SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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eSAFETYWORLD, Inc.
(Name of Small Business Issuer in Its Charter)
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Nevada 44290 11-3496415
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code Number)
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(Address and Telephone Number of Executive Offices)
Edward A. Heil
100-31 South Jersey Avenue
Setauket, New York 11733
212-894-3797, ext. 1042
Facsimile- (212) 208-3082
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
Steven W. Schuster, Esq. Gregory Sichenzia, Esq.
McLaughlin & Stern, LLP Sichenzia, Ross & Friedman LLP
260 Madison Avenue 135 West 50th Street, 20th Floor
New York, NY 10016 New York, New York 10020
Telephone - 212-448-1100 Telephone - (212) 664-1200
Facsimile - 212-448-0066 Facsimile - (212) 664-7329
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
| |
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. | |
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to Be Proposed Offering Proposed Aggregate Amount of
Securities to Be Registered Registered Price per Share (1) Offering Price (1) Registration Fee
Shares of common stock, $.001 par 1,150,000 $ 7.00 $8,050,000 2,237.90
value ("common stock") (2)
Underwriter's Warrant (3) 1 $ .001 $ 100 .28
Shares of common stock underlying 100,000 $10.50 $1,050,000 291.90
Underwriter's Warrant
Total Registration Fee 2,530.08
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Includes 150,000 shares of common stock which may be purchased by the
underwriter to cover over-allotments, if any.
(3) Represents warrant granted to the underwriter to acquire an aggregate
of 100,000 shares of common stock at an exercise price equal to 150% of the
price to the public in this Offering.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE. ================================================================
CROSS REFERENCE SHEET
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ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
1. Forepart of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover and Outside Back Cover of Prospectus
of Prospectus
3. Summary Information; Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page; Cover Page Notes, Underwriting
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Promoters Management
and Control Persons
11. Security Ownership of Beneficial Owners Principal Shareholders
and Management
12. Description of Securities to be Registered Cover Page; Description of Securities
13. Interest of Named Experts and Counsel Experts
14. Disclosure of Commission's Position Indemnification
on Indemnification for Securities Act Liabilities
15. Information with Respect to the Registrant Prospectus Summary; Risk Factors; Management;
Description of Securities; Business; Executive
Compensation and Financial Statements
16. Management's Discussion and Analysis or Management's Discussion and Analysis of Financial
Plan of Operation Condition and Results of Operations
17. Description of Property Not Applicable
18. Certain Relationships and Related Certain Relationships and Related Transactions.
Transactions
19. Market for Common Equity and Outside Front Cover
Related Stockholder Matters
20. Executive Compensation Management
21. Financial Statements Financial Statements
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Subject to Completion Preliminary Prospectus dated September 2, 1999.
PROSPECTUS
eSAFETYWORLD, INC.
1,000,000 SHARES OF COMMON STOCK
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eSAFETYWORLD, Inc.: The Offering:
C eSAFETYWORLD is developing a C eSAFETYWORLD is offering 1,000,000
business-to-business e-commerce site on the Internet shares of common stock through Kashner Davidson
to sell disposable garments and equipment used in Securities, Corp.
controlled environments or workplaces exposed to
environmental hazards. C The underwriter has an option to
C eSAFETYWORLD, 100-31 S. Jersey Avenue, , purchase an additional 150,000 shares from
Setauket, New York 11733 (212)894 3797 eSAFETYWORLD to cover any over-allotments.
C Proposed Nasdaq SmallCap Market Symbol: SFTY C We intend to use the offering proceeds
for marketing, development, repayment of debt,
C Proposed Boston Stock Exchange Symbol: SFT working capital and other general corporate
purposes.
Per Share Total
Public offering price $7.00 $7,000,000
Underwriting discounts and commissions $0.70 $ 700,000
Proceeds, before expenses, to eSAFETYWORLD $6.30 $6,300,000
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The investment involves risk. See "Risk Factors" beginning on page 6.
Neither the SEC nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense. The information in
this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the SEC is effective.
This prospectus is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the offer or sale
is not permitted.
KASHNER DAVIDSON SECURITIES CORP.
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TABLE OF CONTENT
Page
Prospectus Summary 3
Risk Factors 9
Use of Proceeds 19
Dividend Policy 20
Dilution 21
Capitalization 22
Selected Financial Information 23
Management's Discussion and Analysis of Results of
Operations and Financial Condition 25
Business 29
Management 41
Certain Relationships and Related Transactions 43
Principal Shareholders 44
Description of Securities 45
Indemnification of Officers and Directors 46
Underwriting 47
Legal Matters 49
Experts 49
Additional Information 50
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Before making an investment decision, you should read the entire
prospectus carefully, including the consolidated financial statements and
related notes, in order to understand our business and this offering fully.
References in this prospectus to "eSAFETYWORLD," "We," "Our," and "Us"
refer to eSAFETYWORLD, Inc., a Nevada corporation. Unless otherwise indicated,
all references to dollar ($) amounts are to U.S. dollars.
eSAFETYWORLD
Our business
eSAFETYWORLD, Inc. sells disposable garments and equipment to companies
involved in production or other activities that must be done in a controlled
environment or whose employees are exposed to environmental hazards. Our goal is
to develop and operate a business-to-business e-commerce site on the world wide
web in order to sell our products. We believe that the Internet offers
significant opportunities in the areas of e-commerce, including the ability to
reach a large potential market without the need for significant advertising
expenditures.
Our market
We have identified two initial market niches: controlled environmental
facilities and industrial safety and hazardous work sites:
Controlled environment facilities - A clean room is a specially
designed room in which particulate presence and environmental conditions are
carefully maintained. Clean rooms are operated and maintained under strict
procedures to minimize the risk of introducing foreign particles. The
semiconductor market is the largest market for clean rooms and other
contamination control products. eSAFETYWORLD sells a large variety of disposable
items, such as hats, coats, boots and gloves, that are used in cleanroom
facilities. We focus on the sale of disposable items because they are generally
regularly reordered by customers.
Industrial safety and hazardous worksites - Products will be sold to
"end users," including manufacturing companies and service businesses, public
utilities, fisheries, pharmaceutical plants, the transportation industry and
companies whose employees are exposed to hazardous materials. Use of these
products has increased partly from the adoption of OSHA and other governmental
safety standards and the awareness of industry and the genera public for the
need to provide worker protection against hazardous materials contained in
industrial facilities, schools and buildings. These products include coveralls,
shirts, pants, headwear, hoods, aprons, smocks, lab costs, hazardous material
handler suits, examination gowns, sleeves, shoe covers and related items. Many
of these products are disposable and, therefore, offer the same benefits as do
disposable cleanroom products.
Our growth strategy
Our business model is designed to take advantage of the Internet as a
selling medium. Our goal is to use well developed Internet technology and not
incur significant expenditures for technological research and development.
We have identified several ancillary market niches for future
expansion, all of which appear to have the same attributes as eSAFETYWORLD's
initial market niches. The identified niches include products serving the
hospital, plumbing supply, construction and HVAC industries. These product areas
include disposable/limited use protective industrial garments, specialty safety
and industrial work gloves, reusable woven industrial and medical apparel, fire
and heat protective clothing, along with protective systems for personnel, and
suits for use by toxic waste clean up teams.
Our market opportunity
Our strategic plan is to become an Internet seller for a wide array of
available industrial safety and environmental products. We seek to be the
Internet independent sales representative for the industries that we serve and
will serve. To do this, fixed costs must be kept low to improve operating
leverage. The principal advantage of our use of the Internet as a selling
vehicle is the ability to do so without incurring significant levels of fixed
costs or maintaining inventory.
The Department of Commerce has projected that business-to-business
e-commerce revenues will increase from $8 billion in 1997 to $326 billion in
2002 (see The Emerging Digital Economy published in 1998). We believe that
products that are well received or sold through traditional printed catalogs are
well suited for sale on the Internet.
Our history
We were incorporated under the laws of Nevada in February 1997 under
the name The SL Group, Inc. In August, 1999, we changed our name to
eSAFETYWORLD, Inc. Our offices are located at 100-31 South Jersey Avenue,
Setauket, New York 11733, and our telephone number is (212) 894-3797.
In August 1999, we acquired from the distribution division of Laminaire
Corporation its business and intangible assets such as customer lists and vendor
lists. This division, which has been in operation for more than twenty years,
provides us with an important entree to the vendors and customers of a targeted
industry niche. The division sells disposable/limited use apparel, hoods,
gloves, packaging and flooring material, monitoring devices, electrostatic
devices, furnishings, wipers, and swabs as a distributor to a wide variety of
midsized and small companies.
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The offering
Securities offered 1,000,000 shares
Common stock outstanding
prior to offering 2,000,000 shares
Common stock to be outstanding
after Offering 3,000,000 shares
Use of proceeds The net proceeds from the sale of the shares are
estimated to be approximately $5,890,000 deducting
commissions and expenses of the offering, which are
estimated at $1,110,000. We intend to use the net
proceeds of this offering for
C marketing, working capital
C general corporate purposes
Risk factors The shares that we are offering are
C speculative
C involve a high degree of risk
C subject to immediate substantial dilution
C the shares should be considered only by
investors who can afford to sustain a loss of their
entire investment.
Proposed Nasdaq SmallCap symbol SFTY
Proposed Boston Stock Exchange SFT
symbol
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The proposed trading symbols does not imply that a liquid and active
market will be developed or sustained for the securities upon completion of this
offering.
Our calculation that 3,000,000 shares of common stock will be
outstanding after this offering is based on the 2,000,000 shares of common stock
outstanding prior to the offering and 1,000,000 shares of common stock being
sold by us in this offering. The shares of common stock to be outstanding after
this offering excludes:
C 150,000 shares of common stock subject to the underwriter's
over-allotment option.
C 100,000 shares of common stock issuable upon the exercise of the
underwriter's warrants.
C 500,000 shares of common stock reserved for issuance pursuant to our 1999
Stock Option Plan.
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Summary Financial Information
The selected financial data set forth below at June 30, 1999 is derived
from and should be read in conjunction with eSAFETYWORLD's financial statements,
including the notes thereto, appearing elsewhere in this prospectus.
The selected financial data for the Cleanroom Distribution Product
Group of Laminaire Corporation for the years ended December 31, 1998 and 1997 is
derived from and should be read in conjunction with the Group's financial
statements, including the notes thereto, appearing elsewhere in this prospectus.
The summary financial data for the Group set forth below for the interim periods
ended June 30, 1999 and 1998 has been prepared from the Group's books and
records and reflects, inn out opinion, all adjustments necessary for a fair
presentation of the results of operations of the Group for the periods indicated
therein. Results for interim periods are not necessarily indicative of results
which can be expected for the entire year.
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eSAFETYWORLD(1):
6/30/99 6/30/99 6/30/99
(as adjusted)(2) (as further adjusted)(3)
Current assets -------- $375,000 $5,950,000
Total assets $10,000 1,735,000 7,300,000
Stockholders' equity 10,000 710,000 6,610,000
Cleanroom Distribution Product Group(1):
Years Ended Six Months
December 31,(5) Ended June 30,(5)
1998 1999 1998
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1997
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Revenues $2,267,846 $1,506,607 $746,325 $867,700
Operating profit 54,067 204,106 95,984 142,164
Pro forma net income(4) 35,144 132,669 62,390 92,407
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(1) eSAFETYWORLD had no revenues during the period ended June 30, 1999. In
August 1999, it acquired the Cleanroom Distribution Product Group in an
acquisition accounted for as a purchase. Therefore, the operating results of the
acquired business will be included in eSAFETYWORLD's results commencing with the
date of acquisition.
(2) Assumes:
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
(3) Assumes:
C the completion of the offering;
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
The pro forma data does not give effect to proceeds, if any, from the
exercise of the underwriter's overallotment option.
(4) Assumes an effective income tax rate of 35% for the purposes of calculation.
The Cleanroom Distribution Product Group was manages as a division by Laminaire
Corporation during this period. Its assets and liabilities were commingled with
the assets and liabilities of Laminaire, and its operating results were included
in Laminaire's overall results.
(5) eSAFETYWORLD acquired the business, customer and vendor lists of this
Product Group and is not acquiring any tangible assets of the Group.
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RISK FACTORS
You should carefully consider each of the following risks and all of
the other information set forth in this prospectus before deciding to invest in
shares of our common stock. Some of the following risks relate principally to
our business in general and the industry in which we operate. Other risks relate
principally to the securities markets and ownership of our stock. The risks and
uncertainties described below are not the only ones facing our company.
Additional risks that generally apply to publicly traded companies, that are not
yet identified or that we currently think are immaterial, may also impair out
business operations and adversely affect our business.
If any of the following risks and uncertainties develop into actual
events, our business, financial condition or results of operations could be
materially adversely affected. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment.
This prospectus contains forward-looking statements that involve risks
and uncertainties. These statements relate to:
C our future plans;
C objectives;
C expectations and intentions; and
C the assumptions underlying or relating to any of these statements.
We use words such as "expects," "anticipates," "intends,"
"plans" and similar expressions to identify forward-looking statements. Our
actual results could differ materially from those discussed in these statements
as a result of certain factors, which are more fully described below and
elsewhere in this prospectus. We believe that our forward-looking statements are
within the meaning of the safe harbor provisions of the Securities Exchange Act
of 1934.
Our business is subject to the following risks, which include risks
relating to the industry in which we operate.
We are in an early stage of development and we expect to encounter risks
associated with early-stage companies.
eSAFETYWORLD has a limited operating history upon which an evaluation
of our future performance and prospects can be made. Our prospects must be
considered in light of the risks, expenses, delays, problems and difficulties
frequently encountered in the establishment of a new business. An investor in
our common stock must consider the risks and difficulties frequently encountered
by early stage companies operating in new and rapidly evolving markets. These
risks include:
o an evolving business model based on using existing Internet
and software technologies to establish e-commerce businesses in market
niches currently being served in a fragmented or disjointed manner;
o competition;
o ability to maintain and expand a customer base;
o ability to manage working capital and product return risks;
o the need to manage growth and changing operations;
o the need to continue to develop and upgrade our websites,
transaction-processing systems and infrastructure;
o ability to scale our systems and fulfillment capabilities to accommodate
the growth of our business;
o ability to access and obtain additional capital when required;
o ability to develop and maintain strategic relationships;
o dependence upon key personnel; and
o dependence on the reliability and growing use of the
Internet for commerce and communication and on general economic
conditions.
We cannot be certain that our business strategy will be successful or that we
will successfully address these risks. We expect to incur operating losses and
negative cash flow for the foreseeable future because of costs and expenses
related to:
o brand development, marketing and other promotional activities;
o the expansion of financial, management and order fulfillment
infrastructure;
o the development of our website, transaction-processing systems and
management infrastructure;
o the expansion of product offerings and website content; and
o strategic relationship development.
We may need additional financing.
We may require additional financing to fund our operations. We believe
that our success is particularly dependent on marketing our services and
additional funds may be required to increase our marketing program. There can be
no assurance that additional financing will be available. If we are unable to
obtain additional financing, our ability to meet our obligations and plans for
expansion will be materially adversely affected.
Our markets are highly competitive.
The market for Internet electronic commerce and Internet marketing is
highly competitive. We may face competition from one or more entities in all
geographic areas. We anticipate that competition will increase as other
companies enter our market. We expect barriers to entry to decline as costs drop
for computer hardware and services, including creating and maintaining websites.
Many of these current and potential traditional manufacturer or distributor
competitors have longer operating histories, larger customer or user bases,
greater brand recognition and significantly greater financial, marketing and
other resources than do we. These current and potential competitors can devote
substantially more resources to website and systems development. Larger,
well-established and well-financed entities may acquire, invest in or form joint
ventures with online competitors.
Our online competitors can use the Internet as a marketing medium to
reach significant numbers of potential customers. New technologies and the
expansion of existing technologies may increase competition. The new
technologies include price comparison programs that select specific titles from
a variety of websites and may direct customers to other online sellers. If we
face increased competition, our operating results may be adversely affected.
We believe that competition for customers in our industry is based on:
C technology;
C marketing strategy;
C sales force;
C professional capability;
C price;
C reputation for reliability;
C technical support; and
C quality of service.
Our operating results may fluctuate.
Our operating results will be affected and may fluctuate significantly
because of factors outside of our control. Factors that may harm our business or
cause our operating results to fluctuate include:
o our inability to obtain customers at reasonable cost, retain
customers, or successfully encourage repeat purchases;
o decreases in the number of visitors to our websites or our
inability to convert visitors to our websites into customers;
o the mix of products;
o our inability to arrange and manage fulfillment operations;
o our inability to maintain, upgrade and develop our websites,
transaction-processing systems or infrastructure;
o the ability of our competitors to offer new or enhanced websites,
services or products;
o price competition and the impact of marketing alliances between
competitors and online providers;
o the level of our product returns;
o fluctuations in the demand for products sold on our websites;
o our inability to obtain popular products from our vendors;
o the failure to develop strategic marketing and fulfillment relationships;
o increases in the cost of online or offline advertising;
o our inability to attract new independent consultants or personnel
in a timely and effective manner or retain existing independent
consultants and personnel;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;
o unexpected increases in shipping costs or delivery times;
o technical difficulties, system downtime or Internet brownouts; and
o government regulations related to use of the Internet for commerce.
Factors that will cause our gross margins to fluctuate include:
o the mix of products sold,
o the terms negotiated with vendors,
o the level of product returns, and
o the level of discount pricing.
Any change in one or more of these factors could materially and
adversely affect our gross margins and operating results.
We will rely on strategic business alliances.
We anticipate that a portion of our growth will result from
entering into strategic business alliances for the purposes of :
C increasing traffic through our websites; and
C establishing effective fulfillment systems. Such alliances
will involve online and Internet service providers, Internet
portals, operators of other websites, and vendors providing
fulfillment for us. Strategic business alliances may be
executed. No allowances may result in increased levels of
sales or profit for us
Strategic business alliances may not result in additional customers,
sales and/or profits. Any strategic business alliance may involve a number of
risks, which may adversely affect our operating results and require management's
attention.
We are vulnerable to customer concerns regarding security.
Customer concerns over the security of transactions conducted on the
Internet or the privacy of users may inhibit our growth. To transmit
confidential information. We will rely on encryption and authentication
technology that we will obtain and license from third parties. We cannot predict
whether events or developments will result in a compromise or breach of the
algorithms that we will use to protect customer transaction data. The servers
used by us may be vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions. Our business may be adversely affected by
customers' perception of Internet security or if our security measures do not
prevent security breaches. We cannot assure that we can prevent all security
breaches.
Under current credit card practices, we will be liable for fraudulent
credit card transactions because we will not obtain a cardholder's signature.
We rely on vendors with a broad variety of products.
Our success depends on our ability to have access to products in
sufficient quantities at competitive prices. Vendors may offer exclusive
allocations of product to certain distributors for limited periods of time. Some
potential vendors have their own online commerce efforts, which may eliminate or
reduce our ability to get sufficient product allocations from such vendors.
Certain competitors may also be able to secure products from vendors on more
favorable terms, fulfill customer orders more efficiently and adopt more
aggressive pricing or inventory availability policies than us.
Our business will be adversely affected if we are not able to
offer our customers sufficient quantities of products in a timely manner or have
access to products at acceptable prices and terms. Such terms include the
vendor's willingness to drop ship orders directly to customers.
A significant element of our strategic plan involves entering into
agreements with vendors under which such vendors will drop ship products
directly to our customers, thereby substantially reducing our requirements to
maintain and store inventory. There can be no assurances given that we will be
successful in negotiating such arrangements.
We rely on continued growth of the Internet for business-to-business
transactions.
Our success will depend in large part on continued growth in, and the
use of, the Internet, particularly for business-to-business commerce. The issues
concerning the commercial use of the Internet that we expect to affect the
development of the market for our services include:
C security;
C reliability;
C cost;
C ease of access;
C quality of service; and C increases in bandwidth availability.
If the Internet develops more slowly as a commercial or business medium
than predicted, it will adversely affect our business. In addition, companies
that control access to Internet transactions through network access or web
browsers could promote competitors or charge a substantial fee to us for
inclusion in their product or service offerings. Either of these developments
could adversely affect our business.
We must continue to enhance and improve the functionality and features
of our online site. The Internet and the online commerce industry are rapidly
changing. If competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our websites
and systems may become obsolete. Our future success will depend on our ability
to:
o license or internally develop leading technologies useful in our
business;
o develop new services and obtain technologies that address the
increasingly sophisticated and varied needs of our prospective
customers; and
o respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.
Develop our websites and other proprietary technology entails
significant technical and business risks. We may use new technologies
ineffectively or may fail to adapt our websites, transaction-processing systems
and infrastructure to customer requirements or emerging industry standards. If
we face material delays in introducing new services, products and enhancements,
our customers may forego the use of our services and use those of our
competitors.
We have no obligation to spend the offering proceeds in a specified
manner.
Our management will be able to spend most of the proceeds we
receive from this offering in ways in which stockholders may not agree. We
cannot predict that the proceeds will be invested to yield a favorable return.
We are subject to capacity constraints risks; reliance on internally
developed systems and system development risks.
A key element of our strategy is to generate a high volume of
traffic on, and use of, our website. Our revenues depend on the number of
customers who use our website to purchase safety equipment. Accordingly, our
website, transaction processing systems and network infrastructure performance,
reliability and availability are critical to our operating results. These
factors also are critical to our reputation and our ability to attract and
retain customers and maintain adequate customer service levels. The volume of
goods we sell and the attractiveness of our product and service offerings will
decrease if there are any systems interruptions that affect the availability of
our website or our ability to fulfill orders. We are continually enhancing and
expanding our technology and transaction processing systems, and other
technologies, to accommodate a substantial increase in the volume of traffic on
our website. We may be unsuccessful in these efforts or we may be unable to
accurately project the rate or timing of increases in the use of our website. We
may also fail to timely expand and upgrade our systems and infrastructure to
accommodate these increases. In addition, we cannot predict whether additional
network capacity will be available from third party suppliers as we need it.
Also, our network or our suppliers' network might be unable to timely achieve or
maintain a sufficiently high capacity of data transmission to timely process
orders or effectively conduct digital download, especially if our website
traffic increases. Our failure to achieve or maintain high capacity data
transmission could significantly reduce consumer demand for our services.
We are subject to risk of system failure; our systems are located in single
site.
Our success, in particular our ability to successfully receive orders
and provide high quality customer service, largely depends on the efficient and
uninterrupted operation of our computer and communications systems.
Substantially all of our development and management systems are in a single
facility that we lease in Setauket, New York. We contract with Spider, Inc. to
host our computer and communications hardware systems and to maintain our
critical connection to the Internet. These systems are in a single location in
East Northport, New York. Rapid technological change may adversely affect us.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online store. The Internet and
the online commerce industry are characterized by rapid technological change,
changes in user and customer requirements and preferences and frequent new
product and service introductions. If competitors introduce new products and
services embodying new technologies or if new industry standards and practices
emerge, then our existing website and proprietary technology and systems may
become obsolete. Our future success will depend on our ability to do the
following:
C both license and internally develop leading technologies useful in our
business;
C enhance our existing services;
C develop new services and technology that address the
increasingly sophisticated and varied needs of our prospective
customers; and
C respond to technological advances and emerging industry
standards and practices on a cost-effective and timely basis.
To develop our website and other proprietary technology entails
significant technical and business risks. We may use new technologies
ineffectively or we may fail to adapt our website, proprietary technology and
transaction processing systems to customer requirements or emerging industry
standards. If we face material delays in introducing new services, products and
enhancements then our customers may forego the use of our services and use those
of our competitors.
Future public sales or our common stock could adversely affect our stock price
may depress our stock price.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Such sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. Upon completion of this offering, we will have outstanding
3,000,000 shares of common stock (3,150,000 if the underwriter's over-allotment
option is exercised in full). Of these shares, 1,900,000 will be freely
tradeable, subject to lock-up agreements with the underwriter and volume
restrictions imposed by Rule 144.
We may not be able retain the key personnel we need to succeed.
Our future success will depend in part on our ability to attract and
retain qualified personnel to manage the development and future growth of our
company. There can be no assurance that we will be successful in attracting and
retaining such personnel. The failure to recruit additional key personnel could
have a material adverse effect on our business, financial condition and results
of operations.
Our future success will be materially dependent upon continued services
and contributions of Edward A. Heil and David McClelland and our directors. The
loss of one or more of our other key personnel or consultants, or our inability
to attract qualified personnel, could have a material adverse effect on our
business, financial condition and results of operations. We are also dependent
on Spider, Inc and its affiliate, World Internet Marketing Corporation, for the
development of our websites. The loss of Spider as a vendor and consultant could
have a material adverse impact on us and our operations.
Management has broad discretion as to the use of proceeds of the offering.
Our management may spend the proceeds from this offering in ways which
differ from the specific proposed uses described in this prospectus. We have
allocated a large portion of the proceeds from this offering to discretionary
uses. You will be relying on the judgement of our management regarding the
application of the proceeds of this offering. As a stockholder, you may not
agree with management's spending decisions.
Existing shareholders can control our operations.
Upon the completion of this offering, our existing shareholders will
collectively beneficially own approximately 67% (63% if the underwriter's
over-allotment option is exercised in full) of the our outstanding common stock.
Because of their beneficial stock ownership, these stockholders will be in a
position to continue to elect a majority of the Board of Directors and decide
matters requiring stockholder approval.
Our Board can issue blank check preferred stock.
Our Board of Directors will have the authority to issue up to 1,000,000
shares of preferred stock with designations, rights and preferences determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
is empowered, without stockholder approval, to issue classes of preferred stock
with voting liquidation, conversion or other rights that could adversely effect
the holders of our common stock in that the issuance of such preferred stock may
adversely dilute the proportionate equity interest and voting power of such
holders. However, no such preferred stock may issued by us without the
underwriter's consent for a period of 12 months following the effective date of
this offering.
We face risks regarding the year 2000.
Any failure of our material systems, our vendors' material systems or
the Internet to be year 2000 compliant would have material adverse consequences
for us. Such consequences would include difficulties in operating our website
effectively, taking product orders, making product deliveries or conducting
other fundamental parts of our business. We are currently assessing the year
2000 readiness of the software, computer technology and other services that we
use which may not be year 2000 compliant. At this time, we have not yet
developed a contingency plan to address situations that may result if we or our
vendors are unable to achieve year 2000 compliance. The cost of developing and
implementing such a plan, if necessary, could be material.
We also depend on the year 2000 compliance of the computer systems and
financial services used by customers. A significant disruption in the ability of
customers to reliably access the Internet or portions of it or to use their
credit cards would have an adverse effect on demand for our services and would
have a material adverse effect on us.
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the shares being offered hereby
at an assumed public offering price of $7.00 per share are estimated to be
$5,890,000, after deducting the underwriting discount and estimated offering
expenses payable by us (or $1,110,000 million if the underwriter's
over-allotment option is exercised in full).
Marketing and website development $4,417,500 75%
Equipment 100,000 1.7
Repayment of promissory notes(1) 375,000 6.4
General working capital 997,500 16.9
- ------- ----
Total $5,890,000 100%
========== ====
(1) The proceeds will be used to repay promissory notes executed in
July 1999 in the aggregate principal amount of $375,000 and all accrued
interest. The principal amount of the promissory notes has been used for general
working capital and to pay for expenses incurred in connection with the
acquisition of the division from Laminaire and expenses related to this
offering.
This allocation is only an estimate and we may adjust it as necessary
to address our operational needs in the future. For instance, we may also use a
portion of the net proceeds to acquire complementary technologies or businesses.
However, we currently have no commitments or agreements and are not involved in
any negotiations with respect to any such transactions.
We reserve the right to reallocate proceeds to different uses if, in
management's view, the needs of the business so require. In addition, a large
portion of the proceeds is allocated to discretionary purposes. Investors may
not agree with any such allocation or reallocation. Based on our operating plan,
we believe that the net proceeds of this offering, together with available funds
on hand and cash flow from future operations, will be sufficient to satisfy our
working capital requirements for at least 12 months following this offering.
Such belief is based upon certain assumptions (including assumptions as to our
contemplated operations and business plan and economic and industry conditions).
If we were able to make significant acquisitions for cash consideration, we
would require additional capital. In addition, contingencies may arise that may
require us to obtain additional capital. We cannot be certain that we will be
able to obtain such capital on favorable terms or at all. Pending use of the net
proceeds of this offering, we intend to invest the net proceeds in short-term,
interest-bearing, investment grade securities or similar quality investments.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
<PAGE>
DILUTION
Our net tangible book value as of June 30, 1999 was deminimis, or $0
per share. Net tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our total liabilities and divided by
the total number of shares of common stock outstanding. Dilution in net tangible
book value per share represents the difference between the amount per share paid
by purchasers of shares of common stock in this offering and the net tangible
book value per share of common stock immediately after the completion of this
offering. After giving effect to the sale of the 1,000,000 shares of common
stock offered by us at an assumed initial public offering price of $7.00 per
share, and after deducting the underwriting discount and estimated offering
expenses payable by us, our net tangible book value at June 30, 1999 would have
been approximately $5,900,000 or $1.97 per share of common stock. This
represents an immediate increase in net tangible book value of $1.97 per share
to existing stockholders and an immediate dilution of $5.03 per share to new
investors of common stock. The following table illustrates this dilution on a
per share basis:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Assumed initial public offering price per share $7.00
Net tangible book value per share before the offering $0.00
Increase per share attributable to new investors 1.97
-----
Pro forma net tangible book value per share after the offering 1.97
----
Dilution per share to new investors $5.03
=====
</TABLE>
The following table summarizes on an as adjusted basis after giving
effect to the offering, as of June 30, 1999, the differences between the
existing stockholders and new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares Owned Consideration Average
Price per Share
Number Percent Amount Percent
Present Shareholders 2,000,000 67% $10,000 .1 $.001
New Investors 1,000,000 33% 7,000,000 99.9 7.00
--------- --- ---------- ----
Total (1) 3,000,000 100% $7,010,000 100.00
========= ==== ========== === ======
</TABLE>
(1) Does not give effect to:
150,000 additional shares of common stock that are issuable upon the
exercise of the underwriter's over-allotment option; and
100,000 shares of common stock reserved for issuance upon the exercise
of the underwriter's warrants.
CAPITALIZATION
The following table sets forth our capitalization as of August 31, 1999
and as adjusted to reflect the sale of the 1,000,000 shares and the application
of the estimated net proceeds. This table should be read in conjunction with our
financial statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ACTUAL AS ADJUSTED (2)
Debt $375,000 $500,000
-------- -------
Stockholders' Equity; 2,000 3,000
Common stock, par value of $.001 per share; 20,000,000 authorized; 2,000,000
shares outstanding; 3,000,000 shares outstanding as adjusted (1)
Additional paid-in capital 8,000 6,607,000
Retained earnings -- --
---------- ---- ---------- --
Total stockholders' equity 10,000 6,610,000
---- ------ ---------
Total Capitalization $385,000 $7,110,000
======== ==========
</TABLE>
<PAGE>
1. Does not give effect to:
150,000 additional shares of common stock that are issuable upon the
exercise of the underwriter's over-allotment option; and
100,000 shares of common stock reserved for issuance upon the exercise of
the underwriter's warrants.
2. The "As Adjusted" column treats the $100,000 fee for a 24-month consulting
agreement with the underwriter as a prepaid asset and assumes the
completion of the acquisition of the Cleanroom Distribution Product Group.
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial data set forth below at June 30, 1999 is derived
from and should be read in conjunction with eSAFETYWORLD's financial statements,
including the notes thereto, appearing elsewhere in this prospectus.
The selected financial data for the Cleanroom Distribution Product
Group of Laminaire Corporation for the years ended December 31, 1998 and 1997 is
derived from and should be read in conjunction with the Group's financial
statements, including the notes thereto, appearing elsewhere in this prospectus.
The summary financial data for the Group set forth below for the interim periods
ended June 30, 1999 and 1998 has been prepared from the Group's books and
records and reflects, inn out opinion, all adjustments necessary for a fair
presentation of the results of operations of the Group for the periods indicated
therein. Results for interim periods are not necessarily indicative of results
which can be expected for the entire year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
eSAFETYWORLD(1):
6/30/99 6/30/99 6/30/99
(as adjusted)(2) (as further adjusted)(3)
Current assets -------- $375,000 $5,950,000
Total assets $10,000 1,735,000 7,300,000
Stockholders' equity 10,000 710,000 6,610,000
Cleanroom Distribution Product Group(1):
Years Ended Six Months
December 31,(5) Ended June 30,(5)
1998 1999 1998
---- ---- ----
1997
----
Revenues $2,267,846 $1,506,607 $746,325 $867,700
Operating profit 54,067 204,106 95,984 142,164
Pro forma net income(4) 35,144 132,669 62,390 92,407
</TABLE>
(1) eSAFETYWORLD had no revenues during the period ended June 30, 1999. In
August 1999, it acquired the Cleanroom Distribution Product Group in an
acquisition accounted for as a purchase. Therefore, the operating results of the
acquired business will be included in eSAFETYWORLD's results commencing with the
date of acquisition.
(2) Assumes:
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
(3) Assumes:
C the completion of the offering;
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
The pro forma data does not give effect to proceeds, if any, from the
exercise of the underwriter's overallotment option.
(4) Assumes an effective income tax rate of 35% for the purposes of calculation.
The Cleanroom Distribution Product Group was manages as a division by Laminaire
Corporation during this period. Its assets and liabilities were commingled with
the assets and liabilities of Laminaire, and its operating results were included
in Laminaire's overall results.
(5) eSAFETYWORLD acquired the business, customer and vendor lists of this
Product Group and is not acquiring any tangible assets of the Group.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the
financial statements and notes included elsewhere in this prospectus.
Results of operations
General - We had no operating history prior to June 30, 1999.
Distribution division - During the periods discussed below, the
division operated as a product group of Laminaire Corporation. Laminaire lacked
the financial resources to develop the division's business fully and often
"stretched" out its vendors. The principal fluctuations resulted from the
changes in Laminaire's ability to commit resources during the period. Also,
Laminaire used cash generated by the division to help it meet its overall
obligations. Therefore, past operating results are not necessarily indicative of
future performance.
Comparison of the six months ended June 30, 1999 and 1998
A summary of sales and cost of sales by product type follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Sales by Product 6/30/98 6/30/99
- ---------------- ------- -------
Gloves $130,400 17.5% $148,311.00 17.1%
Wipers 227,890 30.5% 264,594.00 30.5%
Accessories 111,325 14.9% 154,786.00 17.8%
Mats 111,177 14.9% 91,893.00 10.6%
Disposable Garments 117,469 15.7% 97,125.00 11.2%
Clean Room Furniture 5,476 0.7% 41,053.00 4.7%
Chairs 8,587 1.2% 10,988.00 1.3%
Fabric Garments 11,142 1.5% 12,713.00 1.5%
Vacuum Products 14,592 2.0% 35,602.00 4.1%
Foam Wipers 7,402 1.0% 7,873.00 0.9%
Static Products 865 0.1% 2,832.00 0.3%
Total $746,325 100.0% $867,770.00 100.0%
Cost Of Sales 6/30/98 6/30/99
- ------------- ------- -------
Gloves $ 94,143 12.6% $121,240 14.0%
Wipers 172,651 23.1% 211,140 24.3%
Accessories 78,433 10.5% 121,946 14.1%
Mats 89,062 11.9% 68,836 7.9%
Disposable Garments 99,142 13.3% 72,456 8.4%
Clean Room Furniture 3,918 0.5% 28,937 3.3%
Chairs 6,386 0.9% 6,768 0.8%
Fabric Garments 6,191 0.8% 8,569 1.0%
Vacuum Products 11,997 1.6% 7,689 0.9%
Foam Wipers 2,724 0.4% 2,830 0.3%
Static Products 686 0.1% 2,327 0.3%
Total $565,333 75.7% $652,738 75.2%
</TABLE>
The division did not emphasize particular products during any period.
Therefore, the fluctuations are a result of orders received in the normal course
of business and not of any concerted marketing efforts.
Comparison of the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1998 % 1997 % Difference
---- - ---- - ----------
Revenues $2,267,846 $1,506,607 $761,239
Cost of Revenues 2,070,174 1,117,464 952,710
Gross Profits 197,672 8.72% 389,143 25.83% -191,471
Selling 98,148 4.33% 154,905 10.28% -56,757
General and Administrative 45,357 2.00% 30,132 2.00% 15,225
Operating Profits 54,167 2.39% 204,106 13.55% -149,939
</TABLE>
In 1998, the division had a significant amount of low margin sales
that required minor sales efforts. Also in 1998, the division had one
fewer full-time employee resulting in a reduction of selling expenses.
The composition of
sales and cost of sales was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Sales by Product Type 12/31/98 12/31/99
- --------------------- -------- --------
Gloves $328,478 14.5% $340,731 22.6%
Wipers 652,221 28.8% 313,362 20.8%
Accessories 348,738 15.4% 272,093 18.1%
Mats 265,795 11.7% 261,631 17.4%
Disposable Garments 456,453 20.1% 163,815 10.9%
Clean Room Furniture 65,238 2.9% 69,175 4.6%
Chairs 89,128 3.9% 23,482 1.6%
Fabric Garments 18,992 0.8% 22,877 1.5%
Vacuum Products 15,985 0.7% 17,737 1.2%
Foam Wipers 14,307 0.6% 15,131 1.0%
Static Products 12,511 0.6% 6,573 0.4%
Total $2,267,846 100.0% $1,506,607 100.0%
Cost of Sales 12/31/98 12/31/99
- ------------- -------- --------
Gloves $228,379 10.1% $236,030 15.7%
Wipers 647,253 28.5% 240,072 15.9%
Accessories 260,488 11.5% 196,244 13.0%
Mats 194,526 8.6% 180,714 12.0%
Disposable Garments 360,238 15.9% 113,566 7.5%
Clean Room Furniture 45,975 2.0% 45,133 3.0%
Chairs 80,249 3.5% 15,028 1.0%
Fabric Garments 12,311 0.5% 15,048 1.0%
Vacuum Products 11,356 0.5% 12,371 0.8%
Foam Wipers 6,415 0.3% 5,142 0.3%
Static Products 4,190 0.2% 6,143 0.4%
Total $1,851,380 81.6% $1,065,491 70.7%
</TABLE>
Liquidity and Capital Resources
Based on our operating plan, we believe that the net proceeds of this
offering, together with available funds on hand and cash flow from future
operations, will be sufficient to satisfy our working capital requirements for
at least 12 months following this offering. Such belief is based upon certain
assumptions (including assumptions as to our contemplated operations and
business plan and economic and industry conditions). Furthermore, if we are able
to make significant acquisitions for cash consideration, we would require
additional capital. In addition, contingencies may arise that may require us to
obtain additional capital. We cannot be certain that we will be able to obtain
such capital on favorable terms or at all. Pending use of the net proceeds of
this offering, we intend to invest the net proceeds in short-term,
interest-bearing, investment grade securities or similar investments.
We entered into a promissory note executed in July 1999 in the principal
amount of $250,000. The principal amount of the promissory note has been used
for general working capital and to pay for expenses incurred in connection with
the acquisition of the division from Laminaire and expenses related to this
offering. The note will be repaid from the proceeds of this offering.
Seasonality
The demand for our products is somewhat seasonal. Vacations in the summer
reduce the demand for our products in the summer months.
New accounting pronouncements
No new pronouncement issued by the Financial Accounting Standards Board,
the American Institute of Certified Public Accountants or the Securities and
Exchange Commission is expected to have a material impact on our financial
position or reported results of operations.
Year 2000 issues
Management has initiated a company-wide program and has developed a formal
plan of implementation to prepare us for the year 2000. This includes taking
actions designed to ensure that our information technology ("IT") systems,
products and infrastructure are year 2000 compliant and that our customers,
suppliers and service providers have taken similar action. We are in the process
of evaluating our internal issues - all of our IT systems, products, equipment
and other facilities systems. At this time, Management believes that we do not
have any internal problem other than to upgrade some of its software to
available new releases that are year 2000 compliant. With respect to its
external issues - customers, suppliers and service providers, we are surveying
them primarily through written and oral correspondence and communication. Spider
has advised us that its servers and systems are year 2000 compliant Despite the
efforts to survey customers, suppliers and service providers, we cannot be
certain as to the actual year 2000 readiness of these third parties. To the
extent any of our suppliers or service providers are not year 2000 ready, we
believe that we will be able to obtain other suppliers or service providers
without a significant interruption to our business. To date, we have not
formulated a year 2000 contingency plan. Based upon responses to our inquiries,
we will determine the need for a contingency plan by the end of the third
quarter of 1999.
We believe that the costs related to our compliance with the year 2000
issue should not have a material adverse effect on our financial position,
results of operations or cash flows.
<PAGE>
BUSINESS
eSAFETYWORLD was established as a Nevada corporation in July
1997 as The SL Group, Inc. We changed our name to eSAFETYWORLD, Inc. in August
1999. Our purpose is to sell disposable garments and equipment to companies
involved in production or other activities that must be done in controlled
environments or whose employees are exposed to environmental hazards through the
development and operation of a business-to-business e-commerce site on the world
wide web. We believe that this market niche is attractive because:
o We believe the business-to-business market available to Internet
sellers is much greater than the business-to-consumer market.
o Businesses, as a group, are generally further along in accepting
e-commerce and electronic data interchange than is the consumer
market.
o The targeted industry segment is large and being serviced in a
very fragmented way by the current entrants.
o A significant part of the selling effort now done in these
segments is done through the distribution of catalogs and
brochures. Our principal premise is that sales and orders placed
through the Internet offers an ideal replacement for traditional
catalogs.
o The identified market niches are currently served by a large
number of small companies. We believe that our state-of-the-art
e-commerce site will provide a competitive advantage.
Our business model is designed to take advantage of the Internet as a
selling medium. eSAFETYWORLD believes that the Internet offers significant
opportunities in the areas of e-commerce, including the ability to reach a large
potential market without the need for substantial advertising expenditures. The
ability to reach a worldwide market means that even a small degree of
penetration can result in a high level of sales revenue. The keys needed to
succeed in e-commerce include:
o Having user friendly software;
o Using a business model that does not require significant amounts
of development costs or working capital; and
o Developing a methodology for encouraging visitors to visit the
website and advertising at a reasonable cost.
Our strategic plan is to:
o Become a significant factor in the marketplace by becoming the
Internet seller for a wide array of available products,. We want
to become the Internet independent sales representative for the
industries that we serves and will serve; and
o Utilize and modify existing technology in an effective, user friendly
way.
eSAFETYWORLD's goal is to use well-developed Internet technology and
therefore not incur significant expenditures for technological research and
development. We will seek ways to use this technology profitably, like targeting
market niches, and will allow others to assume the technological risk of new
development.
The United States Department of Commerce has projected that
business-to-business e-commerce revenues will increase from $8 billion in 1997
to $326 billion in 2002 (see The Emerging Digital Economy published in 1998).
We believe that industrial safety products that are sold through
traditional printed catalogs are uniquely suited for sale on the Internet. The
reasons for this include:
o Products bought through catalogs are purchased by people who do
not need to "touch" or "feel" the product prior to purchase;
o E-commerce can make purchasing easier and quicker than filling out
forms in a catalog or calling a toll-free telephone number; and
o E-commerce can provide more information and update such
information more quickly than can distributors of catalogs.
We also believe that fixed costs must be kept to a minimum in order to
increase operating leverage. The principal advantage of using the Internet as a
selling vehicle is the ability to not incur significant fixed costs. The key
element of this strategy is to:
o minimize or eliminate inventory holding and shipping costs;
o minimize the need for expensive advertising campaigns by selecting
market niches that can be reached through trade shows and less
expensive forms of advertising; and
o out source services wherever possible.
Keeping fixed cost to a minimum is achievable if fulfillment contracts
are negotiated with vendors to perform all or most fulfillment functions. We
believe that most of our vendors will agree to such contracts. We will eliminate
products from our site if the associated vendors will not perform fulfillment
functions. We believe that this strategy may result in some lost sales. However,
we also believe that the strategy offers the best means of achieving the
potential high degree of operating leverage afforded by Internet commerce.
In August 1999, we acquired from the distribution division of
Laminaire Corporation its business and intangible assets such as customer lists
and vendor lists. The purchase price consisted of 100,000 shares of common
stock, notes payable to the seller in the principal amount of $500,000 and the
assumption of debt of $125,000. This division, which has been in operation for
more than twenty years, provides us with an important entree to the vendors and
customers of a targeted industry niche. The division sells disposable/limited
use apparel, hoods, gloves, packaging and flooring material, monitoring devices,
electrostatic devices, furnishings, wipers, and swabs as a distributor to a wide
variety of midsized and small companies. Its principal vendors include
Techswipe, Alma and Kimberly Clark. Its website is linked to a variety of other
sites, including Thomas Register. The Thomas Register is an industry catalogue
which lists thousands of companies in the industrial safety parts and equipment
field. Laminaire also markets its products through telemarketing and
distribution of print catalogs and materials. We have included the products
distributed by the division on our website. Edward A. Heil, our Chairman, is a
director of Laminaire. Steven W. Schuster, one of our directors, is Laminaire's
corporate secretary.
Our principal website is located at www.esafetyworld.com.
Nature of the Internet
The Internet is an increasingly significant medium for communication,
information and commerce. International Data Corporation estimates that there
were 97 million web users worldwide at the end of 1998 and anticipates this
number will grow to approximately 320 million users by the end of 2002. In
addition, business-to-business sales on the Internet are presently a $35 billion
dollar industry, which Forrester Research and the International Data Corporation
have projected to increase to approximately $300 billion by 2002. We believe
that growth in Internet usage and online commerce is being fueled by a number of
factors including:
o a large and growing installed base of personal computers in the workplace
and home;
o advances in the performance and speed of personal computers and modems;
o improvements in network security, infrastructure and bandwidth;
o easier and cheaper access to the Internet; and
o the rapidly expanding availability of commerce sites.
The Internet provides several advantages for online distributors.
Online distributors are able to "display" a larger number of products than
traditional store-based or catalog distributors at a lower cost. In addition,
online distributors are able to frequently adjust their featured selections,
editorial content, shopping interfaces and pricing, thus providing significant
merchandising flexibility. The minimal cost to publish on the web, the ability
to reach and serve a large and global group of customers electronically from a
central location, and the potential for personalized low-cost customer
interaction provide additional economic benefits for online distributors. Unlike
traditional distribution channels, online distributors do not have the
burdensome costs of managing and maintaining a retail store infrastructure or
the significant printing and mailing costs of catalogs. Online distributors can
also easily obtain demographic and behavioral data about customers, increasing
opportunities for direct marketing and personalized services.
We will further expanded the benefits of online selling by
devising a distribution model that requires us to maintain little or no
inventory and by utilizing state-of-the-art software that can be modified or
updated easily and cheaply.
The business-to-business sector of Internet commerce is, in
many ways, more mature than the business-to-consumer sector. However, it is
largely served by individual company sites selling that particular company's
products. In many cases, these sites are looked at as a minor adjunct to a
company's traditional selling efforts.
Market niches and background
The market for disposable industrial garments and equipment
has increased substantially in the past twenty-five years. In 1970, Congress
enacted the Occupational Safety and Health Act ("OSHA"), which requires
employers to supply protective clothing in certain work environments. At about
the same time, DuPont developed Tyvek(TM) which, for the first time, allowed for
the economical production of lightweight, disposable protective clothing. The
attraction of disposable garments grew in the late 1970's with the increases in
both labor and material costs of producing cloth garments and the promulgation
of Federal, state and local regulations requiring that employees wear protective
clothing to protect against exposure to certain contaminants, such as asbestos
and hydro-carbons ("PCBs").
The use of disposable garments avoids the continuing costs of
laundering and decontaminating woven cloth work garments and reduces the
overhead costs associated with handling, transporting and replacing such
garments. As manufacturers have become aware of the advantages of disposable
clothing, the demand for such garments has increased. This has allowed for
greater production volume and, in turn, has reduced the cost of manufacturing
disposable industrial garments.
We believe that this market will grow because of:
Government legislation which mandates the clean up of toxic
waste sites and the elimination of hazardous materials from the environment as
promulgated under various Congressional Super Fund Acts. The Environmental
Protection Agency ("EPA") designated OSHA to be responsible for the health and
safety of workers in and around areas of hazardous materials and contaminated
waste, as well as regulations requiring that employees wear protective clothing
to protect against exposure to certain contaminants, such as, asbestos, PCBs,
lead, acids and other numerous hazardous chemicals and radioactive materials.
Lower cost of disposable/limited use garments compared to
reusable woven and cloth garments because of the elimination of costs associated
with laundering, decontaminating, handling, transporting and replacing reusable
woven or cloth garments.
Increasing workers' compensation claims and large class action
liability suits instituted by both present and prior employees for failure to be
protected against hazardous agents found in the workplace.
Ongoing expansion in the semiconductor, microelectronics,
medical device and pharmaceutical industries, all of which require manufacturing
in a cleanroom environment.
We have identified two initial market niches:
Controlled environment facilities - Clean rooms are one of the
most effective approaches to achieving a contamination controlled environment. A
clean room is a specially designed room in which particulate presence and
environmental conditions are carefully maintained. Clean rooms are used for
product manufacture and assembly, testing, research and development, packaging,
aseptic processing and to perform medical/surgical procedures. Clean rooms are
operated and maintained under strict procedures to minimize the risk of
introducing foreign particles. The greatest demand for clean room products and
services has been and continues to be in the manufacture and assembly of
products based on modern technology. The semiconductor market is the largest
market for clean rooms and other contamination control products, as integrated
circuits can be rendered ineffective by a minute particle, undetectable to the
human eye, and must be discarded.
eSAFETYWORLD sells a large variety of disposable items, such as hats,
coats, boots and gloves, that are used in cleanroom facilities. Disposable items
are ideal products for a distributor because they must be reordered on a regular
basis.
Industrial safety and hazardous worksites - This product group will
sell products to "end users," including manufacturing companies and service
businesses, public utilities, fisheries, pharmaceutical plants, the
transportation industry and companies whose employees are exposed to hazardous
materials. Use of these products has in a large part resulted from the adoption
of OSHA and other governmental safety standards and the awareness of industry
and the general public for the need to provide worker protection against
hazardous materials contained in industrial facilities, schools and buildings.
These products include coveralls, shirts, pants, headwear, hoods, aprons,
smocks, lab coats, hazardous material handler suits, examination gowns, sleeves,
shoe covers and related items. Many of these products are disposable and,
therefore, offer the same benefits as do disposable cleanroom products.
Future market niches - We have identified several additional market
niches for future expansion, all of which appear to have the same attributes as
eSAFETY's initial market niches. The identified niches include products serving
the hospital, plumbing supply, construction and HVAC industries.
The identified product areas include disposable/limited use protective
industrial garments, specialty safety and industrial work gloves, reusable woven
industrial and medical apparel, fire and heat protective clothing, along with
protective systems for personnel, and suits for use by toxic waste clean up
teams.
Protective garments, including boots, goggles, aprons and overalls, are
used primarily for:
C Safety and hazard protection, to protect the wearer from
contaminants or irritants, such as, chemicals, pesticides,
fertilizers, paint, grease, and dust and from limited
exposures to hazardous waste and toxic chemicals including
acids, asbestos, lead, and hydro-carbon's (PCB's);
C Clean room environments, for the prevention of human
contamination of manufacturing processes in clean room
environments;
C Physical protection, to protect a wearer from laceration,
splinters, eye injuries, heat and chemical irritants without
sacrificing manual dexterity or comfort;
C Heat and fire protection, to protect municipal fire fighters,
military, airport and industrial fire fighting teams and for
maintenance of "hot" equipment, such as ovens, kilns, glass
furnaces, refinery installations, and smelting plants;
C Protection from viral and bacterial microbiologicals, to
protect the wearer from contagious diseases, such as AIDS and
hepatitis, at hospitals, clinics and emergency rescue sites;
and
C Protection from highly concentrated and chemical and
biological toxins, to protect the wearer from toxic waste at
Super Fund sites, accidental toxic chemical spills or
biological discharges, the handling of chemical or biological
warfare weapons and the cleaning and maintenance of chemical,
petrochemical and nuclear facilities.
Other ancillary products, all of which are used in cleanroom and
laboratory environments, include:
C Packaging materials,
C Monitor devices,
C Flooring and mats;
C Electrostatic devices;
C Furnishings, and
C Wipers and swabs.
Disposable/limited use industrial garments are used in a wide variety
of industries and applications. Typical industry users are chemical plants,
petrochemical refineries and related installations, automotive manufacturers,
pharmaceutical companies, coal and oil power generation utilities and telephone
utility companies. There are many smaller industries that use these garments for
specific safety applications unique to their situation.
Other - In addition, eSAFETYWORLD sells customized work stations used
in cleanrooms and laboratories, all of which will be manufactured by others.
Software technology
Our strategy has been and is to license commercially available
technology whenever possible rather than seek internally developed solutions.
With this objective in mind, we have entered into an agreement with an
electronic commerce software company, Spider, Inc. and its affiliate, World
Internet Marketing Corporation. Through these agreements, we will have access to
state-of-the-art, end-to-end electronic commerce software. We believe that our
software solution is equal to or better than any comparable systems currently in
use because it is user friendly and easy to administer.
The Spider Web Commercial 2000 System is designed to be a total
end-to-end electronic commerce solution for stand alone interactive e-commerce
enabled business-to-business websites. Each virtual store is an electronic
commerce-enabled website designed to sell products over the Internet.
Because of our software technology, the maintenance of the website is
performed easily and requires fewer operating personnel. The Spider Web
Commercial 2000 software can be maintained by employees having skill levels
equal to order entry employees or store checkout employees. This feature is
advantageous because it enables us to maintain our own websites, as well as
scaling up employees to setup and build e-commerce websites commensurate with
the growth of the Internet. Entry level employees can easily, quickly and
efficiently add, delete or modify products within the website. These changes,
including prices, are simultaneously updated, in real time, in our
Business-to-Business site. Product displays may be enhanced with image animation
that can be added by the same level of employees. Spider's unique technology was
designed so that each Business-to-Business site may have an unlimited number of
departments and unlimited number of products under each department or
sub-department. The website is easily navigable by the consumer, who may move
fluidly among departments, sub-departments and products.
eSAFETYWORLD will use a new e-commerce method, developed with Spider
and World Internet Marketing Corporation, "E-Branding (TM)," which permits our
virtual store to be linked seamlessly with the websites of manufacturers and
distributors. The method was developed by Spider and licensed to eSAFETYWORLD.
Once inside the Virtual Store, a customer can immediately view all of a
manufacturer's or distributor's products including those which are not available
in the retailer's "brick and mortar" store. A customer can then order the
desired product from an "E-Branded(TM)" website.
Our systems are and will continue to be designed based on industry
standard architectures and will be designed to reduce downtime in the event of
outages or catastrophic occurrences. These systems will provide 24-hour-a-day,
seven-day-a-week availability. The system hardware are hosted by Spider in East
Northport, New York, and will provide redundant communications lines and
emergency power backup.
Marketing
Our goal is to become the independent Internet sales representative for
the industrial safety market. Historically, the division purchased from
Laminaire relied on catalogues distributed to customer to generate orders. We
intend to phase out use of the paper catalogue and use a portion of the proceeds
of the offering to convert the catalogue to CD-ROMS's to distribute to
customers. Our standard arrangement is:
o Split the profit on all items sold based on negotiated arrangements
with each "vendor."
o Arrange for the manufacturer to distribute products directly to end
customers.
We will expand our product offerings by:
o Marketing our services and availability at trade shows; and
o Contacting potential users directly.
We will market our availability to customers by:
o Being active in all significant industry trade shows;
o Advertising in catalogs such as the Thomas Register;
o Implementing aggressive e-mailing and brochure campaigns; and
o Making direct sales calls on targeted companies by independent
representatives.
These efforts will be coordinated with a full scale Internet marketing
campaign done in conjunction with WINCORP, an entity engaged solely in that
area. WINCORP has developed proprietary techniques to facilitate high ranking of
clients' websites on search engines. Our efforts will include:
o Distributing a specially designed CD-ROM for trade shows that uses
a patent pending software technology and several Internet
marketing opportunities. The multimedia interactive trade show
CD-ROM interactively displays our products in a manner that
functions seamlessly with our Internet e-commerce website.
o Obtaining e-mail addresses of targeted groups. WINCORP's marketing
staff can identify all newsgroups and chat rooms on the Internet
that discuss a specific topic and extract applicable e-mail
addresses or addresses from local or regional geographic
locations. All such addresses will receive information by e-mail
including selected "sales" and promotions. The e-mail includes a
hotlink to our website.
o Searching the entire Internet for all websites that display
targeted keywords to locate and extract target market e-mail
addresses. Once all targeted e-mail addresses are extracted, a
customized e-mail message, including text and/or banner
advertisement with a website hotlink, is sent to each e-mail
address included on the list.
The identified industry niches offer an advantage in that many vendors
participate in several trade shows each year. Therefore, we can meet with and
have access to these companies without incurring significant advertising
expenditures. We will attend these shows and:
o Distribute our CD-ROM
o Make actual presentations showing that use of our service may add
incremental sales without incurring incremental costs prior to the
sale
o Collect the e-mail and mailing addresses of participants for
follow-up.
We will also engage in traditional mailing and telemarketing efforts.
In most cases, we will perform all billing and collection functions,
even if vendors drop ship products directly to customers.
Competition
We believe that there are hundreds of competitors selling products that
are similar to those sold by us based on listings in industry catalogs such as
Thomas Register. Many of these competitors are regional companies selling
through catalogs and independent sales representatives. Increasing numbers of
these competitors are also establishing websites and e-commerce sites. We
believe that our e-commerce site and our business strategy provide us with a
competitive advantage because:
C Our e-commerce site is user-friendly with significant amounts of
graphics.
C Our strategy requires low levels of working capital and few inventory
holding costs.
However, we can give no assurances that our approach will not be duplicated or
improved upon by others.
Customer service
We believe that a high level of customer service and support is
critical to retaining and expanding its customer base and encouraging repeat
purchases. A customer service representative will be available from 8:00 a.m. to
8:00 p.m. Eastern Time, five days a week, to provide assistance via e-mail or
telephone. We will strive to answer all customer inquiries within 24 hours.
Customer service representatives handle questions about orders, assist customers
in finding desired products and register customers' credit card information over
the telephone. Customer service representatives are expected to be a valuable
source of feedback regarding user satisfaction.
Order fulfillment
In substantially all cases we arrange for vendors to dropship products
directly to customers. In certain cases, this practice involves paying a premium
for the purchased product. We believe that payment of such premium is more cost
beneficial than incurring inventory holding costs.
Products are purchased pursuant to purchase orders or verbal
agreements. No long-term supply agreements exist.
Security
We use the Secure Socket Layer (known as "SSL") transaction protocol to
protect sensitive information transferred to and from our servers. SSL is
currently used for most web-based e-commerce projects to protect credit card and
other processing.
Regulation
Although there are few laws and regulations directly applicable to the
Internet, it is likely that new laws and regulations will be adopted in the
United States and elsewhere covering issues such as unsolicited bulk e-mailing,
license fees, copyrights, privacy, pricing, sales taxes and characteristics and
quality of Internet services. The adoption of restrictive laws or regulations
could slow Internet growth or expose us to significant liabilities associated
with content available on its websites or Internet marketing methods. The
application of existing laws and regulations governing Internet issues such as
property ownership, libel and personal privacy is also subject to substantial
uncertainty. There can be no assurance that current or new government laws and
regulations, or the application of existing laws and regulations (including laws
and regulations governing issues such as property ownership, content, taxation,
defamation and personal injury), will not expose us to significant liabilities,
significantly slow Internet growth or otherwise cause a material adverse effect
on our business, results of operations or financial condition.
We currently do not collect sales or other taxes with respect to the
sale of services or products in states and countries where we believe that it is
not required to do so. One or more states or countries have sought to impose
sales or other tax obligations on companies that engage in online commerce
within their jurisdictions. A successful assertion by one or more states or
countries that we should collect sales or other taxes on products and services,
or remit payment of sales or other taxes for prior periods, could have a
material adverse effect on our business, results of operations and financial
condition.
The Communications Decency Act of 1996 (the "CDA") was enacted in 1996.
Although those sections of the CDA that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over the
Internet were held to be unconstitutional by the U.S. Supreme Court, there can
be no assurance that similar laws will not be proposed and adopted. Although we
do not currently distribute the types of materials that the CDA may have deemed
illegal, the nature of such similar legislation and the manner in which it may
be interpreted and enforced cannot be fully determined, and legislation similar
to the CDA could subject us to potential liability, which in turn could have an
adverse effect on our business, financial condition and results of operations.
Such laws could also damage the growth of the Internet generally and decrease
the demand for our products and services, which could adversely affect our
business, results of operations and financial condition.
As a distributor of Internet content, we face potential liability for
negligence, copyright, patent, trademark, defamation, indecency and other claims
based on the nature and content of the materials that it broadcasts. Such claims
have been brought, and sometimes successfully pressed, against Internet content
distributors. In addition, we could be exposed to liability with respect to the
content or unauthorized duplication or broadcast of content. Although we will
maintain general liability insurance, our insurance may not cover potential
claims of this type or may not be adequate to indemnify us for all liability
that may be imposed. In addition, although we will generally require our content
providers to indemnify us for such liability, such indemnification may be
inadequate. Any imposition of liability that is not covered by insurance, is in
excess of insurance coverage or is not covered by an indemnification by a
content provider could have a material adverse effect on our business, results
of operations and financial condition.
We will hold various web domain names and trademarks. The acquisition
and maintenance of domain names generally is regulated by governmental agencies
and their designees. For example, in the United States, the National Science
Foundation has appointed Network Solutions, Inc. as the current exclusive
registrar for the ".com",".net" and ".org" generic top-level domains (wasn't
this changed). The regulation of domain names in the United States and in
foreign countries is subject to change in the near future. Such changes in the
United States are expected to include a transition from the current system to a
system that is controlled by a non-profit corporation and the creation of
additional top-level domains. Governing bodies may establish additional
top-level domains, appoint additional domain name registrars or modify the
requirements for holding domain names. As a result, we may be unable to acquire
or maintain relevant domain names in all countries in which it may conduct
business. Furthermore, the relationship between regulations governing domain
names and laws protecting trademarks and similar proprietary rights is unclear.
Therefore, we may be unable to prevent third parties from acquiring domain names
that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights.
Intellectual property
We regard the technology we use as proprietary, but have no
existing or pending patent or copyright protection. We rely on the following to
protect our software and other propriety technology:
C confidentiality and license agreements with third parties, C trade
secret and trademark laws, and C common law copyright.
Properties
We will operate out of rented 1,200 square feet of office space located
at 100-3 South Jersey Avenue, East Setauket, New York 11733. The lease calls for
monthly payments of $1,000 through 2001. In addition, we plan on leasing a
similar amount of office space in New Jersey.
Legal proceedings
We are not a party to any legal proceedings.
Personnel
We currently have two full-time employees, as well as officers who
devote various amounts of time to our business. At the completion of the
offering we expect to have fewer than ten full-time employees. Our strategic
plan is to use dedicated consultants and to outsource as many functions as
possible. Therefore, growth is not expected to result in significant increases
in personnel.
<PAGE>
MANAGEMENT
Our management consists of:
Edward A. Heil 47 Chairman and Chief Executive Officer
David McClelland 39 President and Chief Operating Officer
John C. Dello-Iacono 50 Director
R. Bret Jenkins 41 Director
Bridget C. Owens 42 Director
Steven W. Schuster 44 Director
James Brownfiel 28 Vice President
Peter J. Daniele 42 Chief Financial Officer
Paul White 41 Chief Technology Officer
Edward A. Heil has been a director since 1997. He is a certified public
accountant and a managing director, since January 1992, in Independent Network
Group, Inc., a financial consulting firm. From 1984 through December 1991 he was
a partner in the accounting firm, Deloitte & Touche, LLP. From 1973 to 1984 he
was employed in various professional capacities by Deloitte & Touche, LLP. Mr.
Heil holds Bachelor of Arts and Master of Business Administration degrees from
New York University. Mr. Heil, who will devote from 50 to 60 percent of his time
to eSAFETYWORLD, is also a director of Laminaire Corporation and Worldwide
Financial Holdings, Inc. EH Associates, LLC, a firm affiliated with Mr. Heil,
has a consulting contract to provide us with management and financial services.
David McClelland has been an officer since August 1999. He has held
executive positions with Laminaire Corporation, a manufacturer and distributor
of cleanroom products, since 1980. Mr. McClelland is a graduate of New Jersey
Institute of Technology.
John C. Dello-Iacono has been a director since 1997. He has been a
managing director of Independent Network Group, Inc., a financial consulting
firm since 1995. He holds a Bachelors degree from St. John's University.
R. Bret Jenkins has been a director since 1997. He has been in the
private practice of securities and general business law for the past 15 years.
Mr. Jenkins, who is also a director of Worldwide Financial Holdings, Inc., holds
Bachelor of Arts and Juris Doctorate degrees from the University of Utah. JP,
Inc., a consulting firm associated with Mr. Jenkins, has a contract to provide
us with business services.
Bridget C. Owens has been a director since June 1999. She has served as
Special Assistant to the Board of Directors of Laminaire Corporation from
1995-1999. Prior thereto she was director of marketing for Independent Network
Group, Inc in 1994 and for Primac Inc., a privately-held transportation company
from 1992-1993. Prior to Primac, Ms. Owens owned and operated a trucking and
transportation company.
Steven W. Schuster has been a director since August 1999. He is a member of
McLaughlin & Stern, LLP, company counsel. Mr. Schuster has practiced corporate
and securities law for the past 20 years. He received a Bachelor of Arts degree
from Harvard University and a Juris Doctorate from New York University. Mr.
Schuster is also a director of ACTV, Inc., an interactive television company.
James Brownfiel has been an officer since August 1999. He has been engaged
in the contracting business for the past five years. He is a graduate of the
University of Notre Dame. Mr. Brownfiel is Mr. Heil's son-in-law.
Peter Daniele has been an officer since August 1999. He is a certified
public accountant who will devote approximately 50% of his time to us. From 1998
to the present, he founded and operates of Strategic Business Consultants, a New
Jersey-based provider of strategic and financial consulting services. From 1994
to 1998, Mr. Daniele held various financial management positions with Automatic
Data Processing, Inc. He holds a Bachelors Degree from Rutgers University and
also provides services to Laminaire Corporation.
Paul White has been chief technology officer since January 1999. He
founded and is CEO of Spider and World Internet Marketing Corporation. He has
passed the Patent Bar and writes software patents, trademarks and copyrights.
From 1994 to 1995, he invented and managed the development of medical laboratory
billing software at a medical laboratory software firm. From 1982 to 1994, Mr.
White owned and operated a chain of retail stores, The Wind & Surf Shop.
Board of directors
All directors hold office until the completion of their term of office,
which is not longer than three years, or until their successors have been
elected. We have a staggered Board of Directors. All officers are appointed
annually by the Board of Directors and, subject to existing employment
agreements, serve at the discretion of the Board.
The Board of Directors will have an Audit Committee, Finance, Operating
and Compensation Committee. The Audit Committee will review the results and
scope of the audit and other services provided by our independent auditors,
review and evaluate our system of internal controls. The Finance Committee will
oversee our treasury function. The Operating Committee will review and establish
our strategies, goals and direction.
Directors shall receive $4,000 per year and $350 per meeting as
compensation for serving on the Board of Directors. All directors are reimbursed
by us for any expenses incurred in attending directors' meetings. We also intend
to obtain officers and directors liability insurance, although no assurance can
be given that it will be able to do so. Stock option plan
We have a stock option plans which expires in 2009 and enables us to
grant incentive stock options, non-qualified options and stock appreciation
rights ("SARs") for up to an aggregate of 500,000 shares of our common stock.
Incentive stock options granted under the Plan must conform to applicable
Federal income tax regulations and have an exercise price not less than the fair
market value of shares at the date of grant (110% of fair market value for ten
percent or more stockholders). Other options and SARs may be granted on terms
determined by a committee of the Board of Directors.
Executive compensation
No officer, director or employee has received compensation of $100,000,
and no director, officer or employee other than David McClelland, has a contract
or commitment to receive annual compensation in excess of $100,000 except as
described below:
Mr. McClelland has a three-year employment agreement that becomes
effective January 1, 2000 and calls for an annual salary of $125,000 as well as
reimbursement of business expenses including a car allowance.
Mr. Brownfiel has a three-year employment agreement that becomes
effective January 1, 2000 and calls for an annual salary of $75,000 in 2000,
$85,000 in 2001 and $100,000 in 2002, as well as reimbursement of business
expenses including a car allowance.
We have an agreement with EH Associates, LLC, an entity associated with
Mr. Heil, under which we will pay annual consulting fees of $125,000, $140,000
and $150,000 in each of the three years in the period ended December 31, 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1999, we acquired the business and certain intangible assets
of the Distribution Division of Laminaire Corporation and incorporated such
business on our website. This division distributes disposable products used in
Cleanrooms to a wide variety of commercial customers. The purchase price
consisted of 100,000 shares of our common stock, notes payable to the seller in
the principal amount of $500,000 and the assumption of debt of $125,000. This
transaction was accounted for as a purchase in conformity with Opinion No. 16 of
the Accounting Principles Board. Edward A. Heil, our Chairman, is a director of
Laminaire. Steven W. Schuster, one of our directors, is Laminaire's corporate
secretary.
Paul White is President of Spider, Inc. and World Internet Marketing
Corporation. Our business depends heavily on its licensing and marketing
agreements with Spider and Wincorp under which Spider designs and upgrades our
software and website and provides us with servers, internet marketing and
support services for approximately $10,000.
Mr. Heil holds, directly or beneficially, a 10% interest in World Internet
Marketing Corporation, which performs Internet marketing services for us.
We have an agreement with EH Associates, LLC, an entity associated with
Mr. Heil, under which we will pay annual consulting fees of $125,000, $140,000
and $150,000 in each of the three years in the period ended December 31, 2002.
Mr. Heil receives reimbursement for expenses, but receives no other compensation
from us.
EDK Associates, LLC, an entity affiliated with Ms. Owens, has a
contract with us under which we have agreed to pay annual fees of $58,000,
$65,000 and $75,000 in each of the three years in the period ended December 31,
2002 for marketing and investor relations services.
JP Inc., an entity affiliated with Mr. Jenkins, has a contract with us
under which we have agreed to pay minimum annual fees of $50,000 in each of the
three years in the period ended December 31, 2002 for legal and other business
services.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to us
regarding beneficial ownership of our common stock at the date of this
Prospectus by
o each person known by us to own, directly or beneficially, more than 5% of
our common stock,
o each of our directors, and
o all of our officers and directors as a group.
Except as otherwise indicated, we believe that the beneficial owners of
the common stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws, where applicable.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares of Common Stock Shares of Common Stock
Owned Before Offering Owned After Offering
Name and Address of Beneficial Number of Shares Percent of Shares Number of Shares Percent of Shares
----------- ------- ------- ------- ------
Owner Owned Owned Owned Owned
- ------------ ----- ----- ----- -----
Edward A. Heil 443,000 22.15% 443,000 14.77%
JP, Inc. (3) 255,000 12.75% 255,000 8.33%
Donald Arbisi 147,000 7.35% 147,000 4.90%
Shannon White 145,000 7.25% 145,000 4.83%
Windsor Fund 145,000 7.25% 145,000 4.83%
Raymond Burghard 100,000 5.00% 100,000 3.33%
Ben Hoskins 100,000 5.00% 100,000 3.33%
Bret Jenkins 100,000 5.00% 100,000 3.33%
Laminaire Corp. 100,000 5.00% 100,000 3.33%
Steven W. Schuster 100,000 5.00% 100,000 3.33%
John C. Dello-Iacono 50,000 2.50% 50,000 1.67%
Bridget C. Owens 50,000 2.50% 50,000 1.67%
David McClelland 20,000 1.00% 20,000 0.67%
Directors and Officers
as a Group (6 persons) 1,018,000 50.90% 1,018 33.93%
</TABLE>
<PAGE>
1. The address for all officers, directors and 5% shareholders is 100-31 South
Jersey Avenue, Setauket, New York 11733.
<PAGE>
2. Does not give effect to 150,000 additional shares of common stock reserved
for the underwriter's over-allotment option; and 100,000 shares of common stock
reserved for issuance upon the exercise of the underwriter's warrants.
3.JP, Inc. is affiliated with Mr. Jenkins.
DESCRIPTION OF OUR SECURITIES
We are incorporated in the State of Nevada and are authorized to issue
up to 20,000,000 shares of common stock having a par value of $.001 per share
and 1,000,000 shares of blank check preferred stock. Neither the certificate of
incorporation nor the by-laws contain any provision that would delay, defer or
prevent a change in control.
Common stock
2,000,000 shares of common stock are issued and outstanding. Each share
of common stock entitles the holder to one vote on each matter submitted to the
stockholders. The holders of common stock:
C have equal ratable rights to dividends from funds legally
available for payment of dividends when, as and if declared by the
board of directors;
C are entitled to share ratably in all of the assets available for
distribution to holders of common stock upon liquidation,
dissolution or winding up of our affairs.
C do not have preemptive, subscription or conversion rights, or
redemption or access to any sinking fund; and
C are entitled to one non-cumulative vote per share on all matters
submitted to stockholders for a vote at any meeting of
stockholders. We have not paid any dividends on its common stock
to date. eSAFETYWORLD anticipates that, for the foreseeable
future, it will retain earnings, if any, to finance the continuing
operations of its business. The payment of dividends will depend
upon, among other things, capital requirements and the operating
and financial conditions of eSAFETYWORLD.
Shareholders do not have any preemptive rights to subscribe for or
purchase any stock, warrants or other securities of eSAFETYWORLD. The common
stock is not convertible or redeemable. Neither the certificate of incorporation
nor its by-laws provide for preemptive rights.
Preferred stock
Our Certificate of Incorporation authorizes the issuance of 1,000,000
shares of preferred stock with designations, rights and preferences determined
from time to time by its Board of Directors. Accordingly, our Board of Directors
is empowered, without stockholder approval, to issue shares of preferred stock
with voting, liquidation, conversion, or other rights that could adversely
affect the rights of the holders of the common stock. Although we have no
present intention to issue any shares of preferred stock, there can be no
assurance that we will not do so in the future. No preferred stock may be issued
by us without the underwriter's consent for a period of 12 months following the
effective date.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our bylaws provide that we shall indemnify its officers, directors,
employees and other agents to the fullest extent permitted by Nevada law. In
addition, our Certificate of Incorporation provides that, to the fullest extent
permitted by Nevada law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty of care to us or our shareholders.
This provision in the Certificate of Incorporation does not eliminate the
directors' duty of care, and in appropriate circumstances equitable remedies
such as an injunction or other forms of non-monetary relief would remain
available under Nevada law. Each director will continue to be subject to
liability for breach of the director's duty of loyalty to us or our
shareholders, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit and for improper distributions to
shareholders. In addition, this provision does not affect a director's
responsibilities under any other laws, such as the Federal securities laws or
state or Federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act maybe permitted to directors, officers, and controlling persons pursuant to
the foregoing provision, or otherwise, we have been advised that in the opinion
of the SEC, such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suitor proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such case.
There is no pending litigation or proceeding involving a director or
officer as to which indemnification is or may be sought.
UNDERWRITING
The underwriting agreement provides that the obligations of the
underwriter are subject to certain conditions. The nature of the underwriter's
obligations is that they are committed to purchase and pay for all of the above
shares of common stock if any are purchased.
Public offering price and dealers concession
The underwriter proposes initially to offer the shares of common stock
offered by this prospectus to the public at the public offering price per share
set forth on the cover page of this prospectus and to certain dealers, who are
members of the National Association of Securities Dealers, Inc., at that price
less a concession not in excess of $ per share. The underwriter may allow, and
these dealers may reallow, a discount not in excess of $ per share on sales to
certain other NASD member dealers. After commencement of this offering, the
offering price, discount price and reallowance may be changed by the
underwriter. No such change will alter the amount of proceeds to be received by
us asset forth on the cover page of this prospectus.
Over-allotment option
We have granted the underwriter an option, which may be exercised
within 45 days after the date of this prospectus, to purchase up to 150,000
additional shares of common stock to cover over-allotments, if any, at the
initial public offering price, less the underwriting discount set forth on the
cover page of this prospectus. If the underwriter exercise its over-allotment
option to purchase any of these additional 150,000 shares of common stock, these
additional shares will be sold by the underwriter on the same terms as those on
which the shares offered by this prospectus are being sold. We will be
obligated, pursuant to the over-allotment option, to sell shares to the
underwriter if the underwriter exercises their over-allotment option. The
underwriter may exercise its over-allotment option only to cover over-allotments
made in connection with the sale of the shares of common stock offered by this
prospectus.
Non-accountable expense allowance
We have agreed to pay the underwriter a non-accountable expense
allowance of 3% of the gross proceeds derived from the sale of the shares of
common stock underwritten (including the sale of any shares of common stock that
the underwriter may sell to cover over-allotments, if any, pursuant to the
over-allotment option), of which $25,000 has been paid as of the date of this
prospectus. We have also agreed to pay all expenses in connection with
qualifying the common stock offered hereby for sale under the laws of the states
as eSAFETYWORLD and the underwriter may designate and registering the offering
with the NASD, including filing fees and fees and expenses of counsel retained
for these purposes.
Underwriting compensation
The following table summarizes the compensation to be paid to the
underwriter by us:
<TABLE>
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<S> <C> <C> <C> <C> <C> <C>
With
Per Share Overallotment
Underwriting discounts paid by us
</TABLE>
Indemnification of underwriter
We have agreed to indemnify the underwriter against certain civil
liabilities, including liabilities under the Securities Act.
Underwriter's warrants
Upon completion of this offering, we will sell to the underwriter, for
its own accounts, warrants covering an aggregate of up to 100,000 shares of
common stock exercisable at a price of $10.50 per share. The underwriter will
pay a price of $0.001 per warrant. The underwriter may exercise these warrants
as to all or any lesser number of the underlying shares of common stock
commencing on the first anniversary of the date of this offering until the fifth
anniversary of the date of this offering. The terms of these warrants require us
to register the common stock for which these warrants are exercisable within one
year from the date of the prospectus. These underwriter's warrants are not
transferable by the warrant holders other than to officers and partners of the
underwriter. The exercise price of these underwriter's warrants and the number
of shares of common stock for which these warrants are exercisable are subject
to adjustment to protect the warrant holders against dilution in certain events.
Stabilization and other transactions
In connection with this offering, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the common stock. These transactions effected in accordance with Rule 104 of
Regulation M under the Exchange Act, pursuant to which the underwriter may bid
for, or purchase, common stock for the purpose of stabilizing the market price.
The underwriter also may create a short position by selling more common stock in
connection with this offering than they are committed to purchase from us, and
in such case may purchase common stock in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the common stock at a level above that which might otherwise prevail in
the open market. None of the transactions described in the paragraph is
required, and, if they are undertaken, they may be discontinued at any time.
Discretionary accounts
The underwriter has informed that it does not intend to confirm sales
to any account over which it exercises discretionary authority.
Determination of offering price
Prior to this offering, there has been no market for our common stock.
Accordingly, the initial public offering price for the common stock was
determined by negotiation between us and the underwriter. Among the factors
considered in determining the initial public offering price were our results of
operations, our current financial condition, our future prospects, the state of
the markets for our services, the experience of our management, the economics of
the online information industry in general, the general condition of the equity
securities market and the demand for similar securities of companies considered
comparable to us.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed
upon for the Underwriter by its counsel, Sichenzia, Ross & Friedman LLP, 135
West 50th Street, 20th Floor, New York, New York.
Certain legal matters will be passed upon for us by McLaughlin & Stern,
LLP, 260 Madison Avenue, New York, New York.
EXPERTS
The financial statements of eSAFETYWORLD, Inc. at June 30, 1999 and for
each of the three fiscal periods in the period then ended and the financial
statements of the Cleanroom Distribution Product Group of Laminaire Corporation
as of December 31, 1998 and for each of the two years in the period ended
December 31, 1998 appearing in this Prospectus and Registration Statement have
been audited by Eichler, Bergsman & Co., LLP, Certified Public Accountants, as
set forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
eSAFETYWORLD files reports, proxy statements and other information with
the Commission. Those reports, proxy statements and other information may be
obtained:
C At the public reference room of the Commission, Room 1024-
Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C.
20549;
C At the public reference facilities at the Commission's
regional offices located at Seven World Trade Center, 13th
Floor, New York, NY 10048 or Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661;
C By writing to the Commission, Public Reference Section, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549;
C At the offices of the Nasdaq Stock Market, Reports Section,
1735 K Street, N.W., Washington, D.C. 20549
C From the Internet site maintained by the Commission at
http://www.sec.gov, which contains reports, proxy information
statements and other information regarding issuers that file
electronically with the Commission.
eSAFETYWORLD has filed with the Commission a registration statement
under the Securities Act of 1933, as amended, with respect to the common stock
offered hereby. This prospectus, which is a part of the registration statement,
does not contain all the information set forth, or annexed as exhibits to, such
registration statement, certain portions of which have been omitted pursuant to
rules and regulations of the Commission. For further information with respect to
eSAFETYWORLD and the common stock, reference is made to such registration
statement, including exhibits thereto, copies of which may be inspected and
copied at the aforementioned facilities of the Commission. Copies of such
registration statement, including exhibits, may be obtained from the Public
Reference Section of the Commission at the aforementioned address upon payment
of the fee prescribed by the Commission. Information regarding the operation of
the Commission's public reference facilities may be obtained by calling the SEC
at 1-800-SEC-0330.
eSAFETYWORLD intends to distribute to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accountants after the close of each fiscal year, and will make such other
periodic reports as the company may determine to be appropriate or as may be
required by law.
eSAFETYWORLD 's fiscal year ends December 31 each year.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page Number
eSAFETYWORLD, Inc.:
Independent Auditors' Report F-2
Balance Sheet, June 30, 1999 F-3
Statements of Operations for the Period July 17, 1997 (inception) to F-4
December 31, 1997, the Year Ended December 31, 1998 and the Six
Months Ended June 30, 1999.
Statements of Cash Flows for the Period July 17, 1997 (inception) to F-5
December 31, 1997, the Year Ended December 31, 1998 and the Six Months Ended
June 30, 1999.
Notes to Financial Statements F-6
Cleanroom Distribution Product Group of Laminaire Corporation:
Independent Auditors' Report F-8
Balance Sheet, December 31, 1998 F-9
Statements of Operations for the Years Ended December 31, 1998 and F-10
1997
Statements of Cash Flows for the Years Ended December 31, 1998 and F-11
1997
Notes to Financial Statements F-12
Condensed Balance Sheet, June 30, 1999 F-14
Condensed Statements of Operations for the Six Months Ended June 30, F-15
1999 and 1998 (unaudited)
Condensed Statements of Cash Flows for the Six Months Ended June 30, F-16
1999 and 1998
Notes to Condensed Financial Statements for the Six Months Ended June F-17
30, 1999 and 1998 (unaudited)
</TABLE>
<PAGE>
Eichler Bergsman & Co., LLP Gilbert Bergsman
Certified Public Accountants Paul Eichler
404 Park Avenue South, New York, New York 10016 Richard M. Plutzer
Tel 212-447-9007 Fax 212-447-9006 Michael E. Silverman
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
eSafetyworld, Inc.
We have audited the accompanying balance sheet of eSafetyworld, Inc. as of June
30, 1999, and the related statements of income and cash flows for the period
ended December 31, 1997, for the year ended December 31, 1998 and for the six
months ended June 30, 1999. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement 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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of eSafetyworld, Inc. as of June
30, 1999, and the results of its operations and its cash flows for the period
ended December 31, 1997, for the year ended December 31, 1998 and for the six
months ended June 30, 1999 in conformity with generally accepted accounting
principles.
/s/Eichler Bergsman & Co., LLP
New York, New York
August 25, 1999
<PAGE>
<TABLE>
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<S> <C> <C> <C> <C> <C> <C>
eSAFETYWORLD, Inc.
Balance Sheet
June 30, 1999
Assets: Pro forma (unaudited
6/30/99 Note 4)
Current Cash -- $375,000
Customer and Vendor Lists -- 1,350,000
Deferred Offering Costs $10,000 10,000
------- ------
Total $10,000 $1,735,000
======= ==========
Liabilities and Stockholders' Equity:
Notes Payable $ -- $575,000
Accrued Expenses -- 150,000
-------
Total Current Liabilities -- 725,000
Long Term Debt 300,000
Stockholders' Equity:
Preferred Stock; 1,000,000 shares authorized, -- --
none issued
Common stock, par value $.001; 20,000,000 1,900 2,000
authorized; 1,900,000 issued (2,000,000 pro forma)
Paid in capital 8,100 708,000
----- -------
Total Stockholders' Equity 10,000 710,000
------ -------
Total Liabilities and Stockholders' Equity $10,000 $1,735,000
======= ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
eSAFETYWORLD, Inc.
Statements of Operations
Forthe Period July 17, 1997 (inception) to December
31, 1997, the Year Ended December 31, 1998 and the
Six Months Ended
June 30, 1999
Six Months Ended June 30, Year Ended December 31, July 17, 1997 to December
1999 1998 31, 1997
Revenues $-- 0 -- $-- 0 -- $-- 0 --
Costs -- 0 -- -- 0 -- -- 0 --
-- ------- -- ------- -- -------
Results of Operations $-- 0 -- $-- 0 -- $-- 0 --
======== ======== ========
Primary Earnings $-- 0 -- $-- 0 -- $-- 0 --
======== ======== ========
Per Share
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
eSAFETYWORLD, Inc.
Statements of Cash Flows
Forthe Period July 17, 1997 (inception) to December
31, 1997, the Year Ended December 31, 1998 and the
Six Months Ended
June 30, 1999
Six Months Ended June 30, Year Ended July 17, 1997 to December
--------- - --------
1999 December 31, 1998 31, 1997
---- ----------------- --------
Cash from Operating
Activities $-- 0 -- $-- 0 -- $ -- 0 --
-------- -------- ---------
Cash from Financing
Activities
Capital Contribution 10,000 --- ---
Deferred Offering
Costs (10,000) --- ---
-------- ---------- --- --------- ---
Cash End of Period $-- 0 -- $-- 0 -- $-- 0 --
======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
ESAFETY WORLD, Inc.
Notes to Financial Statements
June 30, 1999
1. ORGANIZATION
eSAFETYWORLD was established as a Nevada corporation in July 1997 as The SL
Group, Inc. and changed its name to eSAFETY WORLD, Inc. in August 1999. Its
purpose in being formed was to develop and operate a Business-to-Business
E-Commerce site on the World Wide Web.
In August 1999, the Company entered into an agreement under which it
acquired the distribution business of Laminaire Corporation in exchange for
100,000 shares of its common stock, notes in the principal amount of $500,000
and the assumption of payables in the amount up to $125,000. The Company also
acquired customer and vendor lists but acquired no tangible assets such as
inventories or accounts receivable as part of the transaction. The acquired
business distributes disposable products used in Cleanrooms to a wide variety of
commercial customers. The transaction was accounted for as a purchase in
conformity with Opinion No. 16 of the Accounting Principles Board.
2. ACCOUNTING AND REPORTING POLICIES
A summary of the Company's principal accounting and financial reporting
policies is as follows:
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods, The principal assumptions
inherent in the accompanying financial statements relate to the allocation of
expenses included in such financial statements.
Revenue Recognition - Revenue for product sales will be recognized in
the period in which the product is shipped.
Advertising - The Company will charge advertising costs to expense as
incurred. Costs related to CD-ROMs, promotional literature and catalogs will be
charged to operations when mailed or distributed.
3. STOCKHOLDERS' EQUITY
The Company is a Nevada corporation. Its Certificate of Incorporation
provides that its authorized capital stock consists of 1 million shares of blank
check preferred stock and 20 million shares of common stock, par value S.001 per
share. The holders of the common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Holders of
common stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. The Board of
Directors, without shareholder approval, could issue shares of common stock upon
such terms as it determines to whomever it pleases, including persons who or
entities that would help present management maintain control.
4. SUBSEQUENT EVENTS
In July and August 1999, The Company received one year loans in the
principal amounts of $250,000 and S 125,000, respectively. Both loans bear
interest at the rate of 8% per annum, are repayable one year from the date of
issue and are prepayable upon the completion of a public offering or private
placement of equity securities.
The unaudited pro forma financial information set forth on the Balance
Sheet was prepared assuming that the acquisition described in Note 1 and the
loans described in the paragraph above had taken place on June 30, 1999. For the
purposes of preparing the pro forma information, the shares of common stock
issued were valued at the estimated public offering price. The acquired
business, which functioned as a product group of Laminaire Corporation and not
as a separate and distinct entity, reported the following results in 1998 and
1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1998 1997
---- ----
Revenues $2,267,846 $1,506,607
Cost of revenues 2,070,174 1,117,464
Gross profit 197,672 389,143
Operating profit 54,067 204,106
</TABLE>
In August 1999, The Company made a demand loan to Laminaire Corporation
in the principal amount of $102,000. The loan bears interest at the rate of 9%
per annum and is convertible, at the holder's option into shares of Laminaire's
common stock.
<PAGE>
Eichler Bergsman & Co., LLP Gilbert Bergsman
Certified Public Accountants Paul Eichler
404 Park Avenue South, New York, New York 10016 Richard M. Plutzer
Tel 212-447-9007 Fax 212-447-9006 Michael E. Silverman
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Cleanroom Distribution Product Group
We have audited the accompanying balance sheet of Cleanroom Distribution Product
Group as of December 31, 1998 and the related statements of income and cash
flows for the years ended December 31, 1998 and 1997. 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.
These 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 Cleanroom Distribution Product
Group as of December 31, 1998 and the results of its operations and its cash
flows for the two years ended December 31, 1998 and 1997 in conformity with
generally accepted accounting principles.
/s/Eichler, Bergsman & Co., LLP
New York, New York
August 12, 1999
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cleanroom Distribution Product Group
Balance Sheet
December 31, 1998
ASSETS:
Accounts receivable $213,935
Inventory 75,174
Total $289,109
LIABILITIES AND OTHER:
Accounts payable $318,899
Deficit (30,790)
Total $289,109
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cleanroom Distribution Product Group
Statements of Operations
Years Ended December 31, 1998 and 1997
1998 1997
Revenues $2,267,846 $1,506,607
Cost of revenues 2,070,174 1,117,464
--------- ---------
Gross profit 197,672 389,143
Selling 98,148 154,905
General and administrative 45,357 30,132
------ ------
Operating profit 54,067 204,106
Transferred to Laminaire Corporation
(54,067) (204,106)
-------- ---------
Division Equity, End of Year
$ -0- $ -0-
===== =====
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cleanroom Distribution Product Group
Statements of Cash Flows
Years Ended December 31, 1998 and 1997
1998 1997
Cash From Operations $54,067 $204,106
Cash Transferred to Laminaire
(54,067) (204,106)
-------- ---------
Cash, End of Year $-0- $-0-
==== ====
See Notes to Financial Statements.
</TABLE>
<PAGE>
Cleanroom Distribution Product Group
Notes to Financial Statements
Years Ended December 31, 1998 and 1997
1. Operations and Organization
The Cleanroom Distribution Product Group is a Division of Laminaire
Corporation and is engaged in the sale and distribution of disposable safety
garments and equipment. In August 1999, Laminaire entered into an agreement
under which its distribution business was sold to The SL Group, Inc. in exchange
for common shares of The SL Group, Inc., notes and the assumption of certain
payables.
2. Accounting and Reporting Policies
A summary of the Division's principal accounting and financial
reporting policies is as follows:
Assets and Liabilities
The operating assets and liabilities used by Laminaire are commingled.
The accompanying balance sheet reflects the direct assets and liabilities of the
Cleanroom Product Distribution Group of Laminaire Corporation. All earnings
prior to December 31, 1998 were retained by Laminaire. The cash associated with
such earnings was commingled with other Laminaire cash and was not necessarily
used to satisfy the Group's trade obligations. The deficit represents the extent
to which cash generated by the Group was used for other Laminaire purposes. No
such assets or liabilities were included in the sale to The SL Group, Inc.
The inventories included in the accompanying balance sheet are recorded
at the lower of cost (determined on a FIFO basis) or market.
Revenue Recognition
Revenue for product sales is recognized in the period in which the
product is shipped.
Expenses
The operations of the Division were conducted in Laminaire's facility
during 1998 and 1997. Accordingly, such operations utilized Laminaire's building
and administrative staff. Cost of sales in the accompanying Statement of
Operations consists of direct product costs. Payroll costs represent the payroll
costs of people directly associated with the Division's operations. All other
expenses represent an allocation of corporate and joint expenses. The Division
believes that the cost of obtaining the services represented by the allocated
costs and expenses from outside sources would not be materially higher than the
amount allocated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. The principal assumptions inherent in the
accompanying financial statements relate to the allocation of expenses included
in such financial statements.
Advertising
The Division will charge advertising costs to expense as incurred.
Costs related to mail order catalogs and promotional materials are charged to
operations when mailed or distributed.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cleanroom Distribution Product Group
Balance Sheet
June 30, 1999
(unaudited)
ASSETS:
Accounts receivable $156,403
Inventory 70,680
Total $227,083
LIABILITIES AND OTHER:
Accounts payable $325,859
Deficit (98,776)
Total $227,083
See Notes To Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cleanroom Distribution Product Group
Condensed Statements of Operations
Six Months Ended June 30, 1999 and 1998
(Unaudited)
1999 1998
Revenues $746,325 $867,770
Cost of revenues 565,333 652,738
------- -------
Gross profit 180,992 215,032
Selling 70,081 55,513
General and administrative 14,927 17,355
------ ------
Operating profit 95,984 142,164
Transferred to Laminaire Corporation (95,984) (142,164)
-------- --------
Division Equity, End of Period $ -0- $ -0-
===== =====
See Notes to Condensed Statements of Operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Cleanroom Distribution Product Group
Condensed Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998
(unaudited)
1999 1998
Cash From Operations $95,984 $142,164
Cash Transferred to Laminaire (95,984) (142,164)
-------- ---------
Cash, End of Period $-0- $-0-
==== ====
See Notes to Financial Statements.
</TABLE>
<PAGE>
Cleanroom Distribution Product Group
Notes to Statements of Operations
Six Months Ended June 30, 1999 and 1998
(Unaudited)
NOTE 1--BASIS OF PRESENTATION
The accompanying interim condensed statements of for the six-month
periods ended June 30, 1999 and 1998 are unaudited and include all adjustments
considered necessary by Management for a fair presentation. The results of
operations realized during an interim period are not necessarily indicative of
results to be expected for a full year.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------- -------------------------------------------------------------
We have not authorized anyone to give any information different
from that contained in this prospectus. You must not rely on any unauthorized
information. We are offering to sell, and seeking offers to buy, shares of
common stock only in states where offers and sales are permitted. The
information in
this prospectus is accurate only as of the date of this prospectus. 1,000,000 Shares
of Common Stock
TABLE OF CONTENTS
Page
Prospectus Summary 3
Risk Factors 9 eSAFETYWORLD, INC.
Use of Proceeds .19
Dividend Policy .20
Dilution 21
Capitalization 22
Selected Financial Information 23
Management's Discussion and Analysis of
Results of Operation and Financial Condition 25
Business 29
Management 41 PROSPECTUS
Certain Relationships and
Related Transactions 43
Principal Shareholders 44
Description of Securities 45 KASHNER DAVIDSON Indemnification of
Officers and Directors 46 SECURITIES CORP.
Underwriting 47
Legal Matters 49
Experts 49
Additional Information 50
Financial Statements F-1 , 1999
Until , 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in the securities offered hereby, whether or not
participating in the distribution, may be required to deliver a prospectus. This
is in addition to the obligation of dealers to deliver a prospectus when acting
as underwriters and with regard to their unsold allotments or subscription.
- --------------------------------------------------------------------- -------------------------------------------------------------
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Subsection 1 of Section 78.7302 of Chapter 78 of the Nevada General Corporation
Law ("NGCL") empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (except in an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe his action was unlawful.
Subsection 2 of Section 78.7502 of the NGCL empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses, including
amounts paid in settlement and attorneys' fees, actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if he
acted in accordance with the standard set forth above, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged by a court of competent jurisdiction after
exhaustion of all appeals therefrom to be liable to the corporation or for
amounts paid in settlement to the corporation unless and only to the extent that
the court in which such action or suit was brought or other court of competent
jurisdiction determines that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.
Section 78.751 of the NGCL provides that unless indemnification is ordered by a
court, the determination to provide indemnification must be made by the
stockholders, by a majority vote of a quorum of the board of directors who were
not parties to the action, suit or proceeding, or in specified circumstances by
independent legal counsel in a written opinion. In addition, the articles of
incorporation, bylaws or an agreement made by the corporation may provide for
the payment of the expenses of a director or officer of the expenses of
defending an action as incurred upon receipt of an undertaking to repay the
amount if it is ultimately determined by a court of competent jurisdiction that
the person is not entitled to indemnification. Section 78.751 of the NGCL
<PAGE>
further provides that, to the extent a director or officer of a corporation has
been successful on the merits or otherwise in the defense of any action, suit or
proceeding referred to in subsection (1) and (2) , or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 78.751 of the
NGCL shall not be deemed exclusive of any other rights to which the indemnified
party may be entitled and that the scope of indemnification shall continue as to
directors, officers, employees or agents who have ceased to hold such positions,
and to their heirs, executors and administrators.
Finally, Section 78.752 of the NGCL empowers the corporation to purchase and
maintain insurance on behalf of a director, officer, employee or agent of the
corporation against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such whether or not the
corporation would have the authority to indemnify him against such liabilities
and expenses.
The Registrant's bylaws provide for indemnification of officer, directors and
others to the fullest extent permitted by the laws of the State of Nevada.
Item 25. Other Expenses of Issuance and Distribution
The expenses payable by registrant in connection with the issuance and
distribution of the securities being registered are estimated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Securities and Exchange Commission Fees................................................................$2,530
Accounting Fees and Expenses...........................................................................15, 000
Blue Sky Fees and Expenses.............................................................................25,000
Printing Expenses (including Securities)...............................................................50,000
Legal Fees.............................................................................................75,000
Miscellaneous..........................................................................................32,470
Total..........................................................................................$200,000
</TABLE>
The selling security holders will not assume any of the expenses of their
offering except to the extent that they engage their own legal counsel. The
estimate of expenses includes expenses in connection with the issuance and
distribution of shares by the selling security holders.
Item 26. Recent Sales of Unregistered Securities
All issuances were under Section 4(2) unless otherwise indicated. The issuances
under 4(2) to officers, employees or legal counsel were to persons familiar with
the operations of the registrant. Other issuances under Section 4(2) were to
advisors. The Company believed that these advisors were sufficiently
sophisticated to qualify for the exemption because they are in the business of
advising corporations on marketing, finance or public relations, as the case may
be, and are familiar with the business of the registrant.
<PAGE>
Item 27. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Description
1.1 -- Form of Underwriting Agreement
3.1 -- Registrant's Articles of Incorporation dated July 21, 1997
3.2 -- Registrant's Amendment to Articles of Incorporation dated
August 19, 1999
3.3 -- Registrant's By-laws
4.1 -- Form of Common Stock Certificate1
4.2 -- 1999 Stock Option Plan
4.3 -- Form of Underwriter's Warrant Agreement
5.1 -- Opinion of McLaughlin & Stern, LLP
10.1 -- Asset Purchase Agreement with Laminaire Corp.
10.2 -- Agreement with EH Associates, LLC
10.3 -- Agreement with JP, Inc.
10.4 -- Agreement with EDK Associates, LLC
10.5 -- Employment Agreement with David McClelland1
10.6 -- Employment Agreement with James Brownfiel1
10.7 -- Form of Advisory Investment Banking Agreement between
Registrant and Kashner Davidson Securities Corp.
23.1 -- Consent of Eichler Bergsman & Co., LLP
23.2 -- Consent of McLaughlin & Stern, LLP (included in Exhibit 5.1).
24 -- Power of Attorney (contained on signature page).
27 -- Financial Data Schedule.
Schedules other than those listed above have been omitted since they are either
not required, are not applicable or the required information is shown in the
financial statements or related notes.
Item 28. Undertaking
The undersigned Registrant hereby undertakes to:
(a) (1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
- --------
1 To be filed by amendment.
<PAGE>
(i) Include any prospectus required by section 10(a) (3) of the Securities
Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of a prospectus filed with the Commission
under Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement;
(iii) Include any additional or changed material information on the plan of
distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement for the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering;
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering; and
(b)Provide to the underwriter at the closing specified in the underwriting
agreement certificates in such denominations and registered in such names as
required by the Underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer under the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
under Rule 424(b) (1) or (4) or 497 (h) under the Securities Act shall
be deemed to be part of this registration as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
Town of Setauket, State of New York, on August 31, 1999.
eSAFETYWORLD, Inc.
By: /s/ Edward A. Heil
Edward A. Heil
By:/s/ Peter Daniele, Chief Financial Officer
Peter Daniele, Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Edward A. Heil and Peter Daniele and each of
them his true and lawful attorney-in-fact and agent with power of substitution
and resubstitution, for him or her, and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including post
effective amendments) to this Registration Statement on Form SB-2, and to file
the same, with all exhibits thereto, and all documents in connection
therewith, with the Commission, granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done to comply with the
provisions of the Securities Act and all requirements of the Commission,
hereby ratifying and confirming all that said attorneys-in-fact or either of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Name Title Date
By:/s/ Edward A. Heil Director August 31, 1999
------------------------------
Edward A. Heil
By:/s/ Steven W. Schuster Director August 31, 1999
---------------------------------------
Steven W. Schuster
By:/s/ Bridget C. Owens Director August 31, 1999
---------------------------------------
Bridget C. Owens
By:/s/ John C. Dello-Iacono Director August 31, 1999
------------------------------
John C. Dello-Iacono
By:/s/ R. Bret Jenkins Director August 31, 1999
---------------------------------------
R. Bret Jenkins
EXHIBIT 1.1
eSAFETYWORLD, Inc.
1,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
[_______], 1999
Kashner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34326
Gentlemen:
eSafetyworld, Inc., a corporation organized under the laws of the State
of Nevada (the "Company"), hereby confirms its agreement with Kashner Davidson
Securities Corporation, ("Kashner") as the underwriter of its securities (the
"Underwriter"), as set forth below.
The Company proposes to issue and sell to the Underwriters 1,000,000
shares of the Company's common stock, $.001 par value per share (the "Common
Stock"). The shares of Common Stock being sold by the Company are referred to as
the "Firm Shares."
In addition, for the sole purpose of covering over-allotments from the
sale of the Firm Shares the Company proposes to grant to the Underwriters an
option to purchase an additional 150,000 shares of Common Stock, (the "Firm
Option Shares" or the "Option Shares"), all as provided in Section 2(c) of this
agreement (the "Agreement") and to issue to you the Underwriter's Warrant (as
defined in Section 2 hereof) to purchase certain further additional shares of
Common Stock. The Firm Shares and the Option Shares are collectively referred to
herein as either the "Shares" or the "Securities."
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333- ),
with respect to the Securities and the Underwriter's Warrant Securities (as
hereinafter defined), including a prospectus subject to completion, has been
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and one
or more amendments to that registration statement may have been so filed. Copies
of such registration statement and of each amendment heretofore filed by the
Company with the Commission have been delivered to the Underwriters. After the
execution of this Agreement, the Company will file with the Commission either
(i) if the registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most
<PAGE>
recently included in that registration statement (or, if an amendment thereto
shall have been filed, in such amendment), with such changes or insertions as
are required by Rule 430A under the Act, or permitted by Rule 424(b), under the
Act and as have been provided to and approved by the Underwriters prior to the
execution of this Agreement, or (ii) if that registration statement, as it may
have been amended, has not been declared by the Commission to be effective under
the Act, an amendment to that registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved by the
Underwriters prior to the execution of this Agreement. The Company also may file
a related registration statement with the Commission pursuant to Rule 462(b)
under the Act for purposes of registering certain additional Securities, which
registration statement shall become effective upon filing with the Commission
(the "Rule 462(b) Registration Statement"). As used in this Agreement, the term
"Registration Statement" means that registration statement, as amended at the
time it was or is declared effective, and any amendment thereto that was or is
thereafter declared effective, including all financial schedules and exhibits
thereto and any information omitted therefrom pursuant to Rule 430A under the
Act and included in the Prospectus (as hereinafter defined), together with any
Rule 462(b) Registration Statement; the term "Preliminary Prospectus" means each
prospectus subject to completion filed with the Registration Statement
(including the prospectus subject to completion, if any, included in the
Registration Statement at the time it was or is declared effective); and the
term "Prospectus" means the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act or, if no prospectus is so filed pursuant to Rule
424(b), the prospectus included in the Registration Statement. The Company has
caused to be delivered to the Underwriters copies of each Preliminary Prospectus
and has consented to the use of those copies for the purposes permitted by the
Act. If the Company has elected to rely on Rule 462(b) and the Rule 462(b)
Registration Statement has not been declared effective, then (i) the Company has
filed a Rule 462(b) Registration Statement in compliance with and that is
effective upon filing pursuant to Rule 462(b) and has received confirmation of
its receipt and (ii) the Company has given irrevocable instructions for
transmission of the applicable filing fee in connection with the filing of the
Rule 462(b) Registration Statement, in compliance with Rule 111 promulgated
under the Act or the Commission has received payment of such filing fee.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When each Preliminary
Prospectus and each amendment and each supplement thereto was filed with the
Commission it (i) contained all statements required to be stated therein, in
accordance with, and complied with the requirements of, the Act and the rules
and regulations of the Commission thereunder and (ii) did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration Statement was or is
declared effective, it (i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not
<PAGE>
misleading. When the Prospectus and each amendment or supplement thereto is
filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required so to be filed, when the Registration
Statement containing such Prospectus or amendment or supplement thereto was or
is declared effective) and on the Firm Closing Date and any Option Closing Date
(as each such term is hereinafter defined), the Prospectus, as amended or
supplemented at any such time, (i) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The foregoing provisions o this paragraph (b) do not apply
to statements or omissions made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by the
Underwriters specifically for use therein.
(c) The Company is duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdictions of
incorporation, and duly qualified or authorized to transact business as a
foreign corporation and is in good standing in each jurisdiction where the
ownership or leasing of its properties or the conduct of its businesses require
such qualification or authorization.
(d) The Company has full corporate power and authority, and
all necessary material authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory authorities, to own or lease
its property and conduct its business as now being conducted and as proposed to
be conducted as described in the Registration Statement and the Prospectus (and,
if the Prospectus is not in existence, the most recent Preliminary Prospectus).
(e) The Company does not own, directly or indirectly, an
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business entity.
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All of the issued shares of
capital stock of the Company, have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. There are no
outstanding options, warrants or other rights granted by the Company to purchase
shares of its Common Stock or other securities, other than as described in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The Shares have been duly authorized, by all necessary
corporate action on the part of the Company and, when the Shares are issued and
delivered to and paid for by the Underwriter pursuant to this Agreement, the
Shares will be validly issued, fully paid, nonassessable and free of preemptive
rights and will conform to the description
<PAGE>
thereof in the Prospectus (and, if the Prospectus is not in existence, the most
recent Preliminary Prospectus). No holder of outstanding securities of the
Company is entitled as such to any preemptive or other right to subscribe for
any of the Securities, and no person is entitled to have securities registered
by the Company under the Registration Statement or otherwise under the Act other
than as described in the Prospectus (and, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(g) The capital stock of the Company conforms to the
description thereof contained in the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
(h) All issuances of securities of the Company have been
effected pursuant to an exemption from the registration requirements of the Act.
No compensation was paid to or on behalf of any member of the National
Association of Securities Dealers, Inc. ("NASD"), or any affiliate or employee
thereof, in connection with any such issuance.
(i) The financial statements of the Company included in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present the financial
position of the Company as of the dates indicated and the results of operations
of the Company for the periods specified. Such financial statements have been
prepared in accordance with accounting principles generally accepted in effect
in the United States of America, consistently applied, except to the extent that
certain footnote disclosures regarding unaudited interim periods may have been
omitted in accordance with the applicable rules of the Commission under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The financial data
set forth under the captions "Summary Financial Information" and "Selected
Financial Information" in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present, on the basis
stated in the Prospectus (or such Preliminary Prospectus), the information
included therein.
(j) Eichler Bergsman & Co., LLP has audited certain financial
statements of the Company and delivered their report with respect to the
financial statements included in the Registration Statement and the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), and are independent public accountants with respect to the Company
as required by the Act and the applicable rules and regulations thereunder.
(k) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (and, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), (i) except as
otherwise contemplated therein, there has been no material adverse change in the
business, operations, condition (financial or otherwise), earnings or prospects
of the Company, whether or not arising in the ordinary course of business, (ii)
except as otherwise stated therein, there
<PAGE>
have been no transactions entered into by the Company and no commitments made by
the Company that, individually or in the aggregate, are material with respect to
the Company, (iii) there has not been any change in the capital stock or
indebtedness of the Company, and (iv) there has been no dividend or distribution
of any kind declared, paid or made by the Company in respect of any class of its
capital stock.
(l) The Company has full corporate power and authority to
enter into and perform its obligations under this Agreement and the
Underwriter's Warrant Agreement (as hereinafter defined). The execution and
delivery of this Agreement and the Underwriter's Warrant Agreement have been
duly authorized by all necessary corporate action on the part of the Company and
this Agreement and the Underwriter's Warrant Agreement have each been duly
executed and delivered by the Company and each is a valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law), and except as rights to indemnity and contribution under this Agreement
may be limited by applicable law. The issuance, offering and sale by the Company
to the Underwriters of the Securities pursuant to this Agreement or the
Underwriter's Securities pursuant to the Underwriter's Warrant Agreement, the
compliance by the Company with the provisions of this Agreement and the
Underwriter's Warrant Agreement, and the consummation of the other transactions
contemplated by this Agreement and the Underwriter's Warrant Agreement do not
(i) require the consent, approval, authorization, registration or qualification
of or with any court or governmental or regulatory authority, except such as
have been obtained or may be required under state securities or blue sky laws
and, if the registration statement filed with respect to the Securities (as
amended) is not effective under the Act as of the time of execution hereof, such
as may be required (and shall be obtained as provided in this Agreement) under
the Act, or (ii) conflict with or result in a breach or violation of, or
constitute a default under, any material contract, indenture, mortgage, deed of
trust, loan agreement, note, lease or other material agreement or instrument to
which the Company is a party or by which the Company or any of its property is
bound or subject, or the certificate of incorporation or by-laws of the Company,
or any statute or any rule, regulation, judgment, decree or order of any court
or other governmental or regulatory authority or any arbitrator applicable to
the Company.
(m) No legal or governmental proceedings are pending to which
the Company is a party or to which the property of the Company is subject, and
no such proceedings have been threatened against the Company or with respect to
any of its property, except such as are described in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). No
contract or other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein (and, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) or filed as required.
<PAGE>
(n) The Company is not in (i) violation of its certificate of
incorporation, by-laws or other governing documents, (ii) violation in any
material respect of any law, statute, regulation, ordinance, rule, order,
judgment or decree of any court or any governmental or regulatory authority
applicable to it, or (iii) other than as described in the Prospectus, default in
any material respect in the performance or observance of any obligation,
agreement, covenant or condition contained in any material contract, indenture,
mortgage, deed of trust, loan agreement, note, lease or other material agreement
or instrument to which it is a party or by which it or any of its property may
be bound or subject, and no event has occurred which with notice or lapse of
time or both would constitute such a default.
(o) The Company currently owns or possesses adequate rights to
use all intellectual property, including all trademarks, service marks, trade
names, copyrights, inventions, know-how, trade secrets, proprietary
technologies, processes and substances, or applications or licenses therefor,
that are described in the Prospectus (and if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and any other rights or interests in
items of intellectual property as are necessary for the conduct of the business
now conducted or proposed to be conducted by them as described in the Prospectus
(or, such Preliminary Prospectus), and, except as disclosed in the Prospectus
(and such Preliminary Prospectus), the Company is not aware of the granting of
any patent rights to, or the filing of applications therefor by, others, nor is
the Company aware of, nor has the Company received notice of, infringement of or
conflict with asserted rights of others with respect to any of the foregoing.
All such intellectual property rights and interests are (i) valid and
enforceable and (ii) to the best knowledge of the Company, not being infringed
by any third parties.
(p) The Company possesses adequate licenses, orders,
authorizations, approvals, certificates or permits issued by the appropriate
federal, state or foreign regulatory agencies or bodies necessary to conduct its
business as described in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
and, except as disclosed in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no pending or, to
the best knowledge of the Company, threatened, proceedings relating to the
revocation or modification of any such license, order, authorization, approval,
certificate or permit.
(q) The Company has good and marketable title to all of the
properties and assets reflected in the Company's financial statements or as
described in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), subject
to no lien, mortgage, pledge, charge or encumbrance of any kind, except those
reflected in such financial statements or as described in the Registration
Statement and the Prospectus (and such Preliminary Prospectus). Except as
disclosed in the Prospectus, the Company occupies its leased properties under
valid and enforceable leases conforming to the description thereof set forth in
the Registration Statement and the Prospectus (and such Preliminary Prospectus).
<PAGE>
(r) The Company is not and does not intend to conduct its
business in a manner in which it would be an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940 (the "Investment Company
Act").
(s) The Company has obtained and delivered to the Underwriter
the agreements (the "Lock-up Agreements") with the officers, directors and
principal shareholders of the Company substantially to the effect that, among
other things, each such person will not, commencing on the date that the
Registration Statement is declared effective by the SEC (the "Effective Date")
and continuing for a period of twelve (12) months thereafter, without the prior
written consent of the Underwriter, directly or indirectly, publicly sell, offer
or contract to sell or grant any option to purchase, transfer, assign or pledge,
or otherwise encumber, or dispose of any shares of Common Stock now or hereafter
owned by such person and that the purchaser or transferee in any private sale
agrees to be bound by the Lock-Up Agreement.
(t) No labor dispute with the employees of the Company exists,
is threatened or, to the best of the Company's knowledge, is imminent that could
result in a material adverse change in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company, except
as described in or contemplated by the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
(u) The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which it is engaged; the Company
has not been refused any insurance coverage sought or applied for; and the
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition (financial or
otherwise), business, prospects, net worth or results of operations of the
Company, except as described in or contemplated by the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(v) The Underwriter's Warrant (as hereinafter defined) will
conform to the description thereof in the Registration Statement and in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and, when sold to and paid for by the Underwriter in
accordance with the Underwriter's Warrant Agreement, will have been duly
authorized and validly issued and will constitute valid and binding obligations
of the Company entitled to the benefits of the Underwriter's Warrant Agreement.
The shares of Common Stock issuable upon exercise of the Underwriter's Warrant
(the "Underwriter's Warrant Shares") have been duly authorized and reserved for
issuance upon exercise of the Underwriter's Warrant by all necessary corporate
action on the part of the Company and, when issued and delivered and paid for
upon such exercise in accordance with the terms of the Underwriter's Warrant
Agreement and the
<PAGE>
Underwriter's Warrant, respectively, will be validly issued, fully paid,
nonassessable and free of preemptive rights and will conform to the description
thereof in the Prospectus (and, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(w) No person has acted as a finder in connection with, or is
entitled to any commission, fee or other compensation or payment for services as
a finder for or for originating, or introducing the parties to, the transactions
contemplated herein and the Company will indemnify the Underwriter with respect
to any claim for finder's fees in connection herewith. Except as set forth in
the Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has no
management or financial consulting agreement with anyone. No promoter, officer,
director or stockholder of the Company is, directly or indirectly, affiliated or
associated with an NASD member and no securities of the Company have been
acquired by an NASD member, except as previously disclosed in writing to the
Underwriter.
(x) The Company has filed all federal, state, local and
foreign tax returns which are required to be filed through the date hereof, or
has received extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same are material and
have become due.
(y) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the Company has,
directly or indirectly: used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment. No transaction has occurred between or
among the Company and any of its officers or directors or any affiliates of any
such officer or director, that is required to be described in and is not
described in the Registration Statement and the Prospectus.
(z) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the completion of the Offering, any action designed to
stabilize or manipulate the price of any security of the Company, or which has
caused or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any security
of the Company, to facilitate the sale or resale of any of the Securities or the
Option Securities.
(aa) The Company has obtained, and delivered to the
Underwriter, agreements with the officers, directors and principal shareholders
of the Company substantially to the effect that, among other things, commencing
on the Effective Date and continuing for a period of two years
<PAGE>
thereafter: (i) the Underwriter shall have the right to purchase for its own
account or to sell for the account of the such parties any securities sold by
the such parties in the open market or pursuant to Rule 144 under the Act; (ii)
such parties will agree to consult with the Underwriter and offer the exclusive
opportunity to purchase or sell such securities on terms at least as favorable
as such parties can secure elsewhere, unless such offer of "an exclusive
opportunity" is considered "acting in concert" for purposes of Rule 144; and
(iii) if the Underwriter fails to accept any such offer, in writing, within one
business day after the receipt thereof by verified fax or e-mail, then the
Underwriter shall have no claim or right with respect to sales of the securities
in the offer. If, thereafter, the terms of the sale as provided in the original
offer is modified in any material respect, the parties shall again notify the
Underwriter as provided above.
(bb) The Company has obtained and delivered to the Underwriter
employment agreements with Edward A. Heil, Paul White, David McClelland and
other key employees.
2. Purchase, Sale and Delivery of the Securities, the Underwriter's
Warrants and Consulting Agreement.
(a) On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees, to purchase from the Company, the
number of Firm Shares as set forth opposite its name on Schedule 1 annexed
hereto, at a purchase price of $[___] per share.
(b) Certificates in definitive form for the Firm Securities
that the Underwriters have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Underwriters request upon notice to the Company at least 48 hours prior to the
Firm Closing Date, shall be delivered by or on behalf of the Company to the
Underwriter, against payment by or on behalf of the Underwriters of the purchase
prices therefor by wire transfer of immediately available funds to a bank
account specified by the Company. Such delivery of the Firm Securities shall be
made at the offices of Sichenzia, Ross & Friedman LLP, Counsel for the
Underwriter, 135 West 50th Street, New York, New York 10020 at 9:30 A.M., New
York City time on [______], 1999, within ten (10) business days from the
Effective Date, or at such other place, time or date as the Underwriter and the
Company may agree upon, such time and date of delivery against payment being
herein referred to as the "Firm Closing Date". The Company will make such
certificates for the Firm Securities available for checking and packaging by the
Underwriter, at such offices as may be designated by the Underwriter, at least
24 hours prior to the Firm Closing Date.
In lieu of physical delivery, the closing may occur by "DTC" delivery.
(c) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Securities as contemplated
by the Prospectus, the Company hereby
<PAGE>
grants to the Underwriter an option to purchase any or all of the Option Shares,
which options are exercisable by the Underwriter on behalf of and for the
account of the Underwriter. The purchase price to be paid for any of the Option
Shares shall be the same price per share for the Firm Securities set forth above
in paragraph (a) of this Section 2. The option granted hereby may be exercised
as to all or any part of the Option Shares from time to time within 45 calendar
days after the Firm Closing Date. The Underwriter shall not be under any
obligation to purchase any of the Option Shares prior to the exercise of such
option. The Underwriter may from time to time exercise the option granted hereby
by giving notice in writing or by telephone (confirmed in writing) to the
Company setting forth the aggregate number of Option Shares as to which the
Underwriter is then exercising the option and the date and time for delivery of
and payment for such Option Shares. Any such date of delivery shall be
determined by the Underwriter but shall not be earlier than two business days or
later than three business days after such exercise of the option and, in any
event, shall not be earlier than the Firm Closing Date. The time and date set
forth in such notice, or such other time on such other date as the Underwriter
and the Company may agree upon, is herein called the "Option Closing Date" with
respect to such Option Shares. Upon exercise of the option as provided herein,
the Company shall become obligated to sell to the Underwriter, and, subject to
the terms and conditions herein set forth, the Underwriter shall become
obligated to purchase from the Company, the Option Shares as to which the
Underwriter is then exercising its option. If the option is exercised as to all
or any portion of the Option Shares, certificates in definitive form for such
Option Shares, and payment therefor, shall be delivered on the related Option
Closing Date in the manner, and upon the terms and conditions, set forth in
paragraph (b) of this Section 2, except that reference therein to the Firm
Securities and the Firm Closing Date shall be deemed, for purposes of this
paragraph (c), to refer to such Option Shares and Option Closing Date,
respectively.
(d) On the Firm Closing Date, the Company will further issue
and sell to the Underwriter or, at the direction of the Underwriter, to bona
fide officers of the Underwriter, for an aggregate purchase price of $100,
warrants to purchase Common Stock (the "Underwriter's Warrant") entitling the
holders thereof to purchase an aggregate of 100,000 shares of Common Stock for a
period of four years, such period to commence on the first anniversary of the
Effective Date. The Underwriter's Warrant shall be exercisable at a price equal
to 150% of the public offering price of the Common Stock, and shall contain
terms and provisions more fully described herein below and as set forth more
particularly in the warrant agreement relating to the Underwriter's Warrant to
be executed by the Company on the Effective Date (the "Underwriter's Warrant
Agreement"), including, but not limited to, (i) customary anti-dilution
provisions in the event of stock dividends, split mergers, sales of all or
substantially all of the Company's assets, sales of stock below then prevailing
market or exercise prices and other events, and (ii) prohibitions of mergers,
consolidations or other reorganizations of or by the Company or the taking by
the Company of other action during the five-year period following the Effective
Date unless adequate provision is made to preserve, in substance, the rights and
powers incidental to the Underwriter's Warrant. As provided in the Underwriter's
Warrant Agreement, the Underwriter may designate that the Underwriter's Warrant
<PAGE>
be issued in varying amounts directly to bona fide officers of the Underwriter.
As further provided, no sale, transfer, assignment, pledge or hypothecation of
the Underwriter's Warrant shall be made for a period of 12 months from the
Effective Date, except (i) by operation of law or reorganization of the Company,
or (ii) to the Underwriter and bona fide partners, officers of the Underwriter
and selling group members.
(e) On the Firm Closing Date, the Company and the Underwriter
will execute a non-exclusive corporate finance agreement pursuant to which the
Underwriter will perform consulting services to the Company for a twenty four
month period for an aggregate fee of $96,000. The entire fee due to the
Underwriter pursuant to the corporate finance agreement shall be pre-paid at the
Firm Closing Date.
3. Offering by the Underwriter. The Underwriter propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus (the "Offering").
4. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, to become effective as promptly as possible. If required, the Company
will file the Prospectus and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act. During any time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the rules and regulations of the
Commission thereunder to the extent necessary to permit the continuance of sales
of or dealings in the Securities in accordance with the provisions hereof and of
the Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission any prospectus or amendment referred to in the first sentence of
section (a) (i) hereof, any amendment or supplement to such prospectus or any
amendment to the Registration Statement as to which the Underwriter shall not
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Underwriter
shall not have given its consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Underwriter or counsel to the Underwriter, any
amendments to the Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the Underwriter, and will use its best efforts
to cause any such amendment to the Registration Statement to be declared
effective by the Commission as promptly as possible. The Company will advise the
Underwriter, promptly after receiving notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or supplement thereto as been filed
and will provide evidence satisfactory to the Underwriter of each
<PAGE>
such filing or effectiveness.
(b) The Company will advise the Underwriter, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, (ii) the
suspension of the qualification of any Securities for offering or sale in any
jurisdiction, (iii) the institution, threat or contemplation of any proceeding
for any such purpose, or (iv) any request made by the Commission for amending
the Registration Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to prevent the
issuance of any such stop order and, if any such stop order is issued, to obtain
the withdrawal thereof as promptly as possible.
(c) The Company will, in cooperation with counsel to the
Underwriter, arrange for the qualification of the Securities for offering and
sale under the blue sky or securities laws of such jurisdictions as the
Underwriter may designate and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Securities.
(d) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any other
reason it is necessary at any time to amend or supplement the Prospectus to
comply with the Act or the rules or regulations of the Commission thereunder,
the Company will promptly notify the Underwriter thereof and, subject to Section
4(a) hereof, will prepare and file with the Commission, at the Company's
expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or effects
such compliance.
(e) During a period of one year commencing on the Effective
Date, the Company will not, at any time, directly or indirectly, pay any of its
employees, officers or directors an annual salary in excess of $200,000.
(f) The Company will, without charge, provide to the
Underwriter and to counsel for the Underwriter (i) as many signed copies of the
registration statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto) as the Underwriter
may reasonably request, (ii) as many conformed copies of such registration
statement and each amendment thereto (in each case without exhibits thereto) as
the Underwriter may reasonably request, and (iii) so long as a prospectus
relating to the Securities is required to be delivered under the Act, as many
copies of each Preliminary Prospectus or the Prospectus or any
<PAGE>
amendment or supplement thereto as the Underwriter may reasonably request.
(g) The Company, as soon as practicable, will make generally
available to its security holders and to the Underwriter an earnings statement
of the Company that satisfies the provisions of Section 11 (a) of the Act and
Rule 158 thereunder.
(h) The Company will reserve and keep available for issuance
that maximum number of authorized but unissued shares of Common Stock which are
issuable upon exercise of any outstanding warrants and the Underwriter's Warrant
(including the underlying securities) outstanding from time to time.
(i) The Company will apply the net proceeds from the sale of
the Securities being sold by it as set forth under "Use of Proceeds" in the
Prospectus.
(j) The Company shall continue to retain Eichler Bergsman
&Co., LLP as its accountants, or another firm of independent certified public
accountants acceptable to the Underwriter. Such accounting firm shall have
responsibility to audit and report on the financial statements and financial
exhibits, if any, to be included in the Registration Statement, and shall
prepare all certified financial statements and schedules to be included in the
Registration Statement. The Company shall retain McLaughlin & Stern, LP as its
attorneys, or such other firm that is acceptable to the Underwriter and is
expert in securities law maters, and in the regulatory aspects of the Company's
proposed business. The Company shall also retain a public relations firm
acceptable to the Underwriter for a period of three years commencing on the
Effective Date. The acceptance by the Underwriter of the Company's accountants,
its attorneys and/or public relations firm will not be unreasonably withheld.
(k) Prior to the Closing Date or the Option Closing Date (if
any), the Company will not, directly or indirectly, without prior written
consent of the Underwriter, issue any press release or other public announcement
or hold any press conference with respect to the Company or its activities with
respect to the Offering (other than trade releases issued in the ordinary course
of the Company's business consistent with past practices with respect to the
Company's operations).
(l) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A under the Act, then immediately following the execution of this
Agreement, the Company will prepare, and file or transmit for filing with the
Commission in accordance with Rule 430A and Rule 424(b) under the Act, copies of
the Prospectus including the information omitted in reliance on Rule 430A, or,
if required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted.
<PAGE>
(m) The Company will assist the Underwriter in causing the
Securities to be listed on the Nasdaq SmallCap Market and the Boston Stock
Exchange on the Effective Date and to maintain such listing thereafter.
(n) During the period of five years from the Firm Closing
Date, the Company will, as promptly as possible, not to exceed 135 days, after
each annual fiscal period render and distribute reports to its stockholders
which will include audited statements of its operations and changes of financial
position during such period and its audited balance sheet as of the end of such
period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion and shall timely file all reports
required to be filed under the securities laws.
(o) During a period of two years commencing with the Firm
Closing Date, the Company will furnish to the Underwriter, at the Company's
expense, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(p) The Company has appointed [Continental Stock Transfer &
Trust Company] as transfer agent for the Common Stock, subject to the Closing.
The Company will not change or terminate such appointment for a period of three
years from the Firm Closing Date without first obtaining the written consent of
the Underwriter. For a period of three years after the Effective Date, the
Company shall cause the transfer agent to deliver promptly to the Underwriter a
duplicate copy of the daily transfer sheets relating to trading of the
Securities. The Company shall also provide to the Underwriter, on a weekly
basis, copies of the DTC special securities positions listing report.
(q) During the period of 180 days after the date of this
Agreement, the Company will not at any time, directly or indirectly, take any
action designed to or that will constitute, or that might reasonably be expected
to cause or result in, the stabilization of the price of the Common Stock to
facilitate the sale or resale of any of the Securities.
(r) The Company will not take any action to facilitate the
sale of any shares of Common Stock pursuant to Rule 144 under the Act if any
such sale would violate any of the terms of the Lock-up Agreements.
(s) Prior to the 120th day after the Firm Closing Date, the
Company will provide the Underwriter and their designees with four bound volumes
of the transaction documents relating to the Registration Statement and the
closing(s) hereunder, in form and substance reasonably satisfactory to the
Underwriter.
(t) The Company shall consult with the Underwriter prior to
the distribution to third parties of any financial information news releases or
other publicity regarding the Company,
<PAGE>
its business, or any terms of this offering and the Underwriter will consult
with the Company prior to the issuance of any research report or recommendation
concerning the Company's securities. Copies of all documents that the Company or
its public relations firm intend to distribute will be provided to the
Underwriter for review prior to such distribution.
(u) The Company and the Underwriter will advise each other
immediately in writing as to any investigation, proceeding, order, event or
other circumstance, or any threat thereof, by or relating to the Commission or
any other governmental authority, that could impair or prevent the Offering.
Except as required by law or as otherwise mutually agreed in writing, neither
the Company nor the Underwriter will acquiesce in such circumstances and each
will actively defend any proceedings or orders in that connection.
(v) The Company shall first submit to the Underwriter
certificates representing the Securities for approval prior to printing, and
shall, as promptly as possible, after filing the Registration Statement with the
Commission, obtain CUSIP numbers for the Securities.
(w) The Company will prepare and file a registration statement
with the Commission pursuant to section 12 of the 1934 Act, and will use its
best efforts to have such registration statement declared effective by the
Commission on an accelerated basis on the day after the Effective Date. For this
purpose the Company shall prepare and file with the Commission a General Form of
Registration of Securities (Form 8-A or Form 10).
(x) For so long as the Securities are registered under the
1934 Act, the Company will hold an annual meeting of stockholders for the
election of directors within 180 days after the end of each of the Company's
fiscal years and within 135 days after the end of each of the Company's fiscal
years will provide the Company's stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by Rule 14a-3 under
the 1934 Act and shall be included in an annual report pursuant to the
requirements of such Rule.
(y) The Company will take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions or other
equivalent manual and to maintain its listing therein for a period of five (5)
years from the Effective Date. Such application shall be made on an accelerated
basis no more than two days following the Effective Date.
(z) On or prior to the Effective Date, the Company will give
written instructions to the transfer agent for the Common Stock directing said
transfer agent to place stop-order restrictions against, and appropriate legends
advising of the Lock-Up Agreements on, the certificates representing the
securities of the Company owned by the persons who have entered into the Lock-up
Agreements.
<PAGE>
(aa) For a period of one year commencing on the Effective
Date, the Company will not, without the prior consent of the Underwriter: (i)
file a registration statement on Form S-8 (or any similar or successor form)
with the exception of any Form S-8 registration statement relating to the
500,000 shares of the Company's common stock reserved for issuance upon exercise
of options issued in connection with the Company's 1999 Stock Option Plan; and
(ii) consummate any private transactions in its securities.
(bb) For a period of six months commencing on June 17, 1999,
In the event that the Company either (i) executes a definitive agreement to be
acquired, or (ii) has concluded an alternative financing with an underwriter
other than the Underwriter, and Underwriter has continued to pursue the offering
contemplated hereby with reasonable diligence, except to the extent requested
not to do so by the Company, and the Underwriter is thereby prevented from
proceeding with the offering contemplated hereby, then the Company will promptly
pay to the Underwriter a percentage of the consideration received in the
acquisition or alternative financing, based on a "Lehman" formula scale, in
consideration for the Underwriter's time effort and expenses relating to the
offering contemplated hereby. Such payment shall be in addition to previous
advances made by the Company to the Underwriter, and by the Company to the
Underwriter's counsel's for payment of Blue Sky fees and expenses.
(cc) The Company agrees that it will, upon the Effective Date,
for a period of no less than three (3) years, engage a designee of the
Underwriter as advisors (the "Advisors") to its Board of Directors or elect a
designees of the Underwriter as Director, where such Advisors or Directors shall
attend meetings of the Board, receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors and will
receive the same compensation as other Directors. Such Advisors or Directors
shall be entitled to receive reimbursement for all reasonable costs incurred in
attending such meetings including, but not limited to, food, lodging, and
transportation. The Company further agrees that, during said three (3) year
period, it shall schedule no less than four (4) formal and "in person" meetings
of its Board of Directors in each such year. Further, during such three (3) year
period, the Company shall give notice to the Underwriter with respect to any
proposed acquisitions, mergers, reorganizations or other similar transactions.
The Company agrees to indemnify and hold the Underwriters and such Advisor
or Director harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of your designee at any such meeting described herein. In the event the Company
maintains a liability insurance policy affording coverage for the acts of its
officers and directors, it agrees, if possible, to include the Underwriters'
designees as an insured under such policy.
<PAGE>
(dd) For a period of at least two (2) years commencing on the
Effective Date, the Company shall maintain the $1 million life insurance policy
on Paul White for which it is the named beneficiary.
4. Expenses
(a) The Company shall pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including all costs and expenses incident to (i)
the preparation, printing and filing or other production of documents with
respect to the transactions, including any costs of printing the Registration
Statement originally filed with respect to the Securities and any amendment
thereto, any Preliminary Prospectus and the Prospectus and any amendment or
supplement thereto, this Agreement, the selected dealer agreement and the other
agreements and documents governing the underwriting arrangements and any blue
sky memoranda, (ii) all reasonable and necessary arrangements relating to the
delivery to the Underwriter of copies of the foregoing documents, and the costs
and expenses of the Underwriter in mailing or otherwise distributing the same
including telephone charges, duplications and other accountable expenses, (iii)
the fees and disbursements of the counsel, the accountants and any other experts
or advisors retained by the Company, (iv) the preparation, issuance and delivery
to the Underwriter of any certificates evidencing the Securities, including
transfer agent's, warrant agent's and registrar's fees or any transfer or other
taxes payable thereon, (v) the qualification of the Securities under state blue
sky or securities laws, including filing fees and fees and disbursements of
counsel relating thereto and any fees and disbursements of local counsel, if
any, retained for such purpose, (vi) the filing fees of the Commission and the
NASD relating to the Securities, (vii) the inclusion of the Securities on The
Nasdaq SmallCap Market and in the Standard and Poor's Corporation Descriptions
Manual, (viii) any "road shows" or other meetings with prospective investors in
the Securities, including transportation, accommodation, meal, conference room,
audio-visual presentation an similar expenses, and (ix) the publication of
"tombstone advertisements" in newspapers or other publications selected by the
Underwriter, and the manufacture of prospectus memorabilia. In addition to the
foregoing, the Company, shall reimburse the Underwriter for its expenses on the
basis of a non-accountable expense allowance in the amount of 3.00% of the gross
offering proceeds to be received by the Company. The non-accountable expense
allowance, based on the gross proceeds from the sale of the Firm Securities,
shall be deducted from the funds to be paid by the Underwriter in payment for
the Firm Securities, pursuant to Section 2 of this Agreement, on the Firm
Closing Date. To the extent any Option Shares are sold, any remaining
non-accountable expense allowance based on the gross proceeds from the sale of
the Option Shares shall be deducted from the funds to be paid by the Underwriter
in payment for the Option Shares, pursuant to Section 2 of this Agreement, on
the Option Closing Date. The Company warrants, represents and agrees that all
such payments and reimbursements will be promptly and fully made.
<PAGE>
(b) Notwithstanding any other provision of this Agreement, if
the Offering is terminated in accordance with the provisions of Section 6 or
Section 10, the Company agrees that, in addition to the Company paying its own
expenses as described in subparagraph (a) above, the Company shall reimburse the
Underwriter for its actual accountable out-of-pocket expenses (in addition to
blue sky legal fees and expenses referred to in subparagraph (a) above) net of
the $25,000 which has previously been advanced to the Underwriter. Such expenses
shall include, but are not to be limited to, fees for the services and time of
counsel for the Underwriter to the extent not covered by clause (a) above, plus
any additional expenses and fees, including, but not limited to, travel
expenses, postage expenses, duplication expenses, long-distance telephone
expenses, and other expenses incurred by the Underwriter in connection with the
proposed offering.
5. Intentionally left blank.
6. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Firm Shares shall be subject, in the
Underwriter's sole discretion, to the accuracy of the representations and
warranties of the Company contained herein as of the date hereof and as of the
Firm Closing Date as if made on and as of the Firm Closing Date, to the accuracy
of the statements of the Company's officers made pursuant to the provisions
hereof, to the performance by the Company of its covenants and agreements
hereunder and to the following additional conditions:
(a) If the Registration Statement, as heretofore amended, has
not been declared effective as of the time of execution hereof, the Registration
Statement, as heretofore amended or as amended by an amendment thereto to be
filed prior to the Firm Closing Date, shall have been declared effective not
later than 5:30 P.M., New York City time, on the date on which the amendment to
such Registration Statement containing information regarding the initial public
offering price of the Securities has been filed with the Commission, or such
later time and date as shall have been consented to by the Underwriter; if
required, the Prospectus and any amendment or supplement thereto shall have been
filed with the Commission in the manner and within the time period required by
Rule 424(b) under the Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Underwriter, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Underwriter shall have received an opinion, dated the
Firm Closing Date, of McLaughlin & Stern, LLP, counsel to the Company,
substantially to the effect that:
(1) the Company has been duly incorporated and is validly existing as a
<PAGE>
corporation in good standing under the laws of the jurisdiction of its
organization and is duly qualified to transact business as a foreign corporation
and is in good standing under the laws of each other jurisdiction in which its
ownership or leasing of any properties or the conduct of its business requires
such qualification, except where the failure to be in good standing or so
qualify would not have a materially adverse effect upon the Company;
(2) the Company has full corporate power and authority to own or lease its
property and conduct its business as it is now being conducted and as it is
proposed to be conducted, as described in the Registration Statement and the
Prospectus, and the Company has full corporate power and authority to enter into
this Agreement and the Underwriter's Warrant Agreement and to carry out all the
terms and provisions hereof and thereof to be carried out by it;
(3) to the knowledge of such counsel, there are no outstanding options,
warrants or other rights granted by the Company to purchase shares of its Common
Stock, preferred stock or other securities other than as described in the
Prospectus; the Shares have been duly authorized and the Underwriter's Warrant
Shares have been duly reserved for issuance by all necessary corporate action on
the part of the Company and the Shares when issued and delivered to and paid for
by the Underwriter, pursuant to this Agreement, the Underwriter's Warrant when
issued and delivered and paid for in accordance with this Agreement and the
Underwriter's Warrant Agreement by the Underwriter, and the Underwriter's
Warrant Shares when issued upon payment of the exercise price specified in the
Underwriter's Warrant, will be validly issued, fully paid, nonassessable and
free of preemptive rights and will conform to the description thereof in the
Prospectus; to the knowledge of such counsel, no holder of outstanding
securities of the Company is entitled as such to any preemptive or other right
to subscribe for any of the Shares or the Underwriter's Warrant Shares; and to
the knowledge of such counsel, no person is entitled to have securities
registered by the Company under the Registration Statement or otherwise under
the Act other than as described in the Prospectus;
(4) the execution and delivery of this Agreement and the Underwriter's
Warrant Agreement have been duly authorized by all necessary corporate action on
the part of the Company and this Agreement and the Underwriter's Warrant
Agreement have been duly executed and delivered by the Company, and each is a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and except as rights to indemnity and
contribution under this Agreement and the Underwriter's Warrant Agreement may be
limited by applicable securities laws and the public policy underlying such
laws;
(5) the Underwriter's Warrant is duly authorized and upon payment of the
<PAGE>
purchase price therefore specified in Section 2(d) of this Agreement will be
validly issued and constitute valid and binding obligations of the Company; and
the certificates representing the Securities are in due and proper form under
law;
(6) the statements set forth in the Prospectus under the caption
"Description of Securities" insofar as those statements purport to summarize the
terms of the capital stock and warrants of the Company, provide a fair summary
of such terms; to the knowledge of such counsel, the statements set forth in the
Prospectus describing statutes and regulations and the descriptions of the
consequences to the Company under such statutes and regulations are fair
summaries of the information set forth therein and are accurate in all material
respects; to the knowledge of such counsel, the statements in the Prospectus,
insofar as those statements constitute summaries of the contracts, instruments,
leases or licenses referred to therein, constitute a fair summary in all
material respects of those contracts, instruments, leases or licenses and
include all material terms thereof, as applicable;
(7) none of (A) the execution and delivery of this Agreement and the
Underwriter's Warrant Agreement, (B) the issuance, offering and sale by the
Company to the Underwriter of the Securities pursuant to this Agreement and the
Underwriter's Warrant Shares pursuant to the Underwriter's Warrant Agreement, or
(C) the compliance by the Company with the other provisions of this Agreement
and the Underwriter's Warrant Agreement and the consummation of the transactions
contemplated hereby and thereby, to the knowledge of such counsel (1) requires
the consent, approval, authorization, registration or qualification of or with
any court or governmental authority known to us, except such as have been
obtained and such as may be required under state blue sky or securities laws as
to which we express no opinion or (2) conflicts with or results in a breach or
violation of, or constitutes a default under, any material contract, indenture,
mortgage, deed of trust, loan agreement, note, lease or other material agreement
or instrument known to such counsel to which the Company is a party or by which
the Company or any of its property is bound or subject, or the certificate of
incorporation or by-laws of the Company, or any material statute or any
judgment, decree, order, rule or regulation of any court or other governmental
or regulatory authority known to us applicable to the Company;
(8) to the knowledge of such counsel, (A) no legal or governmental
proceedings are pending to which the Company is a party or to which the property
of the Company is subject except those arising in the ordinary course of
business and fully covered by insurance and (B) no contract or other document is
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement that is not described
therein or filed as required;
(9) to the knowledge of such counsel, the Company possesses adequate
licenses, orders, authorizations, approvals, certificates or permits issued by
the appropriate federal,
<PAGE>
state or local regulatory agencies or bodies necessary to conduct its business
as described in the Registration Statement and the Prospectus, and, there are no
pending or threatened proceedings relating to the revocation or modification of
any such license, order, authorization, approval, certificate or permit, except
as disclosed in the Registration Statement and the Prospectus, which would have
a material adverse effect on the Company;
(10) The Company is not in violation or breach of, or in default with
respect to, any term of its certificate of incorporation or by-laws, and to the
knowledge of such counsel, the Company is not in (i) violation in any material
respect of any law, statute, regulation, ordinance, rule, order, judgment or
decree of any court or any governmental or regulatory authority applicable to
it, or (ii) default in any material respect in the performance or observance of
any obligation, agreement, covenant or condition contained in any material
contract, indenture, mortgage, deed of trust, loan agreement, note, lease or
other material agreement or instrument to which it is a party or by which it or
any of its property may be bound or subject, and no event has occurred which
with notice, lapse of time or both would constitute such a default;
(11) the Shares have been approved for inclusion on the Nasdaq SmallCap
Market and the Boston Stock Exchange;
(12) the Registration Statement is effective under the Act; any required
filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and to our knowledge, no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued, and no proceedings for that purpose have been
instituted or threatened or, to the best knowledge of such counsel, are
contemplated by the Commission;
(13) the Registration Statement originally filed with respect to the
Securities and each amendment thereto and the Prospectus (in each case, other
than the financial statements, the notes, schedules and other financial and
statistical information contained therein, as to which such counsel need express
no opinion) comply as to form in all material respects with the applicable
requirements of the Act and the rules and regulations of the Commission
thereunder; and
(14) the Company is not an "investment company" as defined in Section 3(a)
of the Investment Company Act of 1940 and, if the Company conducts its business
as set forth in the Prospectus, it will not become an Investment company" and
will not be required to register under the Investment Company.
Such counsel also shall state in its opinion that it has
participated in the preparation of the Registration Statement and the Prospectus
and that nothing has come to its attention that has caused it to believe that
the Registration Statement, at the time it became effective (including the
<PAGE>
information deemed to be a part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date or as of the Firm Closing Date, contained an
untrue statement of material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, copies of which certificates will
be provided to the Underwriter, and, as to matters of the laws of certain
jurisdictions, on the opinions of other counsel to the Company, which opinions
shall also be delivered to the Underwriter, in form and substance acceptable to
the Underwriter, if such other counsel expressly authorize such reliance and
counsel to the Company expressly states in their opinion that such counsel's and
the Underwriter's reliance upon such opinion is justified.
(c). A. At the time this Agreement is executed, the
Underwriter shall have received a letter, dated such date, addressed to the
Underwriter in form and substance satisfactory (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
in all respects to the Underwriter and Underwriter's counsel, from Eichler
Bergsman & Co., LLP:
i. confirming that it is a independent certified public accountant with
respect to the Company within the meaning of the Act and the applicable Rules
and Regulations;
ii. stating that it is their opinion that the
financial statements of the Company
as included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Underwriter may rely upon the opinion of
Eichler Bergsman & Co., LLP with respect to the financial statements included in
the Registration Statement;
iii. stating that, on the basis of a limited review
which included a reading of
the latest available unaudited interim financial statements of the Company, a
reading of the latest available minutes of the stockholders and board of
directors and the various committees of the boards of directors of the Company,
consultations with officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures and inquiries
(which, as to the interim financial statements included in the Registration
Statement, shall constitute a review as described in SAS No. 71, Interim
Financial Statements), nothing has come to the attention of Eichler Bergsman &
Co., LLP which would lead it to believe that (A) the unaudited financial
statements of the Company included in the Registration Statement do not comply
as to form in all material respects with the applicable accounting requirements
of the Act and the Rules and
<PAGE>
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the Registration
Statement, or (B) at a specified date not more than five (5) days prior to the
Effective Date, there has been any change in the capital stock or long-term debt
of the Company, or any decrease in the stockholders' equity or net current
assets or net assets of the Company as compared with amounts shown in the
December 31, 1998 consolidated balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any change or decrease, setting forth the amount of
such change or decrease, and (C) during the period from December 31, 1998 to a
specified date not more than five (5) days prior to the Effective Date, there
was any decrease (increase) in net revenues, net income (loss) or in net
earnings (loss) per common share of the Company, in each case as compared with
the corresponding period December 31, 1998 beginning, other than as set forth in
or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease (increase);
iv. setting forth, at a date not later than five (5)
days prior to the Effective
Date, the amount of liabilities of the Company;
v. stating that they have compared specific dollar
amounts, numbers of shares,
percentages of revenues and earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of the
Company and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
vi. statements as to such other matters incident to the transaction
contemplated hereby as the Underwriter may request.
B. At the Firm Closing Date and the Option Closing Date, if any, the
Underwriter shall have received from Eichler Bergsman & Co., LLP a letter, dated
as of the Firm Closing Date or the Option Closing Date, as the case may be, to
the effect that it reaffirms that statements made in the letter furnished
pursuant to subsection A of this Section 6(c), except that the specified date
referred to shall be a date not more than five (5) days prior to the Firm
Closing Date or the Option Closing Date, as the case may be, and, if the Company
has elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (v) of
subsection A of this Section 6(c) with respect to certain amounts, percentages
and financial information as specified by the Underwriter and deemed to be a
part of the Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and
<PAGE>
financial information to be in agreement with the records specified in such
clause (v).
(d) The representations and warranties of the Company
contained in this Agreement shall be true and correct as if made on and as of
the Firm Closing Date; the Registration Statement shall not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein in order to make the statements therein not misleading, and the
Prospectus, as amended or supplemented as of the Firm Closing Date, shall not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company shall
have performed all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to the Firm Closing Date.
(e) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened or
contemplated by the Commission.
(f) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall not have
been any material adverse change, or any development involving a prospective
material adverse change, in the business, operations, condition (financial or
otherwise), earnings or prospects of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment or
supplement thereto).
(g) The Underwriter shall have received a certificate, dated
the Firm Closing Date, of the Chief Executive Officer and the Secretary of the
Company to the effect set forth in subparagraphs (d) through (f) above.
(h) The Common Stock shall be qualified in such jurisdictions
as the Underwriter may reasonably request pursuant to Section 4(c), and each
such qualification shall be in effect and not subject to any stop order or other
proceeding on the Firm Closing Date.
(i) The Company shall have executed and delivered to the
Underwriter the Underwriter's Warrant Agreement and a certificate or
certificates evidencing the Underwriter's Warrant, in each case in a form
acceptable to the Underwriter.
(i) The Underwriter shall have received Lock-up Agreements
executed by the persons listed on Schedule 2 annexed hereto.
(j) On or before the Firm Closing Date, the Underwriter and
counsel for the Underwriter shall have received such further certificates,
documents, letters or other information as they may have reasonably requested
from the Company and other security holders of the Company.
<PAGE>
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriter and counsel
for the Underwriter. The Company shall furnish to the Underwriter such conformed
copies of such opinions, certificates, letters and documents in such quantities
as the Underwriter and counsel for the Underwriter shall reasonably request.
The obligation of the Underwriter to purchase and pay for any Option
Shares shall be subject, in its discretion, to each of the foregoing conditions,
except that all references to the Firm Securities and the Firm Closing Date
shall be deemed to refer to such Option Shares and the related Option Closing
Date, respectively.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20 of the 1934 Act against any
losses, claims, damages, or liabilities, joint or several, to which the
Underwriter, or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(1) any untrue statement or alleged untrue statement of any material fact
contained in (A) the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or (B) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Securities under the Blue Sky or securities laws thereof or filed with the
Commission or any securities association or securities exchange (each an
"Application"), or
(2) the omission or alleged omission to state in such Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, the Underwriter and such
controlling person for any legal or other expenses reasonably incurred by the
Underwriter or such controlling person in connection with investigating or
defending against any loss, claim, damage, liability, action, investigation,
litigation or proceeding; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto, or any Application in reliance upon and in conformity
with written information furnished to the Company by the Underwriter,
<PAGE>
specifically for use therein. This indemnity agreement will be in addition to
any liability which the Company may otherwise have. The Company will not,
without the prior written consent of the Underwriter, or controlling person,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not the Underwriter or any person who
controls the Underwriter or within the meaning of Section 15 of the Act or
Section 20 of the 1934 Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the 1934 Act against, any losses,
claims, damages or liabilities to which the Company or any such director,
officer, or controlling person may become subject under the Act or otherwise,
but only 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 Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application, or (ii) the omission
or the alleged omission to state therein a material fact required to be stated
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application, or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein; and, subject to the limitation set
forth immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by the Company or any such director,
officer, or controlling person in connection with investigating or defending
against any such loss, claim, damage, liability, action investigation,
litigation or proceedings, in respect thereof. This indemnity agreement will be
in addition to any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 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; provided, however, that if the
<PAGE>
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence or (ii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the consent of the indemnifying party.
(d) In circumstances in which the indemnity obligation
provided for in the preceding paragraphs of this Section 7 is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities, or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total proceeds from the Offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriter. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriter, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and the other equitable considerations
appropriate in the circumstances. The Company and the Underwriter agree tat it
would not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation or
<PAGE>
by any other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Underwriter shall
not be obligated to make contributions hereunder that in the aggregate exceed
the total public offering price of the Securities purchased by the Underwriter
under this Agreement, less the aggregate amount of any damages that the
Underwriter has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20 of the 1934 Act shall have the same rights to contribution as the
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the 1934
Act, shall have the same rights to contribution as the Company.
8. Substitution of Underwriter.
If any Underwriter shall for any reason not permitted hereunder cancel
its obligations to purchase the Firm Securities hereunder, or shall fail to take
up and pay for the number of Firm Securities set forth opposite names in
Schedule 1 hereto upon tender of such Firm Securities in accordance with the
terms hereof, then:
(a) If the aggregate number of Firm Securities which such
Underwriter or Underwriter agreed but failed to purchase does not exceed 10% of
the total number of Firm Securities, the other Underwriter shall be obligated to
purchase the Firm Securities which such defaulting Underwriter agreed but failed
to purchase.
(b) If any Underwriter so defaults and the agreed number of
Firm Securities with respect to which such default or defaults occurs is more
than 10% of the total number of Firm Securities, the remaining Underwriter shall
have the right to take up and pay for the Firm Securities which the defaulting
Underwriter agreed but failed to purchase. If such remaining Underwriter do not,
at the Firm Closing Date, take up and pay for the Firm Securities which the
defaulting Underwriter agreed but failed to purchase, the time for delivery of
the Firm Securities shall be extended to the next business day to allow the
remaining Underwriter the privilege of substituting within twenty-four hours
(including nonbusiness hours) another underwriter or Underwriter satisfactory to
the Company. If no such underwriter or Underwriter shall have been substituted
as aforesaid, within such twenty-four hour period, the time of delivery of the
Firm Securities may, at the option of the Company, be again extended to the next
following business day, if necessary, to allow the Company the privilege of
finding within twenty-four hours (including nonbusiness hours) another
underwriter or Underwriter to purchase the Firm Securities which the defaulting
Underwriter
<PAGE>
or Underwriter agreed but failed to purchase. If it shall be arranged for the
remaining Underwriter or substituted Underwriter to take up the Firm Securities
of the defaulting Underwriter as provided in this section, (i) the Company or
the Underwriter shall have the right to postpone the time of delivery for a
period of not more than seven business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other document or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary, and (ii) the respective numbers
of Firm Securities to be purchased by the remaining Underwriter or substituted
Underwriter shall be taken as the basis of the underwriting obligation for all
purposes of this agreement.
If in the event of a default by any Underwriter and the remaining
Underwriter shall not take up and pay for all the Firm Securities agreed to be
purchased by the defaulting Underwriter or substitute another underwriter or
Underwriter as aforesaid, the Company shall not find or shall not elect to seek
another underwriter or Underwriter for such Firm Securities as aforesaid, then
this Agreement shall terminate.
If, following exercise of the option provided in Section 2(c) hereof,
any Underwriter or Underwriter shall for any reason not permitted hereunder
cancel their obligations to purchase Option Shares at the Option Closing Date,
or shall fail to take up and pay for the number of Option Shares, which it
became obligated to purchase at the Option Closing Date upon tender of such
Option Shares in accordance with the terms hereof, then the remaining
Underwriter or substituted Underwriter may take up and pay for the Option Shares
of the defaulting Underwriter in the manner provided in Section 8(b) hereof. If
the remaining Underwriter or substituted Underwriter shall not take up and pay
for all such Option Shares, the Underwriter shall be entitled to purchase the
number of Option Shares for which there is no default or, at their election, the
option shall terminate, the exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any non-defaulting Underwriter to the
Company, provided that the provisions of this Section 8 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
9. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, any of its officers
or directors and the Underwriter set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Underwriter or any
controlling person referred to in Section 7 hereof, and (ii) delivery of and
payment for the Securities. The respective agreements,
<PAGE>
covenants, indemnities and other statements set forth in Sections 4 and 7 hereof
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
10. Termination. This Agreement may be terminated with respect to the
Firm Securities or any Option Shares in the sole discretion of the Underwriter
by notice to the Company given prior to the Firm Closing Date or the related
Option Closing Date, respectively, in the event that the Company shall have
failed, refused or been unable to perform all obligations and satisfy all
conditions on its part to be performed or satisfied under Section 6 hereunder at
or prior thereto or if at or prior to the Firm Closing Date or such Option
Closing Date, respectively:
(1) the Company sustains a loss by reason of explosion, fire, flood,
accident or other calamity, which, in the opinion of the Underwriter,
substantially affects the value of the properties of the Company or which
materially interferes with the operation of the business of the Company
regardless of whether such loss shall have been insured; there shall have been
any material adverse change, or any development involving a prospective material
adverse change (including, without limitation, a change in management or control
of the Company), in the business, operations, condition (financial or
otherwise), earnings or prospects of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment or
supplement thereto);
(2) any action, suit or proceeding shall be threatened, instituted or
pending, at law or in equity, against the Company, by any person or by any
federal, state, foreign or other governmental or regulatory commission, board or
agency wherein any unfavorable result or decision could materially adversely
affect the business, operations, condition (financial or otherwise), earnings or
prospects of the Company;
(3) trading in the Common Stock shall have been suspended by the
Commission, the NASD or on Nasdaq, or trading in securities generally on the New
York Stock Exchange shall have been suspended or minimum or maximum prices shall
have been established on either such exchange or quotation system;
(4) a banking moratorium shall have been declared by
New York or
United States authorities;
(5) there shall have been (A) an outbreak of
hostilities between the United
States and any foreign power (or, in the case of any ongoing hostilities, a
material escalation thereof), (B) an outbreak of any other insurrection or armed
conflict involving the United States or (C) any other calamity or crisis or
material change in financial, political or economic conditions, having an effect
on the financial markets that, in any case referred to in this clause (5), in
the sole judgment of the Underwriter makes it impracticable or inadvisable to
proceed with the public
<PAGE>
offering or the delivery of the Securities as contemplated by the
Registration Statement; and
(6) termination of this Agreement pursuant to this Section 10 shall be
without liability of any party to any other party, except as provided in Section
5(b) and Section 7 hereof.
11. Information Supplied by the Underwriter. The statements set forth
in the first paragraph under the heading "Underwriting" (as to the underwriting
commitment of the Underwriter) and under the heading
"Underwriting--Discretionary Accounts" in any Preliminary Prospectus or the
Prospectus (to the extent such statements relate to the Underwriter) constitute
the only information furnished by the Underwriter to the Company for the
purposes of Section 7(b) hereof. The Underwriter confirms that such statements
(to such extent) are correct.
12. Notices. All notice hereunder to or upon either party hereto shall
be deemed to have been duly given for all purposes if in writing and (i)
delivered in person or by messenger or an overnight courier service against
receipt, or (ii) sent by certified or registered mail, postage paid, return
receipt requested, or (iii) sent by telegram, facsimile, telex or similar means,
provided that a written copy thereof is sent on the same day by postage paid
first-class mail, to such party at the following address:
To the Company: eSafetyworld, Inc.
11-31 South Jersey Avenue
Setauket, NY 11733
Attn: Edward A. Heil
To the Underwriter: Kashner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34326
Attn: Matthew Meister
with a copy to: Sichenzia, Ross & Freidman, LLP
135 West 50th Street, 20th Floor
New York, New York 10020
Attn: Gregory Sichenzia, Esq.
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving of any such notice shall be, in the case of clause (i), the
date of the receipt; in the case of clause (ii), five business days after such
notice or demand is sent; and, in the case of clause (iii), the business day
next following the date such notice is sent.
<PAGE>
13. Amendment. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective, unless in writing and signed by or
on behalf of the parties hereto.
14. Waiver. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any provision
hereof shall be effective, unless in writing and signed by or on behalf of the
party to be charged therewith. No waiver shall be deemed a continuing waiver or
waiver in respect of any other or subsequent breach or default, unless expressly
so stated in writing.
15. Applicable Law. This agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New York
without regard to principles of choice of law or conflict of laws.
16. Jurisdiction. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the Supreme Court of the
State of New York and the United States District Court for the Southern District
of New York in connection with any suit, action or other proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, waives
any objection to venue in the County of New York, State of New York, or such
District and agrees that service of any summons, complaint, notice or other
process relating to such suit, action or other proceeding may be effected in the
manner provided by clause (ii) of Section 12.
17. Remedies. In the event of any actual or prospective breach or
default by either party hereto, the other party shall be entitled to equitable
relief, including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive, and
nothing herein shall be deemed to prohibit or limit either party from pursuing
any other remedy or relief available at law or in equity for such actual or
prospective breach or default, including the recovery of damages.
18. Attorneys' Fees. The prevailing party in any suit, action or other
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, shall be entitled to recover its costs and reasonable
attorneys' fees.
19. Severability. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
<PAGE>
20. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and which together shall constitute one and
the same agreement.
21. Successors. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Company and their respective successors and
assigns. 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 Agreement or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company contained in
Section 7 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the 1934 Act, and (ii) the indemnities of the Underwriter
contained in Section 7 of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Act or Section 20 of the 1934 Act. No purchaser
of Securities from the Underwriter shall be deemed a successor because of such
purchase.
22. Titles and Captions. The titles and captions of the articles and
sections of this Agreement are for convenience of reference only and do not in
any way define or interpret the intent of the parties or modify or otherwise
affect any of the provisions hereof.
23. Grammatical Conventions. Whenever the context so requires, each
pronoun or verb used herein shall be construed in the singular or the plural
sense and each capitalized term defined herein and each pronoun used herein
shall be construed in the masculine, feminine or neuter sense.
24. References. The terms "herein," "hereto," "hereof," "hereby," and
"hereafter," and other terms of similar import, refer to this Agreement as a
whole, and not to any Article, Section or other part hereof.
25. Entire Agreement. This Agreement embodies the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating thereto.
[Signatures on following page]
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company, and the
Underwriter.
Very truly yours,
eSafetyworld, INC.
By:
Name: Edward A. Heil
Title: Chief Executive Officer
The foregoing agreement is hereby confirmed and accepted as of the date first
above written.
KASHNER DAVIDSON SECURITIES CORPORATION
By:______________________________________
Name: Matthew Meister
Title: Chief Executive Officer
<PAGE>
SCHEDULE 1
Underwriter Securities Purchased
Kashner Davidson Securities Corp. [__________]
[----------------] [----------]
[----------------] [----------]
<PAGE>
SCHEDULE 2
Shareholders Subject to Underwriter's Lock-Up Agreement
Shareholder
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
THE SL GROUP, INC.
FIRST: The name of this corporation is:
THE SL GROUP, INC.
SECOND: Its principal office in the State of Nevada is located at 502
East John Street, Carson City, Nevada 89706. The name and address of its
resident agent is CSC Services of Nevada, Inc., at the above address.
THIRD: The nature of the business or objects or purposes proposed may be
organized under the General Corporation Law of the State of Nevada.
FOURTH: The total authorized capital stock of the corporation is One
Thousand Five Hundred (1,500) Shares without Par Value.
FIFTH: The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided in the by-laws of this
corporation, provided that the number of directors shall not be reduced less
than one unless there is less than one stockholder.
The name and post office address of the first board of directors, which shall be
one in number, is as follows:
NAME POST OFFICE ADDRESS
John C. Dello-Iacono 80 Orville Drive, Bohemia, NY 11716
SIXTH: The capital stock, after the amount of the subscription price, or
par value, has been paid in, shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH: The name and post office address of the incorporator signing the
articles of incorporation is as follows:
NAME POST OFFICE ADDRESS
Sherry A. Reed 1013 Centre Road
Wilmington, DE 19805
EIGHTH: The corporation is to have perpetual existence.
<PAGE>
NINTH: In furtherance and not in limitation of the powers conferred by
statue, the board of directors is expressly authorized, subject to the by-laws,
if any, adopted by the shareholders, to make, alter or amend the by-laws of the
corporation.
TENTH: Meetings of stockholders may be held outside of the State of
Nevada at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
ELEVENTH: This corporation reserves the right to amend, alter, change
or repeal any provision contained in the articles of incorporation, in the
manner now or hereafter prescribed, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the sole incorporator herein before named for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this twenty-first day of July, A.D. 1997.
/s/Sherry A. Reed
Sherry A. Reed, Incorporator
<PAGE>
STATE OF DELAWARE )
SS
COUNTY OF NEW CASTLE )
On this twenty-first day of July, A.D., 1997, before me a Notary
Public, personally appeared, Sherry A. Reed, who severally acknowledged that
he/she executed the above instrument.
/s/Dawn J. Quinn
Notary Public
CERTIFICATE OF ACCEPTANCE
OF
APPOINTMENT OF RESIDENT AGENT
I. Lisa G. Mulligan, Authorized Representative, on behalf of CSC Services of
Nevada, Inc. Hereby accepts appointment as Resident Agent of the above-named
corporation.
/s/Lisa G. Mulligan July 21, 1997
Authorized Representative
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed by: The SL Group, Inc.
We the undersigned Ed Heil and R. Bret Jenkins
- -----------------------------------------------------
- --------------------------------- of The SL Group, Inc. do hereby certify:
- --------------------------------------------------
That the Board of Directors of said corporation last a meeting duly
convened, held on the 28th day of July , 1999, adopted a resolution to amend
the original articles as follows:
Article______ is hereby amended to read as follows:
See Attached Exhibit "A"
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 2000; that the said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/S/Edward Heil, President
Edward Heil, President
/S/R. Bret Jenkins, Secretary
R. Bret Jenkins, Secretary
State of Utah
ss.
County of Salt Lake
On August 19, 1999 , personally appeared before me, a Notary Public, R.
Bret Jenkins and Edward Heil, who acknowledged that they executed the above
instrument.
/S/Joy L. Perkins
Joy L. Perkins
1
<PAGE>
EXHIBIT A TO CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
THE SL GROUP, INC.
Dated August 19, 1999
Article I is hereby amended to read as follows:
ARTICLE I
The name of the corporation is: eSAFETYWORLD.COM, Inc.
Article IV is hereby amended to read as follows:
ARTICLE IV
(a) The Corporation shall be authorized to issue the following shares:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class Number of Shares Par Value
Common 20,000,000 $.001
Preferred 1,000,000 $.001
</TABLE>
(b) The designations and the powers, preferences and rights, and the
qualifications and restrictions thereof are as follows:
(1) The Preferred Shares shall be issued from time to time in
one or more series, with such distinctive serial designations as shall
be stated and expressed in the resolution or resolutions providing for
the issue of such shares from time to time adopted by Board of
Directors; and in such resolution or resolutions providing for the
issue of shares of each particular series, the Board of Directors is
expressly authorized to fix the annual rate or rates of dividends for
the particular series; the dividend payment dates for the particular
series and the date from which dividends on all shares of such series
issued prior to the record date for the first dividend payment date
shall be cumulative; the redemption price or prices for the particular
series; the voting powers for the particular series, the rights, if
any, of holders of the shares of the particular series to convert the
same into shares of any other series or class or other securities of
the corporation, with any provisions for the subsequent adjustment of
such conversion rights; and to classify or reclassify any unissued
preferred shares by fixing or altering from time to time any of the
foregoing rights, privileges and qualifications.
(2) All the Preferred shares of any one series shall be
identical with each other in all respects, except that shares of any
one series issued at different times may differ as to the dates from
which dividends thereon shall be cumulative; and all Preferred shares
shall be of equal rank, regardless or series, and shall be
2
<PAGE>
identical in all respects except as to the particulars fixed by the
Board as hereinabove provided or as fixed herein.
(c) No holder of any of the shares of any class of the Corporation
shall be entitled as of right to subscribe for, purchase, or otherwise acquire
any shares of any class of the Corporations which the Corporation proposes to
issue or any rights or options which the Corporation proposes to grant for the
purchase of shares of any class of the Corporation or for the purchase of any
shares, bonds, securities, or obligations of the Corporations which are
convertible into or exchangeable for, or which carry any rights, to subscribe
for, purchase, or otherwise acquire shares of any class of the Corporation; and
any and all of such shares, bonds, securities, or obligations of the
Corporation, whether now or hereafter authorized or created may be issued, or
may be reissued or transferred if the same have been reacquired and have
treasury status, and any and all of such rights and options may be granted by
the Board of Directors to such persons, firms corporations, and associations,
and for such lawful consideration, and on such terms, as the Board of Directors
in its discretion may determine, without first offering the same, or any
thereof, to any said holder.
(d) The capital stock of this corporation shall be nonassessable and
shall not be subject to assessment to pay the debts of the corporation.
Article XII is hereby added as follows:
ARTICLE XII
The corporation shall indemnify all directors, officers,
employees, and agents to the fullest extent permitted by Nevada law as provided
within NRS 78.751 or any other law then in effect or as it may hereafter be
amended.
The corporation shall indemnify each present and future
director, officer, employee, or agent of the corporation who becomes a party or
is threatened to be made a party to any suit or proceeding, whether pending,
completed, or merely threatened, and whether said suit or proceeding is civil,
criminal, administrative, investigative, or otherwise, except an action by or in
the right of the corporation, by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses, including but not limited to attorneys' fees, judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit, or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interest of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The expenses of directors and officers incurred in defending a
civil or criminal action, suit, or proceeding must be paid by the corporation as
they are incurred and in advance of the final disposition of the action, suit,
or proceeding if and only if the director or officer undertakes to repay said
expenses to the corporation if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
3
<PAGE>
The indemnification and advancement of expenses may not be made to or on
behalf of any director or officer if a final adjudication establishes that the
director's of officer's acts or omission involved intentional misconduct, fraud,
or a knowing violation of the law and was material to the cause of action.
5
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
eSAFETYWORLD.com, Inc.
ARTICLE I - IDENTIFICATION
1. Name of Corporation: The name of the Corporation is eSAFETYWORLD.com, Inc.
2. Address: The address of the Corporation's registered office is , and the name
of the registered agent at such address is .
3. Fiscal Year: The fiscal year of the Corporation shall be on a calendar-year
basis commencing on the first day of January, each year, and ending on the last
day of December of the same calendar year.
ARTICLE II - MEETINGS OF SHAREHOLDERS
1. Annual Meeting: The annual meeting of the Stockholders for the election of
Directors and for the transaction of such other business as may lawfully come
before the meeting shall be held during each calendar year at a reasonable time,
date and place to be fixed by the President or Board of Directors. Failure to
hold the annual meeting shall not work a forfeiture or dissolution of the
Corporation.
2. Special Meetings: Special meetings of the Stockholders may be called for any
reasonable time and place by the President, the Board of Directors or the
holders of not less than thirty percent (30%) of all of the issued and
outstanding shares entitled to vote at the meeting.
3. Notice of Shareholders' Meetings: Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) nor more than fifty (50) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary or the officer or persons calling the meeting. If mailed, such notice
shall be deemed to be given when deposited in the United States mail, addressed
to the Shareholder at his address as it appears on the stock transfer books of
the Corporation, with postage thereon prepaid.
4. Quorum: At any meeting of the Stockholders, the representation in person or
by proxy of the majority of the capital stock issued and outstanding on the
books of the Corporation shall be necessary to hold such meeting and such
majority shall constitute a Quorum for all purposes, unless a greater number is
required by law. If the holders of the amount of stock necessary to constitute a
Quorum shall fail to attend in person or by proxy at the time and place fixed by
notice as above provided, for either annual or special meetings, a vote of a
majority of the stock present in person or by proxy may adjourn the meeting,
until holders of the amount of stock requisite to constitute a Quorum shall be
present, at which time any business may be transacted which might have been
transacted at the meeting as originally notified.
5. Voting: The voting shall be oral or by ballot as the meeting shall determine
unless a different vote is required by law. A majority of the votes cast on any
motion shall carry that motion, and in the case of an election, shall elect the
person nominated. Voting by proxy duly given in writing shall be allowed on all
matters, including amendments to the Articles of Incorporation.
On each matter submitted at the meeting, each Shareholder shall be
entitled to one vote for each share of stock held by him as shown by the books
of the Corporation at the close of business on a day preceding the meeting,
which day shall be fixed by the Board of Directors and which day shall not be
more than fifty (50) nor less than ten (10) days prior to the date of the
meeting.
Treasury shares shall not be voted at any meeting or counted in
determining the total number of outstanding shares at any given time.
A Shareholder may vote either in person or by proxy executed in writing
by the Shareholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy.
<PAGE>
At each election for Directors, every Shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are Directors to be elected and
for whose election he has a right to vote. A Stockholder may not accumulate his
votes for one or more Directors. A Shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into the
name of the pledge; thereafter, the pledgee shall be entitled to vote the shares
so transferred.
6. Waiver: Any Stockholder may waive notice of any meeting by writing, signed by
him or his duly authorized attorney, either before or after the meeting.
7. Informal Action by Stockholders: Any action required to be taken at a meeting
of the Shareholders, or any required to be taken at a meeting of the
Shareholders, or any other action which may be taken at a meeting of the
Shareholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the Shareholders entitled
to vote with respect to the subject matter thereof. Failure to comply with the
requirements of this paragraph shall not invalidate any action taken at such
meeting.
ARTICLE III - BOARD OF DIRECTORS
1. Number, Term, Election and Authority: The affairs of the Corporation shall be
managed by a Board of not less than three (3) Directors or more than nine (9)
Directors. At the annual meeting of the Shareholders, the Shareholders shall
elect Directors to hold office until the next succeeding annual meeting. Each
Director shall hold office for the term for which he is elected and until his
successor shall have elected and qualified. If for any reason such Directors
shall not be elected at the annual meeting of the Stockholders which is called
and held for that purpose. The number of Directors may be increased or decreased
from time to time by amendment of these Bylaws. The Directors shall act only as
a Board: the individual Director shall have no power as such.
2. Vacancies: Any vacancy occurring in the Board of Directors may be filled by
the affirmative vote of a majority of the remaining Directors, though less than
a Quorum of the Board of Directors. A Director elected to fill a vacancy shall
be elected for the unexpired term of his predecessor in office. Any directorship
to be filled by reason of an increase in the number of Directors shall be filled
by the Board of Directors, such appointment to be until the next annual meeting
or a special meeting of the Stockholders called for the purpose of electing a
Director to the office so created. Any directorship to be filled by reason of
the removal of one or more Directors by the Shareholders may be filled by
election by the Shareholders at the meeting at which the Director or Directors
are removed.
3. Removal of Directors: One or more Directors or the entire Board of Directors
may be removed, with or with out cause, by a majority vote of a Quorum of
Stockholders at a regular or special meeting of the Stockholders.
4. Place of Meeting: The Directors may hold their meetings at the main office of
the Corporation, or at such place or places as the Board from time to time may
determine.
5. Special Meetings: Special meetings of the Board of Directors shall be held
whenever called by the Chairman of the Board of Directors, by the President or
by a majority of the Board of Directors at that time in office. The Chairman of
the Board of Directors, President or Secretary shall give notice of such special
meeting by mailing the same at least five (5) days before the meeting or
telegraphing or telephoning the same at least three (3) days before the meeting
to each Director, but such notice may be waived by any Director. At all meetings
of the Board of Directors, each Director present, whether or not he is acting as
Chairman of the meeting, shall have one vote. Voting by proxy shall not be
allowed.
Whenever all Directors entitled to vote at any meeting consent, either in
writing on the records of the meeting, by filing a waiver with the Secretary, by
presence at such meeting, by oral consent entered on the minutes or by taking
part in the deliberation at such meeting without objecting to the holding of
such meeting, then such meeting and the action taken thereat shall be as valid
as if the meeting had been regularly called and noticed. Furthermore, any
business may be transacted at such meeting that could be transacted at a
regularly-called meeting with notice; and if any meeting is irregular for want
of notice or of such consent, the proceedings of such meeting may be ratified
and approved and rendered likewise valid, provided a Quorum was present at such
meeting. However, the irregularity or defect therein waived by writing shall be
signed by all Directors having the right to vote at such meeting. Any Directors'
meeting may be held without notice.
Attendance of a Director at meeting shall constitute a waiver of notice
of such meeting, except where a Director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of
<PAGE>
the Board of Directors need be specified in notice or waiver of notice of
such meeting.
6. Quorum: A majority of the Board of Directors in office at the time shall
constitute a Quorum for the transaction of business, but if at any meeting of
the Board there shall be fewer than a Quorum present, a majority of those
present may adjourn the meeting from time to time without notice, other than by
announcement of the meeting, until a Quorum shall be present.
7. Acting Outside Meeting: Any action of a majority of the Board of Directors,
although not at a regularly-called meeting, and the record thereof as assented
to in writing by all of the other members of the Board, shall always be as valid
and effective in all respects as if passed by the Board in a regular meeting.
8. Designation of Depositories: Such bank or trust company as the Board may
choose from time to time shall be the depository of the money or securities of
the Corporation.
ARTICLE IV - OFFICERS
1. Officers: The officers of the Corporation shall consist of a Chairman of the
Board of Directors, a President, a Vice-President, a Secretary and a Treasurer,
who shall be chosen by the Board of Directors in any regularly-called Directors'
meeting. One person may not hold more than one office, except the same person
may serve as Chairman of the Board and at the same time act in another official
capacity. The same person may hold both offices of Secretary and Treasurer. The
Board of Directors may, in their discretion, create such other offices and
appoint such other officers and agents as it desires. All officers, agents and
employees of the Corporation shall be subject to removal at any time by the
affirmative vote of a majority of the whole Board of Directors.
2. Powers and Duties of the Chairman of the Board of Directors: He shall
preside at all meetings of Directors and Shareholders of the Corporation. He may
call meetings of the Board of Directors from time to time. The Chairman shall
also perform such other duties as may be assigned to him by the Board of
Directors.
3. Powers and Duties of the President: The President shall be the chief
executive officer of the Corporation. He may sign and execute all authorized
contracts or obligations in the name of the Corporation, with the Secretary or
an Assistant Secretary, may sign all certificates of the shares of the capital
stock of the Corporation. He shall do and perform such other duties as may from
time to time be assigned to him by the Board of Directors.
4. Powers and Duties of the Vice-President: The Vice-President shall possess the
power and may perform the duties of the President in his absence or disability.
The Vice-President shall perform such other duties as may be from time to time
assigned to him by the Board of Directors or President.
5. Powers and Duties of the Secretary: The Secretary shall keep the minutes of
all meetings of the Board of Directors and of all meetings of Stockholders. He
shall attend to the giving and serving of notices of the Corporation; he may
sign with the President, in the name of the Corporation, all contracts
authorized by the Board of Directors; and when so ordered by the Board of
Directors, he shall affix the seal of the Corporation thereto. The Secretary
shall, with the President or Vice-President sign all certificates of the shares
of the capital stock of the Corporation. He shall do and perform such other
duties as may be assigned from time to time by the Board of Directors or
President.
6. Powers and Duties of the Assistant Secretary: Each Assistant Secretary, if
appointed, shall have such powers and shall perform such duties as may be
assigned to him by the Board of Directors, President or Secretary.
7. Powers and Duties of the Treasurer: The Treasurer shall have the custody of
all funds and securities of the Corporation which may have come into his hands.
When necessary or proper, he shall endorse for collection, on behalf of the
Corporation, checks, notes and other obligations and shall deposit the same to
the credit of the Corporation in such bank or banks or depository as the Board
of Directors may designate. He shall sign all receipts and vouchers for payments
made to the Corporation jointly with such other officers as may be designated by
the Bylaws or by resolution of the Board of Directors. He shall perform such
other acts and duties as may be assigned to him by the Board of Directors or
President.
ARTICLE V - VOTING OF STOCK
Unless otherwise ordered by the Board of Directors, the President shall have
full power and authority in behalf of the Corporation to attend and to act and
to vote at any meeting of the Stockholders of any corporation in which the
<PAGE>
Corporation may hold stock, and at any such meeting shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock, and which, as the owner thereof, the Corporation may have possessed and
exercised if present. The Board of Directors, by resolution, may from time to
time confer such powers upon any other person or persons.
ARTICLE VI - CAPITAL STOCK
1. Certificate of Shares: Each holder of stock of the Corporation shall be
entitled to a stock certificate signed by the President or a Vice-President, and
also by the Secretary or and Assistant Secretary, duly authorized by the Board
of Directors to do so.
2. Transfer of Shares: Shares of the capital stock of the Corporaiton shall be
transferred only on the books of the Corporation at the instance of the holder
thereof in person, or by his attorney, upon surrender and cancellation of
certificates for a like number of shares.
The delivery of a certificate of stock in this Corporation to a bona
fide purchaser or pledgee for value, together with a written transfer of the
same or a written power of attorney to sell, assign and transfer the same,
signed by the owner of the certificate, shall be a sufficient delivery to
transfer the title against all persons except the Corporation, provided all
provisions of the Stock Buy and Sell Agreement in force at the time have been
complied with. No transfer of stock shall be valid against the Corporation until
it shall have been registered upon the books of the Corporation.
The Corporation shall be entitled to treat the holder of record of any
shares as the holder in fact thereof, and accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such hares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - DIVIDENDS AND WORKING CAPITAL
1. Dividends: Dividends may be declared by the Board of Directors from time to
time out of the net earnings or from the surplus of its assets over its
liabilities, but not otherwise. When the Directors shall so determine, dividends
may be paid in stock.
2. Working Capital: Before payment of any dividend or making any distribution of
profits, there may be set aside out of the net profits of the Corporation such
sum or sums as the Directors may from time to time in their discretion think
proper as a working capital or as a reserve fund to meet contingencies and
emergencies, and from time to time the Board of Directors may increase, diminish
and vary such working capital or such reserve fund in its absolute judgment and
discretion.
ARTICLE VIII - CHECKS, NOTES AND EVIDENCE OF INDEBTEDNESS
Disbursements shall be made by checks, all of which shall be signed as
determined by the Board of Directors. Bills receivable, drafts and other
evidences of indebtedness tot he corporation shall be endorsed for the purpose
of discount or collection by the President or such other office or officers of
the Corporation as the Board of Directors shall from time to time, by
resolution, designate. No bonds, notes or other evidence of indebtedness shall
be executed by or on behalf of the Corporation unless the Board of Directors
shall expressly authorize the same.
ARTICLE IX - INDEMNIFICATION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact the he is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect
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to any criminal action or proceeding, had not reasonable cause to believe
that his conduct was unlawful.
ARTICLE X - AMENDMENT
These Bylaws and any other Bylaws may be adopted, amended or repealed either by
the Shareholders or by the Board of Directors, except that:
1. The Board of Directors shall not alter or repeal any Bylaw which the
Stockholders have specifically precluded the Directors from altering or
repealing.
2. No Bylaw shall be adopted by the Directors which shall require more than a
majority of the voting shares for a Quorum at a meeting of Shareholders, or more
than a majority of the votes cast to constitute action by the Shareholders,
except where higher percentages are required by law.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of eSAFETYWORLD.com,
Inc.; and,
2. That the foregoing Bylaws, comprising ____________ (______) pages, constitute
the Bylaws of said Corporation as duly adopted at a meeting of the Board of
directors thereof duly held on the ______ day of July, 1997.
/s/R. Bret Jenkins
Secretary
/s/Edward A. Heil
Chief Executive Officer
<PAGE>
EXHIBIT 4.2
THE SL GROUP, INC.
1999 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this Plan is to enable The SL Group, Inc. and its
affiliates to recruit and retain capable employees for the successful conduct of
its business and to provide an additional incentive to directors, officers and
other eligible key employees, consultants and advisors upon whom rest major
responsibilities for the successful operation and management of the Company and
its affiliates.
2. Definitions.
For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the
event of a Change in Control, the greater of (i) the highest price per Share of
Common Stock paid to holders of the Shares of Common Stock in any transaction
(or series of transactions) constituting or resulting in a Change in Control or
(ii) the highest Fair Market Value of a Share during the ninety (90) day period
ending on the date of a Change in Control.
2.2 "Affiliate Corporation" or "Affiliate" shall
mean any corporation, directly or indirectly, through one of more
intermediaries, controlling, controlled by or under common control with the
Company.
2.3 "Agreement" means the written agreement
between the Company and an Optionee evidencing the grant of an
Award.
2.4 "Award" means an Incentive Stock Option,
Nonqualified Stock Option or Stock Appreciation Right granted or to be granted
pursuant to the Plan.
2.5 "Board" means the Board of Directors of the
Company.
2.6 "Cause" means:
(a) Solely with respect to Nonemployee
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Directors, the commission of an act of fraud or an act of
embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any Affiliate, and
(b) For all other purposes, unless otherwise defined in the Agreement
evidencing a particular Award, an Optionee (other than a Nonemployee Director)
(i) intentional failure to perform reasonably assigned duties, (ii) dishonesty
or willful misconduct in the performance of duties, (iii) involvement in a
transaction in connection with the performance of duties to the Company which
transaction is adverse to the interests of the Company and which is engaged in
for personal profit, or (iv) willful violation of any law, rule or regulation in
connection with the performance of duties (other than traffic violations or
similar offenses).
2.7 "Change in Capitalization" means any increase or reduction in the
Number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, combination or exchange of shares, repurchase of shares,
change in corporate structure or otherwise.
2.8 A "Change in Control" shall mean the
occurrence during the term of the Plan of either of any "person" (as such term
is used in Section 13(c) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or a corporation owned directly or indirectly by the stockholders of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of Securities of the Company
representing 50% or more of the total voting power represented by the Company's
then outstanding voting securities, except that the issuance of shares of Common
Stock in a public offering made pursuant to the Securities Act of 1933, as
amended shall not constitute a Change of Control.
2.9 "Code" means the Internal Revenue Code of
1986, as amended.
2.10 "Committee" means a committee, as described in Section 3.1, appointed
by the Board to administer the Plan and to perform the functions set forth
herein.
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2.11 "Company" means Thermo-Mizer Environmental
Corp. (including any and all subsidiaries currently existing or
hereafter acquired or established).
2.12 "Director Option" means an Option for Shares, Stock Appreciation
Rights or Units granted pursuant to Section 6.
2.13 "Disability" means a physical or mental
infirmity which impairs an Optionee's ability to perform substantially his or
her duties for a period of one hundred eighty (180) consecutive days.
2.14 "Disinterested Director" means a director of
the Company who is "disinterested" within the meaning of Rule 16b- 3 under the
Exchange Act.
2.15 "Eligible Individual" means any director (other than a
Nonemployee Director), officer or employee of, or consultant or advisor to, the
Company or an Affiliate who is receiving cash compensation and who is designated
by the Committee as eligible to receive Awards subject to the conditions set
forth herein.
2.16 "Employee Option" means an option granted pursuant to
Section 5.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.18 "Fair Market Value" on any date means the average of the
high and low sales prices of the Shares on such date on the principal securities
exchange on which such Shares are listed, or if such Shares are not so listed or
admitted to trading, the arithmetic mean of the per Share closing bid price and
closing asked price per Share on such date as quoted on the quotation system of
the Nasdaq Stock Market, Inc. or such other market in which such prices are
regularly quoted, or, if there have been no published bid or asked quotations
with respect to Shares on such date, the Fair Market Value as established by the
Board in good faith and, in the case of an Incentive Stock Option, in accordance
with Section 422 of the Code.
2.19 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.
2.20 "Nonemployee Director" means a director of the Company who
is not an employee of the Company or an Affiliate.
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2.21 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.22 "Option" means a Nonqualified Stock Option, an
Incentive Stock Option, a Director Option, an Employee Option or
any or all of them.
2.23 "Optionee" means a person to whom an Option is being granted
under the Plan.
2.24 "Outside Director" means a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.25 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.26 "Plan" means The SL Group, Inc. 1999 Stock
Option Plan.
2.27 "Pooling Transaction" means an acquisition of the Company in
a transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles as defined in Opinion No. 16 of the
Accounting Principles Board and the amendments thereto.
2.28 "Shares" means the common stock, par value
$.001 per share, of the Company and any securities or other consideration
issuable in respect of Shares in connection with a Change in Capitalization or
Change in Control.
2.29 "Stock Appreciation Right" or "SARs" means a
right to receive all or some portion of the increase in the value of the Shares
as provided in Section 8 hereof.
2.30 "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company.
2.31 "Successor Corporation" means a corporation,
or a parent or subsidiary thereof within the meaning of 424(a) of the Code,
which issues or assumes a stock option in a transaction to which Section 424(a)
of the Code applies.
2.32 "Ten Percent Stockholder" means an Eligible
Individual, who, at the time an Incentive Stock Option is to be granted to him
or her owns (within the meaning of Section 422(b)
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(6) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, or of a Parent or
a Subsidiary thereof.
3. Administration.
3.1 The Plan shall be administered by the
Committee which shall hold meetings at such times as may be necessary for the
proper administration of the Plan. The Committee shall keep minutes of its
meetings. A quorum shall consist of not fewer than two (2) members of the
Committee and a majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by a majority of all of the members
shall be as fully effective as if made by a majority vote at a meeting duly
called and held. The Committee shall consist of at least two (2) directors of
the Company each of whom shall be a Disinterested Director and an Outside
Director. No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder, except for liability arising from his or her
own willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee for
all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
3.2 Subject to the express terms and conditions
set forth herein, the Committee shall have the power from time to
time to:
(a) determine those Eligible Individuals to whom Employee
Options shall be granted under the Plan and the number of Employee Options to be
granted and to prescribe the terms and conditions (which need not be identical)
of each such Employee Option, including the purchase price per Share subject to
each Employee Option, and make any amendment or modification to any Option
Agreement consistent with the terms of this Plan;
(b) construe and interpret the Plan and the
Options granted hereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement,
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in the manner and to the extent it shall deem necessary or advisable so that the
Plan complies with applicable law, including Rule 16b-3 under the Exchange Act
and the Code to the extent applicable, and otherwise to make the Plan fully
effective. All decisions and determinations by the Committee or the exercise of
this power shall be final, binding and conclusive upon the Company, its
Affiliate Corporations, the Options, and all other persons having any interest
therein;
(c) determine the duration and purposes for
leaves of absence which may be granted to an Optionee on an individual basis
without constituting a termination of employment or service for purposes of this
Plan;
(d) exercise its discretion with respect to
the powers and rights granted to it as set forth in the Plan; and
(e) exercise such powers and perform such
acts
as it deems necessary or advisable to promote the best interests of the Company
with respect to the Plan.
4. Stock Subject to the Plan.
4.1 The maximum number of Shares that may be made the subject
of Options granted under the Plan is 500,000. Upon a Change in Capitalization
the maximum number of Shares shall be adjusted in number and kind pursuant to
Section 11. The Company shall reserve for purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each, such number of Shares as shall be determined by the
Board.
4.2 Upon the granting of an Option, the number of Shares
available under Section 4.1 for the granting of further Options shall be reduced
by the number of shares subject to such Option granted. Whenever any outstanding
Option or portion thereof expires, is canceled or is otherwise terminated for
any reason without having been exercised or payment having been made in respect
of the entire Option, the Shares allocable to the expired, canceled or otherwise
terminated portion of the Option may again be the subject of Options granted
hereunder.
5. Option Grants for Eligible Individuals.
5.1 Authority of Committee. Subject to the provisions of the
Plan, the Committee shall have full and final authority to select those Eligible
Individuals who will receive Employee Options, the terms and conditions of which
shall be set forth in
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an Agreement.
5.2 Purchase Price. The purchase price or the manner in which
the purchase price is to be determined for Shares under each Employee Option
shall be determined by the Committee and set forth in the Agreement; provided,
however, that the purchase price per Share under each Incentive Stock Option
shall not be less than 100% of the Fair Market Value of a Share on the date the
Incentive Stock Option is granted (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Employee Options granted hereunder shall
be for such term as the Committee shall determine, provided that an Incentive
Stock Option granted hereunder shall not be exercisable after the expiration of
ten (10) years from the date it is granted (five (5) years in the case of an
Incentive Stock Option granted to a Ten-Percent Stockholder), and a Nonqualified
Stock Option shall not be exercisable after the expiration of ten (10) years
from the date it is granted. The Committee may, subsequent to the granting of
any Employee Option, extend the term thereof but in no event shall the term as
so extended exceed the maximum term provided for in the preceding sentence.
5.4 Vesting. Subject to Section 7.5 hereof, each Employee
Option shall become exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Agreement. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Employee Option expires. The Committee may
accelerate the exercisability of any Option or portion thereof at any time.
5.5 Modification. No modification of an Employee Option shall
adversely alter or impair any rights or obligations under the Employee Option
without the Optionee's consent.
6. Option Grants for Nonemployee Directors.
6.1 Purchase Price. The purchase price for Shares or SARs under each
Director Option shall be not less than to 100% of the Fair Market Value of such
Shares on the date immediately preceding the date of the grant unless
specifically determined to be otherwise by the Committee.
6.2 Vesting. Subject to Sections 6.3 and 7.5 each Director Option shall
become exercisable within four (4) equal
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annual installments beginning on the date of grant; provided, however, that the
Optionee continues to serve as a Director as of such dates. If an Optionee
ceases to serve as a Director for any reason, the Optionee shall have no rights
with respect to that portion of a Director Option which has not then vested
pursuant to the preceding sentence and the Optionee shall automatically forfeit
that portion of the Director Option which remains unvested.
6.3 Limitations on Amendment. The provisions in this Section 6
and Section 7.1 shall not be amended more than once every six (6) months, other
than to comport with changes in the Code or the rules and regulations
thereunder.
7. Terms and Conditions Applicable to All Options.
7.1 Duration. Each Option shall terminate on the date which is
the tenth anniversary of the grant date, unless terminated earlier as follows:
(a) If an Optionee's employment or service
terminates for any reason other than Disability, death or Cause, the Optionee
may for a period of three (3) months after such termination exercise his or her
Option to the extent, and only to the extent, such Option or portion thereof was
vested and exercisable as of the date of the Optionee's employment or service
terminated, after which time the Option shall automatically terminate in full.
(b) If an Optionee's employment or service
terminates by reason of the Optionee's Disability, the Optionee may, for a
period of one (1) year after such termination, exercise his or her Option to the
extent, and only to the extent, such Option or portion thereof was vested and
exercisable as of the date the Optionee's employment or service terminated,
after which time the Option shall automatically terminate in full.
(c) If an Optionee's employment or service
terminates for Cause, the Option granted to the Optionee hereunder shall
immediately terminate in full and no rights thereunder may be exercised.
(d) If an Optionee dies while employed or in the
service of the Company or an Affiliate or within the three (3) month or twelve
(12) month period described in clause (a) or (b), respectively, of this Section
7.1 the Option granted to the Optionee may be exercised at any time within
twelve (12) months after the Optionee's death by the person or persons to whom
such
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rights under the Option shall pass by will, or by the laws of descent and
distribution, after which time the Option shall terminate in full; provided,
however, that an Option may be exercised to the extent, and only to the extent,
such Option or portion thereof was exercisable on the date of death or earlier
termination of the Optionee's services as a Director.
Notwithstanding clauses (a) through (d) above, the Agreement evidencing the
grant of an Employee Option may, in the Committee's sole and absolute
discretion, set forth additional or different terms and conditions applicable to
Employee Options upon a termination or change in status of the employment or
service of an Eligible Individual. Such terms and conditions may be determined
at the time the Employee Option is granted or thereafter.
7.2 Non-transferability. No Option granted
hereunder shall be transferable by the Optionee to whom granted
except by will or the laws of descent and distribution, and an
Option may be exercised during the lifetime of such Optionee only
by the Optionee or his or her guardian or legal representative.
The terms of such Option shall be final, binding and conclusive
upon the beneficiaries, executors, administrators, heirs and
successors of the Optionee.
7.3 Method of Exercise. The exercise of an option shall be
made only by a written notice delivered in person or by mail to the Secretary or
Chief Financial Officer of the Company at the Company's principal executive
office, specifying the number of Shares to be purchased and accompanied by
payment therefor and otherwise in accordance with the Agreement pursuant to
which the Option was granted. The purchase price for any Shares purchased
pursuant to the exercise of an Option shall be paid in full in cash upon such
exercise. Notwithstanding the foregoing, the Committee shall have discretion to
determine at the time of grant of each Employee Option or at any later date (up
to and including the date of exercise) that the form of payment acceptable in
respect of the exercise of such Employee Option may consist of either of the
following (or any combination thereof): (i) cash or (ii) the transfer of Shares
to the Company upon such terms and conditions as determined by the Committee.
The Optionee shall deliver the Agreement evidencing the Option to the Secretary
or Chief Financial Officer of the Company who shall endorse thereon a notation
of such exercise and return such Agreement to the Optionee. No fractional Shares
(or cash in lieu thereof) shall be issued upon exercise of an Option and the
number of Shares that may be purchased upon exercise shall be rounded to the
nearest number of whole Shares.
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7.4 Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until (i)
the Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.
7.5 Effect of Change in Control. In the event of a
Change in Control, all Options outstanding on the date of such
Change in Control shall become immediately and fully vested and
exercisable. In addition, to the extent set forth in an
Agreement evidencing the grant of an Employee Option, an Optionee
will be permitted to surrender for cancellation within sixty (60)
days after such Change in Control, any Employee Option or portion
of an Employee Option to the extent not yet exercised and the
Optionee will be entitled to receive a cash payment in an amount
equal to the excess, if any of (x) (A) in the case of a
Nonqualified Stock Option, the greater of (1) the Fair Market
Value, on the date preceding the date of surrender, of the Shares
subject to the Employee Option or portion thereof surrendered or
(2) the Adjusted Fair Market Value of the Shares subject to the
Employee Option or portion thereof surrendered or (B) in the case
of an Incentive Stock Option, the Fair Market Value, on the date
preceding the date of surrender, of the Shares subject to the
Employee Option or portion thereof surrendered, over (y) the
aggregate purchase price for such Shares under the Employee Option
or portion thereof surrendered; provided, however, that in the
case of an Employee Option granted within six (6) months prior to
the Change in Control to any Optionee who may be subject to
liability under Section 16(b) of the Exchange Act, such Optionee
shall be entitled to surrender for cancellation his or her Option
during the sixty (60) day period commencing upon the expiration of
six (6) months from the date of grant of any such Employee Option.
In the event an Optionee's employment or service with the Company
is terminated by the Company following a Change in Control, each
Option held by the Optionee that was exercisable as of the date of
termination of the Optionee's employment or service shall remain
exercisable for a period ending not before the earlier of the
first anniversary of the termination of the Optionee's employment
or service or the expiration of the stated term of the Option.
8. Stock Appreciation Rights. The Committee may, in its
discretion, either alone or in connection with the grant of an
Employee Option, grant Stock Appreciation Rights in accordance
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with the Plan, the terms and conditions of which shall be set forth in an
Agreement. If granted in connection with an Option, a Stock Appreciation Right
shall cover the same Shares covered by the Option (or such lesser number of
Shares as the Committee may determine) and shall, except as provided in this
Section 8, be subject to the same terms.
8.1 Time of Grant. A Stock Appreciation Right may be granted
(i) at any time if unrelated to an Option, or (ii) if related to an Option,
either at the time of grant, or at any time thereafter during the term of the
Option.
8.2 Stock Appreciation Right Related to an Option.
(a) Exercise. Subject to Section 8.8, a Stock
Appreciation Right granted in connection with an Option shall be exercisable at
such time or times and only to the extent that the related Options are
exercisable, and will not be transferable except to the extent the related
Option may be transferable. A Stock Appreciation Right granted in connection
with an Incentive Stock Option shall be exercisable only if the Fair Market
Value of a Share on the date of exercise exceeds the purchase price specified in
the related Incentive Stock Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock
Appreciation Right related to an Option, the holder shall be entitled to receive
an amount determined by multiplying (A) the excess of the Fair Market Value of a
Share on the date preceding the date of exercise of such Stock Appreciation
Right over the per Share purchase price under the related Option, by (B) the
number of Shares as to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit, in any manner, the
amount payable with respect to any Stock Appreciation Right by including such a
limit in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
(c) Treatment of Related Options and Stock
Appreciation Rights Upon Exercise. Upon the exercise of a
Stock Appreciation Right granted in connection with an Option, the
Option shall be canceled to the extent of the number of Shares as to which the
Stock Appreciation Right is exercised, and upon the exercise of an Option
granted in connection with a Stock Appreciation Right or the surrender of such
Option pursuant to Section 7.3, the Stock Appreciation Right shall be canceled
to the extent of the number of Shares as to which the Option is exercised or
surrendered.
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8.3 Stock Appreciation Right Unrelated to an Option.
The Committee may grant to Eligible Individuals Stock Appreciation Rights
unrelated to Options. Stock Appreciation Rights unrelated to Options shall not
have a term of greater than ten (10) years. Upon exercise of a Stock
Appreciation Right unrelated to an Option, the holder shall be entitled to
contain such terms and conditions as to exercisability (subject to Section 8.8),
vesting and duration as the Committee shall determine, but, in no event, shall
they have a term of greater than ten (10) years. Upon exercise of a Stock
Appreciation Right unrelated to an Option, the holder shall be entitled to
receive an amount determined by multiplying (A) the excess of the Fair Market
Value of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the Fair Market Value of a Share on the date the Stock
Appreciation Right was granted, by (B) the number of Shares as to which the
Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the
Committee may limit, in any manner, the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Agreement evidencing the
same Stock Appreciation Right at the time it is granted.
8.4 Method of Exercise. Stock Appreciation Rights shall be
exercised by a holder only by a written notice delivered in person or by mail to
the Secretary or Chief Financial Officer of the Company at the Company's
principal executive office, specifying the number of Shares with respect to
which the Stock Appreciation Right is being exercised. If requested by the
Committee, the holder shall deliver the Agreement evidencing the Stock
Appreciation Right being exercised and the Agreement evidencing any related
Option to the Secretary or Chief Financial Officer of the Company who shall
endorse thereon a notation of such exercise and return such Agreement to the
holder.
8.5 Form of Payment. Payment of the amount determined under
Sections 8.2(b) or 8.3 may be made in the discretion of the Committee, solely in
whole Shares in a number determined at their Fair Market Value in the date
preceding the date of exercise of the Stock Appreciation Right, or solely in
cash, or in a combination of cash and Shares. If the Committee decides to make
full payment in Shares and the amount payable results in a fractional Share,
payment for the fractional Share will be made in cash. Notwithstanding the
foregoing, no payment in the form of cash may be made upon the exercise of a
Stock Appreciation Right pursuant to Sections 8.2(b) or 8.3 to an officer of the
Company who is subject to liability under Section
12
<PAGE>
16(b) of the Exchange Act, unless the exercise of such Stock Appreciation Right
is made either (i) during the period beginning on the third business day and
ending on the twelfth business day following the date of release for publication
of the Company's quarterly or annual statements of earnings (the "Window
Period") or (ii) pursuant to an irrevocable election to receive cash made at
least six (6) months prior to the exercise of such Stock Appreciation Right.
8.6 Modification. No modification of an Award shall adversely
alter or impair any rights or obligations under the Agreement without the
holder's consent.
8.7 Effect of Change in Control. In the event of a
Change in Control, all Stock Appreciation Rights shall become
immediately and fully exercisable. In addition, to the extent set
forth in an Agreement evidencing the grant of a Stock Appreciation
Right, a holder will be entitled to receive a payment in cash or
stock, in either case, with a value equal to the excess, if any,
of (A) the greater of (x) the Fair Market Value, on the date
preceding the date of exercise, of the underlying Shares subject
to the Stock Appreciation Right or portion thereof exercised and
(y) the Adjusted Fair Market Value, on the date preceding the date
of exercise, of the Shared over (B) the aggregate Fair Market
Value, on the date the Stock Appreciation Right was granted, of
the Shares subject to the Stock Appreciation Right or portion
thereof exercised; provided, however, that in the case of a Stock
Appreciation Right granted within six (6) months of the Change in
Control to any holder who may be subject to liability under
Section 15(b) of the Exchange Act, such holder shall be entitled
to exercise his or her Stock Appreciation Right during the sixty
(60) day period commencing upon the expiration of six months from
the date of grant of any such Stock Appreciation Right. In the
event of a holder's employment or service with the Company is
terminated by the Company following a Change in Control, each
Stock Appreciation Right held by the holder that was exercisable
as of the date of termination of the holder's employment or
service shall remain exercisable for a period ending but not
before the earlier of the first anniversary of the termination of
the holder's employment or service or the expiration of the stated
term of the Stock Appreciation Right.
9. Adjustment Upon Changes n Capitalization.
(a) In the event of a Change in Capitalization, the Committee
shall conclusively determine the appropriate adjustments, if any, to the (i)
maximum number of Shares with respect to which Options may be granted under the
Plan, (ii)
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<PAGE>
maximum number of Shares with respect to which Options may be granted to any
Eligible Individual during the term of the Plan, (iii) the number of Shares
which are subject to outstanding Options granted under the Plan, and the
purchase price therefor, if applicable, and (iv) the number of Shares in respect
of which Director Options are to be granted under Section 6.
(b) Any such adjustment in the Shares subject to Incentive
Stock Options (including any adjustments in the purchase price) shall be made in
such manner as not to constitute a modification as defined by Section 424(h)(3)
of the Code and only to the extent otherwise permitted by Sections 422 and 424
of the Code.
(c) If, by reason of a Change of Capitalization, an Optionee
shall be entitled to exercise an Option with respect to new, additional or
different shares of stock, such new, additional or different shares shall
thereupon be subject to all of the conditions, restrictions and performance
criteria which were applicable to the Shares subject to the Option, prior to
such Change in Capitalization.
10. Effect of Certain Transactions. Subject to Sections
7.5 and 8.7 or as otherwise provided in an Agreement, in the event
of (i) the liquidation or dissolution of the Company or (ii) a
merger or consolidation of the Company, the Plan and the Options
issued hereunder shall continue in effect in accordance with their
respective terms.
11. Interpretation.
(a) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
(b) The Director Options described in Section 6 are intended
to qualify as formula awards under Rule 16b-3 promulgated under the Exchange Act
(thereby preserving the disinterested status of Nonemployee Directors receiving
such Awards) and the Committee shall generally interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with the foregoing intent shall be inoperative and shall
interpret and administer the provisions of the Plan or any Agreement in a manner
consistent therewith. Any provisions inconsistent with the foregoing intent
shall be
14
<PAGE>
inoperative and shall not affect the validity of the Plan.
(c) Unless otherwise expressly stated in the relevant
Agreement, each Option granted under the Plan is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C) of the
Code. The Committee shall not be entitled to exercise any discretion otherwise
authorized hereunder with respect to such Options if the ability to exercise
such discretion or the exercise of such discretion itself would cause the
compensation attributable to such Options to fail to qualify as
performance-based compensation.
12. Pooling Transactions.
Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event of a Change in Control which is also
intended to constitute a Pooling Transaction, the Committee shall take such
actions, if any, which are specifically recommended by an independent public
accounting firm engaged by the Company to the extent reasonably necessary in
order to assure that the Pooling Transaction will qualify as such, including but
not limited to (i) deferring the vesting, exercise, payment or settlement in
respect of any Option, (ii) providing that the payment or settlement in respect
of any Option be made in the form of cash, Shares or securities of a successor
or acquiree of the Company, or a combination of the foregoing, and (iii)
providing for the extension of term of any Option to the extent necessary to
accommodate the foregoing, but not beyond the maximum term permitted for any
Option.
13. Termination and Amendment of the Plan.
The Plan shall terminate on the preceding the tenth
anniversary of the date of its adoption by the stockholders of the Company, and
no Option may be granted thereafter. Subject to Section 6.5, the Board may
sooner terminate the Plan, and the Board may at any time and from time to time
amend, modify or suspend the Plan; provided, however, that:
(a) No such amendment, modification, suspension or termination
shall impair or adversely alter any Award already granted under the Plan, except
with the consent of the Optionee or holder of an SAR nor shall any amendment,
modification or termination deprive any Optionee or holder of an SAR of any
Shares which he or she may have acquired through or as a result of the Plan; and
(b) To the extent necessary under Section 16(b) of the
15
<PAGE>
Exchange Act and the rules and regulations promulgated thereunder or other
applicable law, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations.
14. Non-Exclusivity of the Plan.
The adoption of the Plan by the Board shall not be construed
as amending, modifying or rescinding any previously approved incentive
arrangement or as creating any limitations on the power of the Board to adopt
such other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
15. Limitation of Liability.
As illustrative of the limitations of liability of the
Company, but not intended to be exhaustive thereof, nothing in the Plan shall be
construed to:
(a) give any person any right to be granted an
Option other than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with
respect to Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Company to
terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or implied,
that the Company will employ any person at any particular rate of compensation
or for any particular period of time.
16. Regulations and Other Approvals; Governing Law.
16.1 Except as to matters of Federal law, this Plan and the
rights of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of New York.
16.2 The obligation of the Company to sell or deliver Shares
with respect to Options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable Federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be
16
<PAGE>
deemed necessary or appropriate by the Committee.
16.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
16.4 Each Option is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval or any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Committee.
16.5 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 or other
regulations thereunder. The Committee may require an individual receiving Shares
pursuant to an Award granted under the Plan, as a condition precedent to receipt
of such Shares, to represent and warrant to the Company in writing that the
Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an exemption applicable under the Securities Act as amended, or the rules and
regulations promulgated thereunder. The certificates evidencing any of such
Shares shall be appropriately amended to reflect their status as restricted
securities as aforesaid.
17. Miscellaneous.
17.1 Multiple Agreements. The terms of each Award granted to
an Eligible Individual may differ from other Awards granted under the Plan at
the same time, or at some other time. The Committee may also grant more than one
Award to a given Eligible Individual during the term of the Plan, either in
addition to, or in substitution for, one or more Awards previously
17
<PAGE>
granted to that Eligible Individual.
17.2 Withholding of Taxes.
(a) At such times as an Optionee or holder of an
SAR recognizes taxable income in connection with the receipt of Shares or cash
hereunder (a "Taxable Event"), the Optionee or holder shall pay other amounts as
may be required by law to be withheld by the Company in issuance or release from
escrow of such Shares or the payment of such cash. The Company shall have the
right to deduct from any payment of cash to an Optionee or holder an amount
equal to the Withholding Taxes in satisfaction of the obligation to pay
Withholding Taxes. In satisfaction of the obligation to pay Withholding Taxes to
the Company, the Optionee or holder may make a written election (the "Tax
Election"), which may be accepted or rejected in the discretion of the Committee
to have withheld a portion of the Shares then issuable to him or her having an
aggregate Fair Market Value, on the date preceding the date of such issuance,
equal to the Withholding Taxes, provided that in respect of an Optionee or
holder who may be subject to liability under Section 16(b) of the Exchange Act
either; (i)(A) the Tax Election is made at least six (6) months prior to the
date of the Taxable Event and (B) the Tax Election is irrevocable with respect
to all Taxable Events of a similar nature occurring prior to the expiration of
six (6) months following a revocation of the Tax Election; or (ii)(A) the Tax
Election is made at least six (6) months after the date the Award was granted,
(B) the Award is exercised during the Window Period and (C) the Tax Election is
made during the Window Period in which the related Award is exercised or prior
to such Window Period and subsequent to the immediately preceding Window Period.
Notwithstanding the foregoing, the Committee may, by the adoption of rules or
otherwise, (i) modify this Section 17.2 (other than as regards Director Options)
or impose such other restrictions or limitations on Tax Elections to be made at
such times and subject to such other conditions as the Committee determines will
constitute exempt transactions under Section 16(b) of the Exchange Act.
(b) If an Optionee makes a disposition, within the meaning of Section 424
(c) of the Code and regulations promulgated thereunder, of any Share or Shares
issued to such Optionee pursuant to the exercise of an Incentive Stock Option
within the two-year period commencing on the day after the date of the grant or
within the one-year period commencing on the day after the date of transfer of
such Share or Shares to the Optionee pursuant to such exercise, the Optionee
shall, within ten (10) days of such disposition, notify the Company thereof, by
delivery of written notice to the Company at its principal executive office.
18
<PAGE>
17.3 Effective Date. The effective date of the Plan
shall be as determined by the Board, subject only to the approval
by the affirmative vote of the stockholders.
19
<PAGE>
EXHIBIT 4.3
eSAFETYWORLD, INC.
AND
KASHNER DAVIDSON SECURITIES CORPORATION
UNDERWRITERS
WARRANT AGREEMENT
UNDERWRITER'S WARRANT AGREEMENT dated as of _________, 1999 by
and between eSAFETYWORLD, INC. (the "Company") and KASHNER DAVIDSON SECURITIES
CORPORATION ("Underwriter" or "Kashner") individually (an "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter 100,000
warrants (each a "Underwriter's Warrant") each to purchase a share of the
Company's common stock, par value $.001 per share (the "Common Stock").
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated ______, 1999, by and between the
Underwriter and the Company, to act as the Underwriter in connection with the
Company's proposed public offering (the "Public Offering") of 1,000,000 shares
of Common Stock (the "Offering Securities"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this
Agreement will be issued on Closing Date I (as such term is defined in the
Underwriting Agreement) by the Company to the Underwriter in consideration for,
and as part of, the Underwriter's compensation in connection with the
Underwriter's acting as the Underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of Ten Dollars ($100.00), the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Holder (as defined in Section 3 below) is hereby granted
the right to purchase, at any time from _________, 2000 until 5:00 p.m., New
York time, _______, 2004, up to 100,000 shares of Common Stock, at an initial
purchase price (subject to adjustment as provided in Section 8 hereof) of $____
per share of Common Stock (150% of the per share public offering price), subject
to the terms and conditions of this Agreement. The securities issuable upon
exercise of the Underwriter's Warrant are sometimes referred to herein as the
"Underwriter's Securities."
<PAGE>
2. Warrant Certificates. The warrant certificate (the "Underwriter's
Warrant Certificate") to be delivered pursuant to this Agreement shall be in the
form set forth in Exhibit A attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Underwriter's Warrant.
(a) The Underwriter's Warrant is exercisable during the term
set forth in Section 1 hereof payable by certified or cashier's check or money
order in lawful money of the United States. Upon surrender of Underwriter's
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Underwriter's Securities (and such other amounts, if any, arising pursuant to
Section 4 hereof) at the Company's principal office currently located at 100-31
South Jersey Ave., Setauket, New York, the registered holder of a Underwriter's
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Underwriter's Securities so purchased. The
purchase rights represented by each Underwriter's Warrant Certificate are
exercisable at the option of the Holder or Holders thereof, in whole or in part
as to Underwriter's Securities. The Underwriter's Warrant may be exercised to
purchase all or any part of the Underwriter's Securities represented thereby. In
the case of the purchase of less than all the Underwriter's Securities
purchasable on the exercise of the Underwriter's Warrant represented by a
Underwriter's Warrant Certificate, the Company shall cancel the Underwriter's
Warrant Certificate represented thereby upon the surrender thereof and shall
execute and deliver a new Underwriter's Warrant Certificate of like tenor for
the balance of the Underwriter's Securities purchasable thereunder.
(b) In lieu of the payment of cash upon exercise of the
Underwriter's Warrant as provided in Section 3(a), the Holder may exercise the
Underwriter's Warrant by surrendering the Underwriter's Warrant Certificate at
the principal office of the Company, accompanied by a notice stating (i) the
Holder's intent to effect such exercise by an exchange, (ii) Common Stock to be
issued upon the exchange, (iii) whether Underwriter's Warrants are to be
surrendered in connection with the exchange, and (iv) the date on which the
Holder requests that such exchange is to occur. The Purchase Price for the
Underwriter's Securities to be acquired in the exchange shall be paid by the
surrender as indicated in the notice, of Underwriter's Warrants, having a
"Value", as defined below, equal to the Purchase Price. "Value" as to each
Underwriter's Warrant shall mean the difference between the "Market Price", as
hereinafter defined, of a share of Common Stock and the then Purchase Price for
a share of Common Stock.
By way of example of the application of the formula, assume
that the Market Price of the Common Stock is $8.00, the Purchase Price of the
Underwriter's Warrant is $6.00. On such assumptions, the Value of a
Underwriter's Warrant is $2.00 ($8.00-$6.00) and therefore for each three
Underwriter's Warrants surrendered, the Holder could acquire one share of Common
Stock in the exchange. Notwithstanding the example, the Holder shall not be
limited to exchanging Underwriter's Warrants for Common Stock.
The Warrant Exchange shall take place on the date specified in the notice
or if the date the
<PAGE>
notice is received by the Company is later than the date specified in the
notice, on the date the notice is received by the Company.
4. Issuance of Certificates. Upon the exercise of the Underwriter's
Warrant and payment of the Purchase Price therefor, the issuance of certificates
representing the Underwriter's Securities or other securities, properties or
rights underlying such Underwriter's Warrant, shall be made forthwith (and in
any event within five (5) business days thereafter) without further charge to
the Holder thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Underwriter's Warrant Certificates and the certificates representing the
Underwriter's Securities or other securities, property or rights (if such
property or rights are represented by certificates) shall be executed on behalf
of the Company by the manual or facsimile signature of the then present Chairman
or Vice Chairman of the Board of Directors or President or Vice President of the
Company, attested to by the manual or facsimile signature of the then present
Secretary or Assistant Secretary or Treasurer or Assistant Treasurer of the
Company. The Underwriter's Warrant Certificates shall be dated the date of
issuance thereof by the Company upon initial issuance, transfer or exchange.
5. Restriction On Transfer of Underwriter's Warrant. The Holder of an
Underwriter's Warrant Certificate (and its Permitted Transferee, as defined
below), by its acceptance thereof, covenants and agrees that the Underwriter's
Warrant may be sold, transferred, assigned, hypothecated or otherwise disposed
of, in whole or in part, until _______, 2000 (one year following the effective
date of the Public Offering), only to officers and partners of the Underwriters,
or any Public Offering selling group member and their respective officers and
partners, (APermitted Transferees@). Thereafter the Underwriter's Warrant may be
transferred, assigned, hypothecated or otherwise disposed of in compliance with
applicable law.
6. Purchase Price.
(a) Initial and Adjusted Purchase Price. Except as otherwise
provided in Section 8 hereof, the initial purchase price of the Underwriter's
Securities shall be $____ per share of Common Stock (150% of the per share
public offering price). The adjusted purchase price shall be the price which
shall result from time to time from any and all adjustments of the initial
purchase price in accordance with the provisions of Section 8 hereof.
(b) Purchase Price. The term "Purchase Price" herein shall mean the initial
purchase price or the adjusted purchase price, depending upon the context.
<PAGE>
7. Registration Rights.
(a) Registration Under the Securities Act of 1933 as amended ("Act"). The
Underwriter's Warrant may have not been registered under the Act. The
Underwriter's Warrant Certificates may bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"), and
may not be offered for sale or sold except pursuant to (i) an
effective registration statement under the Act, or (ii) an
opinion of counsel, if such opinion and counsel shall be
reasonably satisfactory to counsel to the issuer, that an
exemption from registration under the Act is available."
(b) Demand Registration. (1) At any time commencing on the first
anniversary of and expiring on the fifth anniversary of the effective date of
the Company's Registration Statement relating to the Public Offering (the
"Effective Date"), the Holders of a Majority (as hereinafter defined) in
interest of the Underwriter's Warrant, or the Majority in interest of the
Underwriter's Securities (assuming the exercise of all of the Underwriter's
Warrant) shall have the right, exercisable by written notice to the Company, to
have the Company prepare and file with the U.S. Securities and Exchange
Commission (the "Commission"), on one (1) occasion, a registration statement on
Form SB-2, S-1 or other appropriate form, and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale, of the Underwriter's Securities by
such Holders and any other Holders of the Underwriter=s Warrant and/or the
Underwriter's Securities who notify the Company within fifteen (15) business
days after receipt of the notice described in Section 7(b)(2). The Holders of
the Underwriter's Warrant may demand registration prior to exercising the
Underwriter's Warrant, and may pay such exercise price from the proceeds of such
public offering.
(2) The Company covenants and agrees to give written notice of any
registration request under this Section 7(b) by any Holders to all other
registered Holders of the Underwriter's Warrant and the Underwriter's Securities
within ten (10) calendar days from the date of the receipt of any such
registration request.
(3) For purposes of this Agreement, the term "Majority" in reference to
the Holders of the Underwriter's Warrant or Underwriter's Securities, shall mean
in excess of fifty percent (50%) of the then outstanding Underwriter's Warrant
or Underwriter's Securities that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as nominees or in
conjunction therewith, or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
(c) Piggyback Registration. (1) If, at any time within the period
commencing on the first anniversary and expiring on the sixth anniversary of the
Effective Date,
<PAGE>
the Company should file a registration statement with the Commission under the
Act (other than in connection with a merger or other business combination
transaction or pursuant to Form S-8), it will give written notice at least
twenty (20) calendar days prior to the filing of each such registration
statement to the Underwriter and to all other Holders of the Underwriter's
Warrant and/or the Underwriter's Securities of its intention to do so. If an
Underwriter or other Holders of the Underwriter's Warrant and/or the
Underwriter's Securities notify the Company within fifteen (15) calendar days
after receipt of any such notice of its or their desire to include any
Underwriter's Securities in such proposed registration statement, the Company
shall afford the Underwriter and such Holders of the Underwriter's Warrant
and/or Underwriter's Securities the opportunity to have any such Underwriter's
Securities registered under such registration statement. Notwithstanding the
provisions of this Section 7(c)(1) and the provisions of Section 7(d), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7(c)(1) (irrespective of whether a written
request for inclusion of any such 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.
(2) If the managing underwriter of an offering to which the above piggyback
rights apply, in good faith and for valid business reasons, objects to such
rights, such objection shall preclude such inclusion.
(d) Covenants of the Company With Respect to Registration. In connection
with any registrations under Sections 7(b) and 7(c) hereof, the Company
covenants and agrees as follows:
(1) The Company shall use its best efforts to file a registration statement
within thirty (30) calendar days of receipt of any demand therefor pursuant to
Section 7(b); provided, however, that the Company shall not be required to
produce audited or unaudited financial statements for any period prior to the
date such financial statements are required to be filed in a report on Form
10-KSB or Form 10-QSB, as the case may be. The Company shall use its best
efforts to have any registration statement declared effective at the earliest
possible time, and shall furnish each Holder desiring to sell Underwriter's
Securities such number of prospectuses as shall reasonably be requested.
(2) The Company shall pay all costs (excluding fees and expenses of
Holders' counsel and any underwriting discounts or selling fees, expenses or
commissions), fees and expenses in connection with any registration statement
filed pursuant to Sections 7(b) and 7(c) hereof including, without limitation,
the Company's legal and accounting fees, printing expenses, blue sky fees and
expenses.
(3) The Company will use its best efforts to qualify or register the
Underwriter's Securities included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
requested by the Holders, provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
<PAGE>
(4) The Company shall indemnify the Holders of the Underwriter's Securities
to be sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), against all
loss, claim, damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from such registration statement, but only to the same extent
and with the same effect as the provisions pursuant to which the Company has
agreed to indemnify the Underwriter contained in Section 8 of the Underwriting
Agreement.
(5) The Holders of the Underwriter's Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 8 of the
Underwriting Agreement pursuant to which the Underwriter has agreed to indemnify
the Company.
(6) Nothing contained in this Agreement shall be construed as requiring the
Holders to exercise their Underwriter's Warrant prior to the initial filing of
any registration statement or the effectiveness thereof, provided that such
Holders have made arrangements reasonably satisfactory to the Company to pay the
exercise price from the proceeds of such offering.
(7) The Company shall furnish to each Underwriter for the offering, if any,
such documents as such Underwriter may reasonably require.
(8) The Company shall as soon as practicable after the effective date of
the registration statement, and in any event within 15 months thereafter, make
"generally available to its security holders" (within the meaning of Rule 158
under the Act) an earnings statement (which need not be audited) complying with
Section 11(a) of the Act and covering a period of at least 12 consecutive months
beginning after the effective date of the registration statement.
(9) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence described below and any managing
Underwriter copies of all correspondence between the Commission and the Company,
its counsel or auditors with respect to the registration statement and permit
each Holder and Underwriter to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and
<PAGE>
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such Holder shall reasonably request.
(10) The Company shall enter into an
underwriting agreement
with the managing underwriter selected for such underwriting by Holders holding
a Majority of the Underwriter's Securities requested to be included in such
underwriting, provided, however that such managing underwriter shall be
reasonably acceptable to the Company, except that in connection with an offering
for which the Holders have piggyback rights, the Company shall have the sole
right to select the managing underwriter or underwriters. Such underwriting
agreement shall be satisfactory in form and substance to the Company, a Majority
of such Holders (in respect of a registration under Section 7(b) only) and such
managing underwriter, and shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily contained in
agreements of that type. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Underwriter's Securities.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
8. Adjustments to Purchase Price and Number of Securities.
(a) Computation of Adjusted Purchase Price. Except as hereinafter provided,
in case the Company shall at any time after the date hereof issue or sell any
shares of Common Stock (other than the issuances referred to in Section 8(g)
hereof), including shares held in the Company's treasury, for a consideration
per share less than the "Market Price" (as defined in Section 8(a)(6) hereof)
per share of Common Stock on the date immediately prior to the issuance or sale
of such shares, or without consideration, then forthwith upon any such issuance
or sale, the Purchase Price of the Common Stock shall (until another such
issuance or sale) be reduced to the price (calculated to the nearest full cent)
determined by dividing (1) the product of (a) the Purchase Price in effect
immediately before such issuance or sale and (b) the sum of (i) the total number
of shares of Common Stock outstanding immediately prior to such issuance or
sale, and (ii) the number of shares determined by dividing (A) the aggregate
consideration, if any, received by the Company upon such sale or issuance, by
(B) the Market Price, and by (2) the total number of shares of Common Stock
outstanding immediately after such issuance or sale provided, however, that in
no event shall the Purchase Price be adjusted pursuant to this computation to an
amount in excess of the Purchase Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock, as provided by Section 8(c) hereof.
For the purposes of this Section 8, the term "Purchase Price"
shall mean the Purchase Price of the Common Stock forming a part of the
Underwriter's Securities set forth in Section 6 hereof, as adjusted from time to
time pursuant to the provisions of this Section 8.
For the purposes of any computation to be made in accordance
with this Section 8(a), the following provisions shall be applicable:
<PAGE>
(1) In case of the issuance or sale of shares of Common Stock (or of
other securities deemed hereunder to involve the issuance or sale of shares of
Common Stock) for a consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the amount of cash
received by the Company for such shares (or, if shares of Common Stock are
offered by the Company for subscription, the subscription price, or, if such
securities shall be sold to Underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting or
purchase thereof by Underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith.
(2) In case of the issuance or sale (otherwise than as a dividend or
other distribution on any stock of the Company, and otherwise than on the
exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company.
(3) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(4) The reclassification of securities of the Company other than shares
of Common Stock into securities including shares of Common Stock shall be deemed
to involve the issuance of such shares of Common Stock for a consideration other
than cash immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Common Stock shall be
determined as provided in Section 8(a)(2).
(5) The number of shares of Common Stock at any one time outstanding
shall include the aggregate number of shares of Common Stock issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
(6) As used herein in the phrase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in the case no such reported sale
takes place on such day, the average of the last reported sales prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the average closing bid price as furnished by the
NASD through the NASD Automated Quotation System ("NASDAQ") or similar
organization if NASDAQ is no longer reporting such
<PAGE>
information, or if the Common Stock is not quoted on NASDAQ, as determined in
good faith by resolution of the Board of Directors of the Company, based on the
best information available to it.
(b) Options, Rights, Warrant and Convertible and Exchangeable Securities.
Except in the case of the Company issuing rights to subscribe for shares of
Common Stock distributed to all the stockholders of the Company and Holders of
Underwriter's Warrant pursuant to Section 8(i) hereof, if the Company shall at
any time after the date hereof issue options, rights or warrants to purchase
shares of Common Stock, or issue any securities convertible into or exchangeable
for shares of Common Stock (other than the issuances referred to in Section 8(g)
hereof), (i) for a consideration per share less than the Market Price (including
the issuance thereof without consideration such as by way of dividend or other
distribution), or (ii) without consideration, the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares of Common Stock issuable or that
may become issuable under such options, rights or warrants (assuming exercise in
full even if not then currently exercisable or currently exercisable in full)
shall be deemed to be issued and outstanding at the time such options, rights or
warrants were issued, and for a consideration equal to the minimum purchase
price per share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as consideration
received on the issue or sale of shares in accordance with the terms of the
Underwriter's Warrant), if any, received by the Company for such options, rights
or warrants; provided, however, that upon the expiration or other termination of
such options, rights or warrants, if any thereof shall not have been exercised,
the number of shares of Common Stock deemed to be issued and outstanding
pursuant to this Section 8(b)(1) (and for the purposes of Section 8(a)(5)
hereof) shall be reduced by such number of shares as to which options, warrants
and/or rights shall have expired or terminated unexercised, and such number of
shares shall no longer be deemed to be issued and outstanding, and the Purchase
Price then in effect shall forthwith be readjusted and thereafter be the price
which it would have been had adjustment been made on the basis of the issuance
only of shares actually issued or issuable upon the exercise of those options,
rights or warrants as to which the exercise rights shall not be expired or
terminated unexercised.
(2) The aggregate maximum number of shares of Common Stock issuable upon
conversion or exchange of any convertible or exchangeable securities (assuming
conversion or exchange in full even if not then currently convertible or
exchangeable in full) shall be deemed to be issued and outstanding at the time
of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Common Stock in accordance with the terms of the
Underwriter's Warrant) received by the Company for such securities, plus the
minimum consideration, if any, receivable by the Company upon the conversion or
exchange thereof; provided, however, that upon the expiration or other
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason or redemption or
<PAGE>
otherwise), the number of shares deemed to be issued and outstanding pursuant to
this Section 8(b)(2) (and for the purpose of Section 8(a)(5) hereof) shall be
reduced by such number of shares as to which the conversion or exchange rights
shall have expired or terminated unexercised, and such number of shares shall no
longer be deemed to be issued and outstanding and the Purchase Price then in
effect shall forthwith be readjusted and thereafter be the price which it would
have been had adjustment been made on the basis of the issuance only of the
shares actually issued or issuable upon the conversion or exchange of those
convertible or exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.
(3) If any change shall occur in the price per share provided for in any of
the options, rights or warrants referred to in Section 8(b)(1), or in the price
per share at which the securities referred to in Section 8(b)(2) are convertible
or exchangeable, and if a change in the Purchase Price has not occurred by
reason of the event giving rise to the change in the price per share of such
other options, rights, warrants, or convertible or exchangeable securities, such
options, rights or warrants or conversion or exchange rights, as the case may
be, to the extent not theretofore exercised, the shall be deemed to have expired
or terminated on the date when such price change became effective in respect of
shares not theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities at the new
price in respect of the number of shares issuable upon the exercise of such
options, rights or warrants or the conversion or exchange of such convertible or
exchangeable securities.
(c) Subdivision and Combination. In case the Company shall at any time
issue any shares of Common Stock in connection with a stock dividend in shares
of Common Stock or subdivide or combine the outstanding shares of Common Stock,
the Purchase Price shall forthwith be proportionately decreased in the case of a
stock dividend or a subdivision or increased in the case of combination.
(d) Adjustment in Number of Securities. Upon each adjustment of the
Purchase Price pursuant to the provisions of this Section 8, the number of
Underwriter's Securities issuable upon the exercise of the Underwriter's Warrant
shall be adjusted to the nearest whole share by multiplying a number equal to
the Purchase Price in effect immediately prior to such adjustment by the number
of Underwriter's Securities issuable upon exercise of the Underwriter's Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Purchase Price.
(e) Definition of Common Stock. For the purpose of this Agreement, the term
"Common Stock" shall mean the class of stock designated as Common Stock in the
Certificate of Incorporation, of the Company as it may be amended as of the date
hereof.
(f) Reclassification, Merger or Consolidation. The Company will not merge,
reorganize or take any other action which would terminate the Underwriter's
Warrant without first making adequate provision for the Underwriter's Warrant.
In case of any reclassification or change of the outstanding shares of Common
Stock issuable upon exercise of the outstanding warrants (other than a change in
par value to no par value, or from nor par value
<PAGE>
to par value, or as a result of a subdivision or combination), or in case of any
consolidation of the Company with, or merger of the Company with, or merger of
the Company into, another corporation (other than a consolidation or merger in
which the Company is the continuing corporation and which does not result in any
reclassification or change of the outstanding Common Stock except a change as a
result of a subdivision or combination of such shares or a change in par value,
as aforesaid), or in the case of a sale or conveyance to another corporation or
other entity of the property of the Company as an entirety or substantially as
an entirety, the Holders of each Underwriter's Warrant then outstanding or to be
outstanding shall have the right thereafter (until the expiration of such
Underwriter's Warrant) to purchase, upon exercise of such Underwriter's Warrant,
the kind and number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owner of the shares of Common Stock
underlying the Underwriter's Warrant immediately prior to any such events at a
price equal to the product of (x) the number of shares issuable upon exercise of
the Underwriter's Warrant and (y) the Purchase Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance, as if such Holders had exercised the Underwriter's Warrant.
In the event of a consolidation, merger, sale or conveyance of property, the
corporation formed by such consolidation or merger, or acquiring such property,
shall execute and deliver to the Holders a supplemental Underwriter's warrant
agreement to such effect. Such supplemental Underwriter's warrant agreement
shall provide for adjustments which shall be identical to the adjustment
provided for in this Section 8. The provisions of this Section 8(f) shall
similarly apply to successive consolidations or mergers.
(g) No Adjustment of Purchase Price in Certain Cases. No adjustment of the
Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the Underwriter's Warrant or the
securities underlying the Underwriter's Warrant, (ii) the securities sold
pursuant to the Public Offering (including those sold upon exercise of the
Underwriter's over-allotment option), or (iii) the shares issuable pursuant to
the options, warrants, rights, stock purchase agreements or convertible or
exchangeable securities outstanding or in effect on the date hereof as described
in the prospectus relating to the Public Offering.
(2) If the amount of said adjustments shall
aggregate less than
two ($.02) cents for one (1) share of Common Stock; provided, however, that in
such case any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried forward,
shall aggregate at least two ($.02) cents for one (1) share of Common Stock. In
addition, Registered Holders shall not be entitled to cash dividends paid by the
Company prior to the exercise of any warrant or warrants held by them.
9. Exchange and Replacement of Warrant Certificates. Each
Underwriter's Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holders at the principal executive office of
the Company, for a new Underwriter's Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same
<PAGE>
number of Underwriter's Securities in such denominations as shall be designated
by the Holders thereof at the time of such surrender.
10. Loss, Theft etc. of Certificates Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any Underwriter's Warrant Certificate, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Underwriter's Warrant
Certificates, if mutilated, the Company will make and deliver a new
Underwriter's Warrant Certificate of like tenor, in lieu thereof.
11. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Underwriter's Warrant, nor shall it be required
to issue scrip or pay cash in lieu of fractional interests; provided, however,
that if a Holder exercises all Underwriter's Warrant held of record by such
Holder the fractional interests shall be eliminated by rounding any fraction to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
12. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Underwriter's
Warrant, such number of shares of Common Stock or other securities and
properties or rights as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of Underwriter's Warrant and payment of
the Purchase Price therefor, all the shares of Common Stock issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as the
Underwriter's Warrant shall be outstanding, the Company shall use its best
efforts to cause the Common Stock to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock issued to the
public in connection herewith may then be listed or quoted.
13. Notices to Underwriter's Warrant Holders. Nothing
contained in this Agreement shall be construed as conferring upon the Holders
the right to vote or to consent or to receive notice as a stockholder in respect
of any meetings of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Underwriter's Warrant and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable
<PAGE>
for shares of capital stock of the Company, or any option, right or warrant
to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially all
of its property, assets and business as an entirety shall be proposed; then, in
any one or more of said events, the Company shall give written notice of such
event at least fifteen (15) calendar days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
14. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or five days after being mailed by registered or
certified mail, return receipt requested: If to the registered Holders of the
Underwriter's Warrant, to the address of such Holders as shown on the books of
the Company; or
(a) If to the Company to 100-31 South Jersey Ave., Setauket, NY 11733, or
to such other address as the Company may designate by notice to the Holders,
with a courtesy copy to McLaughlin & Stern, LLP.
15. Supplements and Amendments. The Company and the
Underwriter may from time to time supplement or amend this Agreement without the
approval of any Holders of Underwriter's Warrant Certificates (other than the
Underwriter) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provision in regard to matters or
questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem shall not
adversely affect the interests of the Holders of Underwriter's Warrant
Certificates.
16. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Underwriter, the Holders and their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close
of business on _______, 2004. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on the expiration of any applicable statue of limitations.
18. Governing Law; Submission to Jurisdiction. This Agreement and each
<PAGE>
Underwriter's Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said state without giving effect to
the rules of said state governing the conflicts of laws.
19. Entire Agreement; Modification. This Agreement (including
the Underwriting Agreement, to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and thereof. This Agreement may not be
modified or amended except by a writing duly signed by the Company and the
Holders of a Majority in Interest of the Underwriter's Securities (for this
purpose, treating all then outstanding Underwriter's Warrants as if they had
been exercised).
20. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Underwriter and any other registered Holders of the Underwriter's
Warrant Certificates or Underwriter's Securities any legal or equitable right,
remedy or claim under this Agreement; and this Agreement shall be for the sole
and exclusive benefit of the Company and the Underwriter and any other Holders
of the Underwriter's Warrant Certificates or Underwriter's Securities.
23. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
24. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, the Underwriter and their respective
successors and assigns and the Holders from time to time of the Underwriter's
Warrant Certificates or any of them.
[Signature on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
eSAFETYWORLD, INC.
By:__________________________________________
Name: Edward A. Heil, C.E.O.
KASHNER DAVIDSON SECURITIES CORP.,
By:__________________________________________
Name: Matthew Miester
Title: C.E.O.
<PAGE>
Schedule A
to
Underwriter's Warrant Agreement
Between
eSAFETYWORLD, INC.
AND
KASHNER DAVIDSON SECURITIES CORPORATION
Underwriter
Kashner Davidson Securities Corp.
<PAGE>
eSAFETYWORLD, INC.
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED FOR SALE OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR
(ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE COMMENCING ___________, 2000 THROUGH
5:00 P.M., NEW YORK TIME ON __________, 2004
Warrant covering 100,000 shares of
Common Stock
No. UW-1
This Warrant Certificate certifies that Kashner Davidson
Securities Corp. or registered assigns, is the registered holder of this Warrant
to purchase initially, at any time from _________, 2000, until 5:00 p.m., New
York time on ________, 2004 (the "Expiration Date"), up to 100,000 shares of
Common Stock, $.001 par value (the "Common Stock") of eSafetyworld, Inc.
("ACompany") exercisable to purchase one share of Common Stock at a purchase
price of $____ per share (150% of the per share public offering price) (the
"Purchase Price"), upon the surrender of this Warrant Certificate and payment of
the applicable Purchase Price at an office or agency of the Company, but subject
to the conditions set forth herein and in the Underwriter's Warrant Agreement,
dated as of ________, 1999, by and between the Company and Kashner Davidson
Securities Corp. (the "Warrant Agreement"). Payment of the Purchase Price shall
be made by certified or cashier's check or money order payable to the order of
the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on
the Expiration Date, at which time all Warrant evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrant evidenced by this Warrant Certificate is part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement
between the Company and the Underwriter, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the
<PAGE>
registered holders or registered holder) of the Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Purchase Price and the type and/or number of the Company's
securities issuable upon the exercise of this Warrant, may, subject to certain
conditions, be adjusted. In such event, the Company will, at the request of the
holder, issue a new Warrant Certificate evidencing the adjustment in the
Purchase Price and the number and/or type of securities issuable upon the
exercise of the Warrant; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrant shall be issued to the transferee(s) in
exchange as provided herein, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
certificate this ___ day of _____, 1999.
eSAFETYWORLD, INC.
By:______________________________________
Stephen M. Watters
CEO
ATTEST:
By:__________________________________
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
<PAGE>
FOR VALUE RECEIVED___________________________
hereby sells, assigns and transfers unto _____________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Warrant Certificate on the books of
eSAFETYWORLD, INC., with full power of substitution.
Dated:
Signature_____________________
(Signature must conform in all respects to the name of
holder as specified on the face of the Warrant Certificate.)
[Signature guarantee] ________________________________
(Insert Social Security or Other
Identifying Number of Holders)
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase ______ shares of Common Stock and herewith
tenders in payment for such securities a certified or cashier's check or money
order payable to the order of eSAFETYWORLD, INC. in the amount of $______, all
in accordance with the terms hereof. The undersigned requests that certificates
for such securities be registered in the name of ___________________________
whose address is _____________________ and that such certificates be delivered
to _____________________________________ whose address is
- ------------------------------------------------------------.
Dated:
Signature_______________________
(Signature must conform in all respects to the name of holder as specified on
the face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holders)
[Signature guarantee]
<PAGE>
EXHIBIT 10.1
BUSINESS PURCHASE AGREEMENT
AGREEMENT made as of the ____ day of August, 1997, by and
among Laminaire Corporation, a corporation duly organized, validly existing and
in good standing under and by virtue of the laws of the State of New Jersey,
with executive offices at 960 East Hazelwood Avenue, Rahway, New Jersey 07065
(hereinafter referred to as the "Seller") and The SL Group, Inc., a Nevada
Corporation having an office at _____________ (hereinafter referred to as the
"Buyer").
INTRODUCTION
WHEREAS, Seller wishes to sell, and Buyer is willing to purchase, all of
business of Seller's Clean Room Distribution Product Group (sometimes referred
to as the "Group") as listed in Exhibit A (the "Assets") from Seller in
consideration of (a) 100,000 shares of Buyer's common stock, $.001 par value,
(b) the assumption of certain liabilities of Seller, as listed in Exhibit B, and
(c) delivery of promissory notes in the aggregate principal amount of $500,000
subject to the terms and conditions of this Agreement; and
WHEREAS, Seller is currently in default in the payment of Notes 1 and 2 (as
defined below), and does not anticipate being able to satisfy these obligations
based upon Seller's current revenues and cash flows.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the sufficiency of which is hereby acknowledged, the parties
intending to be legally bound hereby do hereby agree as follows:
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1. Purchase of Assets and Consideration.
(a) Purchase and Sale of Assets. In reliance on the representations and
warranties, and subject to the terms and conditions hereinafter set forth, the
Seller shall sell and deliver to Buyer, and the Buyer shall purchase and take
delivery from Seller, on the Closing Date (as hereinafter defined), the Business
as described herein. Buyer is not acquiring or purchasing any tangible assets as
part of this agreement.
(b) Purchase Price. Subject to the adjustment at Closing in accordance with
Section 1(c) below, the Purchase Price for the Seller's Stock shall be payable
as follows, (i) assumption by Buyer of certain liabilities and obligations
listed in Exhibit A, (ii) issuance by Buyer of a promissory note in the
aggregate principal amount of $300,000, which note shall bear interest at the
rate of eight percent per anum (the "First Note"), in the form of Exhibit C
attached hereto, (iii) issuance by Buyer of a promissory note in the aggregate
principal amount of $200,000, which note shall bear interest at the rate of
eight percent per anum (the "Second Note")" , and (iv)100,000 shares of common
stock of Buyer, $.001 par value, issued to Laminaire Corporation.
2. Closing
(a) Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on ____ at 10:00 A.M. on such date.
(b) Place of Closing. The Closing shall take place at the offices of
McLaughlin & Stern LLP., 260 Madison Avenue, 18th Floor. New York, New York
10016, or at such other place as the Sellers and the Purchaser may mutually
agree upon in writing.
3. Representations and Warrants of the Seller. The Seller
represents, warrants and agrees as follows:
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(a) Corporate.
(1) The Seller is a corporation duly organized, validly existing and in
good standing under and by virtue of the laws of the State of New Jersey. The
Seller is qualified to do business as a foreign corporation in such other states
in which the ownership of its assets or the nature and conduct of its businesses
requires such qualification and which are set forth in Schedule "2(a)"
previously delivered to Buyer.
(2) The Seller has the power to own its property and to carry on its
business as and where such are now conducted.
(3) Seller retained independent counsel to review all documents relating to
this Agreement, and Seller acknowledges that McLaughlin & Stern, LLP is the
attorney for Buyer.
(4) Seller shall continue to manage the Assets and Clean Room Distribution
Product Group, pursuant to the Management and Fulfillment Agreement attached
hereto as Exhibit ____. The term of the Management and Fulfillment Agreement
will extend until the completion of Buyer's Initial Public Offering. Seller will
execute a covenant not to compete that will have term extending three months
longer than the Management and Fulfillment Agreement.
(5) This Agreement has been duly executed and delivered by the Seller and
constitutes the legal, valid and binding obligation of the Seller, enforceable
in accordance with its terms, except as may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or laws affecting the rights and remedies
of creditors generally, and (ii) the availability of the remedy of specific
performance, injunctive relief or other equitable relief, whether applicable
applied by a
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court of law or equity, including the exercise of judicial discretion in
accordance with general principles of equity.
(b) Financial.
Since _________, except as specified in Schedule ____, the Clean Room
Distribution Product Group segment of the business of the Seller has been
carried on in the ordinary course in substantially the same manner as prior to
that date, and the Seller has not:
(i) undergone any material adverse change in the financial condition or in
the operations or the business of the Seller for the Clean Room Distribution
Product Group from that shown on the unaudited financial statements as of June
30, 1999 and audited financial statements as of December 31, 1998 (which
financials are attached as Exhibit __) referred to in subsection (b)(1) of this
Section 2;
(ii) changed any accounting principles applicable to the books and records
of the Seller; or
(iii) encountered any other event or condition of any character, not in the
ordinary course of business, that materially and adversely affect the results of
operations or business of the Clean Room Distribution Product Group except for
matters relating to past due vendor payments.
(c) Title to Property.
(1) A list of all assets being transferred by Seller in connection with its
Clean Room Distribution Product Group, is set forth on Exhibit A attached
hereto, which Assets represent all of the Seller's intangible assets in
connection with the business of the Group. The Seller owns all right, title and
interest in and to all of the Assets, free and clear of all mortgages,
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liens, pledges, charges or encumbrances of any nature whatsoever, except as set
forth in Schedule 2(d) previously delivered to Buyer; and has taken all steps
necessary or otherwise required to perfect and protect its rights in and to
their respective properties and assets, including intangibles.
(2) The Seller is not restricted by agreement from carrying on the Group's
business anywhere in the United States.
(3) Seller acknowledges that Buyer may recruit present employees of the
Group but is not obligated to do so.
(d) Investment Representation:
(i) Seller represents that it is acquiring the shares of Common Stock of
Buyer (the "Securities") for its own account for investment only and not with a
view towards distribution or resale, and agrees not to sell, transfer, pledge,
hypothecate or otherwise dispose of, or offer to dispose of, the Securities
unless the Securities have been registered under the Securities Act of 1933 (the
"Act") and applicable state securities laws or such registration is not required
in the opinion of counsel for the Seller reasonably acceptable to the Seller.
Any routine sale of the Securities may require compliance with some exemption
under the Act prior to resale. Seller understands that certificates for the
Securities issued pursuant to this Agreement shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER SUCH ACT OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE SELLER THAT AN
EXEMPTION FROM REGISTRATION FOR SUCH SALE, OFFER, TRANSFER,
HYPOTHECATION OR OTHER ASSIGNMENT IS AVAILABLE UNDER SUCH ACT.
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(ii) Seller represents that (i) it is
subscribing for the Securities after
having made adequate investigation of the business, finances and prospects of
Buyer, (ii) it has been furnished any information and materials relating to the
business, finances and operation of Buyer and information and materials relating
to the offer and sale of the Securities which it has requested, including, but
not limited to the filings by Buyer under the Securities Exchange Act of 1934,
and it has been given an opportunity to make any further inquiries desired of
the management and any other personnel of the Buyer as received satisfactory
responses to such inquiries.
3. Representations and Warranties of Buyer. Buyer represents and warrants
as follows:
(a) Organization, Power and Qualification. Buyer is a corporation duly
organized and validly existing, and is in good standing, under the laws of its
jurisdiction of incorporation or organization, has the power and authority to
own its property and to carry on its business as now being conducted and
hereafter proposed to be conducted and is duly qualified and is in good standing
as a foreign corporation or partnership, and authorized to do business, in all
jurisdictions in which the character of its properties and assets or the nature
of its business as now being conducted requires such qualification or
authorization.
(b) Ability to Carry Out the Agreement, Etc. Buyer is not subject to or
bound by any provision of any certificate or articles of incorporation or
by-laws, or to the best of Buyer's knowledge any mortgage, deed of trust, lease,
note, bond, indenture, other instrument or agreement, license, permit, trust,
custodianship, other restriction, or any applicable provision of any law,
statute, rule, regulation, judgment, order, writ, injunction or decree of any
court, governmental
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body, administrative agency or arbitrator which could prevent or be violated by
or under which there would be a default as a result of, nor, is the consent of
any person which has not been obtained required for the execution, delivery and
performance by the Buyer under this Agreement, or any agreements, contemplated
hereunder.
(c) Validity of Agreement, Authority, Etc. The execution and delivery of,
and performance by Buyer of its obligations under this Agreement and the other
documents contemplated or referenced under this Agreement (collectively, the
"Transaction Documents"), have been duly authorized by all necessary action of
Buyer. This Agreement has been, and each other Transaction Document has been, or
will be at the Closing Date, duly executed and delivered by Buyer and (assuming
valid execution and delivery by the other party) the Transaction Documents are,
or will be at the Closing Date, the valid and binding obligation of it,
enforceable in accordance with their terms, except as may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or laws affecting the rights
and remedies of creditors generally, and (ii) the availability of the remedy of
specific performance, injunctive relief or other equitable relief, whether
applicable applied by a court of law or equity, including the exercise of
judicial discretion in accordance with general principles of equity.
(d) Litigation. There are no judicial or administrative actions, suits,
proceedings or investigations pending, or threatened, which question the
validity of or conflict with the terms of this Agreement or of any action taken
or to be taken pursuant to or in connection with the provisions of this
Agreement, nor does any basis exist for any such action, suit, proceeding or
investigation.
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(e) Distribution Buyer agrees and acknowledges that Seller is not required
to use Buyer to distribute any products Seller presently manufactures, although
Seller may enter into such agreements with Buyer.
4. Conduct of the Business of the Seller Pending the Closing
Date. From and after the date of this Agreement and until the Closing Date:
(a) Full Access. Buyer and its authorized representatives shall have full
access, during normal business hours, to all properties, books, records,
contracts and documents of the Seller, and the Seller shall furnish or cause to
be furnished to Buyer and its authorized representatives all information with
respect to the affairs and business of the Seller as Buyer may request.
(b) Carry On In Regular Course. The Seller shall carry on the business of
the Group diligently and substantially in the same manner as heretofore and
shall not make or institute any unusual or novel methods of trade, purchase,
sale, lease, management, accounting or operation.
(c) Contracts and Commitments. The Seller shall not enter into any contract
or commitment or engage in any transaction not in the usual and ordinary course
of the business of the Group and consistent with past practices without the
prior written consent of the Buyer.
(d) Preservation of Organization and Employees. The Seller will use its
best efforts (without making any commitments on behalf of Buyer) to preserve the
business of the Group organization intact, to keep available to Buyer its key
officers and employees, and to preserve for Buyer the present relationships of
the Seller and its suppliers and others having business
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relations with it. The Seller will not change its present relationships with its
employees as set forth in Schedule 5(c) hereof.
(e) Information to be Furnished. The Seller will furnish or make available
to Buyer all the information concerning the Seller required for inclusion in any
statement or application made by Buyer to any governmental body in connection
with the transaction contemplated by this Agreement, and the Seller represents
and warrants that all such information furnished to Buyer for such applications
or statements shall be true and correct in all respects without omission of any
material fact required to be stated to make any such information not misleading.
5. Survival of Representations and Warranties. All
representations, warranties, and agreements of the Seller and Buyer contained
herein (including all schedules and exhibits hereto) or in any document,
statement, certificate or other instrument referred to herein or delivered
hereunder in connection with the transactions contemplated hereby shall survive
the Closing.
6. Conditions Precedent to Buyer's Obligations. Each and every
obligation of Buyer to be performed on the Closing Date or thereafter, as the
case may be, shall be subject to the satisfaction prior thereto of the following
conditions:
(a) Representations and Warranties True at the Closing Date. The
representations and warranties made by the Seller in this Agreement or given on
their behalf hereunder shall be true on and as of the Closing Date with the same
effect as through such representations and warranties had been made or given on
and as of the Closing Date.
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(b) Compliance with Agreement. The Seller shall have performed and complied
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or on the Closing Date.
(c) Certificate of Fulfillment of Conditions. There shall be delivered to
Buyer a certificate of the Seller certifying in such detail as Buyer may specify
the fulfillment of conditions set forth in subsections (a), (b), (c) and (d) of
this Section 5.
(d) Proceedings and Instruments Satisfactory. All proceedings, corporate or
other, to be taken in connection with the transaction contemplated by this
Agreement, and all documents incident thereto, shall be satisfactory in form and
substance to Buyer, and the Seller shall have made available to Buyer for
examination the originals or true and correct copies of all records and
documents relating to the business and affairs of the Seller, which Buyer may
request in connection with said transaction. The Seller shall have complied with
all statutory requirements for the valid consummation by the Seller of the
transaction contemplated by this Agreement.
(e) No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency which in the
opinion of Buyer's counsel is likely to result in the restraint, prohibition or
the obtaining of damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby, or in connection with
any claim against the Seller, not disclosed by the Schedules attached hereto.
(f) All Documents. All documents required by Section 9(a) of this Agreement
shall have been delivered to the Buyer.
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7. Conditions Precedent to the Seller's Obligations. Each and
every obligation of the Seller to be performed on the Closing Date shall be
subject to the satisfaction prior thereto of the following conditions:
(a) Representations and Warranties True at the Closing Date. Buyer's
representations and warranties contained in this Agreement shall be true at and
as of the Closing Date as though such representations and warranties were made
at and as of the Closing Date.
(b) Compliance with Agreement. Buyer shall have performed and complied with
its obligations under this Agreement which are to be performed or complied with
prior to or on the Closing Date.
(c) Notes. Buyer shall have delivered the First Note and the Second Note.
(d) All Documents. All documents required by Section 9(b) of this Agreement
shall have been delivered to the Seller.
8. Indemnification and Resolution of Disputes.
(a) Indemnification by Seller. Seller shall indemnify and hold harmless
Buyer, and shall reimburse Buyer for, any loss, liability, claim, damage,
expense (including, but not limited to, reasonable cost of investigation and
defense and reasonable attorneys' fees) or diminution of value (collectively,
"Damages") arising from or in connection with (a) any inaccuracy in any of the
representations and warranties of Seller pursuant to this Agreement or in any
certificate delivered by the Seller pursuant to this Agreement, or any actions,
omissions or states of facts inconsistent with any such representation or
warranty, or (b) any failure by the Seller to perform or comply with any
provision of this Agreement. The obligations of the Seller to indemnify and hold
harmless Buyer shall also apply to any action, claim or suit which arises from
the operations of the Seller prior
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to the Closing Date, to the extent that the Seller's liability therefore is not
covered by insurance, whether or not such action, claim or suit is disclosed in
this Agreement or the Schedules attached hereto. Buyer shall indemnify and hold
harmless Seller, and shall reimburse Seller for any Damages arising from (a) any
inaccuracy in any of the representations and warranties of Buyer in this
Agreement or in any certificate delivered by the Buyers pursuant to this
Agreement, or any actions, omissions or states of facts inconsistent with any
such representation or warranty, or (b) any failure by the Buyer to perform or
comply with any provision of this Agreement.
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may be effected by the indemnifying party without the indemnified party's
consent (which shall not be unreasonable withheld) unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any person which is not fully remedied by the payment referred to in clause (ii)
and no adverse effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party, (b) the indemnifying party shall have no
liability with respect to any compromise or settlement thereof effected without
its consent (which shall not be reasonably withheld) and (c) the indemnified
party will reasonable cooperate with the indemnifying party in the defense of
such action. If notice is given to an indemnifying party of the commencement of
any action and it does not, within 15 days after the indemnified party's notice
is given, give notice to the indemnified party of its election to assume the
defense thereof, the indemnifying party shall be bound by any determination made
in such action or any compromise or settlement thereof effected by the
indemnified party. Notwithstanding the foregoing, if an indemnified party
determined in good faith that there is a reasonable probability that an action
may materially and adversely affect it or its affiliated other than as a result
of monetary damages, such indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise or settle such action,
but the indemnifying party shall not be bound by any determination of an action
so defended or any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld).
9. Termination and Abandonment. This Agreement may be
terminated and the sale provided for by this Agreement may be abandoned without
liability on the part of any party to the other, on or before the Closing Date:
(a) by mutual consent of Buyer and the Seller;
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(b) by Buyer
(1) if an examination of the Group by Buyer, or its authorized
representatives, shows that since ___________, there has been a material and
adverse change in the financial condition of the Group its operations from that
shown in the financial statements referred to in subsection (b)(1) of Section 2,
or shows that such financial statements do not completely, truly and correctly
reflect and fairly present the financial conditions and results of operations of
the Seller in all material respects; or
(2) if any of the events or conditions specified in subsection (b)(2) of
Section 2 have occurred; or
(3) if any of the conditions provided for in Section 5 of this Agreement
have not been met and have not been waived by Buyer in writing;
(4) by the Seller if any of the conditions of Section 6 of this Agreement
have not been met and have not been waived in writing by the Seller.
In the event of termination and abandonment by any party, as above provided
in this Section 8, prompt written notice shall be given to the other party.
10. Closing Date. The closing with respect to the transactions contemplated
hereunder shall take place at the offices of McLaughlin & Stern, LLP, 260
Madison Avenue, New York, New York, at 10:00 a.m. local time on ________. Buyer
may, at its option, delay the Closing Date until two business days after the
closing of its pending private placement, but no later than ______________, upon
written notice to the Seller. Such date (or such earlier date) is hereinafter
referred to as the "Closing Date".
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At the Closing,
(a) The Seller shall deliver to Buyer the following:
(1) a certificate of fulfillment of conditions signed by an authorized
officer of the Seller, referred to in subsection (e) of Section 5 hereof;
(2) consents of any party to any contract to which the Seller is a party
and whose consent is required by reason of the transactions contemplated by this
Agreement, as set forth on Schedule ___.
(3) such other and further documents, instruments and certificates not
inconsistent with the provisions of this Agreement, executed by Seller as Buyer
shall reasonably require to carry out and effectuate the purposes and terms of
this Agreement.
(b) Buyer shall deliver to the Seller the following:
(1) a stock certificate issued to Laminaire Corporation in the amount of
100,000 shares of Common Stock of Buyer;
(2) The First Note executed by the Buyer;
(3) the Second Note executed by the Buyer;
10. Operation of the Buyer and Seller after the Closing Date. Buyer
- -------------------------------------------------------- covenants as follows:
(a) Separate Books and Records. Buyer shall cause the Seller to maintain
separate records for the operations of the Group's business.
(b) Registration. Buyer acknowledges that pursuant to an engagement letter
between Buyer and Kashner Davidson Securities Corporation, Buyer shall try to
register
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1,000,000 shares of its Common Stock in good faith in a public offering,
pursuant to the rules and regulations of the Securities Act of 1933, as amended.
11. Brokerage. The Seller represents and warrants that it has
not engaged the services of any broker or finder hereunder, and agrees to
indemnify and hold the Buyer harmless against any claim for brokers' or finders'
fees or compensation in connection with the transactions herein provided for by
any person, firm or corporation claiming a right to the same because engaged by
the Seller. Buyer represents and warrants to the Seller that it has not engaged
the services of any broker or finder in connection with the transactions herein
provided for and agrees to indemnify and hold harmless Seller against any claims
for brokers' or finders' fees or compensation in connection with the
transactions herein provided for by any other person, firm or corporation
claiming a right to the same because engaged by Buyer or its subsidiaries.
12. Miscellaneous.
(a) Nature and Survival of Representations. All statements contained in any
certificate, instrument, schedule or document delivered by or on behalf of any
of the parties pursuant to this Agreement and the transactions contemplated
hereby shall be deemed representations and warranties by the respective parties
hereunder. All representations and warranties made by the parties each to each
other in this Agreement or pursuant hereto shall survive, except to the extent
waived in writing by the parties hereto, the consummation of the transactions
contemplated by this Agreement, notwithstanding any investigation heretofore or
hereafter made by any of them or on behalf of any of them. Each Schedule
delivered in accordance with this Agreement shall be deemed to include and refer
to every other Schedule hereto.
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(b) Entire Agreement. This Agreement, together with the Exhibits and
Schedules delivered pursuant to this Agreement, sets forth the entire agreement
and understanding between the parties as to the subject matter hereof, and
merges and supersedes all prior discussions, agreements and understandings of
every and any nature between them, and no party shall be bound by any condition,
definition, warranty, or representation, other than expressly set forth or
provided for in this Agreement, or as may be, on or subsequent to the date
hereof, set forth in writing and signed by the party to be bound thereby. This
Agreement may not be changed or modified, except by agreement in writing, signed
by all of the parties hereto.
(c) Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors in interest of the respective parties hereto.
(d) Laws Governing. This Agreement shall be construed and interpreted
according to the law of the State of New York as applied to contracts executed
and performed in the State of New York.
(e) Assignment. This Agreement shall not be assigned by the Seller or
Buyer.
(f) Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand, or overnight courier, telecopied or mailed, certified or
registered mail, with first-class postage page, (a) if to the Seller, 960 East
Hazelwood Avenue, Rahway, New Jersey 07065, or to such other person and place as
the Seller shall furnish to Buyer in writing, with a copy to________________
_______________________________________; and, (b) if to Buyer, _________, or to
such other
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person and place as Buyer shall furnish to the Seller in writing with a copy to
Steven W. Schuster, Esq., McLaughlin & Stern, LLP, 260 Madison Avenue, New York,
New York 10016. All notices shall be deemed given upon receipt.
(g) Further Instruments. The Seller will, on the Closing Date or such other
date as Buyer may request, without cost or expense to Buyer, execute and deliver
or cause to be executed and delivered to Buyer such other action as Buyer may
reasonably request to more effectively consummate the transactions contemplated
by this Agreement and confirm and assure Buyer title thereto.
(h) Counterparts. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(i) Headings. The headings in the sections of this Agreement are inserted
for convenience only and shall not constitute a part hereof.
(j) Expenses. Buyers, on one hand, and Seller on the other hand, shall bear
their own respective expenses, including professional fees, incurred in
connection with this Agreement and the Transaction Documents.
(k) Transfer Taxes. Except as specifically provided below, Seller shall pay
any state or local sales, transfer or like taxes, including but not limited to
real estate transfer taxes, payable in connection with the transactions
contemplated pursuant to this Agreement, it being understood that each Seller is
solely responsible for his or her personal income tax obligations arising from
the sale of his or her stock as contemplated hereunder.
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(l) Confidentiality. Each party shall maintain the existence of this
Agreement and the other Transaction Documents, and the terms and conditions
described therein ("Confidential Information") strictly confidential. No party
may disclose any Confidential Information to any third party (other than to its
legal, accounting or financial advisors) without the prior consent of the other
party. Any press release will be subject to the prior consent of the parties.
The parties acknowledge that any press release or other disclosure required to
be made by Buyer in order for it to comply with any federal or state securities
laws shall not be subject to Seller's prior review.
(m) Severability. If any provision of this Agreement is held by any court
of competent jurisdiction to be illegal, invalid or unenforceable, such
provision shall be of no force and effect, but the illegality, invalidity or
unenforceability shall have no effect upon and shall not impair the
enforceability of any other provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
LAMINAIRE CORPORATION
By:/s/Peter Daniele
Name: Peter Daniele
Title: Treasurer
THE SL GROUP, INC.
By:/s/Edward A. Heil
Name: Edward A. Heil
Title: Chief Executive Officer
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EXHIBIT 10.2
CONSULTING AGREEMENT
AGREEMENT made this 28th day of July, 1999, by and between EH
Associates, LLC, a consulting firm domiciled in the State of New York
hereinafter referred to as the "Consultant", and The SL Group, Inc. whose
principal place of business is located at in East Setauket, New York hereinafter
referred to as "Company."
WHEREAS, the Company desires to engage the services of the Consultant
to perform consulting services for the Company regarding as an independent
contractor and not as an employee; and
WHEREAS, Consultant desires to consult with the Board of Directors, the
officers of the Company, and the administrative staff, and to undertake for the
Company consultation as to the direction of certain functions in said management
of;
NOW, THEREFORE, it is agreed as follows:
1. Term. The respective duties and obligations of the contracting parties
shall be for a period of five years commencing on July 15, 1999, and may be
terminated by either party after three years by giving ninety (90) days'
written notice to the other party at the addresses stated above or at an
address chosen subsequent to the execution of this agreement and duly
communicated to the party giving notice. This Agreement shall automatically
renew each year thereafter, unless either party gives sixty (60) days
written notice to the other party of his intent not to renew for an
additional period.
2. Consultations. Consultant shall be available to consult with the Board
of Directors, the officers of the Company, and the heads of the
administrative staff, at reasonable times,
<PAGE>
concerning matters pertaining to the organization of the administrative
staff, the fiscal policies of the Company, the relationship of the Company
with its employees or with any organization representing its employees,
and, in general, the important problems of concern in the business affairs
of the Company. Consultant shall not represent the Company, its Board of
Directors, its officers or any other members of the Company in any
transactions or communications nor shall Consultant make claim to do so.
3. Liability. With regard to the services to be performed by the
Consultant pursuant to the terms of this agreement, the Consultant shall
not be liable to the Company, or to anyone who may claim any right due to
any relationship with the Corporation, for any acts or omissions in the
performance of services on the part of the Consultant or on the part of the
agents or employees of the Consultant, except when said acts or omissions
of the Consultant are due to willful misconduct or gross negligence. The
Company shall hold the Consultant free and harmless from any obligations,
costs, claims, judgments, attorneys' fees, and attachments arising from or
growing out of the services rendered to the Company pursuant to the terms
of this agreement or in any way connected with the rendering of services,
except when the same shall arise due to the willful misconduct or gross
negligence of the Consultant and the Consultant is adjudged to be guilty of
willful misconduct or gross negligence by a court of competent
jurisdiction.
4. Compensation. The Consultant shall receive compensation from the
Company for the performance of the services to rendered to the Company
pursuant to the terms of the agreement of not less than $125,000 per year
during Year 1, $140,000 during Year 2 and $150,000 in Year 3 payable in
biweekly instalments. In addition, the Company shall reimburse the
Consultant for any reasonable out of pocket expenses incurred by the
Consultant pursuant to the terms of this agreement. Consultant shall be
paid a bonus or success fee, as determined by the Board of Directors or the
Compensation Committee thereof, for strategic acquisitions or mergers in
which Consultant participates. The compensation set forth in this Agreement
shall be adjusted if Consultant consistently devotes more than five
business days a month to serving the Company.
5. Arbitration. Any controversy or claim arising out of or relating
to this contract, or the breach thereof, shall be settled by arbitration in
accordance of the rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) shall be entered in
any court having jurisdiction thereof. For that purpose, the parties hereto
consent to the jurisdiction and venue of an appropriate court located in
Suffolk County, State of New York. In the event that litigation results
from or arises out of this Agreement or the performance thereof, the
parties agree to reimburse the prevailing party's reasonable attorney's
fees, court costs, and all other expenses, whether or not taxable by the
court as costs, in addition to any other relief to which the prevailing
party may be entitled. In such event, no action shall be entertained by
said court or any court of competent jurisdiction if filed more than one
year subsequent to the date the cause(s) of action actually accrued
regardless of whether damages were otherwise as of said time calculable.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
on the 27th day of July, 1999.
"Company"
eSAFETY WORLD, INC.
Company Name
By: /s/Edward A. Heil
Chief Executive Officer
"Consultant"
EH Associates, LLC
By: /s/Edward A. Heil
<PAGE>
EXHIBIT 10.3
CONSULTING AGREEMENT
AGREEMENT made this 28th day of July, 1999, by and between JP, Inc., a
consulting firm domiciled in the State of Utah hereinafter referred to as the
"Consultant", and The SL Group, Inc. whose principal place of business is
located at in East Setauket, New York hereinafter referred to as "Company."
WHEREAS, the Company desires to engage the services of the Consultant
to perform consulting services for the Company regarding as an independent
contractor and not as an employee; and
WHEREAS, Consultant desires to consult with the Board of Directors, the
officers of the Company, and the administrative staff, and to undertake for the
Company consultation as to the direction of certain functions in said management
of;
NOW, THEREFORE, it is agreed as follows:
1. Term. The respective duties and obligations of the contracting parties
shall be for a period of five years commencing on July 15, 1999, and may be
terminated by either party after three years by giving ninety (90) days'
written notice to the other party at the addresses stated above or at an
address chosen subsequent to the execution of this agreement and duly
communicated to the party giving notice. This Agreement shall automatically
renew each year thereafter, unless either party gives sixty (60) days
written notice to the other party of his intent not to renew for an
additional period.
2. Consultations. Consultant shall be available to consult with the Board
of Directors, the officers of the Company, and the heads of the
administrative staff, at reasonable times,
<PAGE>
concerning matters pertaining to the organization of the administrative
staff, the fiscal policies of the Company, the relationship of the Company
with its employees or with any organization representing its employees,
and, in general, the important problems of concern in the business affairs
of the Company. Consultant shall not represent the Company, its Board of
Directors, its officers or any other members of the Company in any
transactions or communications nor shall Consultant make claim to do so.
3. Liability. With regard to the services to be performed by the
Consultant pursuant to the terms of this agreement, the Consultant shall
not be liable to the Company, or to anyone who may claim any right due to
any relationship with the Corporation, for any acts or omissions in the
performance of services on the part of the Consultant or on the part of the
agents or employees of the Consultant, except when said acts or omissions
of the Consultant are due to willful misconduct or gross negligence. The
Company shall hold the Consultant free and harmless from any obligations,
costs, claims, judgments, attorneys' fees, and attachments arising from or
growing out of the services rendered to the Company pursuant to the terms
of this agreement or in any way connected with the rendering of services,
except when the same shall arise due to the willful misconduct or gross
negligence of the Consultant and the Consultant is adjudged to be guilty of
willful misconduct or gross negligence by a court of competent
jurisdiction.
4. Compensation. The Consultant shall receive compensation from the
Company for the performance of the services to rendered to the Company
pursuant to the terms of the agreement of not less than $50,000 payable in
biweekly instalments. In addition, the Company shall reimburse the
Consultant for any reasonable out of pocket expenses incurred by the
Consultant pursuant to the terms of this agreement. Consultant shall be
paid a bonus or success fee, as determined by the Board of Directors or the
Compensation Committee thereof, for strategic acquisitions or mergers in
which Consultant participates. The compensation set forth in this Agreement
shall be adjusted if Consultant consistently devotes more than five
business days a month to serving the Company.
5. Arbitration. Any controversy or claim arising out of or relating
to this contract, or the breach thereof, shall be settled by arbitration in
accordance of the rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) shall be entered in
any court having jurisdiction thereof. For that purpose, the parties hereto
consent to the jurisdiction and venue of an appropriate court located in
Suffolk County, State of New York. In the event that litigation results
from or arises out of this Agreement or the performance thereof, the
parties agree to reimburse the prevailing party's reasonable attorney's
fees, court costs, and all other expenses, whether or not taxable by the
court as costs, in addition to any other relief to which the prevailing
party may be entitled. In such event, no action shall be entertained by
said court or any court of competent jurisdiction if filed more than one
year subsequent to the date the cause(s) of action actually accrued
regardless of whether damages were otherwise as of said time calculable.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
on the 27th day of July, 1999.
"Company"
eSAFETY WORKD, INC.
Company Name
By: /s/Edward A. Heil
Chief Executive Officer
"Consultant"
J.P., Inc.
By: /s/R. Bret Jenkins
<PAGE>
EXHIBIT 10.4
CONSULTING AGREEMENT
AGREEMENT made this 28th day of July, 1999, by and between EDK
Associates, LLC, a consulting firm domiciled in the State of New Jersey
hereinafter referred to as the "Consultant", and The SL Group, Inc. whose
principal place of business is located at in East Setauket, New York hereinafter
referred to as "Company."
WHEREAS, the Company desires to engage the services of the Consultant
to perform consulting services for the Company regarding as an independent
contractor and not as an employee; and
WHEREAS, Consultant desires to consult with the Board of Directors, the
officers of the Company, and the administrative staff, and to undertake for the
Company consultation as to the direction of certain functions in said management
of;
NOW, THEREFORE, it is agreed as follows:
1. Term. The respective duties and obligations of the contracting parties
shall be for a period of five years commencing on July 15, 1999, and may be
terminated by either party after three years by giving ninety (90) days'
written notice to the other party at the addresses stated above or at an
address chosen subsequent to the execution of this agreement and duly
communicated to the party giving notice. This Agreement shall automatically
renew each year thereafter, unless either party gives sixty (60) days
written notice to the other party of his intent not to renew for an
additional period.
2. Consultations. Consultant shall be available to consult with the Board
of Directors, the officers of the Company, and the heads of the
administrative staff, at reasonable times,
<PAGE>
concerning matters pertaining to the organization of the administrative
staff, the fiscal policies of the Company, the relationship of the Company
with its employees or with any organization representing its employees,
and, in general, the important problems of concern in the business affairs
of the Company. Consultant shall not represent the Company, its Board of
Directors, its officers or any other members of the Company in any
transactions or communications nor shall Consultant make claim to do so.
3. Liability. With regard to the services to be performed by the
Consultant pursuant to the terms of this agreement, the Consultant shall
not be liable to the Company, or to anyone who may claim any right due to
any relationship with the Corporation, for any acts or omissions in the
performance of services on the part of the Consultant or on the part of the
agents or employees of the Consultant, except when said acts or omissions
of the Consultant are due to willful misconduct or gross negligence. The
Company shall hold the Consultant free and harmless from any obligations,
costs, claims, judgments, attorneys' fees, and attachments arising from or
growing out of the services rendered to the Company pursuant to the terms
of this agreement or in any way connected with the rendering of services,
except when the same shall arise due to the willful misconduct or gross
negligence of the Consultant and the Consultant is adjudged to be guilty of
willful misconduct or gross negligence by a court of competent
jurisdiction.
4. Compensation. The Consultant shall receive compensation from the
Company for the performance of the services to rendered to the Company
pursuant to the terms of the agreement of not less than $58,000 in Year 1,
$65,000 in Year 2 and $75,000 in Year 3, payable in biweekly instalments.
In addition, the Company shall reimburse the Consultant for any reasonable
out of pocket expenses incurred by the Consultant pursuant to the terms of
this agreement. Consultant shall be paid a bonus or success fee, as
determined by the Board of Directors or the Compensation Committee thereof,
for strategic acquisitions or mergers in which Consultant participates. The
compensation set forth in this Agreement shall be adjusted if Consultant
consistently devotes more than five business days a month to serving the
Company.
5. Arbitration. Any controversy or claim arising out of or relating
to this contract, or the breach thereof, shall be settled by arbitration in
accordance of the rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) shall be entered in
any court having jurisdiction thereof. For that purpose, the parties hereto
consent to the jurisdiction and venue of an appropriate court located in
Suffolk County, State of New York. In the event that litigation results
from or arises out of this Agreement or the performance thereof, the
parties agree to reimburse the prevailing party's reasonable attorney's
fees, court costs, and all other expenses, whether or not taxable by the
court as costs, in addition to any other relief to which the prevailing
party may be entitled. In such event, no action shall be entertained by
said court or any court of competent jurisdiction if filed more than one
year subsequent to the date the cause(s) of action actually accrued
regardless of whether damages were otherwise as of said time calculable.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
on the 27th day of July, 1999.
"Company"
eSAFETY WORLD, INC.
Company Name
By:/s/Edward A. Heil
Chief Executive Officer
"Consultant"
EDK Associates, LLC
By: /s/Bridget C. Owens
EXHIBIT 10.7
ADVISORY AND INVESTMENT BANKING AGREEMENT
This Agreement is made and entered into as of the __ day of
______, 1999 by and between Kashner Davidson Securities Corporation, a Florida
corporation ("Kashner"), and eSafetyworld, Inc., a Nevada corporation (the
"Company").
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Purpose: The Company hereby engages Kashner for the term
specified in Paragraph 2 hereof to render consulting advice to the Company as an
investment banker relating to financial and similar matters upon the terms and
conditions set forth herein.
2. Term: Except as otherwise specified in paragraph 4 hereof,
this Agreement shall be effective from _______, 1999 to ______, 2001.
3. Duties of Kashner: During the term of this Agreement,
Kashner shall seek out Transactions (as hereinafter defined) on behalf of the
Company and shall furnish advice to the Company in connection with any such
Transactions.
<PAGE>
4. Compensation: In consideration for the services rendered by Kashner to
the Company pursuant to this Agreement (and in addition to the expenses provided
for in Paragraph 5 hereof), the Company shall compensate Kashner as follows:
(a) The Company shall pay Kashner a fee of $4,000 per month during
the term of this Agreement. The sum of $96,000 shall be payable in full on the
date of this Agreement. In the event that Kashner ceases its business operations
as a financial advisor and investment banker, materially breaches or is unable
to satisfy its performance obligations hereunder, then Kashner shall repay to
the Company the pro rata unearned portion of foregoing fee, based on the number
of months fo which performance was delivered and the remaining number of months
in the term.
(b) In the event that any Transaction (as hereinafter defined)
occurs during the term of this Agreement or one year thereafter, the Company
shall pay fees to Kashner as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Consideration Fee
$ - 0 - to $ 1,000,000 5% of Consideration
$ 1,000,001 to $2,000,000 4% of Consideration
$ 2,000,001 to $3,000,000 3% of Consideration
$ 3,000,001 to $4,000,000 2% of Consideration
$4,000,001 or more 1% of the Consideration in excess of
$4,000,001
</TABLE>
For the purposes of this Agreement, "Consideration"
shall mean the total market value on the day of the
closing of stock, cash, assets and all other property
(real or personal) exchanged or received, directly or
indirectly by the Company or any of its security
holders in connection with any Transaction. Any
co-broker or brokers retained by Kashner shall be
paid by Kashner.
For the purposes of the Agreement, a
"Transaction" shall mean (a) any transaction
originated by Kashner, other than in the ordinary
course of trade or business of the Company, whereby,
directly or indirectly, control of or a material
interest in the Company or any of its businesses or
any of their respective assets, is transferred for
Consideration, (b) any transaction originated by
Kashner whereby the Company acquires any other
company or the assets of any other company or an
interest in any other company (an "Acquisition") or (c) any
sale or Acquisition in connection with which the
Company engages an investment banker other than
Kashner and pays such investment banker a fee in
respect of such Transaction unless Kashner was
unwilling waive to so act.
In the event Kashner
originates a line of credit with a lender, the
Company and Kashner will mutually agree on a
satisfactory fee for such services provided based
upon reasonable and customary practice in the
industry and the terms of payment of such fee;
provided, however, that in the event the Company is
introduced to a corporate partner by Kashner in
connection with a merger, acquisition or financing
and a credit line develops directly as a result of
the introduction, the
appropriate fee shall be the amount set forth in the schedule above with
consideration to be based upon the amount of the line of credit. In the event
Kashner introduces the Company to a joint venture partner or customer and sales
develop as a result of the introduction, the Company agrees to pay a fee of five
percent (5%) of total sales generated directly from this introduction during the
first two years following the date of the first sale, in lieu of the fees set
forth in the schedule above. Total sales shall mean cash receipts less any
applicable refunds, returns, allowances, credits and shipping charges and monies
paid by the Company by way of settlement or judgment arising out of claims made
by or threatened against the Company. Commission payments shall be paid on the
15th day of each month following the receipt of customers' payment. In the event
any adjustments are made to the total sales after the commission has been paid,
the Company shall be entitled to an appropriate refund or credit against future
payments under this Agreement. All fees to be paid pursuant to this Agreement,
except as otherwise specified, are due and payable to Kashner in cash at the
closing or closings of any transaction specified in Paragraph 4 hereof. In the
event that this Agreement shall not be renewed or if terminated for any reason,
notwithstanding any such non-renewal or termination, Kashner shall be entitled
to a full fee as provided under Paragraphs 4 and 5 hereof, for any transaction
for which the discussions were initiated during the term of this Agreement and
which is consummated within a period of twelve months after non-renewal or
termination of this Agreement.
5. Expenses of Kashner: In addition to the fees payable hereunder, and
regardless of whether any transaction set forth in Paragraph 4 hereof is
proposed or consummated the Company shall reimburse Kashner for all fees and
disbursements of Kashner's counsel and Kashner's travel and reasonable
out-of-pocket expenses incurred in connection with and in direct furtherance of
the services performed by Kashner pursuant to this Agreement, including without
limitation, hotels, food and associated expenses and
long-distance telephone calls. Kashner shall obtain the consent of the Company
before incurring any expense over $1,000.
6. Liability of Kashner:
(1) The Company acknowledges that all opinions and advice (written or oral)
given by Kashner to the Company in connection with Kashner's engagement are
intended solely for the benefit and use of the Company in considering the
transaction to which they relate, and the Company agrees that no person or
entity other than the Company shall be entitled to make use of or rely upon the
advice of Kashner to be given hereunder, and no such opinion or advice shall be
used for any other purpose or reproduced, disseminated, quoted or referred to at
any time, in any manner or for any purpose, nor may the Company make any public
references to Kashner, or use Kashner's name in any annual reports or any other
reports or releases of the Company without Kashner's prior written consent.
(2) The Company acknowledges that Kashner makes no commitment whatsoever as
to making a market in the Company's securities or to recommending or advising
its clients to purchase the Company's securities, except that Kashner has
committed to make a market in the Company=s securities for at least 45 days
after the effective date of the Company=s initial public offering. Research
reports or corporate finance reports that may be prepared by Kashner will, when
and if prepared, be done solely on the merits or judgment of analysis of Kashner
or any senior corporate finance personnel of Kashner.
7. Kashner's Services to Others: The Company acknowledges that Kashner's or
its affiliates are in the business of providing financial services and
consulting advice to others. Nothing herein contained shall be construed to
limit or restrict Kashner in conducting such business with respect to others, or
in rendering such advice to others.
8. Company Information:
(a) The Company recognizes and confirms that, in
advising the Company and in fulfilling its engagement
hereunder, Kashner will use and rely on data,
material and other information furnished to Kashner
by the Company. The Company acknowledges and agrees
that in performing its services under this
engagement, Kashner may rely upon the data, material
and other information supplied by the Company without
independently verifying the accuracy, completeness or
veracity of same.
(b) Except as contemplated by the
terms hereof or as required by applicable law,
Kashner shall keep confidential all material
non-public information provided to it by the Company,
and shall not disclose such information to any third
party, other than such of its employees and advisors
as Kashner determines to have a need to know. Upon
termination of this Agreement, at the request of the
Company, Kashner shall deliver to the Company all
non-public material in its possession
relating to the business affairs of the Company.
9. Indemnification:
a. The Company shall indemnify and hold Kashner and its directors,
officers, employees and agents harmless against any and all liabilities, claims,
lawsuits, including any and all awards and/or judgments to which it may become
subject under the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934, as amended (the "Act") or any other federal or
state statute, at common law or otherwise, insofar as said liabilities, claims
and lawsuits (including awards and/or judgments) arise out of or are in
connection with the services rendered by Kashner or any transactions in
connection with this Agreement, except for any liabilities, claims and lawsuits
(including awards judgments and related costs and expenses), arising out of acts
or omissions of Kashner. In addition, the Company shall also indemnify and hold
Kashner harmless against any and all reasonable costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing. If it is finally
judicially determined that the Company will not be responsible for any
liabilities, claims and lawsuits or expenses related thereto, the indemnified
party, by his or its acceptance of such amounts, agrees to repay the Company all
amounts previously paid by the Company to the indemnified person and will pay
all costs of collection thereof, including but not limited to reasonable
attorneys= fees related thereto.
Kashner shall give the Company prompt notice of any
such liability, claim or lawsuit which Kashner contends is the subject matter of
the Company's indemnification and the Company thereupon shall be granted the
right to take any and all necessary and proper action, at its sole cost and
expense, with respect to such liability, claim and lawsuit, including the right
to settle, compromise and dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
Kashner shall indemnify and hold the Company and its
directors, officers, employees and agents harmless against any and all
liabilities, claims and lawsuits, including any and all awards and/or judgments
to which it may become subject under the 1933 Act, the Act or any other federal
or state statute, at common law or otherwise, insofar as said liabilities,
claims and lawsuits (including awards and/or judgments) arise out of or are
based upon Kashner=s gross negligence, useful misconduct, bad faith or any
untrue statement or alleged untrue statement of a
material fact or omission at a material fact required to be stated or necessary
to make the statement provided by Kashner, not misleading, which statement or
omission was made in reliance upon information furnished in writing to the
Company by or on behalf of Kashner for inclusion in any registration statement
or prospectus or any amendment or supplement thereto in connection with any
transaction to which this Agreement applies In addition, Kashner shall also
indemnify and hold the Company harmless against any and all costs and expenses,
including reasonable counsel fees, incurred or relating to the foregoing.
The Company shall give to Kashner prompt notice of
any such liability, claim or lawsuit which the Company contends is the subject
matter of Kashner's indemnification and Kashner thereupon shall be granted the
right to a take any and all necessary and proper action, at its sole cost and
expense, with respect to such liability, claim and lawsuit, including the right
to settle, compromise or dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
b. In order to provide for just and equitable contribution under the Act in
any case in which (i) any person entitled to indemnification under this Section
9 makes claim for indemnification pursuant hereto but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 10, then, and in each such case, the Company and Kashner shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion taking
into consideration the relative benefits received by each party fro the offering
covered by the prospectus with respect to any transactions in connection with
this Agreement (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was assessed, the
opportunity to correct and prevent any statement or omission and other equitable
considerations appropriate under the circumstances; provided, however, that
notwithstanding the above in no event shall Kashner be required to contribute
any amount in excess of 10% of the public offering price of any securities to
which such Prospectus applies; and provided, that, in any such case, no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to this Agreement (or
its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the omission so to notify
the Contributing Party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a Contributing Party or his or its representative of the commencement thereof
within the aforesaid fifteen (15) days, the Contributing Party will be entitled
to participate therein with the notifying party and any other Contributing Party
similarly notified. Any such Contributing Party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of the Contributing Party. The indemnification provisions contained in
this Section 10 are in addition to any other rights or remedies which either
party hereto may have with respect to the other or hereunder.
10. Kashner an Independent Contractor : Kashner shall perform its services
hereunder as an independent contractor and not as an employee of the Company or
an affiliate thereof. It is expressly understood and agreed to by the parties
hereto that Kashner shall have no authority to act for, represent or bind the
Company or any affiliate thereof in any manner, except as may be agreed to
expressly by the Company in writing from time to time.
11. Miscellaneous:
(1) This Agreement between the Company and Kashner constitutes the entire
agreement and understanding of the parties hereto, and supersedes any and all
previous agreements and understandings, whether oral or written, between the
parties with respect to the matters set forth herein.
(2) Any notice or communication permitted or required hereunder shall be in
writing and shall be deemed sufficiently given if hand-delivered or sent (i)
postage prepaid by registered mail, return receipt requested, or (ii) by
facsimile, to the respective parties as set forth below, or to such other
address as either party may notify the other in writing:
If to the Company, to: eSafetyworld, Inc.
100-31 South Jersey Ave.
Setauket, NY 11733
Attn: Edward A. Heil
with a copy to: McLaughlin & Stern, LLP
260 Madison Ave
New York, NY 10016
Attn: Steven W. Schuster, Esq.
If to Kashner, to: Kashner Davidson Securities Corporation
77 South Palm Avenue
Sarasota, Florida 34236
Attn: Matthew Meister
with a copy to: Sichenzia, Ross & Freidman
135 West 50th Street, 20th Floor
New York, New York 10020
Attn: Gregory Sichenzia, Esq.
(3) This Agreement shall be binding upon and inure to the benefit of each
of the parties hereto and their respective successors, legal representatives and
assigns.
(4) This Agreement may be executed in any number of counterparts, each of
which together shall constitute one and the same original document.
(5) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
(6) This Agreement shall be construed in accordance with and governed by
the laws of the State of New York, without giving effect to conflict of law
principles. The parties hereby agree that any dispute which may arise between
them arising out of or in connection with this Agreement shall be adjudicated
before a court located in New York City, and they hereby submit to the exclusive
jurisdiction of the courts of the State of New York located in New York, New
York and of the federal courts in the Southern District of New York with respect
to any action or legal proceeding commenced by any party, and irrevocably waive
any objection they now or hereafter may have respecting the venue of any such
action or proceeding brought in such a court or respecting the fact that such
court is an inconvenient forum, relating to or arising out of this Agreement,
and consent to the service of process in any such action or legal proceeding by
means of registered or certified mail, return receipt requested, in care of the
address set forth in Paragraph 11(b) hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
KASHNER DAVIDSON SECURITIES CORPORATION
By:________________________________
ESAFETYWORLD, INC
By:________________________________
EXHIBIT 23.1
Eichler Bergsman & Co., LLP Gilbert Bergsman
Certified Public Accountants Paul Eichler
404 Park Avenue South, New York, New York 10016 Richard M. Plutzer
Tel 212-447-9007 Fax 212-447-9006 Michael E. Silverman
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of eSafetyworld, Inc.
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form SB-2), and related prospectus of eSafetyworld, Inc.
and to the incorporation by reference therein of our reports dated August 12,
1999, relating to the financial statements for the Clean Room Distribution
Product Group as of December 31, 1998 and for the years ended December 31, 1998
and 1997 and for our report dated August 25, 1999 relating to the balance sheet
of eSafetyworld, Inc., as of June 30, 1999, and the results of its operations
and its cash flows for the period ended December 31, 1997, for the year ended
December 31, 1998 and for the six months ended June 30, 1999.
/s/Eichler Bergsman & Co., LLP
EICHLER BERGSMAN & CO., LLP
New York, New York
August 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the six months ended June 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,900
<OTHER-SE> 8,100
<TOTAL-LIABILITY-AND-EQUITY> 10,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
