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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
SPACIAL CORPORATION
(Name of Small Business Issuer in its charter)
DELAWARE 13-4031423
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
317 MADISON AVENUE, SUITE 2310 10017
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive offices)
Issuer's telephone number: (212) 949-9696
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE BUSINESS
Spacial Corporation (the "Company") was incorporated in Delaware in
October 1998 and was formed by Mr. James A. Prestiano, a stockholder, officer,
and director of the Company. The Company's principal executive offices are
located at 317 Madison Avenue, Suite 2310, New York, NY 10017. The Company has
been in the developmental stage since inception and has no operating history
other than organizational matters.
The Company has no operating business. The Company does not intend to
develop its own operating business but instead will seek to effect a merger (a
"Merger") with a corporation which owns an operating business and wishes to
undertake a Merger for its own corporate purposes (a "Merger Target"), generally
related to achieving liquidity for its stockholders. The primary activity of the
Company currently involves seeking a Merger Target. The Company has not yet
selected or entered into any substantive discussions with any potential Merger
Target and does not intend to limit potential candidates to any particular field
or industry, but does retain the right to limit candidates, if it so chooses, to
a particular field or industry. The Company may effect a Merger with a Merger
Target which may be financially unstable or in its early stages of development
or growth.
The Board of Directors has elected to begin implementing the Company's
principal business purpose, described below under "Item 2, Plan of Operation."
As such, the Company can be defined as a "shell" company, whose sole purpose at
this time is to locate a Merger Target and consummate a Merger.
The proposed business activities described herein classify the Company as
a "blank check" or "blind pool" entity. Many states have enacted statutes,
rules, and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. Management does not currently
anticipate that any market for its Common Stock will develop until such time, if
any, as the Company has successfully implemented its business plan and completed
a Merger.
THERE CAN BE NO ASSURANCES GIVEN THAT THE COMPANY WILL BE ABLE TO
SUCCESSFULLY LOCATE A MERGER TARGET OR CONSUMMATE A MERGER. STATUTES,
REGULATIONS, RULES AND THE POSITIONS OF REGULATORY AUTHORITIES HAVE BEEN
BECOMING MORE ADVERSE AND RESTRICTIVE TOWARD SUCH MERGERS AND TOWARD "BLIND
POOL" ENTITIES SUCH AS THE COMPANY.
RISK FACTORS
NO OPERATING HISTORY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES
The Company was incorporated in October 1998 and has no operating
business or plans to develop one and has not, as of the date hereof, identified
any Merger Targets. Accordingly, there is only a limited basis upon which to
evaluate the Company's prospects for achieving its intended business objectives.
To date, the Company's efforts have been limited to organizational activities
and an offering of its common stock pursuant to Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act") (the "Private
Placement"; see Part II, Item 4-- Recent Sales of Unregistered Securities). The
Company has limited resources and has had no revenues to date. In addition, the
Company will not achieve any revenues (other than insignificant investment
income) until, at the earliest, the consummation of a Merger. Moreover, there
can be no assurance that any Merger Target, at the time of the Company's
consummation of a Merger, or at any time thereafter, will derive any material
revenues from its operations or operate on a profitable basis. Further, in order
to avoid status as an "Investment Company" under the Investment Company Act of
1940, the Company will only invest its funds prior to a Merger in limited
investments which do not trigger Investment Company status. There can be no
assurance that determinations ultimately made by the Company will permit the
Company to achieve its business objectives.
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POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has had no revenues to date and will be entirely
dependent upon its limited available financial resources (consisting
primarily of the proceeds of the Private Placement) to implement its business
objectives. The Company cannot ascertain with any degree of certainty the
capital requirements for the execution of its business plan. In the event
that the Company's limited financial resources prove to be insufficient to
implement the Company's business plan (because of the size of the Merger or
other reasons), the Company may be required to seek additional financing.
There can be no assurance that such financing will be available on acceptable
terms, or at all. To the extent that additional financing proves to be
unavailable when needed, the Company would, in all likelihood, be compelled
to abandon plans of a Merger, and would have minimal capital remaining to
pursue other Merger Targets. In addition, in the event of the consummation of
a Merger, the Company may require additional financing to fund the operations
or growth of the Merger Target. The failure by the Company to secure
additional financing could have a material adverse effect on the continued
development or growth of the Merger Target. The Company has no arrangements
with any bank or financial institution to secure additional financing and
there can be no assurance that any such arrangement, if required or otherwise
sought, would be available on terms deemed to be commercially acceptable and
in the best interests of the Company.
UNSPECIFIED INDUSTRY AND MERGER; UNASCERTAINABLE RISKS
The Company has not selected any particular industry or Merger Target
in which to concentrate its Merger efforts. The director and executive
officer of the Company has had no contact or discussions with any entity or
representatives of any entity regarding a consummation of a Merger.
Accordingly, there is no basis to evaluate the possible merits or risks of
the Merger Target or the particular industry in which the Company may
ultimately operate. Additionally, stockholders will only be permitted to vote
on a Merger if a stockholder vote is required under Delaware General
Corporation Law, and, even if allowed to vote, Mr. Prestiano controls a
majority of the stock of the Company, thus effectively giving him control. To
the extent that the Company effects a Merger with a financially unstable
company or an entity in its early stage of development or growth (including
entities without established records of revenues or income), the Company will
become subject to numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth companies.
In addition, to the extent that the Company effects a Merger with an entity
in an industry characterized by a high level of risk, the Company will become
subject to the currently unascertainable risks of that industry. An extremely
high level of risk frequently characterizes certain industries which
experience rapid growth. Although management will endeavor to evaluate the
risks inherent in a particular Merger Target or industry, there can be no
assurance that the Company will properly ascertain or assess all such risks.
SCARCITY OF AND COMPETITION FOR MERGER OPPORTUNITIES
The Company expects to encounter intense competition from other
entities having business objectives similar to those of the Company. Many of
these entities, including venture capital partnerships and corporations,
other blind pool companies, large industrial and financial institutions,
small business investment companies and wealthy individuals, are
well-established and have extensive experience in connection with identifying
and effecting Mergers directly or through affiliates. Many of these
competitors possess greater financial, technical, human and other resources
than the Company and there can be no assurance that the Company will have the
ability to compete successfully. The Company's financial resources will be
limited in comparison to those of many of its competitors. This inherent
competitive limitation may compel the Company to select certain less
attractive Merger prospects. There can be no assurance that such prospects
will permit the Company to achieve its stated business objectives.
NO AGREEMENT FOR MERGER; NO STANDARDS FOR MERGER
The Company has no arrangement, agreement, or understanding with
respect to engaging in a Merger with any private entity. There can be no
assurance that the Company will successfully identify and evaluate suitable
Merger opportunities or conclude a Merger. Management has not identified any
particular industry or specific business within an industry for evaluations.
Other than issuing shares to its original stockholder and conducting the
Private Placement, the Company has never commenced any operational
activities. There is no assurance that the Company will be able to negotiate
a merger on terms favorable to the Company. The Company has not established a
specific length of operating history or a specified level of earnings,
assets, net worth or other criteria which it will require a Merger Target to
have achieved.
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Accordingly, the Company may enter into a Merger with a Merger Target having
no significant operating history, losses, limited or no potential for
earnings, limited assets, negative net worth, or other negative
characteristics.
DEPENDENCE ON MERGER TARGET
The success of the Company's proposed plan of operation will depend
to a great extent on locating and consummating a Merger with a Merger Target.
Subsequent to any Merger, the Company's success will depend greatly on the
operations, financial condition, and management of the identified Merger
Target. While management intends to seek a Merger with a company that has an
established operating history, it cannot assure that the Company will
successfully locate candidates meeting such criteria. In the event the
Company completes a Merger, the success of the Company's operations may be
dependent upon management of the successor entity together with numerous
other factors beyond the Company's control.
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF MERGER TARGET
In the event that the Company succeeds in effecting a Merger, the
Company will, in all likelihood, become subject to intense competition from
competitors of the Merger Target. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with greater financial, marketing,
technical, human and other resources than the initial competitors in the
industry. The degree of competition characterizing the industry of any
prospective Merger Target cannot presently be ascertained. There can be no
assurance that, subsequent to a consummation of a Merger, the Company will
have the resources to compete effectively in the industry of the Merger
Target, especially to the extent that the Merger Target is in a high-growth
industry.
PROBABLE LACK OF BUSINESS DIVERSIFICATION
As a result of the limited resources of the Company, the Company, in
all likelihood, will have the ability to effect only a single Merger.
Accordingly, the prospects for the Company's success will be entirely
dependent upon the future performance of a single business. Unlike certain
entities which have the resources to consummate several Mergers or entities
operating in multiple industries or multiple segments of a single industry,
it is highly likely that the Company will not have the resources to diversify
its operations or benefit from the possible spreading of risks or offsetting
of losses. The Company's probable lack of diversification may subject the
Company to numerous economic, competitive and regulatory developments, any or
all of which may have a material adverse impact upon the particular industry
in which the Company may operate subsequent to the consummation of a Merger.
The prospects for the Company's success may become dependent upon the
development or market acceptance of a single or limited number of products,
processes or services. Accordingly, notwithstanding the possibility of
capital investment in and management assistance to the Merger Target by the
Company, there can be no assurance that the Merger Target will prove to be
commercially viable.
CONFLICTS OF INTEREST; INTER-COMPANY CONFLICTS
Mr. Prestiano serves as the sole director and officer other companies
that contemplate the same business activities as the Company and thus compete
directly with the Company. As a result, Mr. Prestiano will have a conflict of
interest with respect to prospective Merger Targets and presenting the
corporate opportunity to the Company. In general, officers and directors of a
corporation incorporated under the laws of the State of Delaware are required
to present certain business opportunities to such corporation. As a result of
Mr. Prestiano's business associations with multiple companies he will have
conflicting interests. Therefore, the Company has agreed that with respect to
conflicts of interest amongst these companies related to the allocation of
opportunities to negotiate and Merge with Merger Targets, the Company will
waive any conflict or claim related to Mr. Prestiano's fiduciary duty.
However, the conflict should be mitigated by the fact that Mr. Prestiano has
the same ownership interest in each other company as he does in the Company,
and each company (including the Company) has identical stockholders, at least
initially. The conflict will be more significant should, at a later date,
these facts change.
CONFLICTS OF INTEREST; TIME COMMITMENT
Mr. Prestiano is not required to commit his full time to the affairs
of the Company and it is likely that he will not devote a substantial amount
of time to the affairs of the Company. Mr. Prestiano will have conflicts of
interest in allocating management time among various business activities. As
a result, the consummation of a Merger may require a greater
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period of time than if the Company's management devoted their full time to
the Company's affairs. However, Mr. Prestiano will devote such time as he
deems reasonably necessary to carry out the business and affairs of the
Company, including the evaluation of potential Merger Targets and the
negotiation and consummation of a Merger and, as a result, the amount of time
devoted to the business and affairs of the Company may vary significantly
depending upon, among other things, whether the Company has identified a
Merger Target or is engaged in active negotiation and consummation of a
Merger. Mr. Prestiano is affiliated with nine other companies engaged in
business activities similar to those to be conducted by the Company, and may
in the future become affiliated with more, and therefore may have conflicts
of interest in determining to which entity a particular business opportunity
should be presented. In general, officers and directors of a corporation
incorporated under the laws of the State of Delaware are required to present
certain business opportunities to such corporation. Accordingly, as a result
of multiple business affiliations, Mr. Prestiano may have similar legal
obligations to present certain business opportunities to multiple entities.
There can be no assurance that any of the foregoing conflicts will be
resolved in favor of the Company.
CONFLICTS OF INTEREST; COMPENSATION AND REIMBURSEMENT
Although Mr. Prestiano will receive no compensation for his services
as the sole director and/or president of the Company, he and his affiliates
will, however, be reimbursed, at-cost, for any expenses incurred in respect
of reasonable business expenses of the Company, including in relation to the
formation of the Company, the Private Placement, the Registration of the
Company and effecting any Merger. This will include reimbursement for the
cost of the personnel of Mr. Prestiano or his affiliates (other than Mr.
Prestiano himself) to be inclusive of all documented costs of their
employment on a reasonable hourly or daily allocation while engaged in
activities on behalf of the Company.
POSSIBLE MERGER WITH A MERGER TARGET OPERATING OUTSIDE THE UNITED STATES;
SPECIAL ADDITIONAL RISKS
The Company may effectuate a Merger with a Merger Target whose
business operations or even headquarters, place of formation or primary place
of business are located outside the United States. In such event, the Company
may face the significant additional risks associated with doing business in
that country. In addition to the language barriers, different presentations
of financial information, different business practices, and other cultural
differences and barriers that may make it difficult to evaluate such a Merger
Target, ongoing business risks result from the internal political situation,
uncertain legal systems and applications of law, prejudice against
foreigners, corrupt practices, uncertain economic policies and potential
political and economic instability that may be exacerbated in various foreign
countries.
There currently are no limitations on the Company's ability to borrow
funds to increase the amount of capital available to the Company to effect a
Merger. However, the limited resources of the Company and lack of operating
history will make it difficult to borrow funds. The amount and nature of any
borrowings by the Company will depend on numerous considerations, including
the Company's capital requirements, the Company's perceived ability to meet
debt service on any such borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. There can be no
assurance that debt financing, if required or sought, would be available on
terms deemed to be commercially acceptable by and in the best interests of
the Company. The inability of the Company to borrow funds required to effect
or facilitate a Merger, or to provide funds for an additional infusion of
capital into a Merger Target, may have a material adverse effect on the
Company's financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any borrowings
may subject the Company to various risks traditionally associated with
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest. Furthermore, a
Merger Target may have already incurred borrowings and, therefore, all the
risks inherent thereto.
DEPENDENCE UPON SINGLE EXECUTIVE OFFICER AND DIRECTOR; LIMITED EXPERIENCE
The ability of the Company to successfully effect a Merger will be
dependent upon the efforts of its executive officer and sole director, Mr.
James Prestiano. Notwithstanding the significance of Mr. Prestiano, the
Company has not entered into employment agreements or other understandings
with Mr. Prestiano concerning compensation or obtained any "key man" life
insurance on his life. The loss of the services of Mr. Prestiano could have a
material adverse effect on the Company's ability to successfully achieve its
business objectives. Mr. Prestiano is not required to commit a substantial
amount of his time to the affairs of the Company and, accordingly, may have
conflicts of interests in allocating management time among various business
activities. Although Mr. Prestiano has experience in buying and selling
businesses, he has no prior experience in "blind pool" or "blank check"
companies such as the Company. The Company will rely upon the
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expertise of Mr. Prestiano and does not anticipate that it will hire
additional personnel. However, if additional personnel are required, there
can be no assurance that the Company will be able to retain such necessary
additional personnel.
CENTRALIZED CONTROL
Mr. Prestiano owns 2,000,000 shares of Common Stock of the Company,
representing approximately 92% of the issued and outstanding shares of Common
Stock and approximately 92% of the voting power of the issued and outstanding
shares of Common Stock of the Company. In the election of directors,
stockholders are not entitled to cumulate their votes for nominees.
Accordingly, as a practical matter, management may be able to elect all of
the Company's directors and otherwise direct the affairs of the Company.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT
A Merger will, in all likelihood, result in stockholders of any
Merger Target obtaining a controlling interest in the Company. Any such
Merger may require management of the Company to sell, transfer or cancel all
or a portion of the Company's stock held by management, or cause Mr.
Prestiano to resign or be removed as executive officer and/or sole director
and a corresponding reduction in or elimination of his participation in the
future affairs of the Company.
LIMITED LIKELIHOOD OF REGULAR TRADING MARKET
A public market for the Common Stock does not exist and there can be
no assurance that one will ever develop or if developed will continue.
Creation of a public market for the Common Stock depends on (i) acceptance of
the Company on an exchange or interdealer quotation system, (ii) filing of a
Form 15-c2-11 with NASDAQ for trading on the bulletin board or (iii)
registration of the shares through a Registration Statement filed under the
Securities Act of 1933, as amended (the "Securities Act"). Such actions may
be costly and difficult and could potentially fail. If so, it would
substantially hinder the liquidity of the Common Stock. If no market
develops, it may be difficult or impossible for the holders of the Common
Stock to sell their securities if they should desire to do so. In addition,
there are substantial restrictions on the sale or transfer of Common Stock
imposed by federal and state security laws, if the shares of Common Stock of
the Company are not registered through a Registration Statement. If the
shares are registered, there are no assurances that a regular trading market
will develop for any of the Common Stock and that if developed any such
market will be sustained. It is unlikely any market would develop without a
Merger.
AUTHORIZATION OF ADDITIONAL SECURITIES; DILUTION; REDUCTION OF PERCENTAGE SHARE
OWNERSHIP FOLLOWING MERGER
The Company's Certificate of Incorporation authorizes the issuance of
40,000,000 shares of Common Stock. There are currently 37,830,000 authorized
but unissued shares of Common Stock available for issuance. Although the
Company has no commitments as of this date to issue any of these 37,830,000
shares of Common Stock, the Company will, in all likelihood, issue a
substantial number of additional shares in connection with or following a
Merger. To the extent that addi tional shares of Common Stock are issued, the
Company's stockholders would experience dilution of their respective
ownership interests in the Company. Additionally, if the Company issues a
substantial number of shares of Common Stock in connection with or following
a Merger, a change in control of the Company may occur which may affect,
among other things, the Company's ability to utilize net operating loss carry
forwards, if any. Furthermore, the issuance of a substantial number of shares
of Common Stock may adversely affect prevailing market prices, if any, for
the Common Stock and could impair the Company's ability to raise additional
capital through the sale of its equity securities. The Company intends to use
consultants and other third parties providing goods and services, including
assistance in the identification and evaluation of potential Merger Targets.
These consultants or third parties may be paid in cash, stock, options or
other securities of the Company, and the consultants or third parties may be
Placement Agents or their affiliates. Mr. Prestiano has the sole discretion
to engage consultants and other assistance and to pay partially or in whole
with stock or options for stock of the Companies and to raise additional
funds by selling securities of the Company which may involve substantial
additional dilution to the investors.
REGULATORY AND STATUTORY OBSTACLES TO THE COMPANY BECOMING ATTRACTIVE MERGER
CANDIDATE
Merger Targets are often companies which wish to become public
companies to provide liquidity to their shareholders and possibly enhance
their future ability to access the capital markets, without the risk and
expense of an initial public
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offering. While the Merger does not immediately provide significant capital,
it does, if the Merger is executed as intended, create a surviving Company
which is public, which owns the assets and business of the Merger Target
(usually in a subsidiary) and the Merger Targets shareholders end up with
stock in the public Company. Management believes that the Company will
generally be attractive to Merger Targets if the Company has its Common Stock
being quoted by dealers and registered under the Exchange Act. Regulatory and
rulemaking authorities have, however, taken steps to make it difficult, to
enable shell corporations (with no current business other than one similar to
the Company's) to have dealer quotations for the securities of such
corporations. In order to have dealers quote a bid and ask for the common
stock of the Company, in addition to other requirements, the dealer must file
a form pursuant to Rule 15c-2(11) promulgated pursuant to the Exchange Act.
Regulatory authorities may scrutinize and possibly take action to block
quotation by a dealer of stock in a shell company such as the Company. In
addition, the regulatory authorities generally will block a dealer from
quoting on stock of a company without some significant amount of free trading
shares available for trading, often referred to as the "float." The Company
currently has no free trading shares held by a small number of stockholders.
As a result, there is no assurance that the regulatory authorities will not
block the attempt to obtain dealer quotations for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
None of the 2,170,000 shares of Common Stock outstanding of the
Company as of the date of the Registration Statement are eligible for sale
under Rule 144 ("Rule 144") promulgated under the Securities Act. In general,
under Rule 144, as currently in effect, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the Company (or
persons whose shares are aggregated), who has owned restricted shares of
Common Stock beneficially for at least one year is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater
of 1% of the total number of outstanding shares of the same class or, if the
Common Stock is quoted on an exchange or NASDAQ, the average weekly trading
volume during the four calendar weeks preceding the sale. A person who has
not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned the shares of Common Stock
to be sold for at least two years is entitled to sell such shares under Rule
144 without regard to any of the limitations described above. No prediction
can be made as to the effect, if any, that sales of such shares of Common
Stock or the availability of such shares for sale will have on the market
prices, if any, for shares of Common Stock prevailing from time to time.
Nevertheless, the sale of substantial amounts of Common Stock in the public
market would likely adversely affect prevailing market prices for the Common
Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION
The Company may form one or more subsidiary entities to effect a
Merger and may, under certain circumstances, distribute the securities of
subsidiaries to the stockholders of the Company. There cannot be any
assurance that a market would develop for the securities of any subsidiary
distributed to stockholders or, if it did, any assurance as to the prices at
which such securities might trade. The structure of a Merger or the
distribution of securities to stockholders may result in taxation of the
Company, the Merger Target or stockholders. It is likely that any Merger
would result in control by the Merger Target stockholders and that the
stockholders of the Company would retain only a relatively small minority
position
TAXATION
Federal and state tax consequences will, in all likelihood, be major
considerations in any Merger the Company may undertake. Typically, these
transactions may be structured to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions. The Company
intends to structure any Merger so as to minimize the federal and state tax
consequences to both the Company and the Merger Target. Management cannot
assure that Merger will meet the statutory requirements for a tax-free
reorganization, or that the parties will obtain the intended tax-free
treatment upon a transfer of stock or assets. A non-qualifying reorganization
could result in the imposition of both federal and state taxes, which may
have an adverse effect on both parties to the transaction.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), which was enacted principally for the
purpose of regulating vehicles for pooled investments in securities, extends
generally to companies engaged primarily in the business of investing,
reinvesting, owning, holding or trading in securities. The
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Investment Company Act may, however, also be deemed to be applicable to a
company which does not intend to be characterized as an investment company
but which, nevertheless, engages in activities which may be deemed to be
within the definitional scope of certain provisions of the Investment Company
Act. The Company believes that its anticipated principal activities, which
will involve acquiring control of an operating company, will not subject the
Company to regulation under the Investment Company Act. Nevertheless, there
can be no assurance that the Company will not be deemed to be an investment
company, particularly during the period prior to consummation of a Merger. If
the Company is deemed to be an investment company, the Company may become
subject to certain restrictions relating to the Company's activities,
including restrictions on the nature of its investments and the issuance of
securities. In addition, the Investment Company Act imposes certain
requirements on companies deemed to be within its regulatory scope, including
registration as an investment company, adoption of a specific form of
corporate structure and compliance with certain burdensome reporting, record
keeping, voting, proxy, disclosure and other rules and regulations. In the
event of the characterization of the Company as an investment company, the
failure by the Company to satisfy such regulatory requirements, whether on a
timely basis or at all, would, under certain circumstances, have a material
adverse effect on the Company.
NO CASH DIVIDENDS
The Company does not expect to pay dividends prior to the
consummation of a Merger. The payment of dividends after consummating any
such Merger, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements, and general financial condition
subsequent to consummation of a Merger. The payment of any dividends
subsequent to a Merger will be within the discretion of the Company's then
Board of Directors. The Company presently intends to retain all earnings, if
any, for use in the Company's business operations and accordingly, the Board
does not anticipate declaring any dividends in the foreseeable future.
ISSUANCE OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
5,000,000 shares of preferred stock (the "Preferred Stock"), with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions of such series as the Board of Directors, subject to the laws of
the State of Delaware, may determine from time to time. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of Common Stock. In addition, 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 does not
currently intend to issue any shares of Preferred Stock, there can be no
assurance that the Company will not do so in the future. As of this date, the
Company has no outstanding shares of Preferred Stock..
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
THIS REGISTRATION STATEMENT INCLUDES PROJECTIONS OF FUTURE RESULTS
AND "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED IN SECTION 27A OF
THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS THAT ARE INCLUDED IN THIS
REGISTRATION STATEMENT, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE
FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT VIEWS OF THE
COMPANY WITH RESPECT TO THE FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THE RISK FACTORS DESCRIBED IN ITEM
1. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED OR EXPECTED.
THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS WILL OCCUR, AND THAT
THESE JUDGMENTS OR ASSUMPTIONS WILL PROVE CORRECT, THAT UNFORESEEN
DEVELOPMENTS WILL NOT OCCUR OR THAT THE COMPANY'S ASSUMPTIONS CONCERNING
FUTURE DEVELOPMENTS WILL NOT CHANGE.
PLAN OF OPERATION
GENERAL
The Company's plan is to seek, investigate, and if such investigation
warrants, consummate a Merger with one or more Merger Targets desiring the
perceived advantages of a publicly held corporation. At this time, the
Company has no plan, proposal, agreement, understanding, or arrangement to
merge with any specific business or company, and the Company
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<PAGE>
has not identified any specific business or company for investigation and
evaluation. No member of Management or any promoter of the Company, or an
affiliate of either, has had any material discussions with any other company
with respect to any Merger. The Company will not restrict its search to any
specific business, industry, or geographical location, and may participate in
business ventures of virtually any kind or nature. Discussion of proposed
plan of operation and Mergers under this caption and throughout this
Registration Statement is purposefully general and is not meant to restrict
the Company's virtually unlimited discretion to search for and enter into
potential business opportunities.
The Company may seek a Merger with an entity which only recently
commenced operations, or a developing company in need of additional funds to
expand into new products or markets or seeking to develop a new product or
service, or an established business which may be experiencing financial or
operating difficulties and needs additional capital which is perceived to be
easier to raise by a public company. In some instances, a Merger may involve
merging with a corporation which does not need substantial additional cash
but which desires to establish a public trading market for its common stock.
The Company may purchase assets and establish wholly-owned subsidiaries in
various businesses or purchase existing businesses as subsidiaries.
The Company is filing this Form 10-SB on a voluntary basis because
the primary attraction with the Company as a merger partner or acquisition
vehicle will be its status as an SEC reporting company. Any merger or other
combination will most likely result in the Company issuing significant number
of common shares, which would create a substantial dilution to the existing
stockholders.
Selecting a Merger Target will be complex and extremely risky.
Because of general economic conditions, rapid technological advances being
made in some industries, and shortages of available capital, management
believes that there are numerous entities seeking the benefits of a
publicly-traded corporation. Such perceived benefits of a publicly traded
corporation may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for the
principals of a business, creating a means for providing incentive stock
options or similar benefits to key employees, providing liquidity (subject to
restrictions of applicable statues) for all stockholders, and other items.
Potential Merger Targets may exist in many different industries and at
various stages of development, all of which will make the task of comparative
investigation and analysis of such Merger Targets extremely difficult and
complex.
The Company has insufficient capital with which to provide the owners
of Merger Targets significant cash or other assets. Management believes the
Company will offer owners of Merger Targets the opportunity to acquire a
controlling ownership interest in a public company at substantially less cost
than is required to conduct an initial public offering. Nevertheless, the
Company has not conducted market research and is not aware of statistical
data which would support the perceived benefits of a Merger or acquisition
transaction for the owners of a Merger Target.
The Company will not restrict its search for any specific kind of
Merger Target, and may merge with an entity which is in its preliminary or
development stage, which is already in operation, or in essentially any stage
of its corporate life. It is impossible to predict at this time the status of
any business in which the Company may become engaged, in that such business
may need to seek additional capital, may desire to have its shares publicly
traded, or may seek other perceived advantages which the Company may offer.
However, the Company does not intend to obtain funds in one or more private
placements to finance the operation of any acquired business opportunity
until such time as the Company has successfully consummated such a Merger.
SELECTION AND EVALUATION OF MERGER TARGETS
Management of the Company will have complete discretion and
flexibility in identifying and selecting a prospective Merger Target. In
connection with its evaluation of a prospective Merger Target, management
anticipates that it will conduct a due diligence review which will encompass,
among other things, meeting with incumbent management and inspection of
facilities, as well as a review of financial, legal and other information
which will be made available to the Company.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, each Company will only be able to effect a
Merger with a prospective Merger Target that has available audited financial
statements or has financial statements which can be audited
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<PAGE>
The time and costs required to select and evaluate a Merger Target
(including conducting a due diligence review) and to structure and consummate
the Merger (including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and corporation
laws) cannot presently be ascertained with any degree of certainty. The
Company's current executive officer and director intends to devote only a
small portion of his time to the affairs of the Company and, accordingly,
consummation of a Merger may require a greater period of time than if the
Company's management devoted his full time to the Company's affairs. However,
the officer and director of the Company may hire third party consultants and
professionals, at the expense of the Company, which may be paid in cash or
stock or other securities of the Company, for assistance in identification
and evaluation of Merger Targets.
The Company will seek potential Merger Targets from all known sources
and anticipates that various prospective Merger Targets will be brought to
its attention from various non-affiliated sources, including securities
broker-dealers, investment bankers, venture capitalists, bankers, other
members of the financial community and affiliated sources, including,
possibly, the Company's executive officer, director and his affiliates. While
the Company has not yet ascertained how, if at all, it will advertise and
promote itself, the Company may elect to publish advertisements in financial
or trade publications seeking potential business acquisitions. While the
Company does not presently anticipate engaging the services of professional
firms that specialize in finding business acquisitions on any formal basis,
the Company may engage such firms in the future, in which event the Company
may pay a finder's fee or other compensation. In no event, however, will the
Company pay a finder's fee or commission to the officer and director of the
Company or any entity with which he is affiliated for such service. Moreover,
in no event shall the Company issue any of its securities to any officer,
director or promoter of the Company, or any of their respective affiliates or
associates, in connection with activities designed to locate a Merger Target.
In analyzing prospective Merger Targets, management may consider, among
other factors, such matters as;
1) the available technical, financial and managerial resources
2) working capital and other financial requirements
3) history of operation, if any
4) prospects for the future
5) present and expected competition
6) the quality and experience of management services which may be
available and the depth of that management
7) the potential for further research, development or exploration
8) specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company
9) the potential for growth or expansion
10) the potential for profit
11) the perceived public recognition or acceptance of products,
services or trades
12) name identification
Merger opportunities in which the Company may participate will
present certain risks, many of which cannot be adequately identified prior to
selecting a specific opportunity. The Company's stockholders must, therefore,
depend on Management to identify and evaluate such risks. The investigation
of specific Merger opportunities and the negotiation, drafting and execution
of relevant agreements, disclosure documents and other instruments will
require substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to participate
in a specific Merger opportunity the cost therefore incurred in the related
investigation would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific Merger opportunity, the failure
to consummate that transaction may result in the loss of the Company of the
related costs incurred.
There can be no assurance that the Company will find a suitable
Merger Target. If no such Merger Target is found, therefore, no return on an
investment in the Company will be realized, and there will not, most likely,
be a market for the Company's stock.
STRUCTURING AND FINANCING OF A MERGER
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As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of Mergers. The Company will evaluate
the possible tax consequences of any prospective Merger and will endeavor to
structure a Merger so as to achieve the most favorable tax treatment to the
Company, the Merger Target and their respective stockholders. There can be no
assurance that the Internal Revenue Service or relevant state tax authorities
will ultimately assent to the Company's tax treatment of a particular
consummated Merger. To the extent the Internal Revenue Service or any
relevant state tax authorities ultimately prevail in recharacterizing the tax
treatment of a Merger, there may be adverse tax consequences to the Company,
the Merger Target and their respective stockholders. Tax considerations as
well as other relevant factors will be evaluated in determining the precise
structure of a particular Merger.
The Company may utilize available cash and equity securities in
effecting a Merger. Although the Company has no commitments as of this date
to issue any shares of Common Stock or options or warrants, other than those
already issued in the Private Placement, each Company will likely issue a
substantial number of additional shares in connection with the consummation
of a Merger, probably in most cases equal to nine or more times the amount
held by the Company's stockholders prior to the Merger. The Company may have
to effect reverse stock splits prior to any Merger. To the extent that such
additional shares are issued, dilution to the interests of a Company's
stockholders will occur. Additionally, a change in control of the Company may
occur which may affect, among other things, the Company's ability to utilize
net operating loss carryforwards, if any.
There currently are no limitations on each Company's ability to
borrow funds to effect a Merger. However, the Company's limited resources and
lack of operating history may make it difficult to borrow funds. The amount
and nature of any borrowings by the Company will depend on numerous
considerations, including the Company's capital requirements, potential
lenders' evaluation of the Company's ability to meet debt service on
borrowings and the then prevailing conditions in the financial markets, as
well as general economic conditions. The Company has no arrangements with any
bank or financial institution to secure additional financing and there can be
no assurance that such arrangements if required or otherwise sought, would be
available on terms commercially acceptable or otherwise in the best interests
of the Company. The inability of the Company to borrow funds required to
effect or facilitate a Merger, or to provide funds for an additional infusion
of capital into a Merger Target, may have a material adverse effect on the
Company's financial condition and future prospects, including the ability to
effect a Merger. To the extent that debt financing ultimately proves to be
available, any borrowings may subject the Company to various risks
traditionally associated with indebtedness, including the risks of interest
rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a Merger Target may have already incurred debt
financing and, therefore, all the risks inherent thereto.
COMPETITION FOR MERGER OPPORTUNITIES
The Company is, and will continue to be, an insignificant participant
in the business of seeking a Merger with a Merger Target. The Company expects
to encounter intense competition from other entities having business
objectives similar to those of the Company. Many of these entities, including
venture capital partnerships and corporations, other blind pool companies,
large industrial and financial institutions, small business investment
companies and wealthy individuals, are well-established and have extensive
experience in connection with identifying and effecting Mergers directly or
through affiliates. Many of these competitors possess greater financial,
technical, human and other resources than the Company and there can be no
assurance that the Company will have the ability to compete successfully. The
Company's financial resources will be limited in comparison to those of many
of its competitors. This inherent competitive limitation may compel the
Company to select certain less attractive Merger prospects. There can be no
assurance that such prospects will permit the Company to achieve its stated
business objectives.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming
code in existing computer systems as the year 2000 approaches. The Company
has assessed these issues as they relate to the Company, and since the
Company currently has no operating business and does not use any computers,
and since it has no customers, suppliers or other constituents, it does not
believe that there are any material year 2000 issues to disclose in this Form
10-SB.
EQUIPMENT AND EMPLOYEES
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<PAGE>
The Company has no operating business and thus no equipment and no
employees, and the Company does not expect to acquire any equipment or
employees. The Company does not intend to develop its own operating business
but instead will seek to effect a Merger with a Merger Target.
ITEM 3. DESCRIPTION OF PROPERTY
The Company neither owns nor leases any real property at this time.
Pursuant to an oral agreement with The Law Offices of James A. Prestiano,
Esq, a firm controlled by James Prestiano, the Company's President, majority
stockholder and founder, the Company utilizes and will continue to utilize
the office space of such firm as its principal executive office. Such office
is located at 317 Madison Avenue, Suite 2310, New York, NY 10017, telephone:
(212) 949-9696, facsimile: (212) 949-9241.
The Company has not invested in any real property at this time nor
does the Company intend to do so. The Company has no formal policy with
respect to investments in real estate or investments with persons primarily
engaged in real estate activities.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of this date, with
respect to Common Stock of the Company owned by James A. Prestiano, the sole
director and officer of the Company, and the only individual who owns more
than 5% of the outstanding and voting Common Stock.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF CLASS
NAME OWNED OUTSTANDING
- ------------------------------------- ------------ -----------
<S> <C> <C>
James A. Prestiano(1) 2,000,000(2) 92.17%
All Officers and Directors as a group 2,000,000 92.17%
(one person)
</TABLE>
- ---------------------------
(1) The address for Mr. Prestiano is c/o the Company, 317 Madison Avenue,
Suite 2310, New York, NY 10017, telephone: (212) 949-9696, facsimile:
(212) 949-9241.
(2) Mr. Prestiano has sole voting and investment power with respect to the
shares shown.
A Merger will, in all likelihood, result in stockholders of the
Merger Target obtaining a controlling interest in the Company. Any such
Merger may require management of the Company to sell, transfer or cancel all
or a portion of the Company's stock held by management, or cause Mr.
Prestiano to resign or be removed as executive officer and/or sole director
and a corresponding reduction in or elimination of his participation in the
future affairs of the Company
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth information concerning the sole
director, executive officer of the Company:
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
James A. Prestiano 35 President, Secretary, and Sole Director
</TABLE>
MR. JAMES A. PRESTIANO, age 35, is the sole director, president, and
secretary of the Company. Mr. Prestiano is the principal of the Law Offices
of James A. Prestiano. Mr. Prestiano practices law in New York, New York and
specializes in securities, corporate and business matters. Mr. Prestiano has
practiced law in New York since 1993. From 1990 to 1993, Mr. Prestiano was a
Staff Attorney at the Northeast Regional Office of the United States
Securities and Exchange
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<PAGE>
Commission. Mr. Prestiano is a graduate of St. Johns University, where he
received a B.A. degree in 1987 and a law degree in 1990.
The Company currently has no employees.
Mr. Prestiano is not required to commit his full time to the affairs of
the Company and it is likely that he will not devote a substantial amount of
time to the affairs of the Company. Mr. Prestiano will have conflicts of
interest in allocating management time among various business activities. As a
result, the consummation of a Merger may require a greater period of time than
if the Company's management devoted their full time to the Company's affairs.
However, Mr. Prestiano will devote such time as he deems reasonably necessary to
carry out the business and affairs of the Company, including the evaluation of
potential Merger Targets and the negotiation and consummation of a Merger and,
as a result, the amount of time devoted to the business and affairs of the
Company may vary significantly depending upon, among other things, whether the
Company has identified a Merger Target or is engaged in active negotiation and
consummation of a Merger.
ITEM 6. EXECUTIVE COMPENSATION
James A. Prestiano is the sole officer and director of the Company. Mr.
Prestiano receives no compensation for his services as the sole director and/or
president and secretary of the Company. Mr. Prestiano and his affiliates will,
however, be reimbursed, at-cost, for any reasonable business expenses of the
Company, including those incurred in connection with the formation of the
Company, the Private Placement, the preparation and filing of this Registration
statement, and effecting any Merger. This will include reimbursement for the
cost of the personnel of Mr. Prestiano or his affiliates (other than Mr.
Prestiano himself) to be inclusive of all documented costs of their employment
on a reasonable hourly or daily allocation while engaged in activities on behalf
of the Company.
While the Company does not presently anticipate engaging the services of
professional firms that specialize in finding business acquisitions on any
formal basis, the Company may engage such firms in the future, in which event
the Company may pay a finder's fee or other compensation. In no event, however,
will the Company pay a finder's fee or commission to the officer and director of
the Company or any entity with which he is affiliated for such service.
Moreover, in no event shall the Company issue any of its securities to any
officer, director or promoter of the Company, or any of their respective
affiliates or associates, in connection with activities designed to locate a
Merger Target.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To this date, the Company has had no operating business and engaged in no
transactions in which Mr. Prestiano has had any direct or indirect material
interest. Should the Company engage in any such transaction in the future, Mr.
Prestiano's interest therein would arise only from his ownership of Common Stock
of the Company and would receive no extra or special benefit that was not shared
equally (pro rata) by all holders of Common Stock of the Company.
Mr. Prestiano serves as the sole director and officer of other companies
that contemplate the same business activities as the Company and thus compete
directly with the Company. As a result, Mr. Prestiano will have a conflict of
interest with respect to prospective Merger Targets and presenting the corporate
opportunity to the Company. In general, officers and directors of a corporation
incorporated under the laws of the State of Delaware are required to present
certain business opportunities to such corporation. As a result of Mr.
Prestiano's business associations with multiple companies he will have
conflicting interests. Therefore, the Company has agreed that with respect to
conflicts of interest amongst these companies related to the allocation of
opportunities to negotiate and Merge with Merger Targets, the Company will waive
any conflict or claim related to Mr. Prestiano's fiduciary duty. However, the
conflict should be mitigated by the fact that Mr. Prestiano has the same
ownership interest in each other company as he does in the Company, and each
company (including the Company) has identical stockholders, at least initially.
The conflict will be more significant should, at a later date, these facts
change.
Prior to his involvement with the Company, Mr. Prestiano has not been
involved in any "blind pool" or "blank check" offerings. Mr. Prestiano is
affiliated with nine other companies engaged in business activities similar to
those to be
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<PAGE>
conducted by the Company, and may in the future become affiliated with more, and
therefore may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. In general, officers and
directors of a corporation incorporated under the laws of the State of Delaware
are required to present certain business opportunities to such corporation.
Accordingly, as a result of multiple business affiliations, Mr. Prestiano may
have similar legal obligations to present certain business opportunities to
multiple entities. There can be no assurance that any of the foregoing conflicts
will be resolved in favor of the Company.
ITEM 8. DESCRIPTION OF SECURITIES
Under the Company's Certificate of Incorporation, the authorized capital
stock of the Company consists of 45,000,000 shares, of which 40,000,000 shares
are Common Stock and 5,000,000 shares of Preferred Stock.
COMMON STOCK
The Company is authorized to issue 40,000,000 shares of Common Stock,
$0.001 par value per share, of which 2,170,000 shares were outstanding as of
June 15, 1999. The holders of outstanding Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board of Directors may from time to time determine. The Company
has no present intention of paying dividends on its Common Stock. Upon
liquidation, dissolution or winding up of the Company, and subject to the
priority of any outstanding Preferred Stock, the assets legally available for
distribution to stockholders are distributable ratably among the holders of the
Common Stock at the time outstanding. No holder of shares of Common Stock has a
preemptive right to subscribe to future issuances of securities by the Company.
There are no conversion rights or redemption or sinking fund provisions with
respect to the Common Stock. Holders of Common Stock are entitled to cast one
vote for each share held of record on all matters presented to stockholders.
PREFERRED STOCK
Each Company is authorized to issue 5,000,000 shares of Preferred Stock,
of which no shares are currently outstanding. The Company's Board of Directors
is authorized to issue the Preferred Stock in one or more series and, with
respect to each series, to determine the preferences and rights and the
qualifications, limitations or restrictions thereof, including the dividends
rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting the series and the designation of such series. The Board of
Directors could, without stockholder approval, issue Preferred Stock with voting
and other rights that could adversely affect the voting rights of the holders of
Common Stock and could have certain anti-takeover effects.
REGISTRATION RIGHTS AND LOCK-UP
The outstanding shares of Common Stock have certain registration rights
and are subject to certain lock-up restrictions described in Part II, Item 1. of
this Registration Statement.
ANTI-TAKEOVER PROVISIONS
The Company may become subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law. In general, such statute prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person become an interested stockholder, unless
either (i) prior to the date at which the person becomes an interested
stockholder, the Board of Directors approves such transaction or business
combination, (ii) the stockholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of such
transaction, or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of
stockholders (and not by written consent). A "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to such
interested stockholder. For purposes of Section 203, an "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years prior, did own) 15% or more of the corporation's voting stock.
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<PAGE>
TRANSFER AGENT
The Company acts as its own transfer agent for its Common Stock.
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
NO PUBLIC MARKET
The Company's Common Stock is currently not traded on any public trading
market. Management does not currently anticipate that any market for its Common
Stock will develop until such time, if any, as the Company has successfully
implemented its business plan and completed a Merger.
The authorized capital stock of the Company consists of 45,000,000
shares, of which 40,000,000 shares have been designated Common Stock, $0.001 par
value, and 5,000,000 shares of Preferred Stock, $0.0001 par value. At June 15,
1999, there were 2,170,000 shares of Common Stock outstanding and held of record
by nine stockholders.
COMMON EQUITY SUBJECT TO OUTSTANDING OPTIONS OR WARRANTS
In connection with the Private Placement described in Part II, Item 4
below, each placement agent received a portion of its compensation in the form
of warrants to purchase the number of shares of Common Stock of the Company
equal to 30% of the Common Stock of the Company sold by such placement agent in
the Private Placement at an initial exercise price of $0.255 per share (subject
to anti-dilution adjustment in certain circumstances). Warrants (the "Placement
Agent Warrant") to purchase an aggregate of 51,000 shares of Common Stock
(subject to anti-dilution adjustment in certain circumstances) were issued in
connection with the Private Placement. The Private Placement Warrants are
exercisable for a period of seven years commencing April 19, 1999 and
terminating April 19, 2006. The Placement Agent Warrants have a provision for
net cashless exercise whereby the holder will be entitled to receive upon
exercise the number of shares of Common Stock otherwise issuable upon such
exercise, less the number of shares of Common Stock having an aggregate current
market value on the date of exercise equal to the exercise price per share
multiplied by the number of shares of Common Stock for which the Placement Agent
Warrants are being exercised. The shares of Common Stock issuable upon exercise
of the Placement Agent Warrants are subject to the terms of the lock-up
described below and have the same registration rights as purchasers of Shares in
the Private Placement.
DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of
a Merger. The payment of dividends after consummating any such Merger, if any,
will be contingent upon the Company's revenues and earnings, if any, capital
requirements, and general financial condition subsequent to consummation of a
Merger. The payment of any dividends subsequent to a Merger will be within the
discretion of the Company's then Board of Directors and may be subject to
restrictions under the terms of any debt or other financing arrangements that
the Company may enter into in the future. The Company presently intends to
retain all earnings, if any, for use in the Company's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future.
SHARES ELIGIBLE FOR FUTURE SALE; LOCK-UP
None of the 2,170,000 shares of Common Stock outstanding as of June 15,
1999 are eligible for sale under Rule 144 ("Rule 144") promulgated under the
Securities Act until one year from the date of issuance (October 1999). In
general, under Rule 144, as currently in effect, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the Company (or
persons whose shares are aggregated), who has owned restricted shares of Common
Stock beneficially for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class or, if the Common Stock
is quoted on an exchange or NASDAQ, the average weekly trading volume during the
four calendar weeks preceding the sale. A person who has not been an
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<PAGE>
affiliate of the Company for at least three months immediately preceding the
sale and who has beneficially owned the shares of Common Stock to be sold for at
least two years is entitled to sell such shares under Rule 144 without regard to
any of the limitations described above.
Management believes that potential Merger Targets will be sensitive to
the amount of Common Stock of a company which might become free trading at one
time. In order to address that problem the Common Stock that was sold in the
Private Placement is subject to the following restriction, with the
understanding that Management will seek to free the Common Stock from this
specific restriction in the shortest time and maximum amount possible consistent
with achieving, if possible, an attractive Merger. Prior to (i) the consummation
of a Merger by the Company and (ii) either the expiration of relevant holding
periods under Rule 144 promulgated pursuant to the Securities Act or
registration of the Common Stock, purchasers of the Common Stock sold in the
Private Placement may not sell, pledge, assign or otherwise transfer or
hypothecate any Common Stock of the Company. Further, pursuant to a lock-up
agreement incorporated into the subscription documents executed by investors in
the Private Placement, after such registration and Merger, if attained, fifty
percent (50%) of all Common Stock of the merged-Company purchased in the Private
Placement by each holder may not be sold, pledged, assigned or otherwise
transferred or hypothecated for a period of six (6) months from the closing of
any Merger and the remaining fifty percent (50%) of the Common Stock of the
merged-Company purchased in the Private Placement by such holder will be
similarly restricted for a period of twelve (12) months from the closing of any
Merger (the "Lock-up").
In addition, Mr. Prestiano has agreed to restrict his 2,000,000 shares of
Common Stock in the Company pursuant to the same provisions as the Lock-up,
subject to release on the same percentage basis. All shares underlying the
Placement Agent Warrants are also subject to the Lock-up. In order to release
any stockholder from the terms of the Lock-up, all other stockholders must be
proportionately released
REGISTRATION RIGHTS
Each investor in the Private Placement was required to enter into
certain subscription documents (collectively, the "Subscription Documents"),
including a Subscription Agreement (and related Subscription Supplement, Lock-Up
and Registration Rights Agreement, to which each subscriber is bound by
executing the Subscription Agreement). The Subscription Documents granted
investors certain registration rights. In particular, the Subscription Documents
required that, subsequent to any Merger, the Company use its best efforts to
file a Registration Statement under the Securities Act to register the Common
Stock of the Company sold in the Private Placement, subject to certain Lock-up
provisions described in Part II of this Registration Statement.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not subject to any pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In October 1998, James A. Prestiano, the Company's founder, sole director
and officer, acquired 2,000,000 shares of Common Stock for aggregate
consideration of $100 in connection with the formation of the Company. The
shares were issued without registration in reliance upon the exemption provided
by Section 4(2) of the Securities Act.
Commencing November 1, 1998, and ending March 31, 1999, the Company
conducted an offering of its Common Stock (the "Private Placement"), in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act and Regulation D (Rule 506) promulgated under the Securities Act. The
Company offered on a "best efforts" basis directly and through a Placement
Agents who was a member of the National Association of Securities Dealers, Inc.,
a maximum of 225,000 shares of Common Stock at an offering price of $0.25 per
share, to investors who were "accredited investors" as defined in the Securities
Act, and who met certain additional standards set forth by the Company. An
aggregate
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of 170,000 shares of Common Stock were sold in the Private Placement to a
total of eight accredited investors for gross proceeds of $42,500. In
addition, on April 19, 1999, the Company issued Placement Agent Warrants to
purchase 51,000 shares of Common Stock.
The Company is one of the following ten companies in which investors
in the Private Placement were required to make an equal investment: Algiers
Resources, Inc.; Balstron Corporation; Daliprint, Inc.; Hartscup Corporation;
Mayall Partners, Inc.; PSLRA, incorporated; Regal Acquisitions, Inc.; Spacial
Corporation; Voyer One, Inc.; and Voyer Two, Inc.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation (the "Certificate") and
Bylaws include provisions that eliminate the directors' personal liability
for monetary damages to the fullest extent possible under Delaware Law or
other applicable law (the "Director Liability Provision"). The Director
Liability Provision eliminates the liability of directors to the Company and
its stockholders for monetary damages arising out of any violation by a
director of his fiduciary duty of due care. Under Delaware Law, however, the
Director Liability Provision does not eliminate the personal liability of a
director for (i) breach of the director's duty of loyalty, (ii) acts or
omissions not in good faith or involving intentional misconduct or knowing
violation of law, (iii) payment of dividends or repurchases or redemptions of
stock other than from lawfully available funds, or any transaction from which
the director derived an improper benefit. Furthermore, pursuant to Delaware
Law, the limitation on liability afforded by the Director Liability Provision
does not eliminate a director's personal liability for breach of the
director's duty of due care. Although the directors would not be liable for
monetary damages to the corporation or its stockholders for negligent acts or
omissions in exercising their duty of due care, the directors remain subject
to equitable remedies, such as actions for injunction or rescission, although
these remedies, whether as a result of timeliness or otherwise, may not be
effective in all situations. With regard to directors who also are officers
of the Company, these persons would be insulated from liability only with
respect to their conduct as directors and would not be insulated from
liability for acts or omissions in their capacity as officers.
Delaware Law provides a detailed statutory framework covering
indemnification of directors, officers, employees or agents of the Company
against liabilities and expenses arising out of legal proceedings brought
against them by reason of their status or service as directors, officers,
employees or agents. Section 145 of the Delaware General Corporation Law
("Section 145") provides that a director, officer, employee or agent of a
corporation (i) shall be indemnified by the corporation for expenses actually
and reasonably incurred in defense of any action or proceeding if such person
is sued by reason of his service to the corporation, to the extent that such
person has been successful in defense of such action or proceeding, or in
defense of any claim, issue or matter raised in such litigation, (ii) may, in
actions other than actions by or in the right of the corporation (such as
derivative actions), be indemnified for expenses actually and reasonably
incurred, judgments, fines and amounts paid in settlement of such litigation,
even if he is not successful on the merits, 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 in a criminal proceeding, if he did not have
reasonable cause to believe his conduct was unlawful), and (iii) may be
indemnified by the corporation for expenses actually and reasonably incurred
(but not judgments or settlements) of any action by the corporation or of a
derivative action (such as a suit by a stockholder alleging a breach by the
director or officer of a duty owed to the corporation), even if he is not
successful, provided that he acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation,
provided that no indemnification is permitted without court approval if the
director has been adjudged liable to the corporation.
Delaware Law also permits a corporation to elect to indemnify its
officers, directors, employees and agents under a broader range of
circumstances than that provided under Section 145. The Certificate contains
a provision that takes full advantage of the permissive Delaware
indemnification laws (the "Indemnification Provision") and provides that the
Company is required to indemnify its officers, directors, employees and
agents to the fullest extent permitted by law, including those circumstances
in which indemnification would otherwise be discretionary, provided, however,
that prior to making such discretionary indemnification, the Company must
determine that the person acted in good faith and in a manner he or she
believed to be in the best interests of the Company and, in the case of any
criminal action or proceeding, the person had no reason to believe his or her
conduct was unlawful.
In furtherance of the objectives of the Indemnification Provision, the
Company may also enter into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Certificate
-17-
<PAGE>
and Bylaws. Such indemnification agreements may be necessary to attract and
retain qualified directors and executive officers.
The inclusion of provisions limiting the liability of the Company's
officers and directors may have the effect of reducing the likelihood of
derivative litigation against the officers and directors in the future and may
discourage or deter stockholders or management from bringing a lawsuit against
the officers and directors for breach of their duty of care, even though such
action, if successful, might otherwise have benefited the Company and its
stockholders.
-18-
<PAGE>
PART F/S
The financial statements and supplemental data required by Item 310 of
Regulation S-B are attached hereto
-19-
<PAGE>
SPACIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998
(INCEPTION) TO DECEMBER 31, 1998 AND
THE THREE MONTHS ENDED
MARCH 31, 1999 (UNAUDITED)
<PAGE>
SPACIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations and Accumulated Deficit 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 6
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Spacial Corporation
We have audited the accompanying balance sheet of Spacial Corporation (a
development stage company) as of December 31, 1998, and the related statements
of operations and accumulated deficit and cash flows for the period from October
6, 1998 (inception) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 financial statements referred to above present fairly, in
all material respects, the financial position of Spacial Corporation as of
December 31, 1998, and the results of its operations and its cash flows for the
period from October 6, 1998 (inception) to December 31, 1998 in conformity with
generally accepted accounting principles.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 17, 1999
<PAGE>
SPACIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
December 31, March 31,
1998 1999
--------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 100 $ 35,118
Common stock subscription receivable 4,500 -
Prepaid expenses 1,888 1,413
--------------- ----------------
TOTAL ASSETS $ 6,488 $ 36,531
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to stockholder $ 3,076 $ 3,281
Accrued expenses 50 2,000
--------------- ----------------
Total current liabilities 3,126 5,281
--------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value
5,000,000 shares authorized
no shares issued and outstanding - -
Common stock, $0.001 par value
40,000,000 shares authorized
2,020,000 and 2,170,000 shares issued and outstanding 2,020 2,170
Additional paid-in capital 2,580 36,180
Common stock subscription receivable - (2,250)
Deficit accumulated during the development stage (1,238) (4,850)
--------------- ----------------
Total stockholders' equity 3,362 31,250
--------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,488 $ 36,531
=============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SPACIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period from Period from
October 6, For the October 6,
1998 Three Months 1998
(Inception) to Ended (Inception) to
December 31, March 31, March 31,
1998 1999 1999
---------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
OPERATING EXPENSES $ 1,238 $ 3,612 $ 4,850
---------------- --------------- ----------------
NET LOSS (1,238) (3,612) (4,850)
ACCUMULATED DEFICIT, BEGINNING OF PERIOD - (1,238) -
---------------- --------------- ----------------
ACCUMULATED DEFICIT, END OF PERIOD $ (1,238) $ (4,850) $ (4,850)
================ =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SPACIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period from Period from
October 6, For the October 6,
1998 Three Months 1998
(Inception) to Ended (Inception) to
December 31, March 31, March 31,
1998 1999 1999
---------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,238) $ (3,612) $ (4,850)
Change in
Prepaid expenses (1,888) 475 (1,413)
Accrued expenses 50 1,950 2,000
---------------- --------------- ----------------
Net cash used in operating activities (3,076) (1,187) (4,263)
---------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received for common stock 100 36,000 36,100
Due to stockholder 3,076 205 3,281
---------------- --------------- ----------------
Net cash provided by financing activities 3,176 36,205 39,381
---------------- --------------- ----------------
Net increase in cash 100 35,018 35,118
CASH, BEGINNING OF PERIOD - 100 -
---------------- --------------- ----------------
CASH, END OF PERIOD $ 100 $ 35,118 $ 35,118
================ =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SPACIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO THE
THREE MONTHS ENDED MARCH 31, 1999 IS UNAUDITED.)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND LINE OF BUSINESS
Spacial Corporation (the "Company") was incorporated on October 6,
1998 in the State of Delaware. The Company is in the development stage,
and its intent is to operate as a capital market access corporation and
to acquire one or more existing businesses through merger or
acquisition. The Company has had no significant business activity to
date.
START-UP COSTS
Start-up costs include legal and professional fees. In accordance with
Statement of Position 98-5, "Costs of Start-Up Activities," these costs
have been expensed as incurred.
ESTIMATES
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
INCOME TAXES
The Company uses the asset and liability method of accounting for
income taxes. The asset and liability method accounts for deferred
income taxes by applying enacted statutory rates in effect for periods
in which the difference between the book value and the tax bases of
assets and liabilities are scheduled to reverse. The resulting deferred
tax asset or liability is adjusted to reflect changes in tax laws or
rates. Because the Company is in the development stage and has incurred
a loss from operations, no benefit is realized for the tax effect of
the net operating loss carryforward due to the uncertainty of its
realization.
NOTE 2 - STOCKHOLDERS' EQUITY
Subscription receivable of $4,500 at December 31, 1998 was collected in
January 1999. At March 31, 1999, the Company had unpaid subscriptions
of $2,250 (unaudited) to purchase its common stock.
Subscription receivable represents amounts received in a master bank
account for which the President/Director of the Company is the sole
signatory. This account serves as an escrow account. Funds are
transferred from this bank account to the Company's bank account, net
of placement agent's fees for common stock subscribed and any amount
paid on behalf of the Company.
5
<PAGE>
SPACIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 6, 1998 (INCEPTION) TO DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO THE
THREE MONTHS ENDED MARCH 31, 1999 IS UNAUDITED.)
- --------------------------------------------------------------------------------
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company owed $3,076 and $3,281 (unaudited) at December 31, 1998 and
March 31, 1999, respectively, to the President/Director of the Company.
During 1998, the Company's President/Director paid a $3,000 retainer to
the Company's attorney.
The Company issued 2,000,000 shares of common stock to the
President/Director for $100.
NOTE 4 - YEAR 2000 ISSUE
The Company is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the Year 2000
Issue and is developing an implementation plan to resolve the Issue.
The Issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous
data or cause a system to fail. The Company is dependent on computer
processing in the conduct of its business activities.
Based on the review of the computer systems, management does not
believe the cost of implementation will be material to the Company's
financial position and results of operations.
6
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Number Description Pages
- -------------- ----------- -----
<S> <C> <C>
2.1 Certificate of Incorporation
2.2 Bylaws
3.1 Form of Private Placement Warrant
3.2 Form of Subscription Supplement, Lock-Up and Registration
Rights Agreement executed by investors in the Private Placement
3.3 Form of Subscription Agreement executed by investors in the
Private Placement
6.1 Placement Agent Agreement
27 Financial Data Schedule
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPACIAL CORPORATION
By: \s\ James A. Prestiano
------------------------------------------
James A. Prestiano, President and Director
Dated: June 21, 1999
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibit Number Description Pages
- -------------- ----------- -----
<S> <C> <C>
</TABLE>
<PAGE>
CERTIFICATE OF INCORPORATION
OF
SPACIAL CORPORATION
NAME. The name of the Corporation is Spacial Corporation.
2. REGISTERED OFFICE. The address of the registered office of
the Corporation in the State of Delaware is 15 E. North Street in the City of
Dover, County of Kent, Delaware, 19901. The name of its registered agent at that
address is Paracorp Incorporated.
3. BUSINESS. The nature of the business or purpose of the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
4. CAPITAL STRUCTURE.
4.1. AUTHORIZED SHARES. The total number of shares of
capital stock which the Corporation shall have authority to issue is 45,000,000
shares, consisting of two classes of capital stock:
(a) 40,000,000 shares of Common Stock, par value
$.001 per share (the "Common Stock"); and
(b) 5,000,000 shares of Preferred Stock, par
value $.001 per share (the "Preferred Stock").
5. INCORPORATOR. The incorporator is Lili A. Skrumbis, whose
mailing address is 2121 Avenue of the Stars, Tenth Floor, Los Angeles,
California 90067.
6. DIVIDENDS.
6.1. When, as, and if dividends are declared by the
Corporation's Board of Directors, whether payable in cash, property, securities
or rights of the Corporation or any other entity, the holders of shares of
Common Stock shall be entitled to share equally in and to receive, in accordance
with the number of Common Stock held by each such holder.
6.2. Dividends payable under this Section 6 shall be paid
to the holders of record of the outstanding Common Stock as their names shall
appear on the stock register of the Corporation on the record date fixed by the
Board of Directors in advance of declaration and payment of each dividend. Any
Common Stock issued as a dividend pursuant to this Section shall, when so
issued, be duly authorized, validly issued, fully paid and non-assessable, and
free of
1
<PAGE>
all liens and charges. The Corporation shall not issue fractions of Common Stock
on payment of such dividend but shall issue a whole number of shares to such
holder of Common Stock rounded up or down in the Corporation's sole discretion
to the nearest whole number, without compensation to the stockholder whose
fractional share has been rounded down or from any stockholder whose fractional
share has been rounded up.
7. LIQUIDATION RIGHTS. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, after
payment shall have been made to holders of outstanding Preferred Stock, if any,
of the full amount to which they are entitled pursuant to this Certificate of
Incorporation and any resolutions that may be adopted from time to time by the
Corporation's Board of Directors in accordance with Section 10 below, the
holders of Common Stock shall be entitled, to the exclusion of the holders of
Preferred Stock, if any, to share ratably in accordance with the number of
Common Stock held by each such holder, in all remaining assets of the
Corporation available for distribution among the holders of Common Stock,
whether such assets are capital, surplus or earnings. For purposes of this
Section, neither the consolidation or merger of the Corporation with or into any
other corporation or corporations pursuant to which the stockholders of the
Corporation receive capital stock and/or other securities (including debt
securities) of the acquiring corporation (or of the direct or indirect parent
corporation of the acquiring corporation), nor the sale, lease or transfer by
the Corporation of all or any part of its assets, nor the reduction of the
capital stock of the Corporation, shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation as those
terms are used in this Section 7.
8. VOTING RIGHTS.
8.1. The holders of the Common Stock shall vote as a
single class on all matters submitted to a vote of the stockholders, with each
Share entitled to one vote. The holders of Common Stock are not entitled to
cumulate votes in the election of any directors.
8.2. In the event that the shares of Common Stock shall
be listed and quoted on an exchange or other trading system, the Board of
Directors of the Corporation shall ensure, and shall have all powers necessary
to ensure, that the membership of the Board of Directors and the voting rights
of the Holders of Common Stock shall at all times be consistent with the
applicable rules and regulations, if any, for the Common Stock to be eligible
for listing and quotation on such exchange or other trading system.
9. PREFERRED STOCK.
9.1. GENERAL. Subject to the provisions of this
Certificate of Incorporation, the Board of Directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
2
<PAGE>
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(a) The number of shares constituting that series
and the distinctive designation of that series;
(b) The dividend rate on the shares of that
series, whether dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of dividends on
shares of that series;
(c) Whether that series shall have voting rights,
in addition to the voting rights provided by law, and if so, the terms of such
voting rights;
(d) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(e) Whether or not the shares of that series
shall be redeemable, and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund; and
(g) The rights of the shares of that series in
the event of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of payment of
shares of that series.
10. EXISTENCE. The Corporation is to have perpetual existence.
11. BYLAWS. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the bylaws of the Corporation.
12. ELECTIONS, MEETINGS AND BOOKS. Elections of directors need
not be by written ballot unless the bylaws of the Corporation shall so provide.
Meetings of stockholders may be held within or without the State of Delaware, as
the bylaws may provide. The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the board of directors or in
the bylaws of the Corporation.
13. AMENDMENT. The Corporation reserves the right to amend,
alter change or
3
<PAGE>
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
14. LIMITATION ON DIRECTOR LIABILITY. No director shall be
personally liable to the Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (a) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174 of
the Delaware General Corporation Law, or (d) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law hereafter is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation, in addition to the limitations on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation law. Any repeal or modification of this Section shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal
or modification.
15. INDEMNIFICATION.
15.1. GENERAL. Each person who was or is made a party to
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a Director or officer
of the Corporation or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in any other capacity while serving as a Director, officer, employee or agent or
in any other capacity while serving as a Director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to person who has ceased to
be a Director, officer, employee or agent and shall inure to the benefit of his
or her heirs, executors and administrators; provided, however, that, except as
provided in Subsection 15.2, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if the Delaware General Corporation Law requires, the
4
<PAGE>
payment of such expenses incurred by a Director or officer in his or her
capacity as a Director or officer (and not in any other capacity in which
service was or is rendered by such person while a Director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
Director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of Directors and officers.
15.2. FAILURE TO PAY A CLAIM. If a claim under Subsection
15.1 is not paid in full by the Corporation within thirty (30) days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or part, the claimant shall be entitled to
be paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
15.3. NOT EXCLUSIVE. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
this Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested Directors or otherwise.
15.4. INSURANCE. The Corporation may maintain insurance,
at its expense, to protect itself and any Director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trusts or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
15.5. DEFINITION OF THE CORPORATION. As used in this
Section, references to "the Corporation" shall include, in addition to the
resulting or surviving corporation, any constituent corporation absorbed in a
consolidation or merger which, if its separate existence had
5
<PAGE>
continued, would have had power and authority to indemnify its Directors,
officers, employees and agents, so that any person who is or was a Director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a Director, officer, employee
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence had
continued.
15.6. SEVERABILITY. If this Section or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each
Director, officer, employee and agent of the Corporation as to expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, including a grand jury proceeding and an
action by the Corporation, to the fullest extent permitted by any applicable
portion of this Section that shall not have been invalidated or by any other
applicable law.
THE UNDERSIGNED, being the incorporator hereinabove named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, does make this certificate, hereby declaring and
certifying that this is her act and deed and the facts herein stated are true,
and accordingly have hereunto set her hand this 5th day of October, 1998.
\s\ Lili A. Skrumbis
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Lili A. Skrumbis, Incorporator
6
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BYLAWS
OF
SPACIAL CORPORATION
I
OFFICES
SECTION 1.1 REGISTERED OFFICE. The registered office of Spacial
Corporation (the "Corporation") in the State of Delaware shall be at the
office of Incorporating Services, Ltd., in the City of Dover, County of Kent and
said corporation shall be the registered agent of the Corporation.
SECTION 1.2 PRINCIPAL OFFICE. The principal office for the
transaction of the business of the Corporation shall be at 317 Madison Avenue,
Suite 2310, New York, New York 10017. The Board of Directors (the "Board") is
hereby granted full power and authority to change said principal office from one
location to another.
SECTION 1.3 OTHER OFFICES. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
II
MEETINGS OF STOCKHOLDERS
SECTION 2.1 ANNUAL MEETINGS. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings shall be held at
such place, time and date as the Board shall determine by resolution.
SECTION 2.2 SPECIAL MEETINGS. Special meetings of the stockholders
for any purpose or purposes may be called by the Board or a committee of the
Board which has been duly designated by the Board and whose powers and
authority, as provided in a resolution of the Board or in these Bylaws, include
the power to call such meetings. Unless otherwise prescribed by statute or by
the Certificate of Incorporation, special meetings may not be called by any
other person or persons. No business may be transacted at any special meeting of
stockholders other than such business as may be designated in the notice calling
such meeting.
SECTION 2.3 PLACE OF MEETINGS. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
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SECTION 2.4 NOTICE OF MEETINGS. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States and/or Canadian mail, in a
postage prepaid envelope, directed to him at his post office address furnished
by him to the Secretary of the Corporation for such purpose or, if he shall not
have furnished to the Secretary the address for such purpose, then at his post
office address last known to the Secretary, or by transmitting a notice thereof
to him at such address by telegraph, cable or telecopier. Except as otherwise
expressly required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the stockholders
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, shall also state the purpose or purposes for which the meeting
is called. Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall have waived such notice and such notice shall
be deemed waived by any stockholder who shall attend such meeting in person or
by proxy, except a stockholder who shall attend such meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Except as
otherwise expressly required by law, notice of any adjourned meeting of the
stockholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken.
SECTION 2.5 QUORUM. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders pre sent in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.6 VOTING.
(a) Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each share or fractional
share of the stock of the Corporation having voting rights on the matter in
question and which shall have been held by him and registered in his name on the
books of the Corporation:
(i) on the date fixed pursuant to Section 6.5
of these Bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting, or
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(ii) if no such record date shall have been so
fixed, then (A) at the close of business on the day next preceding the day on
which notice of the meeting shall be given or (B) if notice of the meeting
shall be waived, at the close of business on the day next preceding the day
on which the meeting shall be held.
(b) Shares of stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors in such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes. Persons holding stock of the Corporation in a fiduciary
capacity shall be entitled to vote such stock. Persons whose stock is pledged
shall be entitled to vote, unless in the transfer by the pledgor on the books of
the Corporation he shall have expressly empowered the pledgee to vote thereon,
in which case only the pledgee, or his proxy may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety or otherwise, or with respect to
which two or more persons have the same fiduciary relationship, shall be voted
in accordance with the provisions of the General Corporation Law of the State of
Delaware.
(c) Any such voting rights may be exercised by the
stockholder entitled thereto in person or by his proxy appointed by an
instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized and delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three years from its
date unless said proxy shall provide for a longer period. The attendance at any
meeting of a stockholder who may theretofore have given a proxy shall not have
the effect of revoking the same unless he shall in writing so notify the
secretary of the meeting prior to the voting of the proxy. At any meeting of the
stockholders all matters, except as otherwise provided in the Certificate of
Incorporation, in these Bylaws or by law, shall be decided by the vote of a
majority of the shares present in person or by proxy and entitled to vote
thereat and thereon. The vote at any meeting of the stockholders on any question
need not be by ballot, unless so directed by the chairman of the meeting. On a
vote by ballot each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and it shall state the number of shares voted.
SECTION 2.7 LIST OF STOCKHOLDERS. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the duration thereof, and may be inspected by any stockholder who is
present.
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SECTION 2.8 INSPECTOR OF ELECTION. If at any meeting of the
stockholders a vote by written ballot shall be taken on any question, the Board
of Directors or the chairman of such meeting may appoint an Inspector of
Election to act with respect to such vote. The Inspector of Election so
appointed shall first subscribe an oath faithfully to execute the duties of an
inspector of election at such meeting with strict impartiality and according to
the best of his ability. Such Inspector of Election shall decide upon the
qualification of the voters and shall report the number of shares represented at
the meeting and entitled to vote on such question, shall conduct and accept the
votes, and, when the voting is completed, shall ascertain and report the number
of shares voted respectively for and against the question. Reports of the
Inspector of Election shall be in writing and subscribed and delivered by them
to the Secretary of the Corporation. The Inspector of Election need not be a
stockholder of the Corporation, and any officer or director of the Corporation
may be an Inspector of Election on any question other than a vote for or against
a proposal in which he shall have a material interest.
SECTION 2.9 CONDUCT OF MEETING. The chairman of a meeting of the
stockholders, as determined pursuant to Article IV of these Bylaws, shall
conduct such meeting in a businesslike and fair manner, but shall not be
obligated to follow any technical, formal or parliamentary rules or principles
of procedure. The chairman's ruling on procedural matters shall be conclusive
and binding on all stockholders, unless at the time of a ruling a request for a
vote is made to the stockholders entitled to vote and represented in person or
by proxy at the meeting, in which case the decision of a majority of such shares
shall be conclusive and binding on all stockholders. Without limiting the
generality of the foregoing, the chairman shall have all of the powers usually
vested in the chairman of a meeting of stockholders.
III
BOARD OF DIRECTORS
SECTION 3.1 GENERAL POWERS. The property, business and affairs of
the Corporation shall be managed by the Board.
SECTION 3.2 NUMBER AND TERM OF OFFICE. The authorized number of
directors shall be no less than 1 and no more than 8, with the exact number to
be determined from time to time by a resolution adopted by a majority of the
Board or by the affirmative vote of the holders of not less than a majority of
the total voting power of all outstanding shares of voting stock of the
Corporation. The initial number of authorized directors shall be one (1). Each
of the directors of the Corporation shall hold office until his successor shall
have been duly elected and shall qualify or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3.3 ELECTION OF DIRECTORS. The directors shall be elected
by the stockholders of the Corporation, and at each election the persons
receiving the greatest number of votes, up to the number of directors then to be
elected, shall be the persons then elected. The election of directors is subject
to any provisions contained in the Certificate of Incorporation relating
thereto, including any provisions for cumulative voting.
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SECTION 3.4 RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, it shall take effect immediately upon
its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.5 VACANCIES. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office until his successor shall have been elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.6 PLACE OF MEETING AND TELEPHONE MEETINGS. The Board may
hold any of its meetings at such place or places within or without the State of
Delaware as the Board may from time to time by resolution designate or as shall
be designated by the person or persons calling the meeting or in the notice of a
waiver of notice of any such meeting. Directors may participate in any regular
or special meeting of the Board by means of con ference telephone or similar
communications equipment pursuant to which all persons participating in the
meeting of the Board can hear each other, and such participation shall
constitute presence in person at such meeting.
SECTION 3.7 FIRST MEETING. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
SECTION 3.8 REGULAR MEETINGS. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.9 SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chairman of the Board, the Chief Executive Officer, or the
President and shall be called by the President or Secretary on the written
request of two directors. Notice of all special meetings of the Board shall be
given to each director:
(a) by first-class mail, postage prepaid, deposited in
the United States mail in the city where the principal executive office of the
Corporation is located at least five (5) days before the date of such meeting;
or
(b) by telegram, charges prepaid, such notice to be
transmitted by the telegraph company in the city of the principal executive
office of the Corporation at least forty-eight (48) hours before the time of
holding such meeting; or
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(c) by personal delivery or telecopier, or orally in
person or by telephone, at least twenty-four (24) hours prior to the time of
holding such meeting.
Notice given in accordance with paragraph (a) above shall
conclusively be deemed to be given to a director if addressed to the director at
the address the person giving the notice has reason to believe will result in
actual notice to the director prior to the time of the meeting. Notice given in
accordance with paragraph (b) or (c) above shall conclusively be deemed to be
given to a director if delivered in writing or communicated orally either to the
director or to a person whom the person giving the notice has reason to believe
will deliver or communicate it to the director prior to the time of the meeting.
Notice given in accordance with paragraph (a), (b) or (c) above shall
conclusively be deemed given to a director if mailed or delivered to the last
address provided by the director to the Secretary of the Corporation for such
purpose. The notice need not specify the purpose of the meeting, nor need it
specify the place of the meeting if the meeting is to be held at the principal
executive office of the Corporation.
Such notice may be waived by any director and any meeting
shall be a legal meeting without notice having been given if all the directors
shall be present thereat or those not present shall, either before or after the
meeting, sign a written waiver of notice of, or a consent to, such meeting or
shall after the meeting sign the approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the Corporation's records or
be made a part of the minutes of the meeting.
SECTION 3.10 QUORUM AND MANNER OF ACTING. Except as otherwise
provided in the Certificate of Incorporation or these Bylaws or by law, the
presence of a majority of the total number of directors then in office shall be
required to constitute a quorum for the transaction of business at any meeting
of the Board. Except as otherwise provided in the Certificate of Incorporation
or these Bylaws or by law, all matters shall be decided at any such meeting, a
quorum being present, by the affirmative votes of a majority of the directors
present. Except as otherwise provided in the Certificate of Incorporation, these
Bylaws or by law, a meeting at which there is a quorum initially present may
continue to transact business notwithstanding the withdrawal of a director, so
long as any action taken is approved by at least a majority of the required
quorum for such meeting. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 ACTION BY CONSENT. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
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SECTION 3.12 COMPENSATION. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.13 EXECUTIVE COMMITTEE. There may be an Executive
Committee appointed by resolution passed by a majority of the Board, who may
meet at stated times, or on notice to all by any of their own number, during the
intervals between the meetings of the Board; they shall advise and aid the
officers of the Corporation in all matters concerning its interests and the
management of its business, and generally perform such duties and exercise such
powers as may be directed or delegated by the Board from time to time. To the
full extent permitted by law, the Board may delegate to such committee authority
to exercise all the powers of the Board while the Board is not in session.
Vacancies in the membership of the committee shall be filled by the Board at a
regular meeting or at a special meeting for that purpose. The Executive
Committee shall keep written minutes of its meetings and report the same to the
Board when required. The provisions of Sections 3.8, 3.9, 3.10 and 3.11 of these
Bylaws shall apply, mutatis mutandis, to any Executive Committee of the Board.
SECTION 3.14 OTHER COMMITTEES. The Board may, by resolution passed
by a majority of the Board, designate one or more other committees, each such
committee to consist of one or more of the directors of the Corporation. To the
full extent permitted by law, any such committee shall have and may exercise
such powers and authority as the Board may designate in such resolution.
Vacancies in the membership of a committee shall be filled by the Board at a
regular meeting or a special meeting for that purpose. Any such committee shall
keep written minutes of its meetings and report the same to the Board when
required. The provisions of Sections 3.8, 3.9, 3.10 and 3.11 of these Bylaws
shall apply, mutatis mutandis, to any such committee of the Board.
SECTION 3.15 RIGHTS OF INSPECTION. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records,
and documents of every kind and to inspect the physical properties of the
Corporation and also of its subsidiary corporations, domestic or foreign. Such
inspection by a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
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IV
OFFICERS
SECTION 4.1 OFFICERS. The officers of the Corporation shall be a
Chief Executive Officer, a President, a Secretary and a Treasurer. In addition,
the Board may also elect a Chairman of the Board, one or more Vice Presidents,
and one or more Assistant Secretaries and Assistant Treasurers. No officer need
be a director of the Corporation. A person may hold more than one office.
SECTION 4.2 OTHER OFFICERS. The Board may appoint such other
officers as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
SECTION 4.3 ELECTION. Each of the officers of the Corporation,
except such officers as may be appointed in accordance with the provisions of
Section 4.1, Section 4.2 or Section 4.4 of these Bylaws, shall be chosen
annually by the Board and shall hold his office until he shall resign or shall
be removed or otherwise disqualified to serve, or his successor shall be elected
and qualified.
SECTION 4.4 REMOVAL; VACANCIES. Subject to the express provisions
of a contract authorized by the Board, any officer may be removed, either with
or without cause, at any time by the Board or by any officer upon whom such
power of removal may be conferred by the Board. Any vacancy occurring in any
office of the Corporation shall be filled by the Board.
SECTION 4.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board,
if one is elected, shall not be an officer of the Corporation unless designated
as such by the Board. He shall preside at all meetings of the stockholders and
directors and shall have such other powers and duties as may be prescribed by
the Board or by applicable law. He shall be an ex-officio member of standing
committees, if so provided in the resolutions of the Board appointing the
members of such committees. If there is no Chief Executive Officer or President,
the Chairman of the Board shall in addition be the Chief Executive Officer of
the Corporation and shall have the powers and duties prescribed in Section 4.6.
SECTION 4.6 THE CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer, subject to the control of the Board, shall have general supervision,
control and management of the business and affairs of the Corporation, and
general charge and supervision of all officers, agents and employees of the
Corporation; shall see that all orders and resolutions of the Board are carried
into effect; in general shall exercise all powers and perform all duties usually
vested in the office of chief executive officer of a corporation; and shall have
such other powers and duties as may from time to time be assigned to him by the
Board or as may be prescribed by these Bylaws or applicable law. He may execute
and deliver in the name of the Corporation all deeds, mortgages, bonds,
contracts and other instruments, except where required by law or these Bylaws to
be otherwise executed and delivered or when such
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execution and delivery shall be expressly delegated by him or the Board to some
other officer or agent of the Corporation. In the absence of the Chairman of the
Board, or if there is none, the Chief Executive Officer shall preside at all
meetings of the stockholders and, if he is a director, the Board. He shall be an
ex-officio member of all the standing committees, including the executive
committee, if any.
SECTION 4.7 THE PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board or these Bylaws to the Chief Executive Officer
or the Chairman of the Board, if there are such officers, the President shall,
subject to the control of the Board, have the powers and duties prescribed for
the President by the Chief Executive Officer or these Bylaws. In the absence of
the Chairman of the Board and the Chief Executive Officer, or if there are none,
the President shall preside at all meetings of the stockholders and, if he is a
director, the Board. If there is no Chief Executive Officer, the President shall
in addition be the Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in Section 4.6. The President shall be an
ex-officio member of standing committees, if so provided in the resolutions of
the Board appointing the members of such committees.
SECTION 4.8 THE VICE PRESIDENTS. The Vice Presidents, if any, shall
perform such duties and have such powers as the Board may from time to time
prescribe.
SECTION 4.9 THE TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board.
He shall disburse the funds of the Corporation as may be ordered by the
Board, making proper vouchers for such disbursements, and shall render to the
President and the Board, at its regular meetings, or when the Board so requires,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation.
SECTION 4.10 THE SECRETARY. The Secretary shall attend all meetings
of the Board and all meetings of the stockholders and record all the proceedings
of the meetings of the stockholders and of the Board in a book to be kept for
that purpose and shall perform like duties for the standing and special
committees of the Board when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board,
and shall perform such other duties as may be prescribed by the Board or the
President, under whose supervision he shall act. He shall have custody of the
corporate seal of the Corporation and he shall have authority to affix the same
to any instrument requiring it and, when so affixed, it may be attested by his
signature. The Board may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing by his signature.
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SECTION 4.11 THE ASSISTANT TREASURER AND ASSISTANT SECRETARY. The
assistant treasurer and the assistant secretary, if any, shall perform such
duties and have such powers as the Board may from time to time prescribe.
V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.1 CHECKS, DRAFTS, ETC.. All checks, drafts or other
orders for payment of money, notes or other evidence of indebtedness payable by
the Corporation shall be signed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the Board. Each such
person or persons shall give such bond, if any, as the Board may require.
SECTION 5.2 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
SECTION 5.3 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
VI
SHARES AND THEIR TRANSFER
SECTION 6.1 CERTIFICATES FOR STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
Chairman, Vice Chairman or President or a Vice President, and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer. Any of or
all of the signatures on the certificates may be a facsimile. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificate shall have
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ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may nevertheless be issued by the Corporation with
the same effect as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereupon, were such officer,
transfer agent or registrar at the date of issue. A record shall be kept of the
respective names of the persons, firms or corporations owning the shares
represented by such certificates, the number and class of shares represented by
such certificates, respectively, and the respective dates thereof, and in case
of cancellation, the respective dates of cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be canceled, and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled, except
in cases provided for in Section 6.4.
SECTION 6.2 TRANSFERS OF STOCK. Transfers of shares of stock of the
Corporation shall be made on the books of the Corporation by the registered
holder thereof, or by his attorney thereupon authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or transfer
agent appointed as provided in Section 6.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.3 REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.4 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In
any case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board or the President may direct; provided,
however, that a new certificate may be issued without requiring any bond when,
in the judgment of the Board or the President, it is proper so do to.
SECTION 6.5 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
other change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not be
more than sixty
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<PAGE>
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If in any case involving the
determination of stockholders for any purpose other than notice of or voting at
a meeting of stockholders the Board shall not fix such a record date, the record
date for determining stockholders for such purpose shall be the close of
business on the day on which the Board shall adopt the resolution relating
thereto. A determination of stockholders entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
VII
MISCELLANEOUS
SECTION 7.1 SEAL. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 7.2 WAIVER OF NOTICES. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 7.3 AMENDMENTS. Subject to the provisions of the
Certificate of Incorporation, these Bylaws and applicable law, these Bylaws or
any of them may be amended or repealed and new Bylaws may be adopted (a) by the
Board, by vote of a majority of the number of directors then in office or (b) by
the vote of the holders of not less than a majority of the total voting power of
all outstanding shares of voting stock of the Corporation at an annual meeting
of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, repeal or
adoption is given in the notice of special meeting. Subject to the provisions of
the Certificate of Incorporation, any Bylaws adopted or amended by the
stockholders may be amended or repealed by the Board or the stockholders.
SECTION 7.4 VOTING STOCK. Unless otherwise ordered by the Board,
the Chief Executive Officer shall have full power and authority on behalf of the
Corporation to attend and to act and vote at any meeting of the stockholders of
any corporation in which the Corporation may hold stock and at any such meeting
shall possess and may exercise any and all rights and powers which are incident
to the ownership of such stock and which as the owner thereof the Corporation
might have possessed and exercised if present. The Board by resolution from time
to time may confer like powers upon any other person or persons.
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<PAGE>
VIII
EMERGENCY PROVISIONS
SECTION 8.1 GENERAL. The provisions of this Article shall be
operative only during a national emergency declared by the President of the
United States or the person performing the President's functions, or in the
event of a nuclear, atomic, or other attack on the United States or a disaster
making it impossible or impracticable for the Corporation to conduct its
business without recourse to the provisions of this Article. Said provisions in
such event shall override all other Bylaws of the Corporation in conflict with
any provisions of this Article, and shall remain operative so long as it remains
impossible or impracticable to continue the business of the Corporation
otherwise, but thereafter shall be inoperative; provided that all actions taken
in good faith pursuant to such provisions shall thereafter remain in full force
and effect unless and until revoked by action taken pursuant to the provisions
of the Bylaws other than those contained in this Article.
SECTION 8.2 UNAVAILABLE DIRECTORS. All directors of the Corporation
who are not available to perform their duties as directors by reason of physical
or mental incapacity or for any other reason or who are unwilling to perform
their duties or whose whereabouts are unknown shall automatically cease to be
directors, with like effect as if such persons had resigned as directors, so
long as such unavailability continues.
SECTION 8.3 AUTHORIZED NUMBER OF DIRECTORS. The authorized number
of directors shall be the number of directors remaining after eliminating those
who have ceased to be directors pursuant to Section 8.2, or the minimum number
required by law, whichever is greater.
SECTION 8.4 QUORUM. The number of directors necessary to constitute
a quorum shall be one-third of the authorized number of directors as specified
in Section 8.3, or such other minimum number as, pursuant to the law or lawful
decree then in force, it is possible for the Bylaws of the Corporation to
specify.
SECTION 8.5 CREATION OF EMERGENCY COMMITTEE. In the event the
number of directors remaining after eliminating those who have ceased to be
directors pursuant to Section 8.2 is less than the minimum number of authorized
directors required by law, then until the appointment of additional directors to
make up such required minimum, all the powers and authorities which the Board
could by law delegate, including all powers and authorities which the Board
could delegate to a committee, shall be automatically vested in an emergency
committee, and the emergency committee shall thereafter manage the affairs of
the Corporation pursuant to such powers and authorities and shall have all such
other powers and authorities as may by law or lawful decree be conferred on any
person or body of persons during a period of emergency.
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<PAGE>
SECTION 8.6 CONSTITUTION OF EMERGENCY COMMITTEE. The emergency
committee shall consist of all the directors remaining after eliminating those
who have ceased to be directors pursuant to Section 8.2, provided that such
remaining directors are not less than three in number. In the event such
remaining directors are less than three in number, the emergency committee shall
consist of three persons, who shall be the remaining director or directors and
either one or two officers or employees of the Corporation, as the remaining
director or directors may in writing designate. If there is no remaining
director, the emer gency committee shall consist of the three most senior
officers of the Corporation who are available to serve, and if and to the extent
that officers are not available, the most senior employees of the Corporation.
Seniority shall be determined in accordance with any designation of seniority in
the minutes of the proceedings of the Board, and in the absence of such
designation, shall be determined by rate of remuneration. In the event that
there are no remaining directors and no officers or employees of the Corporation
available, the emergency committee shall consist of three persons designated in
writing by the stockholder owning the largest number of shares of record as of
the date of the last record date.
SECTION 8.7 POWERS OF EMERGENCY COMMITTEE. The emergency committee,
once appointed, shall govern its own procedures and shall have the power to
increase the number of members thereof beyond the original number, and in the
event of a vacancy or vacancies therein, arising at any time, the remaining
member or members of the emergency committee shall have the power to fill such
vacancy or vacancies. In the event at any time after its appointment all members
shall die or resign or become unavailable to act for any reason whatsoever, a
new emergency committee shall be appointed in accordance with the foregoing
provisions of this Article.
SECTION 8.8 DIRECTORS BECOMING AVAILABLE. Any person who has ceased
to be a director pursuant to the provisions of Section 8.2 and who thereafter
becomes available to serve as a director shall automatically become a member of
the emergency committee.
SECTION 8.9 ELECTION OF BOARD OF DIRECTORS. The emergency committee
shall, as soon after its appointment as is practicable, take all requisite
action to secure the election of a board of directors, and upon election all the
powers and authorities of the emergency committee shall cease.
SECTION 8.10 TERMINATION OF EMERGENCY COMMITTEE. In the event, after
the appointment of any emergency committee, a sufficient number of persons who
ceased to be directors pursuant to Section 8.2 become available to serve as
directors, so that if they had not ceased to be directors as aforesaid, there
would be enough directors to constitute the minimum number of directors required
by law, then all such persons shall automatically be deemed to be reappointed as
directors and the powers and authorities of the emergency committee shall end.
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<PAGE>
IX
APPROVAL OF INSIDER TRANSACTIONS
SECTION 9.1 Any transaction, agreement or understanding between the
Corporation or any of its subsidiaries and any of the officers and directors of
the Corporation, or any entity in which such officer or director has a material
financial interest, which is material to the business of the Corporation, or the
applicable subsidiary, must be approved by a majority of the directors of the
Corporation who have no interest in such transaction, agreement or
understanding. The interested director may be present at the meeting, if any, at
which such transaction, agreement or underwriting is approved.
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<PAGE>
THIS WARRANT AND THE SECURITIES PURCHASABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH WARRANTS
AND SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO SUCH SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
WARRANT CERTIFICATE NO. 1
WARRANT TO PURCHASE
51,000 SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M.
PACIFIC TIME, ON APRIL 19, 2006
SPACIAL CORPORATION
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that, for value received, Tradeway Securities
Group, Inc., the registered holder hereof or assigns (the "Warrantholder"), is
entitled to purchase from Spacial Corporation (the "Company"), at any time
during the period commencing at 6:30 am., Pacific time, on April 19, 1999, and
before 5:00 p.m., Pacific time, on April 19, 2006, at the purchase price per
share of Common Stock, $0.001 par value (the "Common Stock") of $0.255 (the
"Warrant Price"), 51,000 shares of Common Stock of the Company (the "Warrant
Stock "). The number of shares of Common Stock of the Company purchasable upon
exercise of each Warrant evidenced hereby shall be subject to adjustment from
time to time as set forth in the Placement Agent's Warrant Agreement, dated as
of April 19, 1999, by and between the Company, among others, and Tradeway
Securities Group, Inc. (the "Placement Agent's Warrant Agreement").
The Warrants evidenced hereby represent the right to purchase
an aggregate of up to 51,000 shares of Warrant Stock (subject to adjustment as
provided in the Placement Agent's Warrant Agreement) and are issued under and in
accordance with the Placement Agent's Warrant Agreement, and are subject to the
terms and provisions contained in the Placement Agent's Warrant Agreement, to
all of which the Warrantholder by acceptance hereof consents.
The Warrants evidenced hereby may be exercised in whole or in
part by presentation of this Warrant Certificate with the Purchase Form attached
hereto duly executed (with a signature guarantee as provided hereon) and
simultaneous payment of the Warrant Price at the principal office of the
Company. Payment of such price shall be made at the
<PAGE>
option of the Warrantholder in any manner allowed in the Placement Agent's
Warrant Agreement.
Upon any partial exercise of the Warrants evidenced hereby,
there shall be signed and issued to the Warrantholder a new Warrant Certificate
in respect of the shares of Warrant Stock as to which the Warrants evidenced
hereby shall not have been exercised. These Warrants may be exchanged at the
office of the Company by surrender of this Warrant Certificate properly endorsed
for one or more new Warrants of the same aggregate number of shares of Warrant
Stock as evidenced by the Warrant or Warrants exchanged. No fractional
securities shall be issued upon the exercise of rights to purchase hereunder,
but the Company shall pay the cash value of any fraction upon the exercise of
one or more Warrants. These Warrants are transferable at the office of the
Company in the manner and subject to the limitations set forth in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrantholder to
any of the rights of a stockholder of the Company.
SPACIAL CORPORATION
By:
--------------------------------
James A. Prestiano, President
Dated as of April 19, 1999
ATTEST:
- --------------------------------------
<PAGE>
SPACIAL CORPORATION
PURCHASE FORM
SPACIAL CORPORATION (the "Company")
317 Madison Avenue, Suite 2310
New York, NY 10017
Attention: James A. Prestiano, President
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, _____ shares of Common Stock of the Company (the "Warrant Stock")
provided for therein, and requests that certificates for the Warrant Stock be
issued in the name of:
---------------------------------------------------------------
(Please print or Type Name, Address and Social Security Number)
---------------------------------------------------------------
---------------------------------------------------------------
and, if said number of shares of Warrant Stock shall not be all the Warrant
Stock purchasable hereunder, that a new Warrant Certificate for the balance of
the Warrant Stock purchasable under the within Warrant Certificate be registered
in the name of the undersigned Warrantholder or his Assignee as below indicated
and delivered to the address stated below.
Dated:
-----------------
Name of Warrantholder
or Assignee:
-------------------------
(Please Print)
Address:
-------------------------
-------------------------
Signature:
-------------------------
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
Signature Guaranteed:
-----------------------------
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange of the National Association of Securities Dealers, Inc.)
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the right to purchase _____ shares of Warrant Stock represented by the within
Warrant Certificate unto, and requests that a certificate for such Warrant be
issued in the name of:
---------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
---------------------------------------------------------------
---------------------------------------------------------------
hereby irrevocably constituting and appointing _______________ Attorney to
transfer said Warrants on the books of the Company, with full power of
substitution in the premises and, if said number of shares of Warrant Stock
shall not be all of the Warrant Stock purchasable under the within Warrant
Certificate, that a new Warrant Certificate for the balance of the Warrant Stock
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Warrantholder and delivered to such Warrantholder's address as
then set forth on the Company's books.
Dated:
---------------------- ---------------------------------
Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:
-------------------------------
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
<PAGE>
SUBSCRIPTION SUPPLEMENT, LOCKUP AND
REGISTRATION RIGHTS AGREEMENT
This Subscription Supplement and Registration Rights Agreements (the
"Subscription Supplement"), containing additional terms to the Subscription
Agreement between Algiers Resources, Inc., Balstron Corporation, Daliprint,
Inc., Hartscup Corporation, Mayall Partners, Inc., PSLRA, Incorporated, Regal
Acquisitions, Inc., Spacial Corporation, Voyer One, Inc., Voyer Two, Inc. (the
"Companies") and investors subscribing for shares of Common Stock of the
Companies being offered pursuant to the Companies' Confidential Offering
Memorandum (as hereinafter defined), has been incorporated by reference into the
Subscription Agreement attached hereto (the "Subscription Agreement"). Each
investor should therefore carefully review this Subscription Supplement before
signing the Subscription Agreement. Terms used herein and not otherwise defined
shall have the meaning ascribed to them in the Memorandum.
1. SUBSCRIPTION FOR SHARES. I subscribe for the number of Shares of
Common Stock, par value $0.001 (the "Shares"), of each Company set forth in the
Subscription Agreement, priced at $0.25 per share.
2. REVIEW OF MEMORANDUM. I have carefully reviewed the Confidential
Offering Memorandum in connection with the offering of Shares and any
Supplement(s) thereto provided by the Companies (collectively, the
"Memorandum"). I HAVE BEEN FURNISHED WITH AND HAVE CAREFULLY READ THE
MEMORANDUM, AND VERY SPECIFICALLY THE SECTIONS ENTITLED "RISK FACTORS" AND
"AVAILABLE INFORMATION," AND THE DOCUMENTS REFERENCED THEREIN, INCLUDING ANY
DOCUMENTS LISTED IN "AVAILABLE INFORMATION" WHICH I WISHED TO REVIEW, AND I AM A
SUITABLE INVESTOR AS DESCRIBED IN THE MEMORANDUM.
3. IRREVOCABILITY OF SUBSCRIPTION. I agree that this subscription is and
shall be irrevocable, but my obligations hereunder will terminate if this
subscription is not accepted by the Companies. I agree to pay for the Shares in
the manner set forth in the Subscription Agreement.
4. ILLIQUID INVESTMENT. I understand that investment in the Shares is an
ILLIQUID INVESTMENT. In particular, I recognize that:
(a) I must bear the economic risk of investment in the Shares for
an indefinite period of time, because the Shares have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") and therefore
cannot be sold unless either they are subsequently registered under the
Securities Act or an exemption from such registration is available and a
favorable opinion of counsel for the Companies to that effect is obtained (if
requested by the Companies); and
(b) No established market will exist and it is possible that no
public market for the Shares will develop.
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5. CONSENT TO LEGENDS. I consent to the affixing by the Companies of
such legends on certificates representing the Shares as any applicable federal
or state securities law may require from time to time.
6. SUBSCRIBER'S REPRESENTATION AND WARRANTIES. I represent and warrant
to the Companies that:
(a) The financial information provided in the Subscription
Agreement is complete, true and correct;
(b) I and my investment advisors, if any, have CAREFULLY REVIEWED
AND UNDERSTAND the risks of, and other considerations relating to, a purchase of
Shares, including, but not limited to, the risks set forth under "RISK FACTORS"
in the Memorandum;
(c) I and my investment advisors, if any, have been afforded the
opportunity to obtain any information necessary to verify the accuracy of any
representations or information set forth in the Memorandum and have had all
inquiries to the Companies answered, and have been furnished all requested
materials, relating to the Companies and the offering and sale of the Shares and
anything else set forth in the Memorandum;
(d) Neither I nor my investment advisors, if any, have been
furnished any offering literature by the Companies or any of its affiliates,
associates or agents other than the Memorandum, and the documents referenced
therein;
(e) I am acquiring the Shares for which I am subscribing for my
own account, as principal, for investment and not with a view to the resale or
distribution of all or any part of the Shares;
(f) The undersigned, if a corporation, partnership, trust or
other form of business entity, (i) is authorized and otherwise duly qualified to
purchase and hold the Shares, (ii) has obtained such additional tax and other
advice that it has deemed necessary, (iii) has its principal place of business
at its residence address set forth in the Subscription Agreement, and (iv) has
not been formed for the specific purpose of acquiring the Shares (although this
may not necessarily disqualify the subscriber as a purchaser). The persons
executing the Subscription Agreement, as well as all other documents related to
the Offering, represent that they are duly authorized to execute all such
documents on behalf of the entity. (If the undersigned is one of the
aforementioned entities, it agrees to supply any additional written information
that may be required.);
(g) All of the information which I have furnished to the
Companies or which is set forth in the Subscription Agreement (including this
Subscription Supplement) is correct and complete as of the date of the
Subscription Agreement. If any material change in this information should occur
prior to my subscription being accepted, I will immediately furnish the revised
or corrected information;
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<PAGE>
(h) I further agree to be bound by all of the terms and conditions
of the Offering described in the Memorandum; and
(i) I am the only person with a direct or indirect interest in the
Shares subscribed for by the Subscription Agreement.
7. CERTIFICATION OF INFORMATION. I certify, to the best of my
information and belief, that the above information that I have supplied is true
and correct in all material respects.
8. INDEMNIFICATION OF COMPANIES. I agree to indemnify and hold harmless
the Companies, the Placement Agents and their respective officers, directors,
agents, attorneys, accountants and affiliates from and against all damages,
losses, costs and expenses (including reasonable attorneys' fees) that they may
incur by reason of the failure of the undersigned to fulfill any of the terms or
conditions of this Subscription Supplement or the Subscription Agreement, or by
reason of any breach of the representations and warranties made by the
undersigned herein or in the undersigned's related Subscription Agreement, or in
any document provided by the undersigned to the Companies.
9. NONTRANSFERABILITY OF SUBSCRIPTION. This subscription is not
transferable or assignable by me without the written consent of the Companies.
10. SUBSCRIBERS' JOINT AND SEVERAL LIABILITY. If more than one person is
executing this document, the obligations of each shall be joint and several and
the representations and warranties contained in the Subscription Agreement and
this Subscription Supplement shall be deemed to be made by, and be binding upon,
each of these persons and his or her heirs, executors, administrators,
successors and assigns.
11. SUCCESSORS AND ASSIGNS. This subscription, upon acceptance by each
Company, shall be binding upon my heirs, executors, administrators, successors
and assigns.
12. GOVERNING LAW. The Subscription Agreement, including this
Subscription Supplement, shall be construed in accordance with and governed in
all respects by the laws of the State of California.
13. REGISTRATION RIGHTS. I acknowledge and agree that I will have the
following registration rights with respect to Shares purchased by me in the
Offering:
(a) In connection with the first general registration statement
(other than Form S-8) ("Registration Statement"), if any, filed by a Company
following the closing of a merger with an operating company (a "Merger"), such
Company will use its best efforts to include the Shares of Common Stock of that
Company purchased by the Holder in the Offering in the Registration Statement.
In the event, the Company proposes to register any of its securities following a
Merger, it will give written notice to each Holder, at least thirty (30) days
prior to the filing of a Registration Statement, of its intention to do so. Upon
the written request of any Holder given
3
<PAGE>
within fifteen (15) days after receipt of any such notice of his, her or its or
their desire to include such Holder's Registerable Securities in such
Registration Statement, the Company shall afford such Holder(s) the opportunity
to have such Holder's Registerable Securities registered under such
registration. Notwithstanding anything to the contrary contained in this
paragraph, each Company shall have the right at any time after it shall have
given written notice pursuant to this paragraph (irrespective of whether a
written request for the inclusion of such Registerable Securities shall have
been made) to elect not to file any such proposed Registration Statement, or to
withdraw the same after the filing but prior to the effective date thereof. Any
and all shares registered in a Registration Statement will still be subject to
the lock-up provisions set forth in Paragraph 14 herein.
(b) Each Company shall undertake in good faith to file a
Registration Statement covering my shares as soon as reasonably possible after
such Merger and to keep such Registration Statement effective for a period of at
least two years. However, I acknowledge that no assurance can be given that such
agreement can be obtain or such Registration Statement will be declared
effective, and the lock-up provisions will still apply to such registered
shares, unless otherwise released.
(c) Each Company shall indemnify and hold harmless the
Holders of Registerable Securities from and against any and all losses, claims,
damages and liabilities caused by any untrue statement of material fact
contained in the Registration Statement filed by such Company under the
Securities Act by reason of this Paragraph 13, any post-effective amendment to
such Registration Statement, or any prospectus included therein 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 a Holder (or the authorized representatives or agents
of the Holder) expressly for use therein, which indemnification shall include
each person, if any, who controls the Holder within the meaning of the
Securities Act and each officer, director, employee and agent of the Holder;
provided, however, that the indemnification in this Paragraph 13(b) with respect
to any prospectus shall not inure to the benefit of the Holder (or to the
benefit of any person controlling the Holder) on account of any such loss,
claim, damage or liability arising from the sale of Registerable Securities by
such Holder, if a copy of a subsequent prospectus correcting the untrue
statement or omission in such earlier prospectus was provided to such Holder by
the Company prior to the subject sale and the subsequent prospectus was not
delivered or sent by the Holder to the purchaser of such securities prior to
such sale; and provided further, that the Company shall not be obligated to so
indemnify the Holder or any other person referred to above unless the Holder or
other person, as the case may be, shall at the same time indemnify the Company,
its directors, each officer signing the Registration Statement and each person,
if any, who controls the Company within the meaning of the Securities Act, from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in any Registration Statement or
any prospectus required to be filed or furnished in connection with such
Registration Statement or caused any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
4
<PAGE>
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 expressly for use therein.
If for any reason the indemnification provided for in the preceding
subparagraph 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.
(d) All expenses, filing fees and other costs incurred by each
Company in connection with any registration of securities pursuant to this
Paragraph 13 (exclusive of underwriting discounts and selling commissions
applicable to any sale of registered securities and any fees and costs of legal
counsel engaged by the Holders) shall be borne by such Company.
In the case of the registration effected by each Company pursuant to
the provisions of this Paragraph 13, the Company will (i) furnish to the Holders
of the Registerable Securities such numbers of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Holders may reasonably request in order to
facilitate the disposition of the Registerable Securities owned by them, and
(ii) notify each Holder of Registerable Securities covered by such Registration
Statement at any time when a prospectus relating thereto is required to be
delivered under Securities Act of the happening of any event as a result of
which the prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of circumstances then existing.
(e) For purposes hereof, the term "Registerable Securities" means
the Shares of Common Stock of a Company sold in the Offering.
(f) Notwithstanding anything to the contrary contained in this
Section 13, all of the registration rights described in this Section 13 shall
expire at such time as all the Registrable Securities of a Company held by you
are saleable pursuant to Rule 144(k) of the Securities Act, or such successor
provision.
14. LOCK-UP RESTRICTION ON SALE. Notwithstanding anything to the
contrary contained in the Memorandum or Paragraph 13 hereof, I acknowledge and
agree that prior to registration of any Company, the consummation of a Merger by
a Company, and either the expiration of relevant holding periods under Rule 144
of the Securities Act or registration of the Common Stock, and for a six (6)
month period after the registration of Common Stock and Merger, I will not sell,
pledge, assign or otherwise transfer or hypothecate, any Shares of Common Stock
of any
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<PAGE>
Company, and that, subsequent to the registration of Common Stock and Merger of
a Company, I will not sell, pledge, assign or otherwise transfer or hypothecate
fifty percent (50%) of the Shares of such Company, (including any shares of
Common Stock registered in connection with the Registration Statement described
in Paragraph 13 hereof) or other equity securities of the Company (other than
those acquired in the public market in any initial public offering by such
Company or thereafter) during the twelve (12) month period following the
consummation of the Merger without the prior written consent of such surviving
Company. Notwithstanding anything contained herein, if, subsequent to a Merger,
a Company releases Mr. James A. Prestiano from the terms of his same lock-up
agreement restricting his Shares of Common Stock held prior to the Offering in
such Company, or releases the holder of any Placement Agent Warrant from the
lockup, my Shares will be released in a pro rata percentage from the terms of
the lock-up agreement. This "Lock Up" Agreement may be referenced in a legend on
my shares.
6
<PAGE>
SUBSCRIPTION AGREEMENT
ALGIERS RESOURCES, INC.
BALSTRON CORPORATION
DALIPRINT, INC.
HARTSCUP CORPORATION
MAYALL PARTNERS, INC.
PSLRA, INCORPORATED
REGAL ACQUISITIONS, INC.
SPACIAL CORPORATION
VOYER ONE, INC.
VOYER TWO, INC.
<TABLE>
<S> <C>
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Please read all instructions and the terms and conditions of your Confidential Offering Memorandum dated ___________ __, 1998
carefully before filling out this application. Furthermore, please review the Subscription Supplement and Registration Rights
Agreement (the "Subscription Supplement") which is attached as Exhibit B to the Confidential Offering Memorandum and the terms of
which are incorporated by reference into and made a part of this application. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the Confidential Offering Memorandum. If you need assistance, please call your
registered representative.
/X/ When application is complete, deliver your investment to: ALGIERS RESOURCES, INC.
BALSTRON CORPORATION
DALIPRINT, INC.
HARTSCUP CORPORATION
MAYALL PARTNERS, INC.
PSLRA, INCORPORATED
REGAL ACQUISITIONS, INC.
SPACIAL CORPORATION
VOYER ONE, INC.
VOYER TWO, INC.
c/o James A. Prestiano
The Law Office of James A. Prestiano, Esq.
317 Madison Avenue, Suite 2310
New York, NY 10017
/X/ Make Separate Checks payable to EACH OF ALGIERS RESOURCES, INC., BALSTRON CORPORATION, DALIPRINT, INC., HARTSCUP CORPORATION,
MAYALL PARTNERS, INC., PSLRA, INCORPORATED, REGAL ACQUISITIONS, INC., SPACIAL CORPORATION, VOYER ONE, INC., VOYER TWO, INC.
I. ACCOUNT REGISTRATION - Check One
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/ / INDIVIDUAL ACCOUNT / / JOINT REGISTRATION / / PENSION OR PROFIT SHARING / / CORPORATION, PARTNERSHIP,
TRUST, ASSOCIATION OR OTHER
ENTITY
/ / Joint Tenant with Right / / IRA
of Survivorship
/ / Tenants in Common
/ / Tenants by Entirety
/ / Community Property
____________________________________________________________________________________________
Name of APPLICANT, CUSTODIAN, CORPORATION, TRUST or BENEFICIARY
M or F / / PLEASE PUT A CHECK NEXT TO
_____________ ______________________ THE SOC. SEC. # OR TAX ID. #
Date of Birth Soc. Sec. or Tax ID # RESPONSIBLE FOR TAXES. WE
WILL REPORT THIS NUMBER TO
THE IRS.
____________________________________________________________________________________________
Name of JOINT TENANT or TRUSTEE (IF APPLICABLE)
M or F / /
_____________ ______________________
Date of Birth Soc. Sec. or Tax ID #
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____________________________________________________________________________________________ _________________________
Name of ADDITIONAL TRUSTEE (IF APPLICABLE) Date of Trust
M or F / /
_____________ ______________________
Date of Birth Soc. Sec. or Tax ID #
Marital Status (PLEASE CHECK ONE) / / Single / / Married / / Separated / / Divorced
$________________ INVESTMENT AMOUNT (Minimum Subscription of $5,000, $500 per Company
$________________ PER COMPANY (DIVIDE BY 10) unless approved by the Companies.)
<PAGE>
I. ACCOUNT REGISTRATION - (CONTINUED)
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HOME ADDRESS
___________________________________________________________________________________________________________________________________
Street Address Unit Number
________________________________________________________________________________________ ___________________________--_________
City State ZIP+4
__________________________________
Home Phone Number (with Area Code)
BUSINESS ADDRESS
___________________________________________________________________________________________________________________________________
Name of Company
___________________________________________________________________________________________________________________________________
Street Address Suite Number
________________________________________________________________________________________ ___________________________--_________
City State ZIP+4
______________________________________
Business Phone Number (with Area Code)
Please send all correspondence to: __ Residence __ Business __ Other. Please specify: ________________________________________
II. ALTERNATIVE DISTRIBUTION INFORMATION
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To direct distributions to a party other than the registered owner, complete the information below.
Name of Firm (Bank or Brokerage): _________________________________________________________________________________________________
Account Name: _____________________________________________________________________________________________________________________
Account Number: ___________________________________________________________________________________________________________________
Address: __________________________________________________________________________________________________________________________
City, State ZIP: __________________________________________________________________________________________________________________
III. SUBSCRIPTION AGREEMENT
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You as an individual or you on behalf of the subscribing entity are being asked to complete this Subscription Agreement so a
determination can be made as to whether or not you (it) are qualified to purchase Common Stock under applicable federal and state
securities laws.
YOUR ANSWERS TO THE QUESTIONS CONTAINED HEREIN MUST BE TRUE AND CORRECT IN ALL RESPECTS, AND A FALSE REPRESENTATION BY YOU
MAY CONSTITUTE A VIOLATION OF LAW FOR WHICH A CLAIM FOR DAMAGES MAY BE MADE AGAINST YOU.
Your answers will be kept strictly confidential; however, by signing this Subscription Agreement, you will be authorizing the
Companies to present a completed copy of this Subscription Agreement to such parties as it may deem appropriate in order to make
certain that the offer and sale of the Common Stock will not result in a violation of the Securities Act of 1933, as amended, or
of the securities laws of any state.
This Subscription Agreement does not constitute an offer to sell or a solicitation of an offer to buy the Common Stock, or
any other security.
ALL QUESTIONS MUST BE ANSWERED. If the appropriate answer is "None" or "Not Applicable", please state so. Please print or
type your answers to all questions and attach additional sheets if necessary to complete your answers to any item. Please
initial any correction.
__________________________________________________________________________________________________________________________________
INDIVIDUAL SUBSCRIBERS:
If the Common Stock subscribed for is to be owned by more than one person, you and the other co-subscriber must each complete a
separate Subscription Agreement (except if the co-subscriber is your spouse and Statement B or C of Part I under Section IV below
has been checked) and sign the Signature Page annexed hereto. If your spouse is a co-subscriber, you must indicate his or her
name and social security number.
CORPORATIONS, PARTNERSHIPS, PENSION PLANS AND TRUSTS:
The information requested herein relates to the subscribing entity and not to you personally (unless otherwise determined in the
ACCREDITED INVESTOR STATUS section).
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IV. ACCREDITED INVESTOR STATUS
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IF YOU MEET ANY OF THE FOLLOWING TESTS, PLEASE CHECK THE APPROPRIATE SPACES BELOW.
I. INDIVIDUAL ACCOUNTS
I certify that I am an "accredited investor" because:
A. _______ I had an individual income of more than $200,000 in each of the two most recent calendar years, and I reasonably
expect to have an individual income in excess of $200,000 in the current calendar year.
B. _______ My spouse and I had joint income in excess of $300,000 in each of the two most recent calendar years, and we
reasonably expect to have a joint income in excess of $300,000 in the current calendar year.
C. _______ I have an individual net worth, or my spouse and I have a joint net worth, in excess of $1,000,000 (including
home and personal property).
For purposes of this Subscription Agreement, "individual income" means "adjusted gross income" as reported for Federal income
tax purposes, exclusive of any income attributable to a spouse or to property owned by a spouse and increased by the following
amounts: (i) the amount of any interest income received which is tax-exempt under Section 103 of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) the amount of losses claimed as a limited partner in a limited partnership (as reported on
Schedule E of form 1040), (iii) any deduction claimed for depletion under Section 611 et seq. of the Code and (iv) any amount by
which income from long-term capital gains has been reduced in arriving at adjusted gross income pursuant to the provisions of
Sections 1202 of the Internal Revenue Code as it was in effect prior to enactment of the Tax Reform Act of 1986.
For purposes of this Subscription Agreement, "joint income" means, "adjusted gross income," as reported for Federal income
tax purposes, including any income attributable to a spouse or to property owned by a spouse, and increased by the following
amounts: (i) the amount of any interest income received which is tax-exempt under Section 103 of the Code, (ii) the amount of
losses claimed as a limited partner in a limited partnership (as reported on Schedule E of Form 1040), (iii) any deduction
claimed for depletion under Section 611 et seq. of the Code and (iv) any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income pursuant to the provisions of Section 1202 of the Internal Revenue Code as it
was in effect prior to enactment of the Tax Reform Act of 1986.
For the purposes of this Subscription Agreement, "net worth" means (except as otherwise specifically defined) the excess of
total assets at fair market value, including home and personal property, over total liabilities, including mortgages and income
taxes on unrealized appreciation of assets.
II. CORPORATIONS, PARTNERSHIPS, EMPLOYEE BENEFIT PLANS OR IRAS
A. Has the subscribing entity been formed for the specific purpose of investing in the Common Stock? / / YES / / NO
If your answer to question A is "No" CHECK whichever of the following statements (1-5) is applicable to the subscribing entity.
If your answer to question A is "Yes" the subscribing entity must be able to certify to statement (B) below in order to qualify
as an "accredited investor".
The undersigned entity certifies that it is an "accredited investor" because it is:
1. _______ an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974,
provided that the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, and the plan
fiduciary is a bank, savings and loan association, insurance company or registered investment adviser; OR
2. _______ an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974
that has total assets in excess of $5,000,000; OR
3. _______ each of its shareholders, partners, or beneficiaries meets at least one of the following conditions described
above under INDIVIDUAL ACCOUNTS. Please also CHECK the appropriate space in that section; OR
(NOTE: INCOME STATEMENT MUST BE COMPLETED FOR EACH SHAREHOLDER, PARTNER OR BENEFICIARY)
4. _______ a self directed employee benefit plan and the investment decision is made solely by a person that meets at
least one of the conditions described above under INDIVIDUAL ACCOUNTS; OR
(NOTE: INCOME STATEMENT MUST BE COMPLETED FOR EACH SUCH PERSON)
5. _______ a corporation or a Massachusetts or similar business trust or partnership with total assets in excess of
$5,000,000.
B. If the answer to Question A above is "Yes", please certify the statement below is true and correct:
_______ The undersigned entity certifies that it is an accredited investor because each of its shareholders, partners
or beneficiaries meets at least one of the conditions described above under INDIVIDUAL ACCOUNTS. Please also CHECK the
appropriate space in that section.
III. TRUST ACCOUNTS
A. Has the subscribing entity been formed for the specific purpose of investing in the Common Stock? / / YES / / NO
If your answer to question A is "No" CHECK whichever of the following statements (1-3) is applicable to the subscribing entity.
If your answer to question A is "Yes" the subscribing entity must be able to certify to statement (3) below in order to qualify
as an "accredited investor".
The undersigned trustee certifies that the trust is an "accredited investor" because:
_______1) the trust has total assets in excess of $5,000,000 and the investment decision has been made by a "sophisticated
person" (i.e., a person who has such knowledge and experience in financial and business matters that he or she is capable
of evaluating the merits and risks of an investment in the Common Stock); OR
_______2) the trustee making the investment decision on its behalf is a bank (as defined in Section 3(a)(2) of the
Securities Act), a savings and loan association or other institution (as defined in Section 3(a)(5)(A) of the Securities
Act), acting in its fiduciary capacity; OR
_______3) the grantor(s) of the trust may revoke the trust at any time and regain title to the trust assets and has (have)
retained sole investment control over the assets of the trust and the (each) grantor(s) meets at least one of the conditions
described above under INDIVIDUAL ACCOUNTS. Please also CHECK the appropriate space in that section.
(NOTE: FOR EACH GRANTOR AN INCOME STATEMENT MUST BE COMPLETED)
<PAGE>
V. INCOME STATEMENT - (ROUND OFF TO THE NEAREST $5,000)
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Please specify the amount of your: / / Individual / / Joint / / Trust / / Beneficiary / / Shareholder / / Partner
income (defined in page 2: Accredited Investor Status) in calendar years 1996 and 1997 and your projected income for 1998.
1996 $_________________
1997 $_________________
1998 $_________________ (projected)
Current occupation (position or title and duties):
Name of Business: ___________________________________________
Name of Employer: ___________________________________________ Telephone number (_______) __________________ - ____________________
Former employment (if current employment is less than five years):
Name of Employer: ___________________________________________ Position or Title: _________________________________________________
Nature of Duties: ___________________________________________ Period Employed: ________________________ to _______________________
VI. INVESTMENT EXPERIENCE
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The following information is to be provided by the individual making the investment decision or the person acting on behalf of
the corporation, partnership, individual retirement account, employee benefit plan or trust.
1. Business or professional education (school, dates of attendance, degrees):
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
2. Details of any training or experience in financial, business or tax matters not disclosed in Item 1 immediately above:
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
3. Please indicate the frequency of your investment in marketable securities:
/ / Often / / Occasionally / / Seldom / / Never
4. Please state the approximate number and total dollar amount of the following types of investments in which you have
participated:
a. restricted (non-traded) stock or notes:
Number ___________________ Amount Invested: $ ___________________
b. private placements of securities sold in reliance upon non-public offering exemption from registration under the
Securities Act of 1933:
Number ___________________ Amount Invested: $ ___________________
5. Please initial the appropriate alternative:
_______ ALTERNATIVE ONE: I have such knowledge and experience in financial and business matters and in private placement
investments in particular that I am capable of protecting my interests in connection with the purchase of the Common Stock and
evaluating the merits and risks of an investment in the Common Stock and do not desire to use a professional advisor in
connection with protecting my interests and evaluating such merits and risks. I understand, however, that the Company may request
that I use a professional advisor.
_______ ALTERNATIVE TWO: I intend to use the services of a professional advisor(s) in connection with protecting my interests in
connection with the purchase of the Common Stock and evaluating the merits and risks of an investment in Common Stock and hereby
appoint such person(s) to act as my professional advisor(s) in connection with my proposed purchase of Common Stock. (PLEASE
CONTACT YOUR REGISTERED REPRESENTATIVE FOR FURTHER INSTRUCTIONS.)
Name of Professional Advisor If Alternative Two chosen:
______________________________________________________________ Telephone number (____________) ________________ - _______________
<PAGE>
VII. COVENANTS AND CERTIFICATIONS
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1. I certify that the information contained herein above is complete and accurate and may be relied on by the Companies.
I will notify the Companies promptly of any material change in any of such information.
2. Under penalties of perjury, I certify that (1) my taxpayer identification number shown in this Subscription Agreement
is correct and (2) I am not subject to backup withholding because (a) I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest and dividends or (b) the Internal Revenue Service has notified me
that I am no longer subject to backup withholding. (If you have been notified that you are subject to backup withholding and the
Internal Revenue Service has not advised you that backup withholding has been terminated, strike out item (2).)
BY SIGNING, I ACKNOWLEDGE THAT I HAVE CAREFULLY REVIEWED THE CONFIDENTIAL OFFERING MEMORANDUM REFERRED TO ABOVE, ESPECIALLY THE
SECTIONS ENTITLED "RISK FACTORS" AND "AVAILABLE INFORMATION," AND THE SUBSCRIPTION SUPPLEMENT, LOCKUP AND REGISTRATION RIGHTS
AGREEMENT AND AGREE TO BOUND BY THE TERMS OF THIS SUBSCRIPTION AGREEMENT AND THE SUBSCRIPTION SUPPLEMENT, LOCKUP AND REGISTRATION
RIGHTS AGREEMENT.
3. I certify that I am purchasing the Common Stock solely for my own account, not as a nominee or agent, and not for the
beneficial interest of any other person or with a view to or for resale in connection with any distribution of the Common Stock
or any grant of participations therein.
4. I certify that I am able to bear the economic risk of my investment in the Common Stock, have adequate means of providing
for my current needs and possible contingencies, and have no need for liquidity of my investment.
5. I have had a full and complete opportunity to (i) ask questions of, and receive answers from, the Companies' executive
officer concerning the terms and conditions of this offering, (ii) inspect all material contracts and documents relating to this
offering to which the Companies have access and (iii) obtain any additional information which the Companies possess or can
acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information contained in the
Confidential Offering Memorandum.
6. I agree to indemnify the Companies, [Placement Agent?] and their officers, directors and agents against all loss,
liability, costs and expenses (including reasonable attorneys' fees) arising as a result of any misrepresentation made by me in
this Subscription Agreement, my breach of this Subscription Agreement or my transfer of the Securities in violation of federal
and/or state securities laws.
7. I agree that the representations, certifications and agreements set forth in this Subscription Agreement shall
survive the purchase and delivery of the Common Stock.
8. Any disputes or controversies which may arise between the undersigned and the Companies concerning this subscription or
the Offering shall be submitted to arbitration in accordance with the Rules of the American Arbitration Association.
Notwithstanding the foregoing, if either the Companies or the undersigned is a party to a pending arbitration proceeding under
the Code of Arbitration Procedure of the National Association of Securities Dealers, Inc. ("NASD") arising as a result of the
Offering or the Common Stock, the undersigned agrees to consolidate his action with the pending arbitration, to the extent that
the NASD accepts jurisdiction of such action. Arbitration must be commenced by service upon the Companies of a written demand for
arbitration or a written notice of intention to arbitrate. Judgment upon any award rendered by the arbitrator(s) shall be final,
and may be entered in any court having jurisdiction. Any arbitration proceeding pursuant to this Agreement shall be determined
pursuant to the laws of the State of New York and the Rules of the American Arbitration Association or the Code of Arbitration
Procedure of the NASD, as applicable. The undersigned hereby submits to the in personam jurisdiction of the courts of the State
of New York and the federal courts located therein (and expressly waives any defense to personal jurisdiction of the undersigned
by such courts) for the purpose of confirming, vacating or modifying any such award or judgment entered thereon. To the extent
any controversy as above described is to be resolved in a court action, the undersigned expressly agrees that such action shall
be brought only in the Courts of the State of New York, in the City of New York, or the federal courts located therein and
service of process in such action shall be sufficient if served upon the undersigned by certified mail, return receipt requested,
at the undersigned's last address known to the Companies. THE UNDERSIGNED ACKNOWLEDGES THAT, BY AGREEING TO ARBITRATE ANY
DISPUTES OR CONTROVERSIES UNDER THIS AGREEMENT, THE UNDERSIGNED IS WAIVING THE RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY TRIAL. IN ADDITION, THE UNDERSIGNED IS AWARE THAT: (I) ARBITRATION IS FINAL AND BINDING ON THE PARTIES; (II)
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS; (III) THE ARBITRATORS' AWARD IS
NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAR OR TO SEEK MODIFICATION OF RULINGS BY
THE ARBITRATORS IS STRICTLY LIMITED; AND (IV) THE PANEL OF ARBITRATORS IN A PROCEEDING UNDER THE NASD CODE OF ARBITRATION WILL
TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
. . . . . . . . . . . . . . .
VIII. SIGNATURES
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THE SUBSCRIPTION AGREEMENT AND THE SUBSCRIPTION SUPPLEMENT, LOCKUP AND REGISTRATION RIGHTS AGREEMENT CONTAIN VARIOUS AGREEMENTS,
CERTIFICATIONS AND REPRESENTATIONS BY SUBSCRIBERS AND SHOULD BE CAREFULLY REVIEWED IN THEIR ENTIRETY BEFORE EXECUTING THIS
SIGNATURE PAGE. BY SIGNING, I ACKNOWLEDGE THAT I HAVE CAREFULLY REVIEWED THE CONFIDENTIAL OFFERING MEMORANDUM REFERRED TO ABOVE,
ESPECIALLY THE SECTIONS ENTITLED "RISK FACTORS" AND "AVAILABLE INFORMATION," AND THE SUBSCRIPTION SUPPLEMENT, LOCKUP AND
REGISTRATION RIGHTS AGREEMENT AND AGREE TO BOUND BY THE TERMS OF THIS SUBSCRIPTION AGREEMENT AND THE SUBSCRIPTION SUPPLEMENT,
LOCKUP AND REGISTRATION RIGHTS AGREEMENT, THE TERMS OF WHICH ARE INCORPORATED HEREIN.
THE UNDERSIGNED ACKNOWLEDGES AND AGREES TO ARBITRATE ANY DISPUTE OR CONTROVERSY ARISING AS A RESULT OF THIS SUBSCRIPTION
AGREEMENT, THE OFFERING OR ANY CONTROVERSY OR DISPUTE RELATED TO THE COMMON STOCK ISSUED IN THIS OFFERING, IN ACCORDANCE WITH
PARAGRAPH 8 OF SECTION VII HEREOF.
Dated _____________________________ , 1998
Print name of individual subscriber, custodian, Signature of individual subscriber, authorized person, trustee
corporation, trustee
_______________________________________________ ________________________________________________________________
Print name of co-subscriber, authorized person, Signature of co-subscriber, authorized person,
co-trustee if required by trust instrument co-trustee if required by trust instrument
_______________________________________________ ________________________________________________________________
INVESTMENT AUTHORIZATION. The undersigned corporation, partnership, benefit plan or IRA has all requisite authority to acquire
the Common Stock hereby subscribed for and to enter into the Subscription Agreement and further, the undersigned officer, partner
or fiduciary of the subscribing entity has been duly authorized by all requisite action on the part of such entity to execute
these documents on its behalf. Such authorization has not been revoked and is still in full force and effect.
Check Box: / / Yes / / No / / Not Applicable
<PAGE>
IX. NOTARIZATION
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STATE OF )
) ss.
COUNTY OF )
On ______________________, 199____, before me, _____________________________________________________, personally appeared
_________________________________________________________________________________________________________________________________,
/ / personally known to me / / proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________________________________
Signature of Notary
CAPACITY CLAIMED BY SIGNER:
/ / Individual(s) / / Attorney-In-Fact
/ / Partner(s) / / Subscribing Witness
/ / Trustee(s) / / Guardian/Conservator
/ / Corporate __________________________________ / / Other: _____________________________________
Officer(s) __________________________________ ____________________________________________
Title(s)
SIGNER IS REPRESENTING:
Name of Person(s) or Entity(ies): _______________________________________________________________________________________________
_________________________________________________________________________________________________________________________________
NOTARY: PLEASE FILL IN STATE, COUNTY, DATE AND NAMES OF ALL PERSONS SIGNING AND AFFIX NOTARIAL SEAL.
X. VERIFICATION OF ACCOUNT EXECUTIVE
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I state that I am familiar with the financial affairs and investment objectives of the investor named above and reasonably
believe that a purchase of the Common Stock is a suitable investment for this investor and that the investor, either individually
or together with his or her professional advisor, understands the terms of and is able to evaluate the merits of this offering. I
acknowledge:
(a) that I have reviewed this Subscription Agreement and the Subscription Supplement attached as Exhibit B to the
Confidential Offering Memorandum, and attachments (if any) thereto; and
(b) that the Subscription Agreement and attachments thereto have been fully completed and executed by the appropriate party.
Broker/Dealer Account Executive
_____________________________________________________ ______________________________________________________________
(Name of Broker/Dealer) (Signature)
_____________________________________________________ ______________________________________________________________
(Street Address of AE Office) (Print Name)
_____________________________________________________ ______________________________________________________________
(City of AE Office) (State) (Zip) (Representative I.D. Number)
(__________) __________________ - ___________________ ______________________________________________________________
(Telephone Number of AE Office) (Date)
</TABLE>
<PAGE>
Algiers Resources, Inc.
Balstron Corporation
Daliprint, Inc.
Hartscup Corporation
Mayall Partners, Inc.
PSLRA, Incorporated
Regal Acquisitions, Inc.
Spacial Corporation
Voyer One, Inc.
Voyer Two, Inc.
each a Delaware corporation
Offering of a Maximum of 2,250,000 Shares
of Common Stock, par value $0.001, at $0.25 per Share
PLACEMENT AGENT AGREEMENT
Dated as of December 16, 1998
Tradeway Securities Group, Inc.
19100 Von Karman Avenue
Suite 1000
Irvine, California 92612
Ladies and Gentlemen:
Algiers Resources, Inc., Balstron Corporation, Daliprint,
Inc., Hartscup Corporation, Mayall Partners, Inc., PSLRA, Incorporated, Regal
Acquisitions, Inc., Spacial Corporation, Voyer One, Inc., Voyer Two, Inc.
(each a "Company" and collectively the "Companies") were each formed as shell
corporations in early 1998 for purposes of merging with a company with an
operating business (a "Merger"), all as more fully described in that certain
Confidential Memorandum dated November 1, 1998 (references to which shall be
deemed to include any and all supplements and amendments thereto and all
financial statements and exhibits that are included therein, referred
collectively to herein as the "Memorandum").
Each Company desires to raise $56,250, through the offer
and sale of up to 225,000 shares of Common Stock, par value $0.001 (the
"Shares") of the Company, as more fully described in the Memorandum, in a
private offering (the "Offering"). A maximum of 225,000 Shares of each
Company (2,250,000 in the aggregate) may be sold in the Offering ("Maximum
Offering"). In addition, the Companies, at the request of a Placement Agent
may agree to allow the Placement Agents, as defined below, to sell up to
225,000 additional Shares of each Company to cover over-allotments. There is
a minimum investment of 2,000 Shares in each Company (20,000 in the
aggregate). An equal investment must be made in each Company.
The offer and sale of the Shares is being made in
accordance with the Memorandum. The Shares will not be registered under the
Securities Act of 1933, as amended (the "Securities Act") or any state
securities or "blue sky" laws and will be offered and sold in reliance upon
the exemptions afforded by Section 4(2) and of the Securities Act and Rule
506 of Regulation D promulgated thereunder and by similar exemptions afforded
by or preempted from the state securities or "blue sky" laws. The subscribers
for the Shares each of whom will be required to execute and deliver the
Subscription Agreement and the Subscription Supplement, Lock-up and
Registration Rights Agreement that accompanies the Memorandum (the
"Subscription Documents") will be issued the Shares (the "Investors").
Subsequent to the Offering, each Company anticipates that it
will file a Form 10 in an attempt to register each Company as public company
with the Securities and Exchange Commission, under Section 12(g) of
-1-
<PAGE>
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Companies may file one at a time or some or all at the same time. Some of the
Companies may attempt to file soon after the closing of the Offering, and
some at a later date, even possibly after a Merger. No assurance can be given
that the registration will be allowed by the regulatory authorities.
Subsequent to a Merger, each Company will use its best
efforts to file a Registration Statement ("Registration Statement") to
register the Common Stock of the Company under the Securities Act and to
include all shares of Common Stock of such Company sold in this offering in
the Registration Statement. However, holders of Common Stock purchased in the
Offering should not depend on such registration rights and may have to rely
on Rule 144 of the Securities Act to trade in the Common Stock (assuming a
Merger has occurred and the Company is a reporting Company in compliance
under the Exchange Act, which cannot be assured). Any liquidity at all is
still subject to the risks related to achievement of registration and a
Merger as described in detail in this Memorandum, especially the section
entitled "Risk Factors." Any registration rights of a holder of Common Stock
purchased in the Offering will expire at such time as all such holders'
Common Stock (other than affiliates of the Company) purchased in the Offering
is saleable pursuant to Rule 144 without volume limitations. Any and all
shares of Common Stock registered in a Registration Statement or otherwise
eligible for sale under Rule 144 will still be subject to the lock-up
provisions set forth below.
Prior to (i) the registration of a Company (ii)
consummation of a Merger and (iii) either the expiration of the relevant
holding period under Rule 144 promulgated pursuant to the Securities Act or
registration of the Common Stock, purchasers of the Common Stock in this
Offering may not sell, pledge, assign or otherwise transfer or hypothecate
any shares of Common Stock of the Company sold in this Offering. After such
registration and Merger, subject to restrictions under federal and state
securities laws, fifty percent (50%) of all Common Stock of the
merged-Company purchased in this Offering by each holder may not be sold
pledged, assigned or otherwise transferred or hypothecated for a period of
six (6) months from the closing of a Merger, and the remaining fifty percent
(50%) of the Common Stock of the merged-Company purchased in this Offering by
such holder will be similarly restricted for a period of twelve (12) months
from the Closing of a Merger unless otherwise agreed to by the Company (the
"Lock-up"). Mr. Prestiano, the sole stockholder of each Company has agreed to
restrict his shares of Common Stock in each Company pursuant to the same
provisions as the Lock-up subject to pro-rate release. All shares underlying
the Placement Agent Warrants, as defined below, are also subject to the
Lock-up on the same terms. In order to release any stockholder from the terms
of the Lock-up, all other stockholders must be proportionately released.
All capitalized terms not defined in this Agreement shall
have the meanings ascribed to them in the Memorandum.
Section 1. APPOINTMENT OF PLACEMENT AGENT AND TERMS OF OFFERING.
1.1 APPOINTMENT OF PLACEMENT AGENT. You are hereby invited
to become a Placement Agent ("Placement Agent") and by your confirmation of
this Agreement you agree to act in such capacity for the Offering during the
term of the Offering Period (as defined in Section 1.5 below) and to use your
best efforts to find purchasers for the Shares in accordance with the terms
and conditions set forth in this Agreement.
1.2 CO-PLACEMENT AGENTS. The Company may appoint one or
more registered broker-dealers who are members in good standing of the
National Association of Securities Dealers, Inc., ("NASD") or banks exempt
from broker-dealer registration to serve as co-Placement Agents with you.
1.3 SOLICITATION OF SUBSCRIPTIONS. You hereby agree to
solicit, as an independent contractor and not as an agent of the Company,
Investors acceptable to the Company in accordance with the terms of the
Memorandum and this Agreement.
1.4 SUBSCRIPTIONS.
1.4.1 SOLICITATION PROCEDURES. Each person
desiring to purchase Shares in the Offering shall be required to execute and
deliver to each Company the applicable Subscription Documents and a check in
the amount of $0.25 per Share for the amount purchased of each Company's
Shares made payable to each
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of "Algiers Resources, Inc.", "Balstron Corporation", "Daliprint, Inc.",
"Hartscup Corporation", "Mayall Partners, Inc.", "PSLRA, Incorporated",
"Regal Acquisitions, Inc.", "Spacial Corporation", "Voyer One, Inc.", "Voyer
Two, Inc." By way of example, if an Investor purchased the minimum
subscription of 2,000 Shares of each Company, the Investor must make a check
in the amount of $500 payable to each Company. You shall transmit each
investor's check and original Subscription Documents received by you to the
Companies care of the address listed on the Subscription Documents, retaining
a copy of each for your files. Each Company shall deposit the checks directly
in their respective corporate accounts.
1.4.2 ACCEPTANCE STANDARDS AND PROCEDURES. The
Companies will not consider any proposed subscription until all Subscription
Documents have been completed, signed and delivered. After receipt of all
required Subscription Documents with respect to an Investor, the Companies
will determine whether they wish to accept the offered subscription. No
subscriptions shall be effective unless and until accepted by the Companies.
Subscriptions for Shares will be accepted only from subscribers who meet the
investor suitability standards set forth in the Memorandum. The minimum
required purchase by any Investor shall be 2,000 Shares per Company (20,000
in the aggregate), subject to the right of the Companies in their sole
discretion to allow investment in a lesser amount. The Companies reserve the
right to reject any subscriptions and to allocate subscriptions received in
the event the Shares are oversubscribed.
1.4.3 REJECTION. Subscriptions may be rejected in
whole or in part by the Companies, provided the Companies must notify the
Placement Agent of the rejection of any subscription and return the to the
Placement Agent the funds previously received from the person whose
subscription was paid and the original Subscription Documents, within ten
(10) business days of the receipt of completed Subscription Documents. Should
the Companies determine to reject a subscription, you will promptly return
the Subscription Documents directly to the prospective purchaser and as well
as the funds previously received upon receipt of such documents from the
Companies.
1.5 OFFERING PERIOD. The "Offering Period" shall mean that
period during which any Shares are offered for sale, commencing on the date
upon which the Memorandum is initially delivered to the Companies for
distribution to Investors and continuing until the earlier of (a) the date on
which subscriptions for the maximum number of Shares are accepted or (b)
March 31, 1999, unless earlier terminated by the Companies, or unless further
extended for 120 days by mutual agreement of the Companies and any of the
Placement Agents, to time which the Company may extend the Offering without
further notice to the Investors (the "Termination Date").
1.6 CLOSINGS.
1.6.1 INITIAL CLOSING. If at any time during
the Offering Period, the Companies have accepted any subscriptions, the
subscribers may be admitted as Investors in an initial closing (the "Initial
Closing"). Upon the Initial Closing, the Companies shall remit to the Placement
Agent the commissions then due to the Placement Agent and deliver to each
Investor the certificates representing the Shares purchased by each Investor.
1.6.2 ADDITIONAL CLOSINGS. After the Initial
Closing, the Offering will continue, and the issuance of additional Shares to
subscribers in one or more additional closings ("Additional Closings") may occur
upon acceptance of subscriptions for additional Shares.
1.6.3 FINAL CLOSING. If at any time before the
Termination Date, subscriptions for the maximum number of Shares provided for
herein have been accepted (including subscriptions by the Companies, the
Placement Agent(s) or their affiliates), the subscribers shall be admitted to
the Company as Investors in a final closing (the "Final Closing"). The Companies
shall fix a date no later than ten days after the Termination Date on which the
Final Closing will take place (or, if the tenth day is not a business day, the
next business day) (the "Final Closing Date").
1.6.4 CLOSING CERTIFICATE. The Initial,
Additional and Final Closings will take place at the Companies' offices, or
at such other place as shall be mutually agreed upon by the Companies and
you. At each of the Initial Closing, any Additional Closing and the Final
Closing, you agree to deliver to the Companies
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if so requested by the Companies, a certificate stating (i) the number of
offerees in each of the jurisdictions designated on the blue sky memorandum
(the "Blue Sky Memorandum") delivered to you by the Companies, and (ii) that
your representations and warranties contained in Section 4 are true and
correct with the same effect as though expressly then made and that you have
complied with the covenants contained in Section 5.
1.7 DUE DILIGENCE. You agree to conduct your own
investigation to determine that all material facts upon which each person who
purchases the Shares might rely in making this investment decision have been
accurately and adequately disclosed in the Memorandum to the extent you deem
necessary.
1.8 COMPENSATION TO THE PLACEMENT AGENT. As compensation
for your services hereunder the Company agrees to cause the Company to pay to
you, as a selling commission, an amount equal to ten percent (10%) of the
gross offering proceeds for each Share sold through you, and reimbursement of
certain of your out of pocket expenses. All such compensation under this
Agreement shall be payable not later than ten (10) days following the closing
in which the Investor purchases the Shares. Also as compensation for your
services hereunder the Company agrees to cause the Company to pay to you, as
a selling commission, Placement Agent Warrants (the "Placement Agent
Warrants") to purchase the number of shares of Common Stock of each Company
equal to 30% of the number of Shares of each Company sold by you in the
Offering at an exercise price of $0.255 per share, not later than ten (10)
days following the closing in which the Investor purchasing the Shares is
admitted to the Companies. The Placement Agent Warrants shall be exercisable
for seven years following the completion of the Offering. The Placement Agent
Warrants shall provide for cashless exercise pursuant to which the holder of
the Placement Agent Warrants will receive upon exercise the number of Shares
otherwise issuable upon such exercise, less the number of Shares having an
aggregate Current Market Price on the date of exercise equal to the exercise
price per share multiplied by the number of Shares for which the Placement
Agent Warrants are being exercised and/or by delivery to the Company by the
holder of the Placement Agent Warrants the number of Shares having an
aggregate Current Market Price on the date of exercise equal to the exercise
price multiplied by the number of Shares for which the Placement Agent
Warrants are being exercised. For purposes of the Placement Agent Warrants,
the term "Current Market Price" shall mean (a) if the Shares are traded on
the Nasdaq National Market ("NNM") or on a national securities exchange, the
per share closing price of the Shares on the date of exercise of the
Placement Agent Warrants or (b) if the Shares are traded in the
over-the-counter market and not in the NNM or a national securities exchange,
the average of the per share closing bid prices of the Shares during the
thirty (30) consecutive trading days immediately preceding the date in
question, as reported by the Nasdaq SmallCap Market (or an equivalent
generally accepted reporting service if quotations are not reported on the
Nasdaq SmallCap Market). The closing price referred to in clause (a) above
shall be the last reported sale price or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices,
in either case in the NNM or on the principal stock exchange on which the
Shares are then listed. For purposes of clause (b) above, if trading in the
Shares is not reported by the Nasdaq SmallCap Market, the bid price referred
to in said clause shall be the lowest bid price as reported in the Nasdaq
Electronic Bulletin Board or, if not reported thereon, as reported in the
"pink sheets" published by National Quotation Bureau, Incorporated, and if
the Shares are not so reported, shall be determined by the price of a Share
determined by the Company's Board of Directors in good faith. In the event
that the Placement Agent Warrants have been exercised or remain outstanding
on the effective date of any initial public offering by the Company, the
Dealer Manager shall not be eligible to receive underwriter warrants as
compensation in connection with such initial public offering.
Each Company shall use its best efforts to register the
shares of Common Stock underlying the Placement Agent Warrants of such
Company in the Registration Statement filed by such Company subsequent to a
Merger; provided however, the shares of Common Stock of each Company
underlying the Placement Agent Warrants will be subject to the terms of the
Lock-up.
Payment of these commissions is subject to the following
conditions:
No commission will be payable with respect to any
subscriptions for the Shares which are rejected by the Companies; and
No commissions will be payable to you with respect to any
sale of Shares sold by you until such time as the Companies has received the
total proceeds of any such sale.
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No commissions will be payable with respect to transactions
in jurisdictions where such payments may not legally be made. You may waive
all your compensation in connection with any sales of Shares to you, the
Companies and certain officers, directors, employees or affiliates of you or
the Companies, and you in your discretion may waive all or a portion of your
compensation in connection with any sales of Shares to other purchasers with
whom the Companies or their affiliates have a business relationship.
In no event will the value of the total compensation exceed
the amount allowable in connection with the Companies' obtaining the benefits
of the exemptions from the qualification requirements of state securities
laws.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents, warrants and agrees with you for
your benefit that:
2.1 POWER AND AUTHORITY OF THE COMPANY. Each Company has
been duly organized and is validly existing and in good standing under the
laws of the State of Delaware, with full power and authority to conduct
business as described in the Memorandum. Complete and correct copies of the
Certificate of Incorporation and the Bylaws of each Company and all
amendments thereto have been delivered to you, and no changes therein will be
made subsequent to the date hereof and prior to the Final Closing Date.
2.2 VALIDITY OF ISSUANCE OF SECURITIES. The outstanding
common stock of each Company has been, and the Shares to be issued and sold
by the Companies pursuant to the Offering upon such issuance will be, when
paid thereto for as provided in the Memorandum and the Subscription
Documents, and the execution of all necessary or appropriate amendments or
supplements to, or certificates in connection with, duly authorized, validly
issued, fully paid and non-assessable, and will not be subject to any
preemptive or similar rights. Subscribers for the Shares shall have no
liability in excess of their respective capital contributions.
2.3 ADEQUACY OF THE MEMORANDUM. The \ Companies will have
prepared and delivered to you the Memorandum. The Memorandum does not, and on
any Closing Date will not, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. Every contract or other document
required by the Securities Act or any regulations promulgated thereunder (the
"Regulations") to be described in or attached as an exhibit to the Memorandum
or otherwise made available to Investors has been so described, attached or
made available.
2.4 DUE AUTHORIZATION AND ENFORCEABILITY OF THIS AGREEMENT.
This Agreement has been duly and validly authorized, executed and delivered
by or on behalf of each Company and constitutes the valid, binding and
enforceable agreement of such Company, except to the extent that (i) the
enforceability of this Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally or by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law), and (ii) the
indemnification provisions of this Agreement may be held to violate public
policy (under either state or federal law) in the context of the offer or
sale of securities.
2.5 NO MATERIAL ADVERSE CHANGE. Since the respective dates
as of which information is given in the Memorandum, there has not been any
material adverse change in the condition, financial or otherwise, of each
Company or in the earnings, affairs or business prospects of each Company.
2.6 ABSENCE OF LEGAL OR CONTRACTUAL CONFLICTS. The
execution and delivery of this Agreement by each Company, and the
consummation of the transactions contemplated in the Memorandum, will not, or
with the passage of time or the giving of notice would not, constitute a
breach of, default under or violation of (i) any statute, indenture,
mortgage, deed of trust, voting trust, note, lease or other agreement or any
instrument to which each Company is or will be a party or by which any of
them or their property is or will be bound, or (ii) any order, rule or
regulation applicable to each Company of any court or any governmental body
or administrative agency having jurisdiction over its properties or
businesses.
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2.7 GOVERNMENTAL CONSENTS. No consent, approval,
authorization or order of any court or governmental agency or body has been
or is required for the performance of this Agreement and the consummation of
the transactions contemplated in this Agreement or in the Memorandum by each
Company, except such as have been or are to be obtained under the state
securities or "blue sky" laws.
2.8 ADVERSE CLAIMS. There is not pending, threatened or
contemplated any action, suit or proceeding before or by any court or other
governmental body against each Company and no default exists in the due
performance and observance of any material obligation, term, covenant or
condition of any agreement or instrument to which each Company is or may be a
party, or by which it is bound that is not referred to in the Memorandum and
that might result in any material adverse change in the condition (financial
or otherwise), earnings, affairs or business or prospects of each Company or
might materially and adversely affect any of the assets of each Company.
2.9 LEGAL ACTIONS. There are no actions, suites or
proceedings pending, or to the Companies' knowledge, threatened against or
affecting the Companies or any of its respective officers in their capacity
as such, before or by any Federal or state court, commission, regulatory
body, administrative agency or other governmental body, domestic or foreign,
wherein an unfavorable ruling, decision or finding might materially and
adversely affect the Companies or its respective business, properties,
business prospects, condition (financial or otherwise) or results of
operations taken as a whole.
2.10 INVESTMENT COMPANY. On the date hereof and, each
Closing Date, each Company is not and will not be an investment company as
that term is defined in the Investment Company Act of 1940.
2.11 NO OFFERS. No offer, offer to sell, offer for sale,
sale or attempt to dispose of any Shares to any person has been made prior to
the Offering Period upon the authority of each Company.
2.12 ACCURACY OF REPRESENTATIONS. No statement,
representation, warranty or covenant made by the Companies in this Agreement
or made in any certificate or document required by this Agreement to be
delivered to you was or will be, when made, inaccurate, untrue or incorrect
in any material respect.
Section 3. COVENANTS OF THE COMPANIES.
The Companies covenant with you as follows:
3.1 AMENDMENT OF MEMORANDUM. Promptly upon the occurrence
of any event which would cause the Memorandum to include during the Offering
Period an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading, the Companies
will promptly notify you of the event. The Companies will within a reasonable
period of time prepare and furnish to you such number of copies as you may
request of an amendment or amendments of, or a supplement or supplements to,
the Memorandum (in form and substance satisfactory to you) which will amend
or supplement the Memorandum so that as amended or supplemented it shall not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading.
3.2 COMPLIANCE WITH SECURITIES LAWS. The Companies will use
their best efforts to cause the sale of the Shares to take place in a manner
that will permit reliance upon Regulation D promulgated under the Securities
Act and will file the required Form D in a timely fashion. The Companies will
use its best efforts to secure exemptions from qualification or registration
of the Shares or preemption under the securities or "blue sky" laws of such
states in which it advises you in writing that the Shares may be offered, and
will make such applications, file such documents, and furnish such
information as may reasonably be required for that purpose.
3.3 DUE DILIGENCE INQUIRY. Upon request by you, the
Companies will make reasonable effort to furnish you information necessary in
your judgment, or in the judgment of your counsel, to confirm the continued
fairness, accuracy and completeness of the Memorandum in all material
respects during the Offering Period.
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3.4 REPORTS AND OTHER INFORMATION. The Companies will, as
long as any Shares may remain outstanding, furnish directly to you one (1)
copy of each report furnished to Investors at the time such report is
furnished to the Investors.
3.5 DELIVERY OF SALES MATERIAL. The Companies will deliver
to you, from time to time, all sales material (whether designated solely for
broker-dealer use or otherwise) proposed to be used or delivered in
connection with the offering of the Shares.
3.6 LIMITED LIABILITY AND COMPANY STATUS. The Companies
will take all steps necessary to preserve, to the extent possible, the
limited liability of the Investors and their status as corporations.
3.7 NOTIFICATION OF CHANGES. The Companies will notify you
promptly of any change having or which is likely to have a material adverse
change in the condition (financial or otherwise), earnings, affairs or
business or prospects of each Company or might materially and adversely
affect any of the assets of each Company relating to any of the Companies'
representations, warranties, covenants or agreements contained herein that
occurs at any time prior to the Final Closing.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT.
You hereby represent, warrant and agree with the Companies
for their benefit that:
4.1 CORPORATE POWER AND AUTHORITY. You have been duly
incorporated and are validly existing as a corporation in good standing under
the laws of the State of your incorporation, with all requisite corporate
power and authority to conduct your business and to perform the obligations
contemplated herein.
4.2 DUE AUTHORIZATION AND ENFORCEABILITY OF THIS AGREEMENT.
This Agreement has been duly and validly authorized, executed and delivered
by you or on your behalf and constitutes your valid, binding and enforceable
agreement, except to the extent that (i) the enforceability of this Agreement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally or by general
principles of equity (regardless of whether such enforcement is considered in
a proceeding in equity or at law), and (ii) the indemnification provisions of
this Agreement may be held to violate public policy (under either state or
federal law) in the context of the offer or sale of securities.
4.3 ABSENCE OF LEGAL OR CONTRACTUAL CONFLICTS. Your
execution and delivery of this Agreement, and the performance of your
obligations thereunder, will not result in a violation of, be in conflict
with or constitute a default under any agreement or instrument to which you
are a party or by which you or your properties are bound, or any judgment,
decree, order or, to your knowledge, any statute, rule or regulation
applicable to you.
4.4 ADEQUACY OF THE MEMORANDUM. The information contained
in the Memorandum relating to you, if any, is complete and correct and does
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading.
4.5 BROKER-DEALER QUALIFICATIONS. You are (and will
continue to be during the term of this Agreement) a member in good standing
of the NASD and agree to abide by the Rules of Fair Practice of such
association. You are properly registered or licensed as a broker or dealer
under applicable federal and state securities laws and regulations. You, your
affiliates, and your or their officers and directors (or any other person
serving in a similar capacity) have not taken or failed to take any act, and
are not subject to any order or proceedings, that would make unavailable any
limited offering exemption from registration or qualification requirements of
state securities laws.
4.6 NO DISQUALIFICATIONS. Neither you nor any of your
directors, officers, predecessors or agents nor any beneficial owner of 10%
or more of any class of your equity securities, nor any of their respective
affiliates (nor any other person serving in a similar capacity):
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Has been convicted within ten years prior to the date
hereof of any crime or offense involving the purchase or sale of any
security, involving the making of a false statement with the Securities and
Exchange Commission (the "SEC"), or arising out of such person's conduct as
an underwriter, broker, dealer, municipal securities dealer or investment
adviser;
Is subject to any order, judgment or decree of any court of
competent jurisdiction temporarily or preliminarily enjoining or restraining,
or is subject to any order, judgment, or decree of any court of competent
jurisdiction, entered within five years prior to the date hereof, permanently
enjoining or restraining such person from engaging in or continuing any
conduct or practice in connection with the purchase or sale of any security,
involving the making of a false filing with the SEC, or arising out of the
conduct of the business of an underwriter, broker, dealer, municipal
securities dealer or investment adviser;
Is subject to an order of the SEC entered pursuant to
section 15(b), 15B(a), or 15B(c) of the Exchange Act; or is subject to an
order of the SEC entered pursuant to section 203(e) or (f) of the Investment
Advisers Act of 1940;
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 constituting conduct inconsistent with just and equitable
principles of trade;
Is subject to a United States Postal Service false
representation order entered within fivprior to the date hereof; or is
subject to a restraining order or preliminary injunction entered under
section 3007 of title 39, United States Code, with respect to any conduct
alleged to constitute postal fraud;
Has been or has been named as an underwriter of any
securities 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 hereof;
Has been or has been named as an underwriter of any
securities covered by any filing which is subject to any pending proceeding
under Rule 261 or any similar Rule adopted under section 3(b) of the
Securities Act, or to an order entered thereunder within five years prior to
the date hereof;
Has taken or failed to take any other act, or are subject
to any other order or proceedings, that would make unavailable any limited
offering exemption from registration or qualification requirements of federal
or state securities laws;
Has filed a registration statement that is the subject of a
currently effective stop order entered pursuant to any state's securities law
within five years prior to the date hereof;
Has been convicted within five years prior to the date
hereof of any felony or misdemeanor in connection with the offer, purchase or
sale of any security or any felony involving fraud or deceit, including but
not limited to forgery, embezzlement, obtaining money under false pretenses,
larceny or conspiracy to defraud;
Is currently subject to any state administrative
enforcement order or judgment entered by that state's securities
administrator within five years prior to the date hereof or is subject to any
state's administrative enforcement order or judgment in which fraud or
deceit, including but not limited to making untrue statements of material
facts and omitting to state material facts, was found and the order or
judgment was entered within five years prior to the date hereof;
Is subject to any state's administrative enforcement order
or judgment that prohibits, denies or revokes the use of any exemption from
registration in connection with the offer, purchase or sale of securities; or
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Is currently subject to any order, judgment or decree of
any court of competent jurisdiction temporarily or preliminarily restraining
or enjoining, or is subject to any order, judgment or decree of any court of
competent jurisdiction permanently restraining or enjoining, such party from
engaging in or continuing any conduct or practice in connection with the
purchase or sale of any security or involving the making of any false filing
with the state entered within five years prior to the date hereof.
Section 5. COVENANTS OF THE PLACEMENT AGENT.
You covenant with the Companies as follows:
5.1 DELIVERY OF OFFERING MATERIALS. You or a person acting
on your behalf shall furnish to each offeree, concurrently with making an
offer to such offeree (and its purchaser representative, if such a
representative has been selected), a numbered copy of the Memorandum, as it
may have been amended or supplemented by the Companies, and shall maintain
adequate records of each person to whom a Memorandum has been delivered.
Neither you nor any of your agents will give any information or make any
representation with respect to the Companies or its business or affairs other
than the information or representations contained in the Memorandum or any
sales literature authorized for use in connection with the Offering, or such
other information as is specifically authorized by the Companies.
5.2 CONDUCT OF SOLICITATION. You or a person acting on your
behalf will cause each person interested in acquiring Shares to complete and
execute the Subscription Documents (copies of which is included in the
Memorandum) in order to enable the Companies to determine whether such person
is qualified to acquire Shares. You will not execute any Subscription
Documents for any person and will not invest in the Shares through any
person's discretionary trading account without the written approval of such
person. You will abide by, and take reasonable precautions to insure
compliance with, all provisions contained in the Memorandum and THE SELLING
AGREEMENT regulating the terms and manner of conducting the Offering.
5.3 COMPLIANCE WITH FEDERAL SECURITIES LAWS. You will
comply with all applicable requirements of the Securities Act and the rules
and regulations promulgated thereunder, including Regulation D. Specifically,
but without limitation, neither you nor any person acting on your behalf will
offer the Shares by means of any form of general solicitation or general
advertising nor to any person or entity unless you or your licensed personnel
have a substantial pre-existing business relationship with such person or
entity. No advertisement, article, notice or other communication regarding
the Offering will be published by you in any newspaper, magazine or similar
medium or broadcast over television or radio. Neither you nor any of your
agents will sponsor, hold or participate in any seminar or meeting regarding
the Offering at which the persons attending have been invited by any general
solicitation or general advertising. You and any person acting on your behalf
will make offers of the Shares only to persons whom you and your agents have
reasonable grounds to believe and do believe: (a) have such knowledge and
experience in business and financial matters (either alone or together with a
purchaser representative) that they are capable of evaluating the merits and
risks of the prospective investment and of protecting their own interests in
connection with the transaction and (b) meet the investor suitability
requirements contained in the Memorandum. You and any person acting on your
behalf will cooperate with the Companies so that the Shares are sold only to
"accredited investors" as such term is defined in Rule 501 of Regulation D
and you and your agents will exercise reasonable care to ensure that a
purchaser is not an underwriter within the meaning of Section 2(11) of the
Securities Act.
5.4 COMPLIANCE WITH BLUE SKY LAWS. You will comply with all
applicable requirements of any state securities or "blue sky" law or rule or
regulation promulgated thereunder. You will not offer or sell any of the
Shares in any jurisdiction (i) prior to receiving written instructions from
the Companies that offers may be made in such jurisdiction and (ii) except in
compliance with all applicable securities or "blue sky" laws and in
accordance with the Blue Sky Memorandum. With respect to any state which
limits the number of offers and sales which may be made, you shall offer for
sale no more than such number of Shares as we may advise you may be offered
and/or sold.
5.5 MAINTENANCE OF RECORDS. You will retain in your records
and make available to the Companies, for a period of at least five years,
information establishing that each person who purchases the Shares pursuant
to a Subscription Documents solicited by you is within the permitted class of
investors under the
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requirements, if any, of the jurisdiction in which such purchaser is a
resident and the suitability standards set forth in the Memorandum and the
Subscription Documents.
Section 6. COMPANY'S CERTIFICATES.
At the Final Closing Date and any Initial or Additional
Closing Date, you shall have received a certificate signed by an officer of
each Company on behalf of such Company to the effect that (i) the signer has
carefully examined the Memorandum and, in the signer's opinion, at all times
from the time the Memorandum was initially delivered to you for distribution
to investors the Memorandum did not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) since the date the Memorandum was initially delivered to
you for distribution to investors, no event has occurred which should have
been set forth in an amendment of or supplement to the Memorandum but which
has not been so set forth; (iii) no proceedings have been instituted or
threatened by the Commission or any blue sky agency with respect to the
Offering; and (iv) the representations and warranties contained in Section 2
are true and correct with the same effect as though expressly then made and
the Company has complied with the covenants contained in Section 3.
Section 7. INDEMNIFICATION.
7.1 BY THE COMPANY. The Companies will indemnify and hold
harmless you and each person, if any, who controls you within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which you or such controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the Memorandum, or in any related sales material (whether
designated solely for broker-dealer use or otherwise) which the Companies or
any respective officer thereof authorizes in writing for use by you or any
Placement Agent, or arise out of or are based upon the omission or alleged
omission to state therein any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that none of such persons will be liable to indemnify you or such a
controlling person thereof pursuant to this Section 7.1 to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
any of them by you specifically for use in the Memorandum or sales material;
and will reimburse you and each such controlling person for any legal or
other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
the foregoing provisions of this Section 7.1, the Companies shall not
indemnify you or any person, if any, who controls you within the meaning of
the Securities Act, for losses, liabilities or expenses arising from or out
of an alleged violation of federal or state securities laws unless (i) there
has been a successful adjudication on the merits of each count involving
alleged securities law violations by the particular indemnitee not caused by
materials supplied by the Companies or (ii) such claims have been dismissed
with prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee or (iii) a court of competent jurisdiction approves the
settlement of the claims against the particular indemnitee. In any claim
against a Company for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court
the position of the SEC, the Massachusetts Securities Division, the Tennessee
Securities Division and any other states that may require it with respect to
the issue of indemnification for securities law violations.
7.2 BY THE PLACEMENT AGENT. You will indemnify and hold
harmless each Company and each other person who controls each Company within
the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Memorandum, or any related sales material which the
Companies authorize in writing for use by you, or arise out of or are based
upon the omission or the alleged omission to state therein any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Companies by you
specifically for use therein and (ii) any breach by you or any Placement
Agent of any representation, warranty or covenant contained in this
Agreement, provided that you or
-10-
<PAGE>
any Placement Agent shall be liable under this Section 7.2 only to the extent
that such losses, claims, damages or liabilities result from any action or
inaction by you. You will reimburse any legal or other expenses reasonably
incurred by the Companies or any controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided that you shall reimburse any such legal or other expenses in
connection with investigating or defending any such loss, claim, damage,
liability or action only to the extent that such loss, claim, damage or
liability results from any action or inaction caused by you.
7.3 NOTIFICATION. Promptly after receipt by an indemnified
party under this Section 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 7, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 7. In case any such
action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation.
Section 8. TERMINATION OF THIS AGREEMENT.
8.1 RIGHT OF TERMINATION. You or the Companies shall have
the right to terminate this Agreement at any time.
8.2 NOTICE. If you elect to terminate this Agreement as
provided in this Section 8, the Companies shall be notified promptly by you
pursuant to Section 9 of this Agreement. If the Companies elect to terminate
this Agreement as provided in this Section 8, you shall be notified promptly
by the Companies or pursuant to Section 9 of this Agreement.
8.3 LIABILITY OF PARTIES. All representations, warranties
and indemnification agreements contained in this Agreement shall remain
operative and in full force and effect, regardless of any termination
pursuant to Section 8.1, and shall survive the Final Closing Date.
Section 9. MISCELLANEOUS PROVISIONS.
9.1 NOTICES. All notices provided for by this Agreement
shall be made in writing either (i) by actual delivery of the notice to the
parties thereunto entitled or (ii) by the mailing of the notice in the United
States mails to the address, as stated below (or at such other address as may
have been designated by written notice), of the party entitled thereto, by
certified or registered mail, return receipt requested. The notice shall be
deemed to have been received in case (i) on the date of its actual receipt by
the party entitled thereto and in case (ii) on the date of deposit in the
United States mail.
All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to you, shall be
mailed or delivered to:
c/o James A. Prestiano
The Law Office of James A. Prestiano, Esq.
317 Madison Avenue, Suite 2310
New York, NY 10017
9.2 PARTIES. This Agreement shall inure to the benefit of
and be binding upon you, the Companies and each of your and the Companies'
respective successors and legal representatives. Except as otherwise set
forth in this Section, nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this
-11-
<PAGE>
Agreement, or any provision herein contained. No purchaser of Shares will be
deemed a successor because of such purchase.
9.3 APPLICABLE LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
9.4 ARBITRATION. You and the Companies agree that any
controversy arising out of or relating to this Agreement of the Offering
contemplated hereby shall be settled by arbitration in New York, New York, in
accordance with the rules then in effect for the NASD.
9.5 MULTIPLE COUNTERPARTS. This Agreement may be executed
in a number of identical counterparts, each of which shall be deemed to be an
original, but all of which constitute, collectively, one and the same
Agreement; but in making proof of this Agreement, it shall not be necessary
to produce or account for more than one such counterpart.
9.6 MODIFICATION OR AMENDMENT. This Agreement may not be
modified or amended except by written agreement executed by the parties
hereto.
9.7 OTHER INSTRUMENTS. The parties hereto covenant and
agree that they will execute such other and further instruments and documents
as are or may become necessary or convenient to effectuate and carry out this
Agreement.
9.8 VALIDITY. Should any portion of this Agreement be
declared invalid and unenforceable, then such portion shall be deemed to be
severable from this Agreement and shall not affect the remainder of this
Agreement.
9.9 CAPTIONS. The captions used in this Agreement are for
convenience only and shall not be construed in interpreting this Agreement.
9.10 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties and supersedes any prior understandings or
written or oral agreements between them respecting the subject matter hereof.
-12-
<PAGE>
If the foregoing is in accordance with our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement among you and the
Company in accordance with its terms.
Very truly yours,
ALGIERS RESOURCES, INC.
By:\s\ James A. Prestiano
-----------------------------------
James A. Prestiano, President
BALSTRON CORPORATION DALIPRINT, INC.
By:\s\ James A. Prestiano By:\s\ James A. Prestiano
----------------------------------- -----------------------------------
James A. Prestiano, President James A. Prestiano, President
HARTSCUP CORPORATION MAYALL PARTNERS, INC.
By:\s\ James A. Prestiano By:\s\ James A. Prestiano
----------------------------------- -----------------------------------
James A. Prestiano, President James A. Prestiano, President
PSLRA, INCORPORATED REGAL ACQUISITIONS, INC.
By:\s\ James A. Prestiano By:\s\ James A. Prestiano
----------------------------------- -----------------------------------
James A. Prestiano, President James A. Prestiano, President
SPACIAL CORPORATION VOYER ONE, INC.
By:\s\ James A. Prestiano By:\s\ James A. Prestiano
----------------------------------- -----------------------------------
James A. Prestiano, President James A. Prestiano, President
VOYER TWO, INC.
By:\s\ James A. Prestiano
-----------------------------------
James A. Prestiano, President
-13-
<PAGE>
Confirmed and Accepted as of the date first above written:
Tradeway Securities Group, Inc.
- --------------------------------------
Print Firm Name
By:\s\ Robert M. Guiltinar
-----------------------------------
Robert M. Guiltinar
- --------------------------------------
Print Name
C.F.O./Secretary
- --------------------------------------
Print Title
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS, AND STATEMENTS OF CASH
FLOWS FOR THE COMPANY, AS PREPARED BY THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> OTHER 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> OCT-06-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 100 35,118
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,488 36,531
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 6,488 36,531
<CURRENT-LIABILITIES> 3,126 5,281
<BONDS> 0 0
0 0
0 0
<COMMON> 2,020 2,170
<OTHER-SE> 1,342 29,080
<TOTAL-LIABILITY-AND-EQUITY> 6,488 36,531
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,238 3,612
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,238) (3,612)
<EPS-BASIC> (0.001) (0.002)
<EPS-DILUTED> (0.001) (0.002)
</TABLE>
