<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 28, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ESAFETYWORLD, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 44290 11-3496415
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
(ADDRESS AND TELEPHONE NUMBER OF EXECUTIVE OFFICES)
EDWARD A. HEIL
100-31 SOUTH JERSEY AVENUE
SETAUKET, NEW YORK 11733
516-244-1454
FACSIMILE: (212) 208-3082
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
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
</TABLE>
------------------------
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
under 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 under 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 under 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 under rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED OFFERING
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER PROPOSED AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
shares common stock, $.001 par value
("common stock")(2)........................ 1,150,000 $7.00 $8,050,000 $2,237.90
underwriter's warrant(3)................... 1 $.001 $100 $.28
shares of common stock underlying
underwriter's warrant...................... 100,000 $10.50 $1,050,000 $291.90
Total Registration Fee..................... $2,530.08(4)
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee under
rule 457 under the Securities Act of 1933.
(2) Includes 150,000 shares of common stock that 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.
(4) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE 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 THE DATE AS THE COMMISSION, ACTING UNDER SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 28, 1999.
PROSPECTUS
ESAFETYWORLD, INC.
1,000,000 SHARES OF COMMON STOCK
$7.00 PER SHARE
ESAFETYWORLD, INC.:
o eSAFETYWORLD, 100-31 S. Jersey Avenue, Setauket, New York 11733; (516)
244-1454
o Proposed Nasdaq SmallCap Market symbol: SFTY
o Proposed Boston Stock Exchange symbol: SFT
THE OFFERING:
o Kashner Davidson Securities Corp. has an option to purchase an additional
150,000 shares from eSAFETYWORLD to cover any over-allotments.
o This is a firm commitment offering.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
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
</TABLE>
THE INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
Neither the SEC nor any state securities commission has approved or
disapproved these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
KASHNER DAVIDSON SECURITIES CORP.
The date of this prospectus is , 1999.
<PAGE>
NOTICE FOR CALIFORNIA RESIDENTS
OUR COMMON STOCK IS TO BE SOLD IN THE STATE OF CALIFORNIA PURSUANT TO A
LIMITED OFFERING QUALIFICATION UNDER A SUITABILITY STANDARD WHEREBY INVESTORS
MUST MEET A "SUPER SUITABILITY" STANDARD OF NOT LESS THAN $250,000 LIQUID NET
WORTH (A NET WORTH EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES), PLUS
$65,000 GROSS ANNUAL INCOME OR $500,000 LIQUID NET WORTH OR $1,000,000 NET WORTH
(INCLUSIVE) OR $200,000 GROSS ANNUAL INCOME.
1
<PAGE>
PROSPECTUS SUMMARY
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 as the principal means of selling our products to the industrial safety
market. 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.
We have identified an industry with annual sales in the United States of
greater than $10 billion. We focus on the sale of disposable items used in the
industrial safety and controlled environmental markets because these types of
products must be reordered regularly by customers.
THE OFFERING
<TABLE>
<S> <C>
Securities offered.............................................. 1,000,000 shares
Common stock outstanding prior to the offering.................. 2,000,000 shares
Common stock to be outstanding after the offering............... 3,000,000 shares
</TABLE>
USE OF PROCEEDS
The net proceeds from the sale of the shares are estimated to be
approximately $5,890,000 after 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:
o marketing,
o capital expenditures,
o website development,
o repayment of indebtedness,
o equipment, and
o working capital and general corporate purposes
2
<PAGE>
SUMMARY FINANCIAL INFORMATION
The selected financial data set forth below at June 30, 1999 is derived
from and should be read together with eSAFETYWORLD's financial statements
footnotes 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 together with the Product Group's financial statements
and footnotes appearing elsewhere in this prospectus. The summary financial data
for the Product Group set forth below for the interim periods ended June 30,
1999 and 1998 has been prepared from the Product Group's books and records and
reflects, in our opinion, all adjustments necessary for a fair presentation of
the results of operations of the Product Group for the periods shown. Results
for interim periods may not reflect expected results for the entire year.
ESAFETYWORLD
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. The operating results of the acquired
business are included in eSAFETYWORLD's results commencing with the date of
acquisition.
<TABLE>
<CAPTION>
10/31/99
6/30/99 10/31/99 (AS ADJUSTED)
------- ---------- -------------
<S> <C> <C> <C>
Current assets................................................... -- $ 378,775 $ 5,745,775
Total assets..................................................... $10,000 1,814,175 7,004,175
Liabilities...................................................... -- 1,059,504 359,504
Stockholders' equity............................................. 10,000 756,671 6,644,571
</TABLE>
The "as adjusted column" assumes the completion of the offering.
<TABLE>
<CAPTION>
FOUR MONTHS
ENDED
OCTOBER 31, 1999
----------------
<S> <C>
Revenues............................................................................. $ 355,969
Operating profit..................................................................... $ 63,816
Net income........................................................................... $ 44,671
Income per share..................................................................... $ .02
Average number of shares outstanding................................................. 2,000,000
</TABLE>
The results of the Cleanroom Distribution Product Group are included in our
results of operations from the date of acquisition in August 1999 or for
approximately two and one half months during the four month period ended
October 31, 1999.
CLEANROOM DISTRIBUTION PRODUCT GROUP
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------ --------------------
1998 1997 1999 1998
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Revenues........................................... $2,267,846 $1,506,607 $746,325 $867,700
Operating profit................................... 54,067 204,106 95,984 142,164
Net income......................................... 35,144 132,669 62,390 92,407
</TABLE>
Net income for the years ended December 31, 1999 and 1998 was calculated
assuming an effective income tax rate of 35% for the purposes of calculation.
The Cleanroom Distribution Product Group was managed as a division by
Laminaire 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. eSAFETYWORLD acquired the business, customer and
vendor lists of this division and did not acquire any tangible assets of the
division.
The pro forma data does not give effect to proceeds, if any, from the
exercise of the underwriter's over allotment option.
3
<PAGE>
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.
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 that case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
Our business is subject to the following risks:
BECAUSE OUR OPERATING HISTORY IS LIMITED FROM THE PERIOD SINCE JUNE 1999, WE MAY
NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS OR ACHIEVE PROFITABILITY.
eSAFETYWORLD had no revenues during the period ended June 30, 1999 and no
operating history prior to this date 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.
WE EXPECT TO INCUR OPERATING LOSSES AND NEGATIVE CASH FLOW BECAUSE OF COSTS AND
EXPENSES RELATED TO ONLINE OPERATIONS.
Operating losses are expected to continue because of expenses related to:
o 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;
o strategic relationship development; and
o amortization of goodwill and other intangibles.
FUTURE PUBLIC SALES OF OUTSTANDING RESTRICTED COMMON STOCK COULD DEPRESS OUR
STOCK PRICE BECAUSE APPROXIMATELY TWO-THIRDS OF THE OUTSTANDING COMMON STOCK
AFTER THE OFFERING WILL BE AVAILABLE FOR RESALE.
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. Upon completion of this offering, we will have outstanding 3,000,000
shares of common stock or 3,150,000 shares 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.
ANY RESTRICTION ON OUR AVAILABLE CREDIT TERMS FROM IDEAL SALES INC. OR THE LOSS
OF IDEAL COULD ADVERSELY AFFECT OUR BUSINESS.
We will rely on Ideal Sales Inc. to be the vendor for a substantial
majority of the products that we will sell. Any restrictions imposed on Ideal's
willingness to ship products without requiring an advance payment or the loss of
this vendor would adversely affect our business.
WE HAVE AGREED TO SELL SHARES OF OUR COMMON STOCK TO CALIFORNIA INVESTORS BASED
ON A "SUPER-SUITABILITY" STANDARD WHICH MAY LIMIT YOUR ABILITY TO SELL YOUR
SHARES IN THE AFTERMARKET.
This offering was approved in California on the basis of a limited offering
qualification where offers and sales could only be made to proposed issuees
based on their meeting various suitability standards as described in this
prospectus. We did not have to demonstrate compliance with some or all of the
merit regulations of the California Department of Corporations, as found in
Title 10, California Code of Regulations, Rule 260.140 et seq.
You will be unable to sell shares of common stock that you purchase in this
offering pursuant to exemptions for secondary trading available under California
Corporations Code Section 25104(h), as those exemptions have been withheld.
However, there may be other exemptions to cover private sales by the bona fide
owners of our securities for those owners' own account without advertising and
without being effected by or through a broker dealer in a public offering.
4
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the shares being offered in this offering
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 and assuming that the underwriter's over allotment option
is not exercised. If the underwriter's over allotment option is exercised in
full, our net proceeds are estimated to be $6,803,500.
We intend to use the net proceeds as described in the following table:
<TABLE>
<S> <C> <C>
Marketing................................................................ $ 4,130,000 71%
Repayment of promissory notes............................................ 375,000 6
Capital expenditures, including equipment................................ 350,000 6
Website development...................................................... 250,000 4
Payment of obligations to vendors........................................ 200,000 3
General working capital.................................................. 585,000 10
------------ ----
Total.................................................................... $ 5,890,000 100%
------------ ----
------------ ----
</TABLE>
The marketing costs will consist of:
o advertising,
o general promotional activities,
o creation and distribution of CD-ROMs,
o attendance at trade shows and conventions,
o follow-up with prospective vendors and customers, and
o the personnel costs associated with those functions
The proceeds will be used to repay promissory notes executed in August 1999
in the aggregate principal amount of $375,000. 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.
We anticipate paying an aggregate of $200,000 to Kimberly-Clark
Corporation, The Texwipe Company LLC and Alma, Inc., three of our suppliers, as
required under our guarantees of the obligations of Laminaire. We issued these
guarantees as part of our acquisition of the Distribution Division of Laminaire.
We will deduct any amounts paid under the guarantees from the amounts owed by us
to Laminaire under the promissory notes in the aggregate principal amount of
$500,000 issued when we acquired the Distribution Division of Laminaire.
Website development will include ongoing enhancements to our site as well
as assisting vendors and other strategic partners in developing material for our
site.
Working capital will include salaries, rent and administrative expenses and
inventory financing. A portion of working capital will be used to satisfy
approximately $125,000 in obligations to vendors, assumed in the purchase of the
distribution division from Laminaire.
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 use a portion
of the net proceeds to acquire complementary technologies or businesses.
However, we have no commitments or agreements and are not involved in any
negotiations to purchase any technology or businesses.
We reserve the right to reallocate proceeds to different uses, including
ways which differ from the specific proposed uses described in this prospectus
if management determines 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 the 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. Our
belief is based upon assumptions, including assumptions about our contemplated
operations and economic and industry conditions. 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 sure that we will be able to obtain additional 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.
5
<PAGE>
DILUTION
Our net tangible book value as of October 31, 1999 was $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 October 31, 1999 would have been
approximately $5,900,000 or $2.01 per share of common stock. This represents an
immediate increase in net tangible book value of $2.01 per share to existing
stockholders and an immediate dilution of $4.99 per share to new investors of
common stock. The following table illustrates this dilution on a per share
basis:
<TABLE>
<S> <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....................................... 2.01
-----
Pro forma net tangible book value per share after the offering......................... 2.01
-----
Dilution per share to new investors.................................................... $4.99
-----
-----
</TABLE>
The following table summarizes, on an as adjusted basis after giving effect
to the offering, as of October 31, 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>
SHARES OWNED CONSIDERATION
------------------- --------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
--------- ------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Present shareholders...................... 2,000,000 67% $ 10,000 .1% $ .001
New investors............................. 1,000,000 33% 7,000,000 99.9% 7.00
--------- ---- ---------- -----
Total................................... 3,000,000 100% $7,010,000 100.0%
--------- ---- ---------- -----
--------- ---- ---------- -----
</TABLE>
CAPITALIZATION
The following table states our capitalization as of October 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 together with our financial
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- -------------
<S> <C> <C>
Debt--notes payable................................................................ $ 875,000 $ 300,000
---------- -----------
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
Additional paid-in capital......................................................... 708,000 6,596,900
Retained earnings.................................................................. 44,671 44,671
---------- -----------
Total stockholders' equity...................................................... 754,671 6,644,571
---------- -----------
Total capitalization............................................................ $1,629,671 $ 6,944,571
---------- -----------
---------- -----------
</TABLE>
Our calculation of common shares outstanding as adjusted for the offering does
not give effect to:
o 150,000 additional shares of common stock that are issuable upon the
exercise of the underwriter's over-allotment option; and
o 100,000 shares of common stock reserved for issuance upon the exercise of
the underwriter's warrant.
The "As Adjusted" column treats the $100,000 fee for a 24-month consulting
agreement with the underwriter as a prepaid asset.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read together 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. In August
1999, we acquired the business of the Distribution Product Group of Laminaire
Corporation. Our business strategy for the year following the completion of the
offering is designed to have us identified as the Internet independent sales
representative for the mid and small sized companies in our market niches. This
strategy is to:
o attend and present at trade shows,
o host receptions for potential customers and vendors,
o work with World Internet Marketing Corporation and others to implement a
state-of-the-art Internet marketing campaign,
o prepare and distribute a CD-Rom,
o prepare and distribute printed advertising and promotional material, and
o visit or otherwise contact directly targeted customers and vendors.
In December 1999, we entered into a supply agreement with Ideal Sales,
Inc., a traditional wholesaler of industrial safety products. The agreement will
provide us with the ability to sell more than 15,000 different products
distributed by Ideal. We anticipate that Ideal will become our principal
supplier.
FOUR MONTHS ENDED OCTOBER 31, 1999.
eSAFETYWORLD included the results of the former Distribution Product Group
in its results commencing with the acquisition date in August 1999. Therefore,
approximately two and a half months of sales are included.
Operating results are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Sales................................................................. $355,969 $469,235
Cost of sales......................................................... 213,110 402,927
Gross Profit.......................................................... 142,859 66,308
</TABLE>
The amounts in 1998 consist of the comparable period in 1998 for the
Distribution Division when it was owned and operated by Laminaire.
Our results in 1999 were adversely affected by:
o the need to overcome vendor issues involving past due payments from
Laminaire. We experienced difficulties obtaining shipments through
October while we established our own relationships with vendors whose
payments were delayed by Laminaire. We executed agreements with three
principal vendors in September 1999 which guaranteed payment of amounts
owed by Laminaire. Most of the negotiations with Laminaire's former
vendors were completed by the end of October.
o the loss of an indeterminate amount of sales resulting from our inability
to ship some products while we engaged in negotiations with vendors.
We realized a higher gross margin on sales during the four months ended
October 31, 1999 than was realized by the Distribution Division in 1998 because
of:
o favorable pricing on shipments in September 1999
o the reduction in warehousing and shipping costs by having vendors ship
directly to customers
In addition, the amounts in 1998 include sales that were made at very low
margins to large companies. Some of these sales were in connection with
contracts given to Laminaire when it was eligible for various set-aside and
similar programs as a minority owned business. No such low margin sales took
place in 1999.
7
<PAGE>
Our remaining costs in addition to cost of sales consisted principally of:
o salaries of $33,949
o amortization of the acquired assets of $41,600. Amortization expense
commenced with the date of acquisition.
During this period, our efforts principally were directed towards:
o Completing the supply agreement with Ideal Sales, Inc.;
o Overcoming vendor issues inherited from the Laminaire purchase;
o Developing and refining our overall strategy; and
o Planning this offering.
Distribution Product Group Division--During the periods discussed below,
the division operated as a product group of Laminaire. Laminaire lacked the
financial resources and credit terms from its suppliers to develop the
division's business fully. 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.
Past operating results are not necessarily indicative of future performance.
In September 1999, we entered into letter agreements with Kimberley-Clark
Corporation, The Texwipe Company LLC and Alma Inc., the three principal vendors
of the division prior to our entering into the Ideal agreement. Because
Laminaire was in arrears in its accounts payable to these three suppliers, we
entered into the agreements in order to arrange for continued shipments of
products from these vendors. The amount initially guaranteed to Kimberly-Clark
was $85,450, to Texwipe was $56,284 and to Alma was $77,845, for an aggregate of
$219,579. Alma also agreed to extend a $40,000 line of credit to eSAFETYWORLD.
The agreements provide that we will pay open balances due by Laminaire to the
vendors as of the closing date of this offering. All payments made by us for
these purposes will be offset against the notes in the principal amount of
$500,000 due by us to Laminaire. At November 30, 1999, the aggregate amount owed
by Laminaire to these vendors was approximately $200,000.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
The Product Group became part of eSAFETYWORLD in August 1999.
A summary of sales and cost of sales by product type for the period prior
to the acquisition follows:
<TABLE>
<CAPTION>
SALES BY PRODUCT 6/30/98 6/30/99
- ------------------------------------------------ ----------------- --------------------
<S> <C> <C> <C> <C>
Gloves.......................................... $130,400 17.5% $148,311 17.1%
Wipers.......................................... 227,890 30.5% 264,594 30.5%
Accessories..................................... 111,325 14.9% 154,786 17.8%
Mats............................................ 111,177 14.9% 91,893 10.6%
Disposable garments............................. 117,469 15.7% 97,125 11.2%
Cleanroom furniture............................. 5,476 0.7% 41,053 4.7%
Chairs.......................................... 8,587 1.2% 10,988 1.3%
Fabric garments................................. 11,142 1.5% 12,713 1.5%
Vacuum products................................. 14,592 2.0% 35,602 4.1%
Foam wipers..................................... 7,402 1.0% 7,873 0.9%
Static products................................. 865 0.1% 2,832 0.3%
-------- ----- -------- ------
Total........................................... $746,325 100.0% $867,770 100.0%
-------- ----- -------- ------
-------- ----- -------- ------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
COST OF SALES 6/30/98 6/30/99
- ------------------------------------------------ ----------------- --------------------
<S> <C> <C> <C> <C>
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%
Cleanroom 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. 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>
1998 % 1997 % DIFFERENCE
---------- ----- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues.................................. $2,267,846 100% $1,506,607 100% $761,239
Cost of revenues.......................... 2,070,174 91.28% 1,117,464 74.17% 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.
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<PAGE>
The composition of sales and cost of sales was as follows:
<TABLE>
<CAPTION>
SALES BY PRODUCT TYPE 12/31/98 12/31/97
- -------------------------------------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
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%
Cleanroom 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%
---------- ----- ---------- ------
---------- ----- ---------- ------
</TABLE>
<TABLE>
<CAPTION>
COST OF SALES 12/31/98 12/31/97
- -------------------------------------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
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%
Cleanroom 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
We entered into two promissory notes with unrelated parties in August 1999
in the aggregate principal amount of $375,000. 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. In addition, we loaned $102,000
to Laminaire. The notes will be repaid from the proceeds of this offering.
We believe that the net proceeds of this offering will be sufficient to
satisfy our working capital requirements for at least 12 months following this
offering because most of our expenditures relate to marketing. We have
discretion over the timing and amount of these expenditures. In addition, our
emphasis on outsourcing means that our level of fixed costs is relatively low,
less than $100,000 per month, and we have no material obligations or
requirements for capital expenditures. Our principal commitments in the year
2000 relate to obligations under employment agreements in the aggregate amount
of $200,000.
We have no commitments for financing. If the offering is not completed, we
would seek to obtain sources of financing or to refinance existing notes
payable, although no assurances can be given that we will be successful. We
would seek to obtain financing through expanding our lines of credit with
vendors or
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<PAGE>
though the sale of equity or debt securities. We will seek to obtain financing
through expanding our lines of credit with vendors or through the sale of equity
or debt securities.
SEASONALITY
The demand for our products is somewhat seasonal. Our customers have a
reduced demand for our products in the summer due to the fact that many of our
customer's employees take vacation, plants are often closed during a portion of
the summer months and there is a general reduction of activity in those 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 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 sure
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. We are not aware of any material
service provider or vendor not being Year 2000 compliant and do not believe that
we need a specific contingency plan.
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.
FORWARD LOOKING INFORMATION
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to:
o our future plans;
o objectives;
o expectations and intentions; and
o the assumptions underlying or relating to any of these statements.
We use words like as "expects," "anticipates," "intends," "plans" and
similar expressions to identify forward-looking statements.
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<PAGE>
BUSINESS
INTRODUCTION
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 industrial safety equipment to
companies involved in production or other activities that must be done in
controlled environments or whose employees are exposed to environmental hazards
or otherwise require protective garments or equipment. We intend to expand our
traditional distribution business through the development and operation of a
business-to-business e-commerce site on the world wide web. Our business model
is based on the following assumptions:
o The business-to-business market available to Internet sellers is growing
rapidly based on many publicly available articles and studies, including
one published by the United States Department of Commerce in 1998
entitled The Emerging Digital Economy that projected that
business-to-business e-commerce revenues will increase from $8 billion in
1997 to $326 billion in 2002.
o The targeted industry segment is large and being serviced in a very
fragmented way by the current entrants. The annual United States market
for industrial safety products that we intend to sell is estimated to be
in excess of $10 billion by R.K. Miller, P.C. Walker and C.E. Purcell in
their book, "Occupational Safety and Industrial Hygiene Market" published
in 1998.
o Based upon our conversations with industry participants, a significant
part of the selling effort in these segments takes place through the
distribution of catalogs and brochures. Our principal premise is that
sales and orders placed through the Internet offer an ideal replacement
for traditional catalogs.
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 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. In
addition, we intend to introduce new selective catalogues and brochures targeted
to specific product groups and CD-ROMs to be distributed free of charge.
Our website is located at WWW.ESAFETYWORLD.COM and became operational in
November 1999. All of the frontend design work has been completed. Under our
agreement with Ideal Sales Inc. executed in December 1999, we are adding the
15,000 products distributed by Ideal to the website. We expect that these
products will be added by February 2000. The proceeds of the offering are not
necessary to complete development of the website. We will, however, rely on the
proceeds of the offering and funds from operations to continue to operate and
expand the website to include additional products offered by vendors. Our growth
and expansion into new product areas is dependent on operation of the website.
Customers who do not use our website can continue to order via toll free
telephone numbers.
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<PAGE>
We believe that industrial safety products that are sold through
traditional printed catalogues and brochures are uniquely suited for sale on the
Internet. The reasons for this include:
o Products bought through catalogues 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 catalogue or brochure or calling a toll-free telephone number; and
o E-commerce can provide more information and update information more
quickly than can distributors of catalogues.
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 have
entered into an agreement with Ideal, which gives us access to 15,000 products,
all of which are being included on our website. This vendor will arrange for
shipment and will accommodate small or limited orders. Based on our preliminary
discussions with other vendors, we believe that many of our current and
potential vendors will agree to similar terms although, in some instances, we
may have to pay premiums for products, particularly if order quantities are
small. 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.
Risks associated with our strategy 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 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; and
o dependence on the reliability and growing use of the Internet for
commerce and communication and on general economic conditions.
BACKGROUND
We conducted no material operations in our organization between July 1997
and August 1999. The SL Group was formed for the purpose of receiving shares of
an investment in an unrelated business, which investment did not transpire. The
legal entity had no operations but was used by our founders to establish the
business of eSAFETYWORLD.
The officers and directors of eSAFETYWORLD decided to develop an e-commerce
business to sell disposable garments and equipment. After studying Laminaire, we
concluded that, although it was narrowly focused, acquiring the business of its
distribution division, including its vendors and customer lists, would benefit
eSAFETYWORLD's business. The purchase price was based on negotiations and
reflected Laminaire's needs to satisfy some of its past due liabilities and our
interest in obtaining further visibility in the market place. We did not obtain
an independent fairness opinion. In August 1999, we acquired the
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<PAGE>
distribution division of Laminaire. The purchase price was 100,000 shares of
common stock, notes payable in the aggregate principal amount of $500,000 and
the assumption of accounts payable and accrued expenses of $125,000. The notes
payable bear interest at eight percent per annum. One of the notes in the
principal amount of $200,000 is payable in 12 equal quarterly installments, and
the other note in the principal amount of $300,000 is payable in 20 equal
quarterly installments. We have the right to offset the principal amount of a
$102,000 demand note that we made to Laminaire, in whole or in part, against any
payment due by us to Laminaire under these note agreements. In addition, we can
offset the approximately $200,000 subject to our guarantees of amounts due by
Laminaire to three of its vendors against any amount due by us to Laminaire
under the promissory notes. The first installments due under the promissory
notes are payable at the earlier of our completion of this offering or
March 31, 2000.
Laminaire's division, which has been in operation for more than 20 years,
provides us with an entree to the vendors and customers of a targeted industry
niche. The division provides us with access to approximately 500 industrial
safety products to distribute, including disposable/limited use apparel, hoods,
gloves, packaging and flooring material, monitoring devices, electrostatic
devices, furnishings, wipers, and swabs. The 500 products offered by the
distribution division are targeted to mid-sized and small customers throughout
the United States that use cleanrooms, particularly research laboratories and
microelectronic facilities. Traditionally, no customer has accounted for than
10% of the division's sales. The top 100 products constituted approximately 50%
of the division's revenues in the last two years. The distribution division has
competed with numerous other small distributors and independent sales
representatives. The principal vendors, who accounted for approximately 80% of
purchases in the 12 months ended June 30, 1999, include The Texwipe Company,
Alma, Inc. and Kimberly-Clark Corporation. Purchases and sales are typically
made through invoices and sales orders. The division has no long term supply or
sales contracts. Its personnel prior to the acquisition by eSAFETYWORLD
consisted of three full time employees and a manager who devoted a portion of
his time to the division. Laminaire primarily marketed the division's products
through telemarketing by employees and distribution of print catalogues and
materials. Its website has very limited e-commerce capabilities but is linked to
several 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.
We have included the approximately 500 products distributed by the division
on our website. The products sold by eSAFETYWORLD are available from a wide
variety of vendors and we believe that the loss of any vendor other than Ideal
will have no material impact on our business or on product availability.
During the period August 1999 through November 1999, we operated the
distribution division's business substantially the same way as Laminaire did
except that we arranged for more of our vendors to ship products directly to our
customers. In January or February 2000, we will begin to rely more heavily on
our website, which is more sophisticated than Laminaire's website. The two
salespeople currently employed by us were formerly Laminaire's sales force for
the Distribution Division. Through November 30, 1999 our product line consisted
of substantially the same approximately 500 products distributed by Laminaire's
distribution division. We anticipate that operations will change substantially
in early 2000 when an additional 15,000 products supplied by Ideal Sales, Inc.
will be available on our website as well as additional products provided by
other vendors. The product line of the acquired distribution division will then
become an increasingly less significant portion of our total business.
Edward A. Heil, our chairman, is a director of Laminaire. Steven W.
Schuster, one of our directors, is a member of the law firm that serves as
Laminaire's corporate counsel. The negotiations for the acquisition were
conducted on an arms length basis. Mr. Schuster did not act as counsel for
Laminaire, and Mr. Heil did not participate in the Laminaire board meeting that
approved the transaction. Mr. Heil will provide management and financial
services consulting services to us through EH Associates LLC, an entity
affiliated with Mr. Heil. On average, Mr. Heil is currently devoting about 35
hours per week to us. He will continue as a director of Laminaire after the
offering. Ms. Owens, one of our directors, is employed by Laminaire as special
assistant to the board of directors but will sever all relationships with
Laminaire upon completion of the offering. Ms. Owens devotes approximately 15
hours per week to us. She will perform investor relations, employee benefits and
personnel administration for us through EDK Associates, LLC, which is controlled
by Ms. Owens. Mr. McClelland, one of our officers, will become a full time
employee at the completion of the offering, at which time he will sever his
relationship as a division manager with Laminaire. Currently, he
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<PAGE>
devotes a substantial portion of his time to Laminaire. Peter Danielle is Chief
Financial Officer of Laminaire where he works three days per week. He was our
Chief Financial Officer from August through October 1999, but no longer has any
involvement with us. Neither Ms. Owens, Mr. McClelland nor Mr. Danielle
participated in any of the negotiations relating to the purchase transaction. At
the conclusion of the offering, Mr. Heil is the only individual who will be
affiliated with both us and with Laminaire.
NATURE OF THE INTERNET
The Internet is an increasingly significant medium for communication,
information and commerce. The September 16, 1999 edition of The Wall Street
Journal Interactive Edition reported a research study conducted by Goldman Sachs
that concluded that the value of business-to-business e-commerce conducted in
the United States will increase from approximately $114 billion in 1999 to an
estimated $1.5 trillion by 2004.
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 expand the benefits of online selling by using a
distribution model that requires minimal inventory on hand and by utilizing
software that can be modified or updated easily and cheaply.
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. 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.
The business-to-business sector for industrial safety products is largely
served by individual company sites selling that particular company's products.
In many cases, these sites are viewed as a supplement to a company's traditional
selling efforts.
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:
o security;
o reliability;
o cost;
o ease of access;
o quality of service; and
o increases in bandwidth availability.
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<PAGE>
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.
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 or "OSHA," which requires employers to supply
protective clothing in some work environments. At about the same time, Dupont
developed Tyvek(Trademark) 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 expansion of federal, state
and local regulations requiring that employees wear protective clothing to
protect against exposure to particular contaminants, including asbestos and
hydro-carbons known as "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 these garments. As
manufacturers have become aware of the advantages of disposable clothing, the
demand for disposable 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:
o Government legislation which mandates the clean up of toxic waste sites
and the elimination of hazardous materials from the environment as
required under various Congressional Super Fund Acts. The Environmental
Protection Agency 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 particular
contaminants.
o 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.
o 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.
o 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
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<PAGE>
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, including 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
eSAFETYWORLD's initial market niches. The identified niches include products
serving the hospital, plumbing supply, construction and commercial heating and
air conditioning industries. We also expect to introduce a variety of industrial
first aid products during the first or second quarter of 2000.
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:
o Safety and hazard protection, to protect the wearer from contaminants or
irritants including chemicals, pesticides, fertilizers, paint, grease,
and dust and from limited exposures to hazardous waste and toxic
chemicals including acids, asbestos, lead, and PCB's;
o Clean room environments, for the prevention of human contamination of
manufacturing processes in clean room environments;
o Physical protection, to protect a wearer from laceration, splinters, eye
injuries, heat and chemical irritants without sacrificing manual
dexterity or comfort;
o Heat and fire protection, to protect municipal fire fighters, military,
airport and industrial fire fighting teams and for maintenance of "hot"
equipment including ovens, kilns, glass furnaces, refinery installations,
and smelting plants;
o Protection from viral and bacterial microbiologicals, to protect the
wearer from contagious diseases including AIDS and hepatitis, at
hospitals, clinics and emergency rescue sites; and
o 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:
o Packaging materials,
o Monitor devices,
o Flooring and mats,
o Electrostatic devices,
o Furnishings, and
o Wipers and swabs.
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<PAGE>
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.
IMPLEMENTATION OF BUSINESS PLAN
o We intend to attend at least two trade shows or conventions per month. At
each show, we will arrange to exhibit our site and capabilities. We will
rent exhibit rooms at the convention sites for this purpose. We will also
collect the business cards and email addresses of attendees. These
efforts will be targeted at both prospective vendors and customers. We
will work with prospective vendors to convince them that we will help
bring them additional sales rather than be a competitor. Our message to
customers will be that we are a convenient one stop shopping source.
o We intend to engage marketing employees and selected consultants to
follow-up with and visit attendees of our presentations. In addition, we
will send regular email to all persons on our email lists.
o Within a month of the completion date of this offering, we intend to
start mailings of printed flyers.
o Within two months of the completion of the offering, we intend to start
distributing CD-ROMs free of charge both at shows and in the mail. The
CD-ROMs will contain the information typically contained in a printed
catalogue.
o We intend to start a full-time telemarketing campaign and customer
service program.
o We intend to work with trade groups to be their website of choice and
will negotiate agreements to have links from their website to our
website.
During the first six months following the offering, we intend to enhance our
website to include:
o training programs sponsored by others;
o message boards; and
o improvements suggested by users and customers.
Our staff, management and known consultants can perform the initial phase of our
program if they are augmented by several marketing employees, telemarketers and
customer service representatives. Our goal is to have these people in place
within 60 days after the offering is completed.
SOFTWARE
Our strategy has been and is to license or otherwise obtain 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, use of Spider's
primary and backup servers and access to Wincorp's e-commerce advertising and
marketing programs. We believe that our software solution is effective 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 technology was
designed so that
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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, on a nonexclusive basis, a new e-commerce method,
developed with Spider and World Internet Marketing Corporation,
"E-Branding(Trademark)," 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(Trademark)"
website.
We are continually working with Spider to enhance and expand our technology
and transaction processing systems, and other technologies, to accommodate a
substantial increase in the volume of traffic on our website. Spider designs and
upgrades our software and website and provides us with servers, Internet
marketing and support services for $10,000 per month under the terms of written
agreement. The first payment is due following completion of this offering. Under
the agreement, Spider and Wincorp will also conduct an Internet marketing
campaign on our behalf. The agreement is terminable by either us or Spider after
December 31, 2001. We rely on Spider to maintain our website. We may be unable
to accurately project the rate or timing of increases in the use of our website.
We may fail to timely expand and upgrade our systems and infrastructure to
accommodate these increases. In addition, our failure to achieve or maintain
high capacity data transmission could significantly reduce consumer demand for
our services.
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 is operated 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 and
an Internet portal to the industrial safety market. The division purchased from
Laminaire relied on catalogues distributed to customers to generate orders. We
intend to gradually phase out use of single comprehensive paper catalogue and
use a portion of the proceeds of the offering to convert the catalogue to
CD-ROMS's to distribute to customers. We intend to print catalogs on a selective
basis for certain product groups. We will work with the purchasing departments
of all significant customers, both individually and at trade shows, to
familiarize them with our Internet ordering system. Most customers are medium
sized enterprises that use computer applications extensively in their
businesses. We do not anticipate any material adverse impact of existing
customers not wishing to use the Internet to place orders because we can
currently accommodate orders placed by phone or fax.
Our standard arrangement is:
o Split the profit on all items sold based on negotiated arrangements with
each "vendor."
o Arrange, wherever possible, 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 need to develop and drive traffic through our website. We will market our
availability to customers by:
o Being active in all significant industry trade shows;
o Advertising in industry catalogs similar to and including the Thomas
Register;
o Implementing systematic e-mailing and brochure campaigns; and
o Making direct sales calls on targeted companies by independent
representatives.
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These efforts will be coordinated with a full scale Internet marketing
campaign that we will conduct together with World Internet Marketing
Corporation, an entity engaged solely in that area. World Internet Marketing
Corporation 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. We will distribute CD-ROMS at trade shows
and also by mail to existing and prospective customers.
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 these 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, will
be 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
and
o Collect the e-mail and mailing addresses of participants for follow-up.
We will also engage in traditional mailing and telemarketing efforts.
We will perform all billing and collection functions, even if vendors drop
ship products directly to our 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, including
the Thomas Register. The National Safety Council, a trade organization of
manufacturers and distributors, has over 15,000 members. The most significant
national competitor is Grainger Inc., a distributor of industrial safety
products, who distributes through stores, catalogues and a website. Many of our
competitors are regional companies selling through catalogs and independent
sales representatives. Increasing numbers of these competitors are also
establishing websites and e-commerce sites. Almost all of these companies
compete by:
o distributing catalogs in the mail,
o attending trade shows,
o engaging independent sales representatives and
o telemarketing.
In addition, increasing numbers of competitors are developing in-house websites
and relying on aggressive pricing.
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We believe that our e-commerce site and our business strategy provide us
with a competitive advantage because:
o Our e-commerce site is user-friendly with significant amounts of
graphics.
o Our strategy requires low levels of working capital and few inventory
holding costs.
o Our strategy permits us to serve as a manufacturer's Internet independent
sales representative and does not put us in direct competition with other
sales efforts.
However, we can give no assurances that our approach will not be duplicated or
improved upon by others. If we face increased competition, our operating results
may be adversely affected.
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 commencing
shortly after the completion of the offering. Customer service representatives
handle questions about orders, assist customers in finding desired products and
register customers' credit card information over the telephone and, by June
2000, on a real time messaging system on our website. Customer service
representatives are expected to be a valuable source of feedback regarding user
satisfaction.
ORDER FULFILLMENT AND VENDORS
Our understanding with Ideal, Kimberly Clark, Alma and Texwipe call for
these vendors to drop ship products directly to our customers with customary
payment terms and without any advance payment by us. Products are purchased
using purchase orders or verbal agreements. No long term supply agreements,
including obligations to purchase inventory, exist. As our business grows and we
service other markets and provide a wider array of products, we anticipate that
we will rely less on these vendors.
A significant element of our strategic plan involves entering into
agreements with vendors under which the vendors will drop ship products directly
to our customers. Drop shipment substantially reduces our requirements to
maintain and store inventory. There can be no assurances that we will continue
to be successful in negotiating these arrangements with the vendors.
We anticipate that our principal vendor will be Ideal Sales Inc., a
wholesaler of industrial safety products. Under the agreement, we will offer
products sold by Ideal, which currently number approximately 15,000. Ideal will
be the exclusive supplier of these products, which are manufactured
by select manufacturers. The agreement does not limit our ability to distribute
substantially similar products sold by other manufacturers, including our three
principal vendors. The prices for the products will be negotiated from time to
time. The agreement is terminable by either party on 120 days prior written
notice. We placed our first order, which was for approximately $90,000, with
Ideal in December 1999.
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 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 these vendors. 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.
SECURITY
We use the secure socket layer or "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. 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' perceptions of Internet security or if our
security measures do not prevent security breaches.
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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 like 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 including
property ownership, libel and personal privacy is also very uncertain. There can
be no assurance that current or new government laws and regulations, or the
application of existing laws and regulations 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 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, known as "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 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. These 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. These
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 this liability, the 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 hold the WWW.ESAFETYWORLD.COM domain name, although we believe that in
the future we will hold additional 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 a
registrar for the ".com",".net" and ".org" generic top-level domains. The
regulation of domain names in the United States and in foreign countries could
change in the near future. These 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.
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While we are not regulated by the FDA, OSHA or the EPA, our customers are
subject to federal regulation as well as state regulation related to industrial
safety. Changes in these laws and regulations could materially affect demand for
industrial safety products.
INTELLECTUAL PROPERTY
We regard the technology we use in connection with the operation of our
website 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:
o confidentiality and license agreements with third parties,
o trade secret and trademark laws, and
o 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 month-to-month
verbal lease calls for monthly payments of $1,000 and is payable to Morgan
Bishop, Inc., an entity controlled by Mr. Burghard, who owns 5% of our common
stock. We plan to lease a slightly larger amount of office space in New Jersey
to accommodate newly-hired sales people as well as employees and consultants who
reside in New Jersey.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
PERSONNEL
We have two full-time employees who are salespeople. We have officers who
devote various amounts of time to our business and will devote full time to us
at the completion of the offering as set forth under "Management". At the
completion of the offering we expect to have fewer than 15 full-time employees,
including Mr. McClelland, our Chief Operating Officer, and Mr. Brownfiel, our
Vice President. Our strategic plan is to use dedicated consultants and to
outsource as many functions as possible. Growth is not expected to result in
significant increases in personnel.
Our success will depend upon continued services of Edward A. Heil and our
directors and consultants. Mr. Heil has formulated our business plan,
established our goals, worked with Mr. Paul White and other consultants on our
software development and has extensive contacts in the financial community. Our
consultants have extensive experience dealing with vendors and customers in our
target markets. 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 an adverse impact on us and our
operations.
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MANAGEMENT
Our management consists of:
<TABLE>
<S> <C> <C>
Edward A. Heil.............. 48 chairman, president and chief executive officer
R. Bret Jenkins............. 41 director, secretary, and chief financial officer
David McClelland............ 39 chief operating officer
John C. Dello-Iacono........ 50 director
Bridget C. Owens............ 42 director, assistant secretary
Steven W. Schuster.......... 44 director
James Brownfiel............. 28 vice president
Paul White.................. 41 chief technology advisor
</TABLE>
Edward A. Heil is a founder of eSAFETYWORLD and has been president and 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. During that same period, he has been a principal of EH
Associates, LLC, 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 has a consulting contract to provide
us with management and financial services.
R. Bret Jenkins has been a director since 1997 and became chief financial
officer in October 1999. 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
controlled by Mr. Jenkins, has a contract to provide us with business services.
David McClelland has been an officer since October 1999. Mr. McClelland
will become a full time employee immediately following the completion of the
offering. He has held executive positions with Laminaire Corporation, a
manufacturer and distributor of cleanroom products, since 1980. Mr. McClelland
serves as division manager of the cleanroom distribution and manufacturing
divisions of Laminaire. He is a graduate of New Jersey Institute of Technology.
John C. Dello-Iacono has been a director since 1999. He has been a managing
director of Independent Network Group, Inc., a financial consulting firm since
1994. During this period he assisted companies and individuals in obtaining and
structuring financings. He holds a Bachelors degree from St. John's University.
Bridget C. Owens has been a director since June 1999. She has served as
special assistant to the board of directors of Laminaire Corporation since 1995.
Prior to that 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, eSAFETYWORLD's counsel. Since 1997, he has been
secretary of Laminaire. 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 a
project manager and general manager engaged in the installation of commercial
heating and air conditioning units since 1994. Since 1996, he has been a general
manager for Deshler Mechanical Corp. From 1995 to 1996, he was a District
Manager for Ferguson Enterprises. From 1994 to 1995, he was a project manager
for Porter Brothers Inc. He is a graduate of the University of Notre Dame.
Mr. Brownfiel is Mr. Heil's son-in-law and will become a full time employee
immediately following the completion of the offering.
Paul White has been chief technology advisor since January 1999. He founded
and is chief executive officer of Spider and World Internet Marketing
Corporation where he has worked since 1995. 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.
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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. The compensation committee will manage our
stock option plan and review and recommend compensation arrangements for our
officers. All committees will commence operations concurrent with the completion
of the offering.
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.
We intend to apply for director and officer liability insurance and also
keyman life insurance on the life of Mr. Heil. We have not yet obtained the
insurance.
STOCK OPTION PLAN
We have a stock option plan that expires in 2009 and enables us to grant
incentive stock options, non-qualified options and stock appreciation rights for
up to an aggregate of 450,000 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 or 110% of fair market value for ten percent or more
stockholders. Other options and stock appreciation rights may be granted on
terms determined by the compensation 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 has a contract or commitment to receive annual
compensation in excess of $100,000 except as described below:
We intend to enter into a three-year employment agreement with
Mr. McClelland that will be effective at the effective date of the offering and
will call for an annual salary of $125,000 and reimbursement of business
expenses, including a car allowance. Mr. McClelland devotes approximately five
hours per week to us and will work full time for us upon completion of the
offering.
Mr. Brownfiel has a three-year employment agreement that becomes effective
at the effective date of the offering 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. Mr. Brownfiel devotes
approximately five hours per week to us and will work full time for us upon
completion of the offering.
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 will receive no compensation from us beyond the payments to EH
Associates, LLC. Mr. Heil currently devotes approximately 35 hours per week to
us and will continue to work approximately 35 hours per week upon completion of
the offering.
We have an agreement with EDK Associates, LLC 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 administrative, marketing and investor
relations services. Ms. Owens, a director, is the managing member and sole owner
of EDK Associates, LLC. Ms Owens currently devotes approximately 15 hours per
week to us. It is anticipated that Ms. Owens will devote 30 to 35 hours per week
to eSAFETYWORLD and will perform investor relations, employee benefits and
personnel administration. She will receive reimbursement for expenses but no
other compensation from us.
We have an agreement with JP Inc., an entity controlled by Mr. Jenkins,
under which we have agreed to pay annual fees of $50,000 in each of the three
years in the period ended December 31, 2002 for consultation on financial
services. Mr. Jenkins currently devotes approximately five hours per week to us.
Mr. Jenkins will devote 40 to 50 hours per month to eSAFETYWORLD. The
compensation paid to JP Inc. will increase if we require more of Mr. Jenkins'
time. He will receive no salary as chief financial officer during the period
that JP, Inc. is acting as a consultant. Mr. Jenkins will receive reimbursement
for expenses.
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RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1999, we acquired the business, customer and vendor lists and
base of the Distribution Division of Laminaire Corporation and incorporated the
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. The
transaction was approved by two of our disinterested directors. 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. Bridget Owens, one of our Directors, is employed as special assistant
to the Board of Directors of Laminaire. David McClelland, our chief operating
officer, is a division manager at Laminaire. Both Ms. Owens and Mr. McClelland
will resign their positions with Laminaire concurrent with the completion of the
offering.
In August 1999, eSAFETYWORLD 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. The note is convertible into common stock of Laminaire at a conversion
price of $.08 per share, which was the bid price per share of Laminaire's common
stock on the date of the loan. The loan was made to provide Laminaire with
additional working capital and to lower the amount ultimately due from Laminaire
under the notes issued in connection with the acquisition of the business of the
Distribution Division.
In September 1999, we signed agreements with Kimberly-Clark Corporation,
The Texwipe Company LLC and Alma, Inc., our three principal suppliers, who were
also suppliers to the Distribution Division of Laminaire. Under the agreement
with Kimberly-Clark, we agreed to guarantee payment for all goods and services
sold by Kimberly-Clark to Laminaire, which amount was approximately $200,000 as
of November 30, 1999. Under the agreements with the vendors, any unpaid amounts
as of the closing of this offering will be paid from the proceeds of this
offering. Under the terms of the promissory notes in the principal amount of
$500,000 payable to Laminaire Corporation for the Distribution Division, any
amounts paid to the vendors will be deducted from the amounts owed Laminaire.
Paul White is president and chief executive officer of Spider, Inc. and
chief executive officer of World Internet Marketing Corporation. Our business
depends 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 $10,000 per month.
Mr. Heil owns 10% of the common stock of World Internet Marketing
Corporation. Spider, Inc. has engaged World Internet Marketing Corporation to
perform Internet marketing services for us.
EDK Associates, LLC has a contract with us for administrative, marketing
and investor relations services. Ms. Owens is the managing member and sole owner
of EDK Associates, LLC.
The oral lease for payment of $1,000 per month is with an entity controlled
by Raymond Burghard, an owner of 5% of our outstanding stock.
In July 1997, our founders received shares of common stock in consideration
for $.001 per share. These founders could be considered promoters of
eSAFETYWORLD. The founders and the number of shares that they received, after
giving effect to the subsequent 2,000 for one split, are:
<TABLE>
<S> <C>
Edward A. Heil........................................................... 443,000
R. Bret Jenkins.......................................................... 375,000
Donald Arbisi............................................................ 147,000
Shannon White............................................................ 145,000
Windsor Fund............................................................. 145,000
Raymond Burghard......................................................... 100,000
Ben Hoskins.............................................................. 100,000
Steven W. Schuster....................................................... 100,000
John C. Dello-Iacono..................................................... 50,000
Bridget C. Owens......................................................... 50,000
Hyett Capital............................................................ 75,000
Balmore Fund............................................................. 75,000
Chamberlain Fund......................................................... 75,000
</TABLE>
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Mr. Schuster, one of our directors, is a member of McLaughlin &
Stern, LLP, a law firm that serves as our general counsel.
We have and will maintain at least two independent directors on our board
of directors. All future material affiliated transactions and future loans and
loan guarantees with our officers, directors, 5% shareholders, or their
respective affiliates, will be on terms that are as favorable to us as those
generally available from unaffiliated third parties; and all future transactions
and loans, and any forgiveness of these loans, shall be approved or ratified by
a majority of our independent directors who do not have an interest in the
transactions and who will have access, at our expense, to our counsel or
independent legal counsel.
27
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth 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 the owners, have
sole investment and voting power over to the shares. The table showing the
shares of common stock owned after the offering assumes that the officers and
directors do not buy any shares in the offering.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF SHARES PERCENT OF SHARES
NAMES AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OWNED BEFORE OFFERING OWNED AFTER OFFERING
- ----------------------------------------------------- ------------ --------------------- --------------------
<S> <C> <C> <C>
Edward A. Heil....................................... 443,000 22.15% 14.77%
R. Bret Jenkins ..................................... 375,000 17.75% 11.66%
972 North 1430 West
Orem, Utah 84057
Donald Arbisi ....................................... 147,000 7.35% 4.90%
P. O. Box 151
Dalzell, Illinois
Shannon White ....................................... 145,000 7.25% 4.83%
1101 Shadowbrook Drive
North Lakeland, FL 33813
Windsor Fund ........................................ 145,000 7.25% 4.83%
55 Frederick Street
Nassau, Bahamas
Raymond Burghard .................................... 100,000 5.00% 3.33%
120 Broadway, 28th Floor
New York, NY 10271
Ben Hoskins ......................................... 100,000 5.00% 3.33%
972 North 1430 West
Orem, Utah 84057
Laminaire Corp. ..................................... 100,000 5.00% 3.33%
960 E. Hazelwood Avenue
Rahway, New Jersey 07065
Steven W. Schuster .................................. 100,000 5.00% 3.33%
McLaughlin & Stern LLP
260 Madison Avenue
New York, NY 10016
John C. Dello-Iacono ................................ 50,000 2.50% 1.67%
Jericho Atrium
Suite 125
Broadway, Jericho 11735
Bridget C. Owens..................................... 50,000 2.50% 1.67%
David McClelland..................................... 20,000 1.00% 0.67%
Directors and officers as a group, 8 persons......... 1,038,000 51.90% 34.60%
</TABLE>
The address for all other officers, directors and 5% shareholders not
specified in the table is 100-31 South Jersey Avenue, Setauket, New York 11733.
JP, Inc. owns 225,000 shares. It is an entity controlled by Mr. Jenkins.
Shares held by it are beneficially owned and controlled by Mr. Jenkins.
Mr. Heil is a director of Laminaire Corporation., but disclaims beneficial
ownership of the shares of common stock owned by Laminaire Corporation.
The Windsor Fund is managed by Ian Renart.
Ms. Shannon White is not related to Paul White, our chief technology
advisor.
The calculations for shares and percentages outstanding after the offering
do not give effect to:
o 150,000 additional shares of common stock reserved for the underwriter's
over-allotment option; and
o 100,000 shares of common stock reserved for issuance upon the exercise of
the underwriter's warrant
Upon the completion of this offering, our existing shareholders will
collectively beneficially own approximately 67% of our outstanding common stock
or 63% if the underwriter's over-allotment option is exercised in full. Because
of their beneficial stock ownership, these stockholders will be in a position to
continue to elect a majority of the board of directors, decide matters requiring
stockholder approval and determine our policies.
28
<PAGE>
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 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:
o have equal ratable rights to dividends from funds legally available for
payment of dividends when, as and if declared by the board of directors;
o 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;
o do not have preemptive, subscription or conversion rights, or redemption
or access to any sinking fund; and
o 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.
Our proposed trading symbols do not imply that a liquid and active market
will develop or be 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. Our calculation of the shares of common stock to be outstanding
after this offering excludes:
o 150,000 shares of common stock subject to the underwriter's
over-allotment option,
o 100,000 shares of common stock issuable upon the exercise of the
underwriter's warrant, and
o 450,000 shares of common stock reserved for issuance under our stock
option plan.
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. 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. 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 without the underwriter's
consent for 12 months following the effective date of this prospectus.
TRANSFER AGENT
Standard Registrar & Transfer Company, Inc. has been appointed as the
transfer agent and registrar for our common stock. The transfer agent's address
is 12528 South 1840 East, Draper, Utah 84020, its telephone number is
(801) 571-8844.
29
<PAGE>
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
including as an injunction or other forms of non-monetary relief would remain
available under Nevada law. Each director will continue to be liable 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, including federal securities laws or state or federal environmental
laws.
We have been advised that in the opinion of the SEC, this type of
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against these types of 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 a director,
officer or controlling person in connection with the securities being
registered, we will submit the question of whether indemnification by us is
against public policy to an appropriate court and will be governed by the final
adjudication of the case.
There is no pending litigation or proceeding involving a director or
officer as to which indemnification is or may be sought.
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, we have agreed to sell to the
underwriters named below, for whom Kashner Davidson Securities Corp. is acting
as representative, the following respective numbers of shares of common stock.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Kashner Davidson Securities Corp............................................
----------
Total..................................................................... 1,000,000
----------
----------
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
Upon the completion of this offering and for a period of twelve months,
officers, directors and stockholders who will own more than 5% of our issued and
outstanding common stock after the offering are not permitted, without the prior
consent of the underwriter, to 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 our stock. In the event that our stock is assigned or
transferred in a private sale, the assignee or transfer is also bound by the
agreement.
We will grant to Kashner Davidson Securities Corp. a three year right of
first refusal to have Kashner Davidson Securities Corp. sell securities under
future public and private offerings of any non-bank debt or equity securities or
our subsidiaries, by us, our subsidiaries and/or our affiliates, except for
issuances or sales to employees under the rules of our stock option plan.
In addition, for a 12 month period we will not sell our securities in a
private placement or file a registration statement on Form S-8 (except for the
450,000 shares issuable under our stock option plan) without Kashner Davidson
Securities Corp.'s consent.
30
<PAGE>
We and Kashner Davidson Securities Corp. will enter into a financial
consulting agreement providing for Kashner Davidson Securities Corp. to act as
management and financial consultant to us for a two year period for a fee of
$96,000 payable at the closing of this offering.
We have granted Kashner Davidson Securities Corp., for a period of not less
than three years after the closing of the offering, the right to have Kashner
Davidson Securities Corp.'s designee present at meetings of the board of
directors and each of its committees subject to our right to exclude the
designee under particular circumstances. The designee will be entitled to the
same notices and communications sent by us as we give to our directors and will
attend directors' and committees' meetings, but will not be entitled to vote at
these meetings. Such designee will also be entitled to receive the same
compensation payable to directors as members of the board of directors and its
committees and all reasonable expenses in attending the meetings. As of the date
of this prospectus no designee has been selected.
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 some 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 particular NASD member dealers.
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, under the terms of 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, of which $50,000 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 in this prospectus 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>
<CAPTION>
PER SHARE WITH OVERALLOTMENT
--------- ------------------
<S> <C> <C>
Underwriting discounts paid by us........................................
</TABLE>
31
<PAGE>
INDEMNIFICATION OF UNDERWRITER
We have agreed to indemnify the underwriter against specific civil
liabilities, including liabilities under the Securities Act.
UNDERWRITER'S WARRANT
Upon completion of this offering, we will sell to the underwriter, for its
own accounts, a warrant 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 $100 for the warrant. The underwriter will receive 100,000 shares if it
exercises the warrant, commencing on the first anniversary of the date of this
offering until the fifth anniversary of the date of this offering. The terms of
the warrant require us to register the common stock for which the warrant is
exercisable within one year from the date of the prospectus. This underwriter's
warrant is not transferable by the warrant holders other than to officers and
partners of the underwriter. The exercise price of the underwriter's warrant and
the number of shares of common stock for which the warrant is exercisable are
subject to adjustment to protect the warrant holders against dilution in
specific 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 Securities Exchange Act of 1934, which permits an
underwriter to 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 may then 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 us 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:
o our results of operations,
o our current financial condition,
o our future prospects,
o the state of the markets for our services,
o the experience of our management,
o the economics of the e-commerce industry in general,
o the general condition of the equity securities market, and
o the demand for similar securities of companies considered comparable to
us.
32
<PAGE>
LEGAL MATTERS
Particular legal matters that arise in connection with the offering will be
passed upon for us by McLaughlin & Stern, LLP, 260 Madison Avenue, New York, New
York. Mr. Steven Schuster, a partner of McLaughlin & Stern, LLP, is a director
of eSAFETYWORLD. Particular legal matters that arise 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.
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
stated in their reports which appear elsewhere in this prospectus and in the
registration statement, and are included in reliance upon the reports of
Eichler, Bergsman & Co., LLP given upon its authority as experts in accounting
and auditing.
ADDITIONAL INFORMATION
eSAFETYWORLD will file reports, proxy statements and other information with
the SEC. Those reports, proxy statements and other information may be obtained:
o At the public reference room of the SEC, Room 1024- Judiciary Plaza, 450
Fifth Street, N.W. Washington, D.C. 20549;
o At the public reference facilities at the SEC'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;
o By writing to the SEC, Public Reference Section, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549;
o At the offices of the Nasdaq Stock Market, Reports Section, 1735 K
Street, N.W., Washington, D.C. 20549
o From the Internet site maintained by the SEC at http://www.sec.gov, which
contains reports, proxy information statements and other information
regarding issuers that file electronically with the SEC.
eSAFETYWORLD has filed with the SEC a registration statement under the
Securities Act of 1933, for the common stock offered in this prospectus. This
prospectus, which is a part of the registration statement, does not contain all
the information set forth, or annexed as exhibits to, the registration
statement, some portions of which have been omitted under the rules and
regulations of the SEC. For further information with respect to eSAFETYWORLD and
the common stock, reference is made to our registration statement, including
exhibits, copies of which may be inspected and copied at the facilities of the
SEC. Copies of the registration statement, including exhibits, may be obtained
from the Public Reference Section of the SEC at the address listed in the
paragraph above upon payment of the fee prescribed by the SEC. Information
regarding the operation of the SEC'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 other
periodic reports as we determine to be appropriate or as may be required by law.
eSAFETYWORLD's fiscal year ends June 30 each year.
33
<PAGE>
FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ESAFETYWORLD, INC.:
Independent Auditors' Report............................................................................... F-2
Balance Sheet, June 30, 1999 and October 31, 1999 (unaudited).............................................. F-3
Statements of Operations for the period July 17, 1997 (inception) to December 31, 1997, the year ended
December 31, 1998, the six months ended June 30, 1999 and the four months ended October 31, 1999
(unaudited).............................................................................................. F-4
Statements of Cash Flows for the period July 17, 1997 (inception) to December 31, 1997, the year ended
December 31, 1998, the six months ended June 30, 1999 and the four months ended October 31, 1999
(unaudited).............................................................................................. F-5
Statement of Stockholders' Equity for the period July 17, 1997 (inception) to December 31, 1997, the year
ended December 31, 1998, the six months ended June 30, 1999 and the four months ended October 31, 1999
(unaudited).............................................................................................. F-6
Notes to Financial Statements.............................................................................. F-7
CLEANROOM DISTRIBUTION PRODUCT GROUP OF LAMINAIRE CORPORATION:
Independent Auditors' Report............................................................................... F-10
Balance Sheet, December 31, 1998........................................................................... F-11
Statements of Operations for the years ended December 31, 1998 and 1997.................................... F-12
Statements of Cash Flows for the years ended December 31, 1998 and 1997.................................... F-13
Notes to Financial Statements.............................................................................. F-14
Condensed Balance Sheet, June 30, 1999..................................................................... F-16
Condensed Statements of Operations for the six months ended June 30, 1999 and 1998 (unaudited) ............ F-17
Condensed Statements of Cash Flows for the six months ended June 30, 1999 and 1998......................... F-18
Notes to Condensed Financial Statements for the six months ended June 30, 1999 and 1998 (unaudited)........ F-19
</TABLE>
F-1
<PAGE>
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, stockholders' equity 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 eSAFETYWORLD'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
F-2
<PAGE>
ESAFETYWORLD, INC.
BALANCE SHEET
JUNE 30, 1999 AND OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
10/31/99
6/30/99 (UNAUDITED)
--------- -------------------
<S> <C> <C>
ASSETS
Current:
Cash............................................................................. $ -- $ 118,000
Accounts receivable.............................................................. -- 158,775
Note receivable--Laminaire....................................................... 102,000
------- -----------
Total.................................................................... 378,775
Customer and vendor lists.......................................................... -- 629,200
Deferred offering costs............................................................ 10,000 177,000
Goodwill--net...................................................................... -- 629,200
------- -----------
Total.................................................................... $10,000 $ 1,814,175
------- -----------
------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Notes payable.................................................................... $ -- $ 501,667
Accounts payable and accrued expenses............................................ -- 184,504
------- -----------
Total current liabilities........................................................ -- 686,171
------- -----------
Long-term debt..................................................................... 373,333
------- -----------
Stockholders' equity:
Preferred stock; 1,000,000 shares authorized, none issued........................ -- --
Common stock, par value $.001; 20,000,000 authorized; 1,900,000 and 2,000,000
issued........................................................................ 1,900 2,000
Paid-in capital.................................................................... 8,100 708,000
Retained earnings.................................................................. -- 44,671
------- -----------
Total stockholders' equity......................................................... 10,000 754,671
------- -----------
Total liabilities and stockholders' equity......................................... $10,000 $ 1,814,175
------- -----------
------- -----------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
ESAFETYWORLD, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD JULY 17, 1997 (INCEPTION) TO DECEMBER 31, 1997,
THE YEAR ENDED DECEMBER 31, 1998 AND THE
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
FOUR MONTHS
SIX MONTHS ENDED
ENDED YEAR ENDED JULY 17, 1997 TO OCTOBER 31, 1999
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 (UNAUDITED)
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues............................ $ -0- $ -0- $ -0- $ 355,969
Cost of sales....................... -0- -0- -0- 213,110
----------- ----------- ----------- -----------
Gross profit........................ -0- -0- -0- 142,859
----------- ----------- ----------- -----------
Operating costs..................... -0- -0- -0- 33,949
Amortization........................ 41,600
Interest--net....................... 3,494
----------- ----------- ----------- -----------
Total expenses...................... -0- -0- -0- 79,043
----------- ----------- ----------- -----------
Operating profit.................... -0- -0- -0- 63,816
Income taxes........................ -0- -0- -0- 19,145
----------- ----------- ----------- -----------
Net income.......................... $ -0- $ -0- $ -0- $ 44,671
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share.................. $ -- $ -- $ -- $ .02
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Shares outstanding.................. 1,900,000 1,900,000 1,900,000 2,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
ESAFETYWORLD, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JULY 17, 1997 (INCEPTION) TO DECEMBER 31, 1997,
THE YEAR ENDED DECEMBER 31, 1998 AND THE
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
FOUR MONTHS
SIX MONTHS ENDED
ENDED YEAR ENDED JULY 17, 1997 TO OCTOBER 31, 1999
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 (UNAUDITED)
------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Cash from operating activities........ $ -0- $ -0- $ -0- $ 12,000
------- ------- ------- --------
Cash from financing activities:
Capital contribution.................. 10,000 -- --
Net proceeds from loans............... -- -- -- 273,000
Deferred offering costs............... (10,000) -- -- (167,000)
------- ------- ------- --------
(10,000) -- -- 106,000
------- ------- ------- --------
Cash end of period.................... $ -0- $ -0- $ -0- $118,000
------- ------- ------- --------
------- ------- ------- --------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
ESAFETYWORLD, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ -------- -------- --------
<S> <C> <C> <C> <C>
Initial capital contribution................................... $1,900 $ 8,100 $ 10,000
------ -------- -------- --------
Balance December 31, 1997...................................... $1,900 $ 8,100 -- $ 10,000
1998 activity.................................................. -- -- -- --
------ -------- -------- --------
$1,900 $ 8,100 -- $ 10,000
Six months ended June 30, 1999................................. -- -- -- --
------ -------- -------- --------
Balance June 30, 1999.......................................... 1,900 8,100 -- 10,000
Issuance of shares to Laminaire................................ 100 699,900 -- 700,000
Net income..................................................... $ 44,671 44,671
------ -------- -------- --------
Balance October 31, 1999....................................... $2,000 $708,000 $ 44,671 $754,671
------ -------- -------- --------
------ -------- -------- --------
</TABLE>
See notes to financial statements.
F-6
<PAGE>
ESAFETYWORLD, 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 eSAFETYWORLD, Inc. in August 1999. Its
purpose is to develop and operate a business-to-business E-Commerce site on the
world wide web selling industrial safety products.
2. ACCOUNTING AND REPORTING POLICIES
A summary of eSAFETYWORLD'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 the financial statements.
Revenue Recognition--Revenue for product sales is recognized in the period
in which the product is shipped.
Advertising--eSAFETYWORLD 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.
Long-lived Assets--Long lived assets, including intangibles, to be held and
used are reviewed for impairment whenever events or changes in circumstances
indicate that the related carrying amount may not be recoverable. If required,
impairment losses on assets to be held and used are recognized based on the
excess of the asset's carrying value over its fair value. Long-lived assets to
be sold are reported at the lower of carrying amount or fair value reduced by
estimated disposal costs.
Fiscal Year--eSAFETYWORLD's fiscal year ends on June 30.
3. STOCKHOLDERS' EQUITY
eSAFETYWORLD's certificate of incorporation provides that its authorized
capital stock consists of one million shares of blank check preferred stock and
20 million shares of common stock, par value $.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 the dividends as may be declared by the board of
directors out of funds legally available to pay dividends. The board of
directors, without shareholder approval, could issue shares of common stock upon
the terms as it determines to whomever it pleases, including persons who or
entities that would help present management maintain control.
eSAFETYWORLD has a stock option plan that expires in 2009 and enables it to
grant incentive stock options, non-qualified options and stock appreciation
rights for up to an aggregate of 450,000 shares of its 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 or 110% of fair market value for ten percent or
more stockholders. Other options and stock appreciation rights may be granted on
terms determined by the compensation committee of the board of directors. No
options are outstanding at October 31, 1999.
4. SUBSEQUENT EVENTS (UNAUDITED)
In August 1999, eSAFETYWORLD 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 accounts payables in an amount up to $125,000. The total
F-7
<PAGE>
ESAFETYWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1999
4. SUBSEQUENT EVENTS (UNAUDITED)--(CONTINUED)
purchase price of $1,325,000 was accounted for as a purchase in conformity with
Opinion No. 25 of the Accounting Principles board. All assets acquired,
including goodwill, will be amortized on a straight line basis over five years.
The notes payable bear interest at eight percent per annum. One of the
notes in the principal amount of $200,000 is payable in 12 equal quarterly
instalments, and the other note in the principal amount of $300,000 is payable
in 20 equal quarterly instalments. We have the right to offset the principal
amount of a $102,000 demand note that we made to Laminaire (see Note 4), in
whole or in part against any payment due by us to Laminaire under these note
agreements. In addition, we can offset any amounts that we pay to satisfy
amounts due by Laminaire to its vendors against any amount due by us to
Laminaire under the note agreements. The first instalments under the note
agreements are payable at the earlier of our completion of the offering or March
31, 2000. In September 1999, eSAFETYWORLD also guaranteed the payment of
Laminaire's trade obligations to three of Laminaire's vendors. To the extent
that eSAFETYWORLD makes payments to these vendors, the amount paid will be
treated as a direct offset to the $500,000 notes payable due to Laminaire. At
November 30, 1999, the amount guaranteed was approximately $200,000.
eSAFETYWORLD also acquired the customer and vendor base and lists but
acquired no tangible assets including inventory 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.
In July and August 1999, eSAFETYWORLD received one year loans from
unrelated parties in the principal amounts of $250,000 and $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 following events had occurred on June 30,
1999:
o the acquisition described in Note 1 and
o the loans described in the first paragraph of this note.
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,
reported the following results in 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
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, eSAFETYWORLD 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 at a price of $.08 per share based on the bid price of Laminaire's
shares on the date that the note was issued.
5. RELATED PARTY TRANSACTIONS
eSAFETYWORLD has an agreement with EH Associates, LLC, an entity controlled
by its president, Mr. Heil, under which eSAFETYWORLD will pay annual consulting
fees of $125,000, $140,000 and
F-8
<PAGE>
ESAFETYWORLD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1999
5. RELATED PARTY TRANSACTIONS--(CONTINUED)
$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 cash
compensation from eSAFETYWORLD.
EDK Associates, LLC, an entity controlled by a director, Ms. Owens, has a
contract with eSAFETYWORLD under which eSAFETYWORLD has 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 administrative, marketing and investor relations
services. Ms. Owens, who will devote 30 to 35 hours per week to eSAFETYWORLD,
receives reimbursement for expenses, but receives no other cash compensation
from eSAFETYWORLD.
JP Inc., an entity controlled by a director, Mr. Jenkins, has a contract
with eSAFETYWORLD under which eSAFETYWORLD has agreed to pay minimum annual fees
of $50,000 in each of the three years in the period ended December 31, 2002 for
legal, marketing and other business services. Mr. Jenkins, who will devote 40 to
50 hours per month to eSAFETYWORLD, receives reimbursement for expenses, but
receives no other cash compensation from eSAFETYWORLD.
eSAFETYWORLD has an agreement with Spider Inc. under which Spider Inc.
provides software, webhosting and promotional services to eSAFETYWORLD for
$10,000 per month commencing in February 2000. eSAFETYWORLD's technical advisor
is the President and majority shareholder of Spider, Inc.
6. COMMITMENTS
eSAFETYWORLD is obligated under the terms of a verbal month-to-month
operating lease to be entirely controlled by an individual who holds 5% of
eSAFETYWORLD's common stock for office space which calls for monthly rentals of
$1,000.
eSAFETYWORLD is obligated under the terms of employment agreements to pay
salaries of $200,000 in 2000, $210,000 in 2001 and $225,000 in 2002. These
employment agreements became effective upon the completion of an initial public
offering. eSAFETYWORLD filed a Registration Statement for this offering in
September 1999 as well as pre-effective amendments in November and December
1999.
F-9
<PAGE>
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 eSAFETYWORLD'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
F-10
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Accounts receivable................................................................................... $213,935
Inventory............................................................................................. 75,174
--------
Total.......................................................................................... $289,109
--------
--------
LIABILITIES AND OTHER
Accounts payable...................................................................................... $318,899
Deficit............................................................................................... (30,790)
--------
Total.......................................................................................... $289,109
--------
--------
</TABLE>
See notes to financial statements.
F-11
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
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-
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements
F-12
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Cash from operations....................................................................... $54,067 $204,106
Cash transferred to Laminaire.............................................................. (54,067) (204,106)
------- --------
Cash, end of year.......................................................................... $ -0- $ -0-
------- --------
------- --------
</TABLE>
See Notes to Financial Statements.
F-13
<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. Joint costs
were allocated on a percentage basis using relative amounts of physical space
used in Laminaire's facility and payroll costs as the allocation bases.
Management believes that the allocated costs allocated on that basis reflects a
reasonable amount for the services performed for a privately owned distribution
business. 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.
F-14
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
2. ACCOUNTING AND REPORTING POLICIES--(CONTINUED)
Advertising
The Division charges advertising costs to expense as incurred. Costs
related to mail order catalogs and promotional materials are charged to
operations when mailed or distributed.
Income Taxes
The operating results of the Division were included in the consolidated
income tax returns of Laminaire Corporation. If the Division filed its own
returns pro forma income taxes would have been approximately $18,923 in 1998 and
$71,437 in 1997.
F-15
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Accounts receivable................................................................................... $156,403
Inventory............................................................................................. 70,680
Total.......................................................................................... $227,083
--------
--------
LIABILITIES AND OTHER
Accounts payable...................................................................................... $325,859
Deficit............................................................................................... (98,776)
Total.......................................................................................... $227,083
--------
--------
</TABLE>
See notes to condensed financial statements.
F-16
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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-
-------- --------
-------- --------
</TABLE>
See notes to condensed financial statements.
F-17
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------- --------
<S> <C> <C>
Cash from operations....................................................................... $95,984 $142,164
Cash transferred to Laminaire.............................................................. (95,984) (142,164)
------- --------
Cash, end of period........................................................................ $ -0- $ -0-
------- --------
------- --------
</TABLE>
See notes to condensed financial statements.
F-18
<PAGE>
CLEANROOM DISTRIBUTION PRODUCT GROUP
NOTES TO STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying interim condensed statements are 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.
F-19
<PAGE>
[This page intentionally left blank]
<PAGE>
[This page intentionally left blank]
<PAGE>
------------------------------------------------------
------------------------------------------------------
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.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus summary............................. 2
Risk factors................................... 4
Use of proceeds................................ 5
Dilution....................................... 6
Capitalization................................. 6
Management's discussion and analysis of results
of operation and financial condition......... 7
Business....................................... 12
Management..................................... 24
Certain relationships and related
transactions................................. 26
Principal shareholders......................... 28
Description of our securities.................. 29
Indemnification of officers and directors...... 30
Underwriting................................... 30
Legal matters.................................. 33
Experts........................................ 33
Additional information......................... 33
Financial statements........................... F-1
</TABLE>
------------------------
UNTIL , 2000, 25 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OFFERED IN THIS PROSPECTUS,
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.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
1,000,000 SHARES
OF COMMON STOCK
ESAFETYWORLD, INC.
------------------------
PROSPECTUS
------------------------
KASHNER DAVIDSON
SECURITIES CORP.
, 1999
------------------------------------------------------
------------------------------------------------------
<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 the
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 the 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
that 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 the 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 these 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
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 capacity or arising out of his status as such whether or not the corporation
would have the authority to indemnify him against these 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.
II-1
<PAGE>
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>
<S> <C>
Securities and Exchange Commission Fees............................................................... $ 2,530
Accounting Fees and Expenses.......................................................................... 15,000
Blue Sky Fees and Expenses (including NASDAQ and Boston Exchange filing fees of $11,500) ............. 35,000
Printing Expenses (including Securities).............................................................. 50,000
Legal Fees............................................................................................ 85,000
Miscellaneous......................................................................................... 12,470
--------
Total............................................................................................ $200,000
--------
--------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
All issuances were under Section 4(2) unless otherwise indicated. The
issuances under 4(2) were to officers, directors, employees or accredited
investors.
On July 17, 1997, the Company issued common stock at a price of $.001 to
the persons listed below, after giving effect to a subsequent 2,000 for one
stock split. Each of these persons may be considered promoters of the Company.
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL OWNER SHARES
- ------------------------------------------------------------------------------------------------------ ---------
<S> <C>
Edward A. Heil........................................................................................ 443,000
J.P. Inc.............................................................................................. 225,000
Donald Arbisi......................................................................................... 147,000
Shannon White......................................................................................... 145,000
Windsor Fund.......................................................................................... 145,000
Raymond Burghard...................................................................................... 100,000
Ben Hoskins........................................................................................... 100,000
R. Bret Jenkins....................................................................................... 100,000
Steven W. Schuster.................................................................................... 100,000
Hyett Fund............................................................................................ 75,000
Balmore Fund.......................................................................................... 75,000
Chamberlain Fund...................................................................................... 75,000
John C. Dello-Iacono.................................................................................. 50,000
Bridget C. Owens...................................................................................... 50,000
David McClelland...................................................................................... 20,000
</TABLE>
On August 20, 1999, we issued 100,000 shares of common stock to Laminaire
Corporation as partial consideration for our purchase of the Products
Distribution Division.
On July 15, 1999, we issued an 8% promissory note in favor of Arcadia
Mutual Fund, Ltd. in the principal amount of $250,000.
On August 9, 1999, we issued an 8% promissory note in favor of the
Chamberlain Fund in the principal amount of $125,000.
II-2
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement(1)
3.1 -- Registrant's Articles of Incorporation dated July 21, 1997(1)
3.2 -- Registrant's Amendment to Articles of Incorporation dated August 23, 1999
3.3 -- Registrant's Certificate of Correction to Articles of Incorporation dated November 19, 1999
3.4 -- Registrant's By-laws(1)
4.1 -- Form of common stock certificate(3)
4.2 -- 1999 stock option plan
4.3 -- Form of underwriter's Warrant Agreement
5.1 -- Opinion of McLaughlin & Stern, LLP(3)
10.1 -- Asset Purchase Agreement with Laminaire Corp.
10.2 -- Agreement with EH Associates, LLC(1)
10.3 -- Agreement with J.P. Inc.(1)
10.4 -- Agreement with EDK Associates, LLC
10.5 -- Form of Employment Agreement with David McClelland(2)
10.6 -- Employment Agreement with James Brownfiel(2)
10.7 -- Form of Advisory Investment Banking Agreement between Registrant and Kashner Davidson Securities
Corp.(1)
10.8 -- Agreement with Spider, Inc. dated August 11, 1999(2)
10.9 -- Promissory Note in favor of the Registrant from Laminaire Corporation in the principal amount of
$102,000 dated August 11, 1999
10.10 -- Promissory Note in favor of Laminaire Corporation in the principal amount of $200,000 dated
August 11, 1999
10.11 -- Promissory Note in favor of Laminaire Corporation in the principal amount of $300,000 dated
August 11, 1999
10.12 -- Agreement with Kimberly-Clark Corporation dated September 29, 1999
10.13 -- Agreement with The Texwipe Company, LLC dated September 29, 1999
10.14 -- Agreement with Alma, Inc. dated September 29, 1999
10.15 -- Agreement with Ideal Sales, Inc. dated December 8, 1999
10.16 -- Promissory Note in favor of the Arcadia Mutual Fund, Ltd. dated July 15, 1999
10.17 -- Promissory Note in favor of the Chamberlain Fund dated August 6, 1999
10.18 -- Amendment to Asset Purchase Agreement
23.1 -- Consent of Eichler Bergsman & Co., LLP
23.2 -- Consent of McLaughlin & Stern, LLP (included in Exhibit 5.1)(2)
24 -- Power of Attorney (contained on signature page).
27 -- Financial Data Schedule.
</TABLE>
- ------------------
(1) Filed with the Registration Statement on September 2, 1999.
(2) Filed with Amendment No. 1 on November 3, 1999.
(3) To be filed by amendment.
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.
II-3
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned Registrant undertakes to:
(a) (1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(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 the denominations and registered in the 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 the 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 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.
II-4
<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 amendment of the
registration statement to be signed on its behalf by the undersigned, in the
Town of Setauket, state of New York, on December 27, 1999.
ESAFETYWORLD, INC.
By: /s/ EDWARD A. HEIL
----------------------------------
Edward A. Heil
By: /s/ R. BRET JENKINS
----------------------------------
R. Bret Jenkins,
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.
In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ -------- -----------------
<S> <C> <C>
By: /s/ EDWARD A. HEIL
--------------------------------------
Edward A. Heil Director December 27, 1999
By: /s/ *
--------------------------------------
Steven W. Schuster Director December 27, 1999
By: /s/ *
--------------------------------------
Bridget C. Owens Director December 27, 1999
By: /s/ *
--------------------------------------
John C. Dello-Iacono Director December 27, 1999
By: /s/ R. BRET JENKINS
--------------------------------------
R. Bret Jenkins Director December 27, 1999
* Under Power-of-Attorney
/s/ EDWARD A. HEIL*
- ------------------------------------------
Edward A. Heil
</TABLE>
II-5
<PAGE>
EXHIBITS
AMENDMENT NO. 2
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of underwriting agreement
3.2 -- Registrant's Amendment to Articles of Incorporation dated August 23, 1999
3.3 -- Registrant's Certificate of Correction
4.2 -- 1999 stock option plan
4.3 -- Form of underwriter's warrant agreement
10.1 -- Asset Purchase Agreement with Laminaire Corp.
10.4 -- Consulting Agreement with EDK Associates, LLC
10.9 -- Promissory Note in favor of the Registrant from Laminaire Corporation in the principal amount of
$102,000 dated August 11, 1999
10.10 -- Promissory Note in favor of Laminaire Corporation in the principal amount of $200,000 dated
August 11, 1999
10.11 -- Promissory Note in favor of Laminaire Corporation in the principal amount of $300,000 dated
August 11, 1999
10.12 -- Agreement with Kimberly-Clark Corporation dated September 29, 1999
10.13 -- Agreement with The Texwipe Company, LLC dated September 29, 1999
10.14 -- Agreement with Alma, Inc. dated September 29, 1999
10.15 -- Agreement with Ideal Sales, Inc. dated December 8, 1999
10.16 -- Promissory Note in favor of the Arcadia Mutual Fund, Ltd. dated July 15, 1999
10.17 -- Promissory Note in favor of the Chamberlain Fund dated August 6, 1999
10.18 -- Amendment to Asset Purchase Agreement
23.1 -- Consent of Eichler Bergsman & Co., LLP
27 -- Financial Data Schedule
</TABLE>
<PAGE>
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
<PAGE>
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 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
2
<PAGE>
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 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
3
<PAGE>
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 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
4
<PAGE>
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 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
5
<PAGE>
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.
(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
6
<PAGE>
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).
(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
7
<PAGE>
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
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.
8
<PAGE>
(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 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
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distribution and sale of the Firm Securities as contemplated by the Prospectus,
the Company hereby 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
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Underwriter's Warrant Agreement, the Underwriter may designate that the
Underwriter's Warrant 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
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supplement thereto as been filed and will provide evidence satisfactory to the
Underwriter of each 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
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<PAGE>
delivered under the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any 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.
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<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, its
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<PAGE>
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.
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(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.
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(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.
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(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 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
18
<PAGE>
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 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
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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, 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
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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
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
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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 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
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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 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
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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.
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
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<PAGE>
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,
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,
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<PAGE>
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 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
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<PAGE>
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 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
27
<PAGE>
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 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
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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, 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
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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) a material and
adverse effect on the financial markets and 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 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.
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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.
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
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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.
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
32
<PAGE>
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]
33
<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
34
<PAGE>
SCHEDULE 1
Underwriter Securities Purchased
Kashner Davidson Securities Corp. [ ]
----------
[ ] [ ]
---------------- ----------
[ ] [ ]
---------------- ----------
35
<PAGE>
SCHEDULE 2
Shareholders Subject to Underwriter's Lock-Up Agreement
Shareholder
36
<PAGE>
EXHIBITS 3.2
FILED
Office of the
Secretary of State
STATE OF NEVADA
August 23, 1999
No. C.15695-97
Dean Heller, Secretary of State
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock) Filed by:
The SL Group, Inc.
(Name of Corporation)
We the undersigned Edward Heil and
President or Vice President
R. Bret Jenkins of The SLGroup, Inc.
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at 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 or Vice President
/s/R. Bret Jenkins
---------------------------------------
Secretary or Assistant Secretary
<PAGE>
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
---------------------------------------
Signature of Notary
<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, Inc.
Article IV is hereby amended to read as follows:
ARTICLE IV
(a) The Corporation shall be authorized to issue the following shares:
Class Number of Shares Par Value
----- ---------------- ---------
Common 20,000,000 $.001
Preferred 1,000,000 $.001
(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
<PAGE>
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 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 re
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
<PAGE>
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
<PAGE>
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.
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 directors, or officers acts or omission involved intentional misconduct,
fraud, or a knowing violation of the law and was material to the cause of
action.
<PAGE>
EXHIBIT 3.3
Dean Heller STATE OF NEVADA Tel 702.687.5203
Secretary of State OFFICE OF THE SECRETARY OF STATE Fax 702.687.3471
101 N. CARSON ST. STE 3
Certificate of Correction
(Pursuant to NRS 78.0295 and 80.0007)
-Remit in Duplicate-
1. The name of the corporation for which correction is being made: eSAFETYWORLD,
Inc.
2. Description of the original document for which correction is being made:
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION.
3. Filing date of the original document: 8/23/99
4. Description of the incorrect statement and the reason it is incorrect or the
manner in which the execution or other formal authentication was defective: The
number of shares of the corporation outstanding and entitled to vote on the
amendment to the Articles of Incorporation was incorrectly stated as 2000. This
was a typographical error on the form. The correct number of shares entitled to
vote was 1000.
5. Correction on the incorrect statement or defective execution or
authentication: "The number of shares of the corporation outstanding and
entitled to vote on an amendment to the Articles of Incorporation is 1000 that
the said changes 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."
6. Signature:
/s/R. Bret Jenkins Secretary 11/20/99
- ------------------------------ ----------------- ------------
Signature of Corporate Officer Title of Officer Date
<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:
1
<PAGE>
(a) Solely with respect to Nonemployee 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.
2
<PAGE>
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.
3
<PAGE>
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)
4
<PAGE>
(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,
5
<PAGE>
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 450,000. 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
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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
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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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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
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<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
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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
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<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
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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.
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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.
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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 a warrant
(the "Underwriter's Warrant") to purchase 100,000 shares 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 Warrant 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
<PAGE>
upon exercise of the Underwriter's Warrant are sometimes referred to herein as
the "Underwriter's Securities."
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 3lawful 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 Warrant 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 Warrant, 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). The Holder shall not be limited to
exchanging Underwriter's Warrant for Common Stock.
<PAGE>
The Warrant Exchange shall take place on the date specified in the
notice or if the date the 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 urchase 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 determi nation 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.
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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
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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.)
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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)
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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]
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EXHIBIT 10.1
BUSINESS PURCHASE AGREEMENT
AGREEMENT made as of the 11th day of August, 1999, 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 100-31 S. Jersey Avenue, Setauket, New York
11733 (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, liens,
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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
relations
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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 to the
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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.
(b) Procedure for Indemnification. Promptly after
receipt by an indemnified party under Section 7(a) above, of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such section, give
notice to the indemnifying party of the commencement thereof, but the failure so
to notify the indemnifying party shall not receive it of any liability that it
may have to any indemnified party except to the extent the defense of such
action by the indemnifying party is prejudiced thereby. In case any such action
shall be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, to assume
the defense thereof with counsel reasonable satisfactory to such indemnified
party and, after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party under such section for any fees of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation, If an indemnifying party assume the defense of such an
action, (a) no compromise or settlement thereof may be effected by the
indemnifying party
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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.
16
<PAGE>
(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
17
<PAGE>
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.
18
<PAGE>
(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.
19
<PAGE>
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 Danielle
--------------------------------
Name: Peter Danielle
Title: Treasurer
THE SL GROUP, INC.
By: /s/ Edward Heil
--------------------------------
Name: Edward Heil
Title: President
20
<PAGE>
EXHIBIT 10.4
CONSULTING AGREEMENT
AMENDED AGREEMENT made this 22nd day of December, 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, 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
<PAGE>
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.
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
<PAGE>
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 22nd day of December, 1999.
"Company"
THE SL GROUP, INC.
By: /s/Edward Heil
-------------------------
Edward A. Heil, President
"Consultant"
EDK ASSOCIATES, LLC
By: /s/Bridget Owens
----------------
Bridget Owens
<PAGE>
Exhibit 10.9
SL GROUP, INC.
AUGUST 11, 1999 $102,000
8% DEMAND PROMISSORY NOTE
Laminaire Corporation, a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to SL Group, Inc. or registered assigns
(the "Holder") on demand, at the principal offices of the Company, the principal
sum of ONE HUNDRED AND TWO THOUSAND ($102,000) Dollars in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, and to pay interest on the
outstanding principal sum hereof at eight percent (8%) per annum from the date
hereof until the Company's obligation with respect to the payment of such
principal sum shall be discharged as herein provided. Interest hereunder shall
accrue and shall be payable monthly, in like coin or currency to the Holder
hereof at the office of the Company as hereinafter set forth. In the event that
for any reason whatsoever any interest or other consideration payable with
respect to this Note shall be deemed to be usurious by a court of competent
jurisdiction under the laws of the State of New York or the laws of any other
state governing the repayment hereof, then so much of such interest or other
consideration as shall be deemed to be usurious shall be held by the holder as
security for the repayment of the principal amount hereof and shall otherwise be
waived.
The Note shall be convertible, in whole or in part, at the Holder's
option into shares of the Company's Common Stock at a price equal to 70% of the
closing bid price of such shares on the business day immediately preceding the
date of the Note.
1. Covenants of Company
a. The Company covenants and agrees that, so long as this Note
shall be outstanding, it will:
(i) Promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or upon
its income and profits, or upon any of its property, before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties or
any part thereof; provided, however, that the Company shall not be required to
pay and discharge any such tax,
<PAGE>
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings, and the Company shall set
aside on its books adequate reserves with respect to any such tax, assessment,
charge, levy or claim so contested.
(ii) Do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company as its counsel may
advise;
(iii) At all times maintain, preserve, protect and
keep its property used and useful in the conduct of its business in good repair,
working order and conditions, and from time to time make all needful and proper
repairs, renewals, replacements, betterments and improvements thereto, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times;
(iv) At all times keep true and correct books,
records and accounts.
2. Events of Default
a. This Note shall become due and payable upon written demand
made by the Holder hereof if one or more of the following events, herein called
"events of default", shall happen and be continuing:
(i) Default in the payment of the principal and
accrued interest on this Note, when and as the same shall become due and
payable, whether by acceleration or otherwise;
(ii) Default in the due observance or performance of
any covenant, condition or agreement on the part of the Company to be observed
or performed pursuant to the terms hereof, if such default shall continue
uncured for 30 days after written notice, specifying such default, shall have
been given to the Company by the Holder; provided, however, that the grace
period specified in this Section 3(a)(ii) shall not apply to any other Event of
Default specified in this Section 3. (iii) Entry of a judicial order for the
appointment of a receiver, trustee or liquidator for the Company or its property
which order shall not have been vacated or set aside or otherwise terminated
within 120 days or upon the Company consenting to the entry of such an order;
(iv) Admission in writing of the Company's inability
to pay its debts as they mature;
(v) General assignment by the Company for the benefit
of creditors;
2
<PAGE>
(vi) Filing by the Company of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization, or an arrangement
with creditors;
(vii) Entering against the Company of a court order
approving a petition filed against it under the federal bankruptcy laws, which
order shall not have been vacated or set aside or otherwise terminated within
120 days;
b. The Company agrees that notice of the occurrence of any
event of default will be promptly given to the Holder at his or her registered
address by certified mail within five days of such event of default.
c. In case any one or more of the events of default specified
above shall happen or be continuing, the Holder may proceed to protect and
enforce his or her right by suit for the specific performance of any covenant or
agreement contained in this Note or in aid of the exercise of any power granted
in this Note or may proceed to enforce the payment of this Note or to enforce
any other legal or equitable rights of such Holder.
3. Miscellaneous
a. The Company may consider and treat the person in whose name
this Note shall be registered as the absolute owner hereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company shall not
be affected by any notice to the contrary. Subject to the limitations herein
stated, the registered owner of this Note shall have the right to transfer this
Note by assignment, and the transferee thereof shall, upon his registration as
owner of this Note, become vested with all the powers and rights of the
transferor. Registration of any new owner shall take place upon presentation of
this Note to the Company at its principal offices, together with a duly
authenticated assignment. In case of transfer by operation of law, the
transferee agrees to notify the Company of such transfer and of his address, and
to submit appropriate evidence regarding the transfer so that this Note may be
registered in the name of the transferee. This Note is transferable only on the
books of the Company by the Holder hereof, in person or by attorney, on the
surrender hereof, duly endorsed. Communications sent to any registered owner
shall be effective as against all Holders or transferees of the Note not
registered at the time of sending the communication.
b. Payments of interest shall be made as specified above to
the registered owner of this Note. Payment of principal shall be made to the
registered owner of this Note upon presentation on or after maturity. No
interest shall be due on this Note for such period of time that may elapse
between the maturity of this Note and its presentation for payment.
3
<PAGE>
c. Notice of dishonor, protest, presentment and notice of
protest are hereby waived. In the event an action, suit or proceeding is brought
to enforce this Note or to protest the same, the Holder hereof shall be entitled
to all costs and disbursements, including reasonable attorney's fees and costs
of collection, incurred in connection with such action, suit or proceeding.
d. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Note, if mutilated,
the Company shall execute and deliver a new Note of like tenor and date. Any
such new Note executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Note so lost, stolen,
destroyed or mutilated shall be at any time enforceable by anyone.
e. This Note shall be construed and enforced in accordance
with the laws of the State of New York. Any litigation based thereon, or arising
out of, under, or in connection with, this Note or any course of conduct, course
of dealing, statements (whether oral or written) or actions of the Company or
Holder shall be brought and maintained exclusively in the court of the state of
New York without reference to its conflicts of laws rules or principles. The
Company and the Holder hereby expressly and irrevocably submits to the exclusive
jurisdiction of the Federal Courts of the state of New York sitting in the
Southern District for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation.
f. No recourse shall be had for the payment of the principal
or interest of this Note against any incorporator or any past, present or future
stockholder, officer, director or agent of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, or otherwise; all such liability of the incorporators,
stockholders, officers, directors and agents being waived, released and
surrendered by the Holder hereof by the acceptance of this Note.
4
<PAGE>
IN WITNESS WHEREOF, LAMINAIRE CORPORATION., has caused this Note to be
signed in its name by its Chief Financial Officer on the 11th day of AUGUST,
1999.
LAMINAIRE CORPORATION
By: /s/ Peter Daniele
-----------------------------
Peter Daniele, CFO
SL GROUP, INC.
By: /s/ Edward Heil
-----------------------------
Edward A. Heil, President
5
<PAGE>
Exhibit 10.10
LAMINAIRE CORPORATION
AUGUST 11, 1999 $200,000
8% INSTALMENT PROMISSORY NOTE
SL Group, Inc., a Nevada corporation, (the "Company"), for value
received, hereby promises to pay to Laminaire Corporation or registered assigns
(the "Holder") instalment payments on the payment days set forth below (the
"Maturity Date"), at the principal offices of the Company, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest on
the outstanding principal sum hereof at eight percent (8%) per annum from the
date hereof until the Company's obligation with respect to the payment of such
principal sum shall be discharged as herein provided. Interest hereunder shall
accrue and shall be payable on each instalment date, in like coin or currency to
the Holder hereof at the office of the Company as hereinafter set forth. In the
event that for any reason whatsoever any interest or other consideration payable
with respect to this Note shall be deemed to be usurious by a court of competent
jurisdiction under the laws of the State of New York or the laws of any other
state governing the repayment hereof, then so much of such interest or other
consideration as shall be deemed to be usurious shall be held by the holder as
security for the repayment of the principal amount hereof and shall otherwise be
waived.
The Note shall be payable in 12 equal quarterly instalments commencing
on March 31, 2000. In the event that SL Group, Inc. satisfies any obligation on
behalf of Laminaire Corporation. The amount of such obligation shall, at SL
Group's option, be used to reduce its obligation under this Note in a manner to
be determined by The SL Group.
1. Prepayment
a. The principal amount of this Note may be prepaid by the
Company, in whole or in part, without premium or penalty, at any time, provided,
the Company gives the Holder not less than 10 days prior written notice of such
prepayment (which notice shall set forth the amount and date of such
prepayment).
<PAGE>
b. .Upon any prepayment of a portion of the principal amount
of this Note, all accrued, but unpaid, interest on such portion of the principal
shall be paid to the Holder on the date of prepayment.
2. Covenants of Company
a. The Company covenants and agrees that, so long as this Note
shall be outstanding, it will:
(i) Promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or upon
its income and profits, or upon any of its property, before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties or
any part thereof; provided, however, that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings,
and the Company shall set aside on its books adequate reserves with respect to
any such tax, assessment, charge, levy or claim so contested.
(ii) Do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company as its counsel may
advise;
(iii) At all times maintain, preserve, protect and
keep its property used and useful in the conduct of its business in good repair,
working order and conditions, and from time to time make all needful and proper
repairs, renewals, replacements, betterments and improvements thereto, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times;
(iv) At all times keep true and correct books,
records and accounts.
3. Events of Default
a. This Note shall become due and payable upon written demand
made by the Holder hereof if one or more of the following events, herein called
"events of default", shall happen and be continuing:
(i) Default in the payment of the principal and
accrued interest on this Note, when and as the same shall become due and
payable, whether by acceleration or otherwise;
2
<PAGE>
(ii) Default in the due observance or performance of
any covenant, condition or agreement on the part of the Company to be observed
or performed pursuant to the terms hereof, if such default shall continue
uncured for 30 days after written notice, specifying such default, shall have
been given to the Company by the Holder; provided, however, that the grace
period specified in this Section 3(a)(ii) shall not apply to any other Event of
Default specified in this Section 3.
(iii) Entry of a judicial order for the appointment
of a receiver, trustee or liquidator for the Company or its property which order
shall not have been vacated or set aside or otherwise terminated within 120 days
or upon the Company consenting to the entry of such an order;
(iv) Admission in writing of the Company's inability
to pay its debts as they mature;
(v) General assignment by the Company for the benefit
of creditors;
(vi) Filing by the Company of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization, or an arrangement
with creditors;
(vii) Entering against the Company of a court order
approving a petition filed against it under the federal bankruptcy laws, which
order shall not have been vacated or set aside or otherwise terminated within
120 days;
b. The Company agrees that notice of the occurrence of any
event of default will be promptly given to the Holder at his or her registered
address by certified mail within five days of such event of default.
c. In case any one or more of the events of default specified
above shall happen or be continuing, the Holder may proceed to protect and
enforce his or her right by suit for the specific performance of any covenant or
agreement contained in this Note or in aid of the exercise of any power granted
in this Note or may proceed to enforce the payment of this Note or to enforce
any other legal or equitable rights of such Holder.
4. Miscellaneous
a. The Company may consider and treat the person in whose name
this Note shall be registered as the absolute owner hereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company shall not
be affected by any notice to the contrary. Subject to the limitations herein
stated, the registered owner of this Note shall have the right to transfer this
Note by assignment, and the transferee thereof shall, upon his registration as
owner of this Note, become vested with all the powers and rights of the
transferor. Registration of any new owner
3
<PAGE>
shall take place upon presentation of this Note to the Company at its principal
offices, together with a duly authenticated assignment. In case of transfer by
operation of law, the transferee agrees to notify the Company of such transfer
and of his address, and to submit appropriate evidence regarding the transfer so
that this Note may be registered in the name of the transferee. This Note is
transferable only on the books of the Company by the Holder hereof, in person or
by attorney, on the surrender hereof, duly endorsed. Communications sent to any
registered owner shall be effective as against all Holders or transferees of the
Note not registered at the time of sending the communication.
b. Payments of interest shall be made as specified above to
the registered owner of this Note. Payment of principal shall be made to the
registered owner of this Note upon presentation on or after maturity. No
interest shall be due on this Note for such period of time that may elapse
between the maturity of this Note and its presentation for payment.
4
<PAGE>
c. Notice of dishonor, protest, presentment and notice of
protest are hereby waived. In the event an action, suit or proceeding is brought
to enforce this Note or to protest the same, the Holder hereof shall be entitled
to all costs and disbursements, including reasonable attorney's fees and costs
of collection, incurred in connection with such action, suit or proceeding.
d. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Note, if mutilated,
the Company shall execute and deliver a new Note of like tenor and date. Any
such new Note executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Note so lost, stolen,
destroyed or mutilated shall be at any time enforceable by anyone.
e. This Note shall be construed and enforced in accordance
with the laws of the State of New York. Any litigation based thereon, or arising
out of, under, or in connection with, this Note or any course of conduct, course
of dealing, statements (whether oral or written) or actions of the Company or
Holder shall be brought and maintained exclusively in the court of the state of
New York without reference to its conflicts of laws rules or principles. The
Company and the Holder hereby expressly and irrevocably submits to the exclusive
jurisdiction of the Federal Courts of the state of New York sitting in the
Southern District for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation.
f. No recourse shall be had for the payment of the principal
or interest of this Note against any incorporator or any past, present or future
stockholder, officer, director or agent of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, or otherwise; all such liability of the incorporators,
stockholders, officers, directors and agents being waived, released and
surrendered by the Holder hereof by the acceptance of this Note.
5
<PAGE>
IN WITNESS WHEREOF, SL GROUP, INC. has caused this Note to be signed in
its name by its President on the 11th day of August, 1999.
SL GROUP, INC.
By: /s/ Edward A. Heil
--------------------------------
Edward A. Heil, PRESIDENT
LAMINAIRE CORPORATION
By: /s/ Peter Daniele
-------------------------------
Peter Daniele, Chief Financial Officer
6
<PAGE>
Exhibit 10.11
LAMINAIRE CORPORATION
AUGUST 11, 1999 $300,000
8% INSTALMENT PROMISSORY NOTE
SL Group, Inc., a Nevada corporation, (the "Company"), for value
received, hereby promises to pay to Laminaire Corporation or registered assigns
(the "Holder") instalment payments on the payment days set forth below (the
"Maturity Date"), at the principal offices of the Company, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest on
the outstanding principal sum hereof at eight percent (8%) per annum from the
date hereof until the Company's obligation with respect to the payment of such
principal sum shall be discharged as herein provided. Interest hereunder shall
accrue and shall be payable on each instalment date, in like coin or currency to
the Holder hereof at the office of the Company as hereinafter set forth. In the
event that for any reason whatsoever any interest or other consideration payable
with respect to this Note shall be deemed to be usurious by a court of competent
jurisdiction under the laws of the State of New York or the laws of any other
state governing the repayment hereof, then so much of such interest or other
consideration as shall be deemed to be usurious shall be held by the holder as
security for the repayment of the principal amount hereof and shall otherwise be
waived.
The Note shall be payable in 20 equal quarterly instalments commencing
on June 30, 2000. In the event that SL Group, Inc. satisfies any obligation on
behalf of Laminaire Corporation. The amount of such obligation shall, at SL
Group's option, be used to reduce its obligation under this Note in a manner to
be determined by The SL Group.
1. Prepayment
a. The principal amount of this Note may be prepaid by the
Company, in whole or in part, without premium or penalty, at any time, provided,
the Company gives the Holder not less than 10 days prior written notice of such
prepayment (which notice shall set forth the amount and date of such
prepayment).
<PAGE>
b. Upon any prepayment of a portion of the principal amount of
this Note, all accrued, but unpaid, interest on such portion of the principal
shall be paid to the Holder on the date of prepayment.
2. Covenants of Company
a. The Company covenants and agrees that, so long as this Note
shall be outstanding, it will:
(i) Promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or upon
its income and profits, or upon any of its property, before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties or
any part thereof; provided, however, that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings,
and the Company shall set aside on its books adequate reserves with respect to
any such tax, assessment, charge, levy or claim so contested.
(ii) Do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company as its counsel may
advise;
(iii) At all times maintain, preserve, protect and
keep its property used and useful in the conduct of its business in good repair,
working order and conditions, and from time to time make all needful and proper
repairs, renewals, replacements, betterments and improvements thereto, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times;
(iv) At all times keep true and correct books,
records and accounts.
3. Events of Default
a. This Note shall become due and payable upon written demand
made by the Holder hereof if one or more of the following events, herein called
"events of default", shall happen and be continuing:
(i) Default in the payment of the principal and
accrued interest on this Note, when and as the same shall become due and
payable, whether by acceleration or otherwise;
2
<PAGE>
(ii) Default in the due observance or performance of
any covenant, condition or agreement on the part of the Company to be observed
or performed pursuant to the terms hereof, if such default shall continue
uncured for 30 days after written notice, specifying such default, shall have
been given to the Company by the Holder; provided, however, that the grace
period specified in this Section 3(a)(ii) shall not apply to any other Event of
Default specified in this Section 3.
(iii) Entry of a judicial order for the appointment
of a receiver, trustee or liquidator for the Company or its property which order
shall not have been vacated or set aside or otherwise terminated within 120 days
or upon the Company consenting to the entry of such an order;
(iv) Admission in writing of the Company's inability
to pay its debts as they mature;
(v) General assignment by the Company for the benefit
of creditors;
(vi) Filing by the Company of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization, or an arrangement
with creditors;
(vii) Entering against the Company of a court order
approving a petition filed against it under the federal bankruptcy laws, which
order shall not have been vacated or set aside or otherwise terminated within
120 days;
b. The Company agrees that notice of the occurrence of any
event of default will be promptly given to the Holder at his or her registered
address by certified mail within five days of such event of default.
c. In case any one or more of the events of default specified
above shall happen or be continuing, the Holder may proceed to protect and
enforce his or her right by suit for the specific performance of any covenant or
agreement contained in this Note or in aid of the exercise of any power granted
in this Note or may proceed to enforce the payment of this Note or to enforce
any other legal or equitable rights of such Holder.
4. Miscellaneous
a. The Company may consider and treat the person in whose name
this Note shall be registered as the absolute owner hereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company shall not
be affected by any notice to the contrary. Subject to the limitations herein
stated, the registered owner of this Note shall have the right to transfer this
Note by assignment, and the transferee thereof shall, upon his registration as
owner of this Note, become vested with all the powers and rights of the
transferor. Registration of any new owner
3
<PAGE>
shall take place upon presentation of this Note to the Company at its principal
offices, together with a duly authenticated assignment. In case of transfer by
operation of law, the transferee agrees to notify the Company of such transfer
and of his address, and to submit appropriate evidence regarding the transfer so
that this Note may be registered in the name of the transferee. This Note is
transferable only on the books of the Company by the Holder hereof, in person or
by attorney, on the surrender hereof, duly endorsed. Communications sent to any
registered owner shall be effective as against all Holders or transferees of the
Note not registered at the time of sending the communication.
b. Payments of interest shall be made as specified above to
the registered owner of this Note. Payment of principal shall be made to the
registered owner of this Note upon presentation on or after maturity. No
interest shall be due on this Note for such period of time that may elapse
between the maturity of this Note and its presentation for payment.
4
<PAGE>
c. Notice of dishonor, protest, presentment and notice of
protest are hereby waived. In the event an action, suit or proceeding is brought
to enforce this Note or to protest the same, the Holder hereof shall be entitled
to all costs and disbursements, including reasonable attorney's fees and costs
of collection, incurred in connection with such action, suit or proceeding.
d. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Note, if mutilated,
the Company shall execute and deliver a new Note of like tenor and date. Any
such new Note executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Note so lost, stolen,
destroyed or mutilated shall be at any time enforceable by anyone.
e. This Note shall be construed and enforced in accordance
with the laws of the State of New York. Any litigation based thereon, or arising
out of, under, or in connection with, this Note or any course of conduct, course
of dealing, statements (whether oral or written) or actions of the Company or
Holder shall be brought and maintained exclusively in the court of the state of
New York without reference to its conflicts of laws rules or principles. The
Company and the Holder hereby expressly and irrevocably submits to the exclusive
jurisdiction of the Federal Courts of the state of New York sitting in the
Southern District for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation.
f. No recourse shall be had for the payment of the principal
or interest of this Note against any incorporator or any past, present or future
stockholder, officer, director or agent of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, or otherwise; all such liability of the incorporators,
stockholders, officers, directors and agents being waived, released and
surrendered by the Holder hereof by the acceptance of this Note.
5
<PAGE>
IN WITNESS WHEREOF, SL GROUP, INC. has caused this Note to be
signed in its name by its President on the 11th day of August, 1999.
SL GROUP, INC.
By: /s/ Edward A. Heil
------------------------------------
Edward A. Heil, PRESIDENT
LAMINAIRE CORPORATION
By: /s/ Peter Daniele
------------------------------------
Peter Daniele, Chief Financial Officer
6
<PAGE>
eSAFETYWORLD, Inc.
100-31 South Jersey Avenue
Setauket, NY 11733
212-894-3797 ext. 1042
Fax: 212-208-3082
September 29, 1999
Ms. Jennifer Cooper
Senior Credit Analyst
Kimberly-Clark Corporation
1400 Holcomb Bridge Road
Roswell, GA 30076
Re: Guaranty for payment of goods furnished to Laminaire Corporation
Dear Ms. Cooper:
This letter confirms our obligation to unconditionally guarantee
payment for all goods sold and delivered by Kimberly-Clark Corporation to
Laminaire Corporation. This guaranty covers the total sum of $ 85,449.90
representing the balance owed to Kimberly-Clark Corporation by Laminaire
Corporation as of the date of this letter.
This guarantee shall continue in effect until revoked in writing by the
undersigned from both eSAFETYWORLD, Inc. and Kimberly-Clark Corporation. Notice
of revocation shall not be effective until agreed upon and signed by both
parties.
Our liability to you under this guaranty is limited not only to the
aforementioned amount, but also to all future shipments and subsequent charges
incurred by Laminaire Corporation going forward, regardless of the shipment
address.
We will pay the unpaid portion of the amount covered by this guarantee
in full to Kimberly-Clark Corporation upon the closing of our Initial Public
Offering. We will pay the unpaid portion of the amount covered by this guarantee
in full to Kimberly-Clark within one week upon the closing of our Initial Public
Offering. Kimberly-Clark Corporation agrees to provide us with monthly
statements showing all charges, payments, credits, and unpaid balance of
Laminaire debt until the balance is paid in full
Sincerely,
eSAFETYWORLD, Inc. AGREED to by:
/s/Edward A. Heil By: /s/Jennifer Cooper
- ------------------------- -----------------------
Edward A. Heil Kimberly-Clark Corporation
Chairman
<PAGE>
eSAFETYWORLD, Inc.
100-31 South Jersey Avenue
Setauket, NY 11733
212-894-3797 ext. 1042
Fax: 212-208-3082
September 29, 1999
Mr. Michael Kobylarz
The Texwipe Company, LLC
650 E. Crescent Avenue
Upper Saddle River, NJ
Re: Guaranty for payment of goods furnished to Laminaire Corporation
Dear Mr. Kobylarz:
This letter confirms our obligation to unconditionally guarantee
payment for all goods sold and delivered by The Texwipe Company to Laminaire
Corporation. This guaranty covers the total sum of $ 56,284.00 (past due
receivables) representing the balance owed to The Texwipe Company by Laminaire
Corporation as of the date of this letter. This balance represents the total sum
net of the $30,674.00 (current receivables) due directly to The Texwipe Company
via an existing lockbox arrangement. The existing lockbox arrangement will apply
to customer shipments only, not for inventory stocking. Proceeds from the
lockbox will be applied first to the respective current receivable and the
residual to be applied to the past due receivable balance owed as referenced
above.
Texwipe reserves the right to hold future orders if any individual receivable in
the current receivables aging exceeds 45 days from the date of shipment (invoice
date) until the condition is remedied by payment of the outstanding receivable.
This guarantee shall continue in effect until revoked in writing by the
undersigned. Notice of revocation shall not be effective when received by you,
but shall be presumed to be received by you if sent by certified mail, return
receipt requested, to your address set forth above.
Our liability to you under this guaranty is limited to the aforementioned
amount.
We will pay the unpaid portion of the amount covered by this guarantee in full
to The Texwipe Company upon the closing of our Initial Public Offering. The
Texwipe Company agrees to provide us with monthly statements showing all
charges, payments, credits, and unpaid balance of Laminaire debt until the
balance is paid in full.
Sincerely,
eSAFETYWORLD, Inc. AGREED to by:
/s/Edward A. Heil
Edward A. Heil By:/s/Michael Kobylarz
Chairman The Texwipe Company
<PAGE>
eSAFETYWORLD, Inc.
100-31 South Jersey Avenue
Setauket, NY 11733
212-894-3797 ext. 1042
Fax: 212-208-3082
September 28, 1999
Mr. Gerry Boylan
Vice President, CFO
Alma Inc.
1251 Montalvo Way
Suite K
Palm Springs, CA 92262
Re: Guaranty for payment of goods furnished to Laminaire Corporation
Dear Mr. Boylan:
This letter confirms our obligation to unconditionally guarantee payment
for all goods sold and delivered by Alma, Inc. to Laminaire Corporation. This
guaranty covers the total sum of $77,845.00 representing the balance owed to
Alma, Inc. by Laminaire Corporation as of the date of this letter. Alma agrees
to extend a line of credit to eSAFETYWORLD, Inc. Not to exceed $40,000.
eSAFETYWORLD agrees to direct its customers, who purchase Alma products, to pay
directly to Alma the amount due on the customer's invoice. The example below
illustrates the agreement:
o eSAFETYWORLD purchases $10,000 of mats from Alma
o eSAFETYWORLD ships $8,000 of mats to XYZ Co. and invoices and by
phone, eSAFETYWORLD directs the customer to remit the $9,500 to Alma,
P.O. Box 9133 Palm Springs, CA 92263
o eSAFETYWORLD will directly contact the accounts payable department of
the customer to insure that the customer does not rely on the payee
and address in the customer's computer file. The method of legal
deposit to Alma's account will be mutually agreed by both parties.
Proceeds from P. O. Box will be applied first to the respective current
receivable and the residual to be applied to the past due receivable balance
owed as referenced above.
This guarantee shall continue in effect until revoked in writing by the
undersigned. Notice of revocation shall be effective when received by you, but
shall be presumed to be received by you if sent by certified mail, return
receipt requested, to your address set forth above. If the guaranty is revoked,
guarantor acknowledges and agrees that it will be liable for all amounts then
due and
<PAGE>
owing to Alma Inc. despite such revocation.
Our liability to you under this guaranty is limited to the aforementioned
amount.
We will pay the unpaid portion of the amount covered by this guarantee in full
to Alma, Inc. upon the closing of our Initial Public Offering. Alma agrees to
provide us with monthly statements showing all charges, payments, credits, and
unpaid balance of Laminaire debt until the balance is paid in full
Sincerely,
eSAFETYWORLD, Inc. AGREED to by:
/s/ Edward A. Heil By: /s/ Gerry Boylan
- ---------------------------- ------------------------
Edward A. Heil Alma, Inc.
Chairman
<PAGE>
EXHIBIT 10.15
JOINT INTERNET SUPPLY AGREEMENT
THIS JOINT INTERNET SUPPLY AGREEMENT is made and entered into this 8th
day of December, 1999, by and between eSAFETYWORLD, Inc., whose address is
100-31 South Jersey Avenue, Setauket, New York 11733, (hereinafter referred to
as "ESW"), and Ideal Sales, whose address is 17155 W. Glendale Avenue, New
Berlin, Wisconsin, 53151, (hereinafter referred to as the "Supplier"), and
hereinafter collectively referred to as the "Parties."
WITNESSETH:
WHEREAS, ESW has special abilities and experience in the areas of
selling industrial safety products on the Internet through an e-commerce
business to business site on the World Wide Web, and has capital available for
contribution to a business enterprise; and
WHEREAS, Company has special abilities and experience in the areas of
manufacturing industrial safety products, and has capital available for
contribution to a business enterprise; and
WHEREAS, the Parties desire to establish a business relationship to
include the sale of the Supplier s products to ESW to permit it to expand its
e-commerce business to business site on the World Wide Web; and
WHEREAS, it is the desire of the Parties to define and set out their
relationship in writing and the circumstances under which they are operating, as
of the date of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. PRIOR AGREEMENT. It is the intention of the Parties that this
Agreement replaces all written and/or oral agreements, understandings, and
business ventures, previously, or otherwise, existing between the Parties.
2. RELATIONSHIP. The Parties hereby form a business relationship
pursuant to the terms of this agreement, (hereinafter referred to as the
"Business").
3. PURPOSE. The purpose of the supply relationship is to make Ideal
Sales the exclusive supplier of the products set forth in Exhibit A for ESW.
4. TERM. The Business shall commence as of the 1~ day of February, 2000
and shall continue until terminated by an agreement of the Parties, which shall
require 120 days written notice, The initial term of this supply agreement will
be for twenty-four (24) months, subject to each party s termination clause.
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<PAGE>
5. LIABILITY OF THE PARTIES. During the existence of the Supply
Agreement, neither party shall be liable for any obligations of the other party
created without the express approval of both parties.
6. NATURE OF PERFORMANCE. During the existence of the Supply Agreement,
the Parties shall be solely responsible for performing the following duties:
a) ESW shall perform all work in full compliance with any and
all contract requirements and in strict compliance with any and all governmental
requirements applicable thereto.
b) The Supplier shall, in addition to providing those products
set out in Exhibit A, which is attached hereto and incorporated herein by
reference at prices, which will be negotiated between the parties from time to
time. The Supplier shall perform all work in full compliance with any and all
contract requirements and in strict compliance with any and all governmental
requirements applicable thereto. ESW shall place orders with the Supplier in a
manner acceptable to the Supplier and shall pay obligations there under in a
timeframe acceptable to the Supplier.
7. MISCELLANEOUS PROVISIONS.
a) This Agreement supersedes any and all prior agreements of
the Parties, whether oral or written.
b) The Parties agree to execute any and all documents
necessary to carry out the terms and intent of this Supply Agreement.
c) Section headings contained in this Supply Agreement are
included for convenience only and form no part of the agreement between the
Parties.
d) If any provision of this Supply Agreement is or becomes
invalid, illegal, or unenforceable in any jurisdiction, such provision shall be
deemed amended to conform to applicable laws so as to be valid and enforceable
or, if it cannot be so amended to be enforceable or, if it cannot be so amended
without materially altering the intention of the Parties, it shall be stricken
and the remainder of this Supply Agreement shall remain in full force and
effect.
e) Unless specifically disallowed by law, should litigation
arise hereunder, service of process therefore may be obtained through certified
mail, return receipt requested, the Parties hereto waiving any and all rights
they may have to object to the method by which service was perfected.
f) No waiver of any right under this Supply Agreement shall be
deemed effective unless contained in a writing signed by the parties charged
with such waiver, and no waiver of any
2
<PAGE>
right arising from any breach or failure to perform shall be deemed to be a
waiver of any future such right or of any other right arising under this Supply
Agreement.
g) This instrument contains the entire agreement of the
Parties with respect to the subject matter hereof; and the terms and conditions
thereof may not be further modified except by a writing signed by all the
Parties.
h) This agreement, and all transactions contemplated hereby,
shall be governed by, construed and enforced in accordance with the laws of the
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
occurred regardless of whether damages were otherwise as of said time
calculable.
IN WITNESS WHEREOF, the Parties have executed this instrument this 8th
day of December 1999.
eSAFETYWORLD, Inc.
By: /s/ Edward Heil
------------------------------
Its: President
-----------------------------
Ideal Sales
William 0. Thompson
By: /s/ W. O. Thompson
------------------------------
Its: Pres. 12/8/99
-----------------------------
Its:
3
<PAGE>
EXHIBIT A
(List of Products)
1. Private Label Catalog (Price based on the # of catalogs)
2. Number of items-- 1,000 15,000 SKU's
3. Pricing on product to be determined
4. Set-up eSAFETYWORLD with UPS and other common carriers
5. Yearly license fees - $500.00
6. Wholesale & retail price list (To be Determined)
7. Number of major mfg., as wholesaler
8. Number of minor mfg., as wholesaler
9. Line card by mfg., by product
Top Manufacturers:
3M La Crosse Lakeland
Ansell Rainfair
Best Encon
Perfect Fit Mapa
Howard Height Eagle Mfg.
Biosystems Pelican
4
<PAGE>
EXHIBIT 10.16
SL HOLDINGS CORP.
D\B\A E-SAFETYWORLD, INC.
AUGUST 6, 1999 $250,000
8% PROMISSORY NOTE
DUE July 1, 2000
SL HOLDINGS CORP., D\B\A E-SAFETY, INC., a Nevada corporation, (the
"Company"), for value received, hereby promises to pay to Arcadia Mutual Fund,
Inc., 55 Frederick Street, Box CB-13029, Nassau Bahamas. or registered assigns
(the "Holder") on the 1st day of July 2000 (the "Maturity Date"), at the
principal offices of the Company, the principal sum of Two Hundred Fifty
Thousand ($250,000) Dollars in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, and to pay interest on the outstanding principal sum
hereof at eight percent (8%) per annum from the date hereof until the Company's
obligation with respect to the payment of such principal sum shall be discharged
as herein provided. Interest hereunder shall accrue and shall be payable on the
Maturity Date, in like coin or currency to the Holder hereof at the office of
the Company as hereinafter set forth. In the event that for any reason
whatsoever any interest or other consideration payable with respect to this Note
shall be deemed to be usurious by a court of competent jurisdiction under the
laws of the State of New York or the laws of any other state governing the
repayment hereof, then so much of such interest or other consideration as shall
be deemed to be usurious shall be held by the holder as security for the
repayment of the principal amount hereof and shall otherwise be waived.
1. Prepayment
a. The principal amount of this Note may be prepaid by the Company, in whole or
in part, without premium or penalty, at any time, provided, the Company gives
the Holder not less than 10 days prior written notice of such prepayment (which
notice shall set forth the amount and date of such prepayment).
b. The entire principal amount of this Note shall be prepaid within 5 days
following the date that the Company receives gross proceeds of at least
$5,000,000 pursuant to a public debt or equity financing, or a private debt or
equity financing or series of debt or equity financings, resulting in aggregate
gross proceeds to the Company of at least $5,000,000.
c. Upon any prepayment of a portion of the principal amount of this Note, all
accrued, but unpaid, interest on such portion of the principal shall be paid
1
<PAGE>
to the Holder on the date of prepayment.
2. Covenants of Company
a. The Company covenants and agrees that, so long as this Note shall be
outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or upon its income and profits, or
upon any of its property, before the same shall become in default, as well as
all lawful claims for labor, materials and supplies which, if unpaid, might
become a lien or charge upon such properties or any part thereof; provided,
however, that the Company shall not be required to pay and discharge any such
tax, assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings, and the Company shall set
aside on its books adequate reserves with respect to any such tax, assessment,
charge, levy or claim so contested.
(ii) Do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and franchises and comply with
all laws applicable to the Company as its counsel may advise;
(iii) At all times maintain, preserve, protect and keep its property used and
useful in the conduct of its business in good repair, working order and
conditions, and from time to time make all needful and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times;
(iv) At all times keep true and correct books, records and accounts.
3. Events of Default
a. This Note shall become due and payable upon written demand made by the Holder
hereof if one or more of the following events, herein called "events of
default", shall happen and be continuing:
(i) Default in the payment of the principal and accrued interest on this Note,
when and as the same shall become due and payable, whether by acceleration or
otherwise;
2
<PAGE>
(ii) Default in the due observance or performance of any covenant, condition or
agreement on the part of the Company to be observed or performed pursuant to the
terms hereof, if such default shall continue uncured for 30 days after written
notice, specifying such default, shall have been given to the Company by the
Holder; provided, however, that the grace period specified in this Section
3(a)(ii) shall not apply to any other Event of Default specified in this Section
3.
(iii) Entry of a judicial order for the appointment of a receiver, trustee or
liquidator for the Company or its property which order shall not have been
vacated or set aside or otherwise terminated within 120 days or upon the Company
consenting to the entry of such an order;
(iv) Admission in writing of the Company's inability to pay its debts as they
mature;
(v) General assignment by the Company for the benefit of creditors;
(vi) Filing by the Company of a voluntary petition in bankruptcy or a petition
or an answer seeking reorganization, or an arrangement with creditors;
(vii) Entering against the Company of a court order approving a petition filed
against it under the federal bankruptcy laws, which order shall not have been
vacated or set aside or otherwise terminated within 120 days;
b. The Company agrees that notice of the occurrence of any event of default will
be promptly given to the Holder at his or her registered address by certified
mail within five days of such event of default.
c In case any one or more of the events of default specified above shall happen
or be continuing, the Holder may proceed to protect and enforce his or her right
by suit for the specific performance of any covenant or agreement contained in
this Note or in aid of the exercise of any power granted in this Note or may
proceed to enforce the payment of this Note or to enforce any other legal or
equitable rights of such Holder.
4. Miscellaneous
a. The Company may consider and treat the person in whose name this Note shall
be registered as the absolute owner hereof for all purposes whatsoever (whether
or not this Note shall be overdue) and the Company shall not be affected by any
notice to the contrary. Subject to the limitations herein stated, the registered
owner of this Note shall have the right to transfer this Note by assignment,
3
<PAGE>
and the transferee thereof shall, upon his registration as owner of this Note,
become vested with all the powers and rights of the transferor. Registration of
any new owner shall take place upon presentation of this Note to the Company at
its principal offices, together with a duly authenticated assignment. In case of
transfer by operation of law, the transferee agrees to notify the Company of
such transfer and of his address, and to submit appropriate evidence regarding
the transfer so that this Note may be registered in the name of the transferee.
This Note is transferable only on the books of the Company by the Holder hereof,
in person or by attorney, on the surrender hereof, duly endorsed. Communications
sent to any registered owner shall be effective as against all Holders or
transferees of the Note not registered at the time of sending the communication.
b. Payments of interest shall be made as specified above to the registered owner
of this Note. Payment of principal shall be made to the registered owner of this
Note upon presentation on or after maturity. No interest shall be due on this
Note for such period of time that may elapse between the maturity of this Note
and its presentation for payment.
c. Notice of dishonor, protest, presentment and notice of protest are hereby
waived. In the event an action, suit or proceeding is brought to enforce this
Note or to protest the same, the Holder hereof shall be entitled to all costs
and disbursements, including reasonable attorney's fees and costs of collection,
incurred in connection with such action, suit or proceeding.
d. Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Note, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Note, if mutilated, the Company shall execute
and deliver a new Note of like tenor and date. Any such new Note executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Note so lost, stolen, destroyed or mutilated
shall be at any time enforceable by anyone.
e. This Note shall be construed and enforced in accordance with the laws of the
State of New York. Any litigation based thereon, or arising out of, under, or in
connection with, this Note or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Company or Holder shall
be brought and maintained exclusively in the court of the state of New York
without reference to its conflicts of laws rules or principles. The Company and
the Holder hereby expressly and irrevocably submits to the exclusive
jurisdiction of the Federal Courts of the state of New York sitting in the
Southern District for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation.
4
<PAGE>
f. No recourse shall be had for the payment of the principal or interest of this
Note against any incorporator or any past, present or future stockholder,
officer, director or agent of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, or
otherwise; all such liability of the incorporators, stockholders, officers,
directors and agents being waived, released and surrendered by the Holder hereof
by the acceptance of this Note.
g. All notices and other communications hereunder shall be in writing and shall
be deemed given if delivered personally or by facsimile or three days following
being mailed by certified or registered mail, postage prepaid, return-receipt
requested, addressed (1) to the Holder at its address appearing on the books of
the Company, (2) to the Company at P.O. Box 431, Ridge New York 11961,
Attention: Ed Heil); with a copy to Steven Schuster, Esq., McLaughlin & Stern
LLP, 260 Madison Avenue, New York, New York 10016 (facsimile 212-448-0066).
IN WITNESS WHEREOF, SL Holdings Corp., has caused this Note to be signed in
its name by its President on the 6th day of August, 1999.
SL HOLDINGS CORP.
By: /s/ Edward Heil
-------------------------------
EDWARD A. HEIL, PRESIDENT
5
<PAGE>
EXHIBIT 10.17
SL HOLDINGS CORP.
D\B\A E-SAFETYWORLD, INC.
AUGUST 6, 1999 $125,000
8% PROMISSORY NOTE
DUE July 1, 2000
SL HOLDINGS CORP., D\B\A E-SAFETY, INC., a Nevada corporation, (the
"Company"), for value received, hereby promises to pay to Chamberlain Fund, 55
Frederick Street, Box CB-13029, Nassau Bahamas. or registered assigns (the
"Holder") on the 1st day of July 2000 (the "Maturity Date"), at the principal
offices of the Company, the principal sum of One Hundred Twenty-FIve Thousand
($125,000) Dollars in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest on the outstanding principal sum hereof at
eight percent (8%) per annum from the date hereof until the Company's obligation
with respect to the payment of such principal sum shall be discharged as herein
provided. Interest hereunder shall accrue and shall be payable on the Maturity
Date, in like coin or currency to the Holder hereof at the office of the Company
as hereinafter set forth. In the event that for any reason whatsoever any
interest or other consideration payable with respect to this Note shall be
deemed to be usurious by a court of competent jurisdiction under the laws of the
State of New York or the laws of any other state governing the repayment hereof,
then so much of such interest or other consideration as shall be deemed to be
usurious shall be held by the holder as security for the repayment of the
principal amount hereof and shall otherwise be waived.
1. Prepayment
a. The principal amount of this Note may be prepaid by the Company, in
whole or in part, without premium or penalty, at any time, provided, the Company
gives the Holder not less than 10 days prior written notice of such prepayment
(which notice shall set forth the amount and date of such prepayment).
b. The entire principal amount of this Note shall be prepaid within 5
days following the date that the Company receives gross proceeds of at least
$5,000,000 pursuant to a public debt or equity financing, or a private debt or
equity financing or series of debt or equity financings, resulting in aggregate
gross proceeds to the Company of at least $5,000,000.
c. Upon any prepayment of a portion of the principal amount of this
Note, all accrued, but unpaid, interest on such portion of the principal shall
be paid
<PAGE>
to the Holder on the date of prepayment.
2. Covenants of Company
a. The Company covenants and agrees that, so long as this Note shall
be outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its property, before the same shall become in default,
as well as all lawful claims for labor, materials and supplies which, if unpaid,
might become a lien or charge upon such properties or any part thereof;
provided, however, that the Company shall not be required to pay and discharge
any such tax, assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings, and the Company
shall set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim so contested.
(ii) Do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and franchises and
comply with all laws applicable to the Company as its counsel may advise;
(iii) At all times maintain, preserve, protect and keep its property
used and useful in the conduct of its business in good repair, working order and
conditions, and from time to time make all needful and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times;
(iv) At all times keep true and correct books, records and accounts.
3. Events of Default
a. This Note shall become due and payable upon written demand made by
the Holder hereof if one or more of the following events, herein called "events
of default", shall happen and be continuing:
(i) Default in the payment of the principal and accrued interest on
this Note, when and as the same shall become due and payable, whether by
acceleration or otherwise;
2
<PAGE>
(ii) Default in the due observance or performance of any covenant,
condition or agreement on the part of the Company to be observed or performed
pursuant to the terms hereof, if such default shall continue uncured for 30 days
after written notice, specifying such default, shall have been given to the
Company by the Holder; provided, however, that the grace period specified in
this Section 3(a)(ii) shall not apply to any other Event of Default specified in
this Section 3.
(iii) Entry of a judicial order for the appointment of a receiver,
trustee or liquidator for the Company or its property which order shall not have
been vacated or set aside or otherwise terminated within 120 days or upon the
Company consenting to the entry of such an order;
(iv) Admission in writing of the Company's inability to pay its
debts as they mature;
(v) General assignment by the Company for the benefit of creditors;
(vi) Filing by the Company of a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization, or an arrangement with
creditors;
(vii) Entering against the Company of a court order approving a
petition filed against it under the federal bankruptcy laws, which order shall
not have been vacated or set aside or otherwise terminated within 120 days;
b. The Company agrees that notice of the occurrence of any event of
default will be promptly given to the Holder at his or her registered address by
certified mail within five days of such event of default.
c. In case any one or more of the events of default specified above
shall happen or be continuing, the Holder may proceed to protect and enforce his
or her right by suit for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable rights of such Holder.
4. Miscellaneous
a. The Company may consider and treat the person in whose name this
Note shall be registered as the absolute owner hereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company shall not
be affected by any notice to the contrary. Subject to the limitations herein
stated, the registered owner of this Note shall have the right to transfer this
Note by assignment,
3
<PAGE>
and the transferee thereof shall, upon his registration as owner of this Note,
become vested with all the powers and rights of the transferor. Registration of
any new owner shall take place upon presentation of this Note to the Company at
its principal offices, together with a duly authenticated assignment. In case of
transfer by operation of law, the transferee agrees to notify the Company of
such transfer and of his address, and to submit appropriate evidence regarding
the transfer so that this Note may be registered in the name of the transferee.
This Note is transferable only on the books of the Company by the Holder hereof,
in person or by attorney, on the surrender hereof, duly endorsed. Communications
sent to any registered owner shall be effective as against all Holders or
transferees of the Note not registered at the time of sending the communication.
b. Payments of interest shall be made as specified above to the
registered owner of this Note. Payment of principal shall be made to the
registered owner of this Note upon presentation on or after maturity. No
interest shall be due on this Note for such period of time that may elapse
between the maturity of this Note and its presentation for payment.
c. Notice of dishonor, protest, presentment and notice of protest are
hereby waived. In the event an action, suit or proceeding is brought to enforce
this Note or to protest the same, the Holder hereof shall be entitled to all
costs and disbursements, including reasonable attorney's fees and costs of
collection, incurred in connection with such action, suit or proceeding.
d. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Note, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Note, if mutilated, the Company shall
execute and deliver a new Note of like tenor and date. Any such new Note
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Note so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
e. This Note shall be construed and enforced in accordance with the
laws of the State of New York. Any litigation based thereon, or arising out of,
under, or in connection with, this Note or any course of conduct, course of
dealing, statements (whether oral or written) or actions of the Company or
Holder shall be brought and maintained exclusively in the court of the state of
New York without reference to its conflicts of laws rules or principles. The
Company and the Holder hereby expressly and irrevocably submits to the exclusive
jurisdiction of the Federal Courts of the state of New York sitting in the
Southern District for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation.
4
<PAGE>
f. No recourse shall be had for the payment of the principal or
interest of this Note against any incorporator or any past, present or future
stockholder, officer, director or agent of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, or otherwise; all such liability of the incorporators,
stockholders, officers, directors and agents being waived, released and
surrendered by the Holder hereof by the acceptance of this Note.
g. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by facsimile or three days
following being mailed by certified or registered mail, postage prepaid,
return-receipt requested, addressed (1) to the Holder at its address appearing
on the books of the Company, (2) to the Company at P.O. Box 431, Ridge New York
11961, Attention: Ed Heil); with a copy to Steven Schuster, Esq., McLaughlin &
Stern LLP, 260 Madison Avenue, New York, New York 10016 (facsimile
212-448-0066).
IN WITNESS WHEREOF, SL Holdings Corp., has caused this Note to be signed in
its name by its President on the 6th day of August, 1999.
SL HOLDINGS CORP.
By: /s/ Edward Heil
---------------------------------
EDWARD A. HEIL, PRESIDENT
5
<PAGE>
EXHIBIT 10.18
Agreement dated as of September 29, 1999, between eSAFETYWORLD, Inc. and
Laminaire Corporation.
This letter amends the Asset Purchase Agreement dated August 20, 1999 in the
following manner:
o eSAFETYWORLD, Inc. agrees to guarantee the Laminaire Corporation
indebtedness to Alma, Inc., Kimberly Clark, and The Texwipe Company
for the amount not to exceed $225,000. Any agreement made with respect
to these guarantees will be accounted for in the manner set forth in
the note agreements between Laminaire Corporation and eSAFETYWORLD,
Inc. dated August 20, 1999.
o There will be no management agreement between Laminaire Corporation
and eSAFETYWORLD, Inc.
o In recognition of Laminaire Corporation's current financial condition,
no covenant not to compete will be executed.
This is agreed to by:
Laminaire Corporation
/s/ Peter Danielle
- ---------------------------------
Peter Danielle
CFO
eSAFETYWORLD, Inc.
/s/Edward Heil
- ---------------------------------
Edward A. Heil
CEO
<PAGE>
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 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 prospects 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
New York, New York
December 27, 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> 4-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> OCT-1-1999
<CASH> 118,000
<SECURITIES> 0
<RECEIVABLES> 158,775
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 378,775
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,814,075
<CURRENT-LIABILITIES> 686,171
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> 708,000
<TOTAL-LIABILITY-AND-EQUITY> 1,814,075
<SALES> 355,969
<TOTAL-REVENUES> 355,969
<CGS> 213,110
<TOTAL-COSTS> 79,043
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 63,816
<INCOME-TAX> 19,145
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,671
<EPS-BASIC> .02
<EPS-DILUTED> 0
</TABLE>
