in good faith by the Board. In the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation, the Company shall be deemed to have issued a number of shares of
Common Stock for stock or securities of the other corporation computed on the
basis of the actual exchange ratio on which the transaction was predicated and
for a consideration equal to the fair market value, on the date of such
transaction, of such stock or securities of the other corporation.
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(f) STOCK-SPLITS. If the Company subdivides its outstanding shares of
Common Stock into a greater number of shares, the Per Share Purchase Price in
effect immediately prior to such division shall be proportionately reduced.
Conversely, if the Company combines the outstanding shares of Common Stock into
a smaller number of shares, then the Per Share Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
(g) NON-CIRCUMVENTION. The Company shall not, directly or indirectly,
engage or participate in any transaction or otherwise by any act or omission
(including amending its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, or the issue or sale of
securities) avoid or attempt to avoid the observance and performance of the
provisions of Section 8.1 or 8.2. Instead, the Company shall carry out all such
terms and provisions, in good faith, and take all such actions as may be
reasonably necessary or appropriate to protect and preserve the rights and
benefits intended to be conferred in Section 8.1 and 8.2.
(h) FULLY PAID; NO ENCUMBRANCES. All shares of Common Stock issued to
Purchaser pursuant to Section 8.2, shall, when issued, be: (A) duly authorized,
valid issued and outstanding,and fully paid and non-assessable; and (B) be free
from all Encumbrances.
(i) DOCUMENTARY TAX STAMPS. The Company shall pay any for any
documentary tax stamps required in connection with any issue of shares of Common
Stock to the Purchaser pursuant to this Section 8.2.
(j) NO FRACTIONAL SHARES. The Company shall not issue any fractional
shares in connection with any issuance pursuant to this Section 8.2. Instead, to
the extent that the calculation of the number of shares of Common Stock to be
issued to Purchaser pursuant to this Section 8.2 would result in the issuance of
a fractional share, then the number of shares issued to Purchaser shall be
rounded to the nearest number of whole shares.
8.3 RACHET RIGHT.
(a) Depending on the Company's after tax earnings, as determined in
accordance with GAAP and for the year ending December 31, 1997, the Company
shall issue to Purchaser, for no additional consideration, the following number
of shares of Common Stock:
AFTER TAX EARNINGS NO. OF SHARES OF COMMON STOCK
Less than $1,000,000 0.2529 shares for each share of Common
Stock then held by Purchaser
$1,000,000 to $1,500,000 0.12645 shares for each share of Common
Stock then held by Purchaser
Over $1,500,000 0
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(b) PROCEDURE. If applicable, and subject to applicable Federal and
State securities laws, the Company shall issue the shares of Common Stock
referred to in Section 8.3(a) hereof, within thirty (30) days of the completion
of audited financial statements for the year ending December 31, 1997, but in no
event later than April 15, 1998.
ARTICLE IX
DELIVERIES
9.1 DELIVERIES BY PURCHASER. Contemporaneous with the signing hereof,
Purchaser has executed (where necessary) and delivered or caused to be delivered
to the Company the following documents, certificates and agreements:
(a) PURCHASE PRICE. The Purchase Price;
(b) LOAN. The amount of money which Purchaser has agreed to loan to
the Company pursuant to the terms of that certain Convertible Promissory Note
between the Company and Purchaser, of even date hereof (the "Note"); and
(c) SECURITY AGREEMENT. The Security Agreement between the Company
and Purchaser, of even date herewith, (the "Security Agreement"), duly executed
by Purchaser.
(d) INTERCREDITOR AGREEMENT. The Intercreditor Agreement among the
Company, Purchaser, Union Atlantic, L.C. and the other investors in the Company,
of even date herewith, (the "Intercreditor Agreement"), duly executed by
Purchaser.
9.2 DELIVERIES BY THE COMPANY. Contemporaneous with the signing hereof,
the Company has executed or caused to be executed and delivered or caused to be
delivered to Purchaser the following documents, certificates and agreements:
(a) STOCK CERTIFICATE. A certificate for Purchaser, representing all
of the Shares;
(b) NOTE. The Note, duly signed by an authorized representative of
the Company;
(c) SECURITY AGREEMENT. The Security Agreement, duly signed by an
authorized representative of the Company.
(d) INTERCREDITOR AGREEMENT. The Intercreditor Agreement, duly signed
by an authorized representative of the Company.
(e) BERG EMPLOYMENT AGREEMENT. The Employment Agreement between the
Company and Berg, of even date herewith, duly signed by the Company and Berg;
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(f) TESSIER EMPLOYMENT AGREEMENT. The Employment Agreement between
the Company and Tessier, of even date herewith, duly signed by the Company and
Tessier;
(g) FEES OF PURCHASER'S ATTORNEYS. Payment of the fees of Purchaser's
attorneys, relating to this transaction.
(h) REPRESENTATIONS AND WARRANTIES. A certificate executed by a duly
authorized officer of the Company certifying that the representations and
warranties relating to the Company contained in this Agreement are true and
correct in all material respects as of the date hereof, except for any
representations or warranties that relate solely to an earlier date (in which
case such representations and warranties were true and correct as of such
earlier date);
(i) RESOLUTIONS OF THE COMPANY. A true and complete copy,
certified by the President of the Company, of the resolutions duly and validly
adopted by the Board evidencing its authorization of the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby;
and
(j) INCUMBENCY CERTIFICATE OF THE COMPANY. A certificate of the
Secretary of the Company certifying the names and signatures of the officers of
the Company authorized to sign this Agreement and the other documents to be
delivered hereunder on behalf of the Company.
ARTICLE X
INDEMNIFICATION
10.1 SURVIVAL. All representations and warranties contained herein and
made in writing by or on behalf of the parties hereto in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement for a period of two (2) years after the date hereof, regardless
of any investigation made at any time with respect to any of the foregoing or
any information the parties may have in respect thereto.
10.2 PURCHASER'S RIGHT TO INDEMNIFICATION. Subject to the provisions of
this Article X and in addition to any other rights and remedies available to
Purchaser under applicable law, the Company, Berg (solely with regard to
representations, warranties, covenants and agreements made by Berg hereunder)
and Tessier (solely with regard to representations, warranties, covenants and
agreements made by Tessier hereunder) shall severally indemnify and hold
harmless Purchaser and, if applicable, any of its officers, directors,
shareholders, employees, agents, representatives, attorneys, successors,
predecessors and assigns from and against: (a) any and all losses, obligations,
liabilities, damages, claims, deficiencies, costs and expenses (including, but
not limited to, the amount of any settlement entered into pursuant hereto and
all reasonable legal and other expenses incurred in connection with the
investigation, prosecution or defense of the matter) (collectively "Claims"),
which may be asserted against or sustained or incurred by Purchaser in
connection with, arising out of, or relating to (i) any breach of any, or any
false, incorrect or misleading, representation or warranty that is made by the
Company, Berg or Tessier
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herein or in any Exhibit, Schedule, certificate or other document delivered to
Purchaser by the Company, Berg or Tessier in connection with this Agreement, or
(ii) any breach of any agreements and covenants made by the Company, Berg or
Tessier herein or in any Exhibit, Schedule, certificateor other document
delivered to Purchaser by the Company, Berg or Tessier in connection with this
Agreement; and (b) any and all costs and expenses incurred by Purchaser in
connection with the enforcement of its rights under this Agreement.
10.3 THE COMPANY'S RIGHT TO INDEMNIFICATION. Subject to the provisions of
this Article X and in addition to any other rights and remedies that may be
available to the Company under applicable law, Purchaser shall indemnify and
hold harmless the Company and any of its officers, directors, shareholders,
employees, agents, representatives, attorneys, successors, predecessors and
assigns from and against: (a) Claims which may be asserted against or sustained
or incurred by the Company in connection with, arising out of, or relating to
(i) any breach of any, or any false, incorrect or misleading, representation or
warranty that is made by Purchaser herein or in any Exhibit, Schedule,
certificate or other document delivered to the Company by Purchaser in
connection with this Agreement, or (ii) any breach of any agreements and
covenants made by Purchaser herein or in any Exhibit, Schedule, certificate or
other document delivered to the Company by Purchaser in connection with this
Agreement; and (b) any and all costs and expenses incurred by the Company in
connection with the enforcement of its rights under this Agreement. However,
Purchaser's aggregate liability under this Article X shall not exceed such
Purchaser's Purchase Price.
10.4 PROCEDURE FOR CLAIMS.
(a) NOTICE OF CLAIM. Promptly, but in any event within 30 days after
obtaining knowledge of any claim or demand which may give rise to, or could
reasonably give rise to, a claim for indemnification hereunder (any such claim
an "Indemnification Claim"), the party or parties entitled to indemnification
hereunder (the "Indemnified Party") shall give written notice to the party or
parties subject to indemnification obligations therefor (the "Indemnifying
Party") of such Indemnification Claim (a "Notice of Claim"). A Notice of Claim
shall be given with respect to all Indemnification Claims. However, the failure
to timely give a Notice of Claim to the Indemnifying Party shall not relieve the
Indemnifying Party from any liability that it may have to the Indemnified Party
hereunder to the extent that the Indemnifying Party is not prejudiced by such
failure. Subject to Section 10.1, no Indemnified Party shall be entitled to give
a Notice of Claim with respect to any representation and warranty after the
second anniversary of the Closing Date. The Notice of Claim shall set forth the
amount (or a reasonable estimate) of the loss, damage or expense suffered, or
which may be suffered, by the Indemnified Party as a result of such
Indemnification Claim and a brief description of the facts giving rise to such
Indemnification Claim. The Indemnified Party shall furnish to the Indemnifying
Party such information (in reasonable detail) as the Indemnified Party may have
with respect to such Indemnification Claim (including copies of any summons,
complaint or other pleading which may have been served on it and any written
claim, demand, invoice, billing or other document evidencing or asserting the
same).
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(b) THIRD PARTY CLAIMS.
(i) If the claim or demand set forth in the Notice of Claim is a
claim or demand asserted by a third party (a "Third Party Claim"), the
Indemnifying Party shall have 15 days (or such shorter period if an answer or
other response or filing with respect to the pleadings served by the third party
is required prior to the 15th day) after the date of receipt by the Indemnifying
Party of the Notice of Claim (the "Notice Date") to notify the Indemnified Party
in writing of the election by the Indemnifying Party to defend the Third Party
Claim on behalf of the Indemnified Party.
(ii) If the Indemnifying Party elects to defend a Third Party
Claim on behalf of the Indemnified Party, the Indemnified Party shall make
available to the Indemnifying Party and its agents and representatives all
records and other materials in its possession which are reasonably required in
the defense of the Third Party Claim and the Indemnifying Party shall pay any
expenses payable in connection with the defense of the Third Party Claim as they
are incurred (whether incurred by the Indemnified Party or Indemnifying Party).
(iii) In no event may the Indemnifying Party settle or compromise
any Third Party Claim without the Indemnified Party's consent, which shall not
be unreasonably withheld.
(iv) If the Indemnifying Party elects to defend a Third Party
Claim, the Indemnified Party shall have the right to participate in the defense
of the Third Party Claim, at the Indemnified Party's expense (and without the
right to indemnification for such expense under this Agreement). However, the
reasonable fees and expenses of counsel retained by the Indemnified Party shall
be at the expense of the Indemnifying Party if: (A) the use of the counsel
chosen by the Indemnifying Party to represent the Indemnified Party would
present such counsel with a conflict of interest; (B) the parties to such
proceeding include both the Indemnified Party and the Indemnifying Party and
there may be legal defenses available to the Indemnified Party which are
different from or additional to those available to the Indemnifying Party; (C)
within 10 days after being advised by the Indemnifying Party of the identity of
counsel to be retained to represent the Indemnified Party, the Indemnified Party
objects to the retention of such counsel for valid reasons (which shall be
stated in a written notice to Indemnifying Party), and the Indemnifying Party
does not retain different counsel reasonably satisfactory to the Indemnified
Party; or (D) the Indemnifying Party authorizes the Indemnified Party to retain
separate counsel at the expense of the Indemnifying Party.
(v) If the Indemnifying Party does elect to defend a Third Party
Claim, or does not defend a Third Party Claim in good faith, the Indemnified
Party may, in addition to any other right or remedy it may have hereunder, at
the sole and exclusive expense of the Indemnifying Party, defend such Third
Party Claim. However, such expenses shall be payable by the Indemnifying Party
only if and when such Third Party Claim becomes payable.
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(vi) To the extent that an Indemnified Party recovers on a Third
Party Claim, the amount of such recovery (after deduction of all costs and
expenses incurred in connection with such Third Party Claim) shall reduce,
dollar-for-dollar, the indemnification obligation otherwise owing by the
Indemnifying Party.
(c) COOPERATION IN DEFENSE. The Indemnified Party shall cooperate
with the Indemnifying Party in the defense of a Third Party Claim. Subject to
the foregoing, (i) the Indemnified Party shall not have any obligation to
participate in the defense of or to defend any Third Party Claim, and (ii) the
Indemnified Party's defense of or its participation in the defense of any Third
Party Claim shall not in any way diminish or lessen its right to indemnification
as provided in this Agreement.
ARTICLE XI
CONFIDENTIAL INFORMATION
11.1 Each party shall keep confidential all Confidential Information
obtained from the other party hereto in connection with the negotiation of this
Agreement and the transactions contemplated hereby. Except as expressly
permitted by the Company in writing, neither Purchaser nor any of its Affiliates
shall use the Company's Confidential Information to develop or operate a
business which is directly competitive with the Business as operated by the
Company or any of its Affiliates.
11.2 Notwithstanding the restrictions of Section 11.1, any party (the
"Disclosing Party") may disclose the other party's Confidential Information: (a)
to the Disclosing Party's Representatives so long as the Representatives are
informed of the confidential nature of the Confidential Information; (b) if in
the opinion of the Disclosing Party's legal counsel, disclosure is required
pursuant to any applicable Law, including the Securities Act and the Exchange
Act; (c) if legally compelled by Governmental Order, judicial or administrative
order, deposition, interrogatory, request for documents, subpoena, investigative
demand or other discovery process. However, in the case of the foregoing clause
(c), the Disclosing Party shall use its reasonable best efforts to prevent
disclosure of the Confidential Information by legal means including, if
applicable, attempting to obtain a protective order.
11.3 Each party shall be responsible for a breach of this Article XI by
its Representatives.
ARTICLE XII
ADDITIONAL COVENANTS
12.1 USE OF PROCEEDS. The Company shall only use the Purchase Price for
the acquisition of Galacticomm, Inc. and as general working capital. The Company
shall not use any part of the Purchase Price for: (a) loans to any Person; or
(b) dividends or other distributions to the Company's shareholders.
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12.2 AUDIT. The Company shall, as soon as reasonably practicable after the
date hereof, retain a "Big 6" accounting firm to conduct an audit of the Company
and its Subsidiaries.
12.3 KEY-MAN LIFE INSURANCE. The Company shall promptly obtain life
insurance policies on the lives of each of Berg and Tessier, in the amount of
$1,000,000 per policy.
ARTICLE XIII
GENERAL PROVISIONS
13.1 EXPENSES. Except as otherwise specified in this Agreement, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
13.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(a) receipt, if made by personal service, (b) three days after dispatch, if made
by reputable overnight courier service, (c) upon the delivering party's receipt
of a written confirmation of a transmission made by cable, by telecopy, by
telegram, or by telex or (d) seven days after being mailed by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 13.2):
(a) if to the Company:
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
Attn: Peter Berg, President
(b) if to Berg:
c/o I-View Software, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
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(c) if to Tessier:
c/o I-View Software, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
(d) if to Purchaser:
c/o Bayard Trust Company Limited
2nd Floor, Queen's House
Don Road
St. Helier
Jersey JE1 4HP, Channel Islands
Telephone: (44) 1534-35385
Facsimile: (44) 1534-68632
Attention: Martyn Crespel
13.3 PUBLIC ANNOUNCEMENTS. Except as required by Law or any applicable
Governmental Authority, no party to this Agreement shall make, or cause to be
made, any press release or public announcement in respect of this Agreement or
the transactions contemplated hereby or otherwise communicate with any news
media without the prior written consent of the other party. Except to the extent
prohibited by applicable law, the parties shall cooperate as to the timing and
contents of any such press release or public announcement.
13.4 HEADINGS. The descriptive headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.5 PRONOUNS. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural wherever the context and facts require
such construction.
13.6 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.
13.7 ENTIRE AGREEMENT. This Agreement, including all of the Exhibits and
Schedules attached hereto which are incorporated herein by this reference,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersedes all prior
35
<PAGE>
agreements and undertakings, both written and oral, among the Company, Berg,
Tessier and Purchaser with respect to the subject matter hereof and thereof.
13.8 ASSIGNMENT. This Agreement and the rights and duties hereunder may
not be assigned or assumed by operation of law or otherwise without the express
prior written consent of the other parties hereto (which consent may be granted
or withheld in the sole discretion of such other parties, as applicable).
13.9 AMENDMENT; WAIVER. This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, each party
hereto. Each party to this Agreement may: (a) extend the time for the
performance of any of the obligations or other acts of the other parties; (b)
waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered by the other party
pursuant hereto; or (c) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by all of
the other parties to be bound thereby. Any waiver of any term or condition shall
not be construed as a waiver of any subsequent breach or a subsequent waiver of
the same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.
13.10 GOVERNING LAW AND FORUM SELECTION. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Florida (without
regard to its principles regarding conflicts of law). All actions or proceedings
initiated by any party hereto and arising directly or indirectly out of this
Agreement which are brought to judicial proceedings shall be litigated in
Florida state courts sitting in Broward County, Florida.
13.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
13.12 ATTORNEYS' FEES. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
13.13 FURTHER ACTION. Each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all appropriate action, do or cause to be
done all things reasonably necessary, proper or advisable under applicable Law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
36
<PAGE>
IN WITNESS WHEREOF, the Company, Berg, Tessier and Purchaser have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
I-VIEW SOFTWARE, INC.
By: /s/ YANNICH TESSIER /s/ PETER BERG
-------------------- ------------------------------
Name: Yannich Tessier Peter Berg
Title: President
HEMINGFOLD INVESTMENTS, LTD.
/s/ YANNICK TESSIER By:/s/ MARTIN CREAPEL
Yannick Tessier ---------------------------
Name: MARTIN CREAPEL
-------------------------
Title: DIRECTOR
-----------------------
37
<PAGE>
SCHEDULE 1.21
NONE
<PAGE>
I-VIEW SOFTWARE, INC. - SCHEDULE 3.4
STOCKHOLDERS iView
Shares Percent
Peter Berg 4,938,095 45.75%
Yannick Tessier 4,938,095 45.75%
Lorraine Gouger 539,683 5.00%
Wally Muharsky 215,873 2.00%
Mitch Segal 107,937 1.00%
Vincent Toscano 53,968 0.50%
--------- ------
10,793,651 100.00%
<PAGE>
SCHEDULE 3.7
Subsidiaries
1. Soley for purposes of the Representations and Warranties contained in
Article III:
Galacticomm, Inc.
<PAGE>
SCHEDULE 3.17 (A)
Material Contracts
1. Stock Purchase Agreement, dated October 29, 1996, among the Company,
Christine Stryker, Robert Shaw, Stan Joseph, Robert Stein, Scott Brinker,
Christopher Robert, Keith Money and the law firm of Lucio, Mandler,
Croland, Bronstein & Garbett, P.A.
2. Promissory Note, dated April 2, 1996 and in the principal amount of
$37,500, from the Company in favor of Skyline, Inc.
3. Promissory Note, dated August 3, 1996 and the principal amount of $50,000,
from Tessier Technologies, Inc., in favor of Yannick Tessier.
4. Promissory Note, dated February 2, 1996 and in the principal amount of
$25,000, from the Company in favor of Ron Pascale.
5. Agreement to Distribute Proceeds, dated February 2, 1996, between the
Company and Ron Pascale.
6. Promissory Note, dated February 7, 1996 and in the principal amount of
$25,000, from the Company in favor of Leonard J. Sokolow.
7. Agreement to Distribute Proceeds, dated February 7, 1996, between the
Company and Leonard J. Sokolow.
8. Promissory Note, dated December 28, 1995, and in the principal amount of
$10,000, from the Company in favor of Stephen Sinkoe.
9. Agreement to Distribute Proceeds, dated December 28, 1995, between the
Company and Stephen Sinkoe.
10. Promissory Note, dated December 29, 1995 and in the principal amount of
$10,000, from the Company in favor of Ron Herzog.
11. Agreement to Distribute Proceeds, dated December 29, 1995, between the
Company and Ron Herzog.
12. Promissory Note, undated and in the principal amount of $10,000, from the
Company in favor of Bruce Roberts.
13. Agreement to Distribute Proceeds, undated, between the Company and Bruce
Roberts.
<PAGE>
SCHEDULE 3.19
Real Property
1. 4101 S.W. 47 Avenue, Suite 101, Ft. Lauderdale, Florida 33314
<PAGE>
SCHEDULE 3.20(A)
NONE
<PAGE>
SCHEDULE 3.20(B)
NONE
<PAGE>
SCHEDULE 3.23
Brokers
In connection with the transactions contemplated by this Agreement, Union
Atlantic, L.C. will receive a consulting fee equal to 10% of the aggregate
investment in the Company, plus a non-accountable expense allowance of 3% of the
aggregate investment in the Company.
<PAGE>
SCHEDULE 4.11
Brokers
In connection with the transactions contemplated by this Agreement, Union
Atlantic, L.C. will receive a consulting fee equal to 10% of the aggregate
investment in the Company, plus a non-accountable expense allowance of 3% of the
aggregate investment in the Company.
EXHIBIT 10.2
[LOGO] [LETTERHEAD]
September 8, 1997
Hemingfold Investments, Ltd.
c/o Bayard Trust Company Limited
2nd Floor, Queen's House
Don Road
St. Helier
Jersey JE1 4HP
Re: STOCK PURCHASE AGREEMENT (THE "AGREEMENT") AMONG GALACTICOMM
TECHNOLOGIES, INC., F/K/A I-VIEW SOFTWARE, INC. (THE "COMPANY"),
PETER BERG ("BERG"), YANNICK TESSIER ("TESSIER") AND HEMINGFOLD
INVESTMENTS, LTD ("HEMINGFOLD"), DATED NOVEMBER 21, 1996
Dear Sirs:
As you are aware, the Company is currently preparing a registration
statement to be filed with the United States Securities and Exchange Commission
(the "SEC") for an initial public offering ("IPO") of its securities. As part of
the IPO, the Company requests that the Agreement be amended so that:
(a) section 8.3 of the Agreement, regarding Hemingfold's ratchet
right, be deleted in its entirety, effective immediately; and
(b) the following sections of the Agreement be deleted as of the date
(the "Effective Date") on which the Company's Registration Statement regarding
the initial public offering is declared effective by the SEC:
(i) Section 8.1, regarding Hemingfold's preemptive rights; and
(ii) Section 8.2, regarding Hemingfold's anti-dilution rights.
In consideration of such amendments, the Company shall issue to Hemingfold
300,000 shares (the "Shares") of the Company's common stock, par value $0.0001
per share (the "Common Stock"), within 10 days of your acceptance of the
amendments contained herein. Furthermore, the Company hereby represents and
warrants to Hemingfold that the Shares shall, upon issuance, be duly authorized,
validly issued and free from all encumbrances, other than any encumbrances
created by agreements entered into by Hemingfold. The Shares will be subject to
the registration rights contained in Article VI of the Agreement. However,
Hemingfold shall pay the pro rata portion of the Registration Expenses (as such
term is defined in the Agreement) relating to the registration of the Shares.
Furthermore, as additional consideration for your acceptance of the
amendments contained herein and only for so long as Hemingfold beneficially owns
(as such term is defined in Rule 13d-3 of the Securities Exchange Act of 1934)
20% or more of the outstanding Common Stock, Peter Berg and Yannick Tessier
hereby agree to vote all of their shares of Common Stock to elect: (a) effective
upon your acceptance hereof, one (1) person, nominated by Hemingfold, to the
Company's board of directors (the "Board"); and (b) after the Effective Date,
two (2) persons, nominated by Hemingfold, to the Board. Hemingfold acknowledges
and agrees that Claus Stenbaek, who is already a member of the Board, shall
count as Hemingfold's initial nominee for election to the Board, upon your
acceptance hereof.
[LETTERHEAD] [LOGO]
<PAGE>
Hemingfold Investments, Ltd.
September 8, 1997
Page 2
By agreeing to this amendment of the Agreement, Hemingfold shall be deemed
to have represented and warranted to the Company as follows:
(a) Hemingfold is acquiring the Shares for its own account and for
investment and not with a view towards, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Shares;
(b) Hemingfold acknowledges that: (i) it has had the opportunity to
visit with Company and meet with its officers and other representatives to
discuss the Company's business, assets, liabilities, financial condition, cash
flow and operations; and (ii) all materials requested by Hemingfold have been
provided to Hemingfold to Hemingfold's reasonable satisfaction;
(c) Hemingfold has made its own independent examination,
investigation, analysis and evaluation of the Company; and
(d) Hemingfold has undertaken such due diligence (including a review
of the assets, liabilities, books, records and contracts of the Company) as
Hemingfold deems adequate.
In accordance with your request and in further consideration of your
acceptance of the amendments contained herein, the Agreement is hereby amended
by adding the following sentence to Section 13.8 of the Agreement:
"However, Purchaser may assign its rights and obligations under this
Agreement to an Affiliate of Purchaser, without the consent of the other
parties hereto. Nevertheless, Purchaser shall promptly notify the other
parties hereto of any such assignment to an Affiliate of Purchaser"
All of the other terms and conditions of the Agreement shall remained
unchanged and in full force and effect. If you agree with this amendment to the
Agreement, please: (a) sign and date this letter in the space provided below;
and (b) return an original signed copy of the letter to us.
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ PETER BERG /s/ PETER BERG
--------------------------- --------------------------------
Peter Berg, Chairman & CEO Peter Berg, individually
/s/ YANNICK TESSIER
----------------------------
Yannick Tessier, individually
Agreed to and accepted by:
HEMINGFOLD INVESTMENTS, LTD.
By: [ILLEGIBLE]
---------------------------
<PAGE>
[HEMINGFOLD INVESTMENTS LIMITED]
[LETTERHEAD]
Date: September 8, 1997
Galacticomm Technologies, Inc.
4101 SW 47th Street, Suite 101
Fort Lauderdale, FL 33314
U.S.A.
Attention: Mr. Peter Berg, Chairman & CEO
RE: ASSIGNMENT OF HEMINGFOLD'S INVESTMENTS AND OTHER RIGHTS
Dear Sirs:
On behalf of Hemingfold Investments, Ltd. ("Hemingfold"), I am writing to advise
Galacticomm Technologies, Inc. ("Galacticomm") that Hemingfold intends to
transfer to a newly aquired subsidiary, Kenworthy Investments Ltd.
("Kenworthy"), its 2,255,866 shares of common stock of Galacticomm (the "Stock")
along with Hemingfold's interests in the following contracts and other
instruments:
1. Stock Purchase Agreement, dated November 21, 1996 by and among I-View
Solftware, Inc. ("I-View") (the former name of Galacticomm), Peter Berg
("Berg"), Yannick Tessier ("Tessier"), and Hemingfold, as amended by a
letter agreement (together, the "Stock Purchase Agreement");
2. Security Agreement, dated November 21, 1996, by and between I-View and
Hemingfold ("Security Agreement");
3. Intercreditor Agreement, dated November 21, 1996, by and among I-View,
Hemingfold, Union Atlantic Partners I Limited and Union Atlantic LC (the
"Intercreditor Agreement");
4. Escrow Agreement by and among Lucio, Mandler, Croland, Brongsia, Garbett,
Stiphany & Martinez, P.A., Hemingfold, Berg, Tessier and Lorraine Gouger
("Gouger");
5. Letter Agreement by and between Galacticomm and Hemingfold providing for
the extension of registration rights under the Stock Purchase Agreement to
shares of Galacticomm held by Berg, Tessier and Gouger that are subject to
warrants issued by those individuals to Hemingfold, dated March 15, 1997,
(the "Warrant Letter Agreement") following the exercise of the Warrants
(as defined below);
<PAGE>
[LETTERHEAD]
6. Secured Convertible Promissory note made by I-View, dated November 21,
1996, to the order of Hemingfold in the principal amount of $1,250,000, as
amended by letter agreement by and between Galacticomm and Hemingfold;
7. Warrant issued by Berg granting Hemingfold the right to purchase 1,200,000
shares of Galacticomm, dated March 15, 1997, (the "Berg Warrant");
8. Warrant issued by Tessier granting Hemingfold the right to purchase
1,200,000 shares of Galacticomm, dated March 15, 1997, (the "Tessier
Warrant");
9. Warrant issued by Gouger granting Hemingfold the right to purchase 100,000
shares of Galacticomm, dated March 15, 1997, (the "Gouger Warrant", and
together with the Berg Warrant and the Tessier Warrant, the "Warrants");
and
10. Subscription Agreement, dated May, 1997, by and between I-View and
Hemingfold for the purchase of 271,739 shares of I-View.
Following the assignment of the agreements, instruments and interests
therein described in subparagraphs nos. 1 through to 10 above and the
Galacticomm Stock (collectively, the "Galacticomm Interests") to
Kenworthy, Hemingfold intends to sell its 100% holdings of the common
stock of Kenworthy to an affiliate, the Peder Sager Wallenberg Charitable
Trust.
On behalf of Hemingfold, I request that Galacticomm acknowledge and
contract to the two proposed transfers of the Galacticomm Interests by
signing in the space indicated below and taking such other steps to affect
these transfers, such as reissuing the Stock in the name of Kenworthy,
seeking the agreement of Berg, Tessier and Gouger to the matters set forth
in this letter and issuing and filing a new UCC-1 form in favor of
Kenworthy. Furthermore, Galacticomm's execution of this letter agreement
constitutes a representation by Galacticomm that, to its knowledge, there
are no contractual or other restrictions that prevent Hemingfold from
Transferring its Galacticomm Interests to Kenworthy as proposed, other
that the consent of Union Atlantic Partners I Limited and Union Atlantic
LC under the terms of the Intercreditor Agreement.
Hemingfold represents to Galacticomm that neither it nor Kenworthy is a
U.S. person. Hemingfold acknowledges that its assignment of its rights and
obligations under the above-listed agreements and instruments does not
relieve Hemingfold of its responsibilities for any misrepresentation
stated therein.
By signing in the space below, please acknowledge on behalf of Galacticomm
that it is Galacticomm's intent:
<PAGE>
[LETTERHEAD]
1. That the third paragraph of the letter agreement amending the Stock
Purchase Agreement be construed so that the reference to Hemingfold in the
second line of said paragraph refers to all affiliates of Hemingfold,
including without limitation, Kemworthy; and
2. That the Warrant Letter Agreement be construed to be an amendment of the
Stock Purchase Agreement implementing the intent of the parties as stated
in the Warrant Letter Agreement to provide that the registration rights
set forth in the Stock Purchase Agreement shall apply to the shares to be
acquired by Hemingfold, or its affiliated assignee, pursuant to the
Warrants.
Thank you for your assistance in this matter.
Yours faithfully,
/s/ MARTYN D. CRESPAL
- ---------------------
Martyn D. Crespal
Director
For and on behalf of
Hemingfold Investments Limited
Agreed this 8th day of September, 1997
Galacticomm Technologies, Inc.
/s/ PETER BERG
- ----------------------
By: Peter Berg
Its: Chief Executive Officer
Agreed this day of September, 1997
/s/ PETER BERG /s/ YANNICK TESSIER /s/ LORRAINE GOUGER
- ----------------- ---------------------- ------------------------
Peter Berg Yannick Tessier Lorraine Gouger
Union Atlantic Partners I Limited Union Atlantic LC
/s/ LEONARD J. SKOTOW /s/ LEONARD J. SKOTOW
- --------------------------------- ------------------------------------
By: Leonard J. Skotow By: Leonard J. Skotow
Its: Authorized Agent Its: President
<PAGE>
[KENWORTHY INVESTMENTS LIMITED]
[LETTERHEAD]
Galacticomm Technologies, Inc.
4101 SW 47th Street, Suite 101
Fort Lauderdale, FL 33314
U.S.A. Via Facsimile and Post
ATTENTION: Mr. Peter Berg, Chairman & CEO
Dear Sirs,
RE: DISCLOSURE STATEMENT
Pursuant to your request to inform you in connection with the proposed Initial
Public Offering of Galacticomm Technologies, Inc.("Company") we can inform you
as follows.
Kenworthy International, Limited ("Kenworthy") is the registered holder of
2,255,866 shares (the "Shares") of common stock of the Company, each with a par
value of $0.0001.
Kenworthy is the assignee to a stock purchase agreement by and between the
Company and Hemingfold Investments, Limited ("Hemingfold") and amendment
thereto, pursuant to which the Company shall issue to Kenworthy 300,000
additional shares of common stock in lieu of certain so-called "ratchet rights".
Kenworthy is also the assignee to three warrants, issued by three shareholders
of the Company to Hemingfold, pursuant to which Kenworthy is entitled to
purchase 2,500,000 additional shares of common stock.
Kenworthy is a company wholly owned by the Peder Sager Wallenberg Charitiable
Trust. The Trustees of The Peder Sager Wallenberg Charitiable Trust are Bayard
Trust Company Limited ("Bayard") and Mees Pierson Management (Guerrsey), Limited
("Mees Pierson"), Bayard has designated Martyn D. Crespel, director of Bayard,
and John B. Wilson, director, to act on behalf of Bayard. Mees Pierson has
designated Paul Backhouse, director, and Julie Scott, director, to act on behalf
of Mees Pierson.
Baynard and its respective representatives jointly with Mees Pierson and its
respective representatives share the ultimate power to vote and dispose of these
shares.
Yours faithfully
For and on behalf of
KENWORTHY INVESTMENTS LIMITED
/s/ MARTYN D. CRESPEL
- ------------------------------
M.D. Crespel
Director
<PAGE>
[KENWORTHY INVESTMENTS LIMITED]
[LETTERHEAD]
5th September 1997
VIA FACSIMILE AND POST
Galacticomm Technologies, Inc.
4101 SW 47th Street, Suite 101
Fort Lauderdale, FL 33314
USA
Attention: Mr. Peter Berg, Chairman & CEO
Re: "BAD BOY" REPRESENTATIONS
Dear Sirs
Your counsel has requested that we advise you whether the "Bad Boy"
representations set forth in the enclosed are true and accurate with respect to
Kenworthy investments Limited and its "beneficial owners", as that term is used
in the U.S. securities laws. Please accept this letter as confirmation that the
representations are accurate as to said parties.
Yours faithfully
For and on behalf of
KENWORTHY INVESTMENTS LIMITED
/s/ MARTYN D. CRESPEL
- -----------------------------
M.D. Crespel
Director
Enclosure
cc: Leslie J. Croland, esquire (w/enclosure)
EXHIBIT 10.3
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION
UNDER SUCH ACT OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED.
$1,250,000.00 November 21, 1996
SECURED CONVERTIBLE PROMISSORY NOTE
OF
I-VIEW SOFTWARE, INC.
FOR VALUE RECEIVED, I-VIEW SOFTWARE, INC., a Florida corporation (the
"Company"), hereby promises to pay to the order of HEMINGFOLD INVESTMENTS, LTD.,
whose address is c/o Bayard Trust Company Limited, 2nd Floor, Queen's House, Don
Road, st. Helier, Jersey JE1 4HP, Channel Islands (the "Payee"), on the Maturity
Date (as hereinafter defined) the principal amount of One Million Two Hundred
and Fifty Thousand Dollars ($1,250,000), together with all accrued and unpaid
interest. The unpaid principal balance of this Secured Convertible Promissory
Note (the "Note") shall bear interest at a rate of ten percent (10%) per annum.
The Company shall make payments of accrued interest to the Payee on March 31,
June 30, September 30 and December 31 of each year during which principal and
interest are owed and outstanding under this Note, with the first payment being
made on March 31, 1997.
1. DEFINITIONS.
(a) "Bankruptcy" means: (a) an adjudication of bankruptcy under the U.S.
Bankruptcy Reform Act of 1978, as amended, or any successor statute; (b) the
specified Person stops payment of, is deemed unable or otherwise admits
inability to pay its debts or becomes or is deemed to be insolvent; (c) an
assignment for the benefit of creditors; (d) the specified Person either does,
resolves to do or commences negotiations with a view to doing any of the
following: (i) makes a general or special arrangement or composition (whether
voluntary or involuntary) with its creditors or any class of creditors, (ii)
declares or agrees to a moratorium, (iii) issues a notice convening a meeting to
resolve to do any of the foregoing; (e) the filing of a voluntary petition in
bankruptcy or reorganization or the passing of a resolution for voluntary
liquidation or reconstruction; or (f) the failure to vacate the appointment of a
receiver or trustee, for any part or all of the assets or property of a party
within 60 days from the date of such appointment.
(b) "Common Stock" means the common stock of the Company, par value
$0.0001 per share.
(c) "Common Stock Deemed Outstanding" means the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common
Stock deemed to be outstanding pursuant to Section 6(a) hereof, at and previous
to any given time.
(d) "Conversion Price" means $0.63, as adjusted pursuant to Section 6
hereof.
<PAGE>
(e) "Converted Shares" shall have the meaning set forth in Section 4(a)
hereof.
(f) "Fair Value" means a value determined jointly by the Company and the
Payee. However, if the Company and the Payee are unable to reach an agreement,
"Fair Value" shall be determined by an appraiser jointly selected by the Company
and the Payee, at the Company's sole expense and cost.
(g) "Maturity Date" means the earliest to occur of:
(i) November 21, 1998;
(ii) the completion of a $3,000,000 private placement by the Company;
or
(iii) the completion of an initial public offering of securities
and/or debt by the Company.
(h) "Person" shall mean any individual, partnership, firm, corporation,
limited liability company, association, joint venture, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
(i) "Security Agreement" means the security agreement between the Company
and the Payee, of even date hereof.
(j) "Stock Purchase Agreement" means the stock purchase agreement among
the Company, Payee, Peter Berg and Yannick Tessier, of even date hereof.
2. VOLUNTARY PREPAYMENT; INVOLUNTARY PREPAYMENT.
(a) VOLUNTARY PREPAYMENT. This Note may not be prepaid in whole or in part
without the prior written consent of the Payee. If such prepayment is consented
to by the Payee, the Company shall prepay the principal to which such consent
has been given.
(b) INVOLUNTARY PREPAYMENT. The Payee may demand prepayment in full of
this Note at any time that an Event of Default under this Note exists and has
not been cured or waived, in which event this Note shall be immediately due and
payable. Prepayment shall be made by the Company by the close of business on the
first business day after the Company's receipt of the demand notice, by full
payment of the principal amount of this Note, together with all accrued and
unpaid interest.
3. DEFAULTS, AMENDMENTS, WAIVERS, ETC.
(a) EVENTS OF DEFAULT. Each of the following events is herein called an
"Event of Default":
2
<PAGE>
(i) The occurrence of an event of Bankruptcy with regard to the
Company;
(ii) The Company defaults in the due and punctual payment of
principal or interest on any of its indebtedness other than that evidenced by
this Note, or there exists any default under any mortgage, agreement or note
securing, relating to or evidencing such indebtedness, which default is not
cured within any applicable cure period;
(iii) Any default by the Company in the performance of any covenant
or condition contained in this Note including, but nor limited to, the timely
payment of principal and interest hereunder, which default is not cured with
five (5) business days;
(iv) The Company commits an event of default under the Stock Purchase
Agreement or the Security Agreement; or
(v) The Company fails to deliver to Payee the amount of Common Stock,
duly authorized and issued, fully paid and nonassessable, which the Payee is
entitled to receive upon tendering of the Note for conversion into the Converted
Shares as provided in Section 4(a) hereof.
(b) REMEDIES FOR DEFAULT. If an Event of Default occurs, then this Note
shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Company.
(c) ENFORCEMENT OF REMEDIES. If an Event of Default occurs, the Payee may
proceed to protect and enforce its rights at law and/or in equity, or proceed to
enforce payment of this Note or to enforce any other legal or equitable right of
the Payee, all of which shall be deemed separate and cumulative, and not
exclusive of each other.
(d) AMENDMENTS AND WAIVERS. No course of dealing between the Company and
the Payee, and no failure or delay on the part of the Payee in exercising any
rights under this Note shall operate as a waiver of the rights of the Payee.
Furthermore, no single or partial exercise of any right hereunder shall prevent
any other or further exercise of such right or of any other right. No covenant
or other provision of this Note may be changed, and no Event of Default may be
waived, except by a written document signed by the party consenting to such
change or waiving such Event of Default.
(e) COST AND EXPENSE OF ENFORCEMENT. If an Event of Default occurs
hereunder, the Company shall, to the extent permitted under applicable law, pay
to the Payee such further amount as shall be sufficient to cover the cost and
expense of enforcement, including the reasonable attorney fees and expenses of
the Payee.
3
<PAGE>
4. CONVERSION OF NOTE.
(a) Upon the occurrence of either of the following events, all principal
and accrued interest due and payable under this Note (the "Outstanding Amount")
shall be converted into that number of shares of Common Stock (the "Converted
Shares") equal to the Outstanding Amount divided by the Conversion Price:
(i) upon the written demand of the Payee; or
(ii) upon the written demand of I-View, on or before April 15, 1998,
if the Company's financial statements, as prepared by a "Big 6" accounting firm,
for the financial year ending December 31, 1997, show Company after tax earnings
of $1,000,000 or more.
(b) The Company shall take appropriate action to reserve from the
Company's authorized but unissued Common Stock, sufficient Common Stock to
permit the conversion of the Outstanding Amount pursuant to Section 4(a), which
reservation shall be noted in the books, records and, if appropriate, the
financial statements of the Company.
(c) The Company covenants that all Converted Shares which may be issued
will, upon issuance, be validly issued, fully paid and non-assessable, and free
from all taxes, excluding income taxes, gross receipts taxes or any similar tax
based upon the earnings, receipts, income or gain to the Payee.
5. REGISTRATION RIGHTS. The Payee shall have the same piggyback registration,
demand registration, tag along and bring along rights, regarding the Converted
Shares, as are contained in the Stock Purchase Agreement.
6. ADJUSTMENT OF SHARES AND CONVERSION PRICE.
(a) CONVERSION PRICE
(i) GENERAL.
(A) In order to prevent dilution of the conversion rights granted
under this Note, the Conversion Price shall be subject to adjustment from time
to time pursuant to this Section 6(a).
(B) If the Company issues or sells or, in accordance with Section
6(a)(ii) hereof, is deemed to have issued or sold, any shares of Common Stock
for a consideration per share less than the Conversion Price in effect
immediately prior to the time of such issuance or sale (except for the issuance
or deemed issuance of securities in a transaction described in Section
6(a)(i)(C)), then immediately upon each such issuance or sale the Conversion
Price shall be reduced to a price determined by multiplying the Conversion Price
in effect immediately prior to the issuance or sale by a fraction, the numerator
of which shall be the sum of (i) the number
4
<PAGE>
of shares of Common Stock actually outstanding prior to the issuance or sale and
(ii) the number of shares of Common Stock that the amount receivable by the
Company upon such issuance or sale on that occasion would purchase at the
initial Conversion Price, and the denominator of which shall be the number of
shares of Common Stock actually outstanding and Common Stock Deemed Outstanding
under Subsection 6(a)(ii) immediately after such issuance or sale.
(C) The existence and any exercise of any option, warrant, or
other right to purchase Common Stock, that is outstanding on the date hereof
shall be excluded from the operation of Paragraph (B) of this Subsection 6(a)(i)
and from the operation of Subsection 6(a)(ii)
(ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Conversion Price under Subsection 6(a)(i) above, the
following provisions shall be applicable:
(A) ISSUANCE OF RIGHTS AND OPTIONS. If the Company in any manner
grants any rights or options to subscribe for or to purchase Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities")
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities is
less than the Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes of this
paragraph, the "price per share for which Common Stock is issuable upon exercise
of such Options or upon conversion or exchange of such Convertible Securities"
shall be determined by dividing (i) the total amount, if any, received by the
Company as consideration for the granting of such Options plus the minimum
aggregate amount of additional consideration payable to the Company upon
exercise of all such Options plus, in the case of Options that relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
such Convertible Securities, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options and upon the conversion
or exchange of all Convertible securities issuable upon the exercise of such
Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, and the price per share for
which Common Stock is issuable upon conversion or exchange of such Convertible
Securities is less than the Conversion Price in effect immediately prior to the
time of such issuance or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable upon such conversion or exchange" shall be
determined by dividing (i) the total
5
<PAGE>
amount received by the Company as consideration for the issuance or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities.
(C) CHANGE IN OPTION PRICE AND CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange or any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time, the Conversion Price in effect at the time of such
change shall be reduced to the Conversion Price that would have been in effect
at such time had such Options or Convertible Securities provided for such
changed purchase price, additional consideration, or changed conversion rate, as
the case may be, at the time initially granted, issued or sold.
(D) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options, or Convertible Securities are issued or sold or deemed to have been
issued or sold for consideration that includes unrestricted cash, then the
amount of cash consideration actually received by the Company shall be deemed to
be the full monetary value of the unrestricted cash portion thereof. If any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for a consideration part or all of which is other than
unrestricted cash, then the amount of the consideration other than unrestricted
cash received by the Company shall be deemed to be in the Fair Value of such
consideration.
(E) INTEGRATED TRANSACTIONS. If any Option is issued in
connection with the issuance or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued without consideration.
(F) TREASURY SHARES. The number of shares of Stock Deemed
Outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
shall be considered an issuance or sale of Common Stock.
(iii) SUBDIVISION AND COMBINATION OF COMMON STOCK; STOCK DIVIDENDS.
If the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or Convertible Securities, or any rights to purchase Common Stock
or Convertible Securities as a dividend upon Stock, (b) issue any shares of
Common Stock in subdivision of outstanding shares of Common Stock by
reclassification, stock split or otherwise, or (c) combine outstanding shares of
Common Stock by reclassification, stock split or otherwise, then the Conversion
Price that would apply if purchase rights hereunder were being exercised
immediately prior to such action by the Company shall be reduced only by
multiplying it by a fraction, the numerator of which shall be the number of
shares of Common Stock Deemed Outstanding immediately prior to such dividend,
subdivision or combination and the denominator of which shall be the number of
shares
6
<PAGE>
of Common Stock Deemed Outstanding immediately after such dividend, subdivision
or combination.
(iv) CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Company declares a
dividend or distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus AND otherwise than in Common Stock, Options or
Convertible Securities, the Conversion Price shall be reduced by an amount
equal, in the case of a dividend or distribution in cash, to the amount thereof
payable per share of the Stock or, in the case of any other dividend or
distribution, to the Fair Value of such dividend or distribution per share of
Common Stock. For purposes of the foregoing, a dividend or distribution other
than in cash shall be considered payable out of earnings or earned surplus only
to the extent that such earnings or earned surplus are charged an amount equal
to the Fair Value of such dividend or distribution. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend or distribution, of, if a record is not taken, the date as of which the
holders of Common Stock or record entitled to such dividend or distribution are
to be determined.
(v) MANNER OF CALCULATING ADJUSTMENTS; NO DE MINIMIS ADJUSTMENTS. The
calculation of each adjustment of the Conversion Price shall be made accurate to
the nearest ten- thousandth. No adjustment of the Conversion Price shall be made
if the amount of such adjustment would be less than one cent per share. In such
case any adjustment that otherwise would be required to be made shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment that, together with any adjustment or adjustments so carried forward,
shall amount to not less than one cent per share.
(b) ADJUSTMENT OF NUMBER OF STOCK ISSUABLE UPON EXERCISE. Upon each
reduction of the Exercise Price pursuant to Section 6(a) hereof, the Payee shall
thereafter (until another such reduction) be entitled to purchase, at the
Exercise Price in effect on the date the conversion rights under this Note are
exercised, the number of shares of Common Stock, calculated to the nearest whole
number of Common Stock, determined by (a) multiplying the number of shares of
Common Stock purchasable hereunder immediately prior to the reduction of the
Conversion Price by the Conversion Price in effect immediately prior to such
reduction, and (b) dividing the product so obtained by the Conversion Price in
effect on the date of such exercise.
7. COVENANTS OF THE COMPANY. So long as this Note is outstanding, the Company
covenants and agrees as follows:
(a) The Company shall maintain in full force and effect its existence as a
Florida corporation, its rights and franchises and all licenses, permits and
other rights to use trademarks, tradenames, copyrights, trade secrets, patents
or processes owned or possessed by it and deemed by it to be necessary to the
conduct of its business, and shall comply with all applicable laws and
regulations, whether now in effect or hereinafter enacted or promulgated by any
governmental authority having jurisdiction.
7
<PAGE>
(b) The Company shall duly pay and discharge or cause to be duly paid and
discharged, before the same becomes delinquent, all taxes (including all
employment and payroll taxes), assessments and other governmental charges
imposed upon it or any of its properties or in respect of its franchise or
income. However, no such tax or charge need be paid if being contested in good
faith by proper proceedings diligently conducted and if such reservation or
other appropriate provisions, if any, as shall be required by generally accepted
accounting principles, shall have been made therefor.
(c) The Company shall promptly notify the Payee in writing of: (i) any
litigation against it that is instituted or pending, or to the Company's
knowledge threatened, the outcome of which might have a material adverse effect
on the Company's financial condition, business, operations, assets or
liabilities, or results of operations; (ii) any default by the Company in the
due and punctual payment of principal or interest on any of its indebtedness
other than that evidenced by this Note, or any default by the Company under any
mortgage, agreement or note securing, relating to or evidencing such
indebtedness.
(d) Upon request of the Payee, the Company will provide the Payee with
copies of all filings made by the Company with federal, state or local
governmental bodies or agencies.
(e) While any principal or interest is owed and outstanding hereunder, the
Company shall not declare or make any dividends or distributions to the
Company's stockholders.
8. MISCELLANEOUS PROVISIONS.
(a) NON-ASSIGNMENT. Neither the Company nor the Payee may assign its
rights or delegate its duties hereunder to any other person, except with the
prior written consent of the other party.
(b) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(a) receipt, if made by personal service, (b) two days after dispatch, if made
by reputable overnight courier service, (c) upon the delivering party's receipt
of a written confirmation of a transmission made by cable, by telecopy, by
telegram, or by telex, or (d) three days after being mailed by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section:
If to the Company: 4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
Attn: Peter Berg, President
8
<PAGE>
If to the Payee: c/o Bayard Trust Company Limited
2nd Floor
Queen's House
Don Road
St. Helier
Jersey JE1 4HP
Channel Islands
Telephone: (44) 1534-35385
Facsimile: (44) 1534-68632
Attention: Martyn Crespel
(c) GOVERNING LAW. This Note shall be governed in accordance with the
internal laws of the State of Florida (without regard to its conflict of laws
principles). All actions or proceedings initiated by any party hereto and
arising directly or indirectly out of this Agreement which are brought to
judicial proceedings shall be litigated in the Florida state courts sitting in
Broward County, Florida.
(d) SECTION HEADINGS. The section headings in this Note are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Note.
I VIEW SOFTWARE, INC.
By:/s/ PETER BERG
-------------------
Peter Berg, Chairman
9
EXHIBIT 10.4
[GALACTICOMM TECHNOLOGIES, INC.]
[LETTERHEAD]
September 8, 1997
Hemingfold Investments, Ltd.
c/o Bayard Trust Company Limited
2nd Floor
Queen's House
Don Road
St. Helier
Jersey JE1 4HP
Re: SECURED CONVERTIBLE PROMISSORY NOTE (THE "NOTE") OF GALACTICOMM
TECHNOLOGIES, INC., F/K/A I-VIEW SOFTWARE, INC. (THE "COMPANY") IN
FAVOR OF HEMINGFOLD INVESTMENTS, LTD, DATED NOVEMBER 21, 1996, IN THE
PRINCIPAL AMOUNT OF $1,250,000.00
Dear Sirs:
This letter agreement will serve to amend the terms of the Note. All
capitalized terms contained herein have the meanings set forth in the Note,
unless otherwise specifically defined herein.
Section 4(a) of the Note is hereby deleted in its entirety and replaced by
the following:
"Upon the earliest to occur of any of the following events:
(i) upon the written demand of the Payee;
(ii) on the date that the Company's Registration Statement, regarding
an initial public offering of its securities, is declared effective by the
Securities and Exchange Commission; or
(iii) upon the written demand of the Company, on or before April 15,
1998, if the Company's financial statements, as prepared by a "Big 6" accounting
firm, for the Company's fiscal year ending December 31, 1997, show Company after
tax earnings of $1,000,000 or more,
then (x) all principal due and payable under this Note (the "Outstanding
Amount") shall be converted into that number of shares of Common Stock (the
"Converted Shares") equal to the Outstanding Amount divided by the Conversion
Price, and (y) all accrued interest due and payable under this Note shall be
paid by the Company to the Payee, in cash."
All of the other terms and conditions of the Note shall remained unchanged
and in full force and effect. If you agree with this amendment to the Note,
please: (a) sign and date this letter in the space provided below; and (b)
return an original signed copy of the letter to us.
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ PETER BERG
--------------------------
Peter Berg, Chairman & CEO
<PAGE>
Hemingfold Investments, Ltd.
September 8, 1997
Page 2
Agreed to and accepted by:
HEMINGFOLD INVESTMENTS, LTD.
By: /s/ MARTYN D. CRESPEL
---------------------
Name: Martyn D. Crespel
Title: Director
EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
AMONG
I-VIEW SOFTWARE, INC.,
AS SELLER,
PETER BERG,
YANNICK TESSIER
AND
UNION ATLANTIC PARTNERS I LIMITED,
AS PURCHASER
NOVEMBER 21, 1996
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated November 21, 1996 among
I-VIEW SOFTWARE, INC., a Florida corporation (the "Company"), Peter Berg
("Berg"), Yannick Tessier ("Tessier"), and UNION ATLANTIC PARTNERS I LIMITED
("Purchaser").
RECITALS:
A. The Company wishes to issue 198,413 shares (the "Shares") of its common
stock, par value $0.0001 per share, (the "Common Stock") to Purchaser at a price
of $0.63 per share, in exchange for aggregate consideration in the amount of
$125,000, (the "Purchase Price")
B. Purchaser wishes to purchase the Shares in accordance with the terms
and conditions contained herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Adult Entertainment" means entertainment which contains sexually
explicit content.
1.2 "Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
Controls, is controlled by, or is under common control with, such specified
Person.
1.3 "Assets" means all the properties and assets used or intended to be
used or required by the Company and each Subsidiary in the conduct of the
Business or a Subsidiary's business and which are material and, with respect to
contract rights, is a party to and enjoys the right to the benefits of all
material contracts and agreements used and/or intended to be used by the Company
or a Subsidiary or required in or relating to the conduct of the Business
1.4 "Bankruptcy" means: (a) an adjudication of bankruptcy under the U.S.
Bankruptcy Reform Act of 1978, as amended, or any successor statute; (b) the
specified Person stops payment of, is deemed unable, or otherwise admits
inability to pay, its debts or becomes or is deemed to be insolvent; (c) the
presentation of a petition for or the making of a winding up or administration
order in respect of the specified Person; (d) an assignment for the benefit of
creditors; (e) the specified Person either does, resolves to do or commences
negotiations with a view to doing any of the following: (i) makes a general or
special arrangement or composition (whether voluntary or compulsory) with its
creditors or any class of creditors, (ii) declares or agrees to a moratorium, or
(iii) issues a notice convening a meeting to resolve to do any of the foregoing;
(f) the filing of a voluntary petition in bankruptcy, winding-up or
reorganization or the passing of a resolution for voluntary liquidation,
reconstruction or winding up; or (g) the
<PAGE>
failure to vacate the appointment of a receiver, trustee, provisional liquidator
or administrative receiver for any part or all of the assets or property of a
party within 60 days from the date of such appointment.
1.5 "Board" means the Board of Directors of the Company.
1.6 "Business" means the development, production and distribution of
computer software and hardware, as well as related peripherals.
1.7 "Business Day" means any day that is not a Saturday or a Sunday and on
which banks are open for the conduct of normal banking business in the city of
Miami, Florida.
1.8 "Confidential Information"of any party means all data, reports,
interpretations, forecasts and records containing or otherwise reflecting
information concerning the transactions contemplated hereby which is of a
confidential nature, not available to the general public and which such party
provides or has previously provided to the other party at any time pursuant to
or in connection with this Agreement. "Confidential Information" includes any
information obtained by a meeting with personnel or a representative of a party
or its subsidiaries, together with analyses, compilations, studies or other
documents prepared by the party obtaining the information, which contain the
Confidential Information. However, "Confidential Information" does not include
any information which: (a) at the time of disclosure or thereafter is available
to the public (other than as a result of a disclosure by a party or its
Representative in violation of the terms of this Agreement); or (b) was or
becomes available to a party or its Representatives (collectively, the "Informed
Party") from a source other than the other party, unless the Informed Party
knows that the source is bound by the terms of a confidentiality agreement with
the other party.
1.9 "Control" (including the terms "controlling," "controlled by" and
"under common control with"), with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
1.10 "Current Number" shall have the meaning set forth in Section
8.2(a)(ii) hereof.
1.11 "Demand Registrable Securities" means, the Shares and any other
shares of Common Stock received by Purchaser as a result of the preemption,
anti-dilution and ratchet rights contained herein. However, any such shares
shall be "Demand Registrable Securities" only so long as they are "Restricted
Securities". Any share or other security shall be deemed a "Restricted Security"
until such time as such share or other security: (a) has been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement
2
<PAGE>
covering it; or (b) has been sold pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
1.12 "Demand Registration" shall have the meaning set forth in Section
6.2(a) hereof.
1.13 "Dilution Shares" means, collectively, the Dilutive Shares, the
Dilutive Rights Shares and Excess Existing Rights Shares.
1.14 "Dilutive Rights Shares" has the meaning set forth in Section
1.16(a)(ii) hereof.
1.15 "Dilutive Shares" has the meaning set forth in Section 1.16(a)(i)
hereof
1.16 "Dilutive Issuance" means the occurrence of:
(a) any sale or issuance by the Company, at any time, or the entering
into by the Company of any agreement, arrangement or understanding (whether
conditional or unconditional) for the sale or issuance by the Company of:
(i) any shares ("Dilutive Shares") of Common Stock for
consideration per share (the "Issue Price") of less than the Per Share Purchase
Price, other than (A) the issuance of Existing Rights Shares upon the exercise
of Existing Rights; (B) any sale or issuance to Purchaser pursuant to Section
8.1 or (C) any issuance as a dividend upon or by reason of a split-up of the
Common Stock in which Purchaser participates on the same basis as all other
holders of Common Stock receiving such dividend or shares on consummation of
such split-up;
(ii) any Rights to acquire (conditionally or unconditionally) any
shares ("Dilutive Rights Shares") of Common Stock where the sum (the "Rights
Issue Price") of (A) the consideration paid or payable for any such Right
entitling the holder thereof to acquire one share of Common Stock, plus (B) such
additional consideration paid or payable upon exercise of such Right to acquire
on share of Common Stock, is less than the Per Share Purchase Price; or
(b) any sale or issuance by the Company, at any time, of any Excess
Existing Rights Shares for consideration per share (the "Excess Existing Rights
Exercise Price") of less than the Per Share Purchase Price.
For purposes of this Agreement, (a) each Dilutive Issuance of Common
Stock shall be deemed to involve the issuance of the maximum number of Dilutive
Shares which are sold or issued in such Dilutive Issuance or which are the
subject of the agreement, arrangement, or understanding for sale or issuance
involved in such Dilutive Issuance, regardless of whether all or any of such
shares are actually sold or issued and regardless of whether such agreement is
legally binding and enforceable; (b) each Dilutive Issuance of Rights shall be
deemed to involve the issuance of the maximum number of Dilutive Rights Shares
issuable upon exercise of such Rights (regardless of whether such Rights are
presently exercisable or are ever exercised or of the existence of any
provisions for adjustment in the number of shares of Common Stock issuable
3
<PAGE>
upon exercise of such Rights or in the applicable Rights Issue Price); and (c)
the date of occurrence of any Dilutive Issuance shall be the date of the sale or
issuance or the entering into of the agreement, arrangement or understanding for
the sale or issuance of the shares of Common Stock or Rights involved.
1.17 "Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, option, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
1.18 "Environmental Laws" means any foreign, federal, state or local
statute, code, ordinance, rule, regulation, permit, consent, approval, license,
judgment, order, writ, judicial decision, common law rule, decree, agency
interpretation, injunction or other authorization or requirement whenever
promulgated, issued, or modified, including the requirement to register
underground storage tanks, relating to:
(a) emissions, discharges, spills, releases or threatened releases of
pollutants, contaminants, Hazardous Substances (as hereinafter defined),
materials containing Hazardous Substances, or hazardous or toxic materials or
wastes into ambient air, surface water, groundwater, watercourses, publicly or
privately owned treatment works, drains, sewer systems, wetlands, septic systems
or onto land;
(b) the use, treatment, storage, disposal, handling, manufacturing,
transportation, or shipment of Hazardous Substances, materials containing
Hazardous Substances or hazardous and/or toxic wastes, material, products or
by-products (or of equipment or apparatus containing Hazardous Substances) as
defined in or regulated under the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.,
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. ss. 9601
et seq., and/or the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
each as amended from time to time; or
(c) otherwise relating to pollution or the protection of human health
or the environment.
1.19 "Excess Existing Rights Shares" means either:
(a) the number of shares (if any) of Common Stock issuable upon
exercise of an Existing Right after a Modification, which are in excess of the
number of share issuable upon exercise of a an Existing Right without such
Modification; or
(b) the number of shares (if any) of Common Stock issuable upon the
exercise of an Existing Right after a Modification, where the consideration per
share at which the shares
4
<PAGE>
of Common Stock are issuable, is less than the consideration per share at which
the shares would have been issued without such Modification.
1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.21 "Existing Right" means any of the Rights set forth on SCHEDULE 1.21
hereto.
1.22 "Existing Rights Shares" means, as of any time, the shares of Common
Stock issuable at such time upon exercise of any of the Existing Rights pursuant
to the terms of such Existing Rights as in effect on the date hereof. .
1.23 "GAAP" means United States generally accepted accounting principles
and practices as in effect during the relevant period and applied consistently
throughout the periods involved.
1.24 "Governmental Authority" means any federal, state or local, or
foreign government, governmental, regulatory or administrative authority (or
subdivision thereof) and any agency or commission or any court, tribunal or
judicial or arbitral body that has jurisdiction over Purchaser, the Business,
the "Company" or their respective assets.
1.25 "Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
1.26 "Intellectual Property" means: (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications; (b) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications; (c) national and multinational statutory invention registrations,
patents, patent registrations and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations)
and all rights therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application; (d) trademarks, service marks, trade dress, logos, trade names and
corporate and partnership names, whether or not registered, including all common
law rights, and registrations and applications for registration thereof; (e)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by international treaties
or conventions; (f) moral rights (including, without limitation, rights of
paternity and integrity), and waivers of such rights by others; (g) trade
secrets and confidential, technical and business information; (h) copies and
tangible embodiments of all the foregoing, in whatever form or medium; (i) all
rights to obtain and rights to apply for patents, and to register trademarks and
copyrights; (j) all rights to sue or recover and retain damages and costs and
attorneys' fees for present and past infringement of any of the foregoing; and
(k) all goodwill associated with the foregoing.
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1.27 "Issue Price" has the meaning set forth in Section 1.16(a)(i) hereof.
1.28 "Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law
issued by any Governmental Authority.
1.29 "Material Adverse Effect" means any circumstance, change in, or
effect on the business of any party hereto that could reasonably be expected to
have a materially adverse effect on the business, operations, assets or
liabilities, results of operations or the financial condition of such party.
1.30 "Merger" means the merger of the Company and Tessier Technologies,
Inc.
1.31 "Modification" means the amendment, modification, supplementation,
extension, renewal or replacement of Existing Rights, at time after the date
hereof.
1.32 "Per Share Purchase Price" shall have the meaning set forth in
Section 8.2(a)(ii).
1.33 "Person" means any individual, partnership, firm, corporation,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
1.34 "Piggyback Registrable Securities" means the Shares and any other
shares of Common Stock received by Purchaser as a result of the preemption,
anti-dilution and ratchet rights contained herein. However, any such shares
shall be "Registrable Securities" only so long as they are "Restricted
Securities". Any share or other security shall be deemed a "Restricted Security"
until such time as such share or other security (i) has been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering it, or (ii) has been sold pursuant to Rule 144
(or any similar provision then in force) under the Securities Act.
1.35 "Piggyback Registration" shall have the meaning set forth in Section
6.1(a) hereof.
1.36 "Purchase Price" shall have the meaning set forth in Recital A
hereof.
1.37 "Receivables" means any and all accounts, notes and other receivables
of the Company or a Subsidiary from third parties, including, without
limitation, customers, arising from the conduct of the Business or otherwise
before the date hereof, whether or not in the ordinary course, together with all
unpaid financing charges accrued thereon.
1.38 "Registration Expenses" shall have the meaning set forth in Section
6.3(d) hereof.
1.39 "Representative" means, with respect to a party hereto, such party's
directors, officers, employees or attorneys, accountants and other agents and
representatives who have need
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to know Confidential Information of the other party hereto, in order to perform
their duties or services.
1.40 "Request Securities" shall have the meaning set forth in Section 6.3
hereof.
1.41 "Rights" means any options, warrants or other agreements for the
purchase of Voting Stock.
1.42 "Rights Issue Price" shall have the meaning set forth in Section
1.16(a)(ii).
1.43 "SEC" means the United States Securities and Exchange Commission.
1.44 "Securities Act" means the Securities Act of 1933, as amended.
1.45 "Shares" shall have the meaning set forth in Recital A hereof.
1.46 "Subsidiary" means a Person which is Controlled by the Company
1.47 "Tax" or "Taxes" means any and all taxes, stamp duties, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs duties, tariffs, and
similar charges.
1.48 "Voting Stock" means any class of capital stock of the Company with
general voting rights for the election of directors.
1.49 "Weighted Average Price" means, when used in any calculation herein,
the quotient obtained by dividing:
(a) the sum of (i) the aggregate Issue Price of all Dilutive Shares,
if any, issued in a Dilutive Issuance and in all prior Dilutive Issuances (if
any) plus (ii) the aggregate Rights Issue Price of all Dilutive Rights Shares,
if any, issued in such Dilutive Issuance and in all prior Dilutive Issuances (if
any) plus (iii) the aggregate Excess Existing Rights Exercise Price of all
Excess Existing Rights Shares, if any, issued in a Dilutive Issuance and in all
prior Dilutive Issuances (if any) ; by
(b) the aggregate number of Dilutive Shares (if any) and Dilutive
Rights Shares (if any) issued in such Dilutive Issuance and in all prior
Dilutive Issuances (if any)
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ARTICLE II
PURCHASE AND SALE
Based upon the representations and warranties, set forth herein, Purchaser
hereby purchases from the Company, and the Company hereby sells and issues to
Purchaser, the Shares free and clear of any and all Encumbrances other than
those restrictions imposed by this Agreement or by applicable United States
federal and state securities laws. In consideration of and in full payment for
the Shares, Purchaser hereby pays the Purchase Price to the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, BERG AND TESSIER
As of the date hereof, each of Berg (solely with regard to the Company, as
in existence immediately prior to the Merger), Tessier (solely with regard to
Tessier Technologies, Inc. ("TTI"), as in existence immediately prior to the
Merger) and the Company severally, represent and warrant to Purchaser, as
follows:
3.1 ORGANIZATION, QUALIFICATION, ETC. OF THE COMPANY. Each of the Company
and each Subsidiary is a duly organized and validly existing corporation under
the Laws of the State of Florida and have all necessary corporate power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it has been, is currently and is
anticipated to be conducted. The Company and each Subsidiary are duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the properties owned or leased by them or the operation of their
respective businesses makes such licensing or qualification necessary, except
where the failure to be so licensed, qualified or in good standing does not have
a Material Adverse Effect. All material corporate actions taken by the Company
and each Subsidiary have been duly authorized and neither the Company nor any
Subsidiary has taken any action that in any respect conflicts with, constitutes
a default under or results in a violation of any provision of their respective
Articles of Incorporation or Bylaws (collectively, the "Articles of
Incorporation").
3.2 AUTHORITY OF THE COMPANY. The Company has all necessary power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and (assuming due authorization,
execution and delivery by Purchaser) constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforcement may be subject to (a) Bankruptcy or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
3.3 NO CONFLICT. The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby do
not and will not: (a)
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conflict with or violate any Law or Governmental Order applicable to the Company
or a Subsidiary, which violation or conflict would, individually or in the
aggregate, have a Material Adverse Effect on the Company or a Subsidiary, the
Business or on the transactions contemplated hereby; or (b) conflict with,
result in any breach of, constitute a default (or an event which with the giving
of notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Company or
a Subsidiary, or the Business pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument, agreement or arrangement to which the Company or a Subsidiary
is a party or by which any of such assets or properties is bound or affected,
which conflict or violation would, individually or in the aggregate, have a
Material Adverse Effect on the ability of the Company to consummate the
transactions contemplated hereby or on a Subsidiary or the Business.
3.4 CAPITALIZATION OF THE COMPANY. SCHEDULE 3.4 accurately sets forth the
names of the holders of: (a) all of the outstanding capital stock of the Company
and the number of shares owned by each such stockholder; (b) all Rights relating
to the issuance of capital stock of the Company. SCHEDULE 3.4 also sets forth
the material terms of each of the Rights. Each outstanding share of capital
stock of the Company has been duly and validly authorized and issued and is
fully paid and owned, beneficially and of record, by the stockholder(s) listed
on SCHEDULE 3.4.
3.5 THE SHARES. All of the Shares are duly authorized and validly issued,
fully paid, non-assessable, with all documentary stamp taxes of any kind prepaid
and free and clear of all Encumbrances, other than those restrictions imposed by
this Agreement or by applicable United States federal and state securities laws.
3.6 REGISTRATION OF SHARES. Assuming that Purchaser's representations and
warranties contained herein are true and correct, the offering, issuance, sale
and delivery of the Shares are and shall be exempt from the registration
requirements of the Securities Act.
3.7 SUBSIDIARIES. SCHEDULE 3.7 is a true and complete list of all of the
Company's Subsidiaries. For each Subsidiary, SCHEDULE 3.7 sets forth: (a) the
Subsidiary's name; (b) the Subsidiary's jurisdiction of incorporation; (c) the
Subsidiary's principal office address; (d) the Subsidiary's principal business;
and (d) the percentage of the Subsidiary owned by the Company.
3.8 TITLE TO THE ASSETS. The Company, TTI and each Subsidiary has good
title to or, in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all of their respective Assets, free and clear of all
Encumbrances. All the Assets are in good operating condition and repair,
ordinary wear and tear excepted, and are suitable for the purposes for which
they are used and intended.
3.9 CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by the Company do not and will not require any consent, approval,
authorization or
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other order of, action by, filing with or notification to any Governmental
Authority or any third party.
3.10 FINANCIAL INFORMATION. All balance sheets, profit and loss accounts
and all other financial information of which have been made available to
Purchaser by or on behalf of the Company, TTI and each Subsidiary for the
purposes of or in connection with this Agreement or any transaction contemplated
hereby have been prepared in accordance with GAAP, consistently applied
throughout the periods involved (except as disclosed therein) and give a true
and fair view of the state of affairs of the Company, TTI and each Subsidiary as
of the dates thereof and the results of its operations for the periods then
ended, subject to year-end adjustments consisting only of normal recurring
accruals.
3.11 BOOKS AND RECORDS. The books of account and other financial records
of the Company, TTI and each Subsidiary: (a) reflect all items of income and
expense and all assets and liabilities required to be reflected therein, except
to the extent that the omission to reflect such items could not, individually or
in the aggregate, have a Material Adverse Effect on the Business or the business
of TTI or a Subsidiary; (b) are complete and correct, not misleading and do not
contain or reflect any inaccuracies or discrepancies; and (c) have been
maintained in accordance with good business and accounting practices.
3.12 RECEIVABLES. All Receivables reflected on the most recent balance
sheets of the Company, each Subsidiary and TTI arose from, and the Receivables
existing as of the date hereof have arisen from, the sale of services to persons
not Affiliated with the Company, Berg or Tessier and in the ordinary course of
its business consistent with past practice and constitute or will constitute, as
the case may be, only valid, undisputed claims of the Company, each Subsidiary
and TTI, respectively, not subject to valid claims of set-off, off-set or other
defenses or counterclaims. The financial statements of the Company, each
Subsidiary and TTI make full provision for all doubtful debts and all bad debts
have been written off.
3.13 LITIGATION. There are no actions, disputes or claims being brought or
threatened by or against the Company, TTI or any Subsidiary (or any of the
directors, officers, employees or agents of the Company, TTI or any Subsidiary),
or affecting any of the Assets which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect. None of the Company, TTI, any
Subsidiary or the Assets are subject to any Law or Governmental Order which has
or could reasonably be expected to have a Material Adverse Effect.
3.14 CONDUCT OF BUSINESS IN THE ORDINARY COURSE. The Company, TTI and each
Subsidiary have conducted the Business only in the ordinary course and
consistent with past practice.
3.15 COMPLIANCE WITH LAWS. The Company, TTI and each Subsidiary have
conducted and continue to conduct their respective businesses in all material
respects in accordance with all Laws and all Governmental Orders entered by or
with any Governmental Authorities, and the Company, TTI and each Subsidiary are
in compliance with all such Laws or Governmental Orders.
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3.16 ENVIRONMENTAL COMPLIANCE. The Company, TTI and each Subsidiary and
the Real Property (as hereinafter defined) are, and at all times have been, in
compliance with all applicable Environmental Laws.
3.17 CONTRACTS.
(a) The Company has, or has caused to be, made available to Purchaser
for review and duplication, correct and complete copies (or in the case of oral
contracts, summaries thereof) of all of the following contracts and agreements
of the Company and each Subsidiary, together with all material contracts,
agreements, leases and subleases to which the Company and each Subsidiary is a
party concerning the management or operation of any real property and all
material agreements relating to Intellectual Property (such material contracts
and agreements, listed on SCHEDULE 3.17(A), collectively, "Material Contracts"):
(i) each contract and agreement for the purchase of inventory or
personal property with any supplier or for the furnishing of services to the
Company or a Subsidiary, or otherwise related to the Business under the terms of
which the Company or a Subsidiary; (A) is reasonably anticipated to pay or
otherwise give consideration of more than $5,000 in the aggregate over the
remaining term of such contract or (B) cannot cancel without penalty or further
payment and without more than 30 days' notice;
(ii) each contract and agreement for the sale of inventory or
other personal property or for the furnishing of services by the Company or a
Subsidiary which: (A) is reasonably anticipated to involve consideration of more
than $5,000 in the aggregate during the fiscal year ending December 31, 1996 or
in any fiscal year thereafter, (B) is reasonably anticipated to involve
consideration of more than $5,000 in the aggregate over the remaining term of
the contract or (C) cannot be cancelled by the Company or a Subsidiary without
penalty or further payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research, marketing,
consulting and advertising contracts and agreements to which the Company or a
Subsidiary is a party;
(iv) all management contracts and contracts with independent
contractors, consultants or other persons (including Affiliates) (or similar
arrangements) involving exclusive rights or requiring payments in excess of
$5,000 individually to which the Company or a Subsidiary is a party and which
are not cancelable without penalty or further payment on 30 days' or less
notice;
(v) all contracts and agreements relating to indebtedness of the
Company or a Subsidiary in excess of $5,000 individually or $5,000 in the
aggregate;
(vi) all contracts and agreements with any Governmental Authority
to which the Company or a Subsidiary is a party;
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(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or a Subsidiary to compete in any line of business,
or with any person, or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among the Company
or a Subsidiary on the one hand and any Affiliate of the Company or a Subsidiary
on the other hand;
(ix) all leases and subleases for tangible personal property
having a value in excess of $5,000; for purposes of this Agreement, the term
"lease" shall include any and all leases, subleases, sale/leaseback agreements
or similar arrangements;
(x) all contracts relating to Intellectual Property and all
contracts relating to real property owned, leased or used by the Company or a
Subsidiary; and
(xi) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to the Company, a Subsidiary
or the conduct of the Business.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated hereby shall continue in full
force and effect without penalty or other adverse consequence. Neither the
Company nor any Subsidiary is, and no other party to any Material Contract is,
in breach of or default under any Material Contract, which breach or default
would have a Material Adverse Effect on the Company or any Subsidiary.
(c) There is no contract, agreement or other arrangement granting any
person any preferential right to purchase, other than in the ordinary course of
Business consistent with past practice, any of the properties, assets or
services of the Company or any Subsidiary.
(d) There is not now outstanding any guarantee or agreement for
indemnity or for suretyship either given by or for the benefit of the Company or
any Subsidiary.
3.18 INTELLECTUAL PROPERTY.
(a) The Company has heretofore made available to Purchaser a true and
complete list of all Intellectual Property which the Company and each Subsidiary
own or have the right to use. The Company and each Subsidiary have full
ownership thereof or the right to use all such rights, in each case except to
the extent heretofore disclosed in writing to Purchaser, and the Company has no
knowledge that the conduct of the Business and the business of each Subsidiary
as now operated, as of the date hereof, conflicts with, misappropriates or
infringes, or has been alleged to infringe, any Intellectual Property rights or
franchises of any person (including patents, trade secrets or other proprietary
rights of any third party). The Company has heretofore made available to
Purchaser a true and complete copy of every material license or
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other material agreement, including all amendments thereto, pursuant to which
the Company or any Subsidiary agreed to grant or has granted rights with respect
to the Intellectual Property, or pursuant to which the Company or any Subsidiary
enjoys rights in any Intellectual Property of any person. No current or former
consultant, employee or Affiliate of the Company or any Subsidiary, or any of
their respective shareholders, officers or directors has any right, title or
interest in any of the Intellectual Property used and/or owned by the Company or
any Subsidiary.
(b) None of the Intellectual Property owned by or licensed to the
Company or any Subsidiary is being infringed by any person.
(c) The Intellectual Property heretofore disclosed in writing to
Purchaser comprises all of the Intellectual Property required to enable the
Company and each Subsidiary to lawfully carry on their respective businesses, as
now conducted.
3.19 REAL PROPERTY. The particulars of the real property set forth on
SCHEDULE 3.19 attached hereto (the "REAL PROPERTY") are true and correct in all
respects and the Company and each Subsidiary have good and marketable title to
their respective Real Property free from Encumbrances and other adverse rights.
The Real Property comprises all the real property owned, used or occupied by the
Company and each Subsidiary in connection with their respective businesses and
neither the Company nor any Subsidiary has ever owned any interest in any other
real property other than the Real Property. There is no violation of any Law
(including, without limitation, any building, planning, zoning law or
environmental law) or any covenants, stipulations or conditions relating to any
of the Real Property and the Company and each Subsidiary are in peaceful and
undisturbed possession of each parcel of Real Property. There are no contractual
or legal restrictions that preclude or restrict in any material manner the
ability to use any of the Real Property in the manner in which they are
currently being used and the Real Property has all rights and easements
reasonably necessary for their use and enjoyment for the purposes of the
Business. Neither the Company nor any Subsidiary is leasing or subleasing and
has not leased or sublet any parcel or any portion of any parcel of Real
Property to any other Person, nor has the Company or any Subsidiary assigned its
interest under any lease or sublease for any leased Real Property to any third
party. There are no outstanding material disputes with any Person relating to
the Real Property or its use and no notices have been given or received by the
Company or any Subsidiary which would adversely affect the use and enjoyment of
the Real Property.
3.20 TAXES.
(a) Except as disclosed on SCHEDULE 3.20(A): (i) all returns and
reports in respect of all Taxes required to be filed with respect to the
Company, TTI and each Subsidiary and the Business have been timely filed; (ii)
all Taxes required to be shown on such returns and reports or otherwise due have
been timely paid; (iii) all such returns and reports are true, correct and
complete; (iv) no adjustment relating to such returns has been proposed by any
tax authority and no basis exists for any such adjustment; (v) there are no
pending or threatened actions or proceedings for the assessment or collection of
Taxes against the Company, TTI or any
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Subsidiary; (vi) there are no Encumbrances on any Assets; (vii) none of the
Company, TTI or any Subsidiary has been at any time a member of any partnership
or joint venture or the holder of a beneficial interest in any trust for any
period for which the statute of limitations for any Tax has not expired; and
(viii) all Taxes required to be withheld, collected or deposited by or with
respect to the Company, TTI, each Subsidiary and the Business have been timely
withheld, collected or deposited, as the case may be, and, to the extent
required, have been paid to the relevant taxing authority.
(b) Except as disclosed on SCHEDULE 3.20(B): (i) there are no
outstanding waivers or agreements extending the statute of limitations for any
period with respect to any Tax to which the Company, TTI or any Subsidiary may
be subject; (ii) there are no proposed reassessments of any property owned by
the Company, TTI or any Subsidiary or other proposals that could increase the
amount of any Tax to which the Company, TTI or any Subsidiary would be subject;
and (iii) no power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect the Company, TTI or
any Subsidiary.
(c) The Company has made available to Purchaser correct and complete
copies of all federal, state and foreign income, franchise and similar tax
returns of the Company, TTI and each Subsidiary since 1993, and correct and
complete summaries of all examination reports, and statements of deficiencies
assessed against or agreed to by the Company, TTI and each Subsidiary since
1993.
3.21 DIVESTMENT OF ADULT ENTERTAINMENT BUSINESS. Each of the Company,
Berg, Tessier and their respective Affiliates have divested themselves of any
legal or beneficial interest in any business which is involved in Adult
Entertainment.
3.22 MERGER WITH TESSIER TECHNOLOGIES. The Company and TTI have completed
the Merger.
3.23 BROKERS. Except as disclosed on SCHEDULE 3.23, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement or
the Concurrent Transactions based upon arrangements made by or on behalf of the
Company.
3.24 FULL DISCLOSURE. No representation or warranty with respect to the
Company contained in this Agreement and no written statement contained in any
financial or operating data or certificate furnished to Purchaser pursuant to
this Agreement, or in connection with the transactions contemplated by this
Agreement (including the Concurrent Transactions), contains any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date hereof, Purchaser represents and warrants to the Company,
as follows:
4.1 ORGANIZATION, QUALIFICATION, ETC. OF PURCHASER. If not an individual,
Purchaser is duly organized and validly existing company under the Laws of its
place of incorporation and has all necessary corporate power and authority to
own, operate or lease the properties and assets now owned, operated or leased by
it and to carry on its business as it has been, is currently and is anticipated
to be conducted. If not an individual, Purchaser is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing does not have, or could not reasonably
be expected to have, a Material Adverse Effect.
4.2 AUTHORITY OF PURCHASER. If not an individual, Purchaser has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. If not an individual, the execution and delivery of this Agreement by
Purchaser, the performance by Purchaser of its obligations hereunder and the
consummation by Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and (assuming due
authorization, execution and delivery by the Company) constitutes the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforcement may be subject to: (a)
Bankruptcy or other similar laws now or hereafter in effect relating to
creditors' rights generally; and (b) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
4.3 NO CONFLICT. The execution, delivery and performance of this Agreement
by Purchaser and the consummation of the transactions contemplated hereby do not
and will not: (a) if not an individual, violate, conflict with or result in the
breach of any provision of Purchaser's organizational documents; or (b) conflict
with or violate any Law or Governmental Order applicable to Purchaser, which
violation or conflict could, individually or in the aggregate, have a Material
Adverse Effect on Purchaser.
4.4 CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by Purchaser do not and will not require any consent, approval,
authorization or other order of, action by, filing with, or notification to, any
Governmental Authority or any third party.
4.5 INVESTOR STATUS. Purchaser is a sophisticated investor and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Company represented by
the Shares. Purchaser is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
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4.6 INVESTMENT INTENT AND RESTRICTION ON TRANSFER. Purchaser is acquiring
the Shares for its own account and for investment and not with a view towards,
or for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the Shares. However, the Company, Berg and
Tessier understand that the disposition of any of Purchaser's property is within
its discretion, subject to compliance with federal and state securities laws and
the restrictions contained herein.
4.7 BROKERS. Except as disclosed on SCHEDULE 4.7 hereto, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Purchaser.
ARTICLE V
LEGEND
Purchaser understands that a legend, in substantially the following form,
will be placed on the certificate representing the Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF WITHOUT REGISTRATION UNDER SUCH ACT OR AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED.
ARTICLE VI
REGISTRATION RIGHTS
6.1 PIGGYBACK REGISTRATION RIGHTS.
(a) RIGHT TO PIGGYBACK. Subject to the limitations set forth in
Section 6.1(e) hereof, whenever the Company, in its sole discretion, proposes to
file a registration statement (a "Proposed Registration") under the Securities
Act with respect to any equity security (as defined in the Securities Act)
(other than a registration statement on Form S-4, Form S-8 or any successor form
for the registration of securities to be offered in a transaction subject to
Rule 145 under the Securities Act or to employees of, and/or consultants and
advisors to, the Company and/or its subsidiaries pursuant to any "employee
benefit plan," as such term is defined in Rule 405 promulgated under the
Securities Act) and the registration form to be used may be used for the
registration (a "Piggyback Registration") of Piggyback Registrable Securities,
the Company will give written notice (the "Piggyback Notice") to Purchaser as
soon as practicable (but in no event less than thirty days) before the initial
filing with the Securities and Exchange Commission (the "Commission") of such
registration statement, which notice will (i) specify the kind and number of
securities proposed to be registered and the proposed offering price or prices
and distribution
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arrangements; (ii) include such other information that at the time and under the
circumstances would be appropriate to include in such notice; and (iii) subject
to the provisions of this Section 6.1(a), offer Purchaser the opportunity to
include in such filing all Piggyback Registrable Securities which Purchaser may
request in accordance with subsection 6.1(b) below.
(b) REQUESTS TO PIGGYBACK. Purchaser shall advise the Company in
writing (a "Piggyback Registration Request") within twenty days after the date
of receipt of the Piggyback Notice of the number or amount of each class or
series of Piggyback Registrable Securities which Purchaser desires to have
registered.
(c) SELECTION OF UNDERWRITERS. If the Piggyback Registration is an
underwritten offering, the Board of Directors of the Company will select a
managing underwriter or underwriters to administer the offering.
(d) PIGGYBACK EXPENSES. Subject to the limitations set forth in
Section 6.1(e) hereof, all Registration Expenses of the Piggyback Registration
will be paid solely by the Company.
(e) LIMITATIONS ON PIGGYBACK RIGHTS. Purchaser will be entitled to
request four (4) Piggyback Registrations. A registration will not count as the
permitted Piggyback Registrations until it has become effective, and no
registration will count as the permitted Piggyback Registration unless Purchaser
is able to register and sell at least 55% of the Piggyback Registration
Securities requested to be included in such registration. The exercise of a
Piggyback Registration shall not affect Purchaser's Demand Registration rights
under Section 6.2 hereof. Purchaser shall not be permitted to exercise its
Piggyback Registration rights with regard to any underwritten Piggyback
Registration where a first or second tier underwriter, or underwriters, provides
Purchaser with a reasonable determination, in writing that the amount or kind of
Purchaser's Shares to be included in such offering would materially and
adversely affect the success of all securities proposed to be distributed for
the account of the Company in such offering.
6.2 DEMAND REGISTRATION RIGHTS.
(a) REQUESTS FOR REGISTRATION. Subject to the limitations set forth
in Section 6.2(d) hereof, Purchaser may request registration under the
Securities Act of all or part of its Demand Registrable Securities on Form S-1
or any other registration form available for use by the Company (a "Demand
Registration"). The request for a Demand Registration shall specify the number
of Demand Registrable Securities requested to be registered and the anticipated
per share price range for such offering. However, the Company may postpone, for
a reasonable period of time not to exceed 90 days (but in any event not to
extend beyond the date of public disclosure of the information, or the date of
abandonment or termination of the transactions or negotiations, hereinafter
referred to), the filing of a registration statement otherwise required to be
prepared and filed by it pursuant to this subsection 6.2(a) if: (i) at the time
the Company receives a registration request, the Board determines, in good faith
and in its reasonable business
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judgment, that (A) such Demand Registration would require the public disclosure
of material non-public information concerning any pending or ongoing material
transaction or negotiations involving the Company which, in the opinion of the
Company's outside legal counsel, is not yet required to be publicly disclosed,
and (B) such disclosure would materially interfere with such transaction or
negotiations or have a Material Adverse Effect on the Company, and (ii) the
Company diligently and in good faith continues to pursue such transaction or
negotiations throughout the period of such postponement.
(b) SELECTION OF UNDERWRITERS. If the Demand Registration is for or
includes an underwritten offering, Purchaser shall select the managing
underwriter or underwriters to administer such offering, who shall be reasonably
satisfactory to the Company.
(c) DEMAND EXPENSES. Subject to the limitations set forth in Section
6.3(d) hereof, the Company shall pay for all Registration Expenses relating to
the Demand Registration.
(d) LIMITATIONS ON DEMAND RIGHTS. Purchaser may only request one (1)
Demand Registration. A registration will not count as the permitted Demand
Registration: (a) until it has become effective; and (b) unless Purchaser is
able to register and sell at least 55% of the Demand Registrable Securities
requested to be included in such registration. After the Demand Registrable
Securities have been registered, Purchaser shall have no obligation to sell any
or all of such securities. For a period of three (3) years from the date hereof,
Purchaser may not request a Demand Registration if, at the time of such request,
none of the Company's equity securities are publicly traded. However, after the
period ending three (3) years from the date hereof, Purchaser may request a
Demand Registration at any time, even if none of the Company's equity securities
are then publicly traded.
6.3 PROCEDURE. With respect to any Piggyback Registration or Demand
Registration, the Company shall use its best efforts to effect the registration
of all the Piggyback Registrable Securities or Demand Registrable Securities, as
the case may be (collectively, the Request Securities"), which Purchaser has
requested to be included therein, as quickly as practicable. In connection with
any such request, the Company shall do the following as expeditiously as
possible:
(i) prepare and file with the Commission a registration statement
on any form for which the Company then qualifies and which is available for the
registration of the Request Securities;
(ii) include in the registration on such form all the Request
Securities and use its best efforts to cause such registration statement to
become effective; PROVIDED, HOWEVER, that at least ten days before filing such
registration statement or any prospectus or any amendment or supplement thereto,
including documents to be incorporated by reference upon or after the initial
filing of such registration statement, the Company will furnish to Purchaser
copies of all such documents proposed to be filed (including documents to be
incorporated by reference therein), which documents will be subject to the
reasonable review and comments of Purchaser;
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(iii) unless the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect, prepare and file with the
Commission such amendments and post-effective amendments and supplements to the
registration statement or any prospectus as may be necessary to keep the
registration statement effective for a period of not more than one hundred and
eighty (180) days and comply with the provisions of the Securities Act
applicable to the Company with respect to the disposition of all the Request
Securities, covered by such registration statement or any supplement to any such
prospectus;
(iv) if the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect and if the Company receives a
request for a Demand Registration, prepare and file with the Commission such
registration statement to permit the offering of the Demand Registrable
Securities to be made on a continuous basis pursuant to Rule 415 (or any similar
rule that may be adopted by the Commission) under the Securities Act (a "Shelf
Registration") and keep the Shelf Registration current and continuously
effective until Purchaser can sell all of the Demand Registrable Securities;
(v) furnish to Purchaser such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement and such other documents as Purchaser
may reasonably request;
(vi) use its best efforts to register or qualify such Request
Securities under such other securities or blue sky laws of such jurisdiction as
Purchaser reasonably requests and do any and all other acts and things which may
be reasonably necessary or advisable to enable Purchaser to consummate the
disposition in such jurisdiction (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(vii) notify Purchaser at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
Purchaser, the Company will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to subsequent purchasers of such Request
Securities, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(viii) cause all such Request Securities, to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on one of the following (in order of
priority and assuming that the Company qualifies for such listing): (A) the New
York Stock Exchange, (B) the American Stock Exchange; (C) the NASDAQ National
Market System; or (D) the NASDAQ SmallCap Market System;
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(ix) provide a transfer agent and registrar for all such Request
Securities, not later than the effective date of such registration statement;
(x) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as Purchaser or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Request Securities, (including, without limitation,
effecting a stock split or a combination of shares);
(xi) make available for inspection by Purchaser, any underwriter
participating in any distribution pursuant to such registration statement and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") to the extent reasonably
necessary to enable such person to exercise their due diligence responsibilities
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement. Records and other information which the Company determines, in good
faith, to be confidential and of which determination Purchaser is notified shall
not be disclosed by Purchaser unless (i) the disclosure of such Records or other
information, in the opinion of counsel reasonably acceptable to the Company, is
necessary to avoid or correct a misstatement or omission in the registration
statement, any preliminary prospectus, any prospectus or prospectus supplement,
or (ii) the release of such Records or other information is ordered pursuant to
subpoena, court order or request by a governmental authority or otherwise is
required by applicable law or (iii) the information in such Records or such
other information is generally available to the public. Purchaser shall, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction or by governmental authority, give notice to the Company and allow
the Company, at the expense of the Company, to undertake appropriate action to
prevent disclosure of the Records deemed confidential;
(xii) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, use its reasonable best efforts promptly to obtain the withdrawal
of such order;
(xiii) use its best efforts to obtain a "cold comfort" letter
from the independent public accountants of the Company which is addressed to
Purchaser and any underwriters and contains such matters of the type customarily
covered by "cold comfort" letters; and
(xiv) use its best efforts to obtain an opinion from counsel for
the Company which is addressed to Purchaser and underwriter and contains such
matters of the type customarily covered by counsel for the issuer of securities.
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(a) AFFIDAVITS OF PURCHASER. With respect to any Piggyback
Registration or Demand Registration, Purchaser shall furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with the registration of the Request Securities.
(b) PUBLIC SALE BY PURCHASER. Purchaser shall not effect any public
sale or distribution of Request Securities, of any class or series being
registered in a Demand Registration or Piggyback Registration for offering to
the public, any similar security issued by the issuer of such class or series or
any security exchangeable or exercisable for or convertible into any such class
or series of any such Request Securities or any such similar security, including
a sale pursuant to Rule 144 (or any similar rule then in force) under the
Securities Act, during, in the case of a Piggyback Registration, the fourteen
(14) days prior to, and during the ninety (90) day period beginning on, the
effective date of the Piggyback Registration (except as part of such
registration or pursuant to registrations on Form S-4 or S-8 or any successor
form to either such form) and, in the case of any Demand Registration, the
period commencing on the date of filing the Demand Registration and ending on
the 120th day following the effective date of the Demand Registration (except as
part of such Demand Registration), if and to the extent requested by the
Company, in the case of a non-underwritten public offering, or if and to the
extent requested by the managing underwriter or underwriters, in the case of an
underwritten public offering.
(c) PUBLIC SALE BY THE COMPANY AND OTHERS. Neither the Company nor
any of its Affiliates (other than Purchaser, if deemed to be an Affiliate) will
effect any public sale or distribution of any securities of any class or series
being registered in a Piggyback Registration or Demand Registration for offering
to the public, any similar security issued by the issuer of such class or series
or any security convertible into or exchangeable or exercisable for any such
security during, in the case of a Piggyback Registration, the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the effective date
of the Piggyback Registration (except as part of such registration or pursuant
to registrations on Form S-4 or S-8 or any successor form to either such form)
and, in the case of any Demand Registration, the period commencing on the date
of filing the Demand Registration and ending on the 120th day following the
effective date of the Demand Registration.
(d) REGISTRATION EXPENSES. The Company shall pay for all costs and
expenses ("Registration Expenses") of each registration hereunder, including,
but not limited to, the following: (i) registration and filing fees, (ii) fees
and expenses relating to the Company's compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications), (iii) expenses incident to the preparation, printing
and filing of the registration statement, each preliminary prospectus and
definitive prospectus and each amendment or supplement to any of the foregoing
and copies thereof, (iv) internal expenses (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties), (v) fees and expenses incurred in connection with the
listing of the Request Securities, (vi) fees and disbursements of counsel for
the Company and fees and expenses of independent certified public accountants
retained by the Company, (vii) fees and expenses of any special experts retained
by the Company in
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connection with such registration, (viii) fees and expenses associated with any
filings with or submission to the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriters," as such term is defined in
Schedule E of the By-laws of the NASD, and its counsel), (ix) fees of each
investment banking firm required to be retained or consulted pursuant to the
terms hereof; and (x) fees and disbursements of one law firm for the
underwriters, in any underwritten offering. The Company shall not have any
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Request Securities, as the case may be, by Purchaser, or, except
as otherwise provided in the immediately preceding sentence, any out-of-pocket
expenses of Purchaser (or any agents who manage their accounts) or fees and
disbursements of any counsel for Purchaser.
6.4 INDEMNIFICATION REGARDING REGISTRATION RIGHTS.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify
Purchaser and, if applicable, its officers and directors and each Person who
controls Purchaser (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, preliminary prospectus or definitive prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by Purchaser specifically for
use in the preparation thereof or by Purchaser's failure, if required, to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished Purchaser with a sufficient
number of copies of the same.
(b) INDEMNIFICATION BY PURCHASER. In connection with any registration
statement in which Purchaser is participating, Purchaser shall indemnify the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, preliminary prospectus
or definitive prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in information furnished by
Purchaser to the Company specifically for use in the preparation of such
registration statement or prospectus.
(c) PROCEDURE. Any Person entitled to indemnification hereunder will:
(a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification, provided that the failure of any
indemnified party to give notice shall not relieve the indemnifying party of its
obligations hereunder except to the extent the indemnifying party is actually
prejudiced by such failure; and (b) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
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indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) SURVIVAL. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of securities.
(e) CONTRIBUTION. If the indemnification provided for in this Section
6.4 from the indemnifying party is unavailable to the indemnified party, then
the indemnifying party, instead of indemnifying the indemnified party, shall
contribute to and pay the amount paid or payable by such indemnified party as a
result of the loss, claim, damage, liability or expenses (collectively, the
"Claim") giving rise to indemnification hereunder in such proportion as is
appropriate to reflect the relative fault of the indemnifying and indemnified
party in connection with the actions which gave rise to the Claim. The relative
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the action in question has been made
by, or relates to, information supplied by such indemnifying party or
indemnified party, and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such action. The Company and
Purchaser agree that it would not be just and equitable if contribution and
payment pursuant to this Section 6.4 were determined by pro rata allocation or
by any other allocation method which does not take into account the equitable
considerations referred to in the preceding sentence. The amount paid or payable
as a result of a Claim shall include any legal or other fees and expenses
reasonably incurred by such party in connection with such Claim. However, no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contributions and payment from
any Person who was not guilty of such fraudulent misrepresentation.
6.5 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate
in any underwritten registration hereunder unless such Person: (a) agrees to
sell its securities on the basis provided in any underwriting arrangements
reasonably approved by the Persons entitled hereunder to approve such
arrangements; and (b) accurately completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customarily required under the terms of such underwriting arrangements.
6.6 RULE 144. The Company shall file, on a timely basis, any reports
required to be filed by it under the Securities Act and the Exchange Act so as
to enable a Purchaser to sell the Piggyback Registrable Securities and Demand
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by: (a) Rule 144 under the
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Securities Act, as such Rule may be amended from time to time; or (b) any
similar rule adopted by the Commission.
ARTICLE VII
TAG ALONG RIGHTS AND BRING ALONG RIGHTS
7.1 TAG ALONG RIGHT. With respect to any proposed transfer of shares of
Common Stock by Berg or Tessier to a third party (the "Third Party"), Berg and
Tessier shall not be permitted to effect such a transfer without first offering
Purchaser the right to sell its shares of Common Stock, pro rata with Berg
and/or Tessier, to the Third Party, at the same price per share and upon the
same terms and conditions of the proposed transfer by Berg or Tessier. However
the "tag along" rights granted under this Section 7.1 shall not apply to: (a)
the first 800,000 shares of Common Stock which are sold by Berg and/or Tessier
after the date hereof; (b) shares of Common Stock which are sold by Berg and/or
Tessier after the date hereof in accordance with Rule 144 promulgated under the
Securities Act, unless such shares are sold in a block (as such term is defined
in Rule 10b-18 promulgated under the Exchange Act. In this regard, each of
Tessier and Berg shall promptly notify Purchaser of any such disposition of
shares which is not subject to the "tag along" rights granted hereunder pursuant
to subsection (a) of the preceding sentence. Furthermore, Purchaser shall not be
able to exercise its rights under this Section 7.1 with regard to any of its
shares of Common Stock, if such shares are not registered with the SEC and
Purchaser previously failed to exercise its right to register such shares in a
Piggyback Registration.
7.2 BRING ALONG RIGHT. If Berg or Tessier, or both (collectively, the
"Principals") receive a bona fide offer from an unaffiliated third party (the
"Third Party Offer") to purchase (for cash or securities) all of the then
outstanding shares of Common Stock and the Principals wish to accept such offer,
then the Principals shall, within ten (10) days of accepting the Third Party
Offer, notify Purchaser, in writing, of such offer. Upon receipt of such notice,
Purchaser shall then sell shares of Common Stock, pro rata with Berg and/or
Tessier, at the same price per share and upon the same terms and conditions of
the Third Party Offer. However, the bring along rights granted hereunder shall
not be available to Berg or Tessier unless, the exercise of such right, would
cause the Purchaser to receive an amount from the unaffiliated party equal to at
least four (4) times the Purchase Price. The "bring along" rights granted in
this Section 7.2 shall expire on the third anniversary hereof.
ARTICLE VIII
PREEMPTIVE RIGHTS AND ANTI DILUTION RIGHTS
8.1 PREEMPTIVE RIGHTS.
(a) GRANT OF RIGHT. If the Company proposes to and does issue (the
"Third Party Issuance") additional shares of Voting Stock or any Rights to
acquire Voting Stock, to any Person, other than Purchaser or its respective
Affiliates, then Purchaser shall have the right (the "Preemptive Right") to
purchase shares of Voting Stock or Rights, as the case may be, so that,
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immediately after such purchase and the Third Party Issuance, Purchaser shall
own the same percentage of shares of the Company's issued and outstanding Voting
Stock (or the right to own such percentage), as it had owned prior to the
proposed Third Party Issuance.
(b) PROCEDURE. The Company shall give Purchaser ten (10) Business
Day's prior written notice of any proposed issuance of Voting Stock or Rights
which would entitle Purchaser to exercise the Preemptive Right. Upon receipt of
such notice, Purchaser shall have ten (10) Business Days (the "Exercise Period")
to exercise the Preemptive Right. If by the expiration of the Exercise Period,
Purchaser notifies the Company that it does not wish to exercise the Preemptive
Right or has failed to give a notice to the Company, then the Company may
continue with and effect the proposed Third Party Issuance. If Purchaser chooses
to exercise the Preemptive Right during the Exercise Period, the Company shall
take all actions reasonably necessary to issue such Voting Shares or Rights to
Purchaser in accordance with this Section, and may continue with and effect the
proposed Third Party Issuance.
(c) EXERCISE PRICE. In connection with the exercise of the Preemptive
Right: (i) the exercise price shall be the same price at which the shares of
Voting Stock or Rights are being issued pursuant to the Third Party Issuance;
and (ii) the terms and conditions of the purchase shall be, as nearly as
reasonably practicable, the same as the terms and conditions of the Third Party
Issuance. If all or part of the Third Party Issuance offering price consists of
any consideration other than cash, then the per share, or per Right, price at
which Purchaser is offered the Preemptive Right shall be the amount determined
by dividing the total number of Voting Stock or Rights which are the subject of
the Third Party Issuance into the sum of (i) the aggregate amount of cash, if
any, proposed to be paid for such securities; and (ii) the aggregate fair market
value of the non-cash consideration proposed to be paid for such securities
(taking into account, in determining such fair market value, any liabilities
associated with such non-cash consideration).
(d) EXCEPTIONS. If the Third Party Issuance involves the borrowing of
money from the proposed purchaser, then Purchaser shall not have the Preemptive
Right with regard to such Third Party Issuance unless Purchaser agrees to
participate in such debt financing, on a pro rata basis and pursuant to the same
terms and conditions. Furthermore, the Preemptive Rights shall not apply to any
public offering of securities by the Company which is registered with the SEC.
8.2 ANTI-DILUTION RIGHTS.
(a) RIGHT. Promptly after each Dilutive Issuance, the Company shall
issue to Purchaser without the payment of any additional consideration by
Purchaser, the aggregate number of shares of Common Stock calculated by:
(i) multiplying (A) the Weighted Average Price, calculated after
giving effect to such Dilutive Issuance, by (B) the lesser of (x) the aggregate
number of Dilution Shares, if any, issued, or deemed to be issued, in such
Dilutive Issuance and in all prior Dilutive
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Issuances (if any) and (y) the number of shares issued to Purchaser on the date
hereof (the "Current Number");
(ii) adding to the resulting product, the product of (A) $0.63
(the "Per Share Purchase Price") multiplied by (B) either (x) if the number of
Dilution Shares issued, or deemed to be issued, in such Dilutive Issuance and in
all prior Dilutive Issuances (if any) is less than the Current Number, the
excess of the Current Number over the number of Dilution Shares; or (y) if the
number of Dilution Shares is equal to, or greater than, the Current Number, zero
(0);
(iii) dividing the resulting sum by the Current Number;
(iv) dividing the Purchase Price by the quotient resulting from
the division referred to in (iii); and
(v) subtracting from the resulting quotient the sum of (A) the
Current Number plus (B) the number of shares of Common Stock, if any previously
issued to Purchaser pursuant to this Section 8.2.
(b) ISSUANCES IN CONNECTION WITH OTHER ISSUANCES. If the Company
issues shares of Common Stock or Rights for shares of Common Stock in connection
with the issue or sale of other securities of the Company or in connection with
the delivery by the Company of any other property or assets, which together
comprise one integral transaction in which no specific consideration is
allocated to such shares or Rights, then such shares or Rights shall be deemed
to have been issued without consideration.
(c) ISSUANCES FOR CASH. If the Company issues, for cash, any shares
of Common Stock or any Rights for shares of Common Stock, the consideration
received shall be deemed to be the net amount received by the Company therefor,
after deduction of any accrued interest, dividends or any expenses incurred in
any underwriting commissions or concessions paid or allowed by the Company in
connection therewith.
(d) ISSUANCES FOR NON-CASH CONSIDERATION. If the Company issues, for
non-cash consideration, any shares of Common Stock or any Rights for shares of
Common Stock, the amount of the non-cash consideration shall be deemed the fair
market value of such non-cash consideration on the date of issue of the
securities, as reasonably determined by the Board, less any expenses or
liabilities incurred by the Company in connection therewith.
(e) ISSUANCES IN CONNECTION WITH MERGERS OR CONSOLIDATIONS. If the
Company issues any shares of Common Stock or any Rights for shares of Common
Stock, in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration shall be deemed to be the
fair market value of the portion of the assets and business of the non-surviving
corporation acquired in connection with such merger or consolidation, as
reasonably determined in good faith by the Board. In the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation,
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the Company shall be deemed to have issued a number of shares of Common Stock
for stock or securities of the other corporation computed on the basis of the
actual exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value, on the date of such transaction,
of such stock or securities of the other corporation.
(f) STOCK-SPLITS. If the Company subdivides its outstanding shares of
Common Stock into a greater number of shares, the Per Share Purchase Price in
effect immediately prior to such division shall be proportionately reduced.
Conversely, if the Company combines the outstanding shares of Common Stock into
a smaller number of shares, then the Per Share Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
(g) NON-CIRCUMVENTION. The Company shall not, directly or indirectly,
engage or participate in any transaction or otherwise by any act or omission
(including amending its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, or the issue or sale of
securities) avoid or attempt to avoid the observance and performance of the
provisions of Section 8.1 or 8.2. Instead, the Company shall carry out all such
terms and provisions, in good faith, and take all such actions as may be
reasonably necessary or appropriate to protect and preserve the rights and
benefits intended to be conferred in Section 8.1 and 8.2.
(h) FULLY PAID; NO ENCUMBRANCES. All shares of Common Stock issued to
Purchaser pursuant to Section 8.2, shall, when issued, be: (A) duly authorized,
valid issued and outstanding,and fully paid and non-assessable; and (B) be free
from all Encumbrances.
(i) DOCUMENTARY TAX STAMPS. The Company shall pay any for any
documentary tax stamps required in connection with any issue of shares of Common
Stock to the Purchaser pursuant to this Section 8.2.
(j) NO FRACTIONAL SHARES. The Company shall not issue any fractional
shares in connection with any issuance pursuant to this Section 8.2. Instead, to
the extent that the calculation of the number of shares of Common Stock to be
issued to Purchaser pursuant to this Section 8.2 would result in the issuance of
a fractional share, then the number of shares issued to Purchaser shall be
rounded to the nearest number of whole shares.
8.3 RACHET RIGHT.
(a) Depending on the Company's after tax earnings, as determined in
accordance with GAAP and for the year ending December 31, 1997, the Company
shall issue to Purchaser, for no additional consideration, the following number
of shares of Common Stock:
27
<PAGE>
AFTER TAX EARNINGS NO. OF SHARES OF COMMON STOCK
------------------ -----------------------------
Less than $1,000,000 0.2529 shares for each share of Common
Stock then held by Purchaser
$1,000,000 to $1,500,000 0.12645 shares for each share of Common
Stock then held by Purchaser
Over $1,500,000 0
(b) PROCEDURE. If applicable, and subject to applicable Federal and
State securities laws, the Company shall issue the shares of Common Stock
referred to in Section 8.3(a) hereof, within thirty (30) days of the completion
of audited financial statements for the year ending December 31, 1997, but in no
event later than April 15, 1998.
ARTICLE IX
DELIVERIES
9.1 DELIVERIES BY PURCHASER. Contemporaneous with the signing hereof,
Purchaser has executed (where necessary) and delivered or caused to be delivered
to the Company the following documents, certificates and agreements:
(a) PURCHASE PRICE. The Purchase Price;
(b) LOAN. The amount of money which Purchaser has agreed to loan to
the Company pursuant to the terms of that certain Convertible Promissory Note
between the Company and Purchaser, of even date hereof (the "Note"); and
(c) SECURITY AGREEMENT. The Security Agreement between the Company
and Purchaser, of even date herewith, (the "Security Agreement"), duly executed
by Purchaser.
(d) INTERCREDITOR AGREEMENT. The Intercreditor Agreement among the
Company, Purchaser, Union Atlantic, L.C. and the other investors in the Company,
of even date herewith, (the "Intercreditor Agreement"), duly executed by
Purchaser.
9.2 DELIVERIES BY THE COMPANY. Contemporaneous with the signing hereof,
the Company has executed or caused to be executed and delivered or caused to be
delivered to Purchaser the following documents, certificates and agreements:
(a) STOCK CERTIFICATE. A certificate for Purchaser, representing all
of the Shares;
(b) NOTE. The Note, duly signed by an authorized representative of
the Company;
(c) SECURITY AGREEMENT. The Security Agreement, duly signed by an
authorized representative of the Company.
(d) INTERCREDITOR AGREEMENT. The Intercreditor Agreement, duly signed
by an authorized representative of the Company.
28
<PAGE>
(e) BERG EMPLOYMENT AGREEMENT. The Employment Agreement between the
Company and Berg, of even date herewith, duly signed by the Company and Berg;
(f) TESSIER EMPLOYMENT AGREEMENT. The Employment Agreement between
the Company and Tessier, of even date herewith, duly signed by the Company and
Tessier;
(g) FEES OF PURCHASER'S ATTORNEYS. Payment of the fees of Purchaser's
attorneys, relating to this transaction.
(h) REPRESENTATIONS AND WARRANTIES. A certificate executed by a duly
authorized officer of the Company certifying that the representations and
warranties relating to the Company contained in this Agreement are true and
correct in all material respects as of the date hereof, except for any
representations or warranties that relate solely to an earlier date (in which
case such representations and warranties were true and correct as of such
earlier date);
(i) RESOLUTIONS OF THE COMPANY. A true and complete copy, certified
by the President of the Company, of the resolutions duly and validly adopted by
the Board evidencing its authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; and
(j) INCUMBENCY CERTIFICATE OF THE COMPANY. A certificate of the
Secretary of the Company certifying the names and signatures of the officers of
the Company authorized to sign this Agreement and the other documents to be
delivered hereunder on behalf of the Company.
ARTICLE X
INDEMNIFICATION
10.1 SURVIVAL. All representations and warranties contained herein and
made in writing by or on behalf of the parties hereto in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement for a period of two (2) years after the date hereof, regardless
of any investigation made at any time with respect to any of the foregoing or
any information the parties may have in respect thereto.
10.2 PURCHASER'S RIGHT TO INDEMNIFICATION. Subject to the provisions of
this Article X and in addition to any other rights and remedies available to
Purchaser under applicable law, the Company, Berg (solely with regard to
representations, warranties, covenants and agreements made by Berg hereunder)
and Tessier (solely with regard to representations, warranties, covenants
29
<PAGE>
and agreements made by Tessier hereunder) shall severally indemnify and hold
harmless Purchaser and, if applicable, any of its officers, directors,
shareholders, employees, agents, representatives, attorneys, successors,
predecessors and assigns from and against: (a) any and all losses, obligations,
liabilities, damages, claims, deficiencies, costs and expenses (including, but
not limited to, the amount of any settlement entered into pursuant hereto and
all reasonable legal and other expenses incurred in connection with the
investigation, prosecution or defense of the matter) (collectively "Claims"),
which may be asserted against or sustained or incurred by Purchaser in
connection with, arising out of, or relating to (i) any breach of any, or any
false, incorrect or misleading, representation or warranty that is made by the
Company, Berg or Tessier herein or in any Exhibit, Schedule, certificate or
other document delivered to Purchaser by the Company, Berg or Tessier in
connection with this Agreement, or (ii) any breach of any agreements and
covenants made by the Company, Berg or Tessier herein or in any Exhibit,
Schedule, certificate or other document delivered to Purchaser by the Company,
Berg or Tessier in connection with this Agreement; and (b) any and all costs and
expenses incurred by Purchaser in connection with the enforcement of its rights
under this Agreement.
10.3 THE COMPANY'S RIGHT TO INDEMNIFICATION. Subject to the provisions of
this Article X and in addition to any other rights and remedies that may be
available to the Company under applicable law, Purchaser shall indemnify and
hold harmless the Company and any of its officers, directors, shareholders,
employees, agents, representatives, attorneys, successors, predecessors and
assigns from and against: (a) Claims which may be asserted against or sustained
or incurred by the Company in connection with, arising out of, or relating to
(i) any breach of any, or any false, incorrect or misleading, representation or
warranty that is made by Purchaser herein or in any Exhibit, Schedule,
certificate or other document delivered to the Company by Purchaser in
connection with this Agreement, or (ii) any breach of any agreements and
covenants made by Purchaser herein or in any Exhibit, Schedule, certificate or
other document delivered to the Company by Purchaser in connection with this
Agreement; and (b) any and all costs and expenses incurred by the Company in
connection with the enforcement of its rights under this Agreement. However,
Purchaser's aggregate liability under this Article X shall not exceed such
Purchaser's Purchase Price.
10.4 PROCEDURE FOR CLAIMS.
(a) NOTICE OF CLAIM. Promptly, but in any event within 30 days after
obtaining knowledge of any claim or demand which may give rise to, or could
reasonably give rise to, a claim for indemnification hereunder (any such claim
an "Indemnification Claim"), the party or parties entitled to indemnification
hereunder (the "Indemnified Party") shall give written notice to the party or
parties subject to indemnification obligations therefor (the "Indemnifying
Party") of such Indemnification Claim (a "Notice of Claim"). A Notice of Claim
shall be given with respect to all Indemnification Claims. However, the failure
to timely give a Notice of Claim to the Indemnifying Party shall not relieve the
Indemnifying Party from any liability that it may have to the Indemnified Party
hereunder to the extent that the Indemnifying Party is not prejudiced by such
failure. Subject to Section 10.1, no Indemnified Party shall be entitled to give
a Notice of Claim with respect to any representation and warranty after the
second anniversary
30
<PAGE>
of the Closing Date. The Notice of Claim shall set forth the amount (or a
reasonable estimate) of the loss, damage or expense suffered, or which may be
suffered, by the Indemnified Party as a result of such Indemnification Claim and
a brief description of the facts giving rise to such Indemnification Claim. The
Indemnified Party shall furnish to the Indemnifying Party such information (in
reasonable detail) as the Indemnified Party may have with respect to such
Indemnification Claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same).
(b) THIRD PARTY CLAIMS.
(i) If the claim or demand set forth in the Notice of Claim is a
claim or demand asserted by a third party (a "Third Party Claim"), the
Indemnifying Party shall have 15 days (or such shorter period if an answer or
other response or filing with respect to the pleadings served by the third party
is required prior to the 15th day) after the date of receipt by the Indemnifying
Party of the Notice of Claim (the "Notice Date") to notify the Indemnified Party
in writing of the election by the Indemnifying Party to defend the Third Party
Claim on behalf of the Indemnified Party.
(ii) If the Indemnifying Party elects to defend a Third Party
Claim on behalf of the Indemnified Party, the Indemnified Party shall make
available to the Indemnifying Party and its agents and representatives all
records and other materials in its possession which are reasonably required in
the defense of the Third Party Claim and the Indemnifying Party shall pay any
expenses payable in connection with the defense of the Third Party Claim as they
are incurred (whether incurred by the Indemnified Party or Indemnifying Party).
(iii) In no event may the Indemnifying Party settle or compromise
any Third Party Claim without the Indemnified Party's consent, which shall not
be unreasonably withheld.
(iv) If the Indemnifying Party elects to defend a Third Party
Claim, the Indemnified Party shall have the right to participate in the defense
of the Third Party Claim, at the Indemnified Party's expense (and without the
right to indemnification for such expense under this Agreement). However, the
reasonable fees and expenses of counsel retained by the Indemnified Party shall
be at the expense of the Indemnifying Party if: (A) the use of the counsel
chosen by the Indemnifying Party to represent the Indemnified Party would
present such counsel with a conflict of interest; (B) the parties to such
proceeding include both the Indemnified Party and the Indemnifying Party and
there may be legal defenses available to the Indemnified Party which are
different from or additional to those available to the Indemnifying Party; (C)
within 10 days after being advised by the Indemnifying Party of the identity of
counsel to be retained to represent the Indemnified Party, the Indemnified Party
objects to the retention of such counsel for valid reasons (which shall be
stated in a written notice to Indemnifying Party), and the Indemnifying Party
does not retain different counsel reasonably satisfactory to the
31
<PAGE>
Indemnified Party; or (D) the Indemnifying Party authorizes the Indemnified
Party to retain separate counsel at the expense of the Indemnifying Party.
(v) If the Indemnifying Party does elect to defend a Third Party
Claim, or does not defend a Third Party Claim in good faith, the Indemnified
Party may, in addition to any other right or remedy it may have hereunder, at
the sole and exclusive expense of the Indemnifying Party, defend such Third
Party Claim. However, such expenses shall be payable by the Indemnifying Party
only if and when such Third Party Claim becomes payable.
(vi) To the extent that an Indemnified Party recovers on a Third
Party Claim, the amount of such recovery (after deduction of all costs and
expenses incurred in connection with such Third Party Claim) shall reduce,
dollar-for-dollar, the indemnification obligation otherwise owing by the
Indemnifying Party.
(c) COOPERATION IN DEFENSE. The Indemnified Party shall cooperate
with the Indemnifying Party in the defense of a Third Party Claim. Subject to
the foregoing, (i) the Indemnified Party shall not have any obligation to
participate in the defense of or to defend any Third Party Claim, and (ii) the
Indemnified Party's defense of or its participation in the defense of any Third
Party Claim shall not in any way diminish or lessen its right to indemnification
as provided in this Agreement.
ARTICLE XI
CONFIDENTIAL INFORMATION
11.1 Each party shall keep confidential all Confidential Information
obtained from the other party hereto in connection with the negotiation of this
Agreement and the transactions contemplated hereby. Except as expressly
permitted by the Company in writing, neither Purchaser nor any of its Affiliates
shall use the Company's Confidential Information to develop or operate a
business which is directly competitive with the Business as operated by the
Company or any of its Affiliates.
11.2 Notwithstanding the restrictions of Section 11.1, any party (the
"Disclosing Party") may disclose the other party's Confidential Information: (a)
to the Disclosing Party's Representatives so long as the Representatives are
informed of the confidential nature of the Confidential Information; (b) if in
the opinion of the Disclosing Party's legal counsel, disclosure is required
pursuant to any applicable Law, including the Securities Act and the Exchange
Act; (c) if legally compelled by Governmental Order, judicial or administrative
order, deposition, interrogatory, request for documents, subpoena, investigative
demand or other discovery process. However, in the case of the foregoing clause
(c), the Disclosing Party shall use its reasonable best efforts to prevent
disclosure of the Confidential Information by legal means including, if
applicable, attempting to obtain a protective order.
11.3 Each party shall be responsible for a breach of this Article XI by
its Representatives.
32
<PAGE>
ARTICLE XII
ADDITIONAL COVENANTS
12.1 USE OF PROCEEDS. The Company shall only use the Purchase Price for
the acquisition of Galacticomm, Inc. and as general working capital. The Company
shall not use any part of the Purchase Price for: (a) loans to any Person; or
(b) dividends or other distributions to the Company's shareholders.
12.2 AUDIT. The Company shall, as soon as reasonably practicable after the
date hereof, retain a "Big 6" accounting firm to conduct an audit of the Company
and its Subsidiaries.
12.3 KEY-MAN LIFE INSURANCE. The Company shall promptly obtain life
insurance policies on the lives of each of Berg and Tessier, in the amount of
$1,000,000 per policy.
ARTICLE XIII
GENERAL PROVISIONS
13.1 EXPENSES. Except as otherwise specified in this Agreement, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
13.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(a) receipt, if made by personal service, (b) three days after dispatch, if made
by reputable overnight courier service, (c) upon the delivering party's receipt
of a written confirmation of a transmission made by cable, by telecopy, by
telegram, or by telex or (d) seven days after being mailed by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 13.2):
(a) if to the Company:
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
Attn: Peter Berg, President
33
<PAGE>
(b) if to Berg:
c/o I-View Software, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
(c) if to Tessier:
c/o I-View Software, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
(d) if to Purchaser:
c/o Bayard International Trust (Luxembourg) S.A.
1 Rue du St. Esprit
L-1475 Luxembourg
Telephone: (352) 22-94-44
Facsimile: (352) 22-94-66
Attention: Bart d'Ancona
13.3 PUBLIC ANNOUNCEMENTS. Except as required by Law or any applicable
Governmental Authority, no party to this Agreement shall make, or cause to be
made, any press release or public announcement in respect of this Agreement or
the transactions contemplated hereby or otherwise communicate with any news
media without the prior written consent of the other party. Except to the extent
prohibited by applicable law, the parties shall cooperate as to the timing and
contents of any such press release or public announcement.
13.4 HEADINGS. The descriptive headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.5 PRONOUNS. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural wherever the context and facts require
such construction.
13.6 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal
34
<PAGE>
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
13.7 ENTIRE AGREEMENT. This Agreement, including all of the Exhibits and
Schedules attached hereto which are incorporated herein by this reference,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersedes all prior agreements and
undertakings, both written and oral, among the Company, Berg, Tessier and
Purchaser with respect to the subject matter hereof and thereof.
13.8 ASSIGNMENT. This Agreement and the rights and duties hereunder may
not be assigned or assumed by operation of law or otherwise without the express
prior written consent of the other parties hereto (which consent may be granted
or withheld in the sole discretion of such other parties, as applicable).
13.9 AMENDMENT; WAIVER. This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, each party
hereto. Each party to this Agreement may: (a) extend the time for the
performance of any of the obligations or other acts of the other parties; (b)
waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered by the other party
pursuant hereto; or (c) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by all of
the other parties to be bound thereby. Any waiver of any term or condition shall
not be construed as a waiver of any subsequent breach or a subsequent waiver of
the same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.
13.10 GOVERNING LAW AND FORUM SELECTION. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Florida (without
regard to its principles regarding conflicts of law). All actions or proceedings
initiated by any party hereto and arising directly or indirectly out of this
Agreement which are brought to judicial proceedings shall be litigated in
Florida state courts sitting in Broward County, Florida.
13.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
13.12 ATTORNEYS' FEES. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
35
<PAGE>
13.13 FURTHER ACTION. Each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all appropriate action, do or cause to be
done all things reasonably necessary, proper or advisable under applicable Law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the Company, Berg, Tessier and Purchaser have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
I-VIEW SOFTWARE, INC.
By: /s/ YANNICK TESSIER /s/ PETER BERG
------------------------------ ------------------------------
Name: Yannick Tessier Peter Berg
----------------------------
Title: President
---------------------------
UNION ATLANTIC PARTNERS I LIMITED
/s/ YANNICK TESSIER By: /s/ LEONARD J. SOKOLOW
- --------------------------------- ---------------------------
Yannick Tessier Name: Leonard J. Sokolow
-------------------------
Title: Authorized Representive
------------------------
36
<PAGE>
Schedule 1.21
NONE
<PAGE>
IVIEW SOFTWARE, INC. - SCHEDULE 3.4
STOCKHOLDERS IVIEW SHARES PERCENT
- ------------ ----------- -------
Peter Berg 4,938,095 45.75%
Yannick Tessier 4,938,095 45.75%
Lorraine Gouger 539,683 5.00%
Wally Muharsky 215,873 2.00%
Mitch Segal 107,937 1.00%
Vincent Toscano 53,968 0.50%
---------- --------
10,793,651 100.00%
<PAGE>
SCHEDULE 3.7
Subsidiaries
1. Solely for purposes of the Representations and Warranties contained in
Article III:
Galacticomm, Inc.
<PAGE>
SCHEDULE 3.17(a)
Material Contracts
1. Stock Purchase Agreement, dated October 29, 1996, among the Company,
Christine Stryker, Robert Shaw, Stan Joseph, Robert Stein, Scott Brinker,
Christopher Robert, Keith Money and the law firm of Lucio, Mandler,
Croland, Bronstein & Garbett, P.A.
2. Promissory Note, dated April 2, 1996 and in the principal amount of
$37,500, from the Company in favor os Skyline, Inc.
3. Promissory Note, dated August 3, 1996 and in the principal amount of
$50,000, from Tessier Technologies, Inc., in favor of Yannick Tessier.
4. Promissory Note, dated February 2, 1996 and in the principal amount of
$25,000, from the Company in favor of Ron Pascale.
5. Agreement of Distribute Proceeds, dated February 2, 1996, between the
Company and Ron Pascale.
6. Promissory Note, dated February 7, 1996 and in the principal amount of
$25,000, from the Company in favor of Leonard J. Sololow.
7. Agreement to Distribute Procedds, dated February 7, 1996, between the
Company and Leonard J. Sokolow.
8. Promissory Note, dated December 28, 1995, and in the principal amount of
$10,000, from the Company in favor of Stephen Sinkoe.
9. Agreement to Distribute Proceeds, dated December 28, 1995, between the
Company and Stephen Sinkoe.
10. Promissory Note, dated December 29, 1995 and in the principal amount of
$10,000, from the Company in favor of Ron Herzog.
11. Agreement to Distribute Proceeds, dated December 29, 1995, between the
Company and Ron Herzog.
12. Promissory Note, undated and in the principal amount of $10,000, from the
Company in favor of Bruce Roberts.
13. Agreement to Distribute Proceeds, undated, between the Company and Bruce
Roberts.
<PAGE>
SCHEDULE 3.19
Real Property
1. 4101 S.W. 47 Avenue, Suite 101, Ft. Lauderdale, Florida 33314
<PAGE>
SCHEDULE 3.20(a)
NONE
<PAGE>
SCHEDULE 3.20(b)
NONE
<PAGE>
SCHEDULE 3.23
Brokers
In connection with the transactions contemplated by this Agreement, Union
Atlantic, L.C. will receive a consulting fee equal to 10% of the aggregate
investment in the Company, plus a non-accountable expense allowance of 3% of the
aggregate investment in the Company.
<PAGE>
SCHEDULE 4.7
Brokers
In connection with the transactions contemplated by this Agreement, Union
Atlantic, L.C. will receive a consulting fee equal to 10% of the aggregate
investment in the Company, plus a non-accountable expense allowance of 3% of the
aggregate investment in the Company.
EXHIBIT 10.6
GALACTICOMM TECHNOLOGIES, INC.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
September 8, 1997
Union Atlantic Partners I Limited
c/o Bayard International Trust (Luxembourg) S.A.
1 Rue du St. Esprit
L-1475 Luxembourg
Re: STOCK PURCHASE AGREEMENT (THE "AGREEMENT") AMONG
GALACTICOMM TECHNOLOGIES, INC., F/K/A I-VIEW SOFTWARE, INC.
(THE "COMPANY"),
PETER BERG ("BERG"), YANNICK TESSIER ("TESSIER")
AND UNION ATLANTIC PARTNERS I LIMITED ("UAL"), DATED
NOVEMBER 21, 1996
Dear Sirs:
As you are aware, the Company is currently preparing a registration
statement to be filed with the United States Securities and Exchange Commission
(the "SEC") for an initial public offering ("IPO") of its securities. As part of
the IPO, the Company requests that the Agreement be amended so that:
(a) section 8.3 of the Agreement, regarding UAL's ratchet right, be
deleted in its entirety, effective immediately; and
(b) the following sections of the Agreement be deleted as of the
date (the "Effective Date") on which the Company's Registration Statement
regarding the initial public offering is declared effective by the SEC:
(i) Section 8.1, regarding UAL's preemptive rights; and
(ii) Section 8.2, regarding UAL's anti-dilution rights.
In consideration of such amendments, the Company shall issue to UAL 30,000
shares (the "Shares") of the Company's common stock, par value $0.0001 per share
(the "Common Stock"), within 10 days of your acceptance of the amendments
contained herein. Furthermore, the Company hereby represents and warrants to UAL
that the Shares shall, upon issuance, be duly authorized, validly issued and
free from all encumbrances, other than any encumbrances created by agreements
entered into by UAL. The Shares will be subject to the registration rights
contained in Article VI of the Agreement. However, UAL shall pay the pro rata
portion of the Registration Expenses (as such term is defined in the Agreement)
relating to the registration of the Shares.
By agreeing to this amendment of the Agreement, UAL shall be deemed to
have represented and warranted to the Company as follows:
(a) UAL is acquiring the Shares for its own account and for
investment and not with a view towards, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Shares;
<PAGE>
Union Atlantic Partners I Limited
November 6, 1997
Page 2
(b) UAL acknowledges that it: (i) it has had the opportunity to
visit with Company and meet with its officers and other representatives to
discuss the Company's business, assets, liabilities, financial condition, cash
flow and operations; and (ii) all materials requested by UAL have been provided
to UAL to UAL's reasonable satisfaction;
(c) UAL has made its own independent examination, investigation,
analysis and evaluation of the Company; and
(d) UAL has undertaken such due diligence (including a review of the
assets, liabilities, books, records and contracts of the Company) as UAL deems
adequate.
In accordance with your request and in further consideration of your
acceptance of the amendments contained herein, the Agreement is hereby amended
by adding the following sentence to Section 13.8 of the Agreement:
"However, Purchaser may assign its rights and obligations under this
Agreement to an Affiliate of Purchaser, without the consent of the other
parties hereto. Nevertheless, Purchaser shall promptly notify the other
parties hereto of any such assignment to an Affiliate of Purchaser"
All of the other terms and conditions of the Agreement shall remained
unchanged and in full force and effect. If you agree with this amendment to the
Agreement, please: (a) sign and date this letter in the space provided below;
and (b) return an original signed copy of the letter to us.
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ PETER BERG /s/ PETER BERG
--------------------------------- ---------------------------
Peter Berg, Chairman & CEO Peter Berg, individually
/s/ YANNICK TESSIER
---------------------------------
Yannick Tessier, individually
Agreed to and accepted by:
UNION ATLANTIC PARTNERS I LIMITED
By: /s/ ILLEGIBLE
--------------------------------
EXHIBIT 10.7
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION
UNDER SUCH ACT OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED.
$125,000.00 November 21, 1996
SECURED CONVERTIBLE PROMISSORY NOTE
OF
I-VIEW SOFTWARE, INC.
FOR VALUE RECEIVED, I-VIEW SOFTWARE, INC., a Florida corporation (the
"Company"), hereby promises to pay to the order of UNION ATLANTIC PARTNERS I
LIMITED, whose address is c/o Bayard International Trust (Luxembourg) S.A., 1
Rue du St. Esprit, L-1475 Luxembourg (the "Payee"), on the Maturity Date (as
hereinafter defined) the principal amount of One Hundred and Twenty Five
Thousand Dollars ($125,000), together with all accrued and unpaid interest. The
unpaid principal balance of this Secured Convertible Promissory Note (the
"Note") shall bear interest at a rate of ten percent (10%) per annum. The
Company shall make payments of accrued interest to the Payee on March 31, June
30, September 30 and December 31 of each year during which principal and
interest are owed and outstanding under this Note, with the first payment being
made on March 31, 1997.
1. DEFINITIONS.
(a) "Bankruptcy" means: (a) an adjudication of bankruptcy under the U.S.
Bankruptcy Reform Act of 1978, as amended, or any successor statute; (b) the
specified Person stops payment of, is deemed unable or otherwise admits
inability to pay its debts or becomes or is deemed to be insolvent; (c) an
assignment for the benefit of creditors; (d) the specified Person either does,
resolves to do or commences negotiations with a view to doing any of the
following: (i) makes a general or special arrangement or composition (whether
voluntary or involuntary) with its creditors or any class of creditors, (ii)
declares or agrees to a moratorium, (iii) issues a notice convening a meeting to
resolve to do any of the foregoing; (e) the filing of a voluntary petition in
bankruptcy or reorganization or the passing of a resolution for voluntary
liquidation or reconstruction; or (f) the failure to vacate the appointment of a
receiver or trustee, for any part or all of the assets or property of a party
within 60 days from the date of such appointment.
(b) "Common Stock" means the common stock of the Company, par value
$0.0001 per share.
(c) "Common Stock Deemed Outstanding" means the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common
Stock deemed to be outstanding pursuant to Section 6(a) hereof, at and previous
to any given time.
(d) "Conversion Price" means $0.63, as adjusted pursuant to Section 6
hereof.
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(e) "Converted Shares" shall have the meaning set forth in Section 4(a)
hereof.
(f) "Fair Value" means a value determined jointly by the Company and the
Payee. However, if the Company and the Payee are unable to reach an agreement,
"Fair Value" shall be determined by an appraiser jointly selected by the Company
and the Payee, at the Company's sole expense and cost.
(g) "Maturity Date" means the earliest to occur of:
(i) November 21, 1998;
(ii) the completion of a $3,000,000 private placement by the
Company; or
(iii) the completion of an initial public offering of securities
and/or debt by the Company.
(h) "Person" shall mean any individual, partnership, firm, corporation,
limited liability company, association, joint venture, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
(i) "Security Agreement" means the security agreement between the Company
and the Payee, of even date hereof.
(j) "Stock Purchase Agreement" means the stock purchase agreement among
the Company, Payee, Peter Berg and Yannick Tessier, of even date hereof.
2. VOLUNTARY PREPAYMENT; INVOLUNTARY PREPAYMENT.
(a) VOLUNTARY PREPAYMENT. This Note may not be prepaid in whole or in part
without the prior written consent of the Payee. If such prepayment is consented
to by the Payee, the Company shall prepay the principal to which such consent
has been given.
(b) INVOLUNTARY PREPAYMENT. The Payee may demand prepayment in full of
this Note at any time that an Event of Default under this Note exists and has
not been cured or waived, in which event this Note shall be immediately due and
payable. Prepayment shall be made by the Company by the close of business on the
first business day after the Company's receipt of the demand notice, by full
payment of the principal amount of this Note, together with all accrued and
unpaid interest.
3. DEFAULTS, AMENDMENTS, WAIVERS, ETC.
(a) EVENTS OF DEFAULT. Each of the following events is herein called an
"Event of Default":
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(i) The occurrence of an event of Bankruptcy with regard to the
Company;
(ii) The Company defaults in the due and punctual payment of
principal or interest on any of its indebtedness other than that evidenced by
this Note, or there exists any default under any mortgage, agreement or note
securing, relating to or evidencing such indebtedness, which default is not
cured within any applicable cure period;
(iii) Any default by the Company in the performance of any covenant
or condition contained in this Note including, but nor limited to, the timely
payment of principal and interest hereunder, which default is not cured with
five (5) business days;
(iv) The Company commits an event of default under the Stock
Purchase Agreement or the Security Agreement; or
(v) The Company fails to deliver to Payee the amount of Common
Stock, duly authorized and issued, fully paid and nonassessable, which the Payee
is entitled to receive upon tendering of the Note for conversion into the
Converted Shares as provided in Section 4(a) hereof.
(b) REMEDIES FOR DEFAULT. If an Event of Default occurs, then this Note
shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Company.
(c) ENFORCEMENT OF REMEDIES. If an Event of Default occurs, the Payee may
proceed to protect and enforce its rights at law and/or in equity, or proceed to
enforce payment of this Note or to enforce any other legal or equitable right of
the Payee, all of which shall be deemed separate and cumulative, and not
exclusive of each other.
(d) AMENDMENTS AND WAIVERS. No course of dealing between the Company and
the Payee, and no failure or delay on the part of the Payee in exercising any
rights under this Note shall operate as a waiver of the rights of the Payee.
Furthermore, no single or partial exercise of any right hereunder shall prevent
any other or further exercise of such right or of any other right. No covenant
or other provision of this Note may be changed, and no Event of Default may be
waived, except by a written document signed by the party consenting to such
change or waiving such Event of Default.
(e) COST AND EXPENSE OF ENFORCEMENT. If an Event of Default occurs
hereunder, the Company shall, to the extent permitted under applicable law, pay
to the Payee such further amount as shall be sufficient to cover the cost and
expense of enforcement, including the reasonable attorney fees and expenses of
the Payee.
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4. CONVERSION OF NOTE.
(a) Upon the occurrence of either of the following events, all principal
and accrued interest due and payable under this Note (the "Outstanding Amount")
shall be converted into that number of shares of Common Stock (the "Converted
Shares") equal to the Outstanding Amount divided by the Conversion Price:
(i) upon the written demand of the Payee; or
(ii) upon the written demand of I-View, on or before April 15, 1998,
if the Company's financial statements, as prepared by a "Big 6" accounting firm,
for the financial year ending December 31, 1997, show Company after tax earnings
of $1,000,000 or more.
(b) The Company shall take appropriate action to reserve from the
Company's authorized but unissued Common Stock, sufficient Common Stock to
permit the conversion of the Outstanding Amount pursuant to Section 4(a), which
reservation shall be noted in the books, records and, if appropriate, the
financial statements of the Company.
(c) The Company covenants that all Converted Shares which may be issued
will, upon issuance, be validly issued, fully paid and non-assessable, and free
from all taxes, excluding income taxes, gross receipts taxes or any similar tax
based upon the earnings, receipts, income or gain to the Payee.
5. REGISTRATION RIGHTS. The Payee shall have the same piggyback registration,
demand registration, tag along and bring along rights, regarding the Converted
Shares, as are contained in the Stock Purchase Agreement.
6. ADJUSTMENT OF SHARES AND CONVERSION PRICE.
(a) CONVERSION PRICE
(i) GENERAL.
(A) In order to prevent dilution of the conversion rights
granted under this Note, the Conversion Price shall be subject to adjustment
from time to time pursuant to this Section 6(a).
(B) If the Company issues or sells or, in accordance with
Section 6(a)(ii) hereof, is deemed to have issued or sold, any shares of Common
Stock for a consideration per share less than the Conversion Price in effect
immediately prior to the time of such issuance or sale (except for the issuance
or deemed issuance of securities in a transaction described in Section
6(a)(i)(C)), then immediately upon each such issuance or sale the Conversion
Price shall be reduced to a price determined by multiplying the Conversion Price
in effect immediately prior to the issuance or sale by a fraction, the numerator
of which shall be the sum of (i) the number
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of shares of Common Stock actually outstanding prior to the issuance or sale and
(ii) the number of shares of Common Stock that the amount receivable by the
Company upon such issuance or sale on that occasion would purchase at the
initial Conversion Price, and the denominator of which shall be the number of
shares of Common Stock actually outstanding and Common Stock Deemed Outstanding
under Subsection 6(a)(ii) immediately after such issuance or sale.
(C) The existence and any exercise of any option, warrant, or other
right to purchase Common Stock, that is outstanding on the date hereof shall be
excluded from the operation of Paragraph (B) of this Subsection 6(a)(i) and from
the operation of Subsection 6(a)(ii)
(ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Conversion Price under Subsection 6(a)(i) above, the
following provisions shall be applicable:
(A) ISSUANCE OF RIGHTS AND OPTIONS. If the Company in any
manner grants any rights or options to subscribe for or to purchase Common Stock
or any stock or other securities convertible into or exchangeable for Common
Stock (such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities") and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than the Conversion Price in effect immediately prior to the
time of the granting of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For purposes of
this paragraph, the "price per share for which Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities" shall be determined by dividing (i) the total amount, if any,
received by the Company as consideration for the granting of such Options plus
the minimum aggregate amount of additional consideration payable to the Company
upon exercise of all such Options plus, in the case of Options that relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
such Convertible Securities, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options and upon the conversion
or exchange of all Convertible securities issuable upon the exercise of such
Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, and the price per share for
which Common Stock is issuable upon conversion or exchange of such Convertible
Securities is less than the Conversion Price in effect immediately prior to the
time of such issuance or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable upon such conversion or exchange" shall be
determined by dividing (i) the total
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amount received by the Company as consideration for the issuance or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities.
(C) CHANGE IN OPTION PRICE AND CONVERSION RATE. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange or any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be reduced to the Conversion Price that
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration,
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.
(D) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options, or Convertible Securities are issued or sold or deemed to have
been issued or sold for consideration that includes unrestricted cash, then the
amount of cash consideration actually received by the Company shall be deemed to
be the full monetary value of the unrestricted cash portion thereof. If any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for a consideration part or all of which is other than
unrestricted cash, then the amount of the consideration other than unrestricted
cash received by the Company shall be deemed to be in the Fair Value of such
consideration.
(E) INTEGRATED TRANSACTIONS. If any Option is issued in
connection with the issuance or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued without consideration.
(F) TREASURY SHARES. The number of shares of Stock Deemed
Outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
shall be considered an issuance or sale of Common Stock.
(iii) SUBDIVISION AND COMBINATION OF COMMON STOCK; STOCK DIVIDENDS.
If the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or Convertible Securities, or any rights to purchase Common Stock
or Convertible Securities as a dividend upon Stock, (b) issue any shares of
Common Stock in subdivision of outstanding shares of Common Stock by
reclassification, stock split or otherwise, or (c) combine outstanding shares of
Common Stock by reclassification, stock split or otherwise, then the Conversion
Price that would apply if purchase rights hereunder were being exercised
immediately prior to such action by the Company shall be reduced only by
multiplying it by a fraction, the numerator of which shall be the number of
shares of Common Stock Deemed Outstanding immediately prior to such dividend,
subdivision or combination and the denominator of which shall be the number of
shares
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of Common Stock Deemed Outstanding immediately after such dividend, subdivision
or combination.
(iv) CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Company declares a
dividend or distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus AND otherwise than in Common Stock, Options or
Convertible Securities, the Conversion Price shall be reduced by an amount
equal, in the case of a dividend or distribution in cash, to the amount thereof
payable per share of the Stock or, in the case of any other dividend or
distribution, to the Fair Value of such dividend or distribution per share of
Common Stock. For purposes of the foregoing, a dividend or distribution other
than in cash shall be considered payable out of earnings or earned surplus only
to the extent that such earnings or earned surplus are charged an amount equal
to the Fair Value of such dividend or distribution. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend or distribution, of, if a record is not taken, the date as of which the
holders of Common Stock or record entitled to such dividend or distribution are
to be determined.
(v) MANNER OF CALCULATING ADJUSTMENTS; NO DE MINIMIS ADJUSTMENTS.
The calculation of each adjustment of the Conversion Price shall be made
accurate to the nearest ten- thousandth. No adjustment of the Conversion Price
shall be made if the amount of such adjustment would be less than one cent per
share. In such case any adjustment that otherwise would be required to be made
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment that, together with any adjustment or adjustments so
carried forward, shall amount to not less than one cent per share.
(b) ADJUSTMENT OF NUMBER OF STOCK ISSUABLE UPON EXERCISE. Upon each
reduction of the Exercise Price pursuant to Section 6(a) hereof, the Payee shall
thereafter (until another such reduction) be entitled to purchase, at the
Exercise Price in effect on the date the conversion rights under this Note are
exercised, the number of shares of Common Stock, calculated to the nearest whole
number of Common Stock, determined by (a) multiplying the number of shares of
Common Stock purchasable hereunder immediately prior to the reduction of the
Conversion Price by the Conversion Price in effect immediately prior to such
reduction, and (b) dividing the product so obtained by the Conversion Price in
effect on the date of such exercise.
7. COVENANTS OF THE COMPANY. So long as this Note is outstanding, the
Company covenants and agrees as follows:
(a) The Company shall maintain in full force and effect its existence as a
Florida corporation, its rights and franchises and all licenses, permits and
other rights to use trademarks, tradenames, copyrights, trade secrets, patents
or processes owned or possessed by it and deemed by it to be necessary to the
conduct of its business, and shall comply with all applicable laws and
regulations, whether now in effect or hereinafter enacted or promulgated by any
governmental authority having jurisdiction.
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(b) The Company shall duly pay and discharge or cause to be duly paid and
discharged, before the same becomes delinquent, all taxes (including all
employment and payroll taxes), assessments and other governmental charges
imposed upon it or any of its properties or in respect of its franchise or
income. However, no such tax or charge need be paid if being contested in good
faith by proper proceedings diligently conducted and if such reservation or
other appropriate provisions, if any, as shall be required by generally accepted
accounting principles, shall have been made therefor.
(c) The Company shall promptly notify the Payee in writing of: (i) any
litigation against it that is instituted or pending, or to the Company's
knowledge threatened, the outcome of which might have a material adverse effect
on the Company's financial condition, business, operations, assets or
liabilities, or results of operations; (ii) any default by the Company in the
due and punctual payment of principal or interest on any of its indebtedness
other than that evidenced by this Note, or any default by the Company under any
mortgage, agreement or note securing, relating to or evidencing such
indebtedness.
(d) Upon request of the Payee, the Company will provide the Payee with
copies of all filings made by the Company with federal, state or local
governmental bodies or agencies.
(e) While any principal or interest is owed and outstanding hereunder, the
Company shall not declare or make any dividends or distributions to the
Company's stockholders.
8. MISCELLANEOUS PROVISIONS.
(a) NON-ASSIGNMENT. Neither the Company nor the Payee may assign its
rights or delegate its duties hereunder to any other person, except with the
prior written consent of the other party.
(b) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made) upon the earliest to occur of
(a) receipt, if made by personal service, (b) two days after dispatch, if made
by reputable overnight courier service, (c) upon the delivering party's receipt
of a written confirmation of a transmission made by cable, by telecopy, by
telegram, or by telex, or (d) three days after being mailed by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section:
If to the Company: 4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Tel: (954) 583-5990
Fax: (954) 583-7846
Attn: Peter Berg, President
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If to the Payee: c/o Bayard International Trust (Luxembourg) S.A.
1 Rue du St. Esprit
L-1475 Luxembourg
Telephone: (352) 22-94-44
Facsimile: (352) 22-94-66
Attention: Bart d'Ancona
(c) GOVERNING LAW. This Note shall be governed in accordance with the
internal laws of the State of Florida (without regard to its conflict of laws
principles). All actions or proceedings initiated by any party hereto and
arising directly or indirectly out of this Agreement which are brought to
judicial proceedings shall be litigated in the Florida state courts sitting in
Broward County, Florida.
(d) SECTION HEADINGS. The section headings in this Note are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Note.
I VIEW SOFTWARE, INC.
By:/s/ PETER BERG
---------------------------
Peter Berg, Chairman
9
EXHIBIT 10.8
GALACTICOMM TECHNOLOGIES, INC.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
September 8, 1997
Union Atlantic Partners I Limited
c/o Bayard International Trust (Luxembourg) S.A.
1 Rue du St. Esprit
L-1475 Luxembourg
Re: SECURED CONVERTIBLE PROMISSORY NOTE (THE "NOTE") OF GALACTICOMM
TECHNOLOGIES, INC., F/K/A I-VIEW SOFTWARE, INC. (THE "COMPANY") IN
FAVOR OF UNION ATLANTIC PARTNERS I LIMITED, DATED NOVEMBER 21, 1996,
IN THE PRINCIPAL AMOUNT OF $125,000.00
Dear Sirs:
This letter agreement will serve to amend the terms of the Note. All
capitalized terms contained herein have the meanings set forth in the Note,
unless otherwise specifically defined herein.
Section 4(a) of the Note is hereby deleted in its entirety and replaced by
the following:
"Upon the earliest to occur of any of the following events:
(i) upon the written demand of the Payee;
(ii) on the date that the Company's Registration Statement, regarding
an initial public offering of its securities, is declared effective by the
Securities and Exchange Commission; or
(iii) upon the written demand of the Company, on or before April 15,
1998, if the Company's financial statements, as prepared by a "Big 6" accounting
firm, for the Company's fiscal year ending December 31, 1997, show Company after
tax earnings of $1,000,000 or more,
then (x) all principal due and payable under this Note (the "Outstanding
Amount") shall be converted into that number of shares of Common Stock (the
"Converted Shares") equal to the Outstanding Amount divided by the Conversion
Price, and (y) all accrued interest due and payable under this Note shall be
paid by the Company to the Payee, in cash."
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Union Atlantic Partners I Limited
November 6, 1997
Page 2
All of the other terms and conditions of the Note shall remained unchanged
and in full force and effect. If you agree with this amendment to the Note,
please: (a) sign and date this letter in the space provided below; and (b)
return an original signed copy of the letter to us.
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ PETER BERG
---------------------------
Peter Berg, Chairman & CEO
Agreed to and accepted by:
UNION ATLANTIC PARTNERS I LIMITED
By: /s/ LEONARD J. SOKOLOW
-----------------------
Name: Leonard J. Sokolow
Title: President
EXHIBIT 10.9
NO. 1 MIAMI, FLORIDA
DATED: NOVEMBER 21, 1996
THIS WARRANT EXPIRES IF NOT EXERCISED ON OR BEFORE
5:00 P.M., MIAMI TIME, NOVEMBER 21, 1999, SUBJECT TO
THE PROVISIONS OF ARTICLE VI HEREOF
WARRANT
TO PURCHASE COMMON STOCK
OF
I-VIEW SOFTWARE, INC.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR AN OPINION SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
THIS IS TO CERTIFY that UNION ATLANTIC, L.C., a Florida limited liability
company ("UAL"), is entitled upon the due exercise hereof at any time during the
Exercise Period (as hereinafter defined) to purchase, in whole or in part, from
I-VIEW SOFTWARE, INC., a Florida corporation (the "Company"), five hundred and
sixty seven thousand four hundred and sixty (567,460) duly authorized, validly
issued, fully paid and non-assessable shares of common stock, par value $0.0001
per share, at a price of sixty three cents ($0.63) (the "Exercise Price")
(subject to adjustment as provided herein) for each share of such common stock
so purchased and to exercise the other rights, powers and privileges hereinafter
provided, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
This Warrant has been issued to UAL in return for consulting services
provided by UAL to the Company.
ARTICLE I
DEFINITIONS
The terms defined in this Article I, whenever used in this Warrant, shall
have the respective meanings hereinafter specified. Capitalized terms which are
used herein and are not defined herein shall have the same meanings specified in
the Consulting Agreement (as hereinafter defined). Whenever used in this
Warrant, any noun or pronoun shall be deemed to include both the singular and
plural and to cover all genders.
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"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. "Control"
(including the terms "controlling," "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Demand Registrable Securities" means, the Warrant Shares. However, any
such shares shall be "Demand Registrable Securities" only so long as they are
"Restricted Securities". Any share or other security shall be deemed a
"Restricted Security" until such time as such share or other security: (a) has
been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering it; or (b) has been sold
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Period" means the period commencing on November 21, 1996, and
terminating at 5:00 p.m., Miami, Florida time, on November 21, 1999, or such
later time as is provided in Article VI hereof.
"Fair Value" means a value determined jointly by the Company and the
Holder. However, if the Company and the Holder are unable to reach an agreement,
"Fair Value" shall be determined by an appraiser jointly selected by the Company
and the Holder, at the Company's sole expense and cost.
"Holder(s)" means the Person(s) in whose name this Warrant is registered
on the books of the Company maintained for such purpose.
"Person" shall means an individual, a corporation, a joint venture, a
general or limited partnership, a trust, an unincorporated organization or a
government or any agency or political subdivision thereof.
"Piggyback Registrable Securities" means the Warrant Shares. However, any
such shares shall be "Registrable Securities" only so long as they are
"Restricted Securities". Any share or other security shall be deemed a
"Restricted Security" until such time as such share or other security (i) has
been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering it, or (ii) has been sold
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as the same shall be in effect
from time to time.
"Stock" means the Company's authorized common stock, par value $0.0001 per
share.
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"Stock Deemed Outstanding" means the number of shares of Stock actually
outstanding at such time, plus the number of shares of Stock deemed to be
outstanding pursuant to Section 7.1 hereof, at and previous to any given time.
"Warrant(s)" means this Warrant and all warrants issued upon the partial
exercise, transfer or division of or in substitution for this Warrant.
"Warrant Shares" means shares of Stock issued upon the exercise, in whole
or in part, of this Warrant.
ARTICLE II
NUMBER OF SHARES; EXERCISE OF WARRANT
2.1 NUMBER OF SHARES. This Warrant shall entitle the Holder to subscribe
to and purchase five hundred and sixty seven thousand four hundred and sixty
(567,460) shares of Stock, as adjusted pursuant to Article VII hereof.
2.2 RIGHT TO EXERCISE. Subject to the provisions contained in this Warrant
and upon compliance with the conditions of this Article II, the Holder shall
have the right, at its option, at any time and from time to time during the
Exercise Period to exercise this Warrant in whole or in part.
2.3 NOTICE OF EXERCISE; ISSUANCE OF STOCK. To exercise this Warrant, the
Holder shall deliver to the Company at 4101 S.W. 47 Avenue, Suite 101, Ft.
Lauderdale, Florida 33314, Attention: President (a) a Notice of Exercise
substantially in the form attached hereto, duly executed by the Holder, (b) an
amount equal to the aggregate Exercise Price for all shares of Stock purchased
upon due exercise of this Warrant and (c) this Warrant.
The signature on the Notice of Exercise must be guaranteed by a
commercial bank or trust company in the United States or a member firm of the
New York Stock Exchange.
Payment of the Exercise Price shall be made, at the option of the
Holder, (i) by wire transfer of immediately available funds to an account in a
bank located in the United States designated for such purpose by the Company or
(ii) by certified or official bank check payable to the order of the Company and
drawn on a member of the Chicago or New York Clearing House. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event within
five (5) business days thereafter, cause to be issued and delivered to the
Holder, a certificate representing the aggregate number of duly authorized,
validly issued, fully paid and non-assessable shares of Stock purchased pursuant
to the exercise of this Warrant registered in the name of the Holder. If the
Warrant Shares are not registered under the Securities Act at the time of the
exercise of this Warrant, the certificates representing such Warrant Shares
shall bear the customary legend restricting the transfer thereof before
registration under the Securities Act.
Unless otherwise requested by the Holder, this Warrant shall be
deemed to have been exercised and such certificate shall be deemed to have been
issued, and the Holder shall be
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deemed to have become the holder of record of such Warrant Shares for all
purposes as of the close of business on the date the Notice of Exercise,
together with payment as herein provided and this Warrant, are received by the
Company.
2.4 BALANCE OF WARRANT CERTIFICATE. Upon exercise of this Warrant in part
rather than in whole, the Company shall execute and deliver to or to the order
of the Holder, a new Warrant certificate of like tenor evidencing the
unexercised portion of the Warrant and otherwise in all respects identical with
this Warrant.
ARTICLE III
REGISTRATION
3.1 REGISTRATION; OWNERSHIP. The Company shall keep at the location
specified in Section 2.3 a register in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of ownership of this Warrant. The Company and any agent of the Company may treat
the Person in whose name this Warrant is registered as the owner of this Warrant
for all purposes whatsoever, and neither the Company nor any agent of the
Company shall be affected by notice to the contrary. The Company will not at any
time, except upon the dissolution, liquidation or winding up of the Company,
close such register so as to result in preventing or delaying the exercise of
this Warrant.
3.2 REPLACEMENT OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it, in the exercise of reasonable discretion, of the ownership
of and the loss, theft, destruction or mutilation of any Warrant and, in case of
loss, theft or destruction, the written agreement of the Holder to indemnify the
Company against any resulting loss or expense or in case of mutilation upon
surrender and cancellation of such Warrant, the Company will execute and deliver
in lieu hereof, a new Warrant of like tenor.
ARTICLE IV
ASSIGNMENT OR TRANSFER
This Warrant is transferable, in whole or in part, without charge to the
Holder, at the Company's office by the Holder in person or by a duly authorized
attorney, upon surrender of this Warrant, properly endorsed.
ARTICLE V
NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its Articles of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be
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reasonably necessary or appropriate to protect the rights of the Holder under
this Warrant. Without limiting the generality of the foregoing, the Company
shall: (a) not increase the par value of any shares of Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise;
(b) take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares of
Stock upon the exercise of this Warrant; and (c) obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
ARTICLE VI
RESERVATION OF STOCK ISSUABLE
UPON EXERCISE OF WARRANT
The Company will at all times reserve and keep available, solely for
issuance, sale and delivery upon the exercise of this Warrant, a number of
shares of Stock equal to the number of full shares of Stock issuable upon the
exercise of this Warrant. To the extent that at any time there is not a
sufficient number of authorized and unissued shares of Stock then existing to
provide a number of shares of Stock equal to the number of full shares of Stock
issuable upon exercise of this Warrant, the Company shall take all such actions
which are necessary to provide for the authorization of a number of additional
shares of Stock of the Company such that the number of shares of Stock reserved
by the Company for issuance, sale and delivery upon the exercise of this Warrant
is equal to the number of full shares of Stock issuable upon the exercise of
this Warrant. To the extent that the Holder hereof is a stockholder of the
Company at the time the Company seeks approval of its stockholders for the
authorization of additional shares of Stock for the purposes contemplated in the
preceding sentence, the Holder hereof agrees to vote its shares for the
authorization by the Company of such additional shares of Stock as shall be
necessary in order to provide the number of full shares available to the Company
for issuance of the full number of shares of Stock issuable upon the exercise of
this Warrant. Notwithstanding any other provision of this Warrant to the
contrary, to the extent that as of the stated termination date of the Exercise
Period the Company does not have a sufficient number of authorized and unissued
shares of Stock available to provide the full number of shares of Stock issuable
upon the exercise of this Warrant, the Exercise Period shall not terminate but
shall continue to be effective until 5:00 P.M., Miami, Florida time, on the date
which is thirty (30) days following the date upon which the Company has again
reserved a number of shares of Stock which are sufficient to provide the full
number of shares of Stock issuable upon the exercise of this Warrant.
All shares of Stock issuable upon the exercise of this Warrant shall be,
when issued upon such exercise: (a) duly authorized, validly issued, fully paid
and non-assessable; (b) free from all taxes, liens and charges with respect to
the issue thereof other than any stock transfer taxes in respect of any transfer
occurring contemporaneously with such issue; and (c) free and clear of all
liens, encumbrances, charges, equities, rights and claims whatsoever.
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ARTICLE VII
ADJUSTMENT OF SHARES AND EXERCISE PRICE
7.1 EXERCISE PRICE
(a) GENERAL.
(i) In order to prevent dilution of the rights granted under this
Warrant, the Exercise Price shall be subject to adjustment from time to time
pursuant to this Section 7.1
(ii) If the Company issues or sells or, in accordance with
Section 7.1(b) hereof, is deemed to have issued or sold, any shares of Stock for
a consideration per share less than the Exercise Price in effect immediately
prior to the time of such issuance or sale (except for the issuance or deemed
issuance of securities in a transaction described in Section 7.1(a)(iii)), then
immediately upon each such issuance or sale the Exercise Price shall be reduced
to a price determined by multiplying the Exercise Price in effect immediately
prior to the issuance or sale by a fraction, the numerator of which shall be the
sum of (i) the number of shares of Stock actually outstanding prior to the
issuance or sale and (ii) the number of shares of Stock that the amount
receivable by the Company upon such issuance or sale on that occasion would
purchase at the initial Exercise Price, and the denominator of which shall be
the number of shares of Stock actually outstanding and Stock Deemed Outstanding
under Subsection 7.1(b) immediately after such issuance or sale.
(iii) The existence and any exercise of any option, warrant, or
other right to purchase Stock, that is outstanding on the date hereof shall be
excluded from the operation of Paragraph (b) of this Subsection 7.1(a) and from
the operation of Subsection 7.2(b)
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Subsection 7.1(a) above, the
following provisions shall be applicable:
(i) ISSUANCE OF RIGHTS AND OPTIONS. If the Company in any manner
grants any rights or options to subscribe for or to purchase Stock or any stock
or other securities convertible into or exchangeable for Stock (such rights or
options being herein called "Options" and such convertible or exchangeable stock
or securities being herein called "Convertible Securities") and the price per
share for which Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the Exercise
Price in effect immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this paragraph, the "price per share for
which Stock is issuable upon exercise of such Options or upon conversion or
exchange of such Convertible Securities" shall be determined by dividing (i) the
total amount, if any, received by
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the Company as consideration for the granting of such Options plus the minimum
aggregate amount of additional consideration payable to the Company upon
exercise of all such Options plus, in the case of Options that relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
such Convertible Securities, by (ii) the total maximum number of shares of Stock
issuable upon the exercise of such Options and upon the conversion or exchange
of all Convertible securities issuable upon the exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, and the price per share for
which Stock is issuable upon conversion or exchange of such Convertible
Securities is less than the Exercise Price in effect immediately prior to the
time of such issuance or sale, then the maximum number of shares of Stock
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this paragraph, the "price per share for
which Stock is issuable upon such conversion or exchange" shall be determined by
dividing (i) the total amount received by the Company as consideration for the
issuance or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Stock issuable upon the conversion or exchange of all such Convertible
Securities.
(iii) CHANGE IN OPTION PRICE AND CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange or any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable for Stock
changes at any time, the Exercise Price in effect at the time of such change
shall be reduced to the Exercise Price that would have been in effect at such
time had such Options or Convertible Securities provided for such changed
purchase price, additional consideration, or changed conversion rate, as the
case may be, at the time initially granted, issued or sold.
(iv) CALCULATION OF CONSIDERATION RECEIVED. If any Stock,
Options, or Convertible Securities are issued or sold or deemed to have been
issued or sold for consideration that includes unrestricted cash, then the
amount of cash consideration actually received by the Company shall be deemed to
be the full monetary value of the unrestricted cash portion thereof. If any
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for a consideration part or all of which is other than
unrestricted cash, then the amount of the consideration other than unrestricted
cash received by the Company shall be deemed to be in the Fair Value of such
consideration.
(v) INTEGRATED TRANSACTIONS. If any Option is issued in
connection with the issuance or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued without consideration.
(vi) TREASURY SHARES. The number of shares of Stock Deemed
Outstanding at any given time shall not include shares owned or held by or for
the account of
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the Company, and the disposition of any shares so owned or held shall be
considered an issuance or sale of Stock.
(c) SUBDIVISION AND COMBINATION OF STOCK; STOCK DIVIDENDS. If the
Company shall at any time after the date hereof (a) issue any shares of Stock or
Convertible Securities, or any rights to purchase Stock or Convertible
Securities as a dividend upon Stock, (b) issue any shares of Stock in
subdivision of outstanding shares of Stock by reclassification, stock split or
otherwise, or (c) combine outstanding shares of Stock by reclassification, stock
split or otherwise, then the Exercise Price that would apply if purchase rights
hereunder were being exercised immediately prior to such action by the Company
shall be reduced only by multiplying it by a fraction, the numerator of which
shall be the number of shares of Stock Deemed Outstanding immediately prior to
such dividend, subdivision or combination and the denominator of which shall be
the number of shares of Stock Deemed Outstanding immediately after such
dividend, subdivision or combination.
(d) CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Company declares a
dividend or distribution upon the Stock payable otherwise than out of earnings
or earned surplus AND otherwise than in Stock, Options or Convertible
Securities, the Exercise Price shall be reduced by an amount equal, in the case
of a dividend or distribution in cash, to the amount thereof payable per share
of the Stock or, in the case of any other dividend or distribution, to the Fair
Value of such dividend or distribution per share of Stock. For purposes of the
foregoing, a dividend or distribution other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus are charged an amount equal to the Fair Value of such dividend
or distribution. Such reductions shall take effect as of the date on which a
record is taken for the purpose of such dividend or distribution, of, if a
record is not taken, the date as of which the holders of Stock or record
entitled to such dividend or distribution are to be determined.
(e) MANNER OF CALCULATING ADJUSTMENTS; NO DE MINIMIS ADJUSTMENTS. The
calculation of each adjustment of the Exercise Price shall be made accurate to
the nearest ten- thousandth. No adjustment of the Exercise Price shall be made
if the amount of such adjustment would be less than one cent per share. In such
case any adjustment that otherwise would be required to be made shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment that, together with any adjustment or adjustments so carried forward,
shall amount to not less than one cent per share.
7.2 ADJUSTMENT OF NUMBER OF STOCK ISSUABLE UPON EXERCISE. Upon each
reduction of the Exercise Price pursuant to Section 7.1 hereof, the Holder shall
thereafter (until another such reduction) be entitled to purchase, at the
Exercise Price in effect on the date purchase rights under this Warrant are
exercised, the number of shares of Stock, calculated to the nearest whole number
of Stock, determined by (a) multiplying the number of shares of Stock
purchasable hereunder immediately prior to the reduction of the Exercise Price
by the Exercise Price in effect immediately prior to such reduction, and (b)
dividing the product so obtained by the Exercise Price in effect on the date of
such exercise.
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ARTICLE VIII
REGISTRATION RIGHTS
8.1 PIGGYBACK REGISTRATION RIGHTS.
(a) RIGHT TO PIGGYBACK. Subject to the limitations set forth in
Section 8.1(e) below, whenever the Company, in its sole discretion, proposes to
file a registration statement (a "Proposed Registration") under the Securities
Act with respect to any equity security (as defined in the Securities Act)
(other than a registration statement on Form S-4, Form S-8 or any successor form
for the registration of securities to be offered in a transaction subject to
Rule 145 under the Securities Act or to employees of, and/or consultants and
advisors to, the Company and/or its subsidiaries pursuant to any "employee
benefit plan," as such term is defined in Rule 405 promulgated under the
Securities Act) and the registration form to be used may be used for the
registration (a "Piggyback Registration") of Piggyback Registrable Securities,
the Company will give written notice (the "Piggyback Notice") to the Holder as
soon as practicable (but in no event less than thirty days) before the initial
filing with the Securities and Exchange Commission (the "Commission") of such
registration statement, which notice will (i) specify the kind and number of
securities proposed to be registered and the proposed offering price or prices
and distribution arrangements; (ii) include such other information that at the
time and under the circumstances would be appropriate to include in such notice;
and (iii) subject to the provisions of this Section 1, offer the Holder the
opportunity to include in such filing all Piggyback Registrable Securities which
the Holder may request in accordance with subsection 8.1(b) below.
(b) REQUESTS TO PIGGYBACK. The Holder shall advise the Company in
writing (a "Piggyback Registration Request") within twenty days after the date
of receipt of the Piggyback Notice of the number or amount of each class or
series of Piggyback Registrable Securities which the Holder desires to have
registered.
(c) SELECTION OF UNDERWRITERS. If the Piggyback Registration is an
underwritten offering, the Board of Directors of the Company will select a
managing underwriter or underwriters to administer the offering.
(d) PIGGYBACK EXPENSES. Subject to the limitations set forth in
Section 8.1(e) hereof, all Registration Expenses of the Piggyback Registration
will be paid solely by the Company.
(e) LIMITATIONS ON PIGGYBACK RIGHTS. The Holder will be entitled to
request four (4) Piggyback Registrations. A registration will not count as the
permitted Piggyback Registrations until it has become effective, and no
registration will count as the permitted Piggyback Registration unless the
Holder is able to register and sell at least 55% of the Piggyback Registration
Securities requested to be included in such registration. The exercise of a
Piggyback Registration shall not affect the Holder's Demand Registration rights
under Section 8.2 hereof. The Holder shall not be permitted to exercise its
Piggyback Registration rights with regard to any underwritten Piggyback
Registration where a first or second tier underwriter, or
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underwriters, provides the Holder with a reasonable determination, in writing
that the amount or kind of the Holder's Shares to be included in such offering
would materially and adversely affect the success of all securities proposed to
be distributed for the account of the Company in such offering.
8.2 DEMAND REGISTRATION RIGHTS.
(a) REQUESTS FOR REGISTRATION. Subject to the limitations set forth
in Section 8.2(d) hereof, the Holder may request registration under the
Securities Act of all or part of its Demand Registrable Securities on Form S-1
or any other registration form available for use by the Company (a "Demand
Registration"). The request for a Demand Registration shall specify the number
of Demand Registrable Securities requested to be registered and the anticipated
per share price range for such offering. However, the Company may postpone, for
a reasonable period of time not to exceed 90 days (but in any event not to
extend beyond the date of public disclosure of the information, or the date of
abandonment or termination of the transactions or negotiations, hereinafter
referred to), the filing of a registration statement otherwise required to be
prepared and filed by it pursuant to this subsection 8.2(a) if: (i) at the time
the Company receives a registration request, the Board determines, in good faith
and in its reasonable business judgment, that (A) such Demand Registration would
require the public disclosure of material non-public information concerning any
pending or ongoing material transaction or negotiations involving the Company
which, in the opinion of the Company's outside legal counsel, is not yet
required to be publicly disclosed, and (B) such disclosure would materially
interfere with such transaction or negotiations or have a material adverse
effect on the Company, and (ii) the Company diligently and in good faith
continues to pursue such transaction or negotiations throughout the period of
such postponement.
(b) SELECTION OF UNDERWRITERS. If the Demand Registration is for or
includes an underwritten offering, the Holder shall select the managing
underwriter or underwriters to administer such offering, who shall be reasonably
satisfactory to the Company.
(c) DEMAND EXPENSES. Subject to the limitations set forth in Section
8.2(d) hereof, the Company shall pay for all Registration Expenses relating to
the Demand Registration.
(d) LIMITATIONS ON DEMAND RIGHTS. The Holder may only request one (1)
Demand Registration. A registration will not count as the permitted Demand
Registration: (a) until it has become effective; and (b) unless the Holder is
able to register and sell at least 55% of the Demand Registrable Securities
requested to be included in such registration. After the Demand Registrable
Securities have been registered, the Holder shall have no obligation to sell any
or all of such securities. For a period of three (3) years from the date hereof,
the Holder may not request a Demand Registration if, at the time of such
request, none of the Company's equity securities are publicly traded. However,
after the period ending three (3) years from the date hereof, the Holder may
request a Demand Registration at any time, even if none of the Company's equity
securities are then publicly traded.
8.3 PROCEDURE. With respect to any Piggyback Registration or Demand
Registration, the Company shall use its best efforts to effect the registration
of all the Piggyback Registrable
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Securities or Demand Registrable Securities, as the case may be (collectively,
the Request Securities"), which the Holder has requested to be included therein,
as quickly as practicable. In connection with any such request, the Company
shall do the following as expeditiously as possible:
(i) prepare and file with the Commission a registration statement
on any form for which the Company then qualifies and which is available for the
registration of the Request Securities;
(ii) include in the registration on such form all the Request
Securities and use its best efforts to cause such registration statement to
become effective; PROVIDED, HOWEVER, that at least ten days before filing such
registration statement or any prospectus or any amendment or supplement thereto,
including documents to be incorporated by reference upon or after the initial
filing of such registration statement, the Company will furnish to the Holder
copies of all such documents proposed to be filed (including documents to be
incorporated by reference therein), which documents will be subject to the
reasonable review and comments of the Holder;
(iii) unless the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect, prepare and file with the
Commission such amendments and post-effective amendments and supplements to the
registration statement or any prospectus as may be necessary to keep the
registration statement effective for a period of not more than one hundred and
eighty (180) days and comply with the provisions of the Securities Act
applicable to the Company with respect to the disposition of all the Request
Securities, covered by such registration statement or any supplement to any such
prospectus;
(iv) if the Company qualifies to use a Form S-3 registration
statement or any similar form then in effect and if the Company receives a
request for a Demand Registration, prepare and file with the Commission such
registration statement to permit the offering of the Demand Registrable
Securities to be made on a continuous basis pursuant to Rule 415 (or any similar
rule that may be adopted by the Commission) under the Securities Act (a "Shelf
Registration") and keep the Shelf Registration current and continuously
effective until the Holder can sell all of the Demand Registrable Securities;
(v) furnish to the Holder such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement and such other documents as the Holder
may reasonably request;
(vi) use its best efforts to register or qualify such Request
Securities under such other securities or blue sky laws of such jurisdiction as
the Holder reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Holder to consummate the
disposition in such jurisdiction (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
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(vii) notify the Holder at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
the Holder, the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to subsequent purchasers of such
Request Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements therein
not misleading;
(viii) cause all such Request Securities, to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on one of the following (in order of
priority and assuming that the Company qualifies for such listing): (A) the New
York Stock Exchange, (B) the American Stock Exchange; (C) the NASDAQ National
Market System; or (D) the NASDAQ SmallCap Market System;
(ix) provide a transfer agent and registrar for all such Request
Securities, not later than the effective date of such registration statement;
(x) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Holder or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Request Securities, (including, without limitation,
effecting a stock split or a combination of shares);
(xi) make available for inspection by the Holder, any underwriter
participating in any distribution pursuant to such registration statement and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") to the extent reasonably
necessary to enable such person to exercise their due diligence responsibilities
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement. Records and other information which the Company determines, in good
faith, to be confidential and of which determination the Holder is notified
shall not be disclosed by the Holder unless (i) the disclosure of such Records
or other information, in the opinion of counsel reasonably acceptable to the
Company, is necessary to avoid or correct a misstatement or omission in the
registration statement, any preliminary prospectus, any prospectus or prospectus
supplement, or (ii) the release of such Records or other information is ordered
pursuant to subpoena, court order or request by a governmental authority or
otherwise is required by applicable law or (iii) the information in such Records
or such other information is generally available to the public. the Holder
shall, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction or by governmental authority, give notice to the Company
and allow the Company, at the expense of the Company, to undertake appropriate
action to prevent disclosure of the Records deemed confidential;
(xii) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any
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related prospectus or suspending the qualification of any common stock included
in such registration statement for sale in any jurisdiction, use its reasonable
best efforts promptly to obtain the withdrawal of such order;
(xiii) use its best efforts to obtain a "cold comfort" letter
from the independent public accountants of the Company which is addressed to the
Holder and any underwriters and contains such matters of the type customarily
covered by "cold comfort" letters; and
(xiv) use its best efforts to obtain an opinion from counsel for
the Company which is addressed to the Holder and the underwriter and contains
such matters of the type customarily covered by counsel for the issuer of
securities.
(a) AFFIDAVITS OF THE HOLDER. With respect to any Piggyback
Registration or Demand Registration, the Holder shall furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with the registration of the Request Securities.
(b) PUBLIC SALE BY THE COMPANY AND OTHERS. Neither the Company nor
any of its Affiliates (other than the Holder, if deemed to be an Affiliate) will
effect any public sale or distribution of any securities of any class or series
being registered in a Piggyback Registration or Demand Registration for offering
to the public, any similar security issued by the issuer of such class or series
or any security convertible into or exchangeable or exercisable for any such
security during, in the case of a Piggyback Registration, the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the effective date
of the Piggyback Registration (except as part of such registration or pursuant
to registrations on Form S-4 or S-8 or any successor form to either such form)
and, in the case of any Demand Registration, the period commencing on the date
of filing the Demand Registration and ending on the 120th day following the
effective date of the Demand Registration.
(c) REGISTRATION EXPENSES. The Company shall pay for all costs and
expenses ("Registration Expenses") of each registration hereunder, including,
but not limited to, the following: (i) registration and filing fees, (ii) fees
and expenses relating to the Company's compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications), (iii) expenses incident to the preparation, printing
and filing of the registration statement, each preliminary prospectus and
definitive prospectus and each amendment or supplement to any of the foregoing
and copies thereof, (iv) internal expenses (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties), (v) fees and expenses incurred in connection with the
listing of the Request Securities, (vi) fees and disbursements of counsel for
the Company and fees and expenses of independent certified public accountants
retained by the Company, (vii) fees and expenses of any special experts retained
by the Company in connection with such registration, (viii) fees and expenses
associated with any filings with or submission to the NASD (including, if
applicable, the fees and expenses of any "qualified independent underwriters,"
as such term is defined in Schedule E of the By-laws of the NASD, and its
counsel), (ix) fees of each investment banking firm required to be retained or
consulted
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pursuant to the terms hereof; and (x) fees and disbursements of one law firm for
the underwriters, in any underwritten offering. The Company shall not have any
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Request Securities, as the case may be, by the Holder, or, except
as otherwise provided in the immediately preceding sentence, any out-of-pocket
expenses of the Holder (or any agents who manage their accounts) or fees and
disbursements of any counsel for the Holder.
8.4 INDEMNIFICATION REGARDING REGISTRATION RIGHTS.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify the
Holder and, if applicable, its officers and directors and each Person who
controls the Holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, preliminary prospectus or definitive prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by the Holder specifically for
use in the preparation thereof or by the Holder's failure, if required, to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Holder with a sufficient
number of copies of the same.
(b) INDEMNIFICATION BY THE HOLDER. In connection with any
registration statement in which the Holder is participating, the Holder shall
indemnify the Company, its directors and officers and each Person who controls
the Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact contained in the registration statement,
preliminary prospectus or definitive prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in information furnished by the Holder to the Company specifically for
use in the preparation of such registration statement or prospectus.
(c) PROCEDURE. Any Person entitled to indemnification hereunder will:
(a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification, provided that the failure of any
indemnified party to give notice shall not relieve the indemnifying party of its
obligations hereunder except to the extent the indemnifying party is actually
prejudiced by such failure; and (b) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any
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indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(d) SURVIVAL. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of securities.
(e) CONTRIBUTION. If the indemnification provided for in this Section
8.4 from the indemnifying party is unavailable to the indemnified party, then
the indemnifying party, instead of indemnifying the indemnified party, shall
contribute to and pay the amount paid or payable by such indemnified party as a
result of the loss, claim, damage, liability or expenses (collectively, the
"Claim") giving rise to indemnification hereunder in such proportion as is
appropriate to reflect the relative fault of the indemnifying and indemnified
party in connection with the actions which gave rise to the Claim. The relative
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the action in question has been made
by, or relates to, information supplied by such indemnifying party or
indemnified party, and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such action. The Company and
the Holder agree that it would not be just and equitable if contribution and
payment pursuant to this Section 8.4 were determined by pro rata allocation or
by any other allocation method which does not take into account the equitable
considerations referred to in the preceding sentence. The amount paid or payable
as a result of a Claim shall include any legal or other fees and expenses
reasonably incurred by such party in connection with such Claim. However, no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contributions and payment from
any Person who was not guilty of such fraudulent misrepresentation.
8.5 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate
in any underwritten registration hereunder unless such Person: (a) agrees to
sell its securities on the basis provided in any underwriting arrangements
reasonably approved by the Persons entitled hereunder to approve such
arrangements; and (b) accurately completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customarily required under the terms of such underwriting arrangements.
8.6 RULE 144. The Company shall file, on a timely basis, any reports
required to be filed by it under the Securities Act and the Exchange Act so as
to enable a the Holder to sell the Piggyback Registrable Securities and Demand
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by: (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time; or (b) any similar rule adopted
by the Commission.
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ARTICLE X
TAG ALONG AND BRING ALONG RIGHTS
9.1 TAG ALONG RIGHT. With respect to any proposed transfer of shares of
Stock by Peter Berg ("Berg") or Yannick Tessier ("Tessier") to a third party
(the "Third Party"), Berg and Tessier shall not be permitted to effect such a
transfer without first offering Holder the right to sell its Warrant Shares, pro
rata with Berg and/or Tessier, to the Third Party, at the same price per share
and upon the same terms and conditions of the proposed transfer by Berg or
Tessier. Section 9.1 shall not apply to: (a) the first 800,000 shares of Stock
which are sold by Berg and/or Tessier after the date hereof; or (b) shares of
Stock which are sold by Berg and/or Tessier after the date hereof in accordance
with Rule 144 promulgated under the Securities Act, unless such shares are sold
in a block (as such term is defined in Rule 10b-18 promulgated under the
Exchange Act. In this regard, each of Tessier and Berg shall promptly notify the
Holder of any such disposition of shares which is not subject to the "tag along"
rights granted hereunder pursuant to subsection (a) of the preceding sentence.
Furthermore, the Holder shall not be able to exercise its rights under this
Section 9.1 with regard to any of its shares of Common Stock, if such shares are
not registered with the SEC and the Holder previously failed to exercise its
right to register such shares in a Piggyback Registration.
9.2 BRING ALONG RIGHT. If Berg or Tessier, or both (collectively, the
"Principals") receive a bona fide offer from an unaffiliated third party (the
"Third Party Offer") to purchase (for cash or securities) all of the then
outstanding shares of Stock and the Principals wish to accept such offer, then
the Principals shall, within ten (10) days of accepting the Third Party Offer,
notify the Holder, in writing (the "Bring Along Notice"), of such offer. Upon
receipt of such notice, the Holder shall then sell Warrant Shares, pro rata with
Berg and/or Tessier, at the same price per share and upon the same terms and
conditions of the Third Party Offer. However, the bring along rights granted
hereunder shall not be available to Berg or Tessier unless, the exercise of such
right, would cause the Holder to receive, at a minimum, an amount from the
unaffiliated party equal to the product of: (x) the number of Warrant Shares
then held by the Holder (including any Warrant Shares resulting from any
exercise of this Warrant by the Holder upon receiving the Bring Along Right
Notice), multiplied by (y) the Exercise Price (as adjusted pursuant to Article
VII hereof) multiplied by four (4). The "bring along" rights granted in this
Section 9.2 shall expire on the third anniversary hereof.
ARTICLE X
MISCELLANEOUS
10.1 NONWAIVER. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Holder or the Company shall operate as a
waiver of such right or otherwise prejudice the rights, powers or remedies of
the Holder or the Company.
10.2 NOTICE GENERALLY. Any notice, demand or delivery to be made pursuant
to or in connection with this Warrant shall be sufficiently given or made if
sent by first class mail, postage prepaid, addressed to (a) the Holder at its
last known address appearing on the books or register of the Company maintained
for such purpose or (b) the Company at its principal office
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referred to in Section 2.3. The Holder and the Company may each designate a
different address by written notice to the other pursuant to this Section 10.2.
10.3 PAYMENT OF CERTAIN EXPENSES. Except as otherwise provided in this
Warrant, the Company and the Holder shall each pay their respective expenses in
connection with, and all taxes and other governmental charges that may be
imposed in respect of, the issue, sale and delivery of the shares of Stock
issuable upon the exercise of this Warrant or this Warrant.
10.4 SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Company and the Holder. The provisions of this Warrant are intended to be
for the benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
10.5 AMENDMENT. This Warrant may not be modified or amended except by
written agreement duly executed by the Company and the Holder.
10.6 HEADINGS. The headings of the Articles and Sections of this Warrant
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
10.7 GOVERNING LAW. This Warrant shall be governed by the laws of the
State of Florida without reference to the conflict of laws principles thereof.
10.8 LEGEND. In case any shares of Stock are issued upon the exercise in
whole or in part of this Warrant or are thereafter transferred, in either case
under such circumstances that no registration under the Securities Act or
applicable state securities laws is required, each certificate representing such
shares shall bear on the face thereof the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER ANY STATE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF (i) RECEIPT BY I-VIEW
SOFTWARE, INC. OF AN OPINION OF ITS COUNSEL, OR OTHER COUNSEL ACCEPTABLE
TO IT, THAT NO SUCH REGISTRATIONS ARE REQUIRED, OR (ii) REGISTRATION UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
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Dated: November 21, 1996
I-VIEW SOFTWARE, INC.
a Florida corporation
By: /s/ YANNICK TESSIER
------------------------------
Name: Yannick Tessier
Title: President
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NOTICE OF EXERCISE FORM
(To be executed only upon partial
or full exercise of the within Warrant)
The undersigned registered Holder of the within Warrant irrevocably
exercises the within Warrant for and purchases ________ shares of Stock of
I-View Software, Inc. and agrees to make payment therefor in the amount of
$________, all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate for the shares of Stock of I-View
Software, Inc. hereby purchased be issued to the undersigned, whose address is
________________________________________________, and if such shares of Stock
purchased hereby shall not include all the shares of Stock issuable as provided
in the within Warrant, a new Warrant of like tenor for the number of shares of
Stock of I-View Software, Inc. not being purchased hereunder be issued in the
name of and delivered to the undersigned whose address is
_________________________________.
Dated: ____________, 19____
Signature Guaranteed: By: _____________________________
(Signature of Registered Holder)
___________________________________
By:________________________________
Title:
NOTICE: The signature to this Notice of Exercise must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change whatever.
The signature to this Notice of Exercise must be guaranteed by a
commercial bank or trust company in the United States or a member
firm of the New York Stock Exchange.
EXHIBIT 10.10
GALACTICOMM TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN
<PAGE>
GALACTICOMM TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN
1. PURPOSES. The GALACTICOMM TECHNOLOGIES, INC. 1997 STOCK OPTION PLAN
(the "Plan") is intended to provide the employees (including employees who are
also directors), independent contractors and consultants of GALACTICOMM
TECHNOLOGIES, INC. and its subsidiaries (collectively, the "Company") with an
added incentive to provide their services to the Company and to encourage them
to exert their maximum efforts toward the Company's success. Therefore, the Plan
will benefit the Company and its stockholders by attracting, retaining and
motivating qualified and competent persons who are key to the Company. The Plan
allows the Company to grant Incentive Stock Options ("ISOs") (as defined in
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code")),
and Non-Qualified Stock Options ("NQSOs"), not intended to qualify under Code
Section 422(b) (ISOs and NQSOs granted under the Plan are hereinafter referred
to collectively as the "Options"), to the Company's employees, directors,
independent contractors and consultants.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment under Section 8
hereof, 1,502,856 shares of the Company's Common Stock, par value $.0001 per
share (the "Common Stock"), are subject to Options. While the Plan is in effect,
the Company shall at all times reserve 1,502,856 shares of Common Stock (subject
to adjustment under Section 8 hereof) for the satisfaction of Options. If an
Option: (i) expires or terminates for any reason without having been exercised
in full, or (ii) ceases for any reason to be exercisable in whole or in part,
the unpurchased shares subject to the Option shall again be available for the
granting of Options.
In a given fiscal year, the maximum number of Options that can be
granted to a single person shall be limited to 150,286 Options, as adjusted for
future stock dividends or stock splits. Furthermore, such limitation shall not
be deemed exceeded if after the grant date of Options, the Company effectuates a
stock split or stock dividend which results in an adjustment to the number of
Options previously granted. The foregoing limitation is intended to comply with
Code Section 162(m). To the extent any provision of the Plan or action by the
Company's Board of Directors (the "Board of Directors") or Committee (as
hereinafter defined), fails to comply with Section 162(m), it shall be deemed
null and void to the extent required by statute and to the extent deemed
advisable by the Board of Directors or the Committee.
3. ELIGIBILITY.
(a) The Company may grant ISOs to one or more Company employees. A
Company officer is an employee for the above purpose.
(b) The Company may grant NQSOs to one or more Company employees,
officers, members of the Board of Directors, independent contractors,
consultants and other individuals who are not Company employees, but who are
involved in the continuing development and success of the Company.
<PAGE>
(c) Notwithstanding any provision contained in the Plan to the
contrary, no person who beneficially owns more than 10% of the Company's Common
Stock (as determined in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) is eligible to receive Options.
4. PLAN ADMINISTRATION.
(a) COMPENSATION COMMITTEE. The Compensation Committee (the
"Committee") of the Board of Directors shall administer the Plan. The Board of
Directors shall appoint the members of the Committee which, in accordance with
Code Section 162(m), shall include at least two outside directors (as described
under Rule 16b-3, promulgated under the Securities Exchange Act of 1934 (the
"1934 Act")). If the Committee does not include at least two outside directors,
any Option granted shall not be automatically null and void, except as otherwise
provided herein. Within the Plan's express limits, the Committee may:
(i) determine: (A) the individuals to whom Options are granted;
(B) the times at which the Options are granted; (C) whether granted options are
to be ISOs or NQSOs; and (D) the number of shares of Common Stock which are
subject to each Option;
(ii) interpret the Plan to: (A) prescribe, amend and rescind
Plan rules and regulations; (B) determine Option agreement terms and provisions,
subject to the limitation that option agreements granting ISOs must comply with
the requirements for the ISOs being qualified as "incentive stock options" under
Code Section 422; and
(iii) make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.
In making the above determinations, the Committee may consider the
nature of the services rendered by such individuals, their present and potential
contributions to the Company's success, and such other factors as the Committee
deem relevant. The Committee's determinations regarding the matters referred to
in this Section shall be conclusive.
(b) SECTION 16. The Committee shall have the exclusive right to grant
Options to persons subject to Section 16 of the 1934 Act and set forth the terms
and conditions of such Options. With respect to persons subject to Section 16 of
the 1934 Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3, as amended (and its successor provisions,
if any), under the 1934 Act. If any Plan provision or action by the Board of
Directors or Committee does not comply with Rule 16b-3, it shall be deemed null
and void to the extent required by law and to the extent deemed advisable by the
Board of Directors or the Committee.
5. TERMS OF OPTIONS. Within the express limits of the Plan's provisions,
the Committee may grant either ISOs or NQSOs. An ISO or an NQSO enables the
optionee to purchase a specified number of shares of Common Stock from the
Company at a specified price
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<PAGE>
(the "Option Price"), at any time during a specified exercise period. The
Committee shall determine the terms of each Option, consistent with the Plan's
provisions, including the following:
(a) TERM OF OPTION GRANTED. An Option must be granted within 10 years
from the earlier of: (i) the date the Plan is adopted; or (ii) the date the Plan
is approved by the stockholders of the Company, whichever is earlier.
(b) ISO OPTION PRICE.
(i) The Option Price of the shares of Common Stock subject to
each ISO shall not be less than the fair market value of such shares of Common
Stock as of the time such ISO is granted. However, if an ISO is granted to an
individual who, immediately before the ISO is to be granted, owns (directly or
through attribution) more than 10% of the total combined voting power of all
classes of capital stock of the Company, the Option Price of the shares of
Common Stock subject to such ISO shall not be less than 110% of the fair market
value per share of the shares of Common Stock at the time such ISO is granted.
(ii) The fair market value of the shares of Common Stock on the
grant date:
(A) if the shares of Common Stock are listed on a national
securities exchange or traded on the over-the-counter market, shall be the
closing price on such exchange, or the mean of the closing bid and asked prices
of the shares of Common Stock on the over-the-counter market, as reported by
Nasdaq, the National Association of Securities Dealers OTC Bulletin Board or the
National Quotation Bureau, Inc., as the case may be, on the day on which the
Option is granted or, if there is no closing price or bid or asked price on that
day, the closing price or mean of the closing bid and asked prices on the most
recent day before the day on which the Option is granted for which such prices
are available; and
(B) shall be determined by the Committee if the shares are
not listed on a national securities exchange or traded on the over-the-counter
market.
(c) NQSO OPTION PRICE. The Committee shall, in its sole discretion,
determine the Option Price of the shares of Common Stock subject to an NQSO.
(d) EXPIRATION OF OPTIONS. Options shall: (i) not have an expiration
date later than ten (10) years from the date of its grant; and (ii) shall be
subject to earlier termination as set forth in Section 6 hereof. If an ISO is
granted to any individual who, immediately before the ISO is granted, owns
(directly or through attribution) more than 10% of the total combined voting
power of all classes of capital stock of the Company, such ISO shall expire and
shall not be exercisable after the expiration of five (5) years from the date of
its grant.
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(e) NUMBER OF SHARES TO BE EXERCISED. Except as otherwise provided
herein or in any option agreement under the Plan, an Option shall become
exercisable, in whole or in part at any time. However, an Option may not: (i) be
exercised as to less than one hundred (100) shares of Common Stock at any one
time, or the remaining shares of Common Stock covered by the Option if less than
one hundred (100); or (ii) become fully exercisable more than ten years from the
date of its grant.
(f) MANNER OF EXERCISE. In order to exercise an Option, the Option
holder shall deliver to the Company at its principal office (to the attention of
the Company's Secretary): (i) a written notice of the number of full shares of
Common Stock with respect to which the Option is being exercised; (ii) payment
in full of the Option Price for such shares of Common Stock: (A) in cash or by
certified or bank check payable to the order of the Company, (B) by the delivery
of unexercised Options or shares of Common Stock having a fair market value
equal to the Option Price, or (C) by a combination of cash and such unexercised
Options or shares held by an optionee that have a fair market value equal to the
Option Price. In the case of an NQSO, the Company shall withhold from the shares
of Common Stock to be issued upon exercise of the Option that number of shares
having a fair market value equal to the tax withholding amount due, or the
holder shall otherwise provide for withholding as set forth in Section 9(c)
hereof. The Option Price may also be paid in full by a broker-dealer to whom the
optionee has submitted an exercise notice consisting of a fully endorsed Option,
or by any other payment method authorized by the Committee.
(g) RIGHTS AS STOCKHOLDER. An Option holder shall not have the rights
of a stockholder regarding the shares of Common Stock represented by such
holder's Option until the shares of Common Stock are issued to the Option holder
upon the exercise of the Option.
(h) TRANSFER OF OPTIONS. All Options shall not be transferable,
except by will or the laws of descent and distribution. Options shall not be
subject to execution, attachment or other process.
(i) OPTION VESTING. Subject to the provisions of Section 6 hereof, or
unless otherwise determined by the Committee, each Option shall become
exercisable as follows:
PERCENTAGE OF
SHARES OF COMMON STOCK
DATE WHICH ARE EXERCISABLE
180 days after grant 25%
of Option
1st anniversary of 50%
grant of Option
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2nd anniversary of 75%
grant of option
3rd anniversary of 100%
grant of option
However, the Committee may: (i) specifically provide for other exercise times at
the time the Option is granted; (ii) accelerate the exercisability of any Option
subject to terms and conditions deemed necessary and appropriate by the
Committee; or (iii) at any time before the expiration or termination of a
granted Option, extend the term of the Option for any additional period
determined by the Committee. However, an Option's aggregate term, including the
Option's original term and any extensions thereof, shall not exceed ten years.
(j) ISOS FAIR MARKET VALUE. The aggregate fair market value,
determined as of the time any ISO is granted and in the manner provided for by
Section 5(b), of the shares of Common Stock regarding which ISOs granted under
the Plan are exercisable for the first time during any calendar year and under
incentive stock options qualifying as such in accordance with Code Section 422
granted under any other incentive stock option plan maintained by the Company or
its parent or subsidiary corporations, shall not exceed $100,000. Any grant of
Options in excess of $100,000 shall be deemed a grant of an NQSO. Furthermore,
if an ISO granted under the Plan does not, for any reason, at the time of grant
or during the term of the ISO, satisfy all of the Code's conditions for being
deemed an ISO, then such ISO shall be deemed a NQSO, but only to the extent, if
applicable, such ISO exceeds the Code's conditions. Any determination that an
ISO is deemed an NQSO shall not be deemed the grant of a new Option under the
Plan.
(k) RELOAD OPTIONS. When an Option holder (including a holder of
Reload Options, as hereinafter defined, previously granted under this Section
5(k)), exercises the Option and pays the Option Price pursuant to Section 5(b)
hereof, in whole or in part, by tendering shares of Common Stock previously held
by the Option holder, then the Company shall grant to the Option holder a Reload
Option ("Reload Option"), for a number of shares of Common Stock equal to the
number of shares of Common Stock tendered by the Option holder in payment of the
Option Price of the Option being exercised. The Reload Option Price per share
shall be equal to the fair market value per share of the Company's Common Stock,
as determined as of the date of receipt by the Company of the notice by the
Option holder to exercise the option, and as determined in accordance with
Section 5(b) above. Subject to Section 6 hereof, the Reload Option's term shall
expire and the Reload Option shall no longer be exercisable, on the later of:
(i) the originally exercised Option's expiration date, or (ii) ten (10) years
from the Reload Option's grant date. Any Reload Option shall vest immediately
when granted. All other terms of the granted Reload Options shall be identical
to the terms and conditions of the original Option, the exercise of which causes
the grant of the Reload Option. The Company shall not grant Reload Options if an
option holder is no longer employed or retained by the Company on the exercise
date of the Options which would otherwise cause the grant of Reload Options
hereunder. Furthermore, if there is not a sufficient number of Common Stock
available for
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issuance upon exercise of Reload Options, the Company shall use its best efforts
to increase the number of authorized shares of Common Stock underlying the Plan.
However, if the Company cannot increase the authorized number of shares of
Common Stock underlying the Plan, the Option holder's ability to exercise the
Reload Options may be delayed indefinitely until the required number of shares
of Common Stock have been authorized.
(l) CHANGE IN CONTROL.
(i) If the Company experiences a Change in Control, as defined
below, all Options which were outstanding immediately before the Change in
Control, shall become exercisable (to the extent not already exercisable) as
follows:
PERCENTAGE OF
SHARES OF COMMON STOCK
DATE WHICH ARE EXERCISABLE
Date of 50%
Change in Control
1st Anniversary of 100%
Change in Control
(ii) For purposes of this Subsection, a "Change in Control"
occurs if:
(A) any "person" (other than Peter Berg or Yannick
Tessier) within the meaning of Section 14(d) of the
1934 Act becomes the "beneficial owner" as defined in
Rule 13d-3 thereunder, directly or indirectly, of more
than 50% of the Company's Common Stock.
(B) any "person" (other than Peter Berg and Yannick
Tessier) acquires by proxy or otherwise the right to
vote more than 50% of the Company's Common Stock for
the election of Directors, other than solicitation of
proxies by the Incumbent Board (as hereinafter
defined), for any merger or consolidation of the
Company or for any other matter or question.
(C) during any two-year period, individuals who constitute
the Board of Directors (the "Incumbent Board") as of
the beginning of the two-year period, cease for any
reason to constitute at least a majority of the Board
of Directors. However, any person becoming a Director
during such two-year period whose election or
nomination for election by
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the Company's stockholders was approved by a vote of
at least three quarters of the Incumbent Board (either
by specific vote or by approval of the proxy statement
of the Company in which such person is named as a
nominee for Director without objection to such
nomination) shall be, for purposes of this clause (C),
considered a member of the Incumbent Board.
(D) if the shareholders of the Company shall approve a
plan for the sale, lease, exchange or other
disposition of all or substantially all the property
and assets of the Company.
(iii) For purposes of this Subsection (l), the initial public
offering of Company securities pursuant to Section 5 of the Securities Act of
1933, shall not be deemed a "Change in Control".
6. DEATH, TERMINATION OF EMPLOYMENT, OR DISABILITY.
(a) TERMINATION OF EMPLOYMENT OR DISABILITY. Except as otherwise
provided in the Plan, when the Company terminates the employment or retention of
an Option holder, the Option holder may exercise its Options at any time within
three (3) months after the date of the Option Holder's termination, subject to
the provisions of Section 6(c) and to the extent the Options were exercisable as
of the date of termination,. For purposes of this Section 6, termination of
employment or retention includes termination due to the Option holder's
retirement, layoff or permanent disability. However, if an Option holder is
convicted of a felony against the Company, the Option holder's outstanding
Options shall immediately terminate, and the previous provisions of this Section
6(a) shall not apply. Furthermore, when granting Options, the Committee may
modify the term during which an Option holder may exercise Options after the
date of termination, subject to applicable laws and regulations, from the term
specified above.
(b) DEATH. If an Option holder dies: (i) while employed by the
Company, or (ii) within three (3) months after the termination of the Option
holder's employment or retention, the Option holder's Options may, subject to
the provisions of Section 6(c), be exercised within six (6) months after the
Option holder's death, by the Option's legatee(s) under the Option holder's will
or by the Option holder's personal representatives or distributees.
(c) EXERCISE OF VESTED OPTIONS. An Option may not be exercised under
this Section 6 except to the extent that the Option holder was entitled to
exercise the Option at the time of death or termination of employment or
retention, and may not be exercised after the Option's original expiration date.
(d) AUTOMATIC VESTING UPON DEATH. If an optionee dies during his or
her employment or retention by the Company, then fifty percent (50%) of any
outstanding Options which have not vested and are not exercisable by the
optionee as of the date of death shall be
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automatically deemed vested and exercisable by the optionee's estate and/or his
legatees in accordance with Section 6(b) hereof.
7. LEAVE OF ABSENCE. For purposes of the Plan, an individual who is on
military leave, sick leave or other bona fide leave of absence (such as
temporary employment by the Government) shall be considered as remaining in the
Company's employment for ninety (90) days or such longer period as the
individual's right to re-employment is guaranteed either by statute or by
contract.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) If the number of outstanding shares of Common Stock are changed
due to: (i) recapitalization, reclassification, stock split, combination or
exchange of shares of Common Stock or the like, or (ii) the issuance of
dividends payable in shares of Common Stock, the Committee shall appropriately
adjust the: (A) aggregate number of shares of Common Stock available under the
Plan, (B) the number of shares of Common Stock issuable upon exercise of
outstanding Options, and (C) the Option Price per share. In the event of: (i) a
consolidation or merger of the Company with or into another company, or (ii) the
transfer of all or substantially all of the Company's assets to another company,
each then outstanding Option shall, upon exercise, thereafter entitle the holder
to such number of shares of Common Stock or other securities or property to
which a holder of shares of Common Stock would have been entitled to upon such
consolidation, merger or conveyance. In such event, the Committee shall make an
appropriate adjustment with respect to any future changes in the capitalization
of the Company or its successor entity. In the event of the proposed dissolution
or liquidation of the Company, all outstanding Options under the Plan will
automatically terminate, unless otherwise provided by the Board of Directors or
any authorized committee thereof.
(b) Any adjustment in the number of shares of Common Stock shall
apply proportionately to only the unexercised portion of granted Options. If an
adjustment would result in fractional shares of Common Stock, the adjustment
shall be revised to the next higher whole number of shares of Common Stock.
9. FURTHER CONDITIONS OF EXERCISE.
(a) RESTRICTED SECURITIES. Unless the shares of Common Stock issuable
upon the exercise of an Option have been registered with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), before the Option's exercise, an optionee must: (i) represent
in writing to the Company that the shares of Common Stock are being acquired for
investment purposes only and not with a view towards the further resale or
distribution of the Common Stock; and (ii) must supply the Company with any
other documentation required by the Company, unless in the opinion of the
Company's counsel such representation, agreement or documentation is not
necessary to comply with the Securities Act.
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(b) DELIVERY OF SHARES BY COMPANY. The Company is not required to
deliver any shares of Common Stock until: (i) the shares have been listed on
each securities exchange on which shares of Common Stock may then be listed, or
(ii) there has been qualification under or compliance with such state or federal
laws, rules or regulations as the Company deems applicable. The Company shall
use reasonable efforts to obtain such listing, qualification and compliance.
(c) WITHHOLDINGS. The Committee may make such provisions and take
such steps as it deems necessary or appropriate for the withholding of any taxes
that the Company is required by any law or regulation of any federal, state,
local, or foreign governmental authority, to withhold in connection with the
exercise of an Option, including: (i) the withholding of delivery of shares of
Common Stock upon exercise of Options until the Option holder reimburses the
Company for the amount of taxes which the Company is required to withhold, (ii)
the canceling of an amount of shares of Common Stock issuable upon exercise of
the Options sufficient to reimburse the Company for the amount it is required to
withhold, or (iii) withholding the amount due from the person's wages or
compensation.
10. TERMINATION AND AMENDMENT.
(a) TERMINATION. The Plan (but not Options previously granted under
the Plan) shall terminate ten (10) years from the earliest of: (i) the date of
the Plan's adoption by the Board of Directors; (ii) the date of the Plan's
approval by the Company's stockholders; or (iii) such other date of termination,
as hereinafter provided. No Option shall be granted after the Plan's
termination.
(b) TERMINATION AND AMENDMENT BY SHAREHOLDERS. The Plan may be
terminated or amended by the affirmative vote of the holders of a majority of
the outstanding shares of the Company's capital stock voting as a single class,
and entitled to vote thereon.
(c) TERMINATION AND AMENDMENT BY DIRECTORS. The Board of Directors
may terminate the Plan or make such amendments of the Plan as it may deem
advisable, at any time prior to ten (10) years from the earlier of: (i) the date
of the Plan's adoption by the Board of Directors; or (ii) the date of the Plan's
approval by the stockholders. However, the Board of Directors shall not, without
approval by the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of the Company, voting as a single class, and entitled
to vote thereon: (i) increase (except as provided by Section 8) the maximum
number of shares of Common Stock as to which Options may be granted under the
Plan, (ii) materially change the standards of eligibility under the Plan, or
(iii) materially increase the benefits which may accrue to participants under
the Plan. Any amendment to the Plan which, in the opinion of the Company's
counsel, will be deemed to result in the adoption of a new Plan, will not be
effective until approved by the affirmative vote of the holders of a majority of
the outstanding shares of the Company's capital stock, voting as a single class,
and entitled to vote thereon.
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(d) EFFECT ON RIGHTS. The termination or amendment of the Plan shall
not adversely affect the rights under any outstanding Option, without the
consent of the individual to whom such Option was previously granted or awarded.
11. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective when
adopted by the Board of Directors. The Plan must be approved by the affirmative
vote of the holders of a majority of the outstanding shares of Company capital
stock entitled to vote thereon within one year before or after Board of
Directors' adoption of the Plan.
12. NOT AN EMPLOYMENT CONTRACT. The Plan and any option agreement executed
under the Plan do not: (a) give the an Option holder any right to remain
employed by the Company, or (b) limit the Company's right to terminate an
employee's employment or to terminate any other relationship with an Option
holder, including an independent contractor or consultant relationship. Except
as otherwise provided at the time of grant, all references hereunder to
"termination of employment" means, with respect to consultants and independent
contractors, the termination of retention of their services for the Company.
13. OTHER COMPENSATION PLANS. The adoption of the Plan shall not: (a)
affect any other Company stock option plan, incentive plan or other compensation
plan; or (b) prevent the Company from establishing any other form of stock
option plan, incentive plan or other compensation plan.
10
EXHIBIT 10.11
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT").
NO INTEREST IN THIS NOTE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT), OR (iii)
AN EXEMPTION FROM REGISTRATION UNDER THE ACT WHERE THE HOLDER HAS FURNISHED TO
THE PAYOR AN OPINION OF ITS COUNSEL REASONABLY SATISFACTORY TO THE PAYOR, THAT
AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
NON-NEGOTIABLE 10% UNSECURED PROMISSORY NOTE
$________________ October 28, 1997
Ft. Lauderdale, Florida
FOR VALUE RECEIVED, the undersigned Galacticomm Technologies, Inc., a
Florida corporation ("Payor"), having its executive office and principal place
of business at 4101 S.W. 47 Avenue, Suite 101, Ft. Lauderdale, Florida 33314
promises to pay to ("Payee"), at Payee's address set forth in Payor's corporate
records (or at such other place as Payee may from time to time hereafter direct
by notice in writing to Payor), the principal sum of Dollars ($ ______________
), in such coin or currency of the United States of America as at the time shall
be legal tender for the payment of public and private debts, on the first to
occur of the following dates: (i) the earlier date to occur (the "Maturity
Date") of: (a) January 4, 1999 and (b) the closing date of Payor's initial
public offering of securities; (ii) the date on which the outstanding principal
amount of this Note is prepaid in full as hereinafter permitted (the "Prepayment
Date"); and (iii) any date on which any principal amount of, or accrued unpaid
interest on, any Financing Note (as hereinafter defined) is declared to be, or
becomes, due and payable pursuant to the terms of such Financing Note prior to
the Maturity Date (the "Acceleration Date").
This Note is part of a unit or units (the "Units) and one of a series of
notes (the "Financing Notes") being issued pursuant to Payor's Confidential
Private Placement Memorandum dated September 15, 1997, as supplemented on
October 21 and 24, 1997 (the "Memorandum"), relating to Payor's offering of a
minimum of fifteen (15) Units and up to a maximum of forty-two (42) Units (the
"Bridge Financing"), each Unit consisting of (i) a Financing Note in the
principal amount of $50,000 and (ii) warrants ("Warrants") to purchase an
aggregate of 19,000 shares of Payor's common stock, par value $.0001 per share
("Common Stock"). This Note shall rank pari passu with all other Financing
Notes.
Reference to the Memorandum shall in no way impair the absolute and
unconditional obligation of Payor to pay both principal and interest hereon as
provided herein.
1. INTEREST AND PAYMENT.
1.1 The principal amount of this Note outstanding from time to time
shall bear simple interest at the annual rate (the "Note Rate") of ten percent
(10%) from the date hereof through the earliest to occur of (i) the Maturity
Date, (ii) the Prepayment Date and (iii) the Acceleration Date.
<PAGE>
1.2 Interest accrued on this Note shall be payable semi-annually, in
arrears, on the last day of June and December of each year, commencing on June
30, 1998, and the remaining accrued interest shall be payable in full, together
with the then unpaid principal amount of this Note, on the earliest to occur of
(i) the Maturity Date, (ii) the Prepayment Date and (iii) the Acceleration Date.
1.3 All payments made by the Payor on this Note shall be applied
first to the payment of accrued unpaid interest on this Note and then to the
reduction of the unpaid principal balance of this Note. Payments of principal
and interest shall be deemed made on the date such payment is deposited or, if
mailed, on the date deposited in the mail with proper postage and addressed to
the holder of this Note at the address set forth above or such other address as
provided to the Payor in writing by such holder.
1.4 If payment of the outstanding principal amount of any Financing
Note, together with accrued unpaid interest thereon at the Note Rate, is not
made on the earliest to occur of (i) the Maturity Date, (ii) the Prepayment Date
and (iii) the Acceleration Date, then interest shall accrue on the outstanding
principal amount due under this Note and on any unpaid accrued interest due on
this Note from and after such date of default to the date of the payment in full
of such amounts (including from and after the date of the entry of judgment in
favor of Payee in an action to collect this Note) at an annual rate equal to the
lesser of 18% or the maximum rate of interest permitted by Florida law (the
"Maximum Rate").
1.5 For a period of one (1) year from the date that interest accrues
on the outstanding principal amount due under this Note at the Maximum Rate, the
holder of this Note may, upon written notice to Payor at the address set forth
above, convert this Note into that number of shares of voting capital stock of
the Company ("Conversion Stock") which, when added to the number of shares of
outstanding voting capital stock of the Company (inclusive of shares issuable
upon exercise of outstanding options, warrants and other securities or
instruments of the Company convertible into voting capital stock of the Company
(collectively, "Convertible Securities Stock")) equals that percentage of
outstanding voting capital stock of the Company (inclusive of Convertible
Securities Stock) obtained by dividing (i) the principal amount of this Note by
(ii) the sum obtained by adding the aggregate principal amount of all Financing
Notes to $7,500,000. Upon conversion of this Note in accordance with this
Section 1.5, Payor shall issue a stock certificate for the shares of Conversion
Stock to the holder of this Note within five (5) business days after Payor's
receipt of written notice of the holder's desire to convert this Note without
charge to the holder including, without limitation, any tax which may be payable
in respect of the issuance thereof, and such certificates shall be issued in the
name of the holder. The Conversion Stock issued to the holder of this Note shall
be entitled to all of the rights and subject to all of the obligations set forth
in the Registration Rights Agreement of even date herewith between the Payor and
the Holder. The stock certificates issued upon conversion of this Note under
this Section 1.5 shall bear a legend substantially similar to the following:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 ("Act"), and may not be offered or sold
except (i) pursuant to an effective registration statement under the Act,
(ii) to the extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of securities), or
(iii) upon the delivery by the holder of this
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<PAGE>
certificate to the issuer of an opinion of counsel, reasonably
satisfactory to counsel to the issuer, stating that an exemption from
registration under such Act is available."
1.6 In no event shall Payee be entitled to receive interest, however
characterized and including other consideration received in connection with this
Note, at an effective rate in excess of the Maximum Rate. In the event that a
court of competent jurisdiction determines that such amounts paid or agreed to
be paid by Payor in connection with this Note causes the effective interest rate
on this Note to exceed the Maximum Rate, such interest or other consideration
shall automatically be reduced to a rate which results in an effective interest
rate under this Note equal to the Maximum Rate over the term hereof, and, in
such event, any amounts received by Payee deemed to constitute excessive
interest shall be applied first to the payment of accrued unpaid interest on
this Note and then to the reduction of the unpaid principal balance of this
Note.
1.7 In the event that the date for the payment of any amount payable
under this Note falls due on a Saturday, Sunday or public holiday under the laws
of the State of Florida, the time for payment of such amount shall be extended
to the next succeeding business day and interest at the Note Rate shall continue
to accrue on any principal amount so effected until the payment thereof on such
extended due date.
2. REPLACEMENT OF NOTE.
2.1 In the event that this Note is mutilated, destroyed, lost or
stolen, Payor shall, at its sole expense, execute, register and deliver a new
Note, in exchange and substitution for this Note, if mutilated, or in lieu of
and in substitution for this Note, if destroyed, lost or stolen. In the case of
destruction, loss or theft, Payee shall furnish to Payor indemnity reasonably
satisfactory to Payor. In any such case, and in the case of mutilation, Payee
shall also furnish to Payor evidence to its reasonable satisfaction of the
mutilation, destruction, loss or theft of this Note and of the ownership
thereof. Any replacement Note so issued shall be in the same outstanding
principal amount as this Note and dated the date to which interest shall have
been paid on this Note or, if no interest shall have yet been paid, dated the
date of this Note.
2.2 Every Note issued pursuant to the provisions of Section 2.1
hereof in substitution for this Note shall constitute an additional contractual
obligation of the Payor, whether or not this Note shall be found at any time or
be enforceable by anyone.
3. PREPAYMENT. At the option of Payor, the principal amount of this Note
may be prepaid in whole at any time, or in part from time to time, without
penalty or premium, together with interest thereon accrued through the
Prepayment Date. Each partial prepayment of this Note shall first be applied to
interest accrued through the Prepayment Date and then to principal.
4. COVENANTS OF PAYOR. Payor covenants and agrees that, so long as this
Note remains outstanding and unpaid, in whole or in part:
4.1 Payor will not, and will not permit any of its subsidiaries to,
sell, transfer or in any other manner alienate or dispose of a material part of
its assets; provided, however, that Payor or any of its subsidiaries may effect
such a transaction if (i) the transaction is a bona fide
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<PAGE>
transaction in which fair market value is received, (ii) no Event of Default
(defined below) or any condition or event which, with the giving of notice or
the lapse of time or both, would become an Event of Default has occurred or
would occur after giving effect to such transaction, and (iii) the payment of
this Note is duly provided for from such sale proceeds;
4.2 Payor will not, and will not permit any of its subsidiaries to,
make any loan to any person who is a holder of five percent (5%) or more of
Payor's equity securities, other than for reasonable advances for expenses in
the ordinary course of business;
4.3 Payor will, and will cause each of its subsidiaries to, promptly
pay and discharge all lawful taxes, assessments and governmental charges or
levies imposed upon it, its income and profits, or any of its property, before
the same shall become in default, as well as all lawful claims for labor,
materials and supplies in excess of $10,000 which, if unpaid, might become a
lien or charge upon such properties or any part thereof. However, Payor or such
subsidiary shall not be required to pay and discharge any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be contested in good
faith by appropriate proceedings and Payor or such subsidiary, as the case may
be, shall set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim so contested;
4.4 Payor will, and will cause each of its subsidiaries to, do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and comply with all laws
applicable to Payor as its counsel may advise;
4.5 Payor will, and will cause each of its subsidiaries to, at all
times maintain, preserve, protect and keep its property used or useful in the
conduct of its business in good repair, working order and condition and will,
from time to time, make all necessary and proper repairs, renewals,
replacements, betterments and improvements thereto so that Payor's business may
be conducted at all times;
4.6 Payor will, and will cause each of its subsidiaries to, keep
adequately insured, by financially sound and reputable insurers, all property of
a character usually insured by similar corporations and carry such other
insurance as is usually carried by similar corporations;
4.7 Payor will, promptly following the occurrence of an Event of
Default or of any condition or event which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default, furnish a statement
of Payor's President or Chief Financial Officer to Payee setting forth the
details of such Event of Default or condition or event and the action which
Payor intends to take with respect thereto;
4.8 Payor will, and will cause each of its subsidiaries to, at all
times maintain books of account in which all of its financial transactions are
duly recorded in conformance with generally accepted accounting principles;
4.9 Payor will not, and will not permit any of its subsidiaries to,
purchase or otherwise redeem any Common Stock, unless Payor establishes an
adequate reserve to pay all of its obligations under the Financing Notes;
4
<PAGE>
4.10 Except with the prior written consent of holders of two-thirds
of the aggregate outstanding principal amount of the Financing Notes, Payor will
not, and will not permit any of its subsidiaries to, create, incur, assume,
permit, guarantee or suffer to exist any indebtedness or any other obligations
for money borrowed except for (i) indebtedness existing on the date hereof, (ii)
indebtedness under the Financing Notes, (iii) indebtedness or other obligations
for money borrowed which are subordinated in all respects, including, but not
limited to, priority upon liquidation, to the Financing Notes and (iv)
indebtedness payable to a bank or other financial institution; and
4.11 Except with the prior written consent of holders of two-thirds
of the aggregate outstanding principal amount of the Financing Notes, Payor will
not, and will not permit any of its subsidiaries to, pay or prepay any amounts
under any outstanding indebtedness or other obligations for money borrowed or
incurred subsequent to the date hereof, whether or not such indebtedness becomes
due, past due or accelerated, except for (i) all of the Financing Notes on a pro
rata basis, (ii) indebtedness payable to a bank or other financial institution
incurred in consideration of cash infused into the Payor after the date hereof
(i.e. not for the repayment of other outstanding indebtedness) up to the amount
of the net cash proceeds received by Payor.
5. EVENTS OF DEFAULT. If any of the following events (each an "Event of
Default") occurs:
5.1 The dissolution of Payor or any subsidiary of Payor or any vote
in favor thereof by the board of directors and shareholders of Payor or any
subsidiary of Payor; or
5.2 Payor or any of its subsidiaries becomes insolvent, however
evidenced, or makes an assignment for the benefit of creditors, or files with a
court of competent jurisdiction an application for appointment of a receiver or
similar official with respect to it or any substantial part of its assets, or
Payor or any of its subsidiaries files a petition seeking relief under any
provision of the United States Bankruptcy Code or any other federal or state
statute now or hereafter in effect affording relief to debtors, or any such
application or petition is filed against Payor or any of its subsidiaries, which
application or petition is not dismissed or withdrawn within sixty (60) days
from the date of its filing; or
5.3 Payor fails to pay the principal of, or interest on, or any other
amount payable under, this Note or any of the other Financing Notes, as and when
the same becomes due and payable which default continues for a period of five
(5) days after the due date; or
5.4 Payor or any of its subsidiaries admits in writing its inability
to pay its debts as they mature; or
5.5 Payor or any of its subsidiaries sells all or substantially all
of its assets (other than in compliance with Section 4.1 above) or merges or is
consolidated with or into another corporation (other than, in the case of a
subsidiary of Payor, a sale of assets to another wholly-owned subsidiary of
Payor or the merger or consolidation of such subsidiary with or into another
wholly-owned subsidiary of Payor); or
5
<PAGE>
5.6 A proceeding is commenced to foreclose a security interest or
lien in any property or assets of Payor or of any subsidiary of Payor as a
result of a default in the payment or performance of any debt (in excess of
$50,000 and secured by such property or assets) of Payor or of any subsidiary of
Payor; or
5.7 A final judgment for the payment of money in excess of $50,000 is
entered against Payor or any subsidiary of Payor by a court of competent
jurisdiction, and such judgment is not discharged (nor the discharge thereof
duly provided for) in accordance with its terms, nor a stay of execution thereof
procured, within thirty (30) days after the date such judgment is entered, and,
within such period (or such longer period during which execution of such
judgment is effectively stayed), an appeal therefrom has not been prosecuted and
the execution thereof caused to be stayed during such appeal; or
5.8 An attachment or garnishment is levied against the assets or
properties of Payor or any subsidiary of Payor involving an amount in excess of
$50,000 and such levy is not vacated, bonded or otherwise terminated within
thirty (30) days after the date of its effectiveness; or
5.9 Payor defaults in the due observance or performance of any
covenant, condition or agreement on the part of Payor to be observed or
performed pursuant to the terms of this Note (other than the default specified
in Section 5.3 above) and such default continues uncured for a period of thirty
(30) days; or
5.10 Payor defaults in the payment (regardless of amount) when due of
the principal of, interest on, or any other liability on account of, any
indebtedness of Payor or any of its subsidiaries (other than one or more of the
Financing Notes) having a face or principal amount in excess of $50,000, or a
default occurs in the performance or observance by Payor of any covenant or
condition (other than for the payment of money) contained in any note or
agreement evidencing or pertaining to any such indebtedness, which causes the
maturity of such indebtedness to be accelerated or permits the holder or holders
of such indebtedness to declare the same to be due prior to the stated maturity
thereof;
then, upon the occurrence of any such Event of Default and at any
time thereafter, the holder of this Note shall have the right (at such holder's
option) to declare the principal of, accrued unpaid interest on, and all other
amounts payable under this Note to be due and payable, whereupon all such
amounts shall be immediately due and payable to the holder of this Note, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived; provided, however, that in case of the occurrence of an
Event of Default under any of Sections 5.1, 5.2 or 5.4 above, such amounts shall
become immediately due and payable without any such declaration by the holder of
this Note.
6. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the Payee may proceed to (i) protect and
enforce Payee's rights either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, condition or agreement
contained in this Note or in any agreement or document referred to herein or in
aid of the exercise of any power granted in this Note or in any agreement or
document referred to herein, (ii) enforce the payment of this Note, or (iii)
enforce any other
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<PAGE>
legal or equitable right of the holder of this Note. No right or remedy herein
or in any other agreement or instrument conferred upon the holder of this Note
is intended to be exclusive of any other right or remedy, and each and every
such right or remedy shall be cumulative and shall be in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
7. UNCONDITIONAL OBLIGATION; FEES, WAIVERS, OTHER.
7.1 The obligations to make the payments provided for in this Note
are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
7.2 If Payee shall seek to enforce the collection of any amount of
principal of and/or interest on this Note, there shall be immediately due and
payable from Payor, in addition to the then unpaid principal of, and accrued
unpaid interest on, this Note, all costs and expenses incurred by Payee in
connection therewith, including, without limitation, reasonable attorneys' fees
and disbursements.
7.3 No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver or as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
7.4 This Note may not be modified or discharged (other than by
payment) except by a writing duly executed by Payor and Payee.
7.5 Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property, if
any, at any and all times which Payee had or is existing as security for any
amount called for hereunder.
7.6 Payor shall bear all of its expenses, including attorneys' fees,
incurred in connection with the preparation of this Note.
8. RESTRICTION ON TRANSFER. This Note has been, and if applicable the
Conversion Stock will be, acquired for investment. This Note has not been, and
the Conversion Stock will not be, registered under the securities laws of the
United States of America or any state thereof, except as otherwise set forth
herein or in the Registration Rights Agreement. Accordingly, no interest in this
Note or the Conversion Stock may be offered for sale, sold or transferred in the
absence of registration and qualification of this Note and the Conversion Stock
under applicable federal and state securities laws or an opinion of counsel of
Payee reasonably satisfactory to Payor that such registration and qualification
are not required.
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9. MISCELLANEOUS.
9.1 The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
9.2 All notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been duly given when personally delivered
or sent by registered or certified mail (return receipt requested, postage
prepaid), facsimile transmission or overnight courier to the address of the
intended recipient as set forth in the preamble to this Note or at such other
address as the intended recipient shall have hereafter given to the other party
hereto pursuant to the provisions of this Note.
9.3 This Note and the obligations of Payor and the rights of Payee
shall be governed by and construed in accordance with the substantive laws of
the State of Florida without giving effect to the choice of laws rules thereof.
9.4 Payor and Payee each (i) agree that any legal suit, action or
proceeding arising out of or relating to this Note shall be instituted
exclusively in the state courts of Broward or Dade Counties, Florida ("Florida
Courts") or in the United States District Court for the Southern District of
Florida, (ii) waive any objection which Payor and Payee may have now or
hereafter based upon FORUM NON CONVENIENS or to the venue of any such suit,
action or proceeding, and (iii) irrevocably consent to the jurisdiction of the
Florida Courts and the United States District Court for the Southern District of
Florida in any such suit, action or proceeding. Payor and Payee further agree to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the Florida Courts or in the United States
District Court for the Southern District of Florida and agree that service of
process upon the Payor and Payee, mailed by certified mail to the Payor's and
Payee's address noted hereinabove, will be deemed in every respect effective
service of process upon Payor and Payee, in any suit, action or proceeding.
FURTHER, BOTH PAYOR AND PAYEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO
ENFORCE THIS NOTE AND IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR CROSSCLAIM
ASSERTED IN ANY SUCH ACTION.
10. This Note shall bind Payor and its successors and assigns.
GALACTICOMM TECHNOLOGIES, INC.
By: __________________________
Name:_________________________
Title:________________________
8
EXHIBIT 10.12
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO
RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE
COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
EXERCISABLE ON OR BEFORE
5:00 P.M., MIAMI, FLORIDA TIME,____________ ,_____
No. W- 19,000 Warrants
WARRANT
This warrant certificate (the "Warrant Certificate") certifies that or
registered assigns, is the registered holder of warrants to purchase, at any
time until 5:00 p.m. Miami, Florida time on ____________________________ ,
______ [three years following the initial closing of the Bridge Financing] (the
"Expiration Date"), up to 19,000 fully-paid and non-assessable shares, subject
to adjustment in accordance with Section 6 hereof (the "Warrant Shares"), of the
common stock, par value $.0001 per share (the "Common Stock"), of Galacticomm
Technologies, Inc., a Florida corporation (the "Company"), subject to the terms
and conditions set forth herein. The warrants represented by this Warrant
Certificate and any warrants resulting from a transfer or subdivision of the
warrants represented by this Warrant Certificate shall sometimes hereinafter be
referred to, individually, as a "Financing Warrant" and, collectively, as the
"Financing Warrants." This Warrant Certificate is one of a series of Warrant
Certificates being issues as part of a private offering (the "Bridge Financing")
pursuant to the Company's Confidential Private Offering Memorandum, dated
_________________ ____ , 1997.
1. EXERCISE OF FINANCING WARRANTS. Each Financing Warrant is initially
exercisable to purchase one Warrant Share at an initial exercise price of $3.75
per Warrant Share, subject to adjustment as set forth in Section 6 hereof,
payable in cash or by check to the order of the Company, or any combination of
cash or check. Upon surrender of this Warrant Certificate with the annexed Form
of Election to Purchase duly executed, together with payment of the Exercise
Price (as hereinafter defined) for the Warrant Shares purchased, at the
Company's principal offices (presently located at 4101 S.W. 47 Avenue, Suite
101, Ft. Lauderdale, Florida 33314) the registered holder thereof (the "Holder"
or "Holders") shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. The purchase rights represented by this Warrant
Certificate are exercisable at the option of the Holder hereof, in whole or in
part (but not as to fractional shares of Common Stock). In the case of the
purchase of less than all the Warrant Shares purchasable under this Warrant
Certificate, the Company shall cancel this Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Warrant Shares purchasable hereunder.
<PAGE>
2. ISSUANCE OF CERTIFICATES. Upon the exercise of the Financing Warrants
and payment of the full Exercise Price therefor, the issuance of certificates
for the Warrant Shares purchased pursuant to such exercise shall be made within
five (5) business days thereafter without charge to the holder thereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Section 3 hereof) be issued in the name of, or in such names as may be directed
by, the Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificates in a name other than that
of the Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof 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.
The Warrant Certificates and, upon exercise of the Financing Warrants, the
certificates representing the Warrant Shares shall be executed on behalf of the
Company by the manual or facsimile signature of those officers required to sign
such certificates under Florida law.
The Warrant Certificates and, upon exercise of the Financing Warrants, in
whole or in part, certificates representing the Warrant Shares shall bear a
legend substantially similar to the following:
"The securities represented by this certificate and/or the
securities issuable upon exercise thereof have not been registered
under the Securities Act of 1933 ("Act"), and may not be offered or
sold except (i) pursuant to an effective registration statement
under the Act, (ii) to the extent applicable, pursuant to Rule 144
under the Act (or any similar rule under such Act relating to the
disposition of securities), or (iii) upon the delivery by the holder
to the Company of an opinion of counsel, reasonably satisfactory to
counsel to the issuer, stating that an exemption from registration
under such Act is available."
3. RESTRICTION ON TRANSFER OF FINANCING WARRANTS. The Holder of this
Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Financing Warrants and the Warrant Shares issuable upon exercise of the
Financing Warrants are being acquired as an investment and not with a view to
the distribution thereof.
4. REGISTRATION RIGHTS. The Holder shall be entitled to all of the rights
and subject to all of the obligations set forth in the Registration Rights
Agreement of even date herewith between the Company and the Holder.
5. PRICE.
5.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise price
of each Financing Warrant shall be $3.75 per Warrant Share. The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Section 6 hereof.
2
<PAGE>
5.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
6. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
6.1 DIVIDENDS AND DISTRIBUTIONS. In case the Company shall at any
time after the date hereof pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock, then upon such dividend or distribution,
the Exercise Price in effect immediately prior to such dividend or distribution
shall be reduced to a price determined by dividing an amount equal to the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution multiplied by the Exercise Price in effect immediately prior to
such dividend or distribution, by the total number of shares of Common Stock
outstanding immediately after such issuance or sale. For purposes of any
computation to be made in accordance with the provisions of this Section 6.1,
the shares of Common Stock issuable by way of dividend or distribution shall be
deemed to have been issued immediately after the opening of business on the date
following the date fixed for determination of shareholders entitled to receive
such dividend or distribution.
6.2 SUBDIVISION AND COMBINATION. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
6.3 ADJUSTMENT IN NUMBER OF WARRANT SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 6, the number of
Warrant Shares issuable upon the exercise of each Financing Warrant shall be
adjusted to the nearest full share of Common Stock by multiplying a number equal
to the Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares issuable upon exercise of the Financing Warrants
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
6.4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in nominal value to no nominal value, or from no nominal value to
nominal value, or as a result of a subdivision or combination), or in the case
of any consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding Common Stock, except a change as a result of a
subdivision or combination of such shares or a change in nominal value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the Warrant Shares
issuable upon exercise of the Financing Warrants immediately prior to any such
events at a price equal to the product of (i) the number of Warrant Shares
issuable upon exercise of the Financing Warrants and (ii) the Exercise Price in
effect immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holder had exercised the
Financing Warrants.
3
<PAGE>
6.5 DETERMINATION OF OUTSTANDING COMMON STOCK. The number of shares
of Common Stock at any one time outstanding shall include the aggregate number
of shares issued or issuable upon the exercise of outstanding options, rights
and warrants and upon the conversion or exchange of outstanding convertible or
exchangeable securities.
7. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. This Warrant
Certificate is exchangeable without expense, upon the surrender hereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
8. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock and shall
not be required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of shares of
Common Stock.
9. RESERVATION OF SHARES. The Company covenants and agrees that it will at
all times reserve and keep available out of its authorized share capital, solely
for the purpose of issuance upon the exercise of the Financing Warrants, such
number of shares of Common Stock as shall be equal to the number of Warrant
Shares issuable upon the exercise of the Financing Warrants, for issuance upon
such exercise, and that, upon exercise of the Financing Warrants and payment of
the Exercise Price therefor, all Warrant Shares issuable upon such exercise
shall be duly and validly issued, fully-paid, non-assessable and not subject to
the preemptive rights of any shareholder.
10. NOTICES TO FINANCING WARRANT HOLDERS. Nothing contained in this
Agreement shall be construed as conferring upon the Holder or Holders the right
to vote or to consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter, or
as having any rights whatsoever as a shareholder of the Company. If, however, at
any time prior to the expiration of the Financing Warrants and their exercise,
any of the following events shall occur:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend
or distribution payable otherwise than out of current or retained
earnings, as indicated by the accounting treatment of such dividend
or distribution on the books of the Company; or
4
<PAGE>
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of Common Stock or other shares of
capital stock of the Company or securities convertible into or
exchangeable for Common Stock or other shares of capital stock of
the Company, or any option, right or warrant to subscribe therefor;
or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale
of all or substantially all of its property, assets and business as
an entirety shall be proposed; or
(d) a reclassification, change of the outstanding Common Stock
or any consolidation of the Company with, or merger of the Company
into, another corporation, as referred to in Section 6.4 hereof.
then, in any one or more of such events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
11. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
personally delivered or sent by registered or certified mail (return receipt
requested, postage prepaid), facsimile transmission or overnight courier:
(a) if to a registered Holder of the Financing Warrants, to
the address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section 1
of this Warrant or to such other address as the Company may
designate by notice to the Holders.
12. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company and the Holders shall inure to the benefit of
their respective successors and assigns hereunder.
5
<PAGE>
13. GOVERNING LAW.
13.1 CHOICE OF LAW. This Warrant Certificate shall be deemed to have
been made and delivered in the State of Florida and shall be governed as to
validity, interpretation, construction, effect and in all other respects with
the substantive laws of the State of Florida, without giving effect to the
choice of laws rules thereof.
13.2 JURISDICTION AND SERVICE OF PROCESS. The Company and the Holder
each (a) agrees that any legal suit, action or proceeding arising out of or
relating to this Warrant Certificate, or any other agreement entered into
between the Company and the Holder pursuant to the Bridge Financing shall be
instituted exclusively in the state courts of Broward or Dade Counties, Florida
("Florida Courts") or in the United States District Court for the Southern
District of Florida, (b) waives any objection which the Company or such Holder
may have now or hereafter based upon FORUM NON CONVENIENS or to the venue of any
such suit, action or proceeding, and (c) irrevocably consents to the
jurisdiction of the Florida Courts and the United States District Court for the
Southern District of Florida in any such suit, action or proceeding. The Company
and the Holder each further agrees to accept and acknowledge service of any and
all process which may be served in any such suit, action or proceeding in the
Florida Courts or in the United States District Court for the Southern District
of Florida and agrees that service of process upon the Company or the Holder
mailed by certified mail to their respective addresses shall be deemed in every
respect effective service of process upon the Company or the Holder, as the case
may be, in any suit, action or proceeding. FURTHER, BOTH THE COMPANY AND THE
HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THE TERMS OF THIS
WARRANT CERTIFICATE AND IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR
CROSSCLAIM ASSERTED IN ANY SUCH ACTION.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, as of this _______ day of ___________________ , 1997.
[SEAL] GALACTICOMM TECHNOLOGIES, INC.
By:___________________________
Name:_________________________
Title:________________________
Attest:
__________________________
6
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ Warrant Shares
and herewith tenders in payment for such Warrant Shares cash or a check payable
to the order of Galacticomm Technologies, Inc. in the amount of $ ___________ ,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such Warrant Shares be registered in the name of
______________________ , whose address is , and that such certificate be
delivered to ______________________________________________ , whose address is
_______________________________________________________________________.
Dated: Signature:
_____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
_____________________________________
_____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
7
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED_______________________________________ hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature:
_____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant
Certificate.)
_____________________________________
_____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
8
EXHIBIT 10.13
GALACTICOMM TECHNOLOGIES, INC.
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the 28 day of October, 1997, between the person
whose name and address appear on the signature page attached hereto
(individually a "Holder" or, collectively with the Holders of the Units issued
in the Offering, each as defined below, the "Holders") and Galacticomm
Technologies, Inc., a company incorporated under the laws of Florida, having its
principal place of business at 4101 S.W. 47 Avenue, Suite 101, Ft. Lauderdale,
Florida 33314 (the "Company").
RECITALS:
A. Simultaneously with the executive and delivery of this Agreement, the
Holders are purchasing from the Company an aggregate of up to 42 units (the
"Units"), each Unit consisting of (i) a non-negotiable 10% unsecured promissory
note of the Company in the principal amount of $50,000, which is convertible
into shares (the "Conversion Stock") of the Company's common stock, par value
$.0001 per share (the "Common Stock"), under certain circumstances, and (ii)
warrants (the "Financing Warrants") to purchase an aggregate of 19,000 shares
("Financing Warrant Shares") of the Common Stock (the Financing Warrants are
hereinafter sometimes collectively referred to as the "Financing Securities"),
at an exercise price of $3.75 per Financing Warrant Share, subject to adjustment
in certain circumstances, all upon the terms set forth in the Confidential
Private Placement Memorandum of the Company dated September 15, 1997, as
supplemented on October 21 and 24, 1997 (the "Bridge Financing"); and
B. The Company desires to grant to the Holder the registration rights set
forth herein with respect to the Conversion Stock, and the Financing Warrant
Shares (collectively referred to hereinafter sometimes as the "Registrable
Securities");
NOW THEREFORE, the parties hereto mutually agree as follows:
1. MANDATORY REGISTRATION OF THE REGISTRABLE SECURITIES.
(a) The Company will include the Financing Warrant Shares (and
shares of outstanding Conversion Stock, if any) as part of the securities of the
Company covered by its registration statement (the "IPO Registration Statement")
relating to the initial underwritten public offering of the Company's
securities. The Company will prepare the IPO Registration Statement and file it
with, and use its best efforts to have it declared effective by, the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933 (the
"Act"), so as to permit the public sale of the Registrable Securities pursuant
thereto commencing on the date the IPO Registration Statement is declared
effective by the SEC (the "IPO Effective Date").
(b) Once the IPO Registration Statement covering the Registrable
Securities pursuant to the provisions of this Section 1 is declared effective by
the SEC, the Company will use its best efforts to maintain the effectiveness of
such registration statement until the earlier date to occur (the "Release Date")
of (i) the date that all of the Registrable Securities have been sold pursuant
to the IPO Registration Statement, or (ii) the date that the Holders of the
Registrable Securities receive an opinion of counsel to the Company that all of
the Registrable Securities, other than securities held by "affiliates" of the
Company, as such term is defined in
<PAGE>
Rule 144 of the Act, may be freely traded (without limitation or restriction as
to quantity or timing and without registration under the Act) pursuant to Rule
144 of the Act or otherwise. If the Company fails to keep the IPO Registration
Statement continuously effective during such period, then the Company shall,
promptly upon the request of the Holders of at least 51% of the unsold
Registrable Securities, use its best efforts to update the IPO Registration
Statement or file a new registration statement covering the unsold Registrable
Securities subject to the terms and provisions hereof.
(c) If, for any reason (other than at the request of a Holder or
Holders) less than 80% of the Registrable Securities are included in the IPO
Registration Statement on the IPO Effective Date, the Company, within six months
after the IPO Effective Date, will use its best efforts to file and have
declared effective (within such six month period) by the SEC a new registration
statement covering all of the Registrable Securities which were not included in
the IPO Registration Statement on the IPO Effective Date. The Company will use
its best efforts to maintain the effectiveness of such registration statement
until the earlier date to occur of (i) the date that all of such Registrable
Securities have been sold pursuant to the registration statement, or (ii) the
date that the Holders of the Registrable Securities included in such
registration statement receive an opinion of counsel to the Company that all of
such Registrable Securities, other than securities held by "affiliates" of the
Company, as such term is defined in Rule 144 of the Act, may be freely traded
(without limitation or restriction as to quantity or timing and without
registration under the Act) pursuant to Rule 144 of the Act or otherwise.
2. PIGGYBACK REGISTRATION. For a period of twelve (12) months from the IPO
Effective Date up to and including the Release Date (the "Piggyback Registration
Period") , if the Company proposes to prepare and file a registration statement
(other than a registration statement on Form S-4 or Form S-8) under the Act with
the SEC covering equity or debt securities of the Company, or any such
securities of the Company held by its shareholders, the Company will give
written notice of its intention to do so by registered mail ("Notice"), at least
thirty (30) business days prior to the filing of each such registration
statement, to the Holders. Upon the written request of a Holder (a "Requesting
Holder"), made within twenty (20) business days after the date of the Notice,
that the Company include any of the Requesting Holder's Registrable Securities
(such term for purposes of this Section 2 excludes Conversion Stock) in such
proposed registration statement, the Company shall use its best efforts to cause
such registration statement (a "Piggyback Registration Statement") to be
declared effective under the Act by the SEC so as to permit the public sale of
the Requesting Holder's Registrable Securities pursuant thereto, at the
Company's sole cost and expense and at no cost or expense to the Requesting
Holders; provided, however, that if, in the written opinion of the Company's
managing underwriter, if any, for such offering, the inclusion of all or a
portion of the Registrable Securities requested to be registered, when added to
the securities being registered by the Company or the selling shareholder(s),
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to their then current market value, or (ii)
without otherwise materially adversely affecting the entire offering, then the
Company may exclude from such offering all or a portion of the Registrable
Securities which it has been requested to register on a pro rata basis with any
other shares of Common Stock held by other shareholders of the Company for which
registration rights have been granted prior to the IPO Effective Date. If all or
a portion of a Requesting Holder's Registrable Securities are excluded (the
"Excluded Securities") from the initial Piggyback Registration Statement
pursuant
2
<PAGE>
to the provisions of this Section 2 and a Requesting Holder's Excluded
Securities cannot be freely traded (without limitation or restriction as to
quantity or timing and without registration under the Act) pursuant to Rule 144
of the Act or otherwise by the date that the second Piggyback Registration
Statement is declared effective by the SEC, the Piggyback Registration Period
will be extended until the earlier to occur of (i) twenty-one (21) months from
the IPO Effective Date or (ii) the date that Holders of 80% of the Excluded
Securities receive an opinion of counsel to the Company that all of such
Excluded Securities, other than securities held by "affiliates" of the Company,
as such term is defined in Rule 144 of the Act or otherwise, may be freely
traded (without limitation or restriction as to quantity or timing and without
registration under the Act) pursuant to Rule 144 of the Act or otherwise.
Notwithstanding the provisions of this Section 2, the Company shall have the
right, at any time after it shall have given Notice pursuant to this Section 2
(irrespective of whether any written request for inclusion of Registrable
Securities) to elect not to file any Piggyback Registration Statement or to
withdraw the same after the filing but prior to the effective date thereof.
3. PROHIBITION ON SALES IN CERTAIN CIRCUMSTANCES. The Holders agree that
they will not sell or otherwise transfer any of their Registrable Securities
pursuant to the IPO Registration Statement, a Piggyback Registration Statement
or otherwise until one hundred eighty (180) days following the IPO Effective
Date (or such longer period as The Nasdaq Stock Market, Inc. or the National
Association of Securities Dealers, Inc. or any state regulatory authority may
require in connection with the Company's initial public offering).
4. ADDITIONAL TERMS.
(a) If any stop order shall be issued by the SEC in connection with
the IPO Registration Statement or, following its effectiveness, a Piggyback
Registration Statement (collectively referred to herein as the "Financing
Registration Statement"), the Company will use its best efforts to obtain the
removal of such order. Following the effective date of the Financing
Registration Statement, the Company shall, upon the request of the Holder,
forthwith supply such reasonable number of copies of the Financing Registration
Statement, preliminary prospectus and final prospectus meeting the requirements
of the Act, and other documents necessary or incidental to the registration and
public offering of the Registrable Securities, as shall be reasonably requested
by the Holder to permit the Holder to make a public distribution of such
securities. The Company will use its reasonable efforts to qualify the
Registrable Securities for sale in such states as the holders of such securities
shall reasonably request, provided that no such qualification will be required
in any jurisdiction where, solely as a result thereof, the Company would be
subject to (i) general service of process or to taxation or qualification as a
foreign corporation doing business in such jurisdiction or (ii) qualification
requirements which would require the Company to (A) amend its Articles of
Incorporation or Bylaws or (B) rescind, modify or amend any action taken by the
Board of Directors of the Company in accordance with their fiduciary obligations
to the Company and its shareholders; provided, however, that the Company will
make a good faith effort to obtain a waiver of any such requirement. The
obligations of the Company hereunder with respect to the Registrable Securities
are expressly conditioned on the Holder's furnishing to the Company such
appropriate information concerning the Holder,the Holder's Registrable
Securities and the terms of the Holder's offering of such securities, as the
Company may reasonably request.
3
<PAGE>
(b) The Company shall bear the entire cost and expense of each
registration of the Registrable Securities provided for herein; provided,
however, that the Holder shall be solely responsible for the fees of any legal
counsel or financial advisors retained by the Holder in connection with such
registration and any transfer taxes or underwriting discounts, commissions or
fees applicable to the Registrable Securities sold by the Holder pursuant
thereto.
(c) The Company shall indemnify and hold harmless the Holder and
each underwriter, within the meaning of the Act, who may purchase from or sell
for the Holder, any Registrable Securities, from and against any and all losses,
claims, damages and liabilities caused by any untrue statement of a material
fact contained in the Financing Registration Statement, any other registration
statement filed by the Company under the Act, any post-effective amendment to
such registration statements, or any prospectus included therein required to be
filed or furnished by reason of this Agreement or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission based
upon information furnished or required to be furnished in writing to the Company
by the Holder or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls either the Holder or underwriter
within the meaning of the Act and each officer, director, employee and agent of
the Holder and underwriter; provided, however, that the indemnification in this
paragraph (c) with respect to any prospectus shall not inure to the benefit of
the Holder or underwriter (or to the benefit of any person controlling the
Holder or underwriter) on account of any such loss, claim, damage or liability
arising from the sale of Registrable Securities by the Holder or the
underwriter, if a copy of a subsequent prospectus correcting the untrue
statement or omission in such earlier prospectus was provided to the Holder or
underwriter by the Company prior to the subject sale and the subsequent
prospectus was not delivered or sent by the Holder or underwriter to the
purchaser prior to such sale.
(d) The Holder or underwriter or other person, as the case may be,
shall indemnify the Company, its directors, each officer signing the Financing
Registration Statement and each person, if any, who controls the Company within
the meaning of the Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in the
Financing Registration Statement, any registration statement or any prospectus
required to be filed or furnished by reason of this Agreement or caused by any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or omission
based upon information furnished in writing to the Company by the Holder or
underwriter expressly for use therein.
(e) If for any reason the indemnification provided for in either the
two preceding subparagraphs is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
4
<PAGE>
(f) Neither the filing of a Financing Registration Statement by the
Company pursuant to this Agreement nor the making of any request for
prospectuses by the Holder shall impose upon the Holder any obligation to sell
the Holder's Registrable Securities.
(g) The Holder, upon receipt of notice from the Company that an
event has occurred which requires a post-effective amendment to the Financing
Registration Statement or a supplement to the prospectus included therein, shall
promptly discontinue the sale of Registrable Securities pursuant to such
registration statement until the Holder receives a copy of the amended Financing
Registration Statement or supplemented prospectus from the Company, which the
Company shall provide as soon as practicable after such notice.
5. GOVERNING LAW.
(a) The Financing Securities are being, and will be, delivered in
Florida. This Agreement shall be deemed to have been made and delivered in the
State of Florida and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of Florida.
(b) The Company and the Holder each (i) agrees that any legal suit,
action or proceeding arising out of or relating to this Agreement, or any other
agreement entered into between the Company and the Holder pursuant to the
Private Financing or the Financing Registration Statement, shall be instituted
exclusively in the state courts of Broward or Dade Counties, Florida ("Florida
Courts"), or in the United States District Court for the Southern District of
Florida, (ii) waives any objection which the Company or such Holder may have now
or hereafter based upon FORUM NON CONVENIENS or to the venue of any such suit,
action or proceeding, and (iii) irrevocably consents to the jurisdiction of the
Florida Courts and the United States District Court for the Southern District of
Florida in any such suit, action or proceeding. The Company and the Holder each
further agrees to accept and acknowledge service of any and all process which
may be served in any such suit, action or proceeding in the Florida Courts or in
the United States District Court for the Southern District of Florida and agrees
that service of process upon the Company or the holder mailed by certified mail
to the Company at the address set forth above, in the case of the Company, and
to the Holder's address set forth below, in the case of the Holder,shall be
deemed in every respect effective service of process upon the Company or the
Holder, as the case may be, in any suit, action or proceeding.
6. AMENDMENT. This Agreement may only be amended by a written instrument
executed by the Company and the Holder.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
5
<PAGE>
9. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or five days after such notice is mailed by registered or certified mail,
postage prepaid, return receipt requested, as follows:
(a) if to the Holder, to his or her address set forth on the
signature page of this Agreement;
(b) if to the Company, to the address set forth on the first page of
this Agreement.
10. BINDING EFFECT; BENEFITS. The Holder may not assign his or her rights
hereunder. This Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective heirs, legal representatives and
successors. Nothing herein contained, express or implied, is intended to confer
upon any person other than the parties hereto and their respective heirs, legal
representatives and successors, any rights or remedies under or by reason of
this Agreement.
11. HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
12. SEVERABILITY. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
GALACTICOMM TECHNOLOGIES, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
HOLDER:
____________________________________
Signature
____________________________________
Print Name
Address of Holder:
____________________________________
____________________________________
____________________________________
7
EXHIBIT 10.17
i-View Software, Inc.
300 S. Pine Island Road
Suite 261
Plantation, Florida 33324
October 29, 1996
The Stockholders Listed in Exhibit "A"
Galacticomm, Inc.
4101 S.W. 47th Avenue
Suite 101
Fort Lauderdale, Florida 33314
Dear Lady and Gentlemen:
This letter serves as your agreement to sell, and our agreement to
purchase, all of the shares (the "Shares") of Galacticomm, Inc.'s (the
"Company") common stock, par value $.01 per share, owned by each of the
stockholders (the "Stockholders") listed in Exhibit "A" attached hereto.
1. PURCHASE PRICE. Subject to the terms contained herein, in exchange for
each of the Shares, i-View Software, Inc. ("i-View") will pay to each of the
Stockholders 9.4(cent) in cash and will issue to each of the Stockholders .0644
shares of i-View's common stock, par value $.001 per share, except for the
1,440,000 Shares owned by the Estate of Timothy J. Stryker, (the "Option
Shares") which are subject to the Stock Option Agreement referred to in Section
9 hereof. In exchange for each of the Option Shares, i-View will issue Christine
Stryker, as personal representative of such Estate, .0644 shares of i-View's
common stock plus an additional 92,736 shares. Ms. Stryker will not be paid any
cash by i-View for the Option Shares.
2. ADJUSTMENT TO PURCHASE PRICE. If i-View completes this transaction in
accordance with the terms contained herein and the Company's liabilities on the
date this letter is fully executed have increased by more than $130,000 over the
amount stated in the Financial Statements (as defined in Section 6(e) hereof),
the number of i-View's shares of common stock to be issued as part of the
purchase price for the Shares and the Option Shares will be reduced in
proportion to the dollar amount by which such liabilities have increased by more
than $130,000. Any increase in the liabilities of the Company relating to its
rental payment obligations under a lease with Atria Family II Limited will be
excluded from the calculation of the increase in the Company's liabilities after
the date of this letter.
3. ESCROW ARRANGEMENT. Upon execution of this letter agreement: (a) each
of the Stockholders will deliver the stock certificates representing each of the
Shares (duly endorsed in blank and notarized) to Lucio, Mandler, Croland,
Bronstein & Garbett, P.A., (the "Escrow Agent"), and (b) i-View will deliver to
the Escrow Agent a cashier's check made payable to the Company in an amount
equal to the lesser of: (i) $100,000 or (ii) the amount of cash held by the
Company at the date that all of the Shares are delivered to the Escrow Agent in
<PAGE>
accordance with the terms of this letter agreement (the "Escrowed Funds"). Until
the earlier to occur of November 21, 1996 or the date that i-View provides the
Escrow Agent with written notice of its decision to consummate or terminate this
transaction, all of the Shares and the Escrowed Funds will be held by the Escrow
Agent in accordance with Section 4 hereof. A copy of i-View's notice to the
Escrow Agent under this Section 3 will also be provided contemporaneously to
each of the Stockholders.
4. ESCROW PERIOD. Each of the Stockholders acknowledges and understands
that i-View is entering into this letter agreement before it has completed its
due diligence review of the operations, business and financial condition of the
Company. When i-View completes such due diligence review, it shall have the
option, in its sole and absolute discretion exercised in good faith, to complete
or terminate the purchase of the Shares. Such option must be exercised by no
later than November 21, 1996. When i-View decides whether to complete or
terminate the transaction contemplated hereby, written notice thereof will be
provided to each of the Stockholders and the Escrow Agent. If the transaction is
to be completed, i-View will pay each of the Stockholders the purchase price for
the Shares in accordance with the terms of this letter agreement and the Escrow
Agent will deliver the stock certificates representing the Shares to i-View. If
i-View decides to terminate the transaction contemplated hereby, the Escrow
Agent will return the stock certificates held in escrow hereby to the addresses
for each of the Stockholders set forth herein. Upon the earlier to occur of: (a)
5:00 p.m. (Miami, Florida time) on November 21, 1996, or (b) the Escrow Agent's
receipt of i-View's written notice of completion or termination of the
transaction contemplated hereby, the Escrow Agent will mail the Escrowed Funds
to the Company at the address set forth in this letter agreement. The Escrow
Agent will provide for the safekeeping of the stock certificates representing
the Shares and the Escrowed Funds in accordance with the care exercised by an
escrow agent similarly situated. If any controversy should arise between or
among the parties hereto with respect to any matter set forth in this letter
agreement, the Escrow Agent may commence an interpleader action in the state or
federal courts located in Dade County, Florida and deposit the stock
certificates representing the Shares and the Escrowed Funds in the registry of
the court in which such action is commenced. Each of the Stockholders and i-View
will indemnify and hold harmless the Escrow Agent from any costs or expenses
incurred by the Escrow Agent in connection with acting as an escrow agent in
accordance with this letter agreement. The Escrow Agent hereby undertakes to and
will perform only such duties as are expressly set forth herein, and is entitled
to rely on the written notice from i-View. No implied duties or obligations
shall be read into this letter agreement against the Escrow Agent. Each of the
Stockholders expressly waives any and all conflicts of interest which may exist,
now and in the future, between the Escrow Agent acting as legal counsel to
i-View and Escrow Agent hereunder.
5. MANAGEMENT AGREEMENT. Contemporaneously with the execution of this
letter agreement, the Stockholders will cause the Company to enter into a
Management Agreement with i-View, in the form attached hereto as Exhibit "B."
2
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF EACH OF THE STOCKHOLDERS. As of the
date of this letter agreement each of the Stockholders, severally and not
jointly, represents and warrants to i-View as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida and has
full corporate power and authority to carry on its business as and
where now conducted, and to own, operate and lease its properties
at and in the places where such properties are now owned, operated
or leased by it, and is duly qualified to do business in every
jurisdiction in which the property owned, leased or operated by it,
or the nature of the business conducted by it, makes such
qualification necessary, except where the failure to be so
qualified would not have a material adverse effect upon the
business, operations, assets or liabilities, results of operations
or the financial condition of the Company.
(b) The Company is authorized to issue 10,000,000 shares of common
stock, par value $.01 per share, and the total number of issued and
outstanding shares of such common stock is 8,871,207 shares on a
fully-diluted basis, including the phantom stock units which are
convertible into common stock. There is no other capital stock of
the Company authorized. All of the issued and outstanding shares of
capital stock of the Company are validly issued, fully paid,
non-assessable and subject to no preemptive rights with respect
thereto. Each Stockholder is both the record and beneficial owner
of the shares set forth opposite his or her name on Exhibit "A" and
has, with the exception of the Option Shares, the full right, power
and authority to sell, transfer and deliver to i-View such shares,
free and clear of any liens, claims, charges, options, pledges or
other encumbrances, with no personal liability attaching to the
ownership thereof. It is acknowledged by i-View that the Option
Shares are subject to the Stock Option Agreement referred to in
Section 9 hereof.
(c) Except for the Stock Option Agreement referred to in Section 9
hereof, there are no options, warrants or other rights outstanding
for the purchase of, nor any outstanding securities convertible
into, any shares of capital stock of the Company or any such
convertible securities, and neither the Company nor any Stockholder
has agreed to issue, purchase, or sell or transfer any of same.
(d) The execution of this letter agreement by each of the Stockholders
and its delivery to i-View is not contrary to the Articles of
Incorporation or By-laws of the Company. Neither the execution,
delivery nor consummation of this letter agreement by the
Stockholders will, with the passage of time, the giving of notice,
or otherwise, result in a
3
<PAGE>
violation or breach of, or constitute a default under, any term or
provision of any material indenture, mortgage, deed of trust,
lease, instrument, order, judgment, decree, rule, regulation, law,
contract, agreement or any other restriction to which the Company
or any Stockholder is a party or to which they or any of them are
subject or bound, except for the Stock Option Agreement referred to
in Section 9 hereof, nor will it result in the creation of any lien
or other material charge upon any of the assets of the Company or
any Stockholder, nor will it result in acceleration or termination
of any loan or security interest agreement to which the Company or
any Stockholder is a party or to which any of the Company's assets
or the assets of any Stockholder is subject.
(e) Prior to the date hereof, i-View has been provided with the
unaudited balance sheet of the Company as at September 30, 1996 and
the related statements of income and statements of changes in
financial positions for the period then ended (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis, fairly present the Company's financial
condition and results of its operations at and for the period
therein specified and give a true and accurate view of the affairs
of the Company at and for the period therein specified.
(f) The Company has filed all income, franchise and other tax returns
and reports of every nature required to be filed by it, accurately
reflecting any and all taxes owing to the United States, or any
other government or any subdivision thereof, domestic or foreign,
state or local, or by any other taxing authority, and has paid in
full or made adequate provision for the payment of all taxes
(including penalties and interest), for which it has or may have
liability. The Stockholders have no knowledge of any unassessed tax
deficiency proposed or threatened against the Company as a result
of its business, and there are no tax deficiencies, not accrued as
of September 30, 1996 (including penalties and interest) of any
kind assessed against the Company with respect to taxable periods
ending on or before the completion of this transaction. The Company
is not a party to any action or proceeding by any governmental
authority for assessment or collection of taxes, nor has any such
event been asserted or threatened. The federal income tax returns
of the Company have never been audited by the Internal Revenue
Service.
(g) There are no claims or proceedings by or against the Company
pending or, to the knowledge of the Stockholders, threatened in
which, if adversely determined, could reasonably be expected to
have a material
4
<PAGE>
adverse effect upon the business, operations, assets or
liabilities, results of operations or the financial condition of
the Company.
(h) No representation or warranty contained in this letter agreement
and no document or other written information furnished to i-View
pursuant to this letter agreement, or in connection with the
transaction contemplated by this letter agreement contains any
untrue statement of a material fact, or omits to state a material
fact necessary to make the statements contained herein or therein
not misleading.
(i) Each of the Stockholders is acquiring the i-View shares referred to
in Section 1 hereof for investment purposes and not with a view to,
or for resale in connection with, the distribution thereof (except
in a transaction or transactions permitted under the applicable
securities laws). Each Stockholder has such knowledge and
experience in financial and business matters (as required by Rule
506 of Regulation D of the Securities Act of 1933), and has had
such opportunity as he or she deems necessary or appropriate to ask
questions of and receive answers from representatives of i-View
concerning the business, operations, assets or liabilities, results
of operations or the financial condition of i-View, to enable each
of the Stockholders to evaluate the merits and risks associated
with the ownership of i-View common stock. In addition, each of the
Stockholders has been afforded an opportunity to discuss the
business, operations and prospects of i-View with representatives
of i-View and has also had an opportunity to seek legal and/or
financial advice from his or her advisor(s) in connection with the
transaction contemplated herein.
7. REPRESENTATIONS AND WARRANTIES OF I-VIEW. i-View hereby represents and
warrants to each of the Stockholders as follows:
(a) i-View is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and has full
corporate power and authority to carry on its business as and where
now conducted, and to own, operate and lease its properties at and
in the places where such properties are now owned, operated or
leased by it and is duly qualified to do business in every
jurisdiction in which the property owned, operated or leased by it,
or in the nature of the business conducted by it, make such
qualification necessary.
(b) The execution of this letter agreement by i-View and its delivery
to the Stockholders has been or will be duly authorized by the
Board of Directors of i-View and no further corporate action will
be necessary on
5
<PAGE>
the part of i-View to make this letter agreement valid and binding
upon i-View.
(c) i-View is acquiring the Shares for investment purposes and not with
a view to, or for resale in connection with, the distribution
thereof (except in a transaction or transactions permitted under
applicable securities laws). i-View is an "accredited investor" as
required by Rule 506 of Regulation D of the Securities Act of 1933.
8. I-VIEW'S OFFER TO OTHER STOCKHOLDERS OF THE COMPANY. As soon as
reasonably practicable after the completion of the transaction contemplated
herein, i-View will offer to purchase the shares of the Company's common stock
owned by the other stockholders of the Company on substantially similar terms
and conditions as are contained in this letter agreement.
9. INDEMNIFICATION AND RELEASE OF CHRISTINE STRYKER. i-View will indemnify
Christine Stryker from and against any and all costs, expenses and liabilities
Ms. Stryker may incur as a result of her sale to i-View of 1,440,000 Shares
which are subject to that certain Stock Option Agreement, dated April 30, 1996
(the "Option Agreement"), among Tim Stryker, the Company, and Messrs. Levenson,
Tetro, Newman, Berg and Tessier (the "Optionees"). i-View will obtain and
deliver to Christine Stryker at the closing, a general release, in for a form
acceptable to Christine Stryker, signed by the Optionees in which they: (a)
release Christine Stryker, Tim Stryker and the Estate of Timothy J. Stryker,
from any and all liabilities and claims arising out of the Option Agreement; (b)
waive any rights the Optionees may have under the Option Agreement; and (c)
consent to Christine Stryker and the estate of Timothy J. Stryker selling the
Option Shares to i-View pursuant to this Agreement.
10. NO SHOP. In consideration of i-View's obligations under the Management
Agreement and the Escrowed Funds which will be delivered to the Company whether
the transaction contemplated hereby is completed or terminated, none of the
Stockholders will, during the term of this letter agreement, directly or
indirectly, discuss or enter into any other proposal, understanding or agreement
of any type relating to the Shares or any material assets of the Company.
11. NON-COMPETITION AND NON-DISCLOSURE COVENANT. For a period of 24 months
from the completion of the transaction contemplated hereby: (a) each Stockholder
will not, for his or her own account or either as agent, servant or employee, or
as a stockholder of any corporation or member of any firm, own, manage, operate,
join, control, be employed by or participate in the ownership, management,
operation or control of any individual, entity or business that creates products
that are substantially similar to the Company's products or has products under
development that are substantially similar to the Company's products, both as of
the date of this letter agreement; and (b) each Stockholder will not disclose or
divulge to others any trade secrets, confidential information, or internal
Company business or
6
<PAGE>
technical data. For purposes of this letter agreement, "internal Company
business or technical data" means customer lists, pricing data, sources of
supply, and marketing, production or merchandising systems or plans, proprietary
methods, processes, formulae, compositions, inventions, computer programs,
algorithms and research projects contemplated or underway as of the date that
this letter agreement is fully executed. In the event of an actual or threatened
breach by a Stockholder of this Section 11, i-View shall be entitled to an
injunction restraining such Stockholder from the prohibited conduct. If a court
of competent jurisdiction should hold that the duration and/or scope (geographic
or otherwise) of the provisions contained in this Section 11 are unreasonable,
then, to the extent permitted by law, the court may prescribe a duration and/or
scope (geographic or otherwise) that is reasonable, and the parties hereto agree
to accept such determination, subject to their rights of appeal. Nothing herein
stated shall be construed as prohibiting i-View or any third party from pursuing
any other remedies available to it for such breach or threatened breach,
including the recovery of damages from the Stockholder who has violated this
Section 11. In any action or proceeding to enforce the provisions of this
Section 11, the prevailing party shall be reimbursed by the other party for all
costs incurred in such action or proceeding including, without limitation, all
court costs and filing fees, and all reasonable attorneys' fees, incurred either
at the trial level or at the appellate level. This Section 11 supersedes all
other non-competition provisions in any agreements between the Company and a
Stockholder.
12. CONVERSION OF I-VIEW TO A C CORPORATION. As soon as reasonably
practicable after the completion of the transaction contemplated hereby, i-View
will be converted from an S Corporation to a C Corporation, as such terms are
defined under applicable United States tax laws and regulations.
13. FINDER'S FEES. i-View and each of the Stockholders represent to each
other that no person is entitled to a fee or payment as a finder in connection
with the transaction contemplated herein, and each party will indemnify the
other party hereto with respect to any claim for a finder's fee in connection
therewith.
14. INFORMATION. Until the closing (or termination) of the transaction
contemplated herein, each of the Stockholders will make available for inspection
by i-View and its agents all corporate books and records and all other matters
reasonably considered by i-View to be relevant to the business and affairs of
the Company.
15. CONFIDENTIALITY. Whether or not the transaction is consummated, all
information received by any party with respect to the business and affairs of
the Company and i-View will be considered confidential and will not be disclosed
to others. This section does not prevent any disclosure to professional advisors
and agents of any party hereto. Such information shall not include information
available from public sources or which is disclosed or revealed to a party
hereto and not identified as confidential.
16. EXPENSES. Except for an aggregate of up to $2,000 of the Stockholders'
costs, expenses and the reasonable legal fees of one law firm chosen to
represent all of the Stockholders in connection with this letter agreement,
which will be paid by i-View after the
7
<PAGE>
completion of the transaction contemplated hereby and i-View's receipt of a
reasonably detailed statement therefor, each party will bear its own costs,
expenses and legal fees in connection with the transaction contemplated hereby.
17. COUNTERPARTS. This letter agreement may be signed in two or more
counterparts, each of which when executed will be deemed to be an original but
all of which taken together shall constitute one and the same letter agreement.
18. SURVIVAL. All of the representations and warranties of the parties
contained herein will survive the execution and delivery of this letter
agreement and the closing of the transaction contemplated hereby for a period of
18 months following the closing of such transaction, regardless of any
investigation made at any time by the parties hereto.
19. LIMITATION OF LIABILITY. The aggregate liability of the Stockholders
to i-View for breach of a representation and warranty in Section 6 hereof will
not exceed $1,700,000, plus any shortfall of cash i-View pays to third parties
in accordance with Section 2.2 of the Management Agreement. The liability of the
Stockholders to i-View will be allocated among the Stockholders in proportion to
the number of Shares sold by each Stockholder under this letter agreement,
excluding the Option Shares. In addition, i-View's aggregate liability to the
Stockholders for breach of a representation and warranty in Section 7 hereof
will not exceed $100,000, which will be allocated among the Stockholders in the
same manner as set forth in the preceding sentence.
20. JURISDICTION; SERVICE OF PROCESS. Each of the parties hereto agrees
that all actions or proceedings initiated by any party hereto and arising
directly or indirectly out of this letter agreement which are brought by
judicial proceedings shall be litigated in any court of competent jurisdiction
located in Dade County, Florida. Each of the parties hereto expressly submits to
the jurisdiction of such court and consents to process being served in any suit,
action or proceeding of the nature referred to in this Section 20 by the mailing
of a copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to the address of each of the parties set forth hereinafter.
Each party hereto agrees that such service will be deemed in every respect
effective service of process upon such party in any such suit, action or
proceeding and will be taken and held to be valid personal service upon each of
the parties hereto. Each of the parties hereto irrevocably and unconditionally
waives any objection a party may now or hereafter have to venue in any judicial
proceeding of the nature referred to in this Section 20 and any claim that any
action or proceeding brought in any such court has been brought in an
inconvenient or improper form.
21. NATURE OF THIS LETTER AGREEMENT. This letter agreement constitutes a
binding agreement between and among the parties hereto. However, if the
transaction contemplated herein is not completed in accordance with the terms
contained herein, Section 15 hereof shall remain in full force and effect after
such termination.
8
<PAGE>
If the foregoing correctly sets forth our understanding, please sign and
date the enclosed copy of this letter and return it to the undersigned.
Very truly yours,
i-View Software, Inc.
300 S. Pine Island Drive
Suite 261
Plantation, Florida 33324
By: /s/ PETER BERG
--------------------------
Peter Berg, President
Each of the undersigned has accepted the terms set forth in this letter as
of the date indicated.
/s/ CHRISTINE STRYKER October 30, 1996
- ---------------------------------
Christine Stryker, in her
individual capacity and as
Personal Representative of
the Estate of Timothy J. Stryker
/s/ ROBERT SHAW October 31, 1996
- ---------------------------------
Robert Shaw
/s/ STAN JOSEPH October 30, 1996
- ---------------------------------
Stan Joseph
/s/ ROBERT STEIN October 31, 1996
- ---------------------------------
Robert Stein
9
<PAGE>
/s/ SCOTT BRINKER October 31, 1996
- ---------------------------------
Scott Brinker
/s/ CHRISTOPHER ROBERT October 31, 1996
- ---------------------------------
Christopher Robert
/s/ KEITH MONEY October 31, 1996
- ---------------------------------
Keith Money
The undersigned, an authorized representative of the Escrow Agent, hereby
accepts, on behalf of the Escrow Agent, the terms and conditions set forth in
Sections 3 and 4 hereof.
LUCIO, MANDLER, CROLAND,
BRONSTEIN & GARBETT, P.A.
701 Brickell Avenue, Suite 2000
Miami, Florida 33131
By: /s/ LESLIE J. CROLAND
---------------------------
Leslie J. Croland, in his capacity
as authorized representative of the
firm and not in his individual
capacity
10
<PAGE>
EXHIBIT "A"
NAME OF STOCKHOLDER NO. OF SHARES
------------------- -------------
Estate of Timothy J. Stryker 3,852,679
Christine Stryker 250,324
Robert Shaw 1,100,000
Stan Joseph 666,667
Robert Stein 785,233
Scott Brinker 882,000
Christopher Robert 400,300
Keith Money 100,000
---------
8,037,203
<PAGE>
EXHIBIT "B"
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") dated October __, 1996 is
between Galacticomm, Inc., a Florida corporation ("Galacticomm"), and i-View
Software, Inc., a Florida corporation ("i-View").
RECITALS
A. Certain stockholders of Galacticomm and i-View have entered into a
letter agreement, pursuant to which such stockholders have agreed to sell, and
i-View has agreed to buy, all of the common stock of Galacticomm owned by such
stockholders.
B. Until such time its the completion (or termination) of the letter
agreement referred to in Recital A hereof, Galacticomm desires to retain i-View
as its managing agent to perform certain operational and administrative
functions on behalf of Galacticomm, and i-View is willing to perform such
functions on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
I.
RECITALS
The Recitals of this Agreement are true and correct and are incorporated
herein as part of the terms and conditions of this Agreement.
II.
APPOINTMENT AS AGENT
2.1 APPOINTMENT. Galacticomm hereby appoints i-View as its managing agent
and attorney-in-fact to act in Galacticomm's name, place and stead under the
terms and conditions set forth herein. Any act of i-View under the terms of this
Agreement within the scope of the agency created hereby shall be the act of
Galacticomm and not i-View. Galacticomm shall execute and deliver to i-View, as
requested by i-View, all instruments, documents and certificates, including
powers-of-attorney, necessary or appropriate for i-View to carry out its duties
and responsibilities set forth herein.
2.2 SCOPE OF AGENCY. During the term of this Agreement, I-View shall have
the authority to use the cash of Galacticomm and will be responsible to cover
any shortfall of cash required to pay all rent due including the rent payable
under Galacticomm's lease with Atria Family II Limited, payroll and utility
payments and such other financial obligations of Galacticomm as are agreed to in
writing by the parties hereto. In performing the operational and administrative
functions referred to in this Agreement, i-View shall be subject to the
supervision and control of the board of directors of Galacticomm. In no event
shall i-View
<PAGE>
make any payment or incur an obligation on behalf of Galacticomm involving in
excess of $10,000 without obtaining the prior approval of the board of directors
of Galacticomm.
III.
TERM
3.1 BASIC TERM. Except as provided in Section 3.2 hereof, the term of this
Agreement shall commence on the date hereof and shall end upon the completion
(or termination) of the transaction referred to in Recital A hereof.
3.2 TERMINATION IN EVENT OF BANKRUPTCY. If an involuntary or voluntary
case or proceeding is commenced against or by Galacticomm under the United
States Bankruptcy Reform Act of 1978, as amended, or any similar federal or
state statute, i-View may terminate this Agreement upon 30 days prior written
notice.
3.3 RETURN OF FILES. If this Agreement is terminated pursuant to Sections
3.1 or 3.2 hereof, i-View shall return to Galacticomm all files, information and
material belonging to Galacticomm in its possession and shall return all powers
of attorney and similar documents granted or executed hereunder to i-View;
provided, however, that all such files, information and materials shall be made
available to i-View for inspection and photocopying during normal business
hours; and provided further, that at Galacticomm's sole cost and expense, i-View
will make available to Galacticomm its employees to facilitate an orderly
transfer of such files, information and materials.
IV.
REMUNERATION
It is acknowledged and understood by the parties hereto that this
Agreement is entered into as an interim measure prior to the completion (or
termination) of the transaction referred to in Recital A. Galacticomm shall not
be obligated to compensate i-View for its services hereunder.
V.
INDEMNITY
Galacticomm shall indemnify, save and hold harmless i-View and its
officers, directors, employees and agents from and against any obligation,
liability, cost or damage resulting from i-View's actions in accordance with the
terms of this Agreement, except to the extent occasioned by the gross negligence
or willful misconduct of i-View.
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<PAGE>
VI.
MISCELLANEOUS
6.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with respect to transactions contemplated hereby and may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto. No party to this
Agreement may assign any of its rights or obligations under this Agreement
without the prior written consent of the other party. Notwithstanding anything
else contained herein to the contrary, i-View shall have the right to retain, on
Galacticomm's behalf, consultants, accountants, attorneys, engineers or other
parties to assist i-View in carrying out its duties and responsibilities
hereunder, the fees and expenses of such parties shall be at the sole cost and
expense of i-View (unless agreed to the contrary in writing by Galacticomm).
6.2 BINDING AGREEMENT. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by Galacticomm and i-View and their respective
successors, representatives and permitted assigns.
6.3 LIMITATION ON DAMAGES. Neither party shall be liable to the other
party for any consequential damages resulting from a breach from this Agreement.
6.4 NO JOINT VENTURE OR PARTNERSHIP. Nothing expressed or implied in this
Agreement is intended or shall be construed to create or establish a joint
venture or a partnership between the parties hereto.
6.5 NOTICES. All notices, claims, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if actually delivered as follows:
(a) IF TO GALACTICOMM, to:
Galacticomm, Inc.
4101 S.W. 47th Avenue
Suite 101
Fort Lauderdale, Florida 33314
Attn: President
(b) IT TO I-VIEW, to:
i-View Software, Inc.
300 S. Pine Island Road
Suite 261
Plantation, Florida 33324
Attn: President
3
<PAGE>
or such other address as the party to whom notice is to be given may have
previously furnished to the other party in writing in the manner set forth above
(provided, that notice of any change of address shall be effective upon receipt
thereof).
6.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one in the same instrument.
6.7 FLORIDA LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida applicable to
contracts made and to be performed therein.
6.8 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
hereafter be declared invalid, void or unenforceable.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as of the date first written above.
GALACTICOMM, INC.
By: /s/ ROBERT SHAW
-------------------------------
Authorized Representative
I-VIEW SOFTWARE, INC.
BY: /s/ PETER BERG
-------------------------------
Authorized Representative
4
EXHIBIT 10.18
CONSULTING AGREEMENT
AMENDED AND RESTATED
This Agreement is made and entered into as of July 1, 1997 between Galacticomm
Technologies, Inc. with its principal place of business at 4101 SW 47th Avenue,
Suite 101, Fort Lauderdale, FL 33314 herein referred to as "Corporation", and
Union Atlantic LC with its principal place of business at 701 Brickell Avenue,
Suite 2000, Miami, Florida 3313, herein referred to as "Consultant".
RECITALS
1. Corporation is an Internet services provider as well as a developer and
marketer of communications software for Internet, Intranet and Extranet
applications and in the conduct of such business desires to receive management
consulting services.
2. Consultant has extensive experience in managing, directing and
supervising various aspects of multi-national companies, strategic planning,
corporate development, operations and administration and in designing and
implementing the marketing and channel strategies with specific experience in
consumer electronics, removable cartridge disk drives, mass storage peripherals,
PCs and peripherals, telecommunications, cable, Internet and Intranet
technologies.
3. Consultant agrees to perform these services for Corporation under the
terms and conditions set forth in this Agreement.
In consideration of the mutual promises set forth herein, it is agreed by and
between Corporation and Consultant as follows:
SECTION ONE
NATURE OF WORK
Consultant, will on behalf of the Corporation, perform business consulting and
business advisory services with respect to the recruitment of key personnel, the
development of brand and distribution channels, assisting the Corporation in the
execution of a sales and marketing plan, and identifying and/or assisting in the
development of strategic business partnerships.
SECTION TWO
PLACE OF WORK
It is understood that Consultant's services will be rendered both on and
off-site of Corporation. Corporation agrees to provide an office, secretarial
support, and time of key employees while Consultant is on-site. The parties
agree that Consultant will incur general overhead costs related to the services
its renders under this Agreement, but its shall not be entitled to reimbursement
of such overhead costs except as provided in Section Three.
SECTION THREE
PERSONS AND TIME DEVOTED TO WORK
Consultant agrees to make available at any one time the business consulting
services of one of Consultant's principal consultants, Timothy Mahoney or
Leonard J. Sokolow. In the performance of the services, the services and the
hours Consultant is to work on any given day will be entirely within the
Consultant's control and Corporation will rely upon Consultant to put in such
number of hours as is reasonably necessary to fulfill the spirit and the purpose
of this Agreement.
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<PAGE>
SECTION FOUR
DURATION
The duration of this Agreement (the "Term"), unless otherwise extended by mutual
consent of both, shall be from July 1, 1997 until June 30, 2001.
SECTION FIVE
PAYMENT AND EXPENSES/UA PARTNERS INVESTMENT
Corporation will pay Consultant a consulting fee of Ten Thousand Dollars
($10,000) per calendar month. Payment shall be made on the twentieth day of each
month during the Term.
Corporation shall reimburse Consultant for all pre-approved business and travel
expenses incurred by the Consultant in the performance of the work defined
herein.
The parties acknowledge that Consultant was paid the following amount as a
finder's fee in connection with the November 1996 investment by the Wallenberg
Trust: (1) cash compensation of $375,500; (2) a three -year warrant to purchase
567,460 shares of Common Stock at an exercise price of $0.63 per share with
demand and piggyback registration rights; and 317,360 shares of Common Stock.
The parties further acknowledge that the Company paid Consultant the following
amounts as a finder's fee in connection with the Company's June 1997 Private
Placement: (a) cash compensation of $126,209; and (b) a three year warrant to
purchase 137,184 shares of Common Stock at an exercise price of $0.92 per share
with demand and piggyback registration rights.
SECTION SIX
STATUS OF CONSULTANT
This Agreement calls for the performance of the services as an independent
contractor and Consultant will not be considered an employee of the Corporation
for any purpose.
SECTION SEVEN
SERVICES FOR OTHERS
Consultant may, during the term of this Agreement, perform services for any
other person or firm, without Corporation's prior approval, provided it does not
compete with Corporation in the product areas where Consultant is performing
work.
SECTION EIGHT
OWNERSHIP
Consultant acknowledges that all work developed under this Agreement, will be
the sole property of the Corporation and only Corporation will be free to use
such works without any obligation to remit any payment, other than that which is
agreed to in this Agreement, to Consultant for future and continued usage.
SECTION NINE
CONFIDENTIALITY
Consultant acknowledges that it is being given access to confidential
information under a non-disclosure agreement and will treat all information
received as such and take the necessary precautions to ensure that this
information is kept confidential by all Consultant employees and any and all
subcontractors that it engages for this Agreement.
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<PAGE>
SECTION TEN
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida, The United States of America.
SECTION ELEVEN
INTEGRATION
This Agreement contains the entire agreement among the parties and supersedes
all prior and contemporaneous oral and written agreements, understandings, and
representations among the parties. No amendments to this Agreement shall be
binding unless executed in writing by all the parties.
[The remainder of this page has been intentionally left blank]
3
<PAGE>
SECTION TWELVE
ARBITRATION; ATTORNEY'S FEES
Any controversy or claim arising out of, or relating to, this Agreement, to the
making, performance, or interpretation of it, shall be settled by arbitration in
Miami, Florida, or as otherwise mutually agreed upon by the parties, under the
commercial arbitration rules of the American Arbitration Association then
existing, and any judgment on the arbitration award may be entered in any court
having jurisdiction over the subject matter of the controversy. If any legal
action or any arbitration or other proceeding is brought for the enforcement of
this Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorney's fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
SECTION THIRTEEN
BOARD APPOINTMENT
During the term of this Agreement, Consultant shall have the right to appoint
one representative to the Board of Directors of the Corporation. Consultant
shall have the right to appoint one member to Corporation's Board of Directors
which person is initially designated to be Timothy Mahoney.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the
day and year first above written.
CORPORATION
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ Peter Berg
--------------------------------
Peter Berg, CEO
CONSULTANT
UNION ATLANTIC LC
BY: /s/Leonard J. Sokolow
--------------------------------
Leonard J. Sokolow, President
3
EXHIBIT 10.19
CONSULTING AGREEMENT
This Agreement is made and entered into January 15, 1997 between iView Software,
Inc. with its principal place of business at 4101 SW 47th Avenue, Suite 101,
Fort Lauderdale, Florida 33314 herein referred to as Corporation, and Union
Atlantic, LC with its principal place of business at 701 Brickell Avenue,
Suite 2000, Miami, Florida 33131 herein referred to as Consultant.
RECITALS
1. Corporation specializes in the development and marketing of personal computer
software products that provide online solutions and in the conduct of such
business desires to receive certain consulting services from Mr. Robert J.
O'Brien (O'Brien).
2. Consultant agrees to provide the services of O'Brien to perform these
services for Corporation under the terms and conditions set forth in this
Agreement. In consideration of the mutual promises set forth herein, it is
agreed by and between Corporation and Consultant as follows:
SECTION ONE
NATURE OF WORK
Consultant will provide the services of O'Brien with respect to the development
of and execution of product and marketing strategies, human and systems
resource development and strategic business development ie. software and
hardware bundles and international expansion. Execution will include meeting
regularly with product marketing managers and supervising there efforts in
implementing the marketing strategies.
SECTION TWO
PLACE OF WORK
It is understood that O'Brien's services will be rendered both on and off-site
of Corporation. Corporation agrees to provide an office, secretarial support,
and time of key employees while O'Brien is on-site. Consultant will give
Corporation advance notice of those times when Consultant plans to be on-site.
SECTION THREE
TIME DEVOTED TO WORK
In the performance of the services, the services and the hours O'Brien is to
work on any given day will be entirely within the Consultant's control and
Corporation will rely upon Consultant to have O'Brien provide such number of
hours as is reasonably necessary to fulfill the spirit and the purpose of this
Agreement.
SECTION FOUR
DURATION
The duration of this Agreement (the "Term"), unless otherwise extended pursuant
to Section Five or by mutual consent of both parties, shall be from the date of
this Agreement until December 31, 1997. This agreement will renew for 12 months
with mutual consent with 30 day written notice. Should during the Term,
Corporation shall enter into an agreement for either a sale or merger of the
Corporation the Term shall be extended until said transaction is closed. Should
during the Term, Corporation receive an Underwriter's commitment to do a public
offering the Term of this agreement shall automatically renew for one 12 month
period.
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<PAGE>
SECTION FIVE
PAYMENT
Corporation will pay Consultant a consulting fee of Seven Thousand Dollars
($7,000) per calendar month. Payment shall be made on the first day of each
month during the Term, the first such installment to be paid on February 1, 1997
for the January 1997 period.
Corporation will reimburse Consultant for all pre-approved business expenses
incurred by O'Brien in the performance of the work defined herein.
The Corporation hereby agrees to grant O'Brien an option to acquire 10,000
common shares of iView Inc., at a per share price of $0.63 cents. These options
shall expire three years from the date hereof. These options shall vest
immediately. The common stock underlying such options shall have registration
rights as provided pursuant to the agreement between iView, Inc. and Union
Atlantic dated November 21, 1996.
SECTION SIX
STATUS OF CONSULTANT
This Agreement calls for the performance of the services as an independent
contractor and neither Consultant or O'Brien will be considered an employee of
or broker or finder for the Corporation for any purpose.
SECTION SEVEN
SERVICES FOR OTHERS
Consultant or O'Brien may, during the term of this Agreement, perform services
for any other person or firm, without Corporation's prior approval, provided it
does not compete with Corporation in the product areas where O'Brien is
performing work.
SECTION EIGHT
OWNERSHIP
Consultant acknowledges that all work developed under this Agreement, will be
the sold property of the Corporation and only Corporation will be free to use
such works without any obligation to remit any payment, other than that which
is agreed to in this Agreement, to Consultant for future and continued usage.
SECTION NINE
CONFIDENTIALITY
Consultant acknowledges that it is being given access to confidential
information under a non-disclosure agreement and will treat all information
received as such and take the necessary precautions to ensure that this
information is kept confidential by all Consultant employees and any and all
subcontractors that it engages for this Agreement.
SECTION TEN
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida. The United States of America.
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<PAGE>
SECTION ELEVEN
INTEGRATION
This Agreement contains the entire agreement for the services of O'Brien among
the parties. This agreement does not supersede any prior or contemporaneous oral
and written agreements, understandings, and representations among the parties.
No amendments to this Agreement shall be binding unless executed in writing by
all the parties.
SECTION TWELVE
ARBITRATION; ATTORNEY'S FEES
Any controversy or claim arising out of, or relating to, this Agreement, to the
making, performance, or interpretation of it, shall be settled by arbitration in
Miami, Florida, or as otherwise mutually agreed upon by the parties, under the
commercial arbitration rules of the American Arbitration Association then
existing, and any judgment on the arbitration award may be entered in any court
having jurisdiction over the subject matter of the controversy. If any legal
action or any arbitration or other proceeding is brought for the enforcement of
this Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorney's fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
IN WITNESS WHEREOF, The parties to this Agreement and their respective
shareholders have duly executed it on the day and year first above written.
CORPORATION
iView Software, Inc.
By: /s/ PETER BERG 1/28/97
---------------------------------------
Peter Berg, Chairman Date
CONSULTANT
Union Atlantic, LC
By: /s/ ROBERT J. O'BRIEN 1/28/97
---------------------------------------
Robert J. O'Brien Date
3
EXHIBIT 10.20
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
entered into as of June 30, 1997, by and between GALACTICOMM TECHNOLOGIES, INC.
(formerly known as I-View Software, Inc.), a Florida corporation (the
"Company"), and PETER BERG (the "Executive").
RECITALS:
A. The Company entered into an Employment Agreement with the Executive on
November 21, 1996 (the "Original Agreement").
B. The Company and the Executive wish to amend and restate the Original
Agreement as set forth herein.
NOW THEREFORE, in consideration of the premise, and the respective
covenants and agreements of each of the Company and the Executive contained in
this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
EMPLOYMENT
The Company employs the Executive and the Executive accepts such
employment in accordance with the terms hereof. Subject to the direction of the
Board of Directors of the Company, the Executive shall serve as Chief Executive
Officer and Chairman of the Board of the Company. The Executive shall have such
responsibilities, perform such duties and exercise such power and authority as
are inherent in, or incident to, the offices of Chief Executive Officer and
Chairman of the Board. The Executive shall devote such reasonable time to the
performance of his duties as an officer and employee of the Company as is
necessary.
ARTICLE II
SALARY
2.1 SALARY. Commencing as of November 21, 1996 and continuing through
November 20, 1999, the Company shall pay to the Executive a salary of One
Hundred Seventy Five Thousand Dollars ($175,000) per annum (the "Salary") which
salary shall be automatically increased 10% per annum on a cumulative basis
during the term of this agreement on each anniversary date.
2.2 PAYMENT OF SALARY. Payments of Salary shall be made to the Executive,
in installments, from time to time on the same dates payments of salary are
generally made to all senior management employees of the Company.
<PAGE>
ARTICLE III
BONUS AND STOCK OPTIONS
3.1 Within 45 days of the end of each of the Company's fiscal years ending
December 31 1997, 1998 and 1999, the Company shall pay the Executive a bonus
equal to five percent (5%) of the Company's pre-tax profits for the fiscal year
then ended, if the following conditions are met:
(a) the Company's pre-tax profits for such fiscal year exceed one
million dollars ($1,000,000); and
(b) the Executive was employed by the Company for at least the first
six (6) months of such fiscal year.
3.2 The Company shall issue the Executive 720,000 options to purchase the
Company's common stock, par value $0.0001 per share, in accordance with the
terms of the Stock Option and Agreement attached hereto as Exhibit "A".
ARTICLE IV
EMPLOYMENT BENEFITS
4.1 GENERALLY. The Executive shall be entitled to receive all such
benefits and to participate in such benefit and incentive plans, programs and
arrangements as are generally provided from time to time by the Company to its
senior management employees.
4.2 AUTOMOBILE ALLOWANCE. The Company shall pay to the Executive a monthly
allowance of Six Hundred Dollars ($600) which shall be utilized by the
Executive, on a non-accountable basis, to pay for the costs and expenses
incurred by him in connection with the ownership or lease, repair, maintenance
and operation (including insurance expenses) of a late model automobile.
4.3 MEDICAL INSURANCE; TERM LIFE INSURANCE. The Company shall provide
group medical insurance coverage to the Executive or reimburse the Executive for
the cost of such coverage. The Company shall also provide $1,000,000 of term
life insurance naming such beneficiary thereof as the Executive may desire.
4.4 BUSINESS, TRAVEL AND ENTERTAINMENT. Upon submission of appropriate
evidence, the Company shall promptly pay or reimburse the Executive for all
reasonable business, travel and entertainment expenses incurred by the Executive
in connection with the performance of his duties and obligations hereunder.
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ARTICLE V
TERM AND TERMINATION OF EMPLOYMENT
5.1 TERM. The term of this Agreement shall be for a period of three years,
commencing as of November 21, 1996 and expiring on November 20, 1999.
5.2 TERMINATION OF EMPLOYMENT.
(a) Notwithstanding the provisions of Section 5.1 above:
(i) the employment of the Executive by the Company shall
automatically terminate upon the death of the Executive;
(ii) if the Executive shall suffer a Disability (as such term is
hereinafter defined), then the employment of the Executive by the Company may be
terminated by the Company;
(iii) the employment of the Executive by the Company may be
terminated at any time by the Company, either with or without Cause (as such
term is hereinafter defined); and
(iv) the employment of the Executive by the Company may be
terminated at any time by the Executive, either with or without Good Reason (as
such term is hereinafter defined).
(b) If the Company shall desire to terminate the Executive's
employment, or if the Executive shall desire to terminate the Executive's
employment by the Company, as contemplated by Section 5.2(a) above, then, in any
such event, the party causing such termination shall provide a Termination
Notice (as such term is hereinafter defined) to the other party.
5.3 PAYMENTS UPON TERMINATION OF EMPLOYMENT.
(a) If the employment of the Executive by the Company shall be
terminated due to the Executive's death or Disability, then, in any such event,
the Company shall continue to pay to the Executive or his estate, heirs,
personal representatives or legal representatives, as the case may be, his
Salary (subject to applicable payroll and/or other taxes required by law to be
withheld) for a period of six months from and after the date of termination of
the Executive's employment by the Company.
(b) If the employment of the Executive by the Company shall be
terminated for any reason (other than by the Company due to the Executive's
death or Disability or with Cause, or by the Executive without Good Reason)
then, in any such event, the Company shall continue
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to pay to the Executive his Salary (subject to applicable payroll and/or other
taxes required by law to be withheld) for the greater of (A) the entire
remaining term of this Agreement or (B) twelve consecutive months from such
termination.
(c) If the employment of the Executive by the Company shall be
terminated by the Company with Cause or by the Executive without Good Reason,
then, in any such event, the Company shall continue to pay to the Executive his
Salary (subject to applicable payroll and/or other taxes required by law to be
withheld) through the Termination Date (as such term is hereinafter defined).
(d) If the employment of the Executive by the Company shall be
terminated for any reason, or if the term of this Agreement shall expire in
accordance with its terms, then, in any such event, the Company shall promptly
pay to the Executive all accrued but unpaid benefits to which he shall be
entitled on the date of termination of the Executive's employment by the
Company.
5.4 CERTAIN DEFINITIONS. The following terms shall have the following
respective meanings when utilized in this Article V:
(a) "Cause" shall mean any action by the Executive or any inaction by
the Executive which constitutes:
(i) fraud, embezzlement, misappropriation, dishonesty or breach of
trust;
(ii) a felony;
(iii) a material breach or violation of any or all of the
covenants, agreements and obligations of the Executive set forth in this
Agreement, other than as the result of the Executive's death or Disability;
(iv) a willful or knowing failure or refusal by the Executive to
perform any or all of his material duties and responsibilities as an officer of
the Company, other than as the result of the Executive's death or Disability: or
(v) gross negligence by the Executive in the performance of any or
all of his material duties and responsibilities as an officer of the Company,
other than as a result of the Executive's death or Disability;
provided, however, that if the basis for any termination of the Executive's
employment by the Company as set forth in the Termination Notice delivered by
the Company to the Executive is any or all of the definitions of Cause set forth
in Sections 5.4(a)(iii), 5.4(a)(iv) or 5.4(a)(v) of this Agreement, then, in
such event, the Executive shall have thirty (30) days from and after the date of
his receipt of such Termination Notice to present a reasonable plan to cure such
action or inaction specified in the Termination Notice, which plan may require
more than thirty (30) days
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to cure the specified action or inaction, but such plan must be reasonably
satisfactory to the Company and the Executive must proceed diligently to
effectuate such plan.
(b) "Disability" shall mean any mental or physical illness, condition,
disability, or incapacity which prevents the Executive from reasonably
discharging his duties and responsibilities as an officer of the Company. If any
disagreement or dispute shall arise between the Company and the Executive as to
whether the Executive suffers from any Disability, then, in such event, the
Executive shall submit to the physical or mental examination of a physician
licensed under the laws of the State of Florida, who is mutually agreeable to
the Company and the Executive, and such physician shall determine whether the
Executive suffers from any Disability. In the absence of fraud or bad faith, the
determination of such physician shall be final and binding upon the Company and
the Executive. The entire cost of such examination shall be paid for solely by
the Company.
(c) "Good Reason" shall mean:
(i) the assignment by the Board of Directors or the Executive
Committee of the Board of Directors to the Executive, without his express
written consent, of duties and responsibilities which results in the Executive
having significantly less duties and responsibilities or exercising
significantly less power and authority than he had, or duties and
responsibilities or power and authority not comparable to that of the level and
nature which he had, immediately prior to such assignment;
(ii) the removal of the Executive from, or a failure to reappoint
the Executive to, his then current position or positions with the Company or its
subsidiaries or affiliates, except (A) with the Executive's express written
consent or (B) in connection with any termination of the Executive's employment
by the Company as the result of the Executive's death or Disability or with
Cause;
(iii) the reduction of the Executive's Salary or the reduction of
any or all of the Executive's benefits set forth in Article IV above;
(iv) the Company's failure to perform on a timely basis its
obligations under this Agreement;
(v) the Company's requiring the Executive, without his express
written consent, to travel on Company business to an extent substantially
greater than the Executive's business travel obligations immediately prior to
such time;
(vi) the Company's requiring the Executive, without his express
written consent, to change his place of permanent residency to a place outside
of Broward County, Florida; or
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(vii) the Company's moving its executive offices to a place
outside of Broward County, Florida without the Executive's express written
consent.
(d) "Termination Date" shall mean a specific date not less than
forty-five (45) nor more than ninety (90) days from and after the date of any
Termination Notice upon which the Executive's employment by the Company shall be
terminated in accordance with the provisions of this Agreement.
(e) "Termination Notice" shall mean a written notice which sets forth
(i) the specific provision of this Agreement relied upon to terminate the
Executive's employment, (ii) in reasonable detail the facts and circumstances
claimed to provide the basis for the termination of the Executive's employment,
and (iii) a Termination Date.
5.5 SURVIVAL. All of the provisions of this Agreement, other than those
contained in Articles I, III, and IV hereof, shall survive the termination for
any reason of the Executive's employment by the Company or the expiration of the
term of this Agreement. The provisions of Article II of this Agreement shall
survive the termination for any reason of the Executive's employment by the
Company or the expiration of the term of this Agreement only to the extent set
forth in this Article V.
ARTICLE VI
Certain Restrictions on the Executive
6.1 CERTAIN RESTRICTIONS. The Executive covenants and agrees with the
Company as follows:
(a) He shall not at any time, directly or indirectly, for himself or
any other person, firm, corporation, partnership, association or other entity
(collectively, a "Person") which competes in any manner with the Company or any
of its subsidiaries or affiliates in any county or parish of any state of the
United States of America or its territories and possessions in which the Company
as of the date that the Executive's employment by the Company is terminated for
any reason or the term of this Agreement expires in accordance with its terms,
as the case may be, conducts its business directly or indirectly through any of
its subsidiaries or affiliates (collectively, the "Territory"), employ, attempt
to employ or enter into any contractual arrangement for employment with, any
employee or former employee of the Company or any of its subsidiaries or
affiliates, unless such former employee shall not have been employed by the
Company or any of its subsidiaries or affiliates for a period of at least one
year.
(b) He shall not, during the term of his employment by the Company
and for a period of one year and after the date that his employment by the
Company is terminated for any reason or the term of this Agreement expires in
accordance with its terms, as the case may be, directly or indirectly, (i)
acquire or own in any manner any interest in, or loan any amount to, any Person
which competes in any manner with the Company or any of its subsidiaries or
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affiliates in the Territory, (ii) be employed by or serve as an employee, agent,
officer, or director of, or as a consultant to, any Person, other than the
Company and its subsidiaries and affiliates, which competes in any manner with
the Company or its subsidiaries or affiliates in the Territory, or (iii) compete
in any manner with the Company or its subsidiaries or affiliates in the
Territory. The foregoing provisions of this Section 6.1 (b) shall not prevent
the Executive from acquiring and owning not more than five percent (5%) of the
equity securities of any Person whose securities are listed for trading on a
national securities exchange or are regularly traded in the over-the-counter
securities market.
(c) In the course of the Executive's employment by the Company, the
Executive will have access to confidential or proprietary information of the
Company and its subsidiaries and affiliates. The Executive shall not at any time
use any such confidential or proprietary information other than for the benefit
of the Company and its subsidiaries and affiliates. The term "confidential or
proprietary information" shall mean information not generally available to the
public, including without limitation personnel information, financial
information, customer lists, supplier lists, ownership information, marketing
plans and analyses, trade secrets, know-how, computer software, management
agreements and procedures and techniques of operating and managing the business
of the Company and its subsidiaries and affiliates. The Executive acknowledges
and agrees that all confidential or proprietary information is and shall remain
the property of the Company and its subsidiaries and affiliates, and agrees to
maintain all such confidential or proprietary information in confidence.
(d) DEVELOPMENTS. All inventions patentable, copyrightable or otherwise,
trade secrets, discoveries, improvements, ideas and writings (hereinafter
collectively termed "developments"), which Executive, alone or jointly with
others, has conceived, made, enhanced, modified, developed, or acquired, or may
conceive, make, enhance, modify, develop, or acquire during the period of his
employment hereunder or during an additional period of one (1) year after the
termination of such employment and which relate to the Company's business of
developing and marketing computer hardware and software, and all developments
which relate to the work upon which Executive shall have been engaged while in
the Company's employment, which Executive has conceived, made, enhanced,
modified, developed, or acquired, or may conceive, make, enhance, modify,
develop, or acquire during the period of his employment or during a period of
one (1) year after the termination of such employment, to the extent that such
developments are possessed by Executive at any time, shall be the sole property
of the Company. The term "development" shall include developments conceived,
devised, made, developed or perfected during off-duty hours and away from the
Company's premises as well as to those conceived, devised, made, developed, or
perfected in the regular course of employment.
(e) DISCLOSURE AND COOPERATION. Executive shall promptly and fully
disclose in writing all such developments described in subparagraph (d) hereof
to the Company's Chief Executive Officer. Executive shall, at any time upon the
Company's request, whether or not then in the Company's employ, execute,
acknowledge and deliver to the Company all instruments which the Company shall
prepare, give evidence, and do all other things which are necessary or
desirable, to enable the Company to file and prosecute applications for, and to
acquire, maintain and
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enforce all patents, trademarks, copyrights, and any other intellectual property
rights in all countries, covering such developments. The Company agrees to pay
to Executive reasonable expenses incurred by Executive under this subparagraph
(e).
6.2 REMEDIES. It is recognized and acknowledged by each of the Company and
the Executive that a breach or violation by the Executive of any or all of his
covenants and agreements contained in Section 6.1 of this Agreement will cause
irreparable harm and damage to the Company and its subsidiaries and affiliates
in a monetary amount which would be virtually impossible to ascertain and,
therefore, will deprive the Company of an adequate remedy at law. Accordingly,
if the Executive shall breach or violate any or all of his covenants and
agreements set forth in Section 6.1 hereof, then the Company and its
subsidiaries and affiliates shall have resort to all equitable remedies,
including without limitation the remedies of specific performance and
injunction, both permanent and temporary, as well as all other remedies which
may be available at law.
6.3 INTENT. It is the intent of the parties that the restrictions set
forth in Section 6.1 hereof shall be enforced to the fullest extent permissible
under the laws and public policies of each jurisdiction in which enforcement of
such restrictions may be sought. If any provision contained in Section 6.1
hereof shall be adjudicated by a court of competent jurisdiction to be invalid
or unenforceable because of its duration or geographic scope, then such
provision shall be reduced by such court in duration or geographic scope or both
to such extent as to make it valid and enforceable in the jurisdiction where
such court is located, and in ail other respects shall remain in full force and
effect.
ARTICLE VII
INDEMNIFICATION
The Company shall indemnify auld hold harmless the Executive from and
against the full amount of any and all claims, demands, suits, actions,
judgements, losses, liabilities, costs, interest and expenses, including without
limitation fees and disbursements of trial and appellate counsel, asserted or
brought against the Executive by any Person with respect to any action taken or
omitted to be taken by the Executive in the course of his employment by the
Company or otherwise related to or arising out of his employment by the Company
or acting as a director, officer, employee or agent of the Company or any of its
subsidiaries or affiliates. This right to indemnification shall be in effect to
the fullest extent available pursuant to law, and shall be in addition to any
other right to indemnification the Executive may possess pursuant to law and the
Articles of Incorporation and Bylaws of the Company or any of its subsidiaries
or affiliates.
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ARTICLE VIII
ATTORNEYS' FEES
In the event that any litigation shall arise between the Company and the
Executive based, in whole or in part, upon this Agreement or any or all of the
provisions contained herein, then, in any such event, the prevailing party in
any such litigation shall be entitled to recover from the non-prevailing party,
and shall be awarded by a court of competent jurisdiction, any and all
reasonable fees and disbursements of trial and appellate counsel paid, incurred
or suffered by such prevailing party as the result of, arising from, or in
connection with, any such litigation.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of Florida.
9.2 NOTICES. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or certified mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: Galacticomm Technologies, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
If to the Executive: Peter Berg
15050 S.W. 10 Street
Sunrise, Florida 33326
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 9.2.
9.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Executive with
respect to such subject matter.
9.4 AMENDMENTS. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Executive.
9.5 BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit of,
and shall be binding upon, each of the Company and the Executive and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
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9.6 SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part hereof,
all of which are inserted conditionally on their being valid in law. Except as
otherwise provided in Section 6.3 above, if any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall be
declared invalid by any court of competent jurisdiction, then, in any such
event, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted.
9.7 NO WAIVERS. The waiver by either party of a breach or violation of any
provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The waiver by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
9.8 JURISDICTION AND VENUE; SERVICE OF PROCESS. Any claim or dispute
arising out of, connected with, or in any way related to this Agreement which
results in litigation shall be instituted by the complaining party and
adjudicated either in the federal or state courts located in Broward County,
Florida and each of the parties to this Agreement consent to the personal
jurisdiction of and venue in such courts. In no event shall either party to this
Agreement contest the jurisdiction or venue of such courts with respect to any
such litigation. Each of the Company and the Executive agrees that service of
any process, summons, notice or document, by United States registered or
certified mail, to its or his address set forth in or as provided in Section 9.2
above shall be effective service of such process, summons, notice or document
for any action, suit or proceeding brought against it or him by the other party
in the federal or state courts located in Broward County, Florida.
9.9 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
any or all of the provisions hereof.
9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered
this Agreement as of the date first written above.
GALACTICOMM TECHNOLOGIES, INC.
/s/ PETER BERG By: /s/ YANNICK TESSIER
- -------------------------------- -------------------------------
Peter Berg Name: Yannick Tessier
-----------------------------
Title: President
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EXHIBIT 10.21
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
entered into as of June 30, 1997, by and between GALACTICOMM TECHNOLOGIES, INC.
(formerly known as I-View Software, Inc.), a Florida corporation (the
"Company"), and YANNICK TESSIER (the "Executive").
RECITALS:
A. The Company entered into an Employment Agreement with the Executive on
November 21, 1996 (the "Original Agreement").
B. The Company and the Executive wish to amend and restate the Original
Agreement as set forth herein.
NOW THEREFORE, in consideration of the premise, and the respective
covenants and agreements of each of the Company and the Executive contained in
this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
EMPLOYMENT
The Company employs the Executive and the Executive accepts such
employment in accordance with the terms hereof. Subject to the direction of the
Board of Directors of the Company, the Executive shall serve as President of the
Company. The Executive shall have such responsibilities, perform such duties and
exercise such power and authority as are inherent in, or incident to, the office
of President. The Executive shall devote such reasonable time to the performance
of his duties as an officer and employee of the Company as is necessary.
ARTICLE II
SALARY
2.1 SALARY. Commencing as of November 21, 1996 and continuing through
November 20, 1999, the Company shall pay to the Executive a salary of One
Hundred Seventy Five Thousand Dollars ($175,000) per annum (the "Salary") which
salary shall be automatically increased 10% per annum on a cumulative basis
during the term of this agreement on each anniversary date.
2.2 PAYMENT OF SALARY. Payments of Salary shall be made to the Executive,
in installments, from time to time on the same dates payments of salary are
generally made to all senior management employees of the Company.
<PAGE>
ARTICLE III
BONUS AND STOCK OPTIONS
3.1 Within 45 days of the end of each of the Company's fiscal years ending
December 31 1997, 1998 and 1999, the Company shall pay the Executive a bonus
equal to five percent (5%) of the Company's pre-tax profits for the fiscal year
then ended, if the following conditions are met:
(a) the Company's pre-tax profits for such fiscal year exceed one
million dollars ($1,000,000); and
(b) the Executive was employed by the Company for at least the first
six (6) months of such fiscal year.
3.2 The Company shall issue the Executive 720,000 options to purchase the
Company's common stock, par value $0.0001 per share, in accordance with the
terms of the Stock Option and Agreement attached hereto as Exhibit "A".
ARTICLE IV
EMPLOYMENT BENEFITS
4.1 GENERALLY. The Executive shall be entitled to receive all such
benefits and to participate in such benefit and incentive plans, programs and
arrangements as are generally provided from time to time by the Company to its
senior management employees.
4.2 AUTOMOBILE ALLOWANCE. The Company shall pay to the Executive a monthly
allowance of Six Hundred Dollars ($600) which shall be utilized by the
Executive, on a non-accountable basis, to pay for the costs and expenses
incurred by him in connection with the ownership or lease, repair, maintenance
and operation (including insurance expenses) of a late model automobile.
4.3 MEDICAL INSURANCE; TERM LIFE INSURANCE. The Company shall provide
group medical insurance coverage to the Executive or reimburse the Executive for
the cost of such coverage. The Company shall also provide $1,000,000 of term
life insurance naming such beneficiary thereof as the Executive may desire.
4.4 BUSINESS, TRAVEL AND ENTERTAINMENT. Upon submission of appropriate
evidence, the Company shall promptly pay or reimburse the Executive for all
reasonable business, travel and entertainment expenses incurred by the Executive
in connection with the performance of his duties and obligations hereunder.
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ARTICLE V
TERM AND TERMINATION OF EMPLOYMENT
5.1 TERM. The term of this Agreement shall be for a period of three years,
commencing as of November 21, 1996 and expiring on November 20, 1999.
5.2 TERMINATION OF EMPLOYMENT.
(a) Notwithstanding the provisions of Section 5.1 above:
(i) the employment of the Executive by the Company shall
automatically terminate upon the death of the Executive;
(ii) if the Executive shall suffer a Disability (as such term is
hereinafter defined), then the employment of the Executive by the Company may be
terminated by the Company;
(iii) the employment of the Executive by the Company may be
terminated at any time by the Company, either with or without Cause (as such
term is hereinafter defined); and
(iv) the employment of the Executive by the Company may be
terminated at any time by the Executive, either with or without Good Reason (as
such term is hereinafter defined).
(b) If the Company shall desire to terminate the Executive's
employment, or if the Executive shall desire to terminate the Executive's
employment by the Company, as contemplated by Section 5.2(a) above, then, in any
such event, the party causing such termination shall provide a Termination
Notice (as such term is hereinafter defined) to the other party.
5.3 PAYMENTS UPON TERMINATION OF EMPLOYMENT.
(a) If the employment of the Executive by the Company shall be
terminated due to the Executive's death or Disability, then, in any such event,
the Company shall continue to pay to the Executive or his estate, heirs,
personal representatives or legal representatives, as the case may be, his
Salary (subject to applicable payroll and/or other taxes required by law to be
withheld) for a period of six months from and after the date of termination of
the Executive's employment by the Company.
(b) If the employment of the Executive by the Company shall be
terminated for any reason (other than by the Company due to the Executive's
death or Disability or with Cause, or by the Executive without Good Reason),
then, in any such event, the Company shall continue
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to pay to the Executive his Salary (subject to applicable payroll and/or other
taxes required by law to be withheld) for the greater of (A) the entire
remaining term of this Agreement or (B) twelve consecutive months from such
termination.
(c) If the employment of the Executive by the Company shall be
terminated by the Company with Cause or by the Executive without Good Reason,
then, in any such event, the Company shall continue to pay to the Executive his
Salary (subject to applicable payroll and/or other taxes required by law to be
withheld) through the Termination Date (as such term is hereinafter defined).
(d) If the employment of the Executive by the Company shall be
terminated for any reason, or if the term of this Agreement shall expire in
accordance with its terms, then, in any such event, the Company shall promptly
pay to the Executive all accrued but unpaid benefits to which he shall be
entitled on the date of termination of the Executive's employment by the
Company.
5.4 CERTAIN DEFINITIONS. The following terms shall have the following
respective meanings when utilized in this Article V:
(a) "Cause" shall mean any action by the Executive or any inaction
by the Executive which constitutes:
(i) fraud, embezzlement, misappropriation, dishonesty or breach
of trust;
(ii) a felony;
(iii) a material breach or violation of any or all of the
covenants, agreements and obligations of the Executive set forth in this
Agreement, other than as the result of the Executive's death or Disability;
(iv) a willful or knowing failure or refusal by the Executive to
perform any or all of his material duties and responsibilities as an officer of
the Company, other than as the result of the Executive's death or Disability: or
(v) gross negligence by the Executive in the performance of any
or all of his material duties and responsibilities as an officer of the Company,
other than as a result of the Executive's death or Disability;
provided, however, that if the basis for any termination of the Executive's
employment by the Company as set forth in the Termination Notice delivered by
the Company to the Executive is any or all of the definitions of Cause set forth
in Sections 5.4(a)(iii), 5.4(a)(iv) or 5.4(a)(v) of this Agreement, then, in
such event, the Executive shall have thirty (30) days from and after the date of
his receipt of such Termination Notice to present a reasonable plan to cure such
action or inaction specified in the Termination Notice, which plan may require
more than thirty (30)
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days to cure the specified action or inaction, but such plan must be reasonably
satisfactory to the Company and the Executive must proceed diligently to
effectuate such plan.
(b) "Disability" shall mean any mental or physical illness,
condition, disability, or incapacity which prevents the Executive from
reasonably discharging his duties and responsibilities as an officer of the
Company. If any disagreement or dispute shall arise between the Company and the
Executive as to whether the Executive suffers from any Disability, then, in such
event, the Executive shall submit to the physical or mental examination of a
physician licensed under the laws of the State of Florida, who is mutually
agreeable to the Company and the Executive, and such physician shall determine
whether the Executive suffers from any Disability. In the absence of fraud or
bad faith, the determination of such physician shall be final and binding upon
the Company and the Executive. The entire cost of such examination shall be paid
for solely by the Company.
(c) "Good Reason" shall mean:
(i) the assignment by the Board of Directors or the Executive
Committee of the Board of Directors to the Executive, without his express
written consent, of duties and responsibilities which results in the Executive
having significantly less duties and responsibilities or exercising
significantly less power and authority than he had, or duties and
responsibilities or power and authority not comparable to that of the level and
nature which he had, immediately prior to such assignment;
(ii) the removal of the Executive from, or a failure to
reappoint the Executive to, his then current position or positions with the
Company or its subsidiaries or affiliates, except (A) with the Executive's
express written consent or (B) in connection with any termination of the
Executive's employment by the Company as the result of the Executive's death or
Disability or with Cause;
(iii) the reduction of the Executive's Salary or the reduction
of any or all of the Executive's benefits set forth in Article IV above;
(iv) the Company's failure to perform on a timely basis its
obligations under this Agreement;
(v) the Company's requiring the Executive, without his express
written consent, to travel on Company business to an extent substantially
greater than the Executive's business travel obligations immediately prior to
such time;
(vi) the Company's requiring the Executive, without his express
written consent, to change his place of permanent residency to a place outside
of Broward County, Florida; or
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(vii) the Company's moving its executive offices to a place
outside of Broward County, Florida without the Executive's express written
consent.
(d) "Termination Date" shall mean a specific date not less than
forty-five (45) nor more than ninety (90) days from and after the date of any
Termination Notice upon which the Executive's employment by the Company shall be
terminated in accordance with the provisions of this Agreement.
(e) "Termination Notice" shall mean a written notice which sets
forth (i) the specific provision of this Agreement relied upon to terminate the
Executive's employment, (ii) in reasonable detail the facts and circumstances
claimed to provide the basis for the termination of the Executive's employment,
and (iii) a Termination Date.
5.5 SURVIVAL. All of the provisions of this Agreement, other than those
contained in Articles I, III, and IV hereof, shall survive the termination for
any reason of the Executive's employment by the Company or the expiration of the
term of this Agreement. The provisions of Article II of this Agreement shall
survive the termination for any reason of the Executive's employment by the
Company or the expiration of the term of this Agreement only to the extent set
forth in this Article V.
ARTICLE VI
Certain Restrictions on the Executive
6.1 CERTAIN RESTRICTIONS. The Executive covenants and agrees with the
Company as follows:
(a) He shall not at any time, directly or indirectly, for himself or
any other person, firm, corporation, partnership, association or other entity
(collectively, a "Person") which competes in any manner with the Company or any
of its subsidiaries or affiliates in any county or parish of any state of the
United States of America or its territories and possessions in which the Company
as of the date that the Executive's employment by the Company is terminated for
any reason or the term of this Agreement expires in accordance with its terms,
as the case may be, conducts its business directly or indirectly through any of
its subsidiaries or affiliates (collectively, the "Territory"), employ, attempt
to employ or enter into any contractual arrangement for employment with, any
employee or former employee of the Company or any of its subsidiaries or
affiliates, unless such former employee shall not have been employed by the
Company or any of its subsidiaries or affiliates for a period of at least one
year.
(b) He shall not, during the term of his employment by the Company
and for a period of one year and after the date that his employment by the
Company is terminated for any reason or the term of this Agreement expires in
accordance with its terms, as the case may be, directly or indirectly, (i)
acquire or own in any manner any interest in, or loan any amount to, any Person
which competes in any manner with the Company or any of its subsidiaries or
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affiliates in the Territory, (ii) be employed by or serve as an employee, agent,
officer, or director of, or as a consultant to, any Person, other than the
Company and its subsidiaries and affiliates, which competes in any manner with
the Company or its subsidiaries or affiliates in the Territory, or (iii) compete
in any manner with the Company or its subsidiaries or affiliates in the
Territory. The foregoing provisions of this Section 6.1 (b) shall not prevent
the Executive from acquiring and owning not more than five percent (5%) of the
equity securities of any Person whose securities are listed for trading on a
national securities exchange or are regularly traded in the over-the-counter
securities market.
(c) In the course of the Executive's employment by the Company, the
Executive will have access to confidential or proprietary information of the
Company and its subsidiaries and affiliates. The Executive shall not at any time
use any such confidential or proprietary information other than for the benefit
of the Company and its subsidiaries and affiliates. The term "confidential or
proprietary information" shall mean information not generally available to the
public, including without limitation personnel information, financial
information, customer lists, supplier lists, ownership information, marketing
plans and analyses, trade secrets, know-how, computer software, management
agreements and procedures and techniques of operating and managing the business
of the Company and its subsidiaries and affiliates. The Executive acknowledges
and agrees that all confidential or proprietary information is and shall remain
the property of the Company and its subsidiaries and affiliates, and agrees to
maintain all such confidential or proprietary information in confidence.
(d) DEVELOPMENTS. All inventions patentable, copyrightable or
otherwise, trade secrets, discoveries, improvements, ideas and writings
(hereinafter collectively termed "developments"), which Executive, alone or
jointly with others, has conceived, made, enhanced, modified, developed, or
acquired, or may conceive, make, enhance, modify, develop, or acquire during the
period of his employment hereunder or during an additional period of one (1)
year after the termination of such employment and which relate to the Company's
business of developing and marketing computer hardware and software, and all
developments which relate to the work upon which Executive shall have been
engaged while in the Company's employment, which Executive has conceived, made,
enhanced, modified, developed, or acquired, or may conceive, make, enhance,
modify, develop, or acquire during the period of his employment or during a
period of one (1) year after the termination of such employment, to the extent
that such developments are possessed by Executive at any time, shall be the sole
property of the Company. The term "development" shall include developments
conceived, devised, made, developed or perfected during off-duty hours and away
from the Company's premises as well as to those conceived, devised, made,
developed, or perfected in the regular course of employment.
(e) DISCLOSURE AND COOPERATION. Executive shall promptly and fully
disclose in writing all such developments described in subparagraph (d) hereof
to the Company's Chief Executive Officer. Executive shall, at any time upon the
Company's request, whether or not then in the Company's employ, execute,
acknowledge and deliver to the Company all instruments which the Company shall
prepare, give evidence, and do all other things which are necessary or
desirable, to enable the Company to file and prosecute applications for, and to
acquire, maintain and enforce
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all patents, trademarks, copyrights, and any other intellectual property rights
in all countries, covering such developments. The Company agrees to pay to
Executive reasonable expenses incurred by Executive under this subparagraph (e).
6.2 REMEDIES. It is recognized and acknowledged by each of the Company and
the Executive that a breach or violation by the Executive of any or all of his
covenants and agreements contained in Section 6.1 of this Agreement will cause
irreparable harm and damage to the Company and its subsidiaries and affiliates
in a monetary amount which would be virtually impossible to ascertain and,
therefore, will deprive the Company of an adequate remedy at law. Accordingly,
if the Executive shall breach or violate any or all of his covenants and
agreements set forth in Section 6.1 hereof, then the Company and its
subsidiaries and affiliates shall have resort to all equitable remedies,
including without limitation the remedies of specific performance and
injunction, both permanent and temporary, as well as all other remedies which
may be available at law.
6.3 INTENT. It is the intent of the parties that the restrictions set
forth in Section 6.1 hereof shall be enforced to the fullest extent permissible
under the laws and public policies of each jurisdiction in which enforcement of
such restrictions may be sought. If any provision contained in Section 6.1
hereof shall be adjudicated by a court of competent jurisdiction to be invalid
or unenforceable because of its duration or geographic scope, then such
provision shall be reduced by such court in duration or geographic scope or both
to such extent as to make it valid and enforceable in the jurisdiction where
such court is located, and in ail other respects shall remain in full force and
effect.
ARTICLE VII
INDEMNIFICATION
The Company shall indemnify auld hold harmless the Executive from and
against the full amount of any and all claims, demands, suits, actions,
judgements, losses, liabilities, costs, interest and expenses, including without
limitation fees and disbursements of trial and appellate counsel, asserted or
brought against the Executive by any Person with respect to any action taken or
omitted to be taken by the Executive in the course of his employment by the
Company or otherwise related to or arising out of his employment by the Company
or acting as a director, officer, employee or agent of the Company or any of its
subsidiaries or affiliates. This right to indemnification shall be in effect to
the fullest extent available pursuant to law, and shall be in addition to any
other right to indemnification the Executive may possess pursuant to law and the
Articles of Incorporation and Bylaws of the Company or any of its subsidiaries
or affiliates.
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ARTICLE VIII
ATTORNEYS' FEES
In the event that any litigation shall arise between the Company and the
Executive based, in whole or in part, upon this Agreement or any or all of the
provisions contained herein, then, in any such event, the prevailing party in
any such litigation shall be entitled to recover from the non-prevailing party,
and shall be awarded by a court of competent jurisdiction, any and all
reasonable fees and disbursements of trial and appellate counsel paid, incurred
or suffered by such prevailing party as the result of, arising from, or in
connection with, any such litigation.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of Florida.
9.2 NOTICES. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or certified mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: Galacticomm Technologies, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
If to the Executive: Yannick Tessier
10931 N.W. 3rd Street
Plantation, Florida 33324
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 9.2.
9.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Executive with
respect to such subject matter.
9.4 AMENDMENTS. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Executive.
9.5 BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit of,
and shall be binding upon, each of the Company and the Executive and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
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9.6 SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part hereof,
all of which are inserted conditionally on their being valid in law. Except as
otherwise provided in Section 6.3 above, if any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall be
declared invalid by any court of competent jurisdiction, then, in any such
event, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted.
9.7 NO WAIVERS. The waiver by either party of a breach or violation of any
provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The waiver by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
9.8 JURISDICTION AND VENUE; SERVICE OF PROCESS. Any claim or dispute
arising out of, connected with, or in any way related to this Agreement which
results in litigation shall be instituted by the complaining party and
adjudicated either in the federal or state courts located in Broward County,
Florida and each of the parties to this Agreement consent to the personal
jurisdiction of and venue in such courts. In no event shall either party to this
Agreement contest the jurisdiction or venue of such courts with respect to any
such litigation. Each of the Company and the Executive agrees that service of
any process, summons, notice or document, by United States registered or
certified mail, to its or his address set forth in or as provided in Section 9.2
above shall be effective service of such process, summons, notice or document
for any action, suit or proceeding brought against it or him by the other party
in the federal or state courts located in Broward County, Florida.
9.9 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
any or all of the provisions hereof.
9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered
this Agreement as of the date first written above.
GALACTICOMM TECHNOLOGIES, INC.
/s/ YANNICK TESSIER By: /s/ PETER BERG
- ----------------------------- ----------------------------
Yannick Tessier Name: Peter Berg
--------------------------
Title: CEO
-------------------------
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 25th day of August, 1997 between
GALACTICOMM TECHNOLOGIES, INC. , a Florida corporation ("Corporation"), and T.
MICHAEL LOVE ("Employee").
NOW, THEREFORE, the parties hereto agree as follows:
1. TERM. Except as otherwise provided in Section 10 hereof, the term
of this Agreement shall be for a two year period commencing on this date (the
"Initial Term"). However, if this Agreement has not been terminated pursuant to
Section 10 hereof, this Agreement shall be automatically renewed for successive
one year terms after the Initial Term.
2. TITLE. Employee shall serve as Chief Financial Officer of
Corporation.
3. COMPENSATION. For all services rendered by Employee to Corporation
hereunder during the term of this Agreement, Employee shall receive an annual
salary of $120,000. The salary shall be paid in equal bi-weekly installments or
any other payment mode in which Corporation pays its executive officers.
Employee's annual salary shall be increased at the beginning of each successive
year that Employee is employed hereunder by an amount equal to 10% of the prior
contract year's salary.
4. DUTIES. During the term of this Agreement, Employee shall serve
under the direction and control of Corporation's Chief Executive Officer.
Employee's duties shall include, without limitation, formulating financial
policy and plans for Corporation, as well as the supervision, management and
control of the Corporation's accounting practices, finances and operations.
5. EXPENSES. During the term of this Agreement, Corporation shall
allow Employee reasonable travel, entertainment, business related automobile
expenses and other expenses incurred by Employee in furtherance of the business
of Corporation. Corporation shall reimburse Employee for any such expenses paid
by him subject to the rules adopted by Corporation for handling such
reimbursements, including but not limited to, Employee's submission to the
Corporation of receipts for all such expenses.
6. EMPLOYEE BENEFITS.
(a) GENERAL. Employee shall be entitled to participate in all
fringe benefit plans or programs, including, but not limited to, insurance, and
deferred compensation plans, maintained by Corporation for the benefit of all
executive officers of Corporation, except for an automobile allowance.
(b) STOCK OPTIONS. Contemporaneous with the signing of this
Agreement, Employee shall receive options to purchase 142,162 shares of
Corporation's common stock, which shall vest in accordance with the terms of a
Stock Option Agreement (the "Stock Option Agreement") between Corporation and
Employee, to be entered into pursuant to the terms
<PAGE>
of the Company's 1997 Stock Option Plan. The number of shares of Corporation's
common stock that Employee shall be entitled to purchase under the Stock Option
Agreement shall be adjusted to give effect to Corporation's contemplated reverse
stock split.
(c) HEALTH INSURANCE. During the term of this Agreement,
Employee shall be provided with the health insurance coverage provided to all
other employees of Corporation.
(d) LIFE INSURANCE. During the term of this Agreement,
Corporation shall pay the premium required to maintain a $500,000 twenty year
level term life insurance policy on the life of the employee with the
beneficiary designated by Employee.
(e) VACATION. Employee may take vacation in accordance with the
Company's policy manual. However, Employee shall immediately vest in ten days of
vacation upon the signing of this Agreement and shall accrue vacation days at
the rate of ten days per year.
7. CONFIDENTIAL DATA. While employed by Corporation and thereafter,
Employee shall not, directly or indirectly, disclose or use to the detriment of
the Corporation or for the benefit of any other person or firm any confidential
information or trade secrets which are not in the public domain (including, but
not limited to, the identity and particular needs of any customer of the
Corporation, the methods and techniques of any of the businesses of the
Corporation, the marketing plans and objectives of the Corporation, the
intellectual property rights of any product of the Corporation) belonging to the
Corporation, unless: (a) Employee has first obtained the consent of Corporation,
(b) Employee is required to disclose such information pursuant to an order of a
court of competent jurisdiction, or (c) any such information is in the public
domain through no fault of Employee. Employee shall deliver promptly to
Corporation upon termination of employment, or at any time Corporation may so
request, all drawings, blueprints, formulas, and other documents (and all copies
thereof) relating to the business of Corporation and all property associated
therewith, then possessed or under the control of the Employee. In the event of
a breach or imminent breach by Employee of the provisions of this paragraph 7,
Corporation shall be entitled to an injunction restraining Employee from
disclosing, in whole or in part, such information. In any action or proceeding
to enforce the provisions of this paragraph 7, or seeking damages for breach or
imminent breach of this paragraph 7, the prevailing party shall be reimbursed by
the other party for all costs incurred in such action or proceeding including,
without limitation, all court costs and filing fees, and all reasonable
attorneys' fees, incurred either at the trial level or at all appellate levels.
Nothing contained herein shall be construed as prohibiting Corporation from
pursuing any other remedies available to Corporation for such breach or imminent
breach, including recovery of damages from Employee. This paragraph 7 shall
survive the termination of this Agreement.
8. DISCOVERIES AND INVENTIONS. During the term of this Agreement,
Employee shall assign, without further consideration, to Corporation, all of his
rights, title and interest in and to any and all inventions, discoveries,
developments, improvements, processes, trade secrets,
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<PAGE>
trademark, copyright and patent rights in the United States and elsewhere,
techniques, designs, data and all other work product, whether tangible or
intangible, which relates directly to the business of the Corporation.
9. NON-COMPETITION.
(a) Employee covenants and agrees that, while in the employment
of Corporation and for 12 months after the termination of this Agreement,
Employee shall not, for his own account or either as agent, consultant, servant
or employee, or as a shareholder of any corporation or member of any firm, own,
manage, operate, join, control, or participate in the ownership, management,
operation or control of any individual, or that division or part of any entity
or business that is a direct competitor of Corporation, anywhere in the United
States. Employee's beneficial ownership of up to 5% of the capital stock of any
entity shall not be deemed a violation of this paragraph 9. For purposes of this
Section 9(a), a direct competitor shall mean any entity that develops Web-based
software services that enable on-line collaboration and communication among
users of any one or more of such services.
(b) In the event of an actual or imminent breach by Employee of
any of the provisions in paragraph 9(a) hereof, Corporation shall be entitled to
an injunction restraining Employee from the prohibited conduct. If a court of
competent jurisdiction should hold that the duration and/or scope (geographic or
otherwise) of the covenants contained in paragraph 9(a). hereof are in violation
of Florida law, then, to the extent permitted by Florida law, the court shall
enforce all such covenants (geographic and otherwise) to the fullest extent
permitted under Florida law and the parties hereto agree to be bound by same,
subject to their rights of appeal. Nothing herein stated shall be construed as
prohibiting Corporation from pursuing any other remedies available to it for
such breach or imminent breach, including the recovery of damages from Employee.
In any action or proceeding to enforce the provisions of this paragraph 9, or
seeking damages for breach or imminent breach of this paragraph 9, the
prevailing party shall be reimbursed by the other party for all costs incurred
in such action or proceeding including, without limitation, all court costs and
filing fees, and all reasonable attorneys' fees, incurred either at the trial
level or at all appellate levels. Such reimbursement, if any, shall be paid
within 60 calendar days after the rendition of a final non-appealable order in
such action or proceeding.
(c) The existence of any claim or cause of action by Employee
against Corporation, which does not relate to this Agreement, shall not
constitute a defense to the enforcement by Corporation of the foregoing
restrictive covenant.
10. TERMINATION. This Agreement may be terminated prior to the term
provided for by paragraph 1 hereof upon the occurrence of any of the following
events:
(a) Immediately, upon written notice by Corporation if Employee
has committed an event for "cause" under paragraphs 11(a), (b), (c) or (h)
hereof;
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(b) Thirty days after Corporation's written notice to Employee
if he has committed an event for "cause" under paragraphs 11(d), (e), (f) or
(g), and Employee has failed to cure any such specified violation to the
reasonable satisfaction of Corporation;
(c) Upon Employee's death;
(d) Upon Employee's disability, which shall mean a physical or
mental impairment of Employee resulting in his inability to satisfactorily
perform his duties hereunder for a period of 181 consecutive days;
(e) Immediately and without cause, upon Corporation's written
notice to Employee; or
(f) At any time by written agreement of the parties.
If Corporation terminates this Agreement pursuant to Section 10(e) hereof: (a)
Corporation shall continue to pay Employee his salary under this Agreement, for
a period of six months after the date of termination; and (b) the stock options
which would have vested, under the Stock Option Agreement, at the end of the
vesting period then in effect, shall automatically vest.
11. DEFINITION OF "CAUSE". As used in this Agreement, the term
"cause" shall mean any of the following events:
(a) Employee's commission of any act constituting embezzlement,
theft or misappropriation of Corporation's funds;
(b) Employee's acceptance of kickbacks, bribery or any other
"off-the-books" payment which relate directly or indirectly to Corporation's
business;
(c) Employee's violation of paragraph 7 above;
(d) Employee's violation of paragraph 8 above;
(e) Employee's violation of paragraph 9 above; or
(f) Employee's neglect in the performance of his duties
hereunder (other than on account of a medically determinable disability which
renders Employee incapable of substantially performing his duties hereunder);
(g) Any material breach by Employee of the terms of this
Agreement;
or
(h) Employee's termination of his employment with Corporation
without the prior written consent of Corporation.
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<PAGE>
12. EFFECT OF TERMINATION. Upon the termination of this Agreement
(the "Termination Date"):
(a) the Employee shall not hold himself out as being connected
with the Corporation's business;
(b) the Employee shall return to the Corporation all property of
the Corporation in his possession or control, including all documents in his
possession or control which relate to the Company or contain any Confidential
Information, and shall not retain any copies of such documents; and
(c) any right the Employee has to use credit cards, charge
cards, checks or other similar cards or documents (the "Financial Documents")
which the Corporation has authorized him to use shall automatically terminate.
The Employee shall return the Financial Documents to the Corporation and shall
reimburse the Corporation on demand for any loss the Corporation may suffer
because of unauthorized use of the Financial Documents.
13. NOTICES. All notices required to be given hereunder shall be in
writing, sent certified mail, return receipt requested, postage prepaid to the
following addresses unless and until a different address has been designated by
written notice to the other party.
If to Employee, then to:
T. Michael Love
3458 N.W. 122nd Avenue
Sunrise, Florida 33323
If to Corporation, then to:
Galacticomm Technologies, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Attn: Chief Executive Officer
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
15. REMEDIES AND WAIVERS. If a party is in breach of any provision of
this Agreement, the non-breaching party shall be entitled to pursue all remedies
available to the non-breaching party for such breach, including, but not limited
to, the recovery of damages and injunctive relief. The waiver by either party
hereto of any breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by either party hereto.
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16. BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon the parties, their heirs, personal representatives, successors and assigns.
This Agreement is personal as to Employee and may not be assigned by Employee.
This Agreement may be assigned by Corporation without the prior consent of
Employee, provided, however, that: (a) the assignee shall agree in writing to
fulfill Corporation's obligations to Employee hereunder, and (b) such an
assignment shall not release Corporation from its obligations hereunder, unless
agreed to in writing by Employee.
17. SEVERABILITY. None of the provisions of this Agreement depend on
the validity of any other provision and the invalidity, illegality or
unenforceability, in whole or in part, of any provision shall not affect any
other provision herein contained.
18. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding of the parties relating to the employment of the Employee by
Corporation and supersedes all prior and contemporaneous agreements,
understandings and arrangements, written or verbal, between the parties hereto
with respect to the subject matter hereof. It may not be changed verbally but
only by agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
19. HEADINGS. The headings contained herein are for reference
purposes only and shall be without substantive meaning.
20. COUNTERPARTS. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original, and such counterparts,
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ PETER BERG /s/ T. MICHAEL LOVE
--------------------------- -------------------------
Peter Berg, Chairman & CEO T. Michael Love
6
EXHIBIT 10.23
THIS STOCK OPTION AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS. THIS STOCK OPTION AND THE SHARES MAY NOT BE SOLD,
TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNLESS, IN THE OPINION OF COUNSEL TO THE COMPANY, SUCH REGISTRATION IS NOT THEN
REQUIRED.
GALACTICOMM TECHNOLOGIES, INC.
STOCK OPTION AND AGREEMENT
THIS STOCK OPTION ("option[s]") for a total of 720,000 shares of common
stock, par value $.0001 per share (the "Common Stock"), of Galacticomm
Technologies, Inc., a Florida corporation (the "Company"), has been granted to
Peter Berg ("Optionee"), one of the Company's key personnel, at the price and
subject to the terms and conditions contained herein.
1. EXERCISE PRICE. The exercise price (the "Exercise Price") of all
options granted hereunder is $0.92 for each share of Common Stock.
2. TERM AND VESTING. Subject to the terms and conditions contained herein,
this option shall be exercisable in any order for an amount of shares not to
exceed 720,000 shares of Common Stock, PROVIDED that the rights of Optionee
hereunder to exercise the options shall vest in accordance with the following
schedule:
(a) At any time on or after November 21, 1997, Optionee may exercise
this option to the extent of one-third of the options granted hereby;
(b) At any time on or after November 21, 1998, Optionee may exercise
this option to the extent of an additional one-third of the options granted
hereby; and
(c) At any time after November 21, 1999, Optionee may exercise this
option to the extent of the balance of the options granted hereby.
3. EXERCISE OF OPTION. This option shall be exercisable as follows:
(a) TIME AND MANNER OF EXERCISE OF OPTION.
(i) No portion of the option may be exercised more than five
years from the respective vesting dates set forth in Sections 2(a), (b) and (c)
hereof.
(ii) If Optionee's employment with the Company is terminated
with "cause" pursuant to the terms of Optionee's Employment Agreement, dated as
of November 21, 1996 (as amended), between Optionee and the Company (the
"Employment Agreement"), the Optionee shall forfeit the right to exercise all
non-vested options granted hereunder and payment for the exercise of all options
which were vested on the date of such termination of employment
<PAGE>
shall be made to the Company in accordance with Section 3(b) hereof within the
earlier of ten (10) days of such termination of employment or the date by which
the vested options expire by the terms hereof.
(iii) If the Optionee dies, the options granted hereunder which
have vested as of the Optionee's death may be exercised within one (1) year
after the date of Optionee's death or prior to the date on which the vested
option expires by its terms, whichever is earlier, by the estate of the
Optionee, or by any person or persons whom Optionee shall have designated in
writing in documents filed with the Company or, if no such designation has been
made, by the person or persons to whom Optionee's rights hereunder shall have
passed by will or the laws of descent and distribution.
(iv) Upon the sale of all or substantially all of the assets of
the Company, the transfer of a controlling equity interest (as hereinafter
defined) in the Company, all outstanding options shall automatically vest and
shall be exercisable on the closing date of such transaction. Written notice of
not less than twenty (20) days shall be given by the Company to the Optionee of
the anticipated closing date of any such transaction. If such closing date
changes, the Company shall provide written notice of the new closing date as
soon as practicable to the Optionee. Any options not so exercised by the
Optionee shall be null and void if not exercised on such closing date. As used
herein, the term "controlling equity interest" shall mean the ability of any
person, entity or group to direct the management and policies of the Company.
(v) Each option granted hereunder shall be deemed exercised when
Optionee shall indicate his decision to do so in writing to the Company in
accordance with Section 3(b) hereof, and shall at the same time tender to the
Company payment in full in cash for the shares as to which the option is
exercised. The options granted hereunder may be exercised as to any lesser
number of shares than the full amount for which the options could be exercised.
Such a partial exercise of an option shall not affect the right to exercise the
option as to the remaining shares subject to the option. The right to exercise
this option shall be cumulative so that when the right to exercise an option has
vested, the shares eligible for purchase hereunder may be purchased at any time
thereafter until the expiration of the option pursuant to this Section 3(a).
(b) METHOD OF EXERCISE. This option shall be exercisable by a written
notice which shall:
(i) state the election to exercise the option, the number of
shares in respect of which it is being exercised, the person in whose name the
stock certificate(s) for such shares of Common Stock is to be registered, his or
her address and Social Security Number (or if more than one, the names,
addresses and Social Security numbers of such persons);
(ii) be signed by the person or persons entitled to exercise the
option and, if the option is being exercised by any person(s) other than the
Optionee, be accompanied by proof, satisfactory to counsel for the Company, of
the right of such person(s) to exercise the Option; and
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<PAGE>
(iii) be delivered in person or by certified mail to the
Compensation Committee of the Company's Board of Directors (the "Committee").
(c) PAYMENT. Payment of the purchase price (the "Purchase Price") of
any shares with respect to which the option is being exercised shall be: (i) in
cash; (ii) by certified or bank check payable to the order of the Company; (iii)
by the delivery of unexercised options or shares of Common Stock having a fair
market value equal to the Purchase Price, or (iv) by any combination of the
foregoing having a fair market value equal to the Purchase Price. The Company
shall withhold from the shares of Common Stock to be issued upon the exercise of
this Option that number of shares of Common Stock having a fair market value
equal to the tax withholding amount due.
(d) RESTRICTIONS ON EXERCISE. Notwithstanding anything contained
herein to the contrary, this option may not be exercised if the issuance of the
shares of Common Stock upon such exercise would constitute a violation of any
applicable federal or state securities laws or other applicable laws or
regulations. As a condition to the exercise of this option, the Committee may
require the person exercising this option to make such representations and agree
to such covenants as may be required by any applicable law or regulation.
4. BENEFICIARY DESIGNATION. Optionee may designate to the Committee, on a
form provided by the Company for that purpose, a beneficiary or beneficiaries
who shall be entitled to the benefits hereunder. Such designation may be
canceled or changed by Optionee, but no cancellation or change will be
recognized by the Committee unless effected in writing on a form provided by the
Committee for that purpose and filed with the Company.
5. OPTIONEE'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDERS. Neither the Optionee
nor his successor(s) in interest shall have any rights as a stockholder of the
Company with respect to any shares subject to the options granted to the
Optionee hereunder until the Optionee or his successor in interest becomes a
holder of record of such shares and receives a certificate or certificates
representing such shares from the Company or its duly authorized agent, which
certificate or certificates shall be mailed to the Optionee or his successor in
interest (at the last known address of the Optionee or his successor in
interest) not later than ten (10) business days after the exercise of the Option
in accordance with the terms contained herein.
6. REGULATORY APPROVAL AND COMPLIANCE. The Company shall not be required
to issue any certificate or certificates for shares of its Common Stock upon the
exercise of an option granted hereunder, or record as a holder of record of such
shares the name of the individual exercising any options granted hereby, without
obtaining, to the reasonable satisfaction of the Committee, the approval of all
regulatory bodies deemed necessary by the Committee, and without complying, to
the Committee's complete satisfaction, with all rules and regulations, under
federal, state or local law deemed applicable by the Committee.
7. NON-TRANSFERABILITY OF OPTION. Except as set forth herein, this option
may not be transferred in any manner otherwise than by will or the laws of
descent and distribution and may be exercised during the lifetime of the
Optionee only by him. The terms of this option shall be binding upon the
beneficiaries of Optionee.
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8. ADJUSTMENT OF EXERCISE PRICE IN THE EVENT OF STOCK DIVIDENDS, STOCK
SPLITS AND REVERSE STOCK SPLITS. If the Company issues Common Stock or
convertible securities by way of dividend or other general distribution to all
of the record holders of any stock of the Company or effects a stock split or
reverse stock split of the outstanding shares of Common Stock, the Exercise
Price shall be proportionately adjusted in the case of such issuance (on the day
following the date fixed for determining stockholders entitled to receive such
dividend or other such reverse stock split (on the date that such stock split or
reverse stock split shall become effective), by multiplying the Exercise Price
in effect immediately prior to the stock dividend, stock split or reverse stock
split by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately prior to such stock dividend, stock split or
reverse stock split, and the denominator of which is the number of shares of
Common Stock outstanding immediately after such stock dividend, stock split or
reverse stock split.
9. ADJUSTMENT OF NUMBER OF STOCK ISSUABLE UPON EXERCISE. Upon each
adjustment of the Exercise Price pursuant to Section 8 hereof, the Optionee
shall thereafter (until another such adjustment) be entitled to purchase, at the
Exercise Price in effect on the date purchase rights under this option are
exercised, the number of shares of Common Stock, calculated to the nearest whole
number of Common Stock, determined by (a) multiplying the number of shares of
Common Stock purchasable hereunder immediately prior to the adjustment of the
Exercise Price by the Exercise Price in effect immediately prior to such
adjustment, and (b) dividing the product so obtained by the Exercise Price in
effect on the date of such exercise.
10. INVESTMENT INTENT. The options being received will be purchased solely
for Optionee's own account for investment purposes only and not for the account
of any other person and not for distribution, assignment or resale to others. No
other person has a direct or indirect beneficial interest in the options or the
shares of Common Stock underlying the options (the "Underlying Shares").
Optionee has not subdivided the beneficial ownership of the options or the
Underlying Shares with any other person.
11. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
(a) The Underlying Shares may not be offered or sold except in
compliance with the Securities Act of 1933 (the "Act"), or any similar federal
or state statute then in effect, and then only if such person to whom such offer
or sale is made agrees with the Company to comply with the provisions of this
Section 10 with respect to the restrictions for the resale or other disposition
of such securities contained herein.
(b) Prior to the disposition of any Underlying Shares under
circumstances that might require registration of the Underlying Shares under the
Act, or any similar federal or state statute then in effect, Optionee shall give
written notice to the Company, expressing his intention as to the disposition to
be made of such Underlying Shares. Promptly upon receiving such notice, the
Company shall present copies thereof to its counsel. If, in the opinion of such
counsel, the proposed disposition does not require registration under the Act,
or any similar federal or state statute then in effect with respect to the
Underlying Shares, the Company shall, as promptly as practicable, notify
Optionee of such opinion, whereupon Optionee shall be entitled
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<PAGE>
to dispose of such Underlying Shares, all in accordance with the terms of the
notice delivered by Optionee to the Company.
(c) The Company may cause a legend in substantially the form that
follows to be set forth on the certificate representing the Underlying Shares,
unless counsel for the Company is of the opinion as to any such certificate that
such legend is unnecessary:
The securities represented by this certificate can only be
transferred in compliance with the Securities Act of 1933 and all
applicable state securities laws. This stock option and the shares
may not be sold, transferred, or assigned in the absence of an
effective registration statement unless, in the opinion of counsel to
the Company, such registration is not then required.
12. GOVERNING LAW. This Stock Option and Agreement shall be governed by
and construed in accordance with the laws of the State of Florida.
DATE OF GRANT: JUNE 30, 1997
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ YANNICK TESSIER
---------------------------
Name: Yannick Tessier
Title: President
ATTEST:
[ILLEGIBLE]
- ---------------------
5
<PAGE>
--------
Date
Galacticomm Technologies, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Attention: Compensation Committee
Re: Exercise of Nonqualified Stock Option
Dear Sir:
Please be advised that pursuant to the Stock Option and Agreement
("Agreement"), dated as of _______________, 19___ between Galacticomm
Technologies, Inc. (the "Company") and the undersigned ("Optionee"), Optionee
hereby exercises the stock option ("Option") in the amount of ________________
shares of common stock of the Company and herewith tenders the following
__________________________________________________________, having an aggregate
value of __________________________________________ ($ __________ ), in payment
for such shares of common stock. Capitalized terms not otherwise defined herein
are defined as set forth in the Agreement.
Optionee requests stock certificates for such shares issued in the name of
whose address is and whose social security number is .
Optionee hereby acknowledges, warrants and represents the following:
(1) Optionee's acknowledgements, representations, warranties and
agreements contained in the Agreement are true, complete and accurate as of the
date of this letter.
(2) The Option is presently exercisable and as such, has vested and has
not expired.
(3) Optionee is presently and has been in full compliance with all the
terms, conditions and provisions of the Agreement.
Sincerely,
---------------------------------------
Optionee
6
EXHIBIT 10.24
THIS STOCK OPTION AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF CAN BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS. THIS STOCK OPTION AND THE SHARES MAY NOT BE SOLD,
TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNLESS, IN THE OPINION OF COUNSEL TO THE COMPANY, SUCH REGISTRATION IS NOT THEN
REQUIRED.
GALACTICOMM TECHNOLOGIES, INC.
STOCK OPTION AND AGREEMENT
THIS STOCK OPTION ("option[s]") for a total of 720,000 shares of common
stock, par value $.0001 per share (the "Common Stock"), of Galacticomm
Technologies, Inc., a Florida corporation (the "Company"), has been granted to
Yannick Tessier ("Optionee"), one of the Company's key personnel, at the price
and subject to the terms and conditions contained herein.
1. EXERCISE PRICE. The exercise price (the "Exercise Price") of all
options granted hereunder is $0.92 for each share of Common Stock.
2. TERM AND VESTING. Subject to the terms and conditions contained herein,
this option shall be exercisable in any order for an amount of shares not to
exceed 720,000 shares of Common Stock, PROVIDED that the rights of Optionee
hereunder to exercise the options shall vest in accordance with the following
schedule:
(a) At any time on or after November 21, 1997, Optionee may exercise
this option to the extent of one-third of the options granted hereby;
(b) At any time on or after November 21, 1998, Optionee may exercise
this option to the extent of an additional one-third of the options granted
hereby; and
(c) At any time after November 21, 1999, Optionee may exercise this
option to the extent of the balance of the options granted hereby.
3. EXERCISE OF OPTION. This option shall be exercisable as follows:
(a) TIME AND MANNER OF EXERCISE OF OPTION.
(i) No portion of the option may be exercised more than five
years from the respective vesting dates set forth in Sections 2(a), (b) and (c)
hereof.
(ii) If Optionee's employment with the Company is terminated
with "cause" pursuant to the terms of Optionee's Employment Agreement, dated as
of November 21, 1996 (as amended), between Optionee and the Company (the
"Employment Agreement"), the Optionee shall forfeit the right to exercise all
non-vested options granted hereunder and payment for the exercise of all options
which were vested on the date of such termination of employment
<PAGE>
shall be made to the Company in accordance with Section 3(b) hereof within the
earlier of ten (10) days of such termination of employment or the date by which
the vested options expire by the terms hereof.
(iii) If the Optionee dies, the options granted hereunder which
have vested as of the Optionee's death may be exercised within one (1) year
after the date of Optionee's death or prior to the date on which the vested
option expires by its terms, whichever is earlier, by the estate of the
Optionee, or by any person or persons whom Optionee shall have designated in
writing in documents filed with the Company or, if no such designation has been
made, by the person or persons to whom Optionee's rights hereunder shall have
passed by will or the laws of descent and distribution.
(iv) Upon the sale of all or substantially all of the assets of
the Company, the transfer of a controlling equity interest (as hereinafter
defined) in the Company, or the merger or consolidation of the Company, all
outstanding options shall automatically vest and shall be exercisable on the
closing date of such transaction. Written notice of not less than twenty (20)
days shall be given by the Company to the Optionee of the anticipated closing
date of any such transaction. If such closing date changes, the Company shall
provide written notice of the new closing date as soon as practicable to the
Optionee. Any options not so exercised by the Optionee shall be null and void if
not exercised on such closing date. As used herein, the term "controlling equity
interest" shall mean the ability of any person, entity or group to direct the
management and policies of the Company.
(v) Each option granted hereunder shall be deemed exercised when
Optionee shall indicate his decision to do so in writing to the Company in
accordance with Section 3(b) hereof, and shall at the same time tender to the
Company payment in full in cash for the shares as to which the option is
exercised. The options granted hereunder may be exercised as to any lesser
number of shares than the full amount for which the options could be exercised.
Such a partial exercise of an option shall not affect the right to exercise the
option as to the remaining shares subject to the option. The right to exercise
this option shall be cumulative so that when the right to exercise an option has
vested, the shares eligible for purchase hereunder may be purchased at any time
thereafter until the expiration of the option pursuant to this Section 3(a).
(b) METHOD OF EXERCISE. This option shall be exercisable by a written
notice which shall:
(i) state the election to exercise the option, the number of
shares in respect of which it is being exercised, the person in whose name the
stock certificate(s) for such shares of Common Stock is to be registered, his or
her address and Social Security Number (or if more than one, the names,
addresses and Social Security numbers of such persons);
(ii) be signed by the person or persons entitled to exercise the
option and, if the option is being exercised by any person(s) other than the
Optionee, be accompanied by proof, satisfactory to counsel for the Company, of
the right of such person(s) to exercise the Option; and
2
<PAGE>
(iii) be delivered in person or by certified mail to the
Compensation Committee of the Company's Board of Directors (the "Committee").
(c) PAYMENT. Payment of the purchase price (the "Purchase Price") of
any shares with respect to which the option is being exercised shall be: (i) in
cash; (ii) by certified or bank check payable to the order of the Company; (iii)
by the delivery of unexercised options or shares of Common Stock having a fair
market value equal to the Purchase Price, or (iv) by any combination of the
foregoing having a fair market value equal to the Purchase Price. The Company
shall withhold from the shares of Common Stock to be issued upon the exercise of
this Option that number of shares of Common Stock having a fair market value
equal to the tax withholding amount due.
(d) RESTRICTIONS ON EXERCISE. Notwithstanding anything contained
herein to the contrary, this option may not be exercised if the issuance of the
shares of Common Stock upon such exercise would constitute a violation of any
applicable federal or state securities laws or other applicable laws or
regulations. As a condition to the exercise of this option, the Committee may
require the person exercising this option to make such representations and agree
to such covenants as may be required by any applicable law or regulation.
4. BENEFICIARY DESIGNATION. Optionee may designate to the Committee, on a
form provided by the Company for that purpose, a beneficiary or beneficiaries
who shall be entitled to the benefits hereunder. Such designation may be
canceled or changed by Optionee, but no cancellation or change will be
recognized by the Committee unless effected in writing on a form provided by the
Committee for that purpose and filed with the Company.
5. OPTIONEE'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDERS. Neither the Optionee
nor his successor(s) in interest shall have any rights as a stockholder of the
Company with respect to any shares subject to the options granted to the
Optionee hereunder until the Optionee or his successor in interest becomes a
holder of record of such shares and receives a certificate or certificates
representing such shares from the Company or its duly authorized agent, which
certificate or certificates shall be mailed to the Optionee or his successor in
interest (at the last known address of the Optionee or his successor in
interest) not later than ten (10) business days after the exercise of the Option
in accordance with the terms contained herein.
6. REGULATORY APPROVAL AND COMPLIANCE. The Company shall not be required
to issue any certificate or certificates for shares of its Common Stock upon the
exercise of an option granted hereunder, or record as a holder of record of such
shares the name of the individual exercising any options granted hereby, without
obtaining, to the reasonable satisfaction of the Committee, the approval of all
regulatory bodies deemed necessary by the Committee, and without complying, to
the Committee's complete satisfaction, with all rules and regulations, under
federal, state or local law deemed applicable by the Committee.
7. NON-TRANSFERABILITY OF OPTION. Except as set forth herein, this option
may not be transferred in any manner otherwise than by will or the laws of
descent and distribution and may be exercised during the lifetime of the
Optionee only by him. The terms of this option shall be binding upon the
beneficiaries of Optionee.
3
<PAGE>
8. ADJUSTMENT OF EXERCISE PRICE IN THE EVENT OF STOCK DIVIDENDS, STOCK
SPLITS AND REVERSE STOCK SPLITS. If the Company issues Common Stock or
convertible securities by way of dividend or other general distribution to all
of the record holders of any stock of the Company or effects a stock split or
reverse stock split of the outstanding shares of Common Stock, the Exercise
Price shall be proportionately adjusted in the case of such issuance (on the day
following the date fixed for determining stockholders entitled to receive such
dividend or other such reverse stock split (on the date that such stock split or
reverse stock split shall become effective), by multiplying the Exercise Price
in effect immediately prior to the stock dividend, stock split or reverse stock
split by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately prior to such stock dividend, stock split or
reverse stock split, and the denominator of which is the number of shares of
Common Stock outstanding immediately after such stock dividend, stock split or
reverse stock split.
9. ADJUSTMENT OF NUMBER OF STOCK ISSUABLE UPON EXERCISE. Upon each
adjustment of the Exercise Price pursuant to Section 8 hereof, the Optionee
shall thereafter (until another such adjustment) be entitled to purchase, at the
Exercise Price in effect on the date purchase reights under this option are
exerccised, the number of shares of Common Stock, calculated to the nearest
whole number of Common Stock, determined by (a) multiplying the number of shares
of Common Stock purchasable hereunder immediately prior to such adjustment, and
(b) dividing the product so obtained by the Exercise Price in effect on the date
of such exercise.
10. INVESTMENT INTENT. The options being received will be purchased solely
for Optionee's own account for investment purposes only and not for the account
of any other person and not for distribution, assignment or resale to others. No
other person has a direct or indirect beneficial interest in the options or the
shares of Common Stock underlying the options (the "Underlying Shares").
Optionee has not subdivided the beneficial ownership of the options or the
Underlying Shares with any other person.
11. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
(a) The Underlying Shares may not be offered or sold except in
compliance with the Securities Act of 1933 (the "Act"), or any similar federal
or state statute then in effect, and then only if such person to whom such offer
or sale is made agrees with the Company to comply with the provisions of this
Section 10 with respect to the restrictions for the resale or other disposition
of such securities contained herein.
(b) Prior to the disposition of any Underlying Shares under
circumstances that might require registration of the Underlying Shares under the
Act, or any similar federal or state statute then in effect, Optionee shall give
written notice to the Company, expressing his intention as to the disposition to
be made of such Underlying Shares. Promptly upon receiving such notice, the
Company shall present copies thereof to its counsel. If, in the opinion of such
counsel, the proposed disposition does not require registration under the Act,
or any similar federal or state statute then in effect with respect to the
Underlying Shares, the Company shall, as promptly as practicable, notify
Optionee of such opinion, whereupon Optionee shall be entitled
4
<PAGE>
to dispose of such Underlying Shares, all in accordance with the terms of the
notice delivered by Optionee to the Company.
(c) The Company may cause a legend in substantially the form that
follows to be set forth on the certificate representing the Underlying Shares,
unless counsel for the Company is of the opinion as to any such certificate that
such legend is unnecessary:
The securities represented by this certificate can only be
transferred in compliance with the Securities Act of 1933 and all
applicable state securities laws. This stock option and the shares
may not be sold, transferred, or assigned in the absence of an
effective registration statement unless, in the opinion of counsel to
the Company, such registration is not then required.
12. GOVERNING LAW. This Stock Option and Agreement shall be governed by
and construed in accordance with the laws of the State of Florida.
DATE OF GRANT: JUNE 30, 1997
GALACTICOMM TECHNOLOGIES, INC.
By: /s/ PETER BERG
----------------------------
Name: PETER BERG
Title: CHIEF EXECUTIVE OFFICER
ATTEST:
[ILLEGIBLE]
- ------------------------------
5
<PAGE>
----------
Date
Galacticomm Technologies, Inc.
4101 S.W. 47 Avenue
Suite 101
Ft. Lauderdale, Florida 33314
Attention: Compensation Committee
Re: Exercise of Nonqualified Stock Option
Dear Sir:
Please be advised that pursuant to the Stock Option and Agreement
("Agreement"), dated as of _______________, 19___ between Galacticomm
Technologies, Inc. (the "Company") and the undersigned ("Optionee"), Optionee
hereby exercises the stock option ("Option") in the amount of ________________
shares of common stock of the Company and herewith tenders the following
__________________________________________________________, having an aggregate
value of __________________________________________ ($ __________ ), in payment
for such shares of common stock. Capitalized terms not otherwise defined herein
are defined as set forth in the Agreement.
Optionee requests ____ stock certificates for such shares issued in the
name of ________________________whose address is
___________________________________ and whose social security number is
__________________________.
Optionee hereby acknowledges, warrants and represents the following:
(1) Optionee's acknowledgements, representations, warranties and
agreements contained in the Agreement are true, complete and accurate as of the
date of this letter.
(2) The Option is presently exercisable and as such, has vested and has
not expired.
(3) Optionee is presently and has been in full compliance with all the
terms, conditions and provisions of the Agreement.
Sincerely,
_________________________
Optionee
6
EXHIBIT 10.25
STOCK ISSUANCE AGREEMENT
STOCK ISSUANCE AGREEMENT (the "Agreement") dated as of August 26, 1996
among I-View Software, Inc., a corporation organized under the laws of the State
of Florida, whose principal place of business is at 300 S. Pine Island Road,
Suite 261, Planation, Florida 33324 (the "Company"), Peter Berg, ("Berg"), and
Yannick Tessier ("Tessier").
RECITALS:
A. Berg is the sole director of the Company and owns 2,469,048 shares of
the Company's common stock, par value $.001 per share ("Common Stock"),
representing approximately 88 percent of the issued and outstanding Common
Stock;
B. The Company is an on-line computer services company that offers
subscription services through Bulletin Board Systems ("BBS");
C. Tessier is, and since the inception of the Company has been, the
primary source of the Company's computer and technical expertise and has, among
other things, established the Company's computer infrastructure and integrated
the software platform upon which the Company's services operate; and
D. Berg desires that Tessier join him as co-founder of the Company and
Tessier is willing to do so pursuant to the terms and conditions set forth in
this Agreement.
The parties agree as follows:
1. STOCK ISSUANCE. The Company shall issue such number of shares ("Tessier
Shares") of Common Stock to Tessier such that Tessier shall have a percentage
interest in the Common Stock equal to Berg. There are presently 5,000,000 shares
of Common Stock authorized for issuance by the Company. The Company shall
increase the authorized shares of Common Stock to a number sufficient to permit
the issuance of the Tessier Shares and, subject to Section 3 hereof, promptly
thereafter issue the Tessier Shares to Tessier.
2. CONSIDERATION FOR ISSUANCE. The Tessier Shares shall be issued by Tessier for
his efforts and initiative in founding and organizing the Company's BBS
business. Accordingly, no cash consideration shall be due from Tessier for the
Tessier Shares. Notwithstanding the foregoing, upon issuance, the Tessier Stock
shall be deemed fully paid and non-assessable.
3. MEANS OF ISSUANCE. If agreed to by the parties, the Tessier Shares may be
issued to Tessier as part of an Agreement and Plan of Merger between the Company
and Tessier Technologies, Inc.
4. HEADINGS. The descriptive headings in the sections of this Agreement are
inserted for convenience of reference only and shall not control or affect the
meaning or construction of any of the provisions hereof.
5. SEVERABILITY. If any provision of this Agreement is held by a court or
regulatory body of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be severed and the remaining provisions
hereof shall be enforced to the extent possible or modified in such a way as to
make it enforceable, and the invalidity, illegality or unenforceability thereof
shall not affect the validity, legality or enforceability of the remaining
provisions of this Agreement.
<PAGE>
6. MODIFICATION; AMENDMENT. No modification or amendment of this Agreement shall
be valid unless the same shall be in writing executed by the parties hereto.
7. GOVERNING LAW AND FORUM SELECTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without regard to
the conflict of laws provisions thereof. Each party hereby irrevocably and
unconditionally submits to the exclusive jurisdiction of the state courts of the
State of Florida, sitting in Broward County, and the Federal courts of the
Southern District of Florida. Each party irrevocably and unconditionally waives:
(a) any objection which it may now or hereafter have to venue in any such court;
and (b) any claim that any action or proceeding brought in such court has been
brought in an inconvenient or improper forum.
8. BINDING EFFECT; COMPLETE AGREEMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns. This Agreement
constitutes the entire agreement among the parties hereto and supersede all
prior agreements and understandings, oral or written, among the parties hereto
with respect to the subject matter hereof.
9. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
10. ATTORNEYS' FEES. If any legal action, including an action for declaratory
relief, is brought to enforce any provision of this Agreement, the prevailing
party or parties, as the case may be, shall be entitled to recover his, its or
their respective reasonable attorneys' fees from non-prevailing party or
parties, as the case may be. These fees, which may be set by the court in the
same action or in a separate action brought for that purpose, are in addition to
any other relief to which any prevailing party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
I-VIEW SOFTWARE, INC.
By: /s/ PETER BERG /s/ PETER BERG
------------------ -----------------------
Name: PETER BERG Peter Berg
Title: CHAIRMAN
/s/ YANNICK TESSIER
- ---------------------
Yannick Tessier
2
EXHIBIT 10.27
PROMISSORY NOTE
$37,500 0% Interest Per Annum
April 2nd, 1996
In installments, as set forth, for value received, the undersigned, iView
Software, Inc., a Florida corporation promises to pay to Skyline, Inc., a
Florida corporation at 300 South Pine Island Rd, Suite 261, Plantation, FL 33324
the sum of Thirty Seven Thousand Five Hundred ($37,500), together with interest
from the date above on the unpaid principal balance due at the rate of ten
percent (10%) per annum. No payment shall be due in consecutive monthly
installments. The final installment shall be payable in full by December 31st,
1996 in the amount of the balance of the principal and accrued interest then
remaining unpaid on this Note.
All payments shall be payable in lawful currency of the United States of
America.
The undersigned agrees to pay all costs of collection, including
reasonable attorneys' fees.
This Note may be prepaid at any time or from time to time in whole or in
part without penalty, premium or permission. Any partial payment under this
Section shall be applied to the installments of the Note in the inverse order of
their maturities.
I-VIEW SOFTWARE, INC.
BY /s/ PETER BERG
-------------------
Peter Berg, President
EXHIBIT 10.28
PROMISSORY NOTE
$50,000 0% Interest Per Annum
August 3rd, 1996
In installments, as set forth, for value received, the undersigned,
Tessier Technologies, Inc., a Florida corporation promises to pay to Yannick
Tessier, an individual at 10931 NW 3rd Street, Plantation, FL 33324 the sum of
Fifty Thousand ($50,000), together with interest from the date above on the
unpaid principal balance due at the rate of zero percent (0%) per annum. No
payment shall be due in consecutive monthly installments. The final installment
shall be payable in full by December 31st, 1996 in the amount of the balance of
the principal and accrued interest then remaining unpaid on this Note.
All payments shall be payable in lawful currency of the United States of
America.
The undersigned agrees to pay all costs of collection, including
reasonable attorneys' fees.
This Note may be prepaid at any time or from time to time in whole or in
part without penalty, premium or permission. Any partial payment under this
Section shall be applied to the installments of the Note in the inverse order of
their maturities.
Tessier Technologies, Inc.
BY /s/ YANNICK TESSIER
-----------------------
Yannick Tessier, President
EXHIBIT 10.29
PROMISSORY NOTE EXTENSION
$50,000 0% Interest Per Annum
December 31, 1996
In installments, as set forth, for value received, the undersigned, iView
Software, Inc., a Florida corporation promises to pay to Yannick Tessier, an
individual at 10931 NW 3rd Street, Plantation, FL 33324 the sum of Fifty
Thousand ($50,000), together with interest from the date above on the unpaid
principal balance due at the rate of zero percent (0%) per annum. No payment
shall be due in consecutive monthly installments. The final installment shall be
payable in full by December 31st, 1997 in the amount of the balance of the
principal and accrued interest then remaining unpaid on this Note.
All payments shall be payable in lawful currency of the United States of
America.
The undersigned agrees to pay all costs of collection, including
reasonable attorneys' fees.
This Note may be prepaid at any time or from time to time in whole or in
part without penalty, premium or permission. Any partial payment under this
Section shall be applied to the installments of the Note in the inverse order of
their maturities.
Iview Software, Inc.
BY /s/ PETER BERG
-------------------
Peter Berg, CEO
EXHIBIT 10.30
BUNDLING AGREEMENT
WITH AUTHORIZATION TO REPLICATE PRODUCTS
This Agreement covers the terms under which Vendor authorizes Kodak to
distribute Vendor promotional products when bundled with Kodak products. This
Agreement also covers the terms under which Vendor authorizes Kodak to
replicate the Vendor products it distributes.
This Agreement, comprised of this cover page, the attached terms and
conditions, and any attached schedules and exhibits, is the complete
Agreement between the parties and supersedes any prior oral or written
communications with respect to the subject matter of this Agreement.
By signing below, each party agrees to the terms of this Agreement. Once
signed, any copy of this Agreement that is reliably reproduced may be
considered an original.
Agreed to: Agreed to:
GALACTICOMM, INC. (Vendor) EASTMAN KODAK COMPANY (Kodak)
/s/ PETER BERG /s/ P. C. KOSIERACKI
- -------------------------------- -----------------------------------
Authorized Signature Authorized Signature
PETER BERG P. C. KOSIERACKI
- -------------------------------- -----------------------------------
Printed Name Printed Name
CHIEF BUSINESS OFFICER
CEO DIGITAL & APPLIED IMAGING
- -------------------------------- -----------------------------------
Title Title
5/21/97 5-29-97
- -------------------------------- -----------------------------------
Date Signed Date Signed
- 1 -
<PAGE>
BUNDLING AGREEMENT / AUTHORIZATION TO REPLICATE PRODUCTS
TERMS AND CONDITIONS
1. DEFINITIONS
1.1 "Demo Product" means Vendor's promotional software, equipment or
marketing information about such items, identified on Schedule 1 and provided
to Kodak in digital form for inclusion in the Bundle.
1.2 "Bundle" means a package of goods containing at least one Demo
Product and Kodak digital camera software and, optionally, a Kodak digital
camera, which is marketed under an all inclusive price.
1.3 "Commercial Product" means Vendor's commercial implementation of the
Demo Product, in the form usually sold to end users, identified on Schedule 1.
2. GRANT OF RIGHTS
2.1 Vendor grants Kodak the nonexclusive, worldwide right to distribute,
promote, market and advertise the Demo Products, but only when the Demo Products
are distributed to resellers or end users as part of a Bundle.
2.2 Vendor grants Kodak the nonexclusive, worldwide right to replicate the
Demo Products without alteration for distribution by Kodak under the license
granted in Section 2.1.
3. VENDOR OBLIGATIONS
3.1 Vendor will deliver or otherwise make available to Kodak at the
delivery address set forth on Schedule 1:
(i) a master for each of the Demo Products in digital form on diskette
or CD;
(ii) all applicable artwork associated with the Demo Products and
Commercial Products as digital encapsulated Postscript (EPS) files.
3.2 Vendor will notify Kodak of any changes to the Demo Products or artwork
prior to the date when Vendor implements the change, and will promptly provide
Kodak with the necessary material required for Kodak to replicate the changed
Demo Products or artwork.
3.3 Vendor will incorporate in the Demo Product a means for identifying
those sales of Commercial Product which result from the conversion of the Demo
Product into a Commercial Product by an end user who receives a Bundle.
3.4 Vendor or its agent will take orders, receive payment from and deliver
Commercial Product to end users, and pay commissions to Kodak as provided in
Section 5. Vendor may change the Commercial Product price to end users at its
sole discretion.
3.5 Vendor or its agent is responsible for offering and providing support
to end users of the Demo Products and Commercial Products. Kodak will have no
obligation to provide support to end users of the Demo Product or Commercial
Product.
4. KODAK OBLIGATIONS
4.1 Kodak will use its best efforts to include the Demo Product in the next
CD-ROM pressing for the Bundle, but is not obligated to do so.
- 2 -
<PAGE>
4.2 Kodak will, at its option, incorporate any changes to the Demo Products
or artwork provided by Vendor in any updates to the Bundle.
4.3 To assist Vendor in providing support to end users, Kodak will provide
Vendor with one (1) copy of the Bundle, and one (1) Kodak digital camera if not
included in the Bundle, upon commercial availability.
5. PAYMENTS
5.1 Vendor will pay Kodak a commission for each copy of the Commercial
Product sold by Vendor or its agent to an end user as a result of the Bundle
marketing performed by Kodak. The per copy commission rate for each Commercial
Product is as stated on Schedule 1. Commissions are based upon gross sales of
Commercial Product as described herein, less any applicable shipping and
handling charges and sales tax.
5.2 Commissions are payable by Vendor to Kodak quarterly. Within 30 days
after the end of each calendar quarter, Vendor will mail:
(i) a written statement setting forth the basis for the Vendor's
calculation of the commissions due to the delivery address stated on Schedule 1,
and
(ii) a check covering payment of all required commissions, to the
remittance address set forth on Schedule 1. The commission check and/or check
stub will include the Reference Number provided on Schedule 1.
5.3 In order that the commissions and reports may be verified, Vendor
agrees to keep full, complete and accurate books and records in accordance with
generally accepted accounting principles covering the Commercial Products sold
and commissions payable under this Agreement for a period of three years after
the relevant transaction which gave rise to the accrual of a commission
obligation.
5.4 It is agreed that the books and records of Vendor may be audited from
time to time upon written notice at least five (5) business days in advance,
during Vendor's normal business hours, but not more than once in each calendar
year, by an independent certified public accountant appointed by Kodak and
reasonably acceptable to Vendor, to the extent necessary to verify the accuracy
of the commission statements and payments. Such audit shall be completed at
Kodak's own expense, at Vendor's location unless otherwise agreed to by the
parties, and limited to an audit of the commission reports for the two years
preceding the date of the audit, except that if any discrepancy or error
exceeding five percent of the money actually due is found in connection with the
computation, the reasonable cost of such audit shall be borne by Vendor, and the
scope of the audit may be expanded to cover the three years preceding the date
of the audit.
5.5 Commission payments are to be made in U.S. dollars.
6. MARKETING, ADVERTISING AND PROMOTION
6.1 For use on brochures, advertising, packaging and other promotional
material for the sale of the Bundles created under this Agreement, Kodak may
itself, and may authorize Kodak authorized resellers to, without Vendor's prior
approval:
(i) reproduce without alteration the artwork or Demo Product or
Commercial Product packaging; or
(ii) make factual statements describing a Demo Product or Commercial
Product without using any stylized form of such product names or other stylized
logo or symbol appearing on such products.
6.2 Except as provided in Section 2 concerning replication of Demo
Products, and in the preceding paragraph, no license or rights under any
trademark, trade name, or trade dress of
-3-
<PAGE>
Vendor is granted under this Agreement, nor may any reference to any trademark,
trade name or trade dress of Vendor appear on the Bundle, or on packaging, or
related advertising or promotional materials for the Bundle without Vendor's
express prior written consent.
6.3 Kodak acknowledges Vendor's ownership of the Vendor trademarks and
trade dress that appear on the Demo Product and the Commercial Product, and that
every use of these trademark and trade dress inures solely to the benefit of
Vendor.
6.4 Kodak or Vendor may issue press releases relating to the Bundle. The
content of such releases will be mutually agreed upon between the parties
hereto.
7. WARRANTY.
7.1 Vendor warrants that it has the right and power to enter into this
Agreement and perform its obligations hereunder.
7.2 Vendor warrants that the Demo Products provided to Kodak hereunder are
suitable for worldwide distribution and are in compliance with all applicable
export laws, regulations and other restrictions.
7.3 Kodak warrants that it has the right and power to enter into this
Agreement and perform its obligations hereunder.
8. INDEMNIFICATION
8.1 Vendor will indemnify, defend and hold Kodak harmless against any claim
that the Demo Products distributed hereunder infringe any patent, copyright, or
trademark and Vendor will pay any costs and damages, including reasonable
attorneys' fees, that a court finally awards against Kodak as a result of such
claim or that are paid in settlement thereof, provided Kodak gives Vendor prompt
written notice of such claim and tenders to Vendor the defense and all related
settlement negotiations. Kodak will indemnify, defend and hold Vendor harmless
against any claim that the Kodak products included in the Bundle distributed
hereunder infringe any patent, copyright, or trademark and Kodak will pay any
costs and damages, including reasonable attorneys' fees, that a court finally
awards against Vendor as a result of such claim or that are paid in settlement
thereof, provided Vendor gives Kodak prompt written notice of such claim and
tenders to Kodak the defense and all related settlement negotiations.
8.2 Kodak will indemnify Vendor against any cost, loss, liability, or
expense, including reasonable attorneys' fees, arising out of third party claims
against Vendor relating to the Bundle except to the extent the claim relates to
or is caused by the Demo Product. Vendor will indemnify Kodak against any
cost, loss, liability, or expense, including reasonable attorneys' fees, arising
out of third party claims against Kodak relating to the Demo Product, except to
the extent the claim relates to or is caused by the Kodak products included in
the Bundle.
9. LIMITATION OF LIABILITY
Neither party will be liable to the other for incidental, consequential or
special damages (including punitive or exemplary) arising under this Agreement,
even if advised of the possibility of such damages.
10. TERM AND TERMINATION
10.1 TERM
This Agreement will become effective on the Effective Date, and will
expire on the Expiration Date, both as stated on Schedule 1 of this
Agreement. The parties may renew this
- 4 -
<PAGE>
Agreement thereafter by a mutual written agreement stating new Effective and
Expiration Dates, signed by authorized representatives of the parties.
10.2 TERMINATION FOR CAUSE.
This Agreement may be terminated by either party after a material breach by
the other party upon written notice to the defaulting party specifying the
default, unless the other party cures the default within 30 days after receipt
of the notice.
10.3 EFFECT OF TERMINATION
(i) Upon termination or expiration, each party shall pay to the other
the amount of any commissions, credits, or rebates then due in favor of the
other party.
(ii) Upon termination or expiration, Kodak may continue to sell any
Bundles then in its inventory as necessary to exhaust its inventory of Bundles,
and continue to replicate Demo Products for up to 30 days for the purpose of
filling any unfilled orders which existed on the date of termination or
expiration, subject to continued compliance with all restrictions concerning the
use of Vendor's name and trademarks. Upon exhaustion of its inventory of
Bundles, Kodak will destroy all printed materials, such as packaging and
advertising for Demo Products and Bundles which feature or use Vendor's name or
trademarks.
11. GENERAL PROVISIONS
11.1 INDEPENDENT CONTRACTOR.
Each party is acting in the role of an independent contractor under this
Agreement. Neither party may bind the other party to any legal obligations in
connection with this Agreement.
11.2 SUCCESSORS AND ASSIGNS.
This Agreement will be binding upon, and inure to the benefit of, each of
the parties hereto and its respective successors and assigns.
11.3 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, and will become effective when one or more
counterparts have been signed by the parties hereto and delivered to the other
parties.
11.4 ASSIGNMENT.
This Agreement may not be assigned by either party without the prior
written consent of the other party, and any attempted assignment will be void,
except that either party may assign this Agreement without consent to any party
which acquires substantially all the assets of the party, or to any parent or
subsidiary corporation of the party.
11.5 NOTICES.
All notices required or desired to be given hereunder shall be in
writing and if not personally delivered, be sent by facsimile (with a copy by
ordinary mail) or by registered or certified mail to the notice addresses stated
on Schedule 1 of this Agreement. If sent by facsimile or personally delivered,
notices shall be deemed to have been given on the day when sent or personally
delivered. If mailed by registered or certified mail, notices shall be deemed to
have been given when received or when delivery is refused. Either party may
from time to time change the address to which notices to it are to be sent by
giving notice of such change to the other party.
11.6 FORCE MAJEURE.
Except for payments of outstanding commission, neither party shall be
liable for any damages or penalties for delay in delivery when such delay is due
to the elements, acts of God, acts of civil or military authority, fires or
floods, epidemics, quarantine restrictions, war or riots.
- 5 -
<PAGE>
11.7 NON-WAIVER.
Failure by either party to enforce any term or condition of this
Agreement shall not be deemed a waiver of future enforcement of that or any
other term or condition.
11.8 SEVERABILITY.
If any term, provision, covenant or condition of this Agreement is
held invalid or unenforceable for any reason, the remainder of the provisions
shall continue in full force and effect as if this Agreement had been executed
with the invalid portion thereof eliminated.
11.9 GOVERNING LAW.
This Agreement will be governed by and construed in accordance with the
substantive laws of the State of New York as applied to agreements entered into
between two residents of the State of New York.
11.10 AMENDMENT.
This Agreement may not be amended except by a written amendment executed
by authorized representatives of both parties.
- 6 -
<PAGE>
BUNDLING AGREEMENT / AUTHORIZATION TO REPLICATE PRODUCTS
Schedule 1
- -1- Effective Date: May 20, 1997
Expiration Date: December 31, 1999
- -2- Demo Product(s): Demo version of WebCast Personal -- Trial Version
- -3- Commercial Product(s) and Commission(s):
COMMERCIAL INITIAL END USER COMMISSION RATE (% of
PRODUCT PURCHASE PRICE PURCHASE PRICE)
---------- ---------------- ---------------------
WebCast Personal *E.S.P. $ 42.95 20%
WebCast ProServer *E.S.P. $849.95 20%
* Estimated Street Price
- -4- Delivery address for Demo Products and commission reports:
Eastman Kodak Company
901 Elmgrove Road
Rochester, NY 14653-5245
Attention: John Metzger
Telephone: 716-726-9030
Facsimile: 716-726-0818
- -5- Kodak address for notices:
Eastman Kodak Company
Digital and Applied Imaging
901 Elmgrove Road
Rochester, NY 14653-5241
Attention: Contracts and Pricing
Facsimile: 716-726-0500
- -6- Vendor address for notices:
Galacticomm, Inc.
4101 SW 47th Avenue, Suite 101
Fort Lauderdale, Florida 33314
Attention: Lois Messner
Facsimile: 954-583-7846
- -7- Remittance Address:
Eastman Kodak Company
99 Brown Street SADA
Rochester, NY 14650-0918
Reference Number: 091-GL-6802-01000-000
- 7 -
EXHIBIT 10.31
AGREEMENT BETWEEN MAJORWARE INC. AND
GALACTICOMM INC.
This agreement is between Majorware Inc., (seller) a software development
company located in Toronto, Ontario, Canada. and Galacticomm, Inc., (buyer) a
software development company located in Ft. Lauderdale, Florida, USA.
This agreement outlines the terms and conditions for the sale of the sellers
product line (see section A) to the buyer.
'sale' is defined as the transfer of ownership, including copyrights and
trademarks, source codes, and runtimes for the products listed in Section A.
for the receipt of moneys as indicated in 1.10, section A
Section A
1.00 THE FOLLOWING IS THE LIST OF PRODUCTS BEING TRANSFERRED TO THE BUYER FROM
THE SELLER:
Wheel of Fame
Master of Minds
World Domination
Crib
CGIMagic
WEBMagic
Pacdude
yseazy
Wakeup
PQM
Visual xBasic
The following is a list of miscellaneous source codes and runtimes being
transferred to the buyer:
Activation code generator
/s/ ILLEGIBLE
------------------------
<PAGE>
1.10 CONDITIONS OF THE SALE
The buyer agrees to pay Majorwave Inc. the sum of $15,000 (fifteen thousand
dollars) in American Funds in receipt for the sources, runtimes, copyrights and
trademarks for the products listed in 1.00
The buyer agrees to waive all outstanding moneys owed by the seller for the
purchase of product or services purchased on or before April 13, 1997 except for
a cheque issued to the buyer from the seller that had insufficient funds in
the amount of $871.00 plus $20 dollars for charges incurred by the buyers bank.
The buyer agrees to honor any outstanding moneys owed to the seller. Any moneys
owed to the seller will be sent to the seller on or before the effective date of
this agreement in the form of certified funds; ($374.25)
Total payable to the seller will be: 15000.00+374.25-891.00
=$14483.25
Upon execution of this agreement, the buyer will provide to the seller, via
courier:
- a copy of this agreement, signed by an officer of the company
(Galacticomm, Inc.), and sealed with the companies corporate seal
(Galacticomm, Inc,);
- a cashiers check, in the amount of $7241.62 (seven thousand forty one
dollars and sixty two cents) in US Dollars;
- a post-dated check, dated thirty days from the date of execution of
this agreement, in the amount of $7241.62 (seven thousand forty one
dollars and sixty two cents) in US Dollars;
In the event that the post-dated check issued by the buyer is returned by the
bank for any reason on or after the post date, the buyer will promptly replace
the funds with certified funds adding any bank charges incurred by the seller;
In the event that the post-dated check issued by the buyer is returned by the
bank for any reason on or after the post date, and that the buyer has not
replaced the funds with certified funds within ten calender days of being
informed of the returned check by the buyer, this agreement is null and void
and no moneys will be re-issued back to the buyer. (see termination).
1.20 TRANSFER OF COPYRIGHT AND PRODUCTS
The seller agrees to assign all copyrights and trademarks to products and all
related source code listed in section 1.00
The seller will provide all source code related to the products listed in
1.00, including run-time cxecutables, dll's, help files, etc., to the buyer
via electronic transfer.
The seller is not aware of any patents or copyrights issued by a
copyright/patent firm on any of the products being transferred to the buyer.
In the event that there are such legal copyrights or patents discovered after
this agreement is in effect, the seller will promptly re-assign any legal
copyrights or patents to the buyer.
1.30 RELEASE OF CUSTOMER INFORMATION
<PAGE>
The seller agrees to release the names, addresses, phone numbers, email
addresses, fax numbers of all customers who have purchase 1 or more of the
product software licenses listed in 1.00.
1.40 SALES FIGURES FOR 1997
The seller agrees to release all sales revenue information for the products
listed in 1.00
2.00 RELEASE OF RESPONSIBILITY
The buyer agrees to release the seller for any liability relating to defects in
the software of the products listed in 1.00.
2.10 RELEASE OF RESPONSIBILITY
The sale of the products listed in 1.00 is sold 'as is". Majorware does not
warrant the functionality and/or stability of of the products being
transferred.
The seller will be held responsible for any failures in any product being
transferred.
The buyer will hold no responsibility to repair and/or modify any
product being listed;
The seller warrants that all source code and its associated runtimes are
original, in current distribution and have not been modified in a malicious
manner;
2.20 REMOVAL OF SOURCE CODE/PRODUCTS
The seller will no longer distribute or make available in any form to anyone in
whole-or in part, any product listed in 1.00
The seller will promptly comply with conditions set forth by the buyer to
destroy source codes, run-times, related files;
The seller will promptly comply with conditions so forth by the buyer to remove
all access to these products via the sellers BBS, and Web Site;
7.30 CUSTOMER SUPPORT
The buyer agrees to allow Majorware to support its existing customers until May
1, 1997 via email, fax or telephone;
The buyer agrees to allow the seller the right to modify any source codes until
May 1, 1997 for the purpose of bug fixes only. In the event of bug fixes, the
seller will promptly notify the buyer of any bug fixes and promptly provide the
updated source codes and runtimes to the buyer.
2.40 REFERRAL OF PRODUCT SALES
The seller agrees to refer all sales related inquires to the buyer once this
agreement is in effect;
<PAGE>
2.50 COFIDENTIALITY
The buyer agrees to keep the monitory conditions of this sale confidential,
except for reporting to internal or external audit;
The seller agrees to keep the monitory conditions of this sale confidential,
except for reporting to internal or external audit;
2.60 OWNERSHIP OF SOFTWARE
The seller warrants that all software code is original and is owned in whole by
the seller. The seller warrants that no other third party has any claim to the
software, its copyrights, or ownership. The seller also warrants that there are
no royalties owing to any third party and there are no royalties to be paid to
any third party in association with the products being sold.
2.70 PENDING LEGAL ACTION
The seller warrants that there are no threatened or filed lawsuits,
garnishments, court orders, seizures and or legal claims, pending or otherwise,
against Majorware Inc., or its software and no knowledge of any such matters
pending.
3.00 TERMINATION OF THIS AGREEMENT
Either party may refuse to execute this agreement at any time before the
conditions of the sale are executed;
After the conditions of the sale have been executed, this agreement will
remain in effect indefinitely provided that the seller has received all monies
related to the conditions of this sale;
In the event that the buyer does not make good with any monies owed to the
seller within 40 calendar days of the signing of this agreement, this agreement
will be considered NULL and VOID and no monies or monies owing will be re-issued
to the buyer.
<PAGE>
Signed and Sealed on this day of April 30th, 1997 in the State of Florida, USA
Inc.
/s/ YANNICK TESSIER
- -------------------------
Yannick Tessier
per Galacticomm, Inc.
Yannick Tessier, President
- --------------------------
Name and Title
Seal
Signed and Sealed on this day of April 29th, 1997 in the Province of Ontario,
Canada
/s/ ERIC FURRER
- ------------------------
per Majorware, Inc.
Eric Furrer, President
- -------------------------
Name and Title
Seal
<PAGE>
Schedule 'A' - Original Majorware Customer Software License Agreement
[product name]
Copyright [date] Majorware Inc.
All rights reserved. No part of this document may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means, electronic,
mechanical, recorded, or otherwise without the prior written permission of
Majorware Inc.
You may not make copies of this product, in whole, or in part, except for the
purpose of backups to protect your investment. You may not resell, distribute,
or make this package available by any means to anyone without the prior written
permission of Majorware Inc., and/or its authors of this program.
This document and accompanying software is sold 'as is' and is subject to change
without notice. Majorware Inc. makes no warranty, express or implied, to you or
any other person or entity. We will not be liable for incidental, consequential,
or other similar damages.
Schedule 'B' - Customer Contact and Software License Information
(see attached)
Schedule 'C' - Sales figures for 1997
(see attached)
EXHIBIT 10.32
SALE OF HIGH SOCIETY BBS TO GALACTICOMM, INC.
This agreement is between Yannick Tessier, ("seller") an individual located at
10931 NW 3rd Street Plantation, FL 33324, and Galacticomm, Inc., ("buyer") a
software development company located in Ft. Lauderdale, Florida.
This agreement outlines the terms and conditions for the sale of High Society
BBS.
The 'sale' is defined as the transfer of ownership, including software, hardware
and customers.
1.0 CONDITIONS OF THE SALE
The buyer agrees to pay seller the sum of $30,000 (thirty thousand dollars) in
receipt of the complete system for High Society. Buyer will pay sell 12 monthly
payments of $2500 (two thousand five hundred dollars) starting July 15th, 1997
and ending June 15, 1998.
2.0 HIGH SOCIETY BBS COMPONENTS
High Society consists of the following hardware:
Pentium 90 system with network and equinox host card, 4 486 Systems with network
cards, 2 Cabinet Chasis, 5 CD ROM Drives, 1 Roller Cabinet, 3 Zyxel Racks with
40 Modems, 1 Multi-Tech Rack with 15 Modems, 1 Kentrox DSU, 1 Cisco Router, 1
Motorola DSU, 8 UPS Backups, 3 Switch Boxes, Monitor and keyboard.
High Society consists of the following software:
World group 164 user license with X.25 card, Vircom DMA Server and Major TCP/IP,
Visaman with POS and IC Verify, Tradewars, Mutants, Galactic Empire and many
other add-on modules. Novell Server license.
The business has over 225 monthly accounts and over 1000 hourly accounts. The
business has been established since 1987 and is one of South Florida's longest
running online service.
3.0 PENDING LEGAL ACTION
The seller warrants that there are no threatened or filed lawsuits,
garnishments, court orders, seizures and or legal claims pending or otherwise,
against High Society BBS and no knowledge of any such matters pending.
<PAGE>
4.0 TERMINATION OF THIS AGREEMENT
In the event that the buyer does not make good on monthly payments, seller will
have the right to take back the High Society System. Buyer will have a grace
period of thirty (30) business days.
Date: 6/10/97 Date: 6/10/97
/s/ PETER BERG, CEO /s/ YANNICK TESSIER
- ------------------------ -----------------------
Buyer - Galacticomm, Inc. Seller - Owner
Peter Berg, CEO Yannick Tessier
EXHIBIT 10.33
GALACTICOMM AGREEMENT
This Agreement entered into this 8th day of May, 1997 by Specom Technologies
Corp., a California corporation (hereinafter "SPECOM") and Galacticomm
Technologies, Inc., located at 4101 SW 47th Avenue, Ft. Lauderdale, FL 33114
(hereinafter "GALACTICOMM").
WHEREAS SPECOM would like to include WebCast Lite product (as described in
Appendix A) from GALACTICOMM with SPECOM'S Suite Vision product.
LICENSE
For good and valuable consideration, GALACTICOMM grants and SPECOM accepts a
non-exclusive license to distribute WebCast Lite software with SPECOM's Suite
Vision product.
METHOD OF DISTRIBUTION
PHASE I: GALACTICOMM will ship 1,000 WebCast Lite diskettes to SPECOM for
insertion in Suite Vision packages which are tageted for Fry's Grand Opening
promotion, along with other customer opportunities.
GALACTICOMM will produce WebCast Lite diskettes & labels and ship to SPECOM at
no charge.
GALACTICOMM will produce a sticker for the outside of the Suite Vision package
stating that FREE WebCast Lite video broadcast software is included inside.
PHASE II. License will also entitle SPECOM to put WebCast Lite on SPECOM's Suite
Vision CD for distribution with its Suite Vision product.
ENTITLEMENT PERFORMANCE
In consideration of Galacticomm adding value to SPECOM's Suite Vision product
and Galacticomm providing the free WebCast Lite software offer, consumers will
be directed to a GALACTICOMM for upsell purchase of the full version of WebCast
Personal.
PROPRIETARY MARKS
All intellectual property, including, but not limited to, trademarks,
tradenames, copyrights, company designs and logos, and software, and patents
shall remain the property of the respective owner. SPECOM shall not modify,
reverse engineer or decompile the licensed software. SPECOM may use GALACTICOMM
trademarks solely for advertising in relation to this Agreement. GALACTICOMM
represents and warrants that to the best of its knowledge, (i) it has all
necessary right title and interest in and to the WebCast Lite and commercial
versions of software it offers for sale to grant the license(s) and other rights
granted under this Agreement and (ii) the WebCast Lite and commercial versions
of software it offers for sale does not infringe any United States or
international patent or copyright of any third party. Supplier will save
harmless and indemnifies SPECOM and its clients for any claims against
infringement by their intellectual property provided by GALACTICOMM. This clause
survives termination.
<PAGE>
MISCELLANEOUS
This Agreement is performable in and venue lies in Ft. Lauderdale, Florida. Both
parties agree to be bound by Florida law.
Should a court declare any portion of this Agreement invalid, the remaining
portions shall continue to bind the parties.
The Agreement can only be amended in writing executed by both parties. All
notices shall be sent to the parties at the addresses listed above unless a
later appropriate address is provided. All notices sent by first class mail
shall be deemed delivered with three (3) days of placing in the U.S. Mail or on
the same day if delivered via facsimile, or the next day if sent by a nationally
recognized courier.
This Agreement constitutes the entire Agreement between parties and supersedes
any previous written or oral Agreements. Appendix A forms part of this Agreement
and Demo's and titles may be added from time to time upon mutual agreement.
Each party is acting as an independent contractor and not as an agent, partner,
or joint venture with the other party for any purpose. Except as provided in
this Agreement, neither party shall have any right, power or authority to act or
create any obligation, expressed or implied, on behalf of the other.
The term of this agreement is for one (1) year, commencing on the date hereof,
and shall be automatically renewed for subsequent one (1) year term(s)
commencing on each anniversary date, unless terminated at any term, with a
minimum 30 days notice prior to the end of a term. Upon termination of this
Agreement for any reason, the parties agree to continue their cooperation in
order to affect an orderly termination of their relationship over the next 90
days.
Agreed to:
SPECOM TECHNOLOGIES CORP. GALACTICOMM TECHNOLOGIES, INC.
By: \s\ MAY MARGARET LEE By: /s/ PETER BERG
--------------------- --------------------------
May Margaret Lee Peter Berg
Title: Vice President of Sales Title: CEO
Date: May 12, 1997 Date: May 12, 1997
EXHIBIT 10.35
SOFTWARE DISTRIBUTION LICENSE
This agreement is made and entered into May 30, 1997 between Galacticomm, Inc.
with its principal place of business at 4101 SW 47th Avenue, Suite 101, Ft.
Lauderdale, FL 33314 and Digital Vision, Inc., with its principal place of
business at 270 Bridge Street, Dedham, MA 02026.
The following are the terms and conditions for implementing a joint marketing
and revenue sharing launch of our respective products:
Terms and Conditions:
1. Digital Vision, Inc., will product and ship a CD with the WebCast Lite
application on the CD which will ship with Digital Vision, Inc. video
cameras and capture cards. Galacticomm will provide 2500 WebCast Lite disks
to initiate the bundle program, until such a time in August when Digital
Vision can put WebCast Lite on their CD.
2. Galacticomm will provide the WebCast Lite software master for duplication
on Digital Vision's CD and grant a license to Digital Vision, Inc. that
will allow customers to log on and use the WebCast Lite software at no
charge. For upgrade to the Personal or Pro versions of WebCast the customer
will be directed to contact Galacticomm to purchase these versions.
Galacticomm will pay a finders fee of $3.00 to Digital Vision, Inc. for
each sale of WebCast products that is generated from the Digital Vision,
Inc. CD's. Galacticomm will provide a code for the CD for upgrade purchases
so that Galacticomm can track sales achieved from the CD's. Upon upselling
fully functional versions of WebCast software Galacticomm will pay the
$3.00 bounty to Digital Vision, Inc. on a quarterly basis.
3. Digital Vision, Inc. agrees to insert marketing literature for Galacticomm
products from time to time, in cameras and capture cards that Digital
Vision, Inc. ships. Galacticomm will provide Digital Vision, Inc. with the
materials.
4. Both companies will be responsible for a sales training at each company's
headquarters location.
5. Technical support will be provided by each respective company for their
product offerings.
6. Digital Vision, Inc. agrees to advise Galacticomm of the intent to include
on their CD any products that will compete with the Galacticomm products.
7. Galacticomm and Digital Vision, Inc. mutually agree to perform to best
efforts and will advise each other of changes in market conditions,
pricing, and competitive situations that could affect the success of this
joint marketing effort.
8. This agreement may be terminated by either party with 30 day written
notice. At time of notice where will be a 90 day wind down period for an
orderly termination of the relationship.
9. This agreement is performable in and venue lies in Fort Lauderdale,
Florida. Both parties agree to be bound by the laws of the state of
Florida.
<PAGE>
10. All intellectual property, including but not limited to, trademarks,
tradenames, copyrights, company designs and logos, and software, and
patents shall remain the property of the respective owner. Digital Vision,
Inc. shall not modify, reverse engineer or decompile the licensed software.
Each party may use the other's trademarks solely for advertising in
relation to this agreement. This clause survives termination.
11. The agreement can only be amended in writing executed by both parties. This
agreement constitutes the entire agreement between the parties and
supersedes any previous written or oral agreements. Each party is acting as
an independent contractor and not as an agent, partner, or joint venture
with the other party for any purpose.
12. The term of this agreement is for one year, commencing on the date hereof,
and shall be renewed in writing on the anniversary date.
13. Galacticomm represents and warrants that to the best of its knowledge, (i)
it has all necessary right, title and interest in and to the Lite and
commercial versions of software it offers for sale to grant the license(s)
and other rights granted under this Agreement; and (ii) the Lite and
commercial versions of software it offers for sale does not infringe any
United States or international patent or copyright of any third party.
Galacticomm will save harmless and indemnifies Digital Vision, Inc. and its
clients for any claim against infringement by the intellectual property
provided by Galacticomm.
Agreed to:
/s/ WILLIAM R. SCHILLHAMMER, III /s/ PETER BERG
- --------------------------------- ---------------------------
Digital Vision, Inc., Signature Galacticomm, Inc., Signature
WILLIAM R. SCHILLHAMMER, III PETER BERG
- --------------------------------- ---------------------------
Name Name
VICE PRESIDENT C.E.O.
- --------------------------- ---------------------------
Title Title
JUNE 9, 1997 JUNE 4, 1997
- --------------------------- ---------------------------
Date Date
EXHIBIT 10.36
[LOGO] GALACTICOMM
SOFTWARE DISTRIBUTION LICENSE
This agreement is made and entered into May 30, 1997 between Galacticomm, Inc.
with its principle place of business at 4101 SW 47th Avenue, Suite 101, Ft.
Lauderdale, FL 33314 and Best Data Products, with its principle place of
business at 21800 Nordhoff Street, Chatsworth, CA 91311.
The following are the terms and conditions for implementing a joint marketing
and revenue sharing launch of our respective products:
Terms and Conditions:
1. Galacticomm grants non-exclusive, royalty-free rights to Best Data to
distribute Galacticomm's WebCast Lite software product.
2. Galacticomm will provide the WebCast Lite software master for duplication on
the Best Data CD and grant a license to Best Data Products that will allow
customers to log on and use the WebCast Lite software at no charge.
3. Best Data will product and ship CD's with the WebCast Lite application on
the CD's which will ship with Best Data Products video cameras, modems and
capture cards.
4. For upgrade to the Personal or Pro versions of WebCast the customer will be
directed to contact Galacticomm to purchase these versions. Galacticomm will
pay a finders fee of $3.00 for the Personal version and $10.00 for the Pro
version to Best Data Products for each sale of WebCast products that is
generated from the Best Data Products CD's. Galacticomm will provide Best Data
with a code that will identify Best Data as the origin for the upgrading WebCast
application. Best Data will give this code on their CD for upgrade purchases so
that Galacticomm can track sales achieved from the CD's. Galacticomm will pay
all finders fees to Best Data every 90 days. Galacticomm will provide Best Data
with a quarterly upgrade report.
5. Galacticomm will have the right to sell Best Data products Digital Video
Camera - part #DCC100, Composite Color Camera with capture card alone - part
#MCC100, and capture card alone - part #VCC100, and any new versions of these
products. Best Data Products will maintain inventory of these products and will
drop ship to Galacticomm customers. Best Data Products will pay a 17% fee to
Galacticomm on the gross sale amount of these products 30 days after shipment
invoice date. Shipping cost will be the responsibility of the purchaser.
6. Best Data Products agrees to insert marketing literature for Galacticomm
products from time to time, in cameras and capture cards that Best Data Products
ships. Galacticomm will provide Best Data Products with the materials. Best Data
to approve the inserted material prior to shipment.
7. Both companies will be responsible for sales training at each company's
headquarters location.
8. Technical support will be provided by each respective companies for their
product offerings.
9. Galacticomm will require sample units of the Best Data Products products for
on going support and compatibility testing.
10. Galacticomm will have the right to return any and all products of Best Data
Product that are returned to Galacticomm for full credit. Galacticomm will
ensure that returned products will contain all original components of the
products that were shipped by Best Data to Galacticomm or Galacticomm's
customers. Galacticomm will contact Best Data to receive an RMA number prior to
shipping any products back to Best Data.
11. Best Data Products agrees to advise Galacticomm of the intent to include on
their CD any products that will compete with the Galacticomm products.
12. Galacticomm and Best Data Products manually agree to perform to best efforts
and will advise each other of changes in market conditions, pricing, and
competitive situations that could effect the success of this joint marketing
effort.
13. This agreement may be terminated by either party with 30 day written notice.
At time of notice there will be a 90 day wind down period for an orderly
termination of the relationship.
[LETTERHEAD] [LOGO]
<PAGE>
14. This agreement is performable in and venue lies in Fort Lauderdale, Florida.
Both parties agree to be bound by the laws of the state of Florida.
15. All intellectual property, including but not limited to, trademarks,
tradenames, copyrights, company designs and logos and software and patents shall
remain the property of the respective owner. Best Data Products shall not
modify, reverse engineer or decompile the licensed software. Best Data Products
may use Galacticomm trademarks solely for advertising in relation to this
agreement. This clause survives termination.
16. The agreement can only be amended in writing executed by both parties. This
agreement constitutes the entire agreement between the parties and supersedes
any previous written or oral agreements. Each party is acting as an independent
contractor and not as an agent, partner, or joint venture with the other party
for any purpose.
17. The term of this agreement is for one year, commencing on the date hereof,
and shall be renewed in writing on the anniversary date.
18. Galacticomm represents and warrants that to the best of its knowledge, (i)
it has all necessary right, title and interest in and to the Lite and commercial
versions of software it offers for sale to grant the license(s) and other rights
granted under this Agreement; and (ii) the Lite and commercial versions of
software it offers for sale does not infringe any United States or international
patent or copyright of any third party. Galacticomm will save harmless and
indemnifies Best Data Products and its clients for any claim against
infringement by the intellectual property provided by Galacticomm.
19. Galacticomm will defend any action brought against Best Data to the extent
based on the third party claim that software supplied by Galacticomm, when used
or distributed as provided for by this Agreement, infringes any United States
patent, copyright or trade secrets. Galacticomm will pay any award against
Best Data, or settlement entered into on Best Data's behalf based on such
infringement only if Best Data notifies Galacticomm promptly in writing of the
claim, provides reasonable assistance in connection with defense and/or
settlement thereof, at Galacticomm's expense and permits Galacticomm to control
the defense and/or settlement thereof.
Agreed to:
/s/ BRUCE ZAMAN /s/ PETER BERG
- ---------------------------- ---------------------------
Best Data Products Signature Galacticomm, Inc. Signature
Bruce Zaman Peter Berg
- ---------------------------- ---------------------------
Name Name
CEO CEO
- ---------------------------- ---------------------------
Title Title
6-13-97 6-4-97
- ---------------------------- ---------------------------
Date Date
EXHIBIT 10.37
Datasafe Publications, Inc.
1345 E. Main St., Suite 111
Mesa, AZ 85203
DATASAFE PUBLICATIONS, INC.
October 28, 1997
Yannick Tessier
Galacticomm, Inc.
4101 SW 47th Ave., Suite 101
Ft. Lauderdale, FL 33314
via FAX: 954-587-1417 (2 pages)
Dear Yannick:
As per our telephone conversation yesterday, Galacticomm may sell any Datasafe
product at our currently advertised price. Galacticomm may purchase that
software from Datasafe at a 25% discount of the advertised price. The second
page of this fax contains our current advertised prices.
In addition, Datasafe agrees to port our EZ Charge and POS Dial modules to the
WebCast platform. The two products combined will be called EZ Charge for
WebCast. Galacticomm may sell EZ Charge for WebCast for $449 and purchase it
from Datasafe for $300 (a discount of approximately 33%). I estimate that we
can have EZ Charge for WebCast completed by Monday, November 10, 1997. You can
place orders now for delivery upon completion.
Feel free to give me a call at 602-461-1911 if you have any questions.
Sincerely,
/s/ DEAN M. KERL
- ---------------------
Dean M. Kerl
President
[LETTERHEAD]
<PAGE>
OCTOBER 28, 1997
PRODUCT DOS NT
---------------------------------------------------
Autorate $99 $99
Checkman $49 $49
EZ Charge $199 $249
EZ Charge Autosubscription $100 $100
Global Power $99 $129
Marketplace $199 $249
Multimedia Registry $199 $249
Omni-Mall $399 $499
POS Dial $250 $295
EZ Charge for WebCast $499
Omni-Mall for both DOS and NT is currently on sale for $249
through 10/31/97. All products include both terminal mode and
client/server interfaces. EZ Charge also includes Active HTML
support for Worldgroup 3.0 NT.
EXHIBIT 10.38
RESTATED SOFTWARE LICENSE AGREEMENT
This Restated License Agreement is made and entered into as of the 29th
day of September, 1995, by and between LEAD Technologies, Inc., a North Carolina
corporation, having its principal place of business in Charlotte, North Carolina
("LEAD") and Galacticomm, Inc., a Florida corporation, having its principal
place of business at 4101 SW 47th Avenue, Suite 101, Fort Lauderdale, Florida
33314 (" Galacticomm")
RECITALS
1. LEAD is in the business of developing, marketing and licensing computer
technology and has developed software products, among others, known as LEADTOOLS
to Professional and LEADTOOLS WIN 32 Professional which have, among other
functions, compression, decompression and image processing, functionality.
2. Galacticomm is in the business of marketing and selling computer
products including two products it has developed known as Worldgroup and the
Worldgroup Client/Server Development Kit, each described below.
3. Galacticomm has heretofore acquired a limited, nonexclusive license to
the above referenced software products pursuant to LEAD's standard ("tear-open")
license agreement but desires to use LEAD's aforementioned software products in
a manner not permitted by the standard agreement.
4. LEAD is willing to grant Galacticomm a limited and nonexclusive license
to use the aforementioned software products in accordance with the terms,
conditions and limitations contained in this Restated Software License Agreement
("Agreement") but only in strict accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
obligations contained herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms when
capitalized will have the following meanings:
(a) "Documentation" shall mean the user manuals (in both hard copy
and online or electronic form) which are necessary to operate the Licensed
Program.
(b) "End User" means a person, firm or entity that receives a copy of
the Client Component of Worldgroup Product (and thus a sublicense of the
Redistributables) for business or personal use in connection with a
Worldgroup System.
(c) "Worldgroup Product" is a computer software product created by
Galacticomm which enables the licensee thereof to create and operate an
online service (a "Worldgroup System") which includes a "server" component
and the Client Component.
<PAGE>
(d) "Sysop" is a person, firm or entity who licenses a Worldgroup
Product for the purpose of operating a Worldgroup System and who may
license a Developer Kit to customize the Client Component.
(e) "ISV" means an independent software vendor who licenses a
Developer Kit for the purpose of developing an application that can only
be used exclusively by a Sysop in connection with the operation of a
Worldgroup System.
(f) "LEAD License" is a license in the form of Exhibit A which shall
accompany each unit of Developer Kit. "Licensed Program" shall mean
collectively the machine readable object code to LEAD's LEADTOOLS
Professional version 5.0 and LEADTOOLS WIN 32 Professional version 5.0 and
all updates and new versions, if any, licensed pursuant hereto and the
Documentation for each such product.
(h) "Licensee Restrictions" are the restrictions set forth in Exhibit
B which must be contained in Galacticomm's Worldgroup Product license
agreement upon the release of the first version of Worldgroup Product
containing the Redistributable.
(i) "Redistributables" means the components of the Licensed Software
which may be integrated into the Client Component and may be copied and
redistributed under the limitations contained in this Agreement. The
Redistributables are only those files identified as being, redistributable
in the "Advisory" section of the online Help file contained in the
Documentation.
0) "Developer Kit" means, collectively, the Worldgroup Client/Server
Developer's Kit and the Intermediate Kit including, all enhancements and
new versions thereof.
(k) "Client Component" means the Windows based software component of
the Worldgroup Product comprising the user interface between the End
User's computer and a Worldgroup System that will be distributed to End
Users to use in connection with a Worldgroup System, and into which the
Redistributable will be integrated.
(1) "Worldgroup Client/Server Developer Kit" means the next scheduled
major release (version 2.0) of Galacticomm's developer kit licensed to
ISVs and Sysops that enables ISVs and Sysops to create Add-ons or
customize the Worldgroup Product.
(m) "Intermediate Kit" means the current version of Galacticomm's
developer kit known as Worldgroup Client/Server Developer Kit version 1-0
but to which has been added imaging functionality developed with the
Licensed Program. The Intermediate Kit
2
<PAGE>
will be licensed to Sysops for purposes of modifying Galacticomm Add-ons
and to ISVs for the purpose of developing Add-ons.
(n) "Add-on" is a separate "plug in" application, usually in the form
of a DLL, that provides additional functionality available to a Sysop
operating a Worldgroup System.
(o) "Add-on Source Code" is the Galacticomm material necessary to
enable the modification of a Galacticomm Add-on and which is licensed
solely to Sysops or ISVs who have licensed a Developer Kit from
Galacticomm.
(p) "Galacticomm Add-on" is an Add-on licensed to Sysops by
Galacticomm.
2. OVERVIEW. Galacticomm desires to obtain a license to the Licensed
Program in order to enhance the Worldgroup Product so as to incorporate the
Licensed Program functionality to allow End Users to be able to view graphic
images transmitted to them by a Worldgroup System which will be accomplished by
including the Redistributable in the Client Component. Galacticomm further
desires to utilize the Licensed Program in the development of the Developer
Kit which will allow ISVs to develop Add-ons. The Developer Kit will also be
marketed to Sysops who will utilize it to customize the Client Component to
provide a unique "look and feel." The Developer Kit will accomplish its tasks by
utilizing, an API developed by Galacticomm which will indirectly access the
Licensed Program functions described in the Documentation and contained in the
Redistributable as integrated into the Client Component. The operation of ISV
Add-ons will, therefore, be dependent upon the Redistributable being contained
in the Client Component with the Galacticomm API calling, the Redistributable.
Galacticomm desires to release the Worldgroup Client/Server Developer Kit once
it is completed, and upon the release of Worldgroup version 2.0. However,
Galacticomm desires to immediately release the Intermediate Kit to enable Sysops
to customize the Galacticomm Add-ons and to enable ISVs to develop Add-ons prior
to the release of Worldgroup Product 2.0 and Worldgroup Client/Server Developer
Kit, and in connection therewith, will include the Client Component (and
Redistributables integrated therein) with such Intermediate Kit. No
Redistributables will be included in the Worldgroup Client/Server Developer Kit.
No Documentation will be included with any Developer Kit or otherwise
distributed or made available to any customer.
3. LICENSE OF THE LICENSED PROGRAM. LEAD hereby licenses the Licensed
Program and Galacticomm hereby accepts said license of the Licensed Program on
the terms and conditions set forth hereinafter.
(a) GRANT OF LICENSE. LEAD hereby grants to Galacticomm and
Galacticomm hereby accepts a perpetual, worldwide, nonexclusive limited
license (with the right to grant sublicenses but only in the manner set
forth hereinafter in this, paragraph 3) to use and integrate the Licensed
Program in the creation of Worldgroup and the Developer Kit and to copy
and distribute the Redistributables but only upon the terms and conditions
hereof and subject to the limitations and restrictions set forth in this
Agreement and provided Galacticomm complies with ail of its obligations
contained in this Agreement.
3
<PAGE>
(b) LIMITED SCOPE OF LICENSE.
(i) WORLDGROUP. As it pertains to Worldgroup Product,
Galacticomm's right and license to use the Licensed Program shall be
for the sole purpose of integrating, the Redistributables into the
Client Component so that End Users may view and manipulate images
transmitted through a Worldgroup System.
(ii) WORLDGROUP CLIENT/SERVER DEVELOPER KIT. As it pertains to
Worldgroup Client/Server Developer Kit, Galacticomm's right and
license to use the Licensed Program shall be for the sole purpose of
developing the Worldgroup Client/Server Development Kit which will
enable the ISV to create Add-ons or enable a Sysop to modify the
Client Component exclusively to create a unique look and feel to the
Client Component. No Redistributables will be provided with the
Worldgroup Client/Server Developer Kit.
(iii) INTERMEDIATE KIT. As it pertains to the Intermediate Kit,
Galacticomm's right and license to use the Licensed Program shall be
for the sole purpose of developing the Intermediate Kit which will
enable a Sysop to modify a Galacticomm Add-on and an ISV to develop
an Add-on. Galacticomm may include the Client Component (with the
Redistributables integrated therein) in the Intermediate Kit for the
sole purpose of providing image viewing and manipulation
functionality for the End User. Galacticomm will cease shipping the
Intermediate Kit upon the release of the Worldgroup Client/Server
Development Kit.
(c) SUBLICENSEES AND THIRD PARTIES. Galacticomm may not use, copy,
duplicate, transfer, sell, assign, alienate, lease, sublicense or
otherwise alienate the Licensed Program or any part thereof except as
permitted by the express terms of this Agreement. All license agreements
between Galacticomm and all Sysops and ISVs must protect the Licensed
Program at least as well as it protects Galacticomm's proprietary source
and/or object code. In addition, Galacticomm will include the LEAD License
with each unit of Developer Kit shipped or otherwise distributed by
Galacticomm. Each Worldgroup Product containing the Redistributables
shipped or otherwise distributed must be accompanied by a user license
agreement containing terms substantially similar to the Licensee
Restrictions. Galacticomm may not copy, disclose or transfer to any
person, firm or entity, any Documentation, including, without limitation,
examples, example source code, demos of the Redistributables, include
files, header files, function names and function parameters contained in
the Licensed Program. Further, no third party may access the functionality
of the Redistributables other than through the Galacticomm API contained
in the Worldgroup Product. The Developer Kit will be coded so as to
provide that the application developed therewith will not operate unless
linked with a Worldgroup, System. Further, the Client
4
<PAGE>
Component will be technically unable to connect with systems other, than
Worldgroup for purposes of utilizing any of the Functionality contained in
the Redistributable. If, to Galacticomm's knowledge, any Sysop or End User
infringes or threatens infringement or takes any other action contrary to
the Licensee Terms contained in the Worldgroup license, Galacticomm will
provide LEAD notice thereof and pursue the infringing, party at least as
diligently as Galacticomm pursues infringement of its own license terms.
LEAD shall, at its option, be permitted to join in any such action against
the infringing or breaching licensee or may pursue such infringer
directly. Galacticomm agrees that it will be liable for and will promptly
pay LEAD for any damages, lost profits, claims, costs, including
attorney's fees, and liabilities caused by a breach hereof by Galacticomm.
(d) IMPROVEMENTS, ENHANCEMENTS, ETC. The license granted hereunder
includes the Licensed Program as it exists as of the date of delivery as
provided below and any upgrades, updates, enhancements or improvements
delivered to Galacticomm in accordance with paragraph 12 hereof. Except as
expressly stated herein, Galacticomm does not, by virtue of this
Agreement, obtain any rights in any enhancements, modifications, new
versions or improvements of or relating to the Licensed Program. Except as
expressly permitted herein, Galacticomm may not modify the Licensed
Program or create derivative works therefrom.
(e) PROPRIETARY RIGHTS NOTICES. Galacticomm shall not remove or
destroy any proprietary markings placed on or contained within the
Licensed Program or on any related materials or Documentation. Galacticomm
shall include in all copies of the Client Component, the following notice
in the copyright notice area of the "About" box: "Portions of this program
are provided by LEAD Technologies, Inc., /copyright/LEAD Technologies,
Inc., 1991-1995, ALL RIGHTS RESERVED."
4. DELIVERY. Galacticomm acknowledges receipt of the Licensed Program.
5. LICENSE FEES AND ROYALTIES, PAYMENT TERMS. In exchange for the license
granted hereby and LEAD's undertaking described herein, Galacticomm will pay
LEAD the following
(a) REQUIRED PAYMENTS. Galacticomm will pay LEAD a non-refundable
advance prepaid royalty of Thirty Thousand Dollars ($30,000.00) USD,
payable as follows:
(i) Ten Thousand Dollars ($10,000.00) USD will be paid on the
earlier to occur of (1) October 31, 1995 or (2) the first commercial
shipment or use of a Developer Kit;
(ii) Ten Thousand Dollars ($10,000.00) USD will be payable thirty
(30) days after the date the payment in (a)(i) above becomes due and
payable; and
5
<PAGE>
(iii) Ten Thousand Dollars ($ 10,000.00) USD will be payable
thirty (30) days after the date the payment in (a)(ii) above becomes
due and payable.
(b) PER UNIT ROYALTIES. In addition to the payments above,
Galacticomm will pay royalty to LEAD based on Developer Kits licensed,
used or otherwise distributed at the rate of Seventy-Five Dollars ($75.00)
per unit of Developer Kit sold, used or otherwise disposed of . For each
Add-on created by Galacticomm which utilizes the functionality contained
in the Redistributables, Galacticomm will pay LEAD a royalty of
Seventy-Five Dollars ($75.00). Galacticomm will receive a credit against
the royalties payable pursuant to this paragraph 5(b) for the payments
made pursuant to paragraph 5(a). Once the credit has been exhausted,
royalties will be payable pursuant to paragraph 5(a) hereof.
(c) UPGRADES. Notwithstanding subparagraph 5(b) above, the royalty
rate payable for Worldgroup Client/Server Developer Kits which are
licensed or distributed at an upgrade discount to currently existing ISVs
or Sysops pursuant hereto who have to heretofore acquired a Galacticomm
developer kit (including all prior versions other than the Intermediate
Kit or the Worldgroup Client/Server Developer Kit), will be Twenty Dollars
($20.00) per copy of Worldgroup Developer Kits distributed to such
persons. Such royalties will be payable in accordance with subparagraph
5(f) below and such royalties will not be credited against the prepayments
described in subparagraph 5(a) above.
(d) ADDITIONAL ISV ADD-ONS. An ISV or Sysop who licenses a Developer
Kit will be required to pay LEAD an additional license fee of Seventy-Five
Dollars ($75.00) for each additional application developed with a
Developer Kit (over and above one application) that displays or
manipulates images or otherwise utilizes the functionality contained in
the Redistributables. The ISV or Sysop will be required to pay the royalty
directly to LEAD in accordance with the LEAD License.
(e) NEW VERSIONS OF DEVELOPER KITS. If a customer has purchased a
Developer Kit for which royalty is due and payable hereunder and later
purchases an updated or new version of a Developer Kit ("New Kit"),
Galacticomm will not be required to pay royalty for the sale of the New
Kit, unless the New Kit purchased by such customer contains an upgraded
Redistributable that has significant new functions or performance compared
to the previous version of the Redistributable and such new functions or
performance is communicated by Galacticomm to its customers as a
motivation to upgrade the new Developer Kit . If the new Redistributable
contained in or indirectly accessible by the New Kit contains significant
new functions or performance (which is communicated to Galacticomm's
customers as described above), the royalty will be Twenty Dollars ($20.00)
per copy of New Kit purchased by such customer payable in accordance with
paragraph 5(f) below.
(f) REPORTING AND PAYMENT OF ROYALTIES. Beginning with the first
Developer Kit unit sold, Galacticomm will keep detailed and accurate
records of all sales or other dispositions of Developer Kits. Galacticomm
will send LEAD monthly reports no later
6
<PAGE>
than the twentieth (20th) day of the month following the month in which
the sale occurs indicating the number of Developer Kits sold, the name,
address and telephone number of Galacticomm's customers together with a
check for the royalty due pursuant to paragraph 4(b), (c) and (d) hereof,
if any.
(g) DELINQUENT PAYMENTS. Payment for the license and services
provided herein must be paid on the due date set forth herein. Interest
shall accrue on any amount due and payable hereunder and remaining unpaid
for more than ten (10) days (the "Principal Amount") at a rate per annum
which shall from day to day be equal to the lesser of (i) eighteen percent
(18%) per year, computed on the basis of a year of three hundred sixty
(360) days and for the actual number of days elapsed (including the first
day but excluding the last day) until payment of the Principal Amount or
(b) the maximum rate of interest permitted from day to day under
applicable law.
(h) TAXES. Galacticomm shall be responsible for paying all state and
federal use, sales or value added taxes, duties or governmental charges,
whether presently in force or to come into force in the future, related to
the deliveries and payments hereunder (except for taxes on LEAD's income)
and will indemnify LEAD against any claims made against LEAD relating, to
any such taxes or assessments.
6. OWNERSHIP AND PROTECTION OF LICENSED PROGRAM.
(a) The Licensed Program is proprietary to LEAD and title thereto
shall remain exclusively with LEAD throughout the term of this Agreement.
All applicable rights to patents, copyrights, trademarks, trade secrets,
software applications, hardware applications relating, to the Licensed
Program or any part thereof and any enhancements or modifications
thereto developed by LEAD or any other person are and shall remain the
exclusive property of LEAD subject to written licenses granted by LEAD.
Nothing in this Agreement will prohibit or restrict LEAD's continued
exploitation and marketing of the Licensed Program and any and all
components thereof. Galacticomm shall not sell, transfer, publish,
disclose, display, encumber, license, copy, sublicense, lease or otherwise
make available the Licensed Program or any part thereof, to any person,
firm or entity except as provided in this Agreement. Galacticomm shall not
reverse engineer, decompile or disassemble the Licensed Program, or
attempt to do so except to the extent this restriction is expressly
prohibited by applicable law, and shall not use any portion of the
Licensed Program to attempt to derive products which are competitive with
the Licensed Program, including developer toolkits (other than the
Developer Kit) or LEAD's product known as "LEADVIEW" or will not use the
Licensed Program for any purpose other than as contemplated in paragraph 2
hereof. Galacticomm agrees to secure and protect the Licensed Program in a
manner consistent with the maintenance of LEAD's rights therein and to
take appropriate action by instruction or agreement with its employees,
directors, trustees, officers, agents, consultants, customers or
(sub)licensees who are permitted access to the Licensed Program or any
part thereof to satisfy its obligations hereunder. The covenants herein
shall survive the termination of this Agreement for whatever reason.
7
<PAGE>
7. WARRANTIES AND INFRINGEMENT INDEMNITIES.
(a) WARRANTY. LEAD licenses and Galacticomm, upon acceptance, will
accept the Licensed Program "AS IS" with no warranty except LEAD warrants
that the Licensed Program will not contain any computer virus, worm or any
feature designed to render inaccessible or impair the operation of the
Licensed Program, including, without limitation, any lock or drop-dead
device (provided, however, future versions of the Licensed Program may
have a lock device covering GIF and TIFF (LZW) file format support
functions).
(b) PROPRIETARY RIGHTS INDEMNIFICATION. In the event that a bona fide
claim is filed in a court of competent jurisdiction alleging that the
Licensed Program used within the scope of the license granted hereunder
infringes any copyright of any third party ("Infringement Action"), LEAD
shall indemnify, defend and hold Galacticomm harmless from and against
such Infringement Action and any and all costs, damages, penalties and
expenses, including reasonable attorneys' fees, finally resulting from or
awarded in actions attributable to such claim, provided that (a)
Galacticomm promptly notifies LEAD in writing of the existence of such
Infringement Action when Galacticomm becomes aware of such Infringement
Action, (b) LEAD has control of the defense of such Infringement Action
and all related settlement negotiations, and (c) Galacticomm provides all
reasonable assistance and cooperation in such defense. Notwithstanding the
foregoing, LEAD shall have no liability for any Infringement Action for
use of the Software to the extent the Infringement Action arises due to
the fact that Galacticomm modified or altered the Licensed Program without
the prior written consent of LEAD. Provided further, no indemnity will be
provided with respect to GIF or TIFF (LZW) file formats and the claimed
patent rights of Unisys Corporation. The indemnification provided for in
this paragraph 7(b) shall constitute the entire liability of LEAD with
respect to an Infringement Action.
8 LIMITATION OF WARRANTY AND LIABILITY. THE WARRANTY DESCRIBED IN
PARAGRAPH 7 ABOVE IS A LIMITED AND EXCLUSIVE WARRANTY AND IT IS THE ONLY
WARRANTY MADE BY LEAD. LEAD MAKES AND GALACTICOMM RECEIVES NO OTHER WARRANTY,
EXPRESS OR IMPLIED, AND THERE ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. LEAD SHALL HAVE NO
LIABILITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT FOR
CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES EVEN IF LEAD HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL LEAD BE LIABLE TO GALACTICOMM
FOR ANY DAMAGES RESULTING FROM OR RELATED TO ANY FAILURE OF THE LICENSED PROGRAM
OR ANY PART THEREOF, INCLUDING, BUT NOT LIMITED TO, LOSS OF DATA OR DELAY OF THE
LICENSED PROGRAM IN THE DELIVERY OF THE LICENSED PROGRAM OR IN THE
PERFORMANCE OF SERVICES UNDER THIS AGREEMENT. LEAD'S SOLE OBLIGATION AND
LIABILITY UNDER THIS AGREEMENT SHALL BE TO REPLACE OR
8
<PAGE>
CORRECT SUCH LICENSED PROGRAM, OR AT LEAD'S OPTION IN EITHER CASE, TO REFUND ANY
AND ALL LICENSE FEES PAID BY GALACTICOMM. EXCEPT FOR THE FOREGOING, LEAD SHALL
HAVE NO LIABILITY TO GALACTICOMM OR ANY OTHER PARTY FOR ANY GENERAL, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM THE FAILURE OF THE LICENSED PROGRAM TO
PERFORM OR FOR ANY OTHER CAUSE. GALACTICOMM WILL BE SOLELY RESPONSIBLE FOR THE
OPERATION OF THE WORLDGROUP PRODUCT AND THE DEVELOPER KIT AND GALACTICOMM WILL
INDEMNIFY LEAD FROM ANY CLAIMS MADE AGAINST LEAD BY GALACTICOMM'S CUSTOMERS
ARISING OUT OF SUCH CUSTOMER'S USE OF GALACTICOMM'S PRODUCTS. IN NO EVENT WILL
LEAD'S LIABILITY UNDER THIS AGREEMENT EXCEED THE LICENSE FEES WHICH HAVE BEEN
RECEIVED BY LEAD.
9. INSPECTION RIGHTS. LEAD and its duly authorized agents will be
permitted access, upon reasonable advance notice, during regular business hours
to Galacticomm's principal place of business to review business, accounting and
customer records of Galacticomm for purposes of verifying Galacticomm's
compliance with the terms of this Agreement. LEAD will treat all information
reviewed as confidential information with the meaning, of paragraph 10(a)
hereof.
10. CONFIDENTIALITY AND EMPLOYEES.
(a) CONFIDENTIALITY. Each of the parties hereto agrees to keep
confidential any and all information with respect to the other party which
it has received or may in the future receive in connection with this
Agreement which is not otherwise available to the general public without
restriction. Notwithstanding, the foregoing, each of the parties shall be
entitled to disclose such information (i) to its employees or
representatives who have a need to know such information, for the purposes
of performance under this Agreement and exercising the rights granted
under this Agreement, provided such employees are bound by a valid
confidentiality agreement restricting the disclosure of third party
confidential information, or (ii) to the extent required by applicable
law, or (iii) during the course of or in connection with any litigation,
arbitration or other proceeding based upon or in connection with the
subject matter of this Agreement.
(b) EMPLOYEES. Galacticomm and LEAD each agree during the term of
this Agreement and for a period of two (2) years after termination to
refrain from hiring, or employing (as employee, consultant, agent or
otherwise) any person who has been employed by the other party at any time
during the term of this Agreement.
11. TERMINATION.
(a) TERMINATION FOR CAUSE. The licenses granted in this Agreement
shall continue (unless otherwise specified elsewhere in this Agreement)
unless it is terminated in accordance with the provisions of this
paragraph This Agreement may be terminated by either party in the event of
any material breach by the other party hereto which continues after thirty
(30) days written notice of said breach (which notice shall, in reasonable
detail,
9
<PAGE>
specify the nature of the breach) by the non-defaulting party to the
defaulting party. Failure to timely pay license fees, royalties, per unit
charges or other charges hereunder is conclusively deemed to be a material
breach of this Agreement. In addition, in the event of Galacticomm's
breach of paragraph 6 hereof, LEAD may immediately terminate the licenses
granted under this Agreement by sending, notice of such termination.
(b) OTHER TERMINATION RIGHTS. Galacticomm has the right to terminate
this Agreement without cause, at any time, by providing thirty (30) days
written notice to LEAD. In the event of such termination, Galacticomm will
remain responsible for the payments described in paragraph 5(a) and for
royalties due based on any Developer Kits shipped or used prior to
termination. Upon such termination, Galacticomm will comply with paragraph
11(c) hereof. LEAD will have the right, by providing ninety (90) days
advance written notice ("Notice Period"), to terminate this Agreement at
any time after December 31, 1996. Upon receipt of such notice, Galacticomm
will take steps to remove the Licensed Program material from the
Worldgroup Product and the Developer Kits so that such material will not
be included in the next released version. Once the Notice Period has
elapsed, Galacticomm will not include any Licensed Program material in any
new version or upgrade of the Worldgroup Product or Developer Kits, except
Galacticomm may ship routine "maintenance" releases. For a period of one
(1) year after the expiration of the Notice Period, Galacticomm will be
permitted to ship the version of Developer Kit and Worldgroup Product in
commercial release at the expiration of the Notice Period and maintenance
releases thereto. After expiration of the one (1) year period, all
shipments of the Developer Kits or Worldgroup Products containing any
Licensed Program material will cease and paragraph 1l(c) will apply. LEAD
and Galacticomm will keep each other reasonably apprised of product
changes and enhancements.
(c) EFFECT OF TERMINATION. Upon termination, pursuant to paragraph
1l(a) hereof, of the licenses granted herein, the licenses granted to
Galacticomm pursuant to paragraph 2 shall terminate immediately and
Galacticomm shall immediately discontinue distribution of and return or
destroy all copies of the Licensed Program within its possession or
control except Galacticomm may keep one (1) copy for the sole purpose of
providing technical supports to its then existing customers. No
termination of this Agreement by either Galacticomm or LEAD shall affect
licenses of the Worldgroup Product or the Developer Kit properly granted
by Galacticomm prior to termination. Paragraphs 3 (except for the licenses
granted to Galacticomm in paragraph 3), 5, 6, 7, 8, 9 and 14 will survive
the termination of this Agreement for any reason.
12. TECHNICAL SUPPORT; UPDATES.
(a) SUPPORT. So long as Galacticomm is in compliance with the terms
and conditions hereof, Galacticomm will receive, at no additional costs,
free commercially reasonable technical support and bug fixes in respect of
the contemplated use of Licensed Program in accordance with LEAD's
technical Support policies in effect from time to time for its LEADTOOLS
Professional customers and will diligently respond to Galacticomm's
10
<PAGE>
requests for bug fixes and Support covered by LEAD's policies. LEAD will
not be required to provide technical support in connection with problems
with Galacticomm's product or any other third party software or for bugs
or technical problems caused by Galacticomm. If Galacticomm requests
assistance outside the scope of LEAD's standard technical support
policies, LEAD and Galacticomm will agree on a reasonable time and
materials basis for any technical work which LEAD agrees to perform
(b) UPGRADES, NEW VERSIONS. Galacticomm shall be entitled to receive
Licensed program updates or upgrades (if LEAD has created same) free of
charge for a period of six (6) months from the ship date of the Worldgroup
Client/Server Developer Kit, and such upgrades and updates will require no
further license fees or royalties Over and above those payable pursuant
hereto. Thereafter, all new versions and upgrades will be licensed on such
terms as Galacticomm and LEAD may mutually agree in writing. Any upgrades
or new versions to the Licensed Program licensed to Galacticomm will
become the Licensed program within the meaning hereof.
13. PROMOTIONAL MATERIALS. Galacticomm agrees to include in each package
containing a unit of Developer Kit, promotional information concerning LEAD in
the form of Exhibit C (or replacements thereof reasonably acceptable to
Galacticomm).
14. GENERAL.
(a) APPLICABLE LAW AND JURISDICTION. This Agreement shall be governed
by and construed in accordance with the laws of the State of North
Carolina. (Galacticomm agrees all disputes hereunder will be exclusively
resolved in the courts located in Charlotte, North Carolina and
Galacticomm hereby consents and submits itself to the jurisdiction and
venue of the state and federal courts located in Charlotte, North
Carolina.
(b) TIME. Time shall be of the essence of this Agreement.
(c)ENFORCEABILITY. If any provision of this Agreement is declared by
a court of competent jurisdiction to be invalid, illegal or unenforceable,
such provision or part thereof which is necessary to render the provision
valid, legal and enforceable, shall be severed from the Agreement and the
other provisions and the remaining part of thereof of that provision shall
remain in full force and effect.
(d) FURTHER ASSURANCES. The parties agree to do all such things and
to execute such further documents as may reasonably be required to give
full effect to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and cancels and
supersedes any prior understandings and agreements between the parties
hereto with respect thereto. There are no representations, warranties,
terms, conditions, undertakings or collateral agreements, expressed,
implied or statutory, between the parties other than as expressly set
forth in this Agreement.
11
<PAGE>
(f) REMEDIES. The remedies expressly stated in this Agreement shall
be in addition to and not in substitution for those generally available at
law or in equity.
(g) WAIVER. No waiver or any provision of this Agreement by a party
shall be enforceable against that party unless it is in writing, and
signed by an authorized officer of that party.
(h) ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned by Galacticomm either by assignment, merger,
acquisition or otherwise without the prior written approval of LEAD, which
approval shall not be unreasonably withheld.
(i) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed to be an original
and all of which together shall constitute but one and the same
instrument.
(j) INJUNCTIVE RELIEF; ATTORNEYS' FEES. LEAD shall be entitled to
injunctive and other equitable relief in addition to all other remedies in
the event of a breach of this Agreement by Galacticomm, it being
acknowledged that damages alone will be an inadequate remedy if
Galacticomm breaches this Agreement. The parties agree at the losing party
in a litigation will pay all costs of the prevailing party, including
reasonable attorneys' fees, court costs and other charges associated with
the litigation.
15. NOTICES. All notices hereunder will be sent via confirmed facsimile or
via overnight mail to the addresses and/or fax numbers set forth below:
To LEAD: To GALACTICOMM:
LEAD Technologies, Inc. Galacticomm, Inc.
900 Baxter Street 4101 SW 47th Avenue, Suite 101
Charlotte, NC 28204 Fort Lauderdale, Florida 33314
Phone: 704/332-5532 Phone: 954/583-7806
Fax: 704/372-8161 Fax: 954/583-7846
[Remainder of pace intentionally left blank]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
LEAD TECHNOLOGIES, INC.
By: /s/ RICHARD G. LITTLE
----------------------------
Richard G. Little, President
GALACTICOMM, INC.
By: /s/ CHRIS ROBERT
-----------------------------
Chris Robert, Vice President of
Engineering
13
<PAGE>
EXHIBIT A
LEAD LICENSE
This Addendum supplements the Galacticomm License Agreement accompanying
this package. The software contained in this package is subject to this Addendum
between you, the user, and LEAD Technologies, Inc., a North Carolina corporation
('LEAD"). The enclosed software contained on the electronic media and associated
documentation were developed, in part, with software and related materials
licensed to Galacticomm, Inc. by LEAD pertaining to the manipulation, processing
and display of images (herein the "Software"). LEAD is willing to permit you to
use the Software in the manner described herein only upon the condition that you
accept all the terms set forth in this Addendum. If you do not accept these
terms, return the unopened envelope containing, the electronic media along with
all related documentation to Galacticomm. Opening this package will indicate
your acceptance of the following terms:
1. USE OF SOFTWARE. The Software may only be used to either (i) create an
Add On application to be operated by a Sysop in connection with a Worldgroup
System, as such terms are defined in the accompanying Galacticomm License
Agreement or (ii) customize the Client Software to create a unique 'look and
feel" to the Client Software, and LEAD hereby grants you a nonexclusive personal
license to use the Software in connection therewith. Specifically, you may not
use the Software to create an application which is used to create other computer
applications, such as a developer's toolkit. A Sysop is the operator of a
Worldgroup System service who has licensed Worldgroup. You may not use the
Software to create any application other than an Add On application that is
licensed only to Sysops to be used exclusively with and in connection with the
operation of a Worldgroup System or to customize the Client Software as
described above (herein, collectively the "New Product"). If the Software
contains Client Software, you may distribute exact copies of the LEAD
Redistributable as embedded in the Client Software.
2. SINGLE APPLICATION. You may only develop a single application as
described above with the Software. If you wish to develop more than one
application. and such application is related to the display or manipulation of
images, or otherwise utilizes LEAD functionality contained in the Client
Software, you must obtain additional licenses to do so from LEAD for each such
additional application. Additional licenses will be available for $75.00 per
application. To obtain additional licenses, contact LEAD Technologies, Inc.,
Licensing Department, telephone number 704/332-5532, extension 1232 or complete
the enclosed order form and license application. For purposes hereof, a
modification to the Worldgroup client component of Worldgroup by a Worldgroup
Sysop, will be counted as an application.
3. COPYRIGHT. Portions of the Software are owned by LEAD and are protected
by U.S. copyright laws and international treaty provisions. You must treat the
Software just like a book or other copyrighted item, except that you may (a)
make one copy of the Software for backup or archival purposes, and (b) transfer
the Software onto a single computer's hard disk or solid state storage. You may
not copy any Software documentation provided to you.
4. OTHER RESTRICTIONS. You may not lease or rent the Software or otherwise
distribute it. You may not modify, disassemble, decompile or reverse-engineer
the Software, and you may not remove or obscure any trademark or copyright
notices or any identifying string in the Software or associated documentation.
Your license agreement with
<PAGE>
Sysop will prohibit the Sysop from using the Software or any part thereof except
in connection with the operation of a Worldgroup System.
5. TERMINATION. In the event that you default in the performance of any of
your duties or obligations hereunder, which default shall not be substantially
cured within ten (10) days after written notice is given to you specifying the
default or take any action with respect to the Software which is prohibited
hereby, then LEAD may, by giving written notice thereof to you, terminate the
license ranted herein.
6. REMEDIES: LIMITATIONS. ALL WARRANTIES, EXPRESSED OR IMPLIED, ARE
EXCLUDED FROM THIS AMENDMENT AND SHALL NOT APPLY TO ANY SOFTWARE LICENSED UNDER
THIS AMENDMENT, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. YOUR SOLE AND EXCLUSIVE
REMEDY AGAINST LEAD SHALL BE, AT LEAD'S SOLE DISCRETION, FOR (A) REPAIR OR
REPLACEMENT OF DEFECTIVE SOFTWARE; OR (B) REPAYMENT OF THE LICENSE FEES PAID BY
YOU. NO OTHER REMEDY (INCLUDING, BUT NOT LIMITED TO, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OR LOST PROFITS, LOST SALES, INJURY TO PERSON OR PROPERTY, OR ANY OTHER
INCIDENTAL OR CONSEQUENTIAL LOSS) SHALL BE AVAILABLE TO YOU. IN NO EVENT SHALL
LEAD'S LIABILITY EXCEED AMOUNTS PAID TO LEAD BY YOU UNDER THE TERMS OF THE
AMENDMENT.
7. GENERAL. This Addendum shall be interpreted, construed, and enforced
according to the laws of the State of North Carolina. In the event of any action
under this Amendment, the parties agree that federal and state courts located in
Charlotte, North Carolina will have exclusive jurisdiction and that a suit may
only be brought in Charlotte, North Carolina and you submit yourself to the
jurisdiction and venue of the state and federal courts located in Charlotte,
North Carolina. This Amendment constitutes the entire agreement and
understanding of the parties and may be modified only in writing, signed by both
parties. No officer, salesman, or agent has any authority to obligate LEAD by
any terms, stipulations or conditions not expressed in the Agreement. If any
portion of this Amendment is determined to be legally invalid or unenforceable,
such portion will be severed from this Amendment and the remainder of the
Agreement will continue to be fully enforceable and valid. This Amendment, and
the rights hereunder, may not be assigned by you (whether by oral or written
assignment, sale of assets, merger, consolidation or otherwise), without the
express written consent of LEAD. You agree to be responsible for any and all
losses or damages arising, out of or incurred in connection with the New Product
developed by you and you agree to defend, indemnify and hold LEAD harmless from
any such loss or damage (including attorney's fees) arising, from the use,
operation or performance of the New Product you develop using, the Software. You
shall be responsible for paying, all state and federal use, sales or value added
taxes, duties or Governmental charges, whether presently in force or come into
force in the future, related to the distribution and sale of the New Product and
will indemnify LEAD against any claim made against LEAD relating to any such
taxes or assessments.
<PAGE>
EXHIBIT B
LICENSEE RESTRICTIONS
A. Each Galacticomm Worldgroup license agreement shall contain provisions
no less than protective of LEAD's intellectual property rights set forth below
and on the attached B-1:
1. PROHIBITIONS. Licensee is expressly prohibited from reverse
engineering, disassembling, decompiling, modifying or creating derivative works
from the Software or any part thereof.
2. TITLE. Licensee acknowledges that all title, copyright and other
proprietary rights in and to the Software shall remain with Galacticomm or its
suppliers and licensors who have granted Galacticomm the right to license the
Software; Licensee shall not remove or alter any copyright or other notices
appearing in or on the Software.
3. THIRD PARTY BENEFICIARY. Licensee acknowledges that Galacticomm's
licensors are intended third party beneficiaries of this Agreement.
<PAGE>
EXHIBIT B-1
GALACTICOMM SOFTWARE LICENSE AGREEMENT
WORLDGROUP (TM)
YOU SHOULD CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS BEFORE OPENING THIS
ENVELOPE. OPENING THIS ENVELOPE INDICATES YOUR ACCEPTANCE OF THESE TERMS AND
CONDITIONS. IF YOU DO NOT AGREE WITH THEM, YOU SHOULD RETURN THIS ENVELOPE
UNOPENED WITHIN 30 DAYS OF THE ORIGINAL DATE OF PURCHASE, AND THE PRICE OF THE
PRODUCT WILL BE REFUNDED TO YOU.
Galacticomm, Inc. provides this Software and licenses its use throughout the
world. You assume responsibility for the selection of the Software to achieve
your intended results, and for the installation, use, and results obtained from
the Software.
DEFINITIONS
"You" and "your" shall be taken as referring to the person or business entity
who purchased this License to use this Software or for whom such License was
purchased.
"Software" shall be taken as referring to the files supplied on the diskette(s)
or CD-ROM(s) inside this envelope, and to any and all copies, updates,
modifications, functionally-equivalent deriviatives, or any parts or portions
thereof.
"Run-Time Access" shall be taken as referring to a connection that allows the
exchange of data between two or more computers.
"Live Computer" shall be taken as referring to a single computer connected with
communications hardware providing Run-Time Access to this Software.
"Development Computer" shall be taken as referring to a single computer upon
which a copy of this Software may be installed for configuration and development
purposes, not providing Run-Time Access to this Software.
"Client Software" shall be taken as referring to the program(s) that can be
generated with this Software to give other computers Run-Time Access to your
Live Computer in a Windows client/server mode.
LICENSE
You may:
1. install and use one copy of this Software on a single Live Computer,
you may also install and use one copy of this Software on a single
Development Computer.
2. copy this Software into machine-readable or printed form, for backup or
archival purposes in support of your use of this Software.
3. provide Run-Time Access to this Software on your single Live Computer
to up to 8 other machines at a time (upgradable with licensed User
Six-Packs); said other machines need not, and must not, be provided with
copies of this Software in order to obtain said Run-Time Access.
4. freely distribute the Client Software either electronically or on
diskette(s) or CD-ROM(s).
5. transfer this Software and license to another party if the other party
agrees to accept the terms and conditions of this Agreement. If the
enclosed Software is an update, any transfer must include the update and
all prior versions. If you transfer the Software, you must at the same
time either transfer all copies, whether in machine-readable form, to
the same party, or destroy any copies not transferred.
YOU MAY NOT USE, COPY, MODIFY, OR TRANSFER THIS SOFTWARE, OR ANY COPY,
MODIFICATIONS, OR MERGED PORTION, IN WHOLE OR IN PART, EXCEPT AS EXPRESSLY
PROVIDED FOR IN THIS LICENSE, OR IN AMENDMENTS SIGNED BY AN OFFICER OF
GALACTICOMM. IF YOU TRANSFER POSSESSION OF ANY COPY OF THIS SOFTWARE, OR ANY
FUNCTIONALLY-EQUIVALENT DERIVATIVE, OR ANY PORTION OR MODIFICATION THEREOF, TO
ANOTHER PARTY, YOUR LICENSE IS AUTOMATICALLY TERMINATED.
TERM
This license is effective until terminated. You may terminate it at any time by
destroying all copies of the Software covered by this Agreement. It will also
terminate upon conditions set forth elsewhere in this Agreement or if you fail
to comply with any term or condition of this Agreement. You agree upon such
termination to destroy this Software, including all copies,
functionally-equivalent derivatives, and all portions and modifications thereof
in any form.
(CONTINUED ON OTHER SIDE)
<PAGE>
LIMITED WARRANTY
THIS SOFTWARE, INCLUDING CLIENT SOFTWARE, IS PROVIDED "AS IS", WITHOUT WARRANTY
OF ANY KIND, WITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PUROPSE. THE
ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THIS SOFTWARE IS WITH YOU.
SHOULD THE SOFTWARE PROVE DEFECTIVE, YOU (NOT GALACTICOMM) ASSUME THE ENTIRE
COST OF ALL NECESSARY SERVICING, REPAIR OR CORRECTIONS.
SOME STATES DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
Galacticomm does not warrant that the functions contained in this Software will
meet your requirements or that the operation of this Software will be
uninterrupted or error-free. However, Galacticomm does warrant the diskette(s)
or CD-ROM(s) on which the Software is furnished to be free from defects
in materials and workmanship under normal use for a period of ninety (90) days
from the date of delivery to you.
LIMITATIONS OF REMEDIES
Galacticomm's entire liability and your exclusive remedy shall be:
a. the replacement of any diskette(s) or CD-ROM(s) not meeting Galacticomm's
"Limited Warranty" and which is returned to Galacticomm, or
b. if Galacticomm is unable to deliver a replacement diskette(s) or CD-ROM(s)
which is free of defects in materials or workmanship, you may terminate this
Agreement by returning this Software and you money will be refunded.
IN NO EVENT WILL GALACTICOMM BE LIABLE TO YOU FOR ANY DAMAGES. INCLUDING ANY
LOST PROFITS, LOST SAVINGS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THE USE OR INABILITY TO USE THIS SOFTWARE EVEN IF GALACTICOMM OR ITS
AUTHORIZED REPRESENTATIVES HAS BEEN ADVISES OF THE POSSIBILITY OF SUCH DAMAGES,
OR FOR ANY CLAIM BY ANY OTHER PARTY.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES SO THAT ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
YOU.
GENERAL
You may not sublicense, assign, or otherwise transfer this License or Software
except as expressly provided in this Agreement. Any attempt to otherwise
sublicense, assign, or transfer any of the rights, duties or obligations
hereunder is expressly prohibited and will terminate this Agreement.
This Agreement will be governed by the State of Florida.
All Agreements covering this Software (including but not limited to any and all
updates, upgrades, and enhancements to this Software or any portion thereof,
bearing the same registration number) shall be deemed to be counterparts of one
and the same License Agreement instrument.
BY OPENING THIS ENVELOPE, YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT,
UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER
AGREE THAT IT IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
US, WHICH SUPERSEDES ANY PROPOSAL OR PRIOR AGREEMENT, ORAL OR WRITTEN, AND ANY
OTHER COMMUNICATIONS BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
<PAGE>
EXHIBIT C
To be added upon completion. LEAD will consult with Galacticomm regarding
size and content issues.
EXHIBIT 10.39
Agreement No. 95-1208-350
Licensee: Galacticomm Inc.
PACIFIC SOFTWORKS INC.
ANNUAL SOURCE SUPPORT AND MAINTENANCE AGREEMENT
This Annual Source Support and Maintenance Agreement provides for annual
technical support and Software maintenance upgrades for the Licensee of the
Software. This is an attachment to the executed Source Code License Agreement.
All agreements made in the Source Code License Agreement are binding to this
Agreement by its attachment to the Source Code License Agreement and execution
below. An executed Source Code License Agreement is prerequisite to this
Agreement. This Agreement is effective by the date of last signature below.
1. SUPPORT
Pacific Softworks Inc. will provide technical support to Licensee for the
Software.
1.1 Technical Contracts
Up to two technical contracts, a primary and an alternate, at the
Licensee's site may be identified as the exclusive communication point
between Licensee and Pacific Softworks Inc.
1.2 Telephone Support
Pacific Softworks Inc. will provide technical assistance by telephone,
Facsimile, and/or electronic mail. Also off-line research time, from its
offices during regular business hours (Monday through Friday excluding
Pacific Softworks Inc. published holidays, 8:00 a.m. to 5:00 p.m. Pacific
time).
1.3 Problem Identification and Resolution
Problems are classified in three categories: Priority 1, Priority 2, and
Priority 3. All Problems will be identified, acknowledged and classified by
Pacific Softworks Inc. within 72 hours of written notification by
Licensee via FAX or electronic mail of the problem. Such problems must be
duplicatable on the standard binary configuration in accordance with the
Software Source code License Agreement, Appendix A.2.
PRIORITY 1 PROBLEM means a problem with the Software which renders the
Software unusable or causes a crash of the end user's system. Pacific
Softworks Inc. will exercise its best efforts to resolve Priority 1
Problems within ten (10) working days of problem identification and
reproduction.
PRIORITY 2 PROBLEM means a problem which causes a feature of the Software
to fail in Licensee's System or End-user site, and a work-around or
alternate method for the feature can be identified. Pacific Softworks Inc.
will exercise its best efforts to resolve Priority 2 Problems within twenty
(20) working days of problem identification and reproduction.
PRIORITY 3 PROBLEM means a problem which causes only minor inconvenience to
the end user including as for example, but not limited to, misspelled error
messages and documentation errors. Pacific Softworks Inc. will correct
Priority 3 Problems in future releases of the Software.
1.4 In order for Pacific Softworks Inc. to identify, reproduce, and resolve
Priority and Priority 2 Problems, Licensee will use its reasonable efforts
to convey an accurate description of the problem, to reasonably analyze
the cause of the problem, if required, provide one of Licensee's Systems
or any hardware or software components of the System needed by Pacific
Softworks Inc. Pacific Softworks Inc.'s resolution of the problem is
conditioned upon being able to reproduce the problem on Licensee's System.
Pacific Softworks Inc. agrees to make reasonable efforts towards
recreating and fixing problems with the FUSION code.
1.5 Pacific Softworks Inc.'s obligations are to provide support to Licensee and
not to Licensee's End-user or Distributors
2. SOFTWARE MAINTENANCE AND UPDATES
Updates to the Software are classified in two categories:
REVISION means a maintenance or minor release of the Software to fix bugs by
Pacific Softworks Inc. engineering activities and to resolve Priority 1 and
Priority 2 Problems that have been reported from the field. The Revision level
and number is increased by one but the Release level of the Software does not
change. For example, if 3.4 represents the current Release level (3) and
Revision level (4), a Revision would be indicated by 3.5.
PACIFIC SOFTWORKS, INC. Page 1
<PAGE>
Agreement No. 95-1208-350
Licensee: Galacticomm Inc.
RELEASE means a failure or major release of the Software in which new features,
updates or enhancements to the protocols, and fixes to Priority 3 Problems
reported from the field are added. The Revision level is reset to zero and
Release number is changed. For example, if 3.4 represents the current Release
level (3) and Revision level (4), a Release would be indicated by 4.0.
2.1 During the term of this Agreement, if Pacific Softworks Inc. develops any
new Releases or Revisions of the Software Source Code as it applies to
Licensee's System (as defined in the Source Code Agreement) and which
Licensee obtained by Source Code Agreement, Licensee will have the same
rights with respect to such new Release or Revision as granted in the
Source Code Agreement.
2.2 Pacific Softworks Inc. shall deliver any new Release or Revision of the
Software to Licensee, in accordance with the provisions of the Software
Source Code License Agreement, and subject to reasonable shipping costs
within thirty (30) days of its general availability according to the
configuration and media type defined in the Software Source Code Agreement.
3. PAYMENT
3.1 Licensee agrees to pay Pacific Softworks Inc. the fee for Source Support
and Maintenance as specified in Appendix B. Licensee will execute a company
Purchase Order for the amount of the fee.
3.2 The fee is due and payable within 30 days of receipt by Licensee of the
Software Source Code. Licensee shall pay Pacific Softworks Inc. a charge
of 2% per month (or the highest rate allowed by law) on all amounts which
are due but unpaid under this Agreement. From the date such amounts are
overdue until they are paid, such charge shall accrue and be due and
payable on a daily basis.
4. TERM AND TERMINATION
4.1 Termination of the Source Code Agreement also terminates this Agreement,
and takes precedence over any other termination provision herein.
4.2 Other than 4.1 above, the initial term of this Agreement shall be one (1)
year from the effective date and will be renewed annually on the
anniversary of the effective date, provided payment of fees for the
renewal of the Support and Maintenance Agreement is made by Licensee within
30 days prior to the anniversary (renewal) date.
IN WITNESS WHEREOF, the parties hereto have caused this Annual Source Support
and Maintenance Agreement to be executed by their authorized representatives.
For Pacific Softworks Inc.: For Licensee:
Name: /s/ GLENN RUSSELL /s/ ROBERT N. STEIN
------------------------------- ------------------------------
(signature) (signature)
Name: GLENN RUSSELL ROBERT N. STEIN
------------------------------- ------------------------------
(print) (print)
Title: Executive Vice President Director/Developer
------------------------------- ------------------------------
Date: 07-12-95 6 July 95
------------------------------- ------------------------------
PACIFIC SOFTWORKS, INC. Page 2
<PAGE>
Agreement No. 95-1208-350
Licensee: Galacticomm Inc.
APPENDIX A
TRAINING AGENDA
DAY 1: MORNING SESSION (8:00 A.M. - 12:00 NOON)
GENERAL PRESENTATION OF FUSION ARCHITECTURE
* protocols, links OS/CPU support
* correspondence to the ISO 7-layer model
* table-driven configuration -- extensibility
* entry points, entry functions
* OS dependencies
* utilities provided
SOURCE HIERARCHY OVERVIEW
* source file naming conventions
* major OS families:
- DOS dependencies "msdos/"
- Unix dependencies "unix/"
- VMS dependencies "vms/"
* headers"h/"
* libraries "lib/"
* utilities "utl/"
* kernel:
- kernel library "lib/net/kernal/"
- socket manager "sock/"
- protocols "protos/"
- link-layer drivers "links/" (non-intelligent cards)
- intelligent controller interfact "inp/"
host side "inp/host"
node side "inp/node"
- OS-dependent "os/"
* location of 'make' files
LIBRARY OVERVIEW
* User probram libraries:
- Socket system call interface "lib/net"
- Client/server model
- Other libraries
Pacific Softworks Inc. utility standard function
library "lib/nrc/"
Pacific Softworks Inc. viewport screen painting
package
"lib/view/"used by dbedit and nstat
4.2BSD compatibility library "lib/b42ish" used by ftp
Command interface library "lib/cmd/" used by ftp
and telnet (on VMS)
* kernal socket libraries
- Sockets within the FUSION kernel "lib/net/kernel/"
DAY 1: AFTERNOON SESSION (1:00 P.M. - 5:00 P.M.)
EXAMPLE OF A 'SEND TO' CALL
KERNEL SOCKET STRUCTURE
* 'so_t' & 'sop_tbl'
* allocation
KERNEL PROTOCOL SWITCH TABLE
* 'pr_t' & 'protosw[]'
* link with socket structure
PACIFIC SOFTWORKS, INC. Page A-1
<PAGE>
Agreement No. 95-1208-350
Licensee: Galacticomm Inc.
USER REQUEST/KERNEL SOCKET INTERFACE:
* the 'el' array: why
* socket function dispatch table
* examples
GENERAL MESSAGE STRUCTURE 'M'
NETWORK DEVICES TABLE -- 'NETDEV' & 'NDEVSW[]'
DAY 2: ALL DAY (8:00 A.M. - 5:00 P.M.)
UNIX NETWORK TERMINALS
INTELLIGENT NODE PROCESSORS (INP)
PORTING ISSUES
* O.S. dependencies
* h/config.h, h/osdep/(greater than)os(less than).h, os/(greater than)
os(less than)/a/*.c
* Adding a device driver
* INP porting issues, inp/node/(greater than)machine(less than)/,
inp/host/(greater than)machine(less than)/
DAY 3: MORNING SESSION (8:00 A.M. - 12:00 NOON)
FUSION KERNEL SERVICES
* FUSION heap manager
* Queue management
* Guarded queues
* Sleeps/wakeups - blocking / nonblocking / queuing
* FUSION timer
* Message state machine
* Transaction Work queue
* Timed message queue
* Select, nselect
DAY 3: AFTERNOON SESSION (1:00 P.M. - 5:00 P.M.)
FUSION PROTOCOLS
* Required functions and controls
* ICMP
* INTRA
* FUSION router
* UDP
* ARP
* IP
* ETHERNET
* TCP
PACIFIC SOFTWORKS, INC. Page A-2
<PAGE>
Agreement No. 95-1208-350
Licensee: Galacticomm Inc.
APPENDIX B
SOURCE SUPPORT AND MAINTENANCE FEE SCHEDULE
DESCRIPTION PART NUMBER FEE
Annual Source Support and Maintenance
for FUSION
Lower Layers Source, SLIP and protocols FNS-SRC-EMB-SUP $4,000.00
Support to begin on 07/10/95 and expire
07/09/96.
PACIFIC SOFTWORKS, INC. Page B-1
EXHIBIT 10.42
RENEWAL AND MODIFICATION AGREEMENT
This Renewal and Modification Agreement is effective as of the 8th day of
October, 1995 (the "Effective Date") is between TECH DATA CORPORATION, a
Florida corporation ("Tech Data") and GALACTICOMM, a Florida corporation
("Galacticomm")
RECITALS
A. Tech Data and Galacticomm entered into a Distribution Agreement, dated
October 8, 1992, (the "Original Agreement") pursuant to which Tech Data
acts as a distributor of Galacticomm's products.
B. Tech Data and Galacticomm desire to renew the Original Agreement and
modify certain terms in accordance with this Renewal and Modification
Agreement. The Original Agreement as renewed and modified by this Renewal
and Modification Agreement is hereinafter referred to as the "Agreement."
NOW THEREFORE, in consideration of mutual promises herein contained and other
good and valuable consideration, Tech Data and Galacticomm hereby agree as
follows:
1. MODIFICATION. The Original Agreement is hereby modified and amended as
stated in this section 1.
a. Section 3.1 and 3.2 of the Original Agreement is hereby revised in its
entirety to read as follows:
3. TERM OF THE AGREEMENT. The term of this Agreement shall commence on
October 8, 1992 and was renewed by a Renewal and Modification Agreement
dated to be effective as of the 8th day of October, 1995 and unless
terminated by either party as set forth in this Agreement, shall remain in
full force and effect for a term of one (1) year from Effective Date (as
defined in the Renewal and Modification Agreement), and will automatically
renew for successive one (1) year terms unless prior written notification
of termination is delivered by one of the parties to the other in
accordance with the notice provision of this Agreement.
b. Section 4.1 is hereby added and will read as follows:
ECCN/EXPORT. Galacticomm agrees to provide Tech Data, upon signing this
Agreement and at any time thereafter that Galacticomm modifies or adds
Products distributed or to be distributed by Tech Data, with the Export
Control Classification Number (ECCN) for each of Galacticomm's Products,
and information as to whether or not any of such Products are classified
under the U.S. Munitions List.
c. Section 12.1 is hereby revised in its entirety to read as follows:
12.1 (a) TERMINATION WITH OR WITHOUT CAUSE: Either party may terminate
this Agreement, without cause, upon giving the other party thirty (30)
days prior written notice. In the event that either party materially or
repeatedly defaults in the performance of any of its duties or obligations
set forth in this Agreement, and such default is not substantially cured
within thirty (30) days after written notice is given to the defaulting
party specifying the default, then the party not in default may, by giving
written notice thereof to the defaulting party, terminate this Agreement or
the applicable purchase order relating to such default as of the date
specified in such notice of termination.
<PAGE>
(b) TERMINATION FOR INSOLVENCY OR BANKRUPTCY. Either party may
immediately terminate this Agreement and any purchase orders by giving
written notice to the other party in the event of (i) the liquidation or
insolvency of the other party, (ii) the appointment of a receiver or
similar officer for the other party, (iii) an assignment by the other party
for the benefit of all or substantially all of its creditors, (iv) entry by
the other party into an agreement for the composition, extension, or
readjustment of all or substantially all of its obligations, or (v) the
filing of a petition in bankruptcy by or against a party under any
bankruptcy or debtors' law for its relief or reorganization which is not
dismissed within ninety (90) days.
2. ENTIRE AGREEMENT. The Agreement, including any Exhibits and Schedules
attached hereto or thereto, constitute the entire agreement between Tech Data
and Galacticomm concerning the subject matter hereof and supersedes all prior
agreements between the parties, including, but not limited to the U.S. Software
Resource, Inc. Distribution Agreement dated October 8, 1992.
3. RATIFICATION. Except as modified by this Renewal and Modification Agreement,
the parties hereby ratify and confirm all terms and conditions of the Original
Agreement.
IN WITNESS WHEREOF, each party has signed this Renewal and Modification
Agreement on the day and year written above effective as of the Effective Date.
GALACTICOMM INC. TECH DATA CORPORATION
a Florida corporation a Florida corporation
By: /s/ LINDA HAURY By: /s/ PEGGY K. CALDWELL
- ----------------------------- ------------------------------
Printed Name Printed Name: PEGGY K. CALDWELL
Title: Vice President of Marketing Title: Senior Vice President, Marketing
Date: 10-6-95 Date: 10/18/95
EXHIBIT 10.43
[LOGO]
START-UP AGREEMENT
THIS INGRAM MICRO START-UP AGREEMENT ("Agreement"), dated this 9th day of
April, 1997, is made by and between INGRAM MICRO INC. ("Ingram"), a Delaware
corporation, with its principal place of business at 1600 E. Andrew Place, Santa
Ana, California 92705 and Galacticomm, Inc., a Florida corporation, with its
principal place of business at 4101 S.W. 47th Avenue, Suite 101, Ft. Lauderdale,
Florida 33314 ("Vendor").
RECITALS:
WHEREAS, Ingram is engaged in the sale and distribution of microcomputer
products; and
WHEREAS, Vendor is engaged in the manufacture, production and supply of
microcomputer products described in Exhibit B and attached hereto, ("Products");
and
WHEREAS, Ingram desires to purchase Products from Vendor for sale and
distributio to Ingram's resellers on a North American basis pursuant to the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the terms and conditions set forth herein,
the parties agree as follows:
1. ORDER FULFILLMENT. Vendor will fulfill all Ingram's orders promptly and
completely. If a shortage of any Product in Vendor's inventory exists in
spite of Vendor's good faith efforts, Vendor agrees to allocate its
available inventory of such Product to Ingram in proportion to Ingram's
percentage of all of Vendor's customer orders for such Product during
the previous sixty (60) days. Ingram shall not be required to purchase any
minimum amount or quantity of the Product.
2. DELIVERY OF PRODUCT. Vendor shall deliver all Products as designated in
Ingram's Purchase Orders ("P.O.") unless Vendor rejects the P. O. within
ten (10) days of P.O. date. Products will be shipped F.O.B. Galacticomm's
warehouse unless otherwise indicated on such P.O. Vendor shall bear all
shipping costs and risk of loss or damage to Products in transit. Risk of
loss to Products will pass to Ingram upon receipt thereof; Ingram will
maintain insurance coverage adequate to cover the normal cost of Products.
3. TITLE TO PRODUCT. Title shall pass from Vendor to Ingram upon receipt of
Products at Ingram's warehouse.
4. PRODUCT MARKETING. Vendor shall clearly mark on the packaging of each unit
of Product the Product's name and computer compatibility. Such packaging
shall also bear a machine-readable bar code identifier scannable in
standard Uniform Product Code (UPC) format. The bar code must identify the
Product as specified by the Uniform Code Council (UCC). The bar code shall
fully comply with all conditions regarding standard product labeling set
forth in Exhibit A in the then-current Ingram Micro's GUIDE TO BAR CODE:
THE PRODUCT LABEL. Ingram shall charge a one dollar ($1.00) chargeback to
Vendor for each unit of Product not in compliance with this Product
marking section.
1
<PAGE>
5. RETURNS OF PRODUCT.
a. Ingram may return any Products, including Products returned by Ingram
customers, for credit against open invoices, Unsold Products shall be
inclusive of Products returned by Ingram customers. Such returns shall be
limited to once per month, and shall be made with advance notice to Vendor
as to estimated arrival date. Upon advance notice of returns, Vendor shall
provide a Return Material Authorization (RMA) within ten (10) days of
notice. Vendor shall bear expense and risk of loss of return shipment.
Vendor shall issue payment to Ingram for such returned Products if no
balance is then outstanding.
b. Vendor shall issue an immediate credit for purchase price plus all
return freight charges for defective Product, and Products returned as
defective by Ingram customers. Upon Vendor recall of Products due to
defects, revisions, or upgrades, Ingram shall provide reasonable
assistance, at Vendor's expense, in such recall.
c. Ingram's right to return Products shall survive the term and
termination of this Agreement. Should Ingram have a balance due upon
reconciliation of the account for Products returns, freight chargebacks,
advertising credits, or other upon end of term or termination, Vendor
shall issue payment therefor within thirty (30) days of such term or
termination. Ingram shall use best efforts to return all Products within
one hundred eighty (180) days of termination of the Agreement.
6. SALES AND SELLING PRICE. Ingram's selling prices to its resellers shall be
at Ingram's sole discretion and control. Vendor shall make no pricing
commitments to Reseller or other third parties which otherwise obligates
Ingram. Vendor shall have the right to change the list price of any Product
upon giving thirty (30) days' prior written notice to Ingram. In the event
that Vendor shall raise the list price of a Product, all orders for such
Product placed prior to the effective date of the price increase shall be
invoiced at the lower price.
7. PRICE PROTECTION. In the event that Vendor reduces the price of any Product
or offers the Product at a lower price, including raising the discount
offered, to any other like distributor, Vendor shall promptly credit Ingram
for the difference between the invoice price charged to Ingram and the
reduced price for each unit of Product held in inventory by Ingram on the
date the reduced price is first offered. To be determined by Vendor on a
case-by-case basis, Vendor may also credit Ingram for the difference
between the invoice price charged by Ingram to the customer and the reduced
price charged by Ingram to the customer for each unit of Product held in
inventory by Ingram's customers on the date the reduced price is first
offered by Vendor if Ingram's customers request a credit resulting from
Vendor's price reduction. Should any of Ingram's customers request a price
adjustment as outline in this Section, Ingram shall provide for an
independent third party audit of that customer's inventory upon Vendor's
reasonable request and at Vendor's expense. Ingram will use commercially
reasonable efforts to provide inventory reporting of its customer's
inventory.
8. RECORDS. Vendor shall furnish documentation with each shipment to and
return of Products from Ingram. Ingram shall keep accurate records of all
Products sales and returns, and monthly inventory reports. Ingram shall
supply such monthly reports to Vendor on a monthly basis. Ingram shall
reconcile its account with Vendor upon end of term or termination of the
Agreement. Vendor shall respond to any Ingram request for reconciliation
within thirty (30) days.
2
<PAGE>
9. TERM. The initial term of this Agreement shall be one (1) year. Thereafter,
the Agreement may be renewed upon written agreement by both parties.
10. TERMINATION. Either party may terminate the Agreement, with or without
cause, with ninety (90) days advance written notice. For one hundred and
eighty (180) days after the expiration or earlier termination of this
Agreement, Ingram may return to Vendor any Product for credit against
outstanding invoices, or if there are no outstanding invoices for a cash
refund. Any credit or refund due Ingram for returned Product shall be equal
to the Product's then current replacement cost plus all freight charges
incurred by Ingram in returning the Product.
11. SKU SETUP AND CATALOG LISTING. Vendor agrees to pay six thousand dollars
($6,000) to cover the setup and catalog listing of all Ingram approved
SKU's for the first six (6) month period.
Beginning in the third quarter of the Agreement, Vendors agrees to pay a
three thousand dollar ($3,000) quarterly charge, paid by check in advance
of the start of the quarter for the continuation of Agreement. Quarters
shall be calendar quarters and the quarterly fee will be prorated if the
third quarter begins on a date other than a calendar month. If sales are
greater than $40,000, for three consecutive months, the Vendor will be
moved to Ingram's Standard Distribution Agreement.
The setup and catalog listing charges listed above are in addition to any
marketing funds and the rebate specified in seciton 12.
If sales are less than $40,000 for three consecutive months, the Vendor may
elect to pay $3,000 per quarter to continue the start up Agreement of
Termination.
12. REBATE. Vendor will pay Ingram a three percent (3%) quarterly rebate based
on gross sales. In addition to the three percent (3%) quarterly rebate,
Vendor will establish quarterly gross sales goals, to be negotiated and
agreed to by both parties, for an additional one percent (1%) and two
percent (2%) quarterly rebate based on gross sales. The rebate will be paid
by check within thirty (30) days after quarter end. If no check is received
within that period, Ingram shall deduct that amount from the Vendor's next
payment. Quarterly goals will be set at the beginning of each calendar
quarter.
13. PAYMENT. Vendor will issue invoices concurrently with Product shipments to
Ingram. Ingram will pay Vendor one time per month for any invoices not
held inreserve for: (i) product on hand at Ingram, (ii) product on hand at
resellers who have purchased Vendor's product from Ingram. (iii) Product in
transit to Ingram from resellers, (iv) marketing programs which will occur
in the near future, and (v) for any outstanding debit or invoice to Vendor.
14. BULLETIN BOARD SYSTEM (BBS). Ingram will provide the Detailed Vendor
Buying Report weekly by its electronic BBS. The standard reports will
include sales by zip code, state, product/quantity sold and the detailed
Vendor Buying Report.
15. MARKETING/ADVERTISING. Vendor and Ingram agree to conduct joint marketing
and advertising for the Products as mutually agreed by the parties in
writing. Both parties agree to cooperate in the planning and funding of
such advertising. Ingram's marketing and advertising costs incurred in
accordance with such agreement shall be pre-approved by Ingram's buyer and
prepaid by Vendor via check to Ingram. Vendor shall make no marketing,
advertising, pass through or promotional commitments to Reseller or other
third parties which otherwise obligates Ingram.
3
<PAGE>
16. WARRANTIES/CERTIFICATION.
(a) GENERAL WARRANTY. Vendor represents and warrants that (i) it has good
transferable title to the Products, (ii) the Product will perform in
conformity with specifications and documentation supplied by Vendor, (iii)
the Product or its use does not infringe any patents, copyrights,
trademarks, trade secrets, or any other intellectual property rights, (iv)
that there are no suits or proceedings pending or threatened which allege
any infringement of such proprietary rights, and (v) the Product sales to
Ingram do not in any way constitute violations of any law, ordinance, rule
or regulation in the distribution territory.
(b) WARRANTY. Vendor hereby represents and warrants that any Product
offered for distribution does not contain any obscene, defamatory or
libelous matter or violate any right of publicity or privacy.
(c) END-USER WARRANTY. Vendor shall provide a warranty statement with
Product for end user benefit. This warranty shall commence upon Product
delivery to end-user. NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PLURPOSE ARE MADE BY VENDOR WITH RESPECT TO THE PRODUCT. INGRAM
SHALL NOT EXTEND ANY ADDITIONAL WARRANTIES TO ANY RESELLERS OR END-USERS OF
THE PRODUCT. IN NO EVENT WILL INGRAM BE LIABLE FOR ANY LOST PROFITS OR ANY
OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(d) MADE IN AMERICA CERTIFICATION Vendor by the execution of this Agreement
certifies that it will not label any of its products as being "Made in
America," "Made in U.S.A.," or with similar wording, unless all components
or elements of such Product is in fact made in the United States of
America. Vendor further agrees to defend, indemnify and hold harmless from
and against any and all claims, demands, liabilities, penalties, damages,
judgments or expenses (including attorney's fees and court costs) arising
out of or resulting in any way from Product that does not conform to the
Certification.
17. INDEMNITY. Vendor shall defend, indemnify, and hold harmless Ingram from
and against any claims, demands, liabilities or expenses (including
attorney's fees and costs) for any injury or damage, including, but not
limited to, any personal or bodily injury or property damage, arising out
of or resulting in any way from any defect in Products. This duty to
indemnify shall be in addition to Vendor's warranty obligations.
Vendor shall defend, indemnify and hold Ingram harmless from and against
all damages and costs incurred by Ingram due to claims of infringement of
any patents, copyrights, trademarks, trade secrets, or other proprietary
rights in the manufacture or marketing of Product; provided that, Ingram
promptly notifies Vendor of the infringement claim. Upon claim of
infringement, Vendor may, at its expense and option, either procure the
right to continue using any part of Product, replace same with non-
infringing Products, or modify Products to make it non-infringing; should
Vendor be unable or unwilling to replace, modify, or procure right to
continued distribution of Products within ninety (90) days of claim
notification, Ingram may return Products for a full credit or a cash
refund, at Ingram's option.
4
<PAGE>
18. COMPETITIVE PRICE. Vendor agrees that the prices and terms it offers to
Ingram are now and will continue to be at least as low as those it offers
to any of its like customers. If Vendor offers a lower price, including,
but not limited to, sales price, volume discount, extended terms,
advertising, freight cost, or back haul allowance to any other customer,
then Vendor will immediately offer that lower price to Ingram, and shall
apply such lower price to all Ingram orders not yet shipped. Ingram shall
also be entitled to participate in and receive notice of the same no later
than Vendor's other customers. In addition, Vendor will issue a credit to
reflect the difference in price for all affected inventory in Ingram's or
its resellers inventory on the date of the price decrease.
19. NOTICES. All notices or other communications made hereunder shall be in
writing and sent by U.S. certified or registered first-class mail prepaid,
and receipt thereof shall be deemed to be two (2) days from date
postmarked.
20. ENTIRE AGREEMENT/LAW. This Agreement contains all understanding and
agreements between the parties and may not be modified or supplemented
except in a writing signed by both parties. The parties agree that the
Agreement shall be governed by the law of the State of California,
excepting that body of law concerning conflicts of law.
21. AUTHORIZED REPRESENTATIVES. Either party's authorized representative for
execution of this Agreement or any amendment hereto shall be president, a
partner, or a duly authorized vice-president of their respective party. The
parties executing this Agreement warrant that they have the requisite
authority to do so.
The signer represents that he/she has read this Agreement, agrees, and is an
authorized representative of their respective party.
INGRAM MICRO INC. GALACTICOMM, INC.
By: /s/ VICTORIA L. COTTEN By: /s/ PETER BURG
-------------------------------- --------------------------
Name: Victoria L. Cotten Name: Peter Burg
- ------------------------------------ -------------------------------
Title: Sr. Vice President Purchasing Title: CEO
- ------------------------------------ -------------------------------
Date: 4-30-97 Date: April 28, 1997
- ------------------------------------ -------------------------------
EXHIBIT:
A - Guide To Bar Code: The Product Label
5
<PAGE>
EXHIBIT A
IMI-BC-002
Rev C 8-95
INGRAM MICRO'S
GUIDE TO
BAR CODES:
THE PRODUCT LABEL
CONTENTS:
Statement Of Bar Code Policy................................................. 1
Where Bar Codes Are Used..................................................... 2
Product Label Specifications................................................. 3
Case Pack Label Specifications............................................... 4
Shipping Label Specifications................................................ 5
How To Get the Codes You Need................................................ 6
List of Bar Code Contacts................................................... 7
List Of Top Bar Coding Vendors............................................... 8
Bar Code Checklist........................................................... 10
[INGRAM/MICRO LOGO]
<PAGE>
STATEMENT OF
BAR CODE POLICY
Increasingly, computer companies are taking cue from the retail and distribution
community and implementing bar code programs, thus realizing the benefits of
improved productivity, better control over inventory and ease of product and
information exchange with their trading partners. The most important reason for
this trend is the growth of sales within consumer marketing channels. Another
reason is that more and more resellers are investing in inventory and point-of-
sale systems which utilize bar-coded information. As a result of these trends,
bar coding concerns have become much more prevalent within the computer
industry.
With over ten years of experience, most resellers who use bar codes have
adopted the Universal Product Code (UPC) as their standard data format. As a
supplier to several of these resellers, Ingram Micro is increasingly called upon
to provide UPCs on all products sold through these channels. But as a
distributor, Ingram Micro cannot assign UPCs to products; that task can only be
performed by the original manufacturer. Due to the sporadic use of UPCs within
the microcomputer industry, however, Ingram Micro is often required to invent
codes and create labels for products sold to these resellers.
These requirements have led Ingram Micro to adopt UPC as its coding standard,
this standard dictates that a unique code be assigned for each product and for
every version of that product. Non-unique codes for different product versions
create havoc among consumer market resellers, many of whom have little
experience with computer products. With a correct UPC, inventory can be handled
efficiently within Ingram Micro's warehouses as well as those of our reseller
partners.
On these pages, you will find the Ingram Micro bar code requirements which
reflect the needs of our customers. Additionally, we have provided lists and
explanations to help with your own bar code programs, as well as information
for working with the Uniform Code Council, the agency responsible for UPC bar
codes. At the end of this document, please find the Bar Code Checklist for
use in informing Ingram Micro of your company's bar coding efforts. All Ingram
Micro requirements conform with ABCD guidelines.
Please note some recent additions to our bar code policy. First, we have
experienced a growing demand from our customers to capture serial number
information on products we ship to them. This information is mandatory in order
for our customers to apply for rebates, warranties, upgrades, marketing funds
and support from the manufacturer. Accurate series number capture is, therefore,
imperative. IF SERIAL NUMBERS ARE CARRIED ON YOUR PRODUCTS, WE REQUIRE THIS
INFORMATION TO BE BAR CODED IN CODE 39 FORMAT WITH THE (S) DATA IDENTIFIER
PRESENT IN BOTH THE HUMAN-READABLE TEXT AND MACHINE READABLE BAR CODE. With this
consistent, uniform format, we can capture serial numbers quickly and accurately
while increasing customer satisfaction.
Second, we have included guidelines on case pack and shipping label
specifications. These guidelines are designed to reduce receiving and potential
shipping errors to customers. Again, a consistent, uniform format helps us
capture this important information about your product accurately and without
delay.
We appreciate your investment of time and energy in implementing these bar code
programs. Through our joint efforts and consistent bar code labeling, Ingram
Micro and our vendor partners will be able to increase customer satisfaction,
improve inventory control and reduce the cost of sales through microcomputer
channels. Ingram Micro stands ready to assist with your bar code program. Please
use the Bar Code Contact List when the bar code questions arise.
INGRAM MICRO 1
<PAGE>
Where Bar Codes
Are Used Your Product
INGRAM MICRO RECEIVING DOCK
Each product is checked for a UPC bar code.
Do you have UPC Ingram Micro
bar codes? No must print and apply a
bar code to your
product.
Yes
INGRAM MICRO WAREHOUSE
Bar codes are scanned at every transaction:
product put-away, picking, cycle count,
serial number capture and shipping.
Do you have UPC Ingram Micro
bar codes? No retail customers
want their own
special codes
on product...more
labels.
Yes
COMPUTER RETAILERS AND DEALERS
Bar codes are scanned at every transaction
product put-away, picking and cycle count.
. . . sometimes your product is returned . . .
Do you have UPC Ingram Micro
bar codes? No must remove any
special labels and
take time to identify
your product.
Yes
INGRAM MICRO DISTRIBUTION CENTERS
Product is returned to distribution centers
for resale, or to you (if defective).
2 INGRAM MICRO
<PAGE>
PRODUCT LABEL
SPECIFICATION
NECESSARY DATA FORMAT PLACEMENT
Required
UPC/EAN
Version A
Required
(See Below)
Optional [GRAPHIC OMITTED]
Optional
Optional
/bullet/ Each unit of a product that will be resold by Ingram Micro must
display a product label in UPC or EAN (International Article
Numbering) format, although EAN may not be recognized by all of Ingram
Micro's customers.
/bullet/ Ingram Micro is not concerned with the specific layout of the product
label, as long as the necessary information is included in a legible
format. A serial number may be printed on a separate label as long as
it is placed legible on the exterior of the product package.
/bullet/ Serial numbers must be printed in Code 39 (S) format: (1) if Ingram
Micro's customer is required to record serial numbers of your product
prior to shipping or, (2) if Ingram Micro's customer is required to
confirm serial numbers as a pre-condition of returning defective
product or, (3) if Ingram Micro or its customers are required to
provide serial number information for inventory reporting purposes.
Serial numbers are optional if Ingram Micro reports no serial number
data to your company.
/bullet/ Bar code labels should include human-readable text in addition to the
bar code itself. The nominal UPC symbol size is 1.469 inches wide by
1.020 inches high (including the human-readable characters). Size may
vary from .8 to 2.0 times the nominal dimensions in accordance with
UCC guidelines. Code 39 symbols should have a minimum bar code height
of .5 inches and a minimum height for human-readable text of .125
inches. For product that is SHRINK WRAPPED, THE LABEL IS BEST PLACED
ON THE TOP OR BOTTOM, NEAR THE EDGE. Use caution, avoid the middle
section. Shrink wrap seams obstruct the scanner's ability to read the
bar code.
INGRAM MICRO 3
<PAGE>
CASE PACK FORMAT NECESSARY DATA
LABEL
SPECIFICATIONS [GRAPHIC OMITTED] Required:
UPC Shipping
Container Symbol
THE UPC SHIPPING Required:
CONTAINER SYMBOL Serial Number
in Code 39
[GRAPHIC OMITTED]
The case pack label must
WHERE: identify the specific
case pack quantity
Pos. #1: Packaging Indicator (5) through the use of the
UPC SHIPPING CONTAINER
Pos. #2-3: Number System (00) CODE. This code assigns
a unique identity to
Pos. #4-8: Mfg. ID No. each shipping container,
(66321) intermediate package and
standard pallet. Similar
Pos. #9-13: Item or Product Number to the UPC, it employs
(12345) the use of a packaging
indicator along with the
Pos. #14: Modulo 10 item number in order to
Check Digit (8) get its uniqueness. The
packaging indicator can be any digit from
0 through 7, as assigned by the manufacturer.
The following are guidelines manufacturers
should use when assigning packaging
indicators:
PACKAGING INDICATOR FOR USE WHEN
------------------- ------------
0 the item numbers are
unique, or when the
product must retain its
UPC Ver. A bar code and
a UPC shipping
container symbol on the
same carton (i.e. . .
products whose shipping
container also acts as
the customer package).
1-7 identifying different
levels of packaging
(i.e. inner sleeve,
inner carton or
standard pallat) with
the same item number.
In the U.S., our number system character always begins with zero (0). The
manufacturer I.D. number is the same as assigned in the UPC number. The item
number is the same as assigned by the manufacturer in the UPC number. The check
digit is modulo 10. calculated from left to right, starting with the packaging
indicator.
Each unique serial number of product within the case pack must be printed in
Code 39 format with the (S) data identifier in human-readable text and endoded
within the bar code symbol. The symbols must be a minimum of .5" inches in
height and the human-readable text must be a minimum of .125 inches in height.
4 INGRAM MICRO
<PAGE>
NECESSARY DATA FORMAT THE SHIPPING LABEL
Segment #1 INGRAM MICRO
PURCHASE ORDER:
Segment #2 10 - 12345
[GRAPHIC OMITTED]
Segment #3 Ingram Micro Sequential
Location P.O.
Number
Ingram
Locations Address
-------------------------
Br. 10 1600 E. St. Andrew
Santa Ana, CA
92075
Segment #4
Br. 17 8530 NW 23rd St.
Bldg. #18
Miami, FL 33122
Br. 20 1443 Wainwright
#155
Carrollton, TX,
75007
Segment #5
Br. 25 1600 E. St. Andrew
Santa Ana, CA
92705
The guidelines for our Br. 30 3500 Air Center Dr.
our shipping label Memphis Int'l
have been adopted Airport
from the ANSI Memphis, TN
MH10.8M 38118
shipping label
standard. Upon receipt of your shipment, Br. 40 151 Hastings Drive
it enables us to locate and scan important Buffalo Grove, IL
information quickly. 60089
The first two segments identify where the Br. 50 41490 Boyce Rd.
product shipped from and which Ingram #A
warehouse will receive the product. The Fremont, CA 94538
purchase order, in both human readable
text and bar code format, must employ the Br. 52 48949 Warm Springs
use of the FACT data identifier (K). The Fremont, CA 94538
fourth segment contains the invoice number
in both human-readable text and bar code Br. 70 696 Park N. Blvd.
format. The invoice number must be printed #150
in Code 39 symbology and utilize the FACT Clarkston, GA
data identifier (10K) in both the text and 30021
code symbol. By bar coding the purchase
order and invoice number, Ingram Micro's Br. 80 6455 Allentown
accounting department will be able to Harrisburg, PA
quickly match your invoice to the Ingram 17112
Micro purchase order to ensure prompt payment.
The last segment contains the serialized
shipping container code in both human-readable
and bar code format. Ingram Micro uses the
information contained in this code to tie
together the physical contents of the carton to
the shipment information given to us by a
supplier via Electronic Data Interchange (E.D.I).
The serialized shipping container code is printed
in UCC/EAN-128 bar code symbology. It employs the
use of application identifiers, which serve the
same purpose as data identifiers, only in numeric
form. It gets its uniqueness by coupling the
seven digit UCC/EAN manufacturer number with a
nine digit shipping container number assigned by
the supplier. This bar code is only required if you
provide EDI advanced ship notification.
INGRAM MICRO 5
<PAGE>
HOW TO GET THE
CODES YOU NEED
WORKING WITH THE UNIFORM CODE COUNCIL The Uniform Code Council is a
not-for-profit membership corporation created in 1972 to administer the
Universal Product Code (UPC). Although membership in the Uniform Code Council is
voluntary, it is required in order to obtain the manufacturer's number
assignment necessary for a UPC. The fee for membership is based on the latest
annual U.S. domestic sales volume of the applying company and ranges from $300,
for start-up companies and those under $2 million in annual sales, to $10,000 if
you have over $500 million in sales. This sales figure should include all
products, not just the products which are chosen for coding at the time of
application.
Some manufacturers have previously applied for membership with the Uniform Code
Council, but for a Uniform Industrial Code (UIC) rather than a UPC. Within the
past few years these two programs have merged, and both now operate under the
auspices of Uniform Code Council. Manufacturer's numbers assigned under the UIC
program are now applicable for UPC's as well.
Contact the Uniform Code Council at 8163 Old Yankee Rd., Ste. J. Dayton, OH
45458 or call (513) 435-3870. After receipt of your application, the Uniform
Code Council will assign a UPC manufacturer's number unique to your company.
This six-digit number will be for use on all of your products.
ASSIGNING UPC ITEM CODES
Each manufacturer, according to their own internal numbering system, assigns a
five-digit item number to each product. In combination with the six-digit
manufacturer nubmer, this will form the 11-digit UPC number for each product. A
calculated check-digit in the twelfth position completes the UPC code.
Currently used part numbering systems cannot always be represented, as assigning
any degree of internal intelligence of significance to the positions of the
digits dramatically reduces possible permutations and flexibility. UPCs created
from each manufacturer's number are limited to 100,000 (00000 through 99999).
If, for example, a company produces systems, components and software products
and begins each group's with "1," "2," and "3" respectively, then the 100,000
possible numbers are suddenly reduced to 30,000. Manufacturers who feel uneasy
about starting their numbering system with 00001 may choose another starting
point, such as 25000. Item numbers, then, should be chosen either sequentially
or randomly without duplication. The best place to start is usually the product
with the highest unit volume.
A different number must be assigned for each product as well as different
versions of each product, including different disk sizes or media. Additionally.
a separate code should be created for education or international versions,
promotional packages and specially priced or bundled items. The general rule to
follow is that a separate number should be created when a product is physically
or functionally different from previous products, the product is handled
differently in the channel, different package graphics/dimensions make the
product appear different from earlier versions, or the retail price changes from
one configuration to another. Minor changes that are transparent to the user,
e.g., not identified on the package or in promotional media, should not have a
new UPC assigned as this will cause the item to be treated as a different
product. Many retailers rely on unique UPCs to differentiate between product
versions, media, etc.
6 INGRAM MICRO
<PAGE>
BAR CODE
CONTACT LIST
INGRAM MICRO
Angela Conlon, Operations Administrator (714) 566-1000 ext. 2213
Contact Angela with any questions concerning bar codes, CTLA (formerly ABCD)
standards and other policies outlined in this guide.
Ingram Micro Corporation Operations Fax Number (714) 566-7800
YOUR BUYER (714) 566-1000
Continue to contact your buyer with questions and information concerning product
changes, new products, packaging changes (including dimensions and weight),
package quantity changes and version changes.
OTHER CONTACT:
Bob Furtado, Sr. Vice President of Operations (714) 566-1000 ext. 2215
COMPTIA
The Microcomputer Industry Assoc.
450 E. 22nd Street
Ste. 230
Lombard, IL 60148
(708) 268-1818
UNIFORM CODE COUNCIL
Uniform Code Council
8163 Old Yankee Rd.
Ste. J
Dayton, OH 45458
(513) 435-3870
INGRAM MICRO 7
<PAGE>
LIST OF TOP BAR
BAR CODING
VENDORS
The number of products Ingram Micro has received with UPC has increased
dramatically since 1992. We acknowledge the efforts of our vendors who have
adopted the UPC as their bar coding standard.
[GRAPHIC OMITTED]
CONGRATULATIONS TO THESE COMPANIES LEADING THE WAY IN PRODUCT BAR CODES!
<TABLE>
<CAPTION>
<S> <C> <C>
3M Data Storage Products Crystal Graphics IBM Software
7th Level Curtis Manufacturing IMC Networks
Access Software CTX IMSI Software Publishing
Acculogic D-Link Individual Software
ACI US Daceasy Inset Systems
Activision Dantz Software Insignia Solutions
Adaptive Software Datadesk International Intel
Adobe systems Datastorm Intellicom
Aitech Datatech Intellimedia Sports
Alpha Software Datawiz Interex
Amdek David Systems, Inc. Interplay
Amjet Dayna Communications, Inc. Intersolv
Antec Daystar Digital Iomega Corp.
Apple Computer Software DCA (Crosstalk Commun.) Jetform Corp.
Appoint Delrina Technology Kensington Microware
Asants Delta Point Key Tronic
Asymetrix Deneba Kingston Technology
ATI Tech Diamond Multimedia, Inc. Kodak
Autodesk retail Digi International Labetc
Avantos Digital Systems Research Landmark Research
Aztech Labs, Inc. Discs Knowledge Research Lantronix
Banner Blue DK Multimedia Laser Go
Belkin Components DPT Lexmark
Berkeley Systems DSP Technology Lind Electronic Design
Broderbund Edmark Logitech
Brother EFI (Electronics for Imaging) Lotus
Campbell Services, Inc. Electronic Arts Macromedia
Canon (Still Video Div.) Emerald Systems Madge Networks
Canon Computer Epson Magnavox
CD Technology Exide Electronics Mananita Software
CE Software Expert Software Mass Micro
Central Point Intl. Farallon Maxa
Century Software Fauve Software Maxis
Cheyenne Software Focus Enhancement McAfee
Chinon America, Inc. Foresight Resources MECC
Chipsoft Frame Technology Medio Multimedia
Cirque Corp. Frye Computer Systems Megahertz
Citizen America Corp. Funk Software Memorex
Claris Future Domain Microsoft
Cliff's Notes Future Soft Engineering Microtek
CNET, Inc. Future Vision Multimedia Microtest
Compaq Computer GCC Technologies Midisoft
Compton's New Media Globalink Milan
Computer Associates Gold Disk Mindscape
Comtrol Grolier Mitac
Concentric Data Systems Hayes Mitsubishi (Peripherals)
Conner Storage Hewlett Packard Mountain Network Sol.
Corel Hi-Tech Musicware
Costar Hitachi (Home Entertainment) Mysoftware
Creative Labs HSC Software National Advantages
</TABLE>
8 INGRAM MICRO
<PAGE>
LIST OF TP
BAR CODING
VENDORS
CONGRATULATIONS TO THESE COMPANIES LEADING THE WAY IN PRODUCT BAR CODES!
Nebe Software, Inc. Toshiba America Info
Networth Touchstone S/W Corp.
New Media Trio Information Systems
Newer Technology Tripp Lite
Newgan System Turtle Beach Systems
Norton-Lambert Tut Systems
Orchid Technology Ulead Systems
Novell/Wordperfect Umax
Palindome Corp. Velocity
Panamax Ventana Media
Panasonic - CPD Verbatim Corp.
Paradise Villa Crespo
Paramount Interactive Visioneer
Passport Wacom
Perfect Data Wangtek/Wangdat
Persoft Weames Technology
Phoenix Technologies White Pine Software
Photonics Wizard Works
Plextor Wizard Works
PLI Xaos Tools
Polaroid Z-Ram (Camintonn Corp.)
Practical Peripherals Zoom Telephonics
Primax Electronic, Inc. Zyxel
Proxuma
Psygnosis
Q-Logic
Quark
Quarterdeck Office
Systems
Radius
Rand McNally
Rubbermaid Office
Products
Saber Software
Samsung Information
Systems
Smatron Displays, Inc.
Shapeware
Shiva Corp.
Sierra On-Line
Sigma Designs
SL. Waber
Smith Micro Software
Softkey Academic
Software Publishing Corp.
Software Venture
Solectek Corp.
Sonic Systems
Specular International
Spry
Stac Electronics
Supra Corp.
Swite
Symantec
Syquest International
INGRAM MICRO 9
<PAGE>
BAR CODE CHECKLIST
Please detach and mail this completed checklist to the address on the back, or
fax to (714) 566-7800. For further assistance, contact Angela Coulon at (714)
566-1000, ext. 2213.
1. Who should Ingram Micro contact regarding bar codes on your products?
Company Name: __________________________________________________________________
Contact Name: __________________________________________________________________
Phone Number and Extension: ____________________________________________________
Fax Number: ____________________________________________________________________
Your Address: __________________________________________________________________
2. Does your company utilize UPC bar codes to identify your product?
(Circle one)
a. Currently utilize c. Undecided
b. Plan to utilize d. Do not plan to utilize
3. Please indicate the percentage of your PRODUCT PACKAGES which display the
following bar code formats:
UPC ___________________________________ EAN ___________________________________
Product Serial No. (Code 39 with "S" Data Identifier) __________________________
Part Number (Code 39 with "IP" Data Identifier) ________________________________
Supplier Identification (Code 39 with "2V" Data Identifier) ____________________
Case Code: _____________________________________________________________________
Other: _________________________________________________________________________
4. If you are not utilizing UPC bar code, when do you plan for all of your
product to display UP
a. Currently d. Within 2 years
b. Within 6 months e. Within 5 years
c. Within 1 year
5. Will your current or planned systems be required to capture and track
product serial numbers?
a. Yes c. Undetermined
b. Planned for future d. Not part of system design
enhancement
6. What implementation issues do you fact in putting UPCs on all of your
products?
7. What could Ingram Micro do to help with these issues?
8. How else, besides product labels, are bar codes used within your company?
(master carton labels, shipping labels, etc.)?
9. Would you mind if one of the advertisers included in this publication
contacted you?
____ Yes ____ No
10 INGRAM MICRO
<PAGE>
Galacticomm Distributor
Price List
Effective Date: April 1, 1997
<TABLE>
<CAPTION>
GALACTICOMM, INC.
SUGGESTED DOMESTIC
SKU# UPC# PRODUCT NAME RETAIL DISTRIBUTOR
WebCast
<S> <C> <C> <C> <C>
S-WEB-CAST-PER-PKG 744035970029 WebCast Personal $49.95 $27
S-WEB-CAST-PROSERV 744035970012 WebCast ProServer $995 $547
S-WEB-VIDBROAD-ADD 744035970043 Video Broadcaster Add-on $495 $272
S-WEB-CAST-PROWGAD 744035970036 Worldgroup Pro Add-on $295 $162
S-WEB-CAST-PERS-DL WebCast Personal - Download $29.95 N/A
Worldgroup v3.0 NT/95
S-WGNT-BUSER-CD 744035970050 8-User NT Baseline $699 $454
S-WGNT-6PK-CD 744035972542 8-User Pack (NT) $399 $259
S-WGNT-12PK-CD 744035972559 12-User Pack (NT) $699 $454
S-WGNT-24PK-CD 744035972566 24-User Pack (NT) $1,399 $909
S-WGNT-LAN-CD 744035972573 Novell LAN option $399 $259
S-WGNT-DOUT-CD 744035972580 Dial-Out $279 $181
S-WGNT-FAXONLIN-CD 744035972803 Fax/Online $359 $233
S-WGNT-ETL-CD 744035972610 Entertainment Collection $399 $259
S-WGNT-OMNIMALL-CD Omni-Mall $1,399 $909
S-WGNT-SEARET-CD 744035972627 Search/Retrieve $279 $181
S-TCP-RADSERV-V3NT Radius Server - 32 port $500 N/A
S-TCP-RADIUS 32-V3 Radius 32-Pack $200 N/A
S-TCP-RADIUS-V3 Radius 128-Pack $700 N/A
S-WGNT-DEVKIT-CD 744035972634 Worldgroup Developers' Kit $699 $454
S-WGNT-XSRC-CD 744035972641 Extended C Source Dev. Kit $699 $454
S-WGNT-FAXSRC-CD 744035972665 Fax/Online Developer's Kit $139 $90
S-WGNT-DOUTSRC-CD 744035972658 Dial-Out C Source Code $399 $259
S-WGNT-ETLSRC-CD 744035972672 Ent. Collection Source Code $649 $422
S-WGNT-OMNISRC-CD Omni-Mall Source Code $1,399 N/A
</TABLE>
<PAGE>
Galacticomm Distributor
Price List
Effective Date: April 1, 1997
<TABLE>
<CAPTION>
GALACTICOMM, INC.
SUGGESTED DOMESTIC
SKU# UPC# PRODUCT NAME RETAIL DISTRIBUTOR
Hardware
<S> <C> <C> <C> <C>
H-GBRD-HDW 744035936011 Galact/Board (WG v3.0 $275 $205
DOS only)
H-PCHN-X250-HDW PC Xnet Card $1,000 $880
H-EQXK-1516-HDW 744035946034 ISK 16-line (115.2 Kbps) $1,649 $1,263
H-EQXK-1532-HDW 744035945041 ISK 32-LINE (115.2 Kbps) $2,219 $1,686
H-EQXK-1684-HDW 744035945058 ISK 64-line (115.2 Kbps) $3,600 $2,736
H-EQXK-1596-HDW 744035945065 ISK 96-line (115.2 Kbps) $5,094 $3,871
H-EZXK-1580-HDW 744035945072 ISK 128-line (115.2 Kbps) $5,999 $4,559
H-EQXK-3016-HDW 744035945089 ISK 16-line (230.4 Kbps) $1,600 $1,216
H-EQXK-3032-HDW 744035945096 ISK 32-line (230.4 Kbps) $2,359 $1,793
H-EQXK-16PM-HDW 744035945102 ISK 16-port Upgrade (115.2 $740 $562
Kbps)
H-EQXK-08PM-HDW 744035945119 ISK 8-port Upgrade (230.4 $549 $417
Kbps)
H-EQXK-3008-HDW 744035945126 8-port Intelligent Serial $595 $52
Board
H-COMP-POWER-RACK Computone PowerRack $2,850 N/A
H-COMP-REX-CARDS Computone Rex Cards $645 N/A
H-COMP-CABLE Computone Cables $16 N/A
H-COMP-RADIUS-BUND Computone Radius Bundle $3,550 N/A
</TABLE>
EXHIBIT 10.44
RESELLER AGREEMENT
AGREEMENT ("AGREEMENT") made this 27th day of March, 1997 ("EFFECTIVE
DATE") by and between World Commerce Online Inc., a Florida corporation having
offices at 9429 Tradeport Drive, Orlando, Florida 32827, as reseller ("WCO"),
and Galacticomm, Inc. a Florida corporation with offices at 4104 Southwest 47th
Avenue, Suite 101, Ft. Lauderdale, Florida 33314, as developer ("GALACTICOMM").
ARTICLE 1.
LICENSE AND DISTRIBUTION RIGHTS
1.1 WCO LICENSE. (a) Subject to the terms and conditions of this Agreement,
Galacticomm grants to WCO a non-execlusive license to include the Galacticomm
computer programs set forth in SCHEDULE A, as such programs may be upgraded or
modified from time to time by Galacticomm (together with additional select
premium software or hardware products manufactured by certain independent
software vendors ("ISV's") under separate contracts with Galacticomm, the
"PROGRAMS", as part of one or more systems including a substantial amount of
other software and/or hardware manufactured or marketed by WCO (each such system
a "VALUE ADDED PRODUCT"), and to market, distribute and sublicense the Programs
as part of a Value Added Product, alone or together with ("DOCUMENTATION"), to
communications networks as commercial turnkey integrated solutions, and only to
customers of WCO for use in the regular course of business and not for resale
("END-USERS"). Programs will be provided to WCO on master diskettes, compact
discs or other physical medial as mutually agreed upon (the "MASTERS") from
which WCO may make copies to market, distribute and sublicense, subject to the
terms of this Agreement, WCO may market and sublicense the Value Added Products
worldwide (the "TERRITORY").
(b) Notwithstanding the license granted above, the parties acknowledge
that Galacticomm may continue to sell to third parties its 3.0 and 4.0 Packages
(including any upgrades or modifications thereto) as stand-alone systems.
1.2 COMPETITION, WCO RELATIONSHIP WITH ISV'S
(a) Nothing in this Agreement shall impair WCO's rights at all times
to use or distribute, without obligation to Galacticomm, similar ideas or
programs which have been independently submitted by others to WCO provided they
do not infringe upon Galacticomm's
<PAGE>
copyrights, trade secrets or other intellectual property rights. Further, WCO
may procure, market and distribute products and services at any time which may
be competitive with Galacticomm or the Programs.
(b) The parties acknowledge that WCO must be able to communicate with
current and future ISV's. In that regard Galacticomm agrees to update SCHEDULE B
attached hereto from time to time and to provide any other information
concerning the ISV's as reasonably requested by WCO, Galacticomm's obligations
to update SCHEDULE B and to facilitate communications with ISV's shall survive
termination of this Agreement.
1.3 TRADEMARKS AND TRADE NAMES. WCO may use the trade names and trademarks
specified by Galacticomm in writing for normal advertising and promotion of the
Value Added Products, subject to written direction by Galacticomm which, upon
reasonable notice, withdraws or modifies such authorization. All use of any such
trade name or trademark in any marketing and promotion, including but not
limited to advertisements and packaging, shall contain such notices as may be
specified by Galacticomm from time to time.
ARTICLE 2.
SHIPMENT PRICE AND PAYMENT
2.1 SHIPMENT. Packages containing a Programs, ISV modules in compliance
with ISV/Galacticomm agreements and the applicable Documentation (collectively,
"PROGRAM PACKAGES") shall be shipped by Galacticomm to WCO, F.O.B. delivery of
the Program Packages to a common carrier. Unless otherwise agreed, the shipping
port shall be World Commerce Online, 9429 Tradeport Drive, Orlando, Florida
32827, Galacticomm shall procure on WCO's behalf and at the same rates as
Galacticomm enjoys itself, transportation facilities and access to a
distribution network that would facilitate the timely deliver of Program
Packages to the shipping port. WCO shall reimburse Galacticomm for any and all
shipping charges.
2.2 PRICE.
(a) For each Program Package shipped to WCO, WCO shall pay Galacticomm the
current standard package price of $7,000 per 256 User server, $4,000 per 128
User server, plus 75% of the current retail price of other products through
ISV's, subject to other economic discounts for which WCO may qualify.
2
<PAGE>
(b) In addition to subsection 2.2(a) above, WCO hereby agrees to remit to
Galacticomm 6% of gross revenues collected in respect of telecommunications
customer internet IP connections, payable on a monthly basis during each
calendar year. Each such payment shall be remitted to Galacticomm no later than
15 days form the end of the prior calendar month and shall reflect 6% of the
revenues collected in such prior month.
(c) In addition to subsections 2.2 (a) and (b) above, WCO hereby agrees to
remit 20% of the maintenance fees collected in respect of charges to End-Users
by WCO, payable to Galacticomm on a monthly basis during each calendar year.
Each such payment shall be remitted to Galacticomm no later than 15 days from
the end of the prior calendar month and shall reflect 6% of the fees collected
in such prior month.
(d) Galacticomm may, upon reasonable advance notice and at its own expense,
review the books and records of WCO from time to time as they relate to the
revenues and fees collected as provided under subsections (b) and (c) above.
2.3 TAXES. All pricing and fees under this Agreement are exclusive of
taxes. Except for taxes based on Galacticomm's net income, WCO shall pay any
federal, state, county, local or other governmental taxes, fees or duties now or
hereafter imposed on the licensing, export, use or possession of the Program
Packages, or any other transaction contemplated by this Agreement, as will as
any penalties or interest thereon.
2.4 ORDERS.
(a) The terms and conditions of this Agreement shall apply to all orders
submitted to Galacticomm and supersede any different or additional terms on
WCO's purchase orders. Orders issued by WCO to Galacticomm are solely for the
purpose of requesting delivery dates and quantities. All orders are subject to
acceptance by Galacticomm.
(b) WCO will order product by issuing purchase orders. WCO may issue
written purchase orders within 10 (ten) days after issuing a facsimile. Each
purchase order will specify, but not be limited to, such items as quantity,
delivery date, Galacticomm and WCO part numbers, destination and total price of
the purchase order. Each purchase order issued under this Agreement shall be
make part of and be incorporated into this Agreement, and shall reference this
Agreement on the face of each purchase order issued pursuant to this Agreement.
3
<PAGE>
(c) No additional or different provisions proposed by Galacticomm shall
apply, unless mutually agreed upon by the parties at that time.
(d) The parties agree to collaborate and work together to develop
competitive special pricing deals which may arise from time to time. Such
pricing shall be confirmed in writing and retained by each party's
implementation manager. Such pricing shall apply for the special deal under
consideration and shall not change the then current unit price.
(e) Unit price includes all charges such as packaging, packing and any
applicable taxes except sales, use or other such taxes imposed upon the sale of
product for which WCO is is properly invoiced by Galacticomm.
2.5 DELIVERY OF MASTERS. WCO shall examine the Masters delivered to it and
shall submit a written report to Galacticomm of any discrepancies between the
functioning of the Masters and the specifications or the Documentation.
Galacticomm shall utilize reasonable efforts in accordance with its maintenance
policy set forth herein to correct any discrepancies so specified and deliver a
corrected version of the Programs within thirty (30) days of the receipt of the
report from WCO.
2.6 ACCEPTANCE OF PROGRAMS. WCO shall examine the Programs promptly after
delivery by Galacticomm. Unless Galacticomm is notified by WCO within fifteen
(15) days of delivery of the Programs that discrepancies between the Programs
and the specifications or Documentation exist, the Programs are deemed to be
accepted by WCO. If WCO notifies Galacticomm of any discrepancies, delivery of
the Programs shall be as indicated in paragraph 2.5 until the Programs are
accepted by WCO.
2.7 MAINTENANCE OF MASTERS. For the duration of the warranty period and for
so long as maintenance fees are paid, Galacticomm shall maintain the Masters in
accordance with its standard procedures for maintaining and enhancing computer
software. Maintenance shall consist of correcting (or, in the case of products
through ISV's, using its best efforts to correct; any variance between the
actual functioning of the Programs and the specifications or Documentation. So
long as maintenance fees are paid, Galacticomm will provide technological
support in respect of the Programs between the hours of 9:00 a.m. to 5:00 p.m.
(Eastern Standard Time) Monday through Friday. Such support shall include (a)
updates concerning all Programs covered under this Agreement, and (b) training
classes as reasonably required at WCO's offices for WCO employees or agents; in
connection with any such training class, WCO agrees to pay
4
<PAGE>
Galacticomm $500 per day, plus reasonable expenses. Galacticomm reserves the
right to define the addition of a major function to the Program as a new product
and not as an update. When Galacticomm provides a Program update under this
Agreement, such update shall include the appropriate documentation therefor.
2.8 MAINTENANCE OF WCO'S CUSTOMERS. WCO shall provide support of the
Programs directly to its customers. Support of WCO's customers remains WCO's
responsibility. Under no circumstances shall WCO's customers call Galacticomm
directly.
ARTICLE 3.
OWNERSHIP AND PROPRIETARY RIGHTS
3.1 OWNERSHIP. Galacticomm represents that it has all rights in and to
copyrights, trade secrets and trademarks associated with the Programs as are
necessary to market and license the Programs under this Agreement and, with
respect to products through ISV's, represents that it has not been notified of
any matters which would make the representation provided hereinabove as it
relates to products through ISV's untrue. However, the parties hereby
acknowledge that any changes, additions or modifications made by WCO to the
Programs delivered to WCO by Galacticomm shall be the exclusive property of WCO.
3.2 PROPRIETARY RIGHTS. WCO acknowledges that the Programs, the
Documentation and any items or information provided by Galacticomm and
designated as confidential or proprietary ("CONFIDENTIAL INFORMATION")
constitute valuable trade secrets and confidential information of Galacticomm.
Ownership of all applicable copyrights, trade secrets, patents and other
intellectual property rights in the Programs and Documentation shall remain with
Galacticomm. Title to each copy of the Program shall remain with Galacticomm.
WCO shall not use or disclose the Programs, Documentation or Confidential
Information, except as expressly permitted by this Agreement. WCO shall not
remove Galacticomm's copyright notices, restricted rights legends or any other
notices from the Programs and Documentation and such notices shall appear on all
compact disks, diskettes and other tangible media distributed by WCO containing
the Programs and Documentation.
3.3 UNAUTHORIZED USE OF COPYING. Except as expressly permitted under this
Agreement, WCO shall not copy, modify or reproduce the Programs or Documentation
in any way, nor shall it permit third parties to do so. WCO shall fully
cooperate with Galacticomm in any action relating to enforcement of
Galacticomm's proprietary rights.
5
<PAGE>
3.4 SOURCE AND DEVELOPMENT CODES. Each party acknowledges and understands
the importance of the source codes and development codes pertaining to 3.0 NT
(including any future versions, modifications or updates relating thereto)
retained by Galacticomm to the license and distribution arrangements
contemplated hereunder. In that regard, Galacticomm agrees to maintain such
source and development codes in such condition as is necessary to effectuate the
terms of this Agreement. The covenants set forth in this section shall survive
termination of this Agreement.
ARTICLE 4.
END-USERS
END-USER LICENSE. WCO shall only distribute the Programs and
Documentation to End-Users. WCO shall make no representations or warranties on
behalf of Galacticomm. WCO shall make no representations to End-Users or other
third parties regarding the Programs except as set forth in the applicable
Documentation.
ARTICLE 5.
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) INDEMNIFICATION BY WCO. WCO agrees to indemnify and hold harmless
Galacticomm from and against any claim, injury, loss of expense, including
attorney's fees, arising out of (a) the failure of WCO to comply with the
provisions of Article 4, (b) any misrepresentations of WCO in connection with
Galacticomm or the Masters or Programs, (c) the failure of any Value Added
Product to operate properly, and (d) any other wrongful conduct of WCO or its
agents.
(b) INDEMNIFICATION BY GALACTICOMM. Galacticomm shall indemnify, defend and
hold WCO harmless from any claims, demands, liabilities, losses, damages,
judgements or settlements, including all reasonable costs and expenses related
thereto including attorney's fees, directly or indirectly resulting from any
claimed infringement or violation, of any copyright, patent or other
intellectual property right with respect to the Programs, so long as the
Programs are used in accordance with the Documentation and specifications
provided by Galacticomm, and WCO has adhered to its obligations under this
Agreement. Following notice of a claim or a threat of actual suit, Galacticomm
shall:
6
<PAGE>
(i) procure (or in the case of products through ISV's, use reasonable
efforts to procure) for WCO the right to continue to use, distribute and sell
the Programs at no additional expense to WCO; or
(ii) provide (or in the case of products through ISV's, use reasonable
efforts to provide) WCO with a noninfringing version of the Programs; or
(iii) notify WCO that the Programs are being withdrawn from the market
and immediately terminate this Agreement.
5.2 COOPERATION BY INDEMNIFIED PARTY. Notwithstanding Section 5.1 of this
Agreement, the indemnifying party is under no obligation to indemnify and hold
the other party harmless unless:
(a) the indemnifying party shall have been promptly notified of the
suit or claim by the indemnified party and furnished by the indemnified party
with a copy of each communication, notice or other action relating to said
claim;
(b) the indemnifying party shall have the right to assume sole
authority to conduct the trail or settlement of such claim or any negotiations
related thereto at the party's own expense; and
(c) the indemnified party shall provide reasonable information and
assistance requested by the indemnifying party in connection with such claim or
suit.
ARTICLE 6.
WARRANTY
6.1 WARRANTY. For twenty-four (24) months after delivering the Programs to
WCO, Galacticomm warrants that the Programs shall of good quality and
workmanship. In the event of any branch of the foregoing warranty, Galacticomm
shall take all necessary measures to provide a replacement therefor.
ARTICLE 7.
LIMITATIONS OF LIABILITY
7.1 DAMAGES. SUBJECT TO THE MAXIMUM LIABILITY SET FORTH HEREIN, IN NO EVENT
SHALL GALACTICOMM'S LIABILITY FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT EXCEED
THE AMOUNT PAID TO GALACTICOMM BY WCO UNDER THIS AGREEMENT WITHIN THE THREE (3)
YEAR PERIOD IMMEDIATELY PRECEDING GALACTICOMM'S RECEIPT OF NOTICE OF SUCH CLAIM.
THE LIABILITY OF EACH PARTY TO THE OTHER FOR DIRECT LOSS OR DAMAGE HOWSOEVER
CAUSED AND OF WHATSOEVER NATURE SHALL IN
7
<PAGE>
NO EVENT EXCEED AN AMOUNT EQUAL TO $300,000 FOR ANY INCIDENT OR SERIES OF
CONNECTED INCIDENTS.
ARTICLE 8.
TERM AND TERMINATION
8.1 EXPIRATION. This Agreement shall commence on the Effective Date set
forth above and shall continue for an initial term of three (3) years.
Thereafter, this Agreement shall be sutomatically renewed for additional terms
of one (1) year unless either party service written notice, at least ninety (90)
days prior to the expiration of the initial term or any renewal, of its
intention not to renew.
8.2 TERMINATION. This Agreement may be terminated by either party under any
of the following conditions:
(a) the other party shall be declared insolvent or bankrupt;
(b) if a petition if filed in any court and not dismissed in ninety
(90) days to declare the other party bankrupt or for a reorganization under the
bankruptcy law or any similar stature;
(c) if a trustee in bankruptcy or a receiver or similar entity is
appointed for the other party;
(d) if either party commits a material breach of this Agreement which
is not cured within (30) days after notice of such breach is given by the other
party; or
(e) by written agreement of the parties.
ARTICLE 9.
INTERNATIONAL
9.1 EXPORT LICENSE. WCO shall be exclusively responsible for the
procurement and renewing of all export and import licenses required under United
States or any foreign law for the export or import of the Programs or the Value
Added Products and shall pay all costs and other expenses in connection with
such procurement and renewal.
9.2 EXPORT ASSURANCE. Regardless of any disclosure made by WCO to
Galacticomm of any ultimate destination of a Value Added Product, WCO shall not
export or reexport directly or indirectly the Programs or a Value Added Product
(or any commodity and/or technical data or a system incorporating such commodity
and/or technical data acquired from Galacticomm)
8
<PAGE>
without first obtaining the written approval or required export license to do so
from the United States Department of Commerce or any other agency of the U.S.
Government having jurisdiction over such transaction. WCO hereby assures
Galacticomm that it does not intend to not will it knowingly, without the prior
written consent, if required, of the Office of Export Administration of the U.S.
Department of Commerce, transmit or ship the Programs or any modifications
thereto, or a Value Added Product, directly or indirectly, to Afghanistan or the
Peoples Republic of China or the any Group Q, S, W, Y or Z country specified in
Supplements to Part 770 of the Export Administration Regulations issued by the
U.S. Department of Commerce, or other such regulations as may be adopted from
time to time.
9.3 COMPLIANCE WITH LOCAL LAWS. WCO shall be exclusively responsible at its
own expense for compliance with all local laws relating to a Value Added Product
in the countries in which ECO licenses or markets the Value Added Product.
9.4 TAXES AND PAYMENT. All payment shall be made in United States currency.
Notwithstanding anything in this Agreement to the contrary, if, under any
applicable law, WCO is required to withhold tax or any other amount from any
payment to Galacticomm, the amount due to Galacticomm shall be increased to the
amount Galacticomm would have received if no withholding had been required.
ARTICLE 10.
GENERAL
10.1 FORCE MAJEURE. Neither WCO or Galacticomm shall be liable for any
delay or failure in performance under this Agreement resulting directly or
indirectly from act of God, or any causes beyond its reasonable control.
10.2 JURISDICTION AND VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State or Florida, without reference
to its conflicts of laws provisions. Jurisdiction for litigation or any dispute,
controversy or claim arising out of or in connection with this Agreement, shall
be only in a Federal or a State court having subject matter jurisdiction located
in either Orange County or Dade County, Florida.
10.3 ENTIRE AGREEMENT. This Agreement, including the Schedules attached
hereto, constituted the entire agreement between the parties with respect to
this subject matter and negotiations, representations, writings and all other
communications between the parties. This Agreement may not be
9
<PAGE>
released, discharged, or modified except by an instrument in writing signed by
the parties.
10.4 INDEPENDENT CONTRACTORS. It is expressly agreed that Galacticomm and
ECO are acting hereunder as independent contractors. Under no circumstances
shall any of the employees of one party be deemed the employees of the other for
any purposes.
10.5 ATTORNEY'S FEES. In any action between the parties to enforce any of
the terms of this Agreement, the prevailing party shall be entitled to recover
reasonable expenses, including reasonable attorney's fees.
10.6 NOTICE. Any notice required to be given by either party to the other
shall be deemed given if in writing and actually delivered or if deposited in
the United States mail in registered or certified form with return receipt
requested, postage paid, addressed to the notified party at the address set
forth herein.
10.7 ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement is not assignable
by WCO, without the prior written consent of Galacticomm, which consent shall
not be unreasonably withheld. This agreement shall bind and inure to the benefit
of each of WCO and Galactcomm, and their respective successors (including
without limitation any liquidator, receiver, trustee or debtor in possession of
or for either party) and assigns. In the event any liquidator, receiver, trustee
or debtor in possession succeeds to the rights and obligations of Galacticomm
hereunder and desires to sell or otherwise dispose of the development and/or
source codes pertaining to the 3.0 NTY (including any future versions.
modifications or updates relating thereto), WCO shall have a right of first
refusal to purchase the source and/or development codes upon terms to be agreed
upon within 30 days of its receipt of written notice from any such successor
expressing its desire to sell. Further, in the event Galacticomm (x) is sold
pursuant to a stock transfer (in who or in part) whereby the purchaser(s)
assumes the obligations hereunder (by operation of law or otherwise) or (ii)
sells the source and/or development codes to any third party, whereby such third
party will assume the obligations hereunder pursuant to an assignment and
assumption agreement in form satisfactory to WCO's counsel, in either case
described in (x) or (y), the purchaser shall covenant and agree to continue to
perform under this Agreement so long as WCO is not in default of any of its
obligations (and such default is not cured within 30 days of WCO's receipt of
notice from successor notifying WCO of such default). Galacticomm further agrees
to notify in advance any third party which may acquire an interest in any such
source or development codes of the affirmative covenants contained in this
paragraph. The covenants and
10
<PAGE>
obligations under this paragraph 10.7 shall survive the termination of this
Agreement.
10.8 SEVERABILITY. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable, such
determination shall not affect the validity or enforceability of any other part
or provision of this Agreement.
10.9 WAIVER. No waiver by either party of any breach of any provisions
hereof shall constitute a waiver of any other term of this Agreement unless made
in writing signed by such party.
10.10 SURVIVAL. In consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree that the covenants set forth in Sections 1.2, 1.3, 2.2(b), 2.2(c), 2.2(d),
3.1, 3.2, 3.3, 3.4, 5.1, 5.2, 6.1, 7.1 and 10.7 shall survive termination of
this Agreement.
[Signature page follows}
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by a
duly authorized representative as of the date set forth above.
Galacticomm, Inc. World Commerce Online, Inc.
By: /s/ PETER BERG By: /s/ WILLIAM MOBLEY
------------------------ --------------------------------
Name: Peter Berg Name: William Mobley
Title: Chairman and CEO Title: President
12
<PAGE>
SCHEDULE A
A.1 Mandatory Requirements and WCO specifications.
DESCRIPTION - WCO COMMERCIAL SYSTEM (SERVER) PACKAGE
WorldGroup 3. X DOS;
WorldGroup 3. X NT, and all platforms and any other future versions/updates
under this Agreement, including without limitation WorldGroup 4. X; and
WorldGroup 2.0, a prior version.
FEATURES
Each WCO Commercial System ("server") will be configured to provide the
following features and services:
/bullet/ ELECTRONIC MAIL for all users, with support for rich-text
messages, file attachments, carbon copies, mail forwarding, distribution
lists, offline filing cabinets, "new mail" notification, return receipts,
priority indentification of critical messages, and security controls to
authorize individual users or groups of users to use this service. An AMTP
gateway for Internet e-mail is included, and supports MIME-encoded file
attachments as well as POP3 access for remote end-users; all of these
features may be restricted on a user-by-user basis as well.
/bullet/ GROUP MESSAGING for one-to-many or many-to-many threaded
discussions with support for up to 10,000 unique discussion "forums" (or
"bulletin boards"), each with user-by-user access control features
governing read, write, download, upload, and administrator privileges.
Features include rich-text messages, file attachments, keyword searching,
hierarchial threading of topics, message quoteing, configurable profanity
filter, embedded URL recognition, and an NNTP gateway for automated
import/export with selected Internet newsgroups.
/bullet/ POLLS AND QUESTIONAIRES for user surveys, electronic voting for
events, data collection, mock polls, etc. Features include multiple answer
and open response questions, automated polling with up-to-the-minute pie
charts and bar graphs for poll statistics, data export capabilities for use
with databases and spreadsheets, voting restrictions (e.g., one vote per
user), and option "rewards" for participants (e.g., increased
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<PAGE>
security access or delivery of an specified file). Full user-by-user
security access control is implemented throughout. Uses a simple windowed
interface for on-the-fly creation of new polls.
/bullet/ REGISTRY OF USERS that can be used as a "white pages" directory of
users, along with a configurable template for information asked and
displayed. Security access restrictions indentify which users can insert
entries and which users can read them.
/bullet/ FILE LIBRARY that can be used to manage more than 10,000
categories of files. Each category can have its own description and
security access restrictions to determine which users can view the library,
download files, upload files for approval, and approve uploaded files.
Features include keyword searching, listing by popularity, chronological
listings, and wildcard file searches, as well as the ability to queue up
multiple files for background download.
/bullet/ TELECONFERENCE for real-time data conferencing between the
concurrent users on the same server. Features include private whispers, a
shared whiteboard with file save capability, user-to-user background file
transfers, one-on-one chat, and up to 65, 534 "channels", each of which can
have its own moderator.
/bullet/ ACCOUNT MANAGEMENT to give each WCO server administrator the
ability to create or delete user accounts, assign security access levels to
"classes" of users (or individual users), an audit trail of every log-on,
log-off, and file transfer event, and comprehensive statistics and
reporting capabilities to measure usage based on user class, time-of-day,
and connection channel bank.
/bullet/ CUSTOM HYPERMEDIA GRAPHICS Each server will include a license for
the WorldGroup Hypermedia Editor that will allow WCO to customize the
look-and-feel of their system menus.
/bullet/ STANDARD INTERNET SERVER features, such as a built-in HTTP 1.0 Web
server (including a dynamic HTML file library option), an FTP server with
password protected and anonymous transfers, and a user indentification
"finger" server.
14
<PAGE>
/bullet/ AUTOMATIC FILE LAUNCHING for documents from File Libraries or
message file attachments. When an application-specific document is
downloaded (e.g., an Excel spreadsheet), if that application is resident on
the client machine, WCO will automatically launch the application and open
the document.
/bullet/ DIAL-UP ACCESS SUPPORT that would enable remote users to call
directly into an WCO Server with a modem or ISDN terminal adapter to access
services. This requires modem-terminal adapter hardware on both the client
and server, as well as an NT-compatable intelligent multiport serial board
for the server which would be provided separately by Galacticomm.
/bullet/ FAX/ONLINE ADD-ON OPTION Provides an outgoing online fax service
for the system. Users can fax pre-scanned images and ASCII text files from
your document database, inquire about fax rate charges, and send fax copies
to others. Requires EIA Class 2/CCITT Group 3 fax modems. Fax Online
Developer's Kit included.
/bullet/ CLIENT/SERVER DEVELOPER'S KIT Contains the Client App Developer's
Kit along with the server-side engine in LIB form and the C source code to
all the server/side applications. Modify WorldGroup and its existing
add-ons or write add-on options. Includes files necessary to recompile the
run-time executable, two of the utilities and certain standard DLLs.
Documentation is included. Requires a registered copy of WorldGroup, the
Phar Lap 2861DOC-Extender SDK or Borland C++, Visual Basic Pro 3.0 and 3-D
Widgets from Sheridan Software.
Additional applications, such as video conferencing, active HTML,
multi-threading, animation and end-to-end online publishing solutions, and
more can be added at any time, on a request by WCO basis.
REQUIREMENTS
Each WCO Server software license will require a Window NT Server (3.51 or
4.0) Pentium machine with a minimum of 32 MB RAM and a minimum of 200MB
free hard drive space. The WCO Server software will include support for
modem/serial dial-up user connections, TCP/IP user connections, and Novell
SPX user connections; however, it is the responsibility of [WCO/END-USER]
and/or each customer to provide the connectivity hardware (for examples,
modems and multiport
15
<PAGE>
serial boards) and network connections, management, and configuration for
each system.
Each WCO Server will also support Internet e-mail (also with support for
MIME-encoded file attachments), file transfers (ftp), newsgroups, incoming
and outgoing telnet access, a basic Web server, and proxy Web access for
users; however, it is up to [WCO/END-USER] and/or each customer to provide
the Internet connection 1/4 terminating in a TCP/IP network connection on
the NT server 3/4 and any and all equipment and services necessary to
establish that connection (for example, T1 lines, routers, wireless
antennas, etc.). As part of that connection, [WCO/END-USER] and/or the
customer will also need an Internet Service Provider (ISP) to hook the
system to the Internet's backbone, as well as to provide a Domain Name
Service (DNS) server and an NNTP newsgroup server, at least one of each at
a minimum, and provide/register domain names and IP addresses for each
server.
Each WCO Client software will require a 386 or better IBM PC-compatible
machine running Windows 3.1. Windows 95, or Windows NT 3.51 or higher with
a minimum of 8MB RAM and a minimum of 20MB free hard drive space. Each WCO
Client machine will also need a connection 3/4 via TCP/IP, Novell 8PX, or
dial-up modem 3/4 to the WCO Server in order to use the service. A Web
browser will be needed for each client as well.
DOS SERVER SUBSTITUTION OPTION
The above models are based on Windows NT-driven WCO Servers. Alternatively,
Galacticomm can substitute all or some servers of these with DOS-based WCO
Servers. The feature set would be largely comparable, but it would require
the use of a dedicated 486 (for small systems) or Pentium (for large
systems) DOS PC.
16
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SCHEDULE B
List of Current ISV's
ISV/PRODUCER RETAIL PRICE
- ------------ ------------
GALACTICOMM
Web Cast 699.99
DATASAFE
Omni-Mail w/POS Dial 749.00
Visaman 49.00
Multimedia Registry 199.00
Marketplace 299.00
Auto Subscription 100.00
Global Power 99.00
ANNEX
System Sentinal 150.00
MOUNTAIN ROSE
Major CD 225.00
Mountain Mail 249.00
File Library Extensions 149.00
Major CD LAN Option 89.00
WorldGroup Statistics 149.00
HIGH VELOCITY
Menu Magician 150.00
Auto Valitator 80.00
The Newsroom 80.00
SITIUS
Employment Service 119.00
VITCOM
TCP/TP 700.00
DIALSOFT
DS-DOS 99.00
PRODESIGN
Agenda 199.00
17
EXHIBIT 10.46
WEB HOSTING AGREEMENT
This agreement shall void and nullify any and all previous agreements to this
date between Galacticomm and Horst Entertainment Inc.
There shall be no additional fees of any kind paid to Galaticomm, other than
those stated within this agreement for software usage and/or bandwidth usage.
Horst Entertainment agrees to pay Galactcomm $0.01 (one cent) per access up to
400,000 accesses thereafter payment shall be $0.005 (one-half cent) per access.
Horst Entertainment shall send this amount to Galacticomm by no later than
Wednesday for accesses used from the previuos week (Monday thru Sunday).
Galacticomm must provide a person(s) to correct any technical problems (Server
being down or inaccessible) 24 hours per day, 7 days per week. This person(s)
must be available by beeper or telephone. Horst Entertainment shall provide this
same 24 hour service at the broadcast location.
In the event Galacticomm, Inc. chooses to terminate this agreement, Horst
Entertainment Inc. will have the right to purchase a license copy of the
software in the amount of $15,000.00.
All parties have read and fully agree to all terms and conditions as set forth
in this Web Hosting Agreement. Any disputes arising herein shall be settled in a
court in FLorida.
/s/ Yannick Tessier 9/9/97
- ----------------------- ------
Galacticomm Date
[ILLEGIBLE] HORST 9/9/97
- ------------------------- ------
Horst Entertainment Inc. Date
EXHIBIT 11
GALACTICOMM TECHNOLOGIES, INC.
COMPUTATION OF PER SHARE LOSS
Year Ended December 31, 1996
PRIMARY
Weighted average common shares outstanding, exclusive
of issuances within twelve months prior to the IPO $ 1,626,075
Common shares and equivalents issued within 12 months
prior to the IPO assumed to be outstanding for the entire
period $ 1,259,198
-----------
Weighted average common shares outstanding at end of
year 2,885,273
===========
Net loss (1,041,268)
===========
Net loss per share $ (0.36)
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Galacticomm, Technologies, Inc.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Miami, Florida
November 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 410,951 1,466,392
<SECURITIES> 0 0
<RECEIVABLES> 271,785 122,125
<ALLOWANCES> 148,602 90,363
<INVENTORY> 133,409 83,730
<CURRENT-ASSETS> 790,880 1,614,875
<PP&E> 605,011 583,362
<DEPRECIATION> 119,767 38,793
<TOTAL-ASSETS> 3,608,881 4,434,020
<CURRENT-LIABILITIES> 1,428,956 2,090,455
<BONDS> 0 0
0 0
0 0
<COMMON> 373 342
<OTHER-SE> 793,759 949,566
<TOTAL-LIABILITY-AND-EQUITY> 3,608,881 4,434,020
<SALES> 1,787,879 1,692,743
<TOTAL-REVENUES> 1,787,879 1,692,743
<CGS> 502,310 758,050
<TOTAL-COSTS> 2,842,814 2,673,699
<OTHER-EXPENSES> (59,837)<F1> (30,905)
<LOSS-PROVISION> 0 124,363
<INTEREST-EXPENSE> (84,759) (91,217)
<INCOME-PRETAX> (1,079,857) (1,041,268)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,079,857) (1,041,268)
<EPS-PRIMARY> 3,725,805 3,423,108
<EPS-DILUTED> 4,401,502 2,885,273
<FN>
<F1> Amount represesnts other income.
</FN>
</TABLE>
