<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1996
REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
ALL-COMM MEDIA CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 7389
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL 88-0085608
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
(I.R.S. EMPLOYER
</TABLE>
------------------------
400 CORPORATE POINTE, SUITE 780
CULVER CITY, CALIFORNIA 90230
(310) 342-2800
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
MR. BARRY PETERS
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
ALL-COMM MEDIA CORPORATION
400 CORPORATE POINTE, SUITE 780
CULVER CITY, CALIFORNIA 90230
(310) 342-2800
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT A. ZUCCARO, ESQ. IRWIN M. ROSENTHAL, ESQ.
JONES, DAY, REAVIS & POGUE RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
599 LEXINGTON AVENUE 30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10112
(212) 326-3939 (212) 698-7700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the 'Securities Act') check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
NUMBER TO OFFERING PRICE PROPOSED MAXIMUM AMOUNT OF
BE PER SHARE OR AGGREGATE REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED WARRANT(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share(2)........................ 1,725,000 $ 5 1/32 $ 8,678,907 $2,630
Representative's Warrants(3)..................................... 150,000 $ -- $ -- $- 0 -(4)
Common Stock, par value $.01 per share(5)(6)..................... 150,000 $ 5 1/32 $ 754,688 $ 229
Common Stock, par value $.01 per share(7)........................ 1,344,468 $ 5 1/32 $ 6,764,355 $2,050
---------
Total Registration Fee....................................... $4,909
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act.
(2) Includes 225,000 shares subject to the Underwriters' over-allotment options
granted by the Company and certain selling stockholders.
(3) To be issued to LT Lawrence & Co., Inc. (the 'Representative').
(4) Pursuant to Rule 457(g), no registration fee is payable.
(5) Represents shares issuable upon exercise of the Representative's Warrants.
(6) Pursuant to Rule 416, the Company is also registering such additional shares
as may become issuable to the holders of the Representative's Warrants
pursuant to the anti-dilution provisions thereof.
(7) Represents 94,468 shares owned outright and 1,250,000 shares issuable upon
conversion of the Company's Class B Convertible Preferred Stock, par value
$.01 per share, to be sold by certain selling stockholders on a delayed
basis, and not as part of the underwritten offering.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 17, 1996
PROSPECTUS
ALL-COMM MEDIA CORPORATION
1,500,000 SHARES OF
COMMON STOCK
AS DESCRIBED BELOW, THE OFFERING OF AN ADDITIONAL 1,344,468 SHARES OF
COMMON STOCK IS BEING REGISTERED BY CERTAIN STOCKHOLDERS OF THE COMPANY (THE
'DELAYED SELLING STOCKHOLDERS'); HOWEVER SUCH SHARES OF COMMON STOCK WILL BE
OFFERED ON A DELAYED BASIS, AND NOT AS PART OF THE UNDERWRITTEN OFFERING.
------------------------
This Prospectus relates to an offering (the 'Offering') of 1,500,000 shares
of common stock, par value $.01 per share (the 'Common Stock'), of which
1,400,000 shares are being offered by All-Comm Media Corporation ('All-Comm' or
the 'Company') and 100,000 shares are being offered by certain stockholders of
the Company (the 'Selling Stockholders'). The Company will not receive any of
the proceeds from the sale of the Common Stock by the Selling Stockholders. See
'Principal and Selling Stockholders.' The Common Stock is quoted on The Nasdaq
SmallCap MarketSM under the symbol 'ALCM.' On October 16, 1996 the last sale
price of the Company's Common Stock, as reported by The Nasdaq SmallCap
MarketSM, was $5 1/32 per share. See 'Price Range of Common Stock.'
This Prospectus also relates to the sale of 1,344,468 shares of Common
Stock (the 'Delayed Stock') by the Delayed Selling Stockholders of which 94,468
shares are currently owned by certain of the Delayed Selling Stockholders and
1,250,000 shares are issuable upon conversion of shares of the Company's Series
B Convertible Preferred Stock, par value $.01 per share (the 'Series B Preferred
Stock'). The Delayed Stock will be offered on a delayed basis and not as part of
the Offering. The Company will not receive any proceeds from the sale of the
Delayed Stock by the Delayed Selling Stockholders. See 'Delayed Selling
Stockholders and Plan of Distribution.'
SEE 'RISK FACTORS' BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
Total(3)....................... $ $ $ $
</TABLE>
(1) Does not include (a) warrants (the 'Representative's Warrants') to be issued
to LT Lawrence & Co., Inc. (the 'Representative'), in its individual
capacity and not as representative of the underwriters (the 'Underwriters')
to purchase 150,000 shares of Common Stock at an exercise price per share
equal to 120% of the initial public offering price per share and (b) a
non-accountable expense allowance payable to the Representative equal to 3%
of the gross proceeds of the Offering. The Representative's Warrants are
exercisable for a period of four years commencing one year from the date of
this Prospectus. The Representative may allow to certain dealers, and such
dealers may reallow, concessions and a portion of the Representative's
Warrants. The Company has agreed to indemnify the Underwriters against, or
contribute to losses arising out of, certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
'Underwriting.'
(2) Before deducting expenses payable by the Company estimated to be $ .
(3) The Company, the Selling Stockholders and certain other stockholders (the
'Over-Allotment Selling Stockholders') have granted to the Underwriters
options, exercisable within 45 days of the date hereof, to purchase, in the
aggregate, up to 225,000 additional shares of Common Stock, upon the same
terms and conditions as the shares of Common Stock offered hereby, solely to
cover over-allotments, if any. If the Underwriters exercise the
over-allotment options in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company, Proceeds to Selling
Stockholders and the proceeds to the Over-Allotment Selling Stockholders
will be $ , $ , $ , $ and $ , respectively. The
Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders and the Over-Allotment Selling Stockholders. See
'Principal and Selling Stockholders' and 'Underwriting.'
------------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if issued to and accepted by
them, subject to the approval of certain legal matters by counsel for the
Underwriters and to certain other conditions. It is expected that delivery of
the shares to the Underwriters will be made against payment therefor on or about
, 1996, at the office of LT Lawrence & Co., Inc., 3 New York
Plaza, New York, New York 10004.
------------------------
LT LAWRENCE & CO., INC.
, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
[Photographs]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK ON
THE OVER-THE-COUNTER MARKET OR OTHERWISE AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information, including the financial statements and the notes thereto,
included elsewhere in this Prospectus. All-Comm conducts its business through
two wholly-owned operating subsidiaries: Stephen Dunn & Associates, Inc.
('SD&A') and Metro Services Group, Inc. ('Metro'). SD&A was acquired by Alliance
Media Corporation ('Alliance'), which was simultaneously acquired by the
Company, in April 1995. Metro was acquired by the Company in October 1996.
References to 'All-Comm' and the 'Company' include All-Comm Media Corporation
(and predecessor entities) and its consolidated subsidiaries, Alliance, SD&A and
Metro, unless the context otherwise requires. Unless indicated otherwise, the
information in this Prospectus assumes that the Underwriters' over-allotment
options will not be exercised. The Company's fiscal year ends on June 30 of each
year. All share and per share information has been adjusted to reflect a
one-for-four reverse stock split of the Common Stock effected August 22, 1995.
Certain capitalized terms used in the Prospectus Summary are defined elsewhere
in this Prospectus. Certain totals contained herein may not add due to rounding
adjustments.
THE COMPANY
All-Comm provides database management services, custom
telemarketing/telefundraising services and other direct marketing services to a
diverse group of approximately 600 clients located throughout the United States.
These services include customer and market data analysis, database creation and
analysis, data warehousing, merge/purge, predictive behavioral modeling, list
processing, brokerage and management, data enhancement, other direct marketing
information services and custom outbound telemarketing/telefundraising services.
Through this combination of services, the Company assists its clients in
defining target markets and uses sophisticated data analysis to support and
track the results of clients' direct marketing campaigns. The Company believes
its expertise in applying these direct marketing tools increases the
productivity of its clients' marketing expenditures.
The Company's value-added premium services have enabled it to become a
leading provider of database management services, custom
telemarketing/telefundraising services and other direct marketing services to
performing arts and cultural institutions in the United States. The Company's
clients include Lincoln Center for the Performing Arts, Kennedy Center for the
Performing Arts, Art Institute of Chicago, Dallas Symphony, Carnegie Hall, New
York Philharmonic, Los Angeles Philharmonic, Boston Symphony, Atlanta Opera,
Detroit Symphony, New York University, UCLA and numerous public broadcasting
stations. In addition, the Company renders database management and direct
marketing services to such commercial clients as The Shubert Organization, Crain
Communications, The CIT Group, 3Com Corporation, Mitsubishi Electronics and
UNOCAL. Since January 1996, the Company has begun providing services to new
clients including Seattle Art Museum, Walt Disney Company, Avery Dennison,
Countrywide Insurance and Nomura Asset Capital Corporation. Giving effect to the
Company's acquisition of Metro, on a pro forma basis, revenues for the Company's
fiscal year ended June 30, 1996 were $24.0 million.
The Company utilizes industry specific knowledge and proprietary database
software applications developed at its data center in New York City to produce
customized data management and direct marketing solutions for its clients. The
Company's custom telemarketing/telefundraising services are conducted both
on-site at client-provided facilities and also at the Company's calling center
in Berkeley, California. By providing these services, the Company seeks to
become an integral part of its clients' marketing programs, which the Company
believes fosters long-term client relationships and provides opportunities for
recurring revenues and business growth.
All-Comm's objective is to further capitalize on its competitive strengths
to become a leading provider of value-added premium services beyond the
performing arts and cultural markets. To achieve this goal, the Company plans to
(i) increase the range of services provided, through acquisitions, strategic
alliances and internal growth, to include or expand services such as direct
mail, print and lettershop services, media services and creation of content for
electronic and interactive media including the Internet and other on-line
services, and (ii) utilize its technological skills and depth of experience in
direct marketing services in order to increase its penetration of targeted
industries. These targeted industries include publishing, live entertainment and
events marketing, public broadcasting, financial
3
<PAGE>
<PAGE>
services (including credit card, home mortgage and home equity services),
education, travel and leisure and healthcare.
The Company is considering several acquisitions in order to enlarge its
core competencies and enable it to enter new markets and increase its potential
for cross-selling, although no agreement, definitive or otherwise, with respect
to any of such potential acquisitions has been reached. No assurance can be
given that the Company will complete either the acquisitions currently under
consideration or any other acquisitions or that any acquisition, if completed,
will be successful.
INDUSTRY OVERVIEW
The use of direct marketing by businesses to target and communicate with
customers has increased over the last few years due in part to the relative cost
efficiency of direct marketing compared to mass marketing methods, as well as
the rapid development of more powerful and more cost-effective information
technology and data capture capabilities. According to the Direct Marketing
Association (the 'DMA'), expenditures for direct marketing services in 1995 were
approximately $134.0 billion, the largest component of which, $54.1 billion, was
attributable to telemarketing. The DMA has estimated that annual telemarketing
expenditures may grow to $78.9 billion by the year 2000. According to other
industry sources, total expenditures for database management services in the
United States, including services used by direct marketing and other industries,
were estimated to have been $3.2 billion in 1993 and are projected to grow at a
compound annual rate of 29% through 1998.
The direct marketing industry is extremely fragmented. According to
industry sources, there are over 11,000 direct marketing service and database
service businesses in the United States. The Company believes that most of such
businesses are small, specialized companies which offer limited services and/or
limited expertise and industry specialization. However, industry consolidation
has increased in the last few years resulting in a greater number of large
companies providing services similar to those provided by the Company. The
Company believes that much of this consolidation is due to: (i) the economies of
scale expected to be obtained by direct marketing service providers in hardware,
software and other marketing resources; (ii) the objective of direct marketing
service providers to cross-sell services; and (iii) the growing need to
coordinate various components of direct marketing and media programs within a
single, reliable environment. The Company believes these trends are likely to
continue due in part to client demand for more cost-effective service to perform
increasingly complex functions that support such marketing and media programs.
The Company believes that more businesses will seek to utilize providers of
marketing information systems and data analysis, enhancement and management
services, such as the Company, to identify customer attributes and behaviors, in
order to apply direct marketing methodologies to a wider range of marketing
mediums.
STRATEGY
All-Comm's strategy to enhance its position as a value-added premium
provider of database management, custom telemarketing/telefundraising services
and other direct marketing services is to:
Increase revenues by expanding the range of services offered and by
cross-selling;
Deepen market penetration in new industries and market segments as well as
those currently served by the Company;
Further develop existing and create new proprietary database software and
database management applications;
Increase capacity for telemarketing/telefundraising services and enhance
on-site data and calling systems; and
Pursue strategic acquisitions, joint ventures and marketing alliances to
expand services offered and industries served.
------------------------
The Company's principal executive offices are located at 400 Corporate
Pointe, Suite 780, Culver City, California 90230 and its telephone number is
(310) 342-2800.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company................ 1,400,000 shares(1)
Common Stock Offered by the Selling Stockholders... 100,000 shares(1)
Total Common Stock Offered Pursuant to the
Offering.................................... 1,500,000 shares(1)
Common Stock Offered by the Delayed Selling
Stockholders..................................... This Prospectus also relates to the offer and sale of
1,344,468 shares of Common Stock by the Delayed Selling
Stockholders. See 'Delayed Selling Stockholders and Plan of
Distribution.'(2)
Common Stock to be Outstanding Following the
Offering......................................... 6,505,407 shares(1)(3)
Use of Proceeds.................................... Of the estimated $6.2 million net proceeds of the Offering
to the Company, approximately $4.0 million will be applied
to expand the Company's business by investing in technology,
technical support, sales and marketing personnel and for
advertising and promoting the Company's services. In
addition, approximately $1.0 million of such proceeds may be
used to repay indebtedness related to the Metro acquisition.
The balance of such proceeds will be used for general
corporate purposes, including possible future acquisitions.
See 'Use of Proceeds.'
Dividend Policy.................................... The Company intends to retain future earnings, if any, to
finance the growth and development of its business and
therefore does not anticipate paying cash dividends on the
Common Stock in the foreseeable future. See 'Dividend
Policy.'
Listing............................................ The Common Stock is quoted and traded on The Nasdaq SmallCap
MarketSM under the symbol 'ALCM.'
Risk Factors....................................... See 'Risk Factors' beginning on page 9 for a discussion of
certain material factors that should be considered by
prospective purchasers of the Common Stock.
</TABLE>
- ------------
(1) Does not include up to 225,000 shares of Common Stock that may be sold by
the Company, certain of the Selling Stockholders and certain of the
Over-Allotment Selling Shareholders pursuant to the Underwriters'
over-allotment options. See 'Principal and Selling Stockholders' and
'Underwriting.'
(2) 94,468 of these shares of Common Stock are currently owned outright by
certain of the Delayed Selling Stockholders and 1,250,000 of these shares
are issuable upon conversion of shares of the Series B Preferred Stock by
certain of the Delayed Selling Stockholders.
(3) Does not include up to 12,025,092 shares of Common Stock issuable upon
conversion or exercise of certain securities or other contractual rights, as
follows: (i) 6,200 shares of the Series B Preferred Stock, which are
currently convertible into 2,480,000 shares of Common Stock; (ii) 2,000
shares of the Company's Series C Convertible Preferred Stock, par value $.01
per share (the 'Series C Preferred Stock'), which are currently convertible
into 166,666 shares of Common Stock; (iii) warrants issued to holders of
Series B Preferred Stock, which are currently exercisable for 3,100,000
shares of Common Stock; (iv) warrants issued to holders of Series C
Preferred Stock, which are currently exercisable for 3,000,000 shares of
Common Stock; (v) warrants to be issued upon consummation of the Offering to
the Representative, exercisable for 150,000 shares of Common Stock; (vi)
warrants to be issued upon consummation of the Offering to certain
stockholders of the Company as consideration for their agreement to certain
lock-up arrangements, exercisable for an aggregate of up to 1,192,913 shares
of Common Stock, depending on the extent to
5
<PAGE>
<PAGE>
which the Underwriters' over-allotment options are exercised, if at
all -- see 'Shares Eligible for Future Sale' and 'Underwriting;' (vii) all
other outstanding options, warrants and other contractual rights, all of
which are currently exercisable for 1,570,135 shares of Common Stock in the
aggregate; (viii) the promissory notes issued to the former shareholders of
Metro in connection with the Company's acquisition of Metro, which are
currently convertible into 185,874 shares of Common Stock; and (ix) 179,504
shares of Common Stock reserved for issuance but not yet issued under the
Company's 1991 Stock Option Plan. See 'Management -- Stock Option Plan,'
'Description of Capital Stock' and 'Underwriting.' Although no assurance can
be given that any of the foregoing options, warrants or other contractual
rights will be exercised, if all of such options, warrants and other
contractual rights having exercise prices at or below the assumed public
offering price of $5 3/8 per share were exercised, the aggregate proceeds to
the Company resulting therefrom would be approximately $28.7 to $28.8
million, depending on the extent to which the Underwriters' over-allotment
options are exercised. The Company expects that it would use such proceeds,
if any, for general corporate purposes, including possible future
acquisitions.
6
<PAGE>
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth (i) summary historical financial data of the
Company as of June 30, 1996, in the case of balance sheet data, and for the
years ended June 30, 1995 and 1996, in the case of operating data, and (ii)
unaudited summary pro forma as adjusted financial data of the Company as of and
for the year ended June 30, 1996. The summary historical financial data of the
Company as of June 30, 1996, in the case of balance sheet data, and for the
years ended June 30, 1995 and 1996, in the case of operating data, have been
derived from the Company's audited consolidated financial statements included
elsewhere in this Prospectus. The summary unaudited pro forma as adjusted
financial data give effect to the Offering and the acquisition of Metro as if
the Offering and such acquisition had occurred as of June 30, 1996, in the case
of balance sheet data, and as of July 1, 1995, in the case of operating data.
The unaudited summary pro forma as adjusted financial information is for
illustrative purposes only and is not necessarily indicative of what the actual
results of operations and financial position of the Company would have been as
of and for the periods indicated, nor does it purport to represent the Company's
future financial position and results of operations. The summary financial
information should be read in conjunction with 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the financial
statements and notes thereto included elsewhere in this Prospectus. See 'Index
to Financial Statements.'
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,(1)
---------------------------------
HISTORICAL PRO FORMA
------------------ AS ADJUSTED
1995(2) 1996 1996
------- ------- -----------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATING DATA:(3)
Revenues.................................................................... $ 3,631 $15,889 $23,983
Salaries and benefits....................................................... $ 3,139 $12,712 $14,690
Direct costs................................................................ $ 102 $ 807 $ 5,357
Selling, general and administrative......................................... $ 1,121 $ 1,843 $ 2,804
Amortization of intangible assets........................................... $ 65 $ 362 $ 770
Total operating costs and expenses.......................................... $ 4,887 $16,350 $24,429
Loss from operations........................................................ $(1,256) $ (460) $ (446)
Total other income (expense)................................................ $ 1,200 $ (475) $ (581)
Loss from continuing operations before income taxes......................... $ (56) $ (936) $(1,027)
Net income (loss)........................................................... $ 110 $(1,077) $(1,197)
Net income (loss) attributable to common stockholders....................... $ 110 $(1,094) $(1,215)
Weighted average common and common equivalent shares outstanding(4)......... 1,807,540 3,068,278 6,282,278
Net income (loss) per common share(5)....................................... $0.06 ($0.36) ($0.19)
----- ----- -----
----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996(1)
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:(3)
Cash and cash equivalents................................................................ $ 1,393 $ 7,581
Working capital.......................................................................... $ 1,651 $ 7,592
Intangible assets at cost, net........................................................... $ 7,851 $16,187
Total assets............................................................................. $13,301 $29,391
Long-term obligations to related parties less current portion(6)......................... $ 1,517 $ 2,437
Total stockholders' equity............................................................... $ 8,251 $21,707
</TABLE>
(footnotes on next page)
7
<PAGE>
<PAGE>
(footnotes from previous page)
- ------------
(1) Each of SD&A and Metro had a fiscal year ending December 31 prior to its
acquisition by the Company.
(2) Reflects operations of Alliance and SD&A for the period beginning with the
acquisition by the Company of Alliance on April 25, 1995.
(3) See 'Management's Discussion and Analysis of Financial Condition and Results
of Operations' for discussion of businesses discontinued and acquired in
fiscal 1995 and 1996.
(4) Pro forma as adjusted data includes 1,814,000 shares of Common Stock issued
to the former shareholders of Metro in connection with the Company's
acquisition of Metro and 1,400,000 shares being sold in the Offering by the
Company, but does not include up to 12,025,092 shares of Common Stock
issuable upon conversion or exercise of certain securities or other
contractual rights as described in footnote (3) under 'Prospectus
Summary -- The Offering.'
(5) Primary and fully diluted income (loss) per common share are the same in all
fiscal years presented. See Note 2 of Notes to Consolidated Financial
Statements of All-Comm.
(6) Pro forma as adjusted data includes $1.0 million aggregate face amount of
promissory notes issued by the Company to the former shareholders of Metro,
discounted to $0.9 million to reflect an estimated effective interest rate
of 10%, which is in excess of the stated rate of 6%, in connection with the
Company's acquisition of Metro.
FUTURE NONRECURRING CHARGE TO EARNINGS
The Company will incur a nonrecurring non-cash charge estimated to be $0.5
million in the fiscal quarter in which the Offering is consummated as a result
of the issuance by the Company of warrants exercisable for an aggregate of up to
1,192,913 shares of Common Stock to certain stockholders of the Company as
consideration for the agreement of such stockholders to certain lock-up
arrangements. See 'Shares Eligible For Future Sale.'
Although the nonrecurring charge to be taken by the Company will increase
the Company's accumulated deficit, such increase will be offset by a
corresponding increase in additional paid-in-capital. Accordingly, total
stockholders' equity will be unchanged. The recording of such charge will have a
material adverse effect on the Company's results of operations, and may result
in a loss for the fiscal quarter in which the Offering is consummated. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Future Nonrecurring Charge to Earnings.'
8
<PAGE>
<PAGE>
RISK FACTORS
LIMITED BUSINESS HISTORY; ABSENCE OF COMBINED OPERATING HISTORY; LACK OF
CONSOLIDATED PROFITABLE OPERATIONS; FUTURE NONRECURRING CHARGE. All-Comm may be
considered to be a new company without an operating history because of: (i) the
recent date of the acquisitions of All-Comm's operating subsidiaries, Metro and
SD&A; (ii) the change in All-Comm's management and its board of directors (the
'Board of Directors' and each member thereof individually a 'Director') arising
out of the Company's acquisition of Alliance on April 25, 1995; and (iii) the
related sale in March 1995 of the Company's then principal operating business,
Sports-Tech International, Inc. ('STI'). Accordingly, there can be no assurance
that the Company will be able to successfully manage or integrate Metro and SD&A
and their separate operations, employees and management or that the Company's
overall operations will be successful. For fiscal 1995 and 1996, the Company had
losses from operations of $1.3 million and $0.5 million, respectively.
The Company will incur a nonrecurring non-cash charge estimated to be $0.5
million in the fiscal quarter in which the Offering is consummated as a result
of the issuance by the Company of warrants exercisable for an aggregate of up to
1,192,913 shares of Common Stock to certain stockholders of the Company as
consideration for the agreement of such stockholders to certain lock-up
arrangements. See 'Shares Eligible For Future Sale.' The recording of such
charge will have a material adverse effect on the Company's result of
operations, and may result in a loss for the fiscal quarter in which the
Offering is consummated. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Future Non-recurring Charge to Earnings.'
RISKS ASSOCIATED WITH ACQUISITION AND GROWTH STRATEGY. As a key component
of its growth strategy, the Company has pursued and intends to continue to
pursue acquisitions of companies that provide direct marketing, interactive and
other media services. The Company acquired SD&A in April 1995 and Metro in
October 1996, for a total of approximately $15.0 million (not including any
earn-out or other contingent payments that may be payable after the date of this
Prospectus in connection therewith), and seeks to acquire additional companies.
Execution of its growth strategy requires the Company's management to, among
other things: (i) identify new industries and market segments in which the
Company can successfully compete; (ii) identify acquisition candidates who are
willing to be acquired at prices acceptable to the Company; (iii) consummate
identified acquisitions; and (iv) obtain financing for future acquisitions.
Certain risks are inherent in an acquisition strategy, such as dilution of
outstanding equity securities, increased leverage and debt service requirements
and the difficulty in combining different company cultures and facilities, any
of which could materially adversely affect the Company's operating results or
the market price of the Common Stock prevailing from time to time. The success
of any completed acquisition will depend in part on the Company's ability to
effectively integrate the acquired business, which integration may involve
unforeseen difficulties and may require a disproportionate amount of
management's attention and the Company's financial and other resources.
The Company is currently considering several acquisitions in order to
enlarge its core competencies and enable it to enter new industries and market
segments and increase its potential for cross-selling, although no agreement,
definitive or otherwise, with respect to any of such potential acquisitions has
been reached. From time to time the Company has, and in the future may continue
to, enter into negotiations with respect to potential acquisitions, some of
which have resulted or may result in preliminary agreements. In the course of
the Company's negotiations and/or due diligence, these negotiations and/or
preliminary agreements may be abandoned or terminated. No assurance can be given
that the Company will complete the acquisitions currently under consideration,
that additional suitable acquisition candidates will be identified, that such
future acquisitions will be financed and made on acceptable terms, or that
future acquisitions, if completed, will be successful. In March 1996, the
Company's agreement to acquire Bullseye Database Marketing, Inc. was terminated
and, in February 1996, the Company abandoned its negotiations to acquire Forms
Direct, Inc.
The Company's business has changed significantly since the Company's
acquisitions of Alliance and SD&A, which has placed demands on the Company's
administrative, operational and financial resources. Any continued growth of the
Company's client base and its services could place an additional strain on its
capacity, management and operations. The Company's future performance and
profitability will depend in part on its ability to successfully implement
improved financial and management systems,
9
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to add capacity as and when needed and to hire qualified personnel to respond to
changes in its business. The failure to implement such systems, add any such
capacity or hire such qualified personnel may have a material adverse effect on
the Company's business, financial condition and results of operations. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE. Although the
Common Stock is quoted on The Nasdaq SmallCap MarketSM, at times the Common
Stock has been and may be thinly traded. Such quotation does not provide any
assurance that an active public market for the Common Stock will develop or be
sustained. If an active public market does not develop or is not sustained, the
market price and liquidity of the Common Stock may be adversely affected. In
addition, the stock market in recent years has experienced extreme price and
volume fluctuations that often have been unrelated or disproportionate to the
operating performance of companies. These fluctuations as well as general
economic and market conditions may adversely affect the market price of the
Common Stock prevailing from time to time.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the public market, or the perception that such sales could occur, could
adversely affect prevailing market prices of the Common Stock. Immediately
following the Offering, the Company will have 6,505,407 shares of Common Stock
outstanding. At such time, up to an additional 12,025,092 shares of Common Stock
will be issuable upon the conversion or exercise of outstanding securities or
other contractual rights, all of which are currently exercisable or convertible.
Of the Common Stock outstanding immediately following the Offering,
3,424,529 shares will be freely tradeable without restriction under the
Securities Act of 1933, as amended (the 'Securities Act'), or will be eligible
for sale in the public market without regard to the availability of current
public information, volume limitations, manner of sale restrictions or notice
requirement under Rule 144(k) except for any such shares held by or purchased
from persons deemed to be 'affiliates' of the Company which are subject to
certain resale limitations pursuant to Rule 144 under the Securities Act. The
remaining 3,080,878 shares of Common Stock outstanding (the 'Restricted Shares')
will be 'restricted securities' within the meaning of Rule 144. As of April 25,
1997, approximately 935,532 Restricted Shares may become eligible for sale
pursuant to Rule 144, or continue to be eligible for sale under other exemptions
from registration, under the Securities Act.
Holders of an aggregate of up to 11,562,309 shares of Common Stock,
consisting of up to 2,431,280 Restricted Shares outstanding immediately
following the Offering and up to 9,131,029 Restricted Shares issuable upon the
conversion or exercise of other securities or other contractual rights then
outstanding and then convertible or exercisable, in each case depending on the
extent to which the Underwriters' over-allotment options are exercised, if at
all, will have demand and/or piggyback rights to have such Restricted Shares
registered under the Securities Act pursuant to various registration rights
agreements with the Company. The Company, its Directors and officers and certain
of its stockholders and holders of options, warrants, conversion or contractual
rights to acquire Common Stock, who will hold in the aggregate up to 14,142,237
Restricted Shares outright or issuable upon exercise of such rights, depending
on the extent to which the Underwriters' over-allotment options are exercised,
if at all, have agreed to certain lock-up arrangements. The Representative may
from time to time in its sole discretion release some or all of the stockholders
who have agreed to such lock-up arrangements from the restrictions thereof. See
'Shares Eligible for Future Sale.'
No prediction can be made as to the effect, if any, that future sales of
additional Common Stock or the availability of such shares for sale, either
pursuant to exercised registration rights or under Rule 144, will have on the
market price of the Common Stock prevailing from time to time. The possibility
that substantial amounts of Common Stock may be sold in the public market may
adversely affect the market price of the Common Stock prevailing from time to
time and could impair the ability of the Company to raise capital through the
sale of its equity securities.
POSSIBLE NEED FOR ADDITIONAL FINANCING. In addition to the management
challenges presented by the continued implementation of the Company's growth
strategy, future growth will require significant capital. The Company's
acquisition of SD&A was financed with seller financing and the Company's
acquisition of Metro was financed with both seller financing and equity. No
assurance can be given that
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the Company will be able to finance possible future acquisitions on those or any
other terms. Although the Company currently estimates that the net proceeds of
the Offering, together with cash generated from operations, will be sufficient
to finance its current operations and planned capital expenditure requirements
through fiscal 1998, there can be no assurance that the Company will not require
additional capital at an earlier date, especially in light of the Company's
acquisition program. The Company may, from time to time, seek additional funding
through public or private financing, including debt or equity financing. There
can be no assurance that adequate funding will be available as needed or, if
available, on terms acceptable to the Company. If additional funds are raised by
issuing equity securities, existing stockholders may experience dilution.
Insufficient funds may require the Company to scale back or eliminate some or a
significant part of its services or possible future acquisitions. See 'Use of
Proceeds' and 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources.'
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's revenues and
operating results are subject to significant fluctuation between fiscal
quarters. A significant portion of the Company's quarterly revenues is derived
from new projects and contracts for direct marketing services, the timing of
which is subject to a variety of factors outside the Company's control, such as
client marketing budgets and modifications in client strategies. In part due to
certain seasonal marketing patterns and subscriptions, the Company generated net
losses during the second and third quarters of fiscal 1996. Metro (which was not
acquired until October 1996) generated net losses during its fiscal equivalents
of the Company's third and fourth quarters of fiscal 1996. The Company cannot
predict the degree to which, on a consolidated basis, these trends will
continue. Additionally, the Company periodically incurs cost increases due to
both hiring and training of new employees and computer capacity upgrades in
anticipation of future growth. In addition, the size, timing and integration of
possible future acquisitions may cause substantial fluctuations in operating
results from quarter to quarter. As a result, operating results for any fiscal
quarter may not be indicative of the results that may be achieved for any
subsequent fiscal quarter or for a full fiscal year. These fluctuations could
adversely affect the market price of the Common Stock.
AMORTIZATION OF INTANGIBLE ASSETS. Approximately $16.2 million, or 55%, of
the Company's pro forma total assets as of June 30, 1996 consisted of goodwill
arising from the Company's acquisitions of Metro and SD&A. Goodwill is an
intangible asset that represents the difference between the aggregate purchase
price for the assets acquired and the amount of such purchase price allocated to
the tangible assets so acquired for purposes of the Company's pro forma balance
sheet. Goodwill is amortized over a 40-year period, with the amount amortized in
a particular period constituting a non-cash expense that would decrease the
Company's net income (or increase its net loss) in that period. The reduction in
net income (or increase in net loss) resulting from the amortization of goodwill
as a result of past or possible future acquisitions may have an adverse impact
upon the market price of the Common Stock prevailing from time to time.
LACK OF LONG-TERM CONTRACTS. The Company's contracts or other arrangements
with its clients are generally entered into on a project by project basis.
Moreover, if the Company were to lose a long-standing client, replacing such
client with a comparable client may require significant lead time. In addition,
new client programs often begin with a pilot project that is smaller in scale
and more limited in scope and has a smaller marketing budget than projects
conducted with long-standing clients. Although the Company believes that
historically SD&A and Metro have achieved satisfactory levels of client
retention, no assurance can be given that the Company will be able to do so in
the future.
GOVERNMENT REGULATION AND PRIVACY ISSUES. The telemarketing industry has
become subject to an increasing amount of federal and state regulation during
the past five years. The federal Telephone Consumer Protection Act of 1991 (the
'TCPA') limits the hours during which telemarketers may call consumers and
prohibits the use of automated telephone dialing equipment to call certain
telephone numbers. The federal Telemarketing and Consumer Fraud and Abuse
Prevention Act of 1994 (the 'TCFAPA') broadly authorizes the Federal Trade
Commission (the 'FTC') to issue regulations prohibiting misrepresentations in
telemarketing sales. The FTC's new telemarketing sales rules prohibit
misrepresentations of the cost, terms, restrictions, performance or duration of
products or services offered by telephone solicitation, prohibit a telemarketer
from calling a consumer when that consumer
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has instructed the telemarketer not to contact him or her, prohibit a
telemarketer from calling prior to 8:00 a.m. or after 9:00 p.m. and specifically
address other perceived telemarketing abuses in the offering of prizes and the
sale of business opportunities or investments. Violation of these rules may
result in injunctive relief, monetary penalties or disgorgement of profits and
can give rise to private actions for damages. While the FTC's new rules have not
caused the Company to alter its operating procedures, additional federal or
state consumer-oriented legislation could limit the telemarketing activities of
the Company or its clients or significantly increase the Company's costs of
regulatory compliance.
Several of the industries which the Company intends to serve, including the
financial services and healthcare industries, are subject to varying degrees of
government regulation. Although compliance with these regulations is generally
the responsibility of the Company's clients, the Company could be subject to a
variety of enforcement or private actions for its failure or the failure of its
clients to comply with such regulations.
In addition, the growth of information and communications technology has
produced a proliferation of information of various types and has raised many new
issues concerning the privacy of such information. Congress and various state
legislatures have considered legislation which would restrict access to, and the
use of, credit and other personal information for direct marketing purposes. The
direct marketing services industry, including the Company, could be negatively
impacted in the event any of these or similar types of legislation are enacted.
LIMITED PROPRIETARY PROTECTION. The Company holds no registered patents,
trademarks or copyrights. The Company depends in part upon its know-how and
proprietary applications of computer programs and database information systems
to differentiate its services from those of its competitors. The Company also
relies on a combination of contract rights (including non-competition agreements
with key employees) and trade secret laws to protect its know-how. There can be
no assurance, however, that competitors will not obtain unauthorized access to
the Company's know-how or that the Company's contractual or legal remedies will
be sufficient to protect the Company's interests.
RAPID TECHNOLOGICAL CHANGE. The market for the Company's services is
characterized by rapidly changing technology and frequent new and enhanced
services. The Company believes that its future success will be highly dependent
upon its ability to enhance existing services and to develop and introduce new
services to respond to changing client needs. There can be no assurance that the
Company can successfully identify, develop and bring new and enhanced services
to market in a timely manner, that such services will be commercially successful
or that services or technologies developed by others will not render the
Company's services non-competitive.
RISK OF EQUIPMENT FAILURE. SD&A maintains a telemarketing calling center in
Berkeley, California which contributed 16.7% of the Company's revenues in fiscal
1996. Although SD&A maintains business interruption insurance and has not had a
major failure of equipment at its Berkeley calling center, the risk of such
failure does exist and, if the Company's back-up procedures prove inadequate,
such failure could have a material adverse effect on the Company's business.
Similarly, Metro maintains extensive computer processing equipment at its
facilities in New York City, which equipment represents the substantial majority
of its data services capability. Although back-up client files and databases are
maintained off-site and Metro maintains business interruption insurance and has
not had a major failure of its equipment, the risk of such failure does exist
and, if Metro's back-up systems and databases prove inadequate, such failure
could have a material adverse effect on the Company's business.
CYCLICALITY. The direct marketing services industry relies upon marketing
expenditures by clients. Such expenditures are dependent upon the level of
economic activity, in general, and the specific industry of the client in
respect of cyclical effects that may bear upon that industry. Various segments
of the direct marketing industry, such as business to business or business to
consumer activity, may be affected by business cycle conditions. Insofar as
marketing budgets are related to availability of funds and general economic
conditions, product manufacturers or service providers may choose to reduce
expenditures for direct marketing services.
LACK OF UNDERWRITING HISTORY. The Representative was organized in February
1992 and first registered as a broker-dealer in 1994. Prior to this Offering,
the Representative has participated as a sole or co-manager in four public
offerings. Prospective purchasers of the Common Stock offered
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hereby should consider the lack of experience of the Representative in being a
manager of an underwritten public offering. See 'Underwriting.'
CERTAIN ANTI-TAKEOVER PROVISIONS. The Amended and Restated Articles of
Incorporation of the Company, as amended (the 'Restated Articles'), the by-laws
of the Company, as amended (the 'By-Laws'), and certain employment agreements
between the Company and certain executives may have the effect of hindering,
delaying or deterring a third party acquisition of the Company which may, in
turn, adversely affect the market price of the Common Stock. Pursuant to the
terms of the Restated Articles, certain business combinations and
reclassifications involving the Company require the approval of the holders of
75% of the outstanding Common Stock and the holders of a majority of the
outstanding Common Stock not held by the potential acquiror. See
'Management -- Change in Control Provisions of the Restated Articles.' In
addition, the Restated Articles establish a classified Board of Directors and
provide that Directors may only be removed upon the affirmative vote of 75% of
the outstanding Common Stock. See 'Management -- Board of Directors.'
Furthermore, upon a change in control of the Company, each of the Company's
Chief Executive Officer and President has the right to terminate his respective
employment contract, whereupon he becomes entitled to severance payments equal
to two year's salary. See 'Management -- Executive Compensation -- Employment
Agreements.'
The Company has unissued preferred stock, which could be issued to a third
party selected by current management, or used as the basis for a stockholders'
rights plan, which could have the effect of deterring a potential acquiror.
Pursuant to the Restated Articles, shares of the Company's preferred stock may
be issued in the future without further stockholder approval and upon such terms
and conditions, and having such rights, privileges and preferences (including
the right to vote and the right to convert into Common Stock) as the Board of
Directors may determine. Furthermore, certain provisions of the By-Laws may have
the effect of limiting or delaying a change in control of the Company.
The effect of such provisions, together with certain provisions of Nevada
law limiting the voting rights of an acquiror of a controlling interest in a
Nevada corporation (such as the Company), as well as restrictions on certain
business combinations (including certain mergers and exchanges), may be to
reduce the probability of, or the premiums that stockholders would receive in
connection with, an acquisition of the Company.
RISK OF DILUTION. Purchasers of Common Stock in the Offering will
experience immediate dilution in pro forma net tangible book value per share of
Common Stock offered hereby in an amount estimated at $4.52 per share of Common
Stock. See 'Dilution.'
The Company's acquisitions of SD&A and Metro involved, and possible future
acquisitions may involve, the issuance of additional Common Stock and/or
payments based on earnings formulas which could require the issuance of
additional Common Stock. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Liquidity and Capital Resources.'
Moreover, certain employees and Directors of the Company have received, and may
receive, options to purchase Common Stock at the discretion of the Board of
Directors. No assurance can be given that any future share issuances will be at
a valuation that would avoid potential dilution to existing stockholders.
NO INTENTION TO PAY DIVIDENDS. The Company does not intend to pay any cash
dividends on its Common Stock for the foreseeable future. The Company has not
paid cash dividends on any of its capital stock in at least the last six years.
It is anticipated that future earnings, if any, will be used to finance future
growth of the Company. In addition, there can be no assurance that operations
will generate sufficient revenues to enable the Company to declare or pay
dividends.
RELIANCE UPON SUBSIDIARIES. The parent company's assets consist primarily
of the stock of its subsidiaries. Accordingly, the Company's ability to meet its
cash obligations is partially dependent upon the ability of its subsidiaries to
make cash distributions to the Company. No assurance can be given that any or
all of its subsidiaries will be able to make such cash distributions, or, if
made, that such distributions will be adequate to meet the Company's financial
obligations. Accordingly the Company may be dependent upon external financing to
continue its business plan.
POSSIBLE DECLINE IN EFFECTIVENESS OF TELEMARKETING. Although the
telemarketing industry has grown significantly in the last five years, advances
in new forms of direct marketing, such as the development of interactive
commerce through television, computer networks, interactive media (including the
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Internet) and other media, could have an adverse effect on the demand for
telemarketing as a form of direct marketing. As the industry continues to grow,
telemarketing's effectiveness as a direct marketing tool may also decrease as a
result of consumer saturation and consumer resistance to telemarketing
generally. Although the Company attempts to monitor industry trends and to
respond accordingly, the Company may not be able to anticipate and successfully
respond to such trends in a timely manner.
POSSIBLE LIMITATION ON ABILITY TO DO BUSINESS WITH CERTAIN POTENTIAL
CLIENTS. The Company may determine from time to time in the exercise of its
business judgment that it is not prudent to pursue business opportunities with
or accept business from competitors of existing or potential clients or from
groups which may have interests adverse to interests of the Company's clients.
Although to date such considerations have not significantly impaired the
Company's ability to do business with new clients, no assurance can be given
that these considerations will not increase in the future and reduce
opportunities that would otherwise be available to the Company.
COMPETITION. Many of the Company's services, and service capabilities that
the Company may acquire, are sold in highly competitive markets in the United
States, including the markets for planning and developing direct marketing
strategies and the implementation of various direct marketing programs that
include gathering information and tracking and analysis of direct marketing
campaigns. In addition, many formats, including television, radio and
newspapers, compete for the marketing expenditures of the Company's clients. The
Company competes with a number of entities, or divisions of entities, many of
which have more extensive financial, technical, marketing and other resources
than the Company and may be able to respond more quickly to new or emerging
technologies and other competitive pressures. Some of these entities have growth
strategies that involve the acquisition of companies which the Company may have
identified as acquisition candidates. The Company also competes with in-house
telemarketing and direct mail operations of certain of its clients or potential
clients. See 'Business -- Competition.'
DEPENDENCE ON LABOR FORCE. As is common in the telemarketing industry, the
Company's telemarketing/telefundraising services are labor-intensive and
historically have been characterized by a high level of personnel turnover.
Unskilled and semi-skilled employees typically work part-time and receive
relatively modest hourly wages; skilled employees commonly work full-time and
command higher wages. Increases in the turnover rate would result in higher
recruiting and training costs. If the Company were unable to recruit and retain
a sufficient number of employees, it would be forced to limit its growth or
possibly modify its operations. The Company may not be able to continue to hire
and retain a sufficient number of qualified personnel, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. See 'Business -- Personnel and Training.'
DEPENDENCE UPON KEY PERSONNEL. The Company's decentralized management
philosophy delegates day-to-day operating decisions to the subsidiary managers.
As a result, the Company is highly dependent upon the effectiveness of a small
group of people at the subsidiary level and a small group of people at the
corporate level. The loss of any key person could have a significant bearing
upon the Company's profitability, its ability to consummate future acquisitions
and its ability to finance, manage or develop marketing programs. The Company's
operational success is contingent upon its ability to retain and expand its
staff of qualified personnel on a timely basis. There can be no assurance that
adequate replacements could be found if the Company were to lose the services of
any key employees. The Company is also dependent upon the specialized skills of
certain other personnel and may need to hire additional skilled personnel if it
experiences growth in its business. Competition for such personnel is intense
and the inability to attract or maintain qualified employees could materially
and adversely affect the Company's business, financial condition and results of
operations.
DEPENDENCE ON RELATIONSHIPS WITH DATA COMPILERS. The Company's database
management services utilize both clients' proprietary information and
information licensed by the Company from leading data compilers. Such licenses
generally have a one year term. While such information is presently available to
the Company from several sources, there can be no assurance that the Company
will be able to economically access such information in the future. Failure to
do so could have an adverse effect on the Company's business, financial
condition and results of operations. See 'Business -- Services -- Database
Management Services.'
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DEPENDENCE ON TELEPHONE AND POSTAL SERVICE. Certain aspects of the direct
marketing services industry depend upon services provided by various local and
long distance telephone companies and the United States Postal Service ('USPS').
Possible future modifications by the USPS of its rate structure or increases in
the rates currently paid by the Company for local and long distance telephone
service could have an adverse effect on the Company's operating expenses which,
in turn, may materially adversely affect its operating results, to the extent
that the Company is unable to pass any such increase through to its clients. Any
significant interruption or capacity limitation in any such services could also
have an adverse effect on the Company's business, financial condition and
results of operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain Statements in the Prospectus Summary and under the captions 'Risk
Factors,' 'Use of Proceeds,' 'Dilution,' 'Management's Discussion and Analysis
of Financial Condition and Results of Operations,' 'Business' and elsewhere in
this Prospectus constitute 'forward-looking statements' within the meaning of
the Private Securities Litigation Reform Act of 1995 (the 'Reform Act'). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following
general economic and business conditions: industry capacity; direct marketing
and other industry trends; demographic changes; competition; the loss of any
significant customers; changes in business strategy or development plans;
availability and successful integration of acquisition candidates; availability,
terms and deployment of capital; advances in technology; quality of management;
business abilities and judgment of personnel; availability of qualified
personnel; changes in, or the failure to comply with, government regulations;
computer, telephone and postal costs; and other factors discussed in this
Prospectus. See 'Risk Factors.'
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,400,000 shares of Common
Stock offered by the Company hereby are estimated to be $6.2 million based on an
assumed offering price of $5 3/8 per share of Common Stock.
Of such net proceeds to the Company, approximately $4.0 million will be
applied to expand the Company's business by investing approximately $2.3 million
for technology (including computer systems, software and telemarketing
equipment), approximately $1.2 million for technical support, sales and
marketing personnel and approximately $0.5 million for advertising and promotion
of the Company's services. In addition, approximately $1.0 million of such
proceeds may be used to repay the promissory notes issued to the former
shareholders of Metro in connection with the Company's acquisition of Metro. The
balance will be used for general corporate purposes, including possible future
acquisitions. Pending application of such net proceeds as described above, such
net proceeds will be invested in short-term, interest-bearing money market
instruments. The foregoing represents the Company's best estimate of the
allocation of the net proceeds to the Company of the Offering. Future events
such as changes in economic or competitive conditions may result in the Company
re-allocating such proceeds. In addition, there can be no assurance that the
Company's estimates will prove to be accurate or that unforeseen expenses will
not occur.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders, the Over-Allotment Selling Stockholders or
the Delayed Selling Stockholders.
DIVIDEND POLICY
The Company has not paid any cash dividends on any of its capital stock in
at least the last six years. The Company intends to retain future earnings, if
any, to finance the growth and development of its business and therefore does
not anticipate paying cash dividends on the Common Stock for the foreseeable
future. See 'Risk Factors -- No Intention to Pay Dividends.'
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PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on The Nasdaq SmallCap MarketSM under the symbol
'ALCM.' Prior to August 1995, when the Company changed its name to All-Comm
Media Corporation, the Common Stock was quoted under the symbol 'SPTK.' The
following table sets forth the high and low sales prices for the Common Stock
for the fiscal quarters indicated, as furnished by the National Association of
Securities Dealers, Inc. ('NASD'), adjusted to reflect a one-for-four reverse
stock split of the Common Stock effected August 22, 1995:
<TABLE>
<CAPTION>
HIGH LOW
------------ ------------
<S> <C> <C>
Fiscal 1997
Second Quarter (through October 16)..................................... $5 5/8 $5
First Quarter........................................................... 6 1/8 4 5/8
Fiscal 1996
Fourth Quarter.......................................................... $6 3/8 $2 1/8
Third Quarter........................................................... 4 7/16 3
Second Quarter.......................................................... 5 1 7/8
First Quarter........................................................... 8 1/4 3 5/8
Fiscal 1995
Fourth Quarter.......................................................... $9 3/4 $6 1/2
Third Quarter........................................................... 8 5 1/4
Second Quarter.......................................................... 6 3/4 3 1/2
First Quarter........................................................... 6 3
</TABLE>
As of September 30, 1996, there were approximately 850 registered holders
of record of the Common Stock.
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CAPITALIZATION
The following table sets forth the capitalization of the Company: (i) at
June 30, 1996; (ii) pro forma to give effect to the acquisition of Metro as if
it had occurred on June 30, 1996; and (iii) pro forma as adjusted to give effect
to such acquisition and to the Offering and the application of the net proceeds
to the Company therefrom as if each such event had occurred on June 30, 1996.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.................................................... $ 1,393 $ 1,381 $ 7,581
------- --------- -----------
Long-term obligations to related parties less current portion(1)............. 1,517 2,437 2,437
------- --------- -----------
Stockholders' equity:
Convertible Preferred Stock, $.01 par value; 50,000 shares authorized
consisting of:
6,200 shares of Series B Convertible Preferred Stock issued and
outstanding actual, pro forma and pro forma as adjusted; and
2,000 shares of Series C Convertible Preferred Stock issued and
outstanding actual, pro forma and pro forma as adjusted.......... * * *
Common Stock, $.01 par value; 6,250,000 shares authorized at June 30,
1996, increased to 36,250,000 on August 14, 1996; 3,198,534 issued and
3,186,734 outstanding; 5,012,534 issued and 5,000,734 outstanding pro
forma; 6,412,534 issued and 6,400,734 outstanding pro forma as
adjusted(2)........................................................... 32 50 64
Additional paid-in capital................................................... 14,462 21,700 28,411
Accumulated deficit.......................................................... (6,108) (6,108) (6,633)
Less 11,800 shares of common stock in treasury, at cost...................... (135) (135) (135)
------- --------- -----------
Total stockholders' equity.............................................. 8,251 15,507 21,707
------- --------- -----------
Total capitalization............................................... $11,161 $19,325 $31,725
------- --------- -----------
------- --------- -----------
</TABLE>
- ------------
* Less than $1,000.
(1) The pro forma and pro forma as adjusted data each include $1.0 million
aggregate face amount of promissory notes issued by the Company to the
former shareholders of Metro in connection with the Company's acquisition of
Metro. The promissory notes, which have a stated interest rate of 6%, were
discounted to $0.9 million to reflect an estimated effective interest rate
of 10%.
(2) Includes the following issuances: (a) pro forma -- 1,814,000 shares of
Common Stock issued to former shareholders of Metro in connection with the
Company's acquisition of Metro and (b) pro forma as adjusted -- the shares
described in clause (a) above plus the 1,400,000 shares being sold in the
Offering by the Company. Does not include up to 12,025,092 shares of Common
Stock issuable upon conversion or exercise of certain securities or other
contractual rights as described in footnote (3) under 'Prospectus
Summary -- The Offering.'
17
<PAGE>
<PAGE>
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
dilution in the pro forma net tangible book value of their Common Stock from the
assumed initial public offering price of $5 3/8 per share. As of June 30, 1996,
after giving pro forma effect to the Metro acquisition, the Company had a
deficit in pro forma net tangible book value of $(0.7) million or $(0.14) per
share of Common Stock. The deficit in pro forma net tangible book value per
share represents the amount by which total liabilities exceed total net tangible
assets, divided by the number of outstanding shares of Common Stock. As of June
30, 1996, after giving effect to the application of the estimated net proceeds
to the Company from the sale of the 1,400,000 shares of Common Stock by the
Company at an assumed initial offering price of $5 3/8 per share, after
deducting the estimated underwriting discounts and commissions and estimated
Offering expenses payable by the Company, the pro forma as adjusted net tangible
book value of the Company would have been $5.5 million or $0.86 per share of
Common Stock. This represents an immediate increase in pro forma net tangible
book value of $1.00 per share to existing stockholders and an immediate dilution
of $4.52 per share to new investors purchasing shares in the Offering. The
following table illustrates the dilution per share as described above:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................. $5.38
Deficit in pro forma net tangible book value before the
Offering........................................................ $(0.14)
Increase attributable to new investors............................ 1.00
------
Pro forma as adjusted net tangible book value after the
Offering........................................................ 0.86
------
Dilution in pro forma net tangible book value to new investors.... $4.52
------
------
</TABLE>
Based on the foregoing assumptions, the following table sets forth, as of
June 30, 1996, giving effect to the Offering, the number of shares of Common
Stock purchased from the Company, the total consideration paid to the Company by
the existing stockholders and the new investors purchasing shares of Common
Stock in the Offering and the average price per share paid by each group:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE PER
NUMBER % AMOUNT % SHARE
--------- ----- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)................................. 5,000,734 78.1% $17,927,056 70.4% $3.58
New investors(1)......................................... 1,400,000 21.9% $ 7,525,000 29.6% $5.38
--------- ----- ----------- ----- ---------
Total............................................... 6,400,734 100.0% $25,452,056 100.0% $3.98
--------- ----- ----------- ----- ---------
--------- ----- ----------- ----- ---------
</TABLE>
- ------------
(1) Does not include up to 12,025,092 shares of Common Stock issuable upon
conversion or exercise of certain securities or other contractual rights, as
follows: (i) 6,200 shares of the Series B Preferred Stock, which are
currently convertible into 2,480,000 shares of Common Stock; (ii) 2,000
shares of the Series C Preferred Stock, which are currently convertible into
166,666 shares of Common Stock; (iii) warrants issued to holders of Series B
Preferred Stock, which are currently exercisable for 3,100,000 shares of
Common Stock; (iv) warrants issued to holders of Series C Preferred Stock,
which are currently exercisable for 3,000,000 shares of Common Stock; (v)
warrants to be issued upon consummation of the Offering to the
Representative, exercisable for 150,000 shares of Common Stock; (vi)
warrants to be issued upon consummation of the Offering to certain
stockholders of the Company as consideration for their agreement to certain
lock-up arrangements, exercisable for an aggregate of up to 1,192,913 shares
of Common Stock, depending on the extent to which the Underwriters'
over-allotment options are exercised, if at all -- see 'Shares Eligible for
Future Sale' and 'Underwriting;' (vii) all other outstanding options,
warrants and other contractual rights, all of which are currently
exercisable for 1,570,135 shares of Common Stock in the aggregate; (viii)
the promissory notes issued to the former shareholders of Metro in
connection with the Company's acquisition of Metro, which are currently
convertible into 185,874 shares of Common Stock; and (ix) 179,504 shares of
Common Stock reserved for issuance but not yet issued under the Company's
1991 Stock Option Plan. See 'Management -- Stock Option Plan,' 'Description
of Capital Stock' and 'Underwriting.'
18
<PAGE>
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Balance Sheets have
been prepared based upon the audited historical consolidated balance sheet of
the Company as of June 30, 1996 and the unaudited historical condensed balance
sheet of Metro as of June 30, 1996 and give effect to (i) the Company's
acquisition of Metro and (ii) the application of the estimated net proceeds to
the Company from the Offering (after deducting underwriting discounts and
commissions and estimated expenses of the Offering payable by the Company), as
if each had occurred as of June 30, 1996. The following Unaudited Pro Forma
Condensed Combined Statements of Operations for the fiscal year ended June 30,
1996 have been prepared based on the audited historical consolidated statement
of operations of the Company for the year ended June 30, 1996 and the unaudited
historical statements of operations of Metro for the last six months of the year
ended December 31, 1995 and the six months ended June 30, 1996 and give effect
to the acquisition of Metro and the Offering as if each such event had occurred
as of July 1, 1995. Pro forma adjustments for each such pro forma financial
statement are described in the accompanying notes.
The following unaudited pro forma condensed combined financial information
is not necessarily indicative of the actual results of operations or financial
condition of the Company that would have been reported if the events described
above had occurred as of July 1, 1995 or June 30, 1996, as the case may be, nor
does such information purport to indicate either the results of the Company's
future operations or the Company's future financial condition. In the opinion of
management, all adjustments necessary to present fairly such pro forma financial
information have been made.
The pro forma condensed combined financial information should be read in
conjunction with 'Capitalization' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and with the financial statements
and notes thereto included elsewhere in this Prospectus.
19
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------- PRO FORMA
ALL-COMM MEDIA METRO SERVICES -----------------------
CORPORATION GROUP, INC. ADJUSTMENTS COMBINED
-------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 1,393 $ 138 $ 6,200(A) $ 7,581
(150)(B)
Accounts receivable............................. 2,682 1,412 -- 4,094
Land held for sale at cost...................... 921 -- -- 921
Other current assets............................ 108 23 -- 130
-------------- ------- ----------- --------
5,104 1,573 6,050 12,727
Property and equipment, net..................... 299 82 -- 381
Intangible assets, net.......................... 7,851 -- 8,186(B) 16,187
150(B)
Other assets.................................... 47 50 -- 97
-------------- ------- ----------- --------
Total assets............................... $ 13,301 $1,704 $14,386 $29,391
-------------- ------- ----------- --------
-------------- ------- ----------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings........................... $ 500 -- -- $ 500
Trade accounts payable.......................... 471 $1,634 -- 2,105
Accrued salaries and wages...................... 706 -- -- 706
Accrued expenses................................ 758 -- -- 758
Income taxes payable............................ 10 15 -- 25
Current portion of long-term obligations to
related parties............................... 583 -- -- 583
Related parties payable......................... 425 32 -- 457
-------------- ------- ----------- --------
Total current liabilities.................. 3,453 1,681 -- 5,135
Long-term portion of long-term obligations to related
parties............................................ 1,517 -- $ 920(B) 2,437
Other liabilities.................................... 80 33 -- 113
-------------- ------- ----------- --------
Total liabilities.......................... 5,050 1,714 920 7,685
-------------- ------- ----------- --------
Stockholders' equity:
Convertible preferred stock..................... * -- -- *
Common stock.................................... 32 1 14(A) 64
18(B)
(1)(B)
Additional paid-in capital...................... 14,462 -- 6,186(A) 28,411
7,238(B)
525(C)
Accumulated deficit............................. (6,108) (11) 11(B) (6,633)
(525)(C)
Treasury stock.................................. (135) -- -- (135)
-------------- ------- ----------- --------
Total stockholders' equity (deficit)....... 8,251 (10) 13,466 21,707
-------------- ------- ----------- --------
Total liabilities and stockholders'
equity.............................. $ 13,301 $1,704 $14,386 $29,391
-------------- ------- ----------- --------
-------------- ------- ----------- --------
</TABLE>
- ------------
* Less than $1,000.
The accompanying Notes are an integral part of these unaudited
pro forma condensed combined balance sheets.
20
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
The Unaudited Pro Forma Condensed Combined Balance Sheets present the
historical balance sheets of All-Comm and Metro and pro forma adjustments as if
the Offering and the acquisition of Metro by the Company had taken place as of
June 30, 1996. The pro forma purchase accounting adjustments are summarized as
follows:
(A) Represents $7.5 million in cash proceeds to the Company from the
Offering of 1,400,000 shares of Common Stock at $5 3/8 per share, less
estimated offering costs of $1.3 million.
(B) Represents the purchase of Metro, which had a shareholder deficit
of $10,000, for $8.2 million (1,814,000 shares of Common Stock valued at $4
per share and $1.0 million aggregate face amount of promissory notes issued
by the Company to the former shareholders of Metro; the promissory notes,
which have a stated interest rate of 6%, were discounted to $0.9 million to
reflect an estimated effective interest rate of 10%). In connection with
the acquisition, the Company obtained three year covenants not to compete
from the former shareholders of Metro. Acquisition costs are estimated to
be $0.2 million.
The acquisition was accounted for as a purchase and assets and
liabilities were recorded at fair market values, which approximated net
book values. The purchase is summarized as follows (in thousands):
<TABLE>
<S> <C> <C>
Value of stock paid....................................................... $ 7,256
Promissory notes payable.................................................. 920
-------
Total purchase price................................................. 8,176
Acquisition costs......................................................... 150
-------
Total cost........................................................... 8,326
Less fair market value of:
Assets acquired...................................................... (1,704)
Liabilities assumed.................................................. 1,714
-------
Deficit in net tangible assets....................................... 10
------
Costs in excess of tangible net assets.................................... 8,336
Less estimated value of covenants not to compete.......................... 650
------
Goodwill.................................................................. $7,686
------
------
</TABLE>
(C) Represents the estimated value of warrants issued by the Company
in connection with the Offering to certain holders of Restricted Shares and
warrants having registration rights relating thereto in consideration for
such holders consent to certain modifications of their respective
registration rights. See 'Shares Eligible for Future Sale.' The expense is
non-recurring and will be charged in the fiscal quarter in which the
Offering is consummated.
21
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------- PRO FORMA
ALL-COMM MEDIA METRO SERVICES --------------------------
CORPORATION GROUP, INC. ADJUSTMENTS COMBINED
--------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues....................................... $ 15,889 $8,094 -- $ 23,983
--------------- ------- ----------- ---------
Salaries and benefits.......................... 12,712 1,978 -- 14,690
Direct costs................................... 807 4,550 -- 5,357
Selling, general and administrative............ 1,843 961 -- 2,804
Professional fees.............................. 626 181 -- 806
Amortization................................... 362 -- $ 409(A) 770
--------------- ------- ----------- ---------
Total operating expenses.................. 16,350 7,670 409 24,429
--------------- ------- ----------- ---------
Income (loss) from operations.................. (460) 424 (409) (446)
Interest income................................ 12 -- -- 12
Interest expense............................... (488) -- (106)(B) (594)
--------------- ------- ----------- ---------
Income (loss) before income taxes.............. (936) 424 (515) (1,027)
Provision for income taxes..................... (141) (29) --(C) (170)
--------------- ------- ----------- ---------
Net income (loss).............................. $ (1,077) $ 395 $ (515) $ (1,197)
--------------- ------- ----------- ---------
--------------- ------- ----------- ---------
Net income (loss) attributable to common
stockholders............................ $ (1,094) $ 395 $ (515) $ (1,215)
--------------- ------- ----------- ---------
--------------- ------- ----------- ---------
Primary and fully diluted loss per
share................................... $(0.36) $(0.19)
------ ------
------ ------
Weighted average common and common equivalent
shares outstanding........................... 3,068,278 3,214,000(D) 6,282,278
--------------- ----------- ---------
--------------- ----------- ---------
</TABLE>
The accompanying Notes are an integral part of these unaudited
pro forma condensed combined statements of operations.
22
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Condensed Combined Statements of Operations combine
the results of operations of the Company for its fiscal year ended June 30, 1996
with the results of operations of Metro for the year then ended. The revenues
and results of operations of the combined businesses included in such pro forma
financial statements are not considered by management to be indicative of the
anticipated results of the business for the periods subsequent to the
acquisition by the Company, nor are they considered to be indicative of the
results of operations which might have been attained for the period presented.
The pro forma purchase accounting adjustments reflect the effect on the
combined results for the fiscal year ended June 30, 1996 as if the Offering and
the acquisition of Metro by the Company had taken place at the beginning of such
year. The adjustments are summarized as follows:
(A) Reflects amortization of $8.3 million in excess of costs over the
fair value of the net deficit acquired, including $0.7 million in the
aggregate in covenants not to compete. The covenants are amortized over
their three year durations and the remainder over its expected benefit
period of 40 years.
(B) Reflects interest expense incurred on $1.0 million aggregate face
amount of 6% promissory notes issued to former shareholders of Metro in
connection with the Company's acquisition of Metro. The promissory notes
were discounted to $0.9 million to reflect an estimated effective interest
rate of 10%.
(C) Prior to its acquisition by All-Comm, Metro had elected to be
taxed under the provisions of Subchapter S of the Internal Revenue Code of
1986, as amended (the 'Code') and, as a result, Metro's federal taxable
income or loss and tax credits were passed through to Metro's former
shareholders. Metro's provision for income taxes resulted from income taxes
due on taxable income for states which did not recognize Metro's S
corporation status. No pro forma tax provision has been made for federal
taxes in the pro forma condensed combined statements of operations due to
the availability of All-Comm's net operating loss carryforwards.
(D) Pro forma primary and fully diluted earnings per share include the
effect of issuance of 1,814,000 shares of Common Stock in connection with
the Company's acquisition of Metro and 1,400,000 shares of Common Stock in
connection with the Offering, as if each such event had occurred on July 1,
1995.
23
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of the Company as of June 30, 1996,
in the case of balance sheet data, and for the years ended June 30, 1995 and
1996, in the case of operating data, have been derived from the Company's
audited consolidated financial statements included elsewhere in this Prospectus.
The following selected financial data of Metro as of December 31, 1995, in
the case of balance sheet data, and for the years ended December 31, 1994 and
1995, in the case of operating data, have been derived from Metro's audited
financial statements included elsewhere in this Prospectus. The selected
financial data of Metro presented below as of and for the six months ended June
30, 1995 and 1996 have been derived from Metro's unaudited financial statements
included elsewhere in this Prospectus. Metro's unaudited financial statements
include all adjustments, consisting of normal recurring accruals, that the
Company considers necessary for a fair presentation of Metro's financial
position and results of operations for those periods. Operating results for the
six months ended June 30, 1996 are not necessarily indicative of the results of
operations for any subsequent period.
The data set forth below should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
the financial statements and notes thereto included elsewhere in this
Prospectus.
ALL-COMM MEDIA CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,(1)
------------------------
1995(2) 1996
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
OPERATING DATA:(3)
Revenues......................................................................... $ 3,631 $ 15,889
Salaries and benefits............................................................ $ 3,139 $ 12,712
Direct costs..................................................................... $ 102 $ 807
Selling, general and administrative.............................................. $ 1,121 $ 1,843
Professional fees................................................................ $ 459 $ 626
Amortization of intangible assets................................................ $ 65 $ 362
Total operating costs and expenses............................................... $ 4,887 $ 16,350
Loss from operations............................................................. $ (1,256) $ (460)
Total other income (expenses).................................................... $ 1,200 $ (475)
Loss from continuing operations before income taxes.............................. $ (56) $ (936)
Provision for income taxes....................................................... $ (75) $ (141)
Loss from continuing operations before discontinued operations................... $ (131) $ (1,077)
Net gain from discontinued operations............................................ $ 241 $ --
Net income (loss)................................................................ $ 110 $ (1,077)
Net income (loss) attributable to common stockholders............................ $ 110 $ (1,094)
Weighted average common and common equivalent shares outstanding................. 1,807,540 3,068,278
Net income (loss) per common share(4)............................................ $ 0.06 $ (0.36)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:(3)
Cash and cash equivalents..................................................................... $ 1,393
Working capital............................................................................... $ 1,651
Intangible assets, net........................................................................ $ 7,851
Total assets.................................................................................. $ 13,301
Long-term obligations to related party less current portion................................... $ 1,517
Total stockholders' equity.................................................................... $ 8,251
</TABLE>
(footnotes on next page)
24
<PAGE>
<PAGE>
(footnotes from previous page)
- ------------
(1) SD&A had a fiscal year ending December 31 prior to its acquisition by the
Company.
(2) Reflects operations of Alliance and SD&A for the period beginning with the
Company's acquisition of Alliance on April 25, 1995.
(3) See 'Management's Discussion and Analysis of Financial Condition and Results
of Operations' for discussion of businesses discontinued and acquired in
1995.
(4) Primary and fully diluted income (loss) per common share are the same in
both fiscal years presented. See Note 2 of Notes to Consolidated Financial
Statements of All-Comm.
METRO SERVICES GROUP, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(1) SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
1994 1995 1995 1996
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues..................................... $ 5,914 $ 8,096 $ 3,555 $ 3,553
Direct costs................................. $ 3,290 $ 4,653 $ 2,022 $ 1,919
Salaries and wages........................... $ 1,672 $ 1,792 $ 855 $ 1,041
Selling, general and administrative.......... $ 868 $ 899 $ 442 $ 504
Total operating expenses..................... $ 5,964 $ 7,520 $ 3,417 $ 3,567
Income (loss) before provision for income
taxes...................................... $ (50) $ 576 $ 138 $ (14)
Provision for income taxes(2)................ $ 7 $ 35 $ 7 $ --
Net income (loss)............................ $ (57) $ 541 $ 131 $ (14)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995(1) JUNE 30, 1996
-------------------- -------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash................................................................... $ 8 $ 138
Working capital (deficit).............................................. $ 178 $ (109)
Total assets........................................................... $2,505 $ 1,704
Total shareholders' equity (deficit)................................... $ 235 $ (10)
</TABLE>
- ------------
(1) Metro had a fiscal year ending December 31 prior to its acquisition by the
Company.
(2) Prior to its acquisition by the Company, Metro had elected to be taxed under
the provisions of Subchapter S of the Code and, as a result, Metro's federal
taxable income or loss and tax credits were passed through to Metro's former
shareholders. Metro's provision for income taxes resulted from income taxes
due on taxable income for states which did not recognize Metro's S
corporation status.
25
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with All-Comm's,
Metro's and SD&A's financial statements and notes thereto included elsewhere in
this Prospectus and the other financial and operating information included
elsewhere in this Prospectus. Certain statements under this caption
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' constitute 'forward-looking statements' under the Reform Act. See
'Special Note Regarding Forward-Looking Statements.' For a more complete
understanding of the Company's operations, see 'Risk Factors' and 'Business.'
OVERVIEW
The Company acquired Alliance, which simultaneously acquired SD&A, on April
25, 1995. Accordingly, the Company's consolidated statements of operations and
consolidated statements of cash flows include the operations of Alliance and
SD&A starting on April 25, 1995. Because the Company's fiscal year ends on June
30 of each year, only approximately two months of Alliance's and SD&A's
operations were included in the Company's results of operations for fiscal 1995
but their results of operations for the entire year were included in fiscal
1996.
In addition, because the Company acquired Metro in October 1996, Metro's
operations are not included in any of the Company's historical consolidated
financial statements contained in this Prospectus, but are included separately.
See 'Index to Financial Statements.' For certain pro forma condensed combined
financial information which gives effect to the acquisition of Metro, see 'Pro
Forma Condensed Combined Financial Information.' In order to conform with
industry standards and to provide for a more meaningful comparison between the
Company's historical financial statements and such pro forma financial
information (and future financial statements), the Company has reclassified
certain accounts. See Note 2 of Notes to Consolidated Financial Statements of
All-Comm.
The Company has accounted for the acquisitions of Alliance and SD&A, and
will account for the acquisition of Metro, under the purchase method of
accounting.
During 1991, under the prior management, the Company acquired a 100%
interest in STI and changed the Company's name from Bristol Holdings, Inc. to
Sports-Tech, Inc. In 1993, the Company acquired the business of High School
Gridiron Report ('HSGR'). STI and HSGR supplied information services and
technology as well as academic, athletic and video data to high school, college
and professional coaches and student athletes. In November 1994, after a failed
business strategy, the prior management of the Company discontinued these
operations through the sale of STI and the cessation of the HSGR operation and
the Company's consolidated financial statements were reclassified to report the
net assets, operating results, gain on disposition and cash flows of these
operations as discontinued operations. In August 1995, following the
acquisitions of Alliance and SD&A, the Company again changed its name from
Sports-Tech, Inc. to All-Comm Media Corporation.
As a result of the Alliance and SD&A acquisitions and discontinued
operations, the Company's results of operations for fiscal years 1995 and 1996
are not directly comparable and the Company's historical results of operations
may not be indicative of future results.
The Company's revenues in fiscal 1995 and fiscal 1996 consisted principally
of fees earned by the Company from telemarketing and telefundraising campaigns
conducted on-site at client locations and off-site at the Company's calling
center in Berkeley, California. Revenues from on-site campaigns are recorded
when pledged cash is received by the Company's clients. Revenues from operations
at the Berkeley calling center are recorded when the services are provided.
On-site telemarketing and telefundraising fees are generally based on an agreed
upon percentage of amounts received by a client from a campaign. Off-site fees
are typically based on an agreed upon amount per contact with a potential donor.
During fiscal 1995 and 1996, the Company's margins relating to off-site
campaigns were generally higher than margins relating to on-site campaigns.
For fiscal 1995 and 1996, salaries and benefits were the Company's
principal expense category and accounted for 86.5% and 80.0%, respectively, of
revenues, and 64.2% and 77.8%, respectively, of total operating expenses.
26
<PAGE>
<PAGE>
Selling, general and administrative expenses were the Company's second most
significant expense category in fiscal 1995 and fiscal 1996. Such expenses
include the cost of services the Company provides to manage its operating
subsidiaries, and in fiscal 1995, its discontinued operations. These expenses
include rent, depreciation, public relations costs, insurance premiums and costs
relating to the identification and evaluation of potential acquisitions and
financing sources (excluding professional fees).
Direct costs include telephone, postage and other sales expenses relating
to the Berkeley calling center and costs associated with advertising for staff
for on-site campaigns. Professional fees include fees for outside consultants,
accountants and attorneys principally related to acquisition and financing
efforts and recurring audit and public reporting requirements.
Amortization of intangible assets relates to intangible assets acquired in
the simultaneous acquisitions of Alliance and SD&A on April 25, 1995. The
purchase prices for these acquisitions were substantially in excess of the book
value of the acquired assets. As a consequence, these acquisitions have
generated significant goodwill and have generated, and will continue to
generate, significant levels of amortization. Although amortization is a
non-cash charge, it decreases reported net income (or increases reported net
losses). Accordingly, the faster the Company expands by making such
acquisitions, the more likely it will be to incur additional amortization
charges. See Notes 2 and 3 of Notes to Consolidated Financial Statements of
All-Comm.
Interest expense for fiscal 1995 and fiscal 1996 is principally comprised
of interest on indebtedness of the Company to the former owner of SD&A (the
'SD&A Seller Debt'). See 'Certain Transactions -- Transactions Under Current
Management After Alliance Acquisition -- Transactions With Mr. Dunn.'
As of June 30, 1996, the Company had consolidated net operating loss
carryforwards of $2.0 million which may offset future income for U.S. federal
income tax purposes. The Company incurs state income taxes on taxable income at
the subsidiary level which cannot be reduced by losses incurred at the corporate
level.
FUTURE NONRECURRING CHARGE TO EARNINGS
The Company will incur a nonrecurring non-cash charge estimated to be $0.5
million in the fiscal quarter in which the Offering is consummated as a result
of the issuance by the Company of warrants exercisable for an aggregate of up to
1,192,913 shares of Common Stock to certain stockholders of the Company as
consideration for the agreement of such stockholders to certain lock-up
arrangements. See 'Shares Eligible For Future Sale.'
Although the nonrecurring charge to be taken by the Company will increase
the Company's accumulated deficit, there will be a corresponding increase in
additional paid-in-capital, and, accordingly, total stockholders' equity will be
unchanged. The recording of such charge will have a material adverse effect on
the Company's results of operations, and may result in a loss for the fiscal
quarter in which the Offering is consummated.
RESULTS OF OPERATIONS
The following table sets forth for the fiscal periods indicated (i)
information derived from the Company's audited historical consolidated
statements of operations for the fiscal years ended June 30, 1995 and 1996 and
(ii) information derived from the unaudited historical statements of operations
of Metro for the six months ended June 30, 1995 and 1996, in each case expressed
as a percentage of revenues.
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<TABLE>
<CAPTION>
METRO SERVICES
ALL-COMM MEDIA GROUP, INC.
CORPORATION ----------------
----------------
SIX MONTHS ENDED
YEAR ENDED JUNE
30, JUNE 30,
---------------- ----------------
1995 1996 1995 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues.............................................................. 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Salaries and benefits................................................. 86.5 80.0 24.0 29.3
Direct costs.......................................................... 2.8 5.1 56.9 54.0
Selling, general and administrative................................... 30.9 11.6 12.4 14.2
Professional fees..................................................... 12.7 3.9 2.8 2.9
Amortization of intangible assets..................................... 1.8 2.3 -- --
----- ----- ----- -----
Total operating costs and expenses............................ 134.6 102.9 96.1 100.4
----- ----- ----- -----
Income (loss) from operations......................................... (34.6) (2.9) 3.9 (0.4)
Other income (expense)................................................ 33.1 (3.0) -- --
Provision for income taxes............................................ (2.1) (0.9) (0.2) --
----- ----- ----- -----
Income (loss) from continuing operations before discontinued
operations.......................................................... (3.6) (6.8) 3.7 (0.4)
Net gain from discontinued operations................................. 6.6 -- -- --
----- ----- ----- -----
Net income (loss)..................................................... 3.0% (6.8)% 3.7% (0.4)%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
ALL-COMM MEDIA CORPORATION
FISCAL YEARS ENDED JUNE 30, 1996 AND 1995
Revenues of $15.9 million in fiscal 1996 increased by $12.3 million over
fiscal 1995 revenues, principally due to the inclusion of a full year of
operations of SD&A in fiscal 1996 as compared with the period from the date of
acquisition (April 25, 1995) to June 30, 1995 in fiscal 1995. Fiscal 1996
revenues from on-site telemarketing and telefundraising campaigns totaled $13.2
million (83.3% of revenues) and revenues from off-site campaigns totaled $2.7
million (16.7% of revenues).
Salaries and benefits of $12.7 million in fiscal 1996 increased by $9.6
million over salaries and benefits of $3.1 million in fiscal 1995, principally
due to the inclusion of a full year of operations of SD&A in fiscal 1996. As a
percentage of revenues, however, salaries and benefits declined from 86.5% to
80.0% because, in fiscal 1995 and fiscal 1996, the Company had a full year of
administrative salaries and benefits at the corporate level but only
approximately two months of revenues from the operations of SD&A in fiscal 1995.
Direct costs of $0.8 million in fiscal 1996 increased by $0.7 million over
direct costs of $0.1 million in fiscal 1995, principally due to the inclusion of
costs associated with the Berkeley calling center operations for all of fiscal
1996 as well as $0.2 million in costs associated with advertising for staff for
on-site campaigns in fiscal 1996.
Selling, general and administrative expenses of $1.8 million in fiscal 1996
increased by $0.7 million, or 64.4%, over $1.1 million of such expenses in
fiscal 1995, principally due to the inclusion of a full year of operations of
SD&A in fiscal 1996. Professional fees of $0.6 million in 1996 increased by
approximately $0.2 million, or 36.2%, over professional fees of $0.5 million in
fiscal 1995, principally due to legal and accounting fees incurred in connection
with the evaluation of potential acquisitions and financing sources.
Amortization of intangible assets of $0.4 million in fiscal 1996 increased
by $0.3 million over amortization of approximately $65,000 in fiscal 1995, due
to the amortization of the goodwill and a covenant-not-to-compete associated
with the Alliance and SD&A acquisitions on April 25, 1995.
The Company had other expense of $0.5 million in fiscal 1996 compared to
other income of $1.2 million in fiscal 1995, a decrease of $1.7 million,
principally due to increases in fiscal 1996 interest expense related to the SD&A
Seller Debt. In fiscal 1995, the Company had nonrecurring net gains from sales
of securities of $1.6 million, which were partially offset by a loan commitment
fee of $0.3 million in connection with the original purchase of such securities.
See 'Certain Transactions -- Transaction Under Former Management Prior to
Alliance Acquisition -- Florida Gaming Corporation Loan.'
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The provision for income taxes in fiscal 1996 of $141,000 increased by
approximately $66,000, or 88.1%, over the provision for income taxes of $75,000
in 1995. The provision for income taxes increased, despite losses from
continuing operations, as a result of state and local taxes incurred on taxable
income at the operating subsidiary level. Under applicable tax law, such taxes
at the operating subsidiary level could not be offset by losses incurred at the
corporate level.
The gain on sale of, and loss from, discontinued operations in fiscal 1995
relates to the STI and HSGR operations which were either sold or closed in
fiscal 1995 as a condition precedent to the acquisition of Alliance. No amounts
related to discontinued operations were incurred in fiscal 1996.
As a result of the foregoing factors, the Company had a net loss of $1.1
million in fiscal 1996 as compared to net income of $0.1 million in 1995.
METRO SERVICES GROUP, INC.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Metro generates revenues from the development and marketing of
information-based services used primarily in direct marketing programs and
fundraising campaigns. These services, which are usually integrated, include:
(i) database management, which includes updating and maintaining client
databases; (ii) data processing; (iii) list services; and (iv) as an ancillary
service (through outsourcing), creating, printing and mailing of brochures. See
'Business -- Services.' Metro recognizes revenues as services are performed.
Revenues of $3.6 million remained constant for the first six months of 1996
compared to the prior year period, notwithstanding the loss of Metro's two
largest clients. Such clients were to be acquired by other firms during the
first quarter of 1996 and, as a result, no longer required Metro's services. On
a combined basis, those two clients accounted for 17.0%, 14.5% and 3.5% of
Metro's revenues for the year ended December 31, 1995 and the six months ended
June 30, 1995 and 1996, respectively. The loss of such revenues in the first six
months of 1996 was offset by $0.6 million in revenues from new clients and
increased business from existing clients during the same period. Subsequent to
June 30, 1996, one such client resumed business with Metro after its proposed
acquisition was not consummated.
Salaries and benefits of $1.0 million for the six months ended June 30,
1996 increased by approximately $0.2 million, or 21.8%, compared to $0.9 million
for the first six months of the prior year. The increase was primarily due to
staffing increases in the 1996 period in connection with anticipated client
activity.
Direct costs for Metro are principally the costs of lists and other data
purchased for clients from third parties. Direct costs for Metro also include
commissions payable to third party list owners for lists rented to clients, as
well as printing and fulfillment costs incurred on behalf of clients. Direct
costs of $1.9 million for the first six months of 1996 decreased by $0.1
million, or 5.0%, from direct costs of $2.0 million for the comparable period in
1995 reflecting the approximately equal revenues in both years. As a percentage
of revenues, direct costs decreased from 56.9% to 54.0%, which levels are
consistent with historical patterns.
Selling, general and administrative expenses for Metro are principally
comprised of rent, promotion, insurance, utilities, and postage and delivery.
Selling, general and administrative expenses of $0.5 million for the first six
months of 1996 increased by approximately $62,000, or 14.0%, from $0.4 million
for the first six months of 1995. The increase was principally the result of
increases in promotional expenses relating to advertising, partially offset by a
decrease in rent expense relating to the expiration of a lease for the Company's
former facilities which the Company had sublet at a loss.
Prior to its acquisition by All-Comm, Metro had elected to be taxed under
the provision of Subchapter S of the Code and, as a result, Metro's federal
taxable income or loss and tax credits were passed through to Metro's former
shareholders. Metro's provision for income taxes resulted from income taxes due
on taxable income for states which did not recognize Metro's S corporation
status.
Primarily as a result of the foregoing factors, the Company had a net loss
of approximately $14,000 for the first six months of 1996 compared to net income
of approximately $0.1 million for the first six months of 1995.
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METRO SERVICES GROUP, INC.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenues of $8.1 million in 1995 increased by $2.2 million, or 36.9%, over
revenues of $5.9 million in 1994, principally due to increases in revenues from
database management and list brokerage, and increasing penetration of the
financial services sector. In 1995, 17.0% of Metro's revenues were generated by
two clients as compared to 10.9% in 1994.
Salaries and benefits of $1.8 million in 1995 increased by $0.1 million, or
7.2%, over $1.7 million in 1994, principally due to merit pay increases in 1995.
As a percentage of revenues, however, salaries and benefits decreased from 28.3%
in 1994 to 22.1% in 1995, principally due to Metro's limiting its hiring
activities in 1995 to active projects rather than hiring in anticipation of
growth as had been done in 1994.
Direct costs of $4.7 million in 1995 increased by $1.4 million, or 41.4%,
from direct costs of $3.3 million in 1994, principally as a result of the
related increases in revenues. As a percentage of revenues, however, direct
costs increased from 55.6% in 1994 to 57.5% in 1995, which levels are consistent
with historical patterns.
Selling, general and administrative expenses of $0.9 million in 1995
increased by approximately $31,000, or 3.6%, compared to the 1994 level, due in
part to increased travel and entertainment expenses associated with the growth
of Metro's out-of-state business.
Prior to its acquisition by All-Comm, Metro had elected to be taxed under
the provision of Subchapter S of the Code and, as a result, Metro's federal
taxable income or loss and tax credits were passed through to Metro's former
shareholders. Metro's provision for income taxes resulted from income taxes due
on taxable income for states which did not recognize Metro's S corporation
status.
Principally as a result of the foregoing factors, the Company had net
income of $0.5 million in 1995 compared to a net loss of approximately $57,000
in 1994.
LIQUIDITY AND CAPITAL RESOURCES
ALL-COMM MEDIA CORPORATION
The parent company's assets consist primarily of the stock of its
subsidiaries. At June 30, 1996, on a consolidated basis, the Company had cash
and cash equivalents of $1.4 million and accounts receivable, net of allowance
for doubtful accounts, of $2.7 million. On August 16, 1996, the Company sold its
land in Laughlin, Nevada for $1.0 million in cash.
The Company generated losses from operations of $1.3 million in fiscal 1995
and $0.5 million in fiscal 1996. The Company met its liquidity requirements in
fiscal 1995 and 1996 principally through financing activities in the form of
private placements of Common Stock, preferred stock and warrants. In fiscal
1996, the Company's financing activities provided $1.6 million. See Note 13 of
Notes to Consolidated Financial Statements of All-Comm. At June 30, 1996, SD&A
had a $0.5 million line of credit with a bank, which was fully drawn at such
date. The Company is exploring the possible replacement of such line of credit
with a larger credit facility with a different institution. No assurance can be
given that the Company will be able to obtain such a replacement credit
facility, or that any such replacement credit facility will be larger than the
existing facility.
In fiscal 1996, the Company used $0.9 million in cash for operating
activities, principally due to net losses incurred during the first full year
following the acquisition of SD&A. While the SD&A operations generated both
income from operations and net income during fiscal 1996, such amounts were
offset by legal, accounting and other expenditures of approximately $1.4 million
incurred by the parent company in connection with the implementation of the
Company's business strategy, including identification and evaluation of
potential acquisitions and financing sources, and obligations associated with a
prior registration statement and other remaining obligations associated with the
activities of the prior management. The Company's management has satisfied
substantially all known remaining payment obligations arising from activities of
the prior management. Additional cash used in fiscal 1996 resulted from an
increase in accounts receivable at SD&A of $0.6 million due to increases in
sales.
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In fiscal 1996, the Company used $0.6 million in investing activities, most
of which ($0.5 million) was a contingent cash payment to Mr. Stephen Dunn, the
former shareholder and current President of SD&A, as a result of SD&A's meeting
specified financial targets with respect to such fiscal year. Capital
expenditures in fiscal 1996 of $0.1 million were principally leasehold
improvements to increase the usable space at SD&A's offices. The Company moved
its Berkeley calling center in August 1996 at a cost of approximately $0.1
million. In the first quarter of fiscal 1997, the Company expanded the calling
capacity at such calling center at a cost of approximately $75,000. The Company
intends to refinance approximately $.14 million of the expansion and relocation
costs through bank borrowings under SD&A's credit facility.
On April 25, 1995, Alliance and SD&A were acquired for 1,025,000 shares of
Common Stock valued at $2.7 million plus approximately $0.5 million of
acquisition costs. Liabilities assumed as a result of such acquisitions totaled
$6.7 million including the SD&A Seller Debt in the original aggregate principal
amount of $4.5 million, payable with interest at prime over a four year period.
Payments due in fiscal 1996 on the SD&A Seller Debt originally totaled $1.5
million, payable in quarterly installments. Additional contingent payments of up
to $0.85 million per year over the three year period ending June 30, 1998 may be
required to be made to Mr. Dunn based on achievement of defined results of
operations of SD&A. At the Company's option, up to one half of the additional
contingent payments may be made with restricted Common Stock of the Company
subject to certain registration rights. SD&A achieved its defined results of
operations during fiscal 1996 and $0.425 million was paid in cash and $0.425
million accrued in stock, as of June 30, 1996. See 'Certain
Transactions -- Transactions Under Current Management After Alliance
Acquisition -- Transactions with Mr. Dunn.'
In October 1995, the Company increased its cash balances by entering into
an option agreement whereby, in consideration of a cash payment to the Company
of $.15 million, an unaffiliated third party was granted an option to purchase
the Company's undeveloped land in Laughlin, Nevada, for $2.0 million. The option
agreement expired on April 8, 1996, and was extended until July 8, 1996. The
Company bought back the option in July 1996 for $0.15 million, pursuant to a put
provision in the option agreement. On August 16, 1996 the land was sold to
another unaffiliated third party, by auction, for $1.0 million in cash.
In June 1996, the Company completed a private placement with certain
accredited investors of 6,200 shares of Series B Preferred Stock for $3.1
million and 2,000 shares of Series C Preferred Stock for $1.0 million.
In addition, the Company issued warrants to the holders of the Series B
Preferred Stock to purchase a total of 3,100,000 shares of Common Stock at an
exercise price of $2.50 per share exercisable for three years, starting with and
subject to the availability of shares following stockholder authorization of
additional common shares. The Company also issued warrants to holders of the
Series C Preferred Stock to purchase 3,000,000 shares of Common Stock at an
exercise price of $3.00 per share exercisable for three years, starting with and
subject to the availability of shares following stockholder authorization of
additional common shares.
The proceeds of the sale of Series B Preferred Stock and the Series C
Preferred Stock were used by the Company to pay approximately $2.0 million on
account of the SD&A Seller Debt. The remaining $2.1 million of long-term
obligations to Mr. Dunn are payable in 36 monthly principal payments of $58,333
plus interest at 8%, beginning September 19, 1996. In June 1996, the Company
paid $0.8 million in connection with the repurchase of 10,000 shares of
previously outstanding Series A Preferred Stock issued in the private placement
in May 1996. The balance of the proceeds are being used for working capital and
general corporate purposes.
In connection with the Metro acquisition, the Company issued promissory
notes to the former shareholders of Metro in an aggregate principal amount of
$1.0 million. Such notes bear interest at 6% per annum, are scheduled to mature
June 30, 1998 and are convertible at the option of the holders thereof into
185,874 shares of Common Stock.
Due to contingent payments earned as of June 30, 1996 based on SD&A's
earnings, amortization expense will increase by $22,000 in fiscal 1997.
Additional contingent payments may be due at the end of fiscal 1997 and 1998,
which will continue to increase amortization expense in subsequent years. Also,
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the acquisition of Metro in October 1996 will result in increased amortization
expense during fiscal 1997, currently estimated to be $0.3 million in fiscal
1997.
Due to prepayment and restructuring in June 1996, interest on the SD&A
Seller Debt will decrease significantly in fiscal 1997. See 'Certain
Transactions -- Transactions Under Current Management After Alliance
Acquisition -- Transactions with Mr. Dunn.'
In July 1996, All-Comm publicly announced the proposed acquisition of
Metro. The announcement contained a forward-looking statement that the Company
expected Metro's revenues 'to be comfortably in excess of $10 million for the
fiscal year ending June 30, 1997.' Such forward-looking statement is only an
estimate and is not a guarantee of future results. Metro's revenues for such
year may vary from the estimate and such variations may be material. Numerous
factors, many of which are beyond the Company's control, could cause Metro's
actual revenues for such year to be materially different from those expected at
the time of the public announcement. Such factors include those listed under the
heading 'Risk Factors,' in particular those under the subheadings 'Limited
Operating History; Absence of Combined Operating History; Lack of Consolidated
Profitable Operations,' 'Risks Associated with Acquisition and Growth Strategy,'
'Lack of Long-Term Contracts,' 'Government Regulation and Privacy Issues,'
'Rapid Technological Change,' 'Risk of Equipment Failure,' 'Cyclicality,'
'Competition,' 'Dependence upon Key Personnel' and 'Dependence on Relationships
with Data Suppliers.'
The Company believes that the net proceeds of the Offering, together with
funds available from operations, including the operations of Metro, and from the
August 1996 sale of the Laughlin, Nevada land should be adequate to finance its
operations and enable the Company to meet interest and debt obligations through
its fiscal year ending June 30, 1998. In conjunction with the Company's
acquisition and growth strategy, additional financing may be required to
complete such acquisitions and to meet potential contingent acquisition
payments. There can be no assurance, however, that such capital, if required,
will be available on terms acceptable to the Company, if at all. See 'Risk
Factors -- Possible Need for Additional Financing.'
In addition, up to 9,198,922 shares of Common Stock are issuable upon
exercise of certain options, warrants or other contractual rights, depending on
the extent to which the Underwriters' over-allotment options are exercised, if
at all. Although no assurance can be given that any of such options, warrants or
other contractual rights will be exercised, if all of such options, warrants and
other contractual rights having exercise prices at or below the assumed public
offering price for the Common Stock of $5 3/8 per share were exercised, the
aggregate proceeds to the Company resulting therefrom would be approximately
$28.7 to $28.8 million, depending on the extent to which the Underwriters' over-
allotment options are exercised. The Company expects that it would use such
proceeds, if any, for general corporate purposes, including possible future
acquisitions.
METRO SERVICES GROUP, INC.
Metro's primary source of working capital is cash provided by operating
activities. In the year ended December 31, 1995 and the first six months of
1996, Metro generated cash from operating activities of approximately $39,000
and $0.4 million, respectively. The cash provided by operating activities in the
first six months of 1996 was generated largely from increases in collections of
accounts receivable. Cash at June 30, 1996 was approximately $0.1 million. Metro
had no committed lines of credit at such date and does not have any current
plans to obtain any such commitment.
Metro's capital expenditures consist primarily of computer hardware,
software and related equipment and office equipment. Investments in such fixed
assets in 1995 and the first six months of 1996 were approximately $43,000 and
$17,000, respectively. Metro expects to receive from All-Comm between $1.7
million and $2.0 million of the net proceeds of the Offering for investments in
such fixed assets, principally computer hardware and software.
Prior to its acquisition by All-Comm, Metro had elected to be taxed under
the provisions of Subchapter S of the Code and, as a result, Metro's federal
taxable income or loss and tax credits were passed through to Metro's former
shareholders. Metro's provision for income taxes resulted from income taxes due
on taxable income for states which did not recognize Metro's S corporation
status. In
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addition, in order to permit its shareholders to meet their tax obligations
resulting from Metro's 1995 operations, during the first six months of 1996
Metro paid dividends of approximately $0.2 million to its shareholders. As a
result of All-Comm's acquisition of Metro, Metro is no longer an S corporation.
During the first six months of 1996, Metro advanced $50,000 to one of its
shareholders. See 'Certain Transactions -- Transactions Under Current Management
After Alliance Acquisition -- Indebtedness of Management.'
NEW ACCOUNTING PRONOUNCEMENTS
Adoption of the Financial and Accounting Standards Board ('FASB') Statement
of Financial Accounting No. 121, 'Accounting for the Impairment of Long-Lived
Assets for Long-Lived Assets to be Disposed of,' which is effective for
financial statements for fiscal years beginning after December 15, 1995, is not
anticipated to have a material effect on the Company's consolidated financial
statements.
The FASB recently issued Statement of Financial Accounting No. 123,
'Accounting for Stock-Based Compensation' ('SFAS 123'), which is effective for
financial statements for fiscal years beginning after December 15, 1995. SFAS
123 establishes new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation cost for
stock-based compensation under SFAS 123 or APB Opinion No. 25, 'Accounting for
Stock Issued to Employees.' The Company has elected to continue the accounting
treatment of such compensation pursuant to APB Opinion No. 25. However, starting
in the first quarter of fiscal 1997 the Company will be required to make pro
forma disclosure of net income and earnings per share as if the provisions of
SFAS 123 had been applied.
BUSINESS
All-Comm provides database management services, custom
telemarketing/telefundraising services and other direct marketing services to a
diverse group of approximately 600 clients located throughout the United States.
These services include customer and market data analysis, database creation and
analysis, data warehousing, merge/purge, predictive behavioral modeling, list
processing, brokerage and management, data enhancement, other direct marketing
information services and custom outbound telemarketing/telefundraising services.
Through this combination of services, the Company assists its clients in
defining target markets and uses sophisticated data analysis to support and
track the results of clients' direct marketing campaigns. The Company believes
its expertise in applying these direct marketing tools increases the
productivity of its clients' marketing expenditures.
The Company's value-added premium services have enabled it to become a
leading provider of database management services, custom
telemarketing/telefundraising services and other direct marketing services to
performing arts and cultural institutions in the United States. The Company's
clients include Lincoln Center for the Performing Arts, Kennedy Center for the
Performing Arts, Art Institute of Chicago, Dallas Symphony, Carnegie Hall, New
York Philharmonic, Los Angeles Philharmonic, Boston Symphony, Atlanta Opera,
Detroit Symphony, New York University, UCLA and numerous public broadcasting
stations. In addition, the Company renders database management and direct
marketing services to such commercial clients as The Shubert Organization, Crain
Communications, The CIT Group, 3Com Corporation, Mitsubishi Electronics and
UNOCAL. Since January 1996, the Company has begun providing services to new
clients including Seattle Art Museum, Walt Disney Company, Avery Dennison,
Countrywide Insurance and Nomura Asset Capital Corporation.
The Company utilizes industry specific knowledge and proprietary database
software applications developed at its data center in New York City to produce
customized data management and direct marketing solutions for its clients. The
Company's custom telemarketing/telefundraising services are conducted both
on-site at client-provided facilities and also at the Company's calling center
in Berkeley, California. By providing these services, the Company seeks to
become an integral part of its clients' marketing programs which the Company
believes fosters long-term client relationships and provides opportunities for
recurring revenues and business growth.
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THE DIRECT MARKETING INDUSTRY
Overview. Direct marketing is used for a variety of purposes including
lead-generation and prospecting for the acquisition of new customers, enhancing
existing customer relationships, exploring the potential for new products and
services and establishing new products. Unlike traditional mass marketing, which
aims at a broad audience and focuses on creating image and general brand or
product awareness, successful direct marketing requires the identification and
sophisticated analysis of relationships between customers and their purchasing
patterns. Such patterns enable businesses to more easily identify and create a
customized message aimed at a highly defined audience. This communication is
intended to produce more favorable responses from customers or prospects who
have been approached in a more individualized manner as compared to mass
marketing. Previously, direct marketing activity consisted principally of direct
mail, but now has expanded into the use of multiple mediums including
telemarketing, print, television, radio, video, CD-ROM, on-line services, the
Internet and a variety of other interactive marketing formats.
The analysis, enhancement and management of customer information and
related marketing data are integral to the successful implementation of a direct
marketing program. Database management capabilities allow for the creation of
lists of customers with specific, identifiable attributes. Direct marketers
utilize such lists to customize messages and marketing programs that generate
new customers whose purchasing patterns can be statistically analyzed to isolate
key determinants. In turn, this enables direct marketers to continually evaluate
and adjust their marketing programs, and to measure customer response rates in
order to assess returns on marketing expenditures, which the Company believes
increases the effectiveness of such marketing programs.
Database management covers a range of services, including general marketing
consultation, execution of marketing programs and the creation and development
of customer databases and sales tracking and data analysis software. Data
analysis software consolidates and analyzes customer profile information to find
common characteristics among buyers of certain products. The results of such
tracking and analysis are used to define and match customer and product
attributes from millions of available database files for future direct marketing
applications. The process is one of continual refinement, as the number of
points of contact with customers increases, together with the proliferation of
mediums available to reach customers.
Telemarketing/telefundraising projects generally require significant
amounts of customer information supplied by the client or third party sources.
Custom telemarketing/ telefundraising programs seek to maximize a client's
direct marketing project results by utilizing appropriate databases to
communicate with a highly specific audience having identifiable demographics.
This customization is often achieved through sophisticated and comprehensive
data analysis which identifies psychographic, cultural and behavioral patterns
and preferences, in specific geographic markets.
Industry Growth. The use of direct marketing by businesses has increased
over the last few years due in part to the relative cost efficiency of direct
marketing compared to mass marketing, as well as the rapid development of more
powerful and more cost-effective information technology and data capture
capabilities. According to industry sources, over the next decade, demographic
shifts and changes in lifestyle, combined with a proliferation of new marketing
mediums, are expected to create higher demand for marketing information and
services that provide businesses with direct access to their customers and a
more efficient means of targeting specific audiences and developing long-term
customer relationships. According to the DMA, expenditures for direct marketing
services in 1995 were approximately $134.0 billion, the largest component of
which, $54.1 billion, was attributable to telemarketing. The DMA has estimated
that annual telemarketing expenditures may grow to $78.9 billion by the year
2000. According to other industry sources, total expenditures for database
management services in the United States, including services used by direct
marketing and other industries, were estimated to have been $3.2 billion in 1993
and are projected to grow at a compound annual rate of 29% through 1998.
The Company believes that more businesses will seek to utilize marketing
information systems and data analysis, enhancement and management to identify
customer attributes and behaviors, in order to apply direct marketing
methodologies to a wider range of marketing and media applications. Corporate
marketing departments often lack the technical expertise to create, manage and
control these aspects of
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the direct marketing process. As a result, the Company believes that there is a
growing trend among direct marketers to utilize or rely on service providers to
implement direct marketing programs.
Industry Consolidation. The direct marketing industry is extremely
fragmented. According to industry sources, there are over 11,000 direct
marketing service and database service businesses in the United States. The
Company believes that most of such businesses are small, specialized companies
which offer limited services and/or limited expertise and industry
specialization. However, industry consolidation has increased in the last few
years resulting in a greater number of large companies providing services
similar to those provided by the Company. See ' -- Competition.' The Company
believes that much of this consolidation is due to: (i) the economies of scale
expected to be obtained by direct marketing service providers in hardware,
software and other marketing resources; (ii) the objective of direct marketing
service providers to cross-sell services; and (iii) the growing need to
coordinate various components of direct marketing and media programs within a
single, reliable environment. The Company believes these trends are likely to
continue due in part to client demand for more cost-effective service to perform
increasingly complex functions that support such marketing and media programs.
SERVICES
The Company's operating businesses provide comprehensive database
management services, custom telemarketing/telefundraising services and other
direct marketing services. The principal advantages of these customized services
include: (i) the ability to expand and adapt a database to the client's changing
business needs; (ii) the ability to have these services operate on a flexible
basis consistent with the client's goals; and (iii) the integration with other
direct marketing services of database management services and list processing
services, which is necessary to keep a given database current. Some of the
services offered by the Company are described below.
Database Management Services. The Company's broad range of database
management services begins with the Company's approach to database creation and
development. This includes several planning stages and analytical processes by
which all of the client's customer and operational files are analyzed. Utilizing
both proprietary applications and commercial software, the Company consolidates
all of the separate information and relationships across multiple files and
converts the client's raw information into a consolidated format. Once the
client's customer data is consolidated and the database created, the Company
enhances the data by utilizing a wide selection of demographic, geographic,
census (age, approximate income level, education level and household
composition) and lifestyle information for over 95 million households and 153
million individuals to identify patterns and probabilities of behavior. The
Company licenses this information from a variety of leading data compilers. See
'Risk Factors -- Dependence on Relationships with Data Compilers.'
The combination of each client's proprietary customer information with
these external data files provides a customized profile of a client's customer
base, enabling the client, through the use of the Company's behavior modeling
and analysis services, to design a direct marketing program for its customers.
Through the development of a scoring model, the client can segment its database
and determine its best customers and prospects in each marketplace. The entire
process results in a customized direct marketing program that can be targeted to
distinct audiences with a high propensity to buy the client's products or
services. Because of the dynamic nature and complexity of these databases,
clients frequently request that the Company update such databases with the
results of recent marketing programs and periodically perform list processing
services as part of the client's ongoing direct marketing efforts.
Data Processing. The Company's primary data processing service is to
manage, on a cost-effective basis from the Company's data center, all or a
portion of a client's marketing information processing needs. After migrating a
client's raw data to the Company's data center, the Company's technology allows
the client to continue to request and access all available information from
remote sites. Further, the database can be verified for accuracy and overlayed
with external data elements to further identify specific consumer behavior.
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Other data processing services provided include migration (takeover and
turnover) support for database maintenance or creation, merge/purge, data
overlay and postal qualification. The Company also offers on-line and batch
processing capacity, technical support, and data back-up and recovery.
List Services. List processing includes the preparation and generation of
comprehensive name and address lists which are used in direct marketing
promotions. The Company's state-of-the-art data center in New York City and
large volume processing capabilities allow the Company to meet the list
processing needs of its clients through its advanced list processing software
applications, list brokerage and list management operations. The Company
customizes list processing solutions by utilizing a variety of licensed software
products and services, such as Address Conversion and Reformat, Address
Standardization and Enhanced Merge/Purge, as well as National Change of Address
(NCOA), Delivery Sequence File and Locatable Address Conversion System. Other
licensed products include databases used for suppressions such as the DMA Mail
Preference File and the American Correctional Association Prison Suppress File.
The Company also offers an array of list acquisition techniques.
Approximately 12,000 lists are available for rental in the list industry. The
Company's account managers, most of whom are hired from existing Company
accounts, use their industry experience as well as sophisticated computer
profiles to recommend particular lists for customer acquisition campaigns. The
Company acquires hundreds of millions of records annually for customer
acquisition campaigns. The Company also manages over 75 lists for rental
purposes on behalf of list owners.
Database Product Development. To further leverage its database management
and list processing services, the Company has developed a new product using
client/server technology. The product is a scalable, three-tiered client/server
data warehouse system that provides desktop, real-time decision support and
marketing analysis to a non-technical user. This application is an intuitive,
graphical user interface tool that offers both flexibility and the ability to
access and analyze large customer files exceeding 100 million records. The
incorporation of third-party software, relational and multidimensional database
technology in an open system environment is intended to allow the Company's
clients to take advantage of the latest developments in high-speed computing,
utilizing both single and multi-processor hardware, as well as the Company's
experience in the development and integration of database marketing systems
applications. See 'Risk Factors -- Rapid Technological Change.'
Custom Telemarketing/Telefundraising Services. Custom
telemarketing/telefundraising services are designed according to the client's
existing database and any other databases which may be purchased or rented on
behalf of the client to create a direct marketing program or fundraising
campaign to achieve specific objectives, such as renewing annual memberships,
season ticket purchases, enlarging the general constituency of an institution,
capital projects financing, establishing a new donor pledge base, soliciting
donations and other programs which may be annually recurring or limited in
duration. After designing the program according to the marketing information
derived from the database analysis, it is conceptualized in terms of message
content and values to be contained in the offer or solicitation, and an
assessment is made of other supporting elements, such as the use of a direct
mail letter campaign, to precede the initial contact call.
Typically, a campaign is designed in collaboration with a client, tested
for accuracy and responsiveness and adjusted accordingly, after which the full
campaign is commenced. The full campaign runs for a mutually agreed period,
which can be shortened or extended depending on the results achieved.
A distinguishing feature of the custom telemarketing/telefundraising
campaign is that it can be implemented either on-site at a client-provided
facility or at the Company's calling center in Berkeley, California. On-site
campaigns are generally based on what is called a 'relationship' or 'affinity'
sale. Telemarketing campaigns often require multiple calls whereby a caller must
be knowledgeable about the organization and the subject matter and will seek to
engage a prospect selected from the client's database in an extended
conversation which serves to: (i) gather information; (ii) convey the offer,
describe its merits and cost, and solicit gifts or donations; and (iii) conclude
with a purchase, donation or pledge. Telefundraising from the Company's calling
center usually involves campaigns that do not use the multiple call format, but
instead use computer driven predictive dialing systems which are designed to
maximize the usage rate for all telephones as the system works through the
calling database.
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Market Analysis. The Company's market research services include problem
conceptualization, program design, data gathering from relational databases and
data tabulation and results analysis, conducted through telephone, mail and
focus groups. Through the use of data capture technology, the Company is also
able to obtain data from a statistically projectable sample of market survey
contacts. The Company then tabulates and analyzes fielded data using
multi-variate statistical techniques, and produces detailed reports that can
answer clients' marketing questions and suggest further avenues of inquiry where
appropriate.
Direct Mail Support Services. The Company's direct mail support services
include preparing and coordinating direct marketing database services and custom
telemarketing/telefundraising services for use in addressing and mailing
materials to current and potential customers of the Company's clients. The
Company obtains name and address data from clients and other external sources,
processes the data to eliminate duplicates, corrects errors, sorts for postal
discounts and electronically prepares the data for other vendors who will
address pre-printed materials, in some cases with personalized greetings and
messages.
Custom Value-Added Premium Services. The Company offers additional
value-added premium services, such as strategic marketing, planning and
consulting services, and management training to complement its core database
management services, custom telemarketing/telefundraising services and other
direct marketing services.
MARKETING AND SALES
The Company's marketing strategy is to offer customized value-added
solutions to its clients' database management, telemarketing/telefundraising and
other direct marketing requirements. Historically, the Company's operating
businesses have acquired new clients and marketed their services primarily by
attending trade shows, advertising in industry publications, responding to
requests for proposals, pursuing client referrals and cross-selling to existing
clients. The Company targets those companies that it believes have the greatest
propensity to generate recurring revenues because of their ongoing direct
marketing needs, and also those companies which have large customer bases that
can benefit from targeted direct marketing database services and customized
telemarketing/telefundraising services.
The Company markets its database management services, custom
telemarketing/telefundraising services and other direct marketing services
through a sales force consisting of both salaried and commissioned sales
persons. In many instances, account representatives, when servicing the same
client, will coordinate such client's database management, custom
telemarketing/telefundraising and/or other direct marketing needs in an effort
to provide the highest performance possible and to identify cross-selling
opportunities.
Account representatives are responsible for keeping existing and potential
clients informed of the results of recent marketing campaigns, industry trends
and new developments in the Company's technical database resources. Often, the
Company develops an initial pilot program for new or potential clients to
demonstrate the Company's abilities and the effectiveness of its services.
Access to data captured during such pilot programs allows the Company and its
clients to identify previously unrecognized target market opportunities and to
modify or enhance the client's marketing effort on the basis of such
information. Additionally, the Company is able to provide its clients with
current updates on the progress of ongoing direct marketing programs.
Pricing for database management services, custom
telemarketing/telefundraising services and other direct marketing services is
dependent upon the complexity of the services required. In general, the Company
establishes pricing for clients by detailing a broad range of service options
and quotation proposals for specific components of a direct marketing program.
These quotes are based in part on the volume of records to be processed and the
level of customization required. Additionally, if the level of up-front
customization is high, the Company charges a one-time development fee. Pricing
for data processing services is dependent upon the anticipated range of computer
resource consumption. Typically, clients are charged a flat or stepped-up rate
for data processing services provided under multi-year contracts. If the
processing time, data storage, retrieval requirements and output volume exceed
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the budgeted amounts, the client may be subject to an additional charge. Minimum
charges and early termination charges are typically included in contracts or
other arrangements between the Company and the client.
On-site telemarketing and telefundraising fees are generally based on a
mutually agreed percentage of amounts received from a campaign. Off-site fees
are typically based on a mutually agreed amount per contact with a potential
donor.
PERSONNEL AND TRAINING
The Company believes that the quality and training of its employees is a
key element of client satisfaction. The Company further believes that its
strategy of recruiting personnel with industry specific experience, technical
knowledge or particular affinities or experience related to the client's purpose
or activities, particularly with respect to its custom
telemarketing/telefundraising on-site calling services, attracts a high-quality,
effective and dedicated work force. The Company offers extensive in-house and
on-the-job training programs for its personnel, including instruction on the
nature and purpose of the specific database management projects or
telemarketing/telefundraising campaigns, as well as regular briefings concerning
regulatory matters relating to privacy issues and proper telemarketing and data
capture techniques. With respect to telemarketing projects, calls are typically
made from a lead provided by the client or other third party sources. Callers
are always required to identify themselves and the institution they represent,
in advance of any dialogue. Since calls are meant to be non-intrusive and
friendly, it often takes two or more calls to a customer to confirm a purchase,
renewal, new subscription or contribution.
In addition, as is typical in the telemarketing industry as a whole,
approximately 80% of the Company's service representatives are part-time
employees who are compensated on an hourly basis with a commission and/or
performance bonus. The Company's decision to use calling facilities provided by
a client relates in part to the Company's high level of dedication to customer
service and to the localized talent pool found by the Company to be most
effective for promoting employee retention. As of June 30, 1996, the Company had
approximately 135 full-time employees. In addition, during peak periods, the
Company has employed as many as 1,000 part-time or temporary employees. None of
the Company's employees is represented by a labor union and the Company believes
it has satisfactory relations with its employees.
CLIENT BASE
The Company believes that its large and diversified client base is a
primary asset which contributes to stability and the opportunity for growth in
revenues. The Company has approximately 600 clients who utilize various database
management services, custom telemarketing/telefundraising services and other
direct marketing services. These clients are comprised of leading arts and
cultural institutions, advocacy groups, and commercial companies in the
publishing, live entertainment and events marketing, public broadcasting,
financial services (including credit card, home mortgage and home equity
services), education, travel and leisure and healthcare industries. No single
client accounted for more than 8% of such total revenue in fiscal 1996 on a pro
forma basis.
QUALITY ASSURANCE
Each of the Company's operating businesses has consistently emphasized
quality service and extensive employee training. In particular, the Company's
quality assurance program with respect to its telemarketing/telefundraising
services includes the selection and training of qualified calling
representatives, the training and professional development of call center
management personnel, monitoring of calls and sales verification and editing.
Both the Company and its clients are able to perform real time on-site and
remote call monitoring to maintain quality and efficiency. Sales confirmations
may be recorded (with customer consent), and calls may also be monitored by
management personnel to verify the accuracy and authenticity of transactions.
The Company diligently pursues its policies of good practice and has had
satisfactory experience with regulators concerning its activities. Although the
telemarketing industry has had, in certain instances, a history of abusive
practices, many of which have been targeted at the elderly or uneducated
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segments of the population, the individuals targeted by the Company generally
consist of affinity group members who are receptive to the calls, often
volunteering valuable marketing information to the institution for which the
representative is calling.
COMPETITION
The direct marketing services industry in which the Company operates is
highly competitive and fragmented, with no single dominant competitor. The
Company regularly competes with companies that have more extensive financial,
marketing and other resources and substantially greater assets than those of the
Company, thereby enabling such competitors to have an advantage in obtaining
client contracts where sizable asset purchases or investments are required. The
Company also competes with in-house database management,
telemarketing/telefundraising and direct mail operations of certain of its
clients or potential clients.
Competition is based on the quality and reliability of products and
services, technological expertise, historical experience, ability to develop
customized solutions for clients, technological capabilities and price. Based on
these factors, together with its extensive list of nationally known clients and
the longevity of the Company's relationships with many of such clients, the
Company believes that it competes favorably, especially in the performing arts,
and cultural sectors. The Company's principal competitors in the database
management services field are Acxiom, Inc., Dimac Corporation, Direct Marketing
Technology, Fair - Isaac, Inc., Harte-Hanks Communications, Inc. and May & Speh,
Inc. The Company's principal competitors in the custom
telemarketing/telefundraising field are Arts Marketing, Inc. and Ruffalo, Cody &
Associates, and, with respect to the operation of calling centers, The Share
Group and Great Lakes Communications.
COMPETITIVE STRENGTHS
Customized Value-Added Premium Services. The Company believes that many of
its services can be distinguished from those of its competitors because of the
custom nature and value-added component it provides within the client's overall
marketing process. This customization and value-added component arises from
enhancing and integrating data provided by or generated for clients to achieve
the most productive and cost-effective marketing program for the client's
particular goals and target audience. The Company, as a value-added custom
service provider, not only collaborates on message content but also assists its
client in identifying which medium or mix of mediums, such as print, mail,
telephone, television, on-line computer network or other media, is best suited
to implement the client's marketing program.
Large Number of Long-Term Client Relationships and Recurring Revenue
Streams. The Company has over 600 clients and believes that the reason a
substantial majority of its clients have been clients for many years is because
of its ability to continue to provide quality service with added value on a
customized basis, and because such services produce satisfying results for such
clients. This relationship has benefited the Company in its ability to gain
knowledge of and experience with a client's customer base and market dynamics as
well as in-depth knowledge of the industry in which the client participates. The
Company seeks recurring revenues by becoming an integral part of such clients'
marketing programs by offering a wide breadth of ongoing interrelated services.
Although many of the Company's arrangements with clients are entered into on a
project by project basis, it has been the Company's experience that its database
management clients cannot easily change service providers due to the breadth and
nature of the ongoing services provided by the Company, largely because these
services often become a key element of the clients' marketing operations and
there are significant costs associated with making such a change. See 'Risk
Factors -- Lack of Long-Term Contracts.'
Continuity of Management, Industry Specific Expertise and Investment in
Technical Personnel. The Company believes that its industry focused approach
creates a competitive advantage over other providers of database management,
custom telemarketing/telefundraising services and other direct marketing
services who have a more generalized approach. The Company has hired and seeks
to hire many individuals with extensive industry specific experience who
understand the nature of the clients' customers and donors and the dynamics of
the marketplace in which the clients operate. The Company
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considers such personnel better able to apply the Company's proprietary know-how
and software programs to meet the client's direct marketing and data processing
needs.
State-of-the-Art Technology. The Company's investment in state-of-the-art
technology has enabled it to provide premium quality service to its clients to
whom the use of timely, accurate data is critical for the success of their
direct marketing programs. This is particularly true with respect to the
Company's database management services that are designed to drive higher
response rates within the specific time period allotted for a marketing program.
In addition, much of the data processing which is outsourced to the Company by
its clients requires prompt turnaround time for marketing decisions to be made
in the development and application of time sensitive customer information.
TECHNOLOGICAL RESOURCES AND FACILITIES
The Company maintains a state-of-the-art outbound
telemarketing/telefundraising calling center in Berkeley, California. The
Berkeley calling center increases the efficiency of its outbound calling by
using an EIS Systems predictive dialing system supported by a UNIX-based call
processing server system and networked computers. The predictive dialing system,
using relational database software, supports 72 outbound telemarketers and
maximizes calling efficiency by reducing the time between calls for each calling
station and reducing the number of calls connected to wrong numbers, answering
machines and electronic devices. The system provides on-line real time reporting
of caller efficiency and client program efficiency as well as flexible and
sophisticated reports analyzing caller sales results and client program results
against Company and client selected parameters. The Berkeley calling center has
the capacity to serve up to 15 separate clients or projects simultaneously and
can produce 27,000 valid contacts per week (1,400,000 per year) or 3,400 calling
hours per week (176,800 per year) on a single shift basis. A valid contact
occurs when the caller speaks with the intended person and receives a 'yes,'
'no' or 'will consider' response. The existing platform can be expanded to
accommodate 100 predictive dialing stations with a single shift capacity of
approximately 1,900,000 valid contacts per year.
INTELLECTUAL PROPERTY RIGHTS
The Company relies upon its trade secret protection program and
non-disclosure safeguards to protect its proprietary computer technologies,
software applications and systems know-how. In the ordinary course of business,
the Company enters into license agreements and contracts which specify terms and
conditions prohibiting unauthorized reproduction or usage of the Company's
proprietary technologies and software applications. In addition, the Company
generally enters into confidentiality agreements with its employees, clients,
potential clients and suppliers with access to sensitive information and limits
the access to and distribution of its software documentation and other
proprietary information. No assurance can be given that steps taken by the
Company will be adequate to deter misuse or misappropriation of its proprietary
rights or trade secret know-how. The Company believes that there is rapid
technological change in its business and, as a result, legal protections
generally afforded through patent protection for its products are less
significant than the knowledge, experience and know-how of its employees, the
frequency of product enhancements and the timeliness and quality of customer
support in the usage of such products.
GROWTH STRATEGY
As the markets for the Company's services continue to demand increasingly
sophisticated database management services, custom telemarketing/telefundraising
services and other direct marketing services, the Company believes that there
are significant growth opportunities to continue to expand its business. The
Company seeks to become a leading provider of these services by providing a more
comprehensive approach to servicing the needs of its clients' marketing
programs. Accordingly, the key elements of the Company's growth strategy are as
follows:
Increase Revenues by Expanding the Range of Services Offered and by
Cross-Selling. The Company intends to generate additional revenues from existing
clients by offering a wider range of direct marketing services while maintaining
its current level of quality and performance. To effect this strategy, the
Company is focused on assembling a sophisticated spectrum of direct marketing
services, including enhancing and expanding outbound custom
telemarketing/telefundraising services, market research,
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training, marketing, consulting, and database management services and making
available to its clients an array of ancillary services that include electronic
and other multimedia mediums, including the Internet and other on-line services,
for inclusion within their marketing programs. In particular, the Company will
utilize its technological and industry expertise to provide flexible solutions
designed to meet its clients' specialized requirements through an integrated
approach to direct marketing programs and improved coordination between its
database capabilities and its value-added premium telemarketing services.
Deepen Market Penetration. The Company intends to capitalize on its areas
of core competencies and industry specific expertise, particularly in the
performing arts and cultural markets, which it believes will enable it to
maintain a competitive advantage within these markets. For example, the live
entertainment and events marketing industry spends substantial amounts on
advertising and direct marketing programs which utilize many of the Company's
services, such as audience analysis, customer profiling, database creation and
management, list processing services, telemarketing for products and ticket
sales, and direct marketing support for media events, retail and catalog sales.
The Company believes its expertise in database management and custom
telemarketing will permit it, over time, to gain an increasing share of the
industries which it currently serves.
The Company also intends to apply its expertise and know-how with respect
to industries served to a more limited extent by the Company. The Company
believes that its broad and well-known client base, and its quality service and
performance, will enable the Company to gain further acceptance in such
industries as publishing, live entertainment and events marketing, public
broadcasting, financial services (including credit card, home mortgage and home
equity services), education, travel and leisure and healthcare, all of which
have been identified by the Company as potential growth areas.
Further Develop Existing and Create New Proprietary Software and Database
Management Applications. The Company intends to continue to develop existing and
new proprietary software products and services that allow customized data
processing and enhancement of a client's direct marketing databases. These
software products and services also improve the effectiveness of telemarketing
programs and the management of client information. The Company intends to
continue to expand its direct marketing service offerings, particularly with
software designed to create and manage large relational and/or multidimensional
databases, and its ability to integrate such data with different marketing
programs developed in collaboration with its clients.
Increase Capacity for Telemarketing/Telefundraising Services and Enhance
On-Site Data and Calling Systems. The Company has recently expanded its calling
center facilities in Berkeley, California to accommodate more calling stations
and upgraded technology in order to increase revenues, improve margins and
afford greater efficiency in client direct marketing programs. The Company
intends to implement similar technological improvements at its on-site locations
through new technology configurations and software systems that link information
with client databases and direct marketing programs and to further upgrade both
the Berkeley calling center and these on-site locations as needed.
Pursue Strategic Acquisitions, Joint Ventures and Marketing Alliances. The
Company believes that as the direct marketing industry consolidates, breadth of
skills, industry knowledge and size will be increasingly critical to providing
value-added premium services. As a result, the Company intends to expand its
direct marketing service capabilities to increase its breadth of skills and
industry knowledge and help clients to improve their returns on marketing
expenditures. The Company is currently considering several acquisitions in order
to enlarge its core competencies, enable it to enter new markets and increase
its potential for cross-selling. See 'Risk Factors -- Risks Associated with
Acquisition Strategy.'
The Company also intends to continue to grow internally by investing in
systems, technology and personnel development to enable its clients to utilize,
within a single environment, various services such as database creation, data
warehousing, database management and decision support capabilities, list
processing, modeling, and response measurement and analysis. Because these
services provide the fundamental support systems for the direct marketing and
media selection processes, the Company will seek to expand its base of
technology and know-how, and its telemarketing services, often in conjunction
with direct mail, television, print and various electronic mediums.
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GOVERNMENT REGULATION AND PRIVACY ISSUES
The telemarketing industry has become subject to an increasing amount of
federal and state regulation during the past five years. The TCPA limits the
hours during which telemarketers may call consumers and prohibits the use of
automated telephone dialing equipment to call certain telephone numbers. The
TCFAPA broadly authorizes the FTC to issue regulations prohibiting
misrepresentations in telemarketing sales. The FTC's new telemarketing sales
rules prohibit misrepresentations of the cost, terms, restrictions, performance
or duration of products or services offered by telephone solicitation, prohibit
a telemarketer from calling a consumer when that consumer has instructed the
telemarketer not to contact him or her, prohibit a telemarketer from calling
prior to 8:00 a.m. or after 9:00 p.m. and specifically address other perceived
telemarketing abuses in the offering of prizes and the sale of business
opportunities or investments. Violation of these rules may result in injunctive
relief, monetary penalties or disgorgement of profits and can give rise to
private actions for damages.
While the FTC's new rules have not caused the Company to alter its
operating procedures, additional federal or state consumer-oriented legislation
could limit the telemarketing activities of the Company or its clients or
significantly increase the Company's costs of regulatory compliance.
Several of the industries which the Company intends to serve, including the
financial services, and healthcare industries, are subject to varying degrees of
government regulation. Although compliance with these regulations is generally
the responsibility of the Company's clients, the Company could be subject to a
variety of enforcement or private actions for its failure or the failure of its
clients to comply with such regulations.
In addition, the growth of information and communications technology has
produced a proliferation of information of various types and has raised many new
issues concerning the privacy of such information. Congress and various state
legislatures have considered legislation which would restrict access to, and the
use of, credit and other personal information for direct marketing purposes. The
direct marketing services industry, including the Company, could be negatively
impacted in the event any of these or similar types of legislation are enacted.
Currently the Company trains its service representatives and other
personnel to comply with the regulations of the TCPA, the TCFAPA and the FTC and
the Company believes that it is in substantial compliance with all such
regulations.
LEGAL PROCEEDINGS
The Company is, and, from time to time may be, a party to routine legal
proceedings incidental to its business. The outcome of these legal proceedings
are not expected to have a material adverse effect on the consolidated financial
condition, liquidity or expectations of the Company, based on the Company's
current understanding of the relevant facts and law.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's executive officers, Directors and significant employees and
their positions with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- -----------------------------------------------------------
<S> <C> <C>
Barry Peters........................ 55 Chairman of the Board of Directors and Chief Executive
Officer
E. William Savage................... 54 Director, President, Chief Operating Officer, Secretary and
Treasurer
S. James Coppersmith................ 63 Director
Seymour Jones....................... 65 Director
C. Anthony Wainwright............... 63 Director
J. Jeremy Barbera................... 40 Director and Vice President of All-Comm and President and
Chief Executive Officer of Metro
Stephen Dunn........................ 46 Vice President of All-Comm and President and Chief
Executive Officer of SD&A
Robert M. Budlow.................... 35 Vice President of All-Comm and Executive Vice President and
Chief Operating Officer of Metro
Scott A. Anderson................... 39 Chief Financial Officer
Thomas Scheir....................... 43 Vice President and Chief Operating Officer of SD&A
</TABLE>
Mr. Peters has been Chairman of the Board and Chief Executive Officer of
the Company since the acquisition of Alliance in April 1995 and has 26 years of
experience in business development and corporate finance. Prior thereto, Mr.
Peters served as Chairman and Chief Executive Officer of Alliance, which he
co-founded, since its formation in 1994. Prior to the formation of Alliance,
from 1972 to 1993, Mr. Peters served as the Managing Director of Vector
Holdings, Inc. and its predecessor companies, an investment concern which
specialized in sponsoring management groups for buyouts and restructurings of
companies including: ESB Ray-O-Vac Corp., Time, Inc., Avco/Embassy Pictures
Corp., Signal Companies, Inc., ITT Corporation, Borg-Warner Corporation and F.
Schumacher & Co., Inc.
Mr. Savage has been a Director and President, Chief Operating Officer,
Secretary and Treasurer of the Company since the acquisition of Alliance in
April 1995 and has 27 years of executive business experience with emphasis on
operations, marketing and business development. Prior thereto, he served as
President of Alliance, which he co-founded, since its formation in 1994. In
addition, Mr. Savage has been serving since 1991 as a director and as President
of Movie Theatre Associates, Inc. and Movie Theatre Holdings, Inc., a general
partner and a limited partner, respectively, of Movie Theatre Investors Ltd., an
investment partnership that owns and operates movie theatres.
Mr. Coppersmith has been a Director of the Company since June 1996. Since
1994, Mr. Coppersmith has been Chairman of the Board of Trustees of Boston's
Emerson College. Until his retirement in 1994, he held various senior executive
positions with Metromedia Broadcasting where he managed its television
operations in Los Angeles, New York, and Boston, and served as President and
General Manager of Boston's WCVB-TV, an ABC affiliate owned by The Hearst
Corporation. Mr. Coppersmith also serves as a director for WABAN, Inc., Sun
America Asset Management Corporation, Chyron Corporation, Uno Restaurant Corp.,
Kushner/Locke, Inc., and The Boston Stock Exchange.
Mr. Jones has been a Director of the Company since June 1996. From April
1974 to September 1995, Mr. Jones was a senior partner of the accounting firm of
Coopers & Lybrand L.L.P. Mr. Jones has over 35 years of accounting experience
and over 10 years of experience as an arbitrator and as an expert witness,
particularly in the area of mergers and acquisitions.
Mr. Wainwright has been a Director of the Company since August 1996 and
also served as a Director of the Company from the acquisition of Alliance until
May 1996. Prior thereto, he was a director of Alliance. Mr. Wainwright also has
been Chairman and Chief Executive Officer of the advertising firm Harris Drury
Cohen, Inc. since 1995. Prior thereto, from 1994 to 1995, he served as a senior
executive with Cordiant P.L.C.'s Compton Partners, a unit of the advertising
firm Saatchi &
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Saatchi World Advertising, and, from 1989 to 1994, as Chairman and Chief
Executive Officer of Campbell Mithun Esty, a unit of the advertising firm
Saatchi & Saatchi World Advertising, in New York. Mr. Wainwright also serves as
a director of Gibson Greeting, Inc., Del Webb Corporation, American Woodmark
Corporation and Specialty Retail Group, Inc.
Mr. Barbera has been a Director and Vice President of the Company since
October 1996 and President and Chief Executive Officer of Metro since its
formation in 1987. Mr. Barbera has 15 years of experience in data management
services, and over 20 years of experience in the entertainment marketing area.
Mr. Dunn has been Vice President of the Company since September 1996 and
has also been President and Chief Executive Officer of SD&A, which he
co-founded, since its formation in 1983. Previously, Mr. Dunn served as a
consultant for the Los Angeles Olympic Organizing Committee for the Olympic Arts
Festival, as Director of Marketing for the New World Festival of the Arts, and
as Director of Marketing for the Berkeley Repertory Theater.
Mr. Budlow has been Vice President of the Company since October 1996 and
Executive Vice President and Chief Operating Officer of Metro since 1990. He has
10 years of experience in database management services and subscription,
membership and donor renewal programs.
Mr. Anderson has been Chief Financial Officer of the Company since May 1996
and was Controller from May 1995 to May 1996 and a Director of the Company from
May 1996 to August 1996. Prior thereto, from December 1994 to April 1995, he was
associated with the accounting firm of Coopers & Lybrand L.L.P., and, from 1988
to 1994, he was a manager in the assurance department of an affiliate of the
accounting firm of Deloitte & Touche, LLP. Mr. Anderson is a Certified Public
Accountant.
Mr. Scheir has been Vice President and Chief Operating Officer of SD&A
since September 1996. Prior thereto, from 1990 to September 1996, he was Chief
Financial Officer of SD&A, and from 1983 to 1990, he served as Business Manager
of SD&A. Prior to joining SD&A, Mr. Scheir was List Manager with the San
Francisco Symphony's marketing department.
BOARD OF DIRECTORS
Classification of Board
The Board of Directors of the Company currently consists of six members and
is divided into three classes (designated Class I, Class II and Class III).
Class I consists of Messrs. Peters and Savage, Class II consists of Messrs.
Jones and Barbera and Class III consists of Messrs. Coppersmith and Wainwright,
each of whom will serve until the annual meetings of the Company to be held in
1996, in the case of the Class I and Class II Directors, and 1997, in the case
of the Class III Directors. At the 1996 annual meeting of the Company, each of
the Class I and Class II Directors will stand for re-election for terms which
will expire in 1998, in the case of the Class I Directors, and 1999, in the case
of the Class II Directors. At each annual stockholders' meeting, Directors
nominated to the class of Directors whose term is expiring at that annual
meeting will be elected for a term of three years, and the remaining Directors
will continue in office until their respective terms expire. Accordingly, at
each annual meeting at least two of the Company's six Directors will be elected,
and each Director will be required to stand for election once every three years.
In addition, the Restated Articles provide that Directors may only be removed
upon the affirmative vote of 75% of the outstanding Common Stock.
Compensation of Directors
Directors who are not employees of the Company currently receive an annual
retainer fee of $10,000 for serving on the Board of Directors and an annual
retainer fee of $1,500 for serving as a member of any committee thereof. Such
Directors will also be reimbursed for their reasonable expenses for attending
board and committee meetings. Any Director who is also an employee of the
Company is not entitled to any compensation or reimbursement of expenses for
serving as a Director of the Company or a member of any committee thereof.
44
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<PAGE>
Committees
The Board of Directors has established two directorate committees -- an
audit review committee (the 'Audit Committee'), comprised of Messrs. Coppersmith
and Jones, and a compensation committee (the 'Compensation Committee'),
comprised of Messrs. Coppersmith and Wainwright, all of whom are independent
Directors and are not eligible to receive options or other rights under any
employee stock or other benefit plan for so long as such Director is a member of
the Compensation Committee (other than the right of each such Director to
receive options exercisable for 15,000 shares of Common Stock granted in April
of each year, if such Director is then serving in such capacity, pursuant to a
resolution adopted by the Board of Directors). The functions of the Audit
Committee are to recommend annually to the Board of Directors the appointment of
the independent public accountants of the Company, discuss and review the scope
and the fees of the prospective annual audit, review the results thereof with
the Company's independent public accountants, review compliance with existing
major accounting and financial policies of the Company, review the adequacy of
the financial organization of the Company, review management's procedures and
policies relative to the adequacy of the Company's internal accounting controls
and compliance with federal and state laws relating to accounting practices, and
review and approve (with the concurrence of a majority of the independent
Directors of the Company) transactions, if any, with affiliated parties. The
functions of the Compensation Committee are to formulate the Company's policy on
compensation of executive officers, to review and approve annual salaries and
bonuses for all officers, to review, approve and recommend to the Board of
Directors the terms and conditions of all employee benefit plans or changes
thereto, and to administer the Company's stock option plans.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table (the 'Summary Compensation Table') provides information
relating to compensation for the fiscal years ended June 30, 1996 and June 30,
1995 for the Chairman of the Board and Chief Executive Officer and each of the
other executive officers of the Company whose compensation is required to be
disclosed by the rules and regulations of the Securities and Exchange Commission
(the 'Commission') during such years as shown in the table (collectively, the
'Named Executive Officers').
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
AWARDS
-----------------------
FISCAL ANNUAL COMPENSATION SECURITIES
YEAR ---------------------------------------- RESTRICTED UNDERLYING
ENDED OTHER ANNUAL STOCK OPTIONS/
NAME AND PRINCIPAL POSITION JUNE 30,(1) SALARY($) BONUS($) COMPENSATION($) AWARDS($) SARS(#)
- ---------------------------------- ----------- --------- -------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry Peters ..................... 1996 100,626 -- -- 32,058 150,000
Chairman of the Board and Chief 1995 26,442 -- -- -- --
Executive Officer
E. William Savage ................ 1996 100,626 -- -- 32,058 150,000
President, Chief Operating 1995 26,442 -- -- -- --
Officer, Secretary and Treasurer
Stephen Dunn ..................... 1996 228,462 -- -- -- 5,000
Vice President of All-Comm and 1995 42,308 -- -- -- --
President and Chief Executive
Officer of SD&A
Thomas Scheir .................... 1996 128,461 -- -- -- 12,500
Executive Vice President of SD&A 1995 21,635 -- -- -- --
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
PAYOUTS
----------
LTIP ALL OTHER
NAME AND PRINCIPAL POSITION PAYOUTS($) COMPENSATION($)
- ---------------------------------- ---------- ---------------
<S> <C> <C>
Barry Peters ..................... -- --
Chairman of the Board and Chief -- --
Executive Officer
E. William Savage ................ -- --
President, Chief Operating -- --
Officer, Secretary and Treasurer
Stephen Dunn ..................... -- --
Vice President of All-Comm and -- --
President and Chief Executive
Officer of SD&A
Thomas Scheir .................... -- --
Executive Vice President of SD&A -- --
</TABLE>
- ------------
(1) Prior to the acquisition of Alliance in April 1995, none of the Named
Executive Officers was an officer or employee of the Company. Therefore,
compensation for each of the Named Executive Officers is shown only for the
prior two fiscal years. In addition, because the acquisition of Alliance
took place in April 1995, the compensation shown for each of the Named
Executive Officers for the fiscal year ended June 30, 1995 reflects only two
months of compensation in such fiscal year.
45
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<PAGE>
In October 1996, the Company acquired Metro. Based on their current
arrangements with the Company, if Messrs. Jeremy Barbera, Vice President of the
Company and President and Chief Executive Officer of Metro, and Robert Budlow,
Vice President of the Company and Executive Vice President of Metro, had been
executive officers of the Company at the beginning of fiscal 1996, they would
have been among the most highly compensated executive officers of the Company
for such fiscal year. Based on their current arrangements with the Company, the
Company expects that Messrs. Barbera and Budlow will be among the Company's most
highly compensated executive officers for fiscal 1997. See
'Management -- Executive Compensation -- Employment Contracts.'
Stock Option Grants
The table below provides information relating to stock options granted to
the Named Executive Officers during the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
-------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE($) EXPIRATION ---------------------------
NAME GRANTED(#) FISCAL YEAR(3) (PER SHARE(4)) DATE 5% 10%
- ---------------------------------- ------------ -------------- -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Barry Peters...................... 150,000 29% $ 2.00 12/01/02 $122,130 $ 284,615
E. William Savage................. 150,000 29% 2.00 12/01/02 122,130 284,615
Stephen Dunn...................... 5,000 1% 3.38 01/08/99 2,660 5,586
Thomas Scheir..................... 12,500 2% 2.00 12/01/02 10,178 23,718
</TABLE>
- ------------
(1) Since June 30, 1996 through the date hereof, options currently exercisable
for 300,000 shares of Common Stock have been granted to each of Mr. Peters
and Mr. Savage. No other additional options have been granted during this
period to any of the Named Executive Officers.
(2) Potential realizable value was calculated using an assumed annual compounded
growth rate over the term of the option of 5% and 10%, respectively. Use of
this model should not be viewed in any way as a forecast of the future
performance of the Common Stock, which will be determined by future events
and unknown factors.
(3) During the fiscal year ended June 30, 1996, all employees and all
non-employee Directors of the Company received stock options for a total of
525,003 shares of Common Stock.
(4) Exercise price is the closing sales price of the Common Stock as reported on
The Nasdaq SmallCap MarketSM on the date of the grant.
The following table sets forth information regarding the exercise of
options during the Company's fiscal year ended June 30, 1996 and the number and
value of securities underlying unexercised stock options held by the Named
Executive Officers as of June 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
AT FISCAL OPTIONS/SARS AT
YEAR FISCAL YEAR END
SHARES END(#) ($)(1)
ACQUIRED ON VALUE ------------ --------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- -------- ------------ --------------------
<S> <C> <C> <C> <C>
Barry Peters............................................. -- -- 150,000/0 506,250/0
E. William Savage........................................ -- -- 150,000/0 506,250/0
Stephen Dunn............................................. -- -- 5,000/0 10,000/0
Thomas Scheir............................................ -- -- 12,500/0 42,188/0
</TABLE>
- ------------
(1) Fair market value of $5 3/8 per share at June 30, 1996 was used to determine
the value of in-the-money options.
Stock Option Plan
The following summary of the material features of the 1991 Stock Option
Plan is qualified in its entirety by reference to the full text of the 1991
Stock Option Plan.
Purpose, Participants, Effective Date and Duration. On April 15, 1992 the
Company's stockholders ratified and approved the All-Comm Media Corporation
(formerly, Bristol Holdings, Inc.) 1991 Stock Option Plan (the 'Stock Option
Plan'). The purpose of the Stock Option Plan is to advance the interests of the
Company by providing an additional incentive to attract and retain qualified and
46
<PAGE>
<PAGE>
competent employees upon whose efforts and judgment the success of the Company
is largely dependent, through stock ownership in the form of options to acquire
Common Stock ('Options'). The Stock Option Plan will terminate 10 years from the
date of its adoption, unless earlier terminated by the Board of Directors.
Termination of the Stock Option Plan will not affect awards made prior to
termination, but awards will not be made after termination.
Eligibility. Officers, directors and employees of, and consultants to, the
Company, its subsidiaries and other companies in which the Company holds a
substantial ownership interest (collectively, the 'Optionees'), are eligible to
be granted Options under the Stock Option Plan. Participation is solely at the
discretion of the Option Plan Committee (as defined below under
' -- Administration').
Shares Subject to the Stock Option Plan. The total number of shares of
Common Stock that may be subject to Options under the Stock Option Plan
(including any Options granted and outstanding as of October 10, 1996) may not
exceed 1,450,000 or such other number as the Board of Directors may, in its sole
discretion, determine from time to time, of which 179,504 remain available for
issuance (the 'Reserved Shares'). These shares may be authorized but unissued
shares or treasury shares. In the event of any change in the number or kind of
Common Stock outstanding pursuant to a reorganization, recapitalization,
exchange of shares, stock dividend or split or combination of shares,
appropriate adjustments to the Reserved Shares and the number of shares subject
to outstanding grants or awards, in the exercise price per share of outstanding
Options and in the kind of shares which may be distributed under the Stock
Option Plan, will be made. Under the Stock Option Plan, there is no maximum or
minimum number of shares that may be covered by Options granted to a single
person. Shares will be deemed issued under the Stock Option Plan only to the
extent actually issued pursuant to an award or settled in cash or shares. To the
extent that an award under the Stock Option Plan lapses or is forfeited, any
shares subject to such award will again become available for grant under the
terms of the Stock Option Plan.
As of October 10, 1996, Options for 1,112,058 shares of Common Stock had
been granted and were outstanding under the Stock Option Plan at exercise prices
ranging from $2.00 to $16.00, and 179,504 shares of Common Stock were available
for grants of Options under the Stock Option Plan.
Administration. The Stock Option Plan is administered by a committee
appointed by the Board of Directors (the 'Option Plan Committee'). The Option
Plan Committee consists of three or more persons appointed by the Board of
Directors, each of whom may be a 'disinterested person' within the meaning of
former Rule 16b-3(d)(3) promulgated by the Staff of the Commission under the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), as such Rule
was in effect prior to May 1, 1991. Because the Board of Directors has not
appointed such an Option Plan Committee, as required by the terms of the Stock
Option Plan, the term 'Option Plan Committee' refers to the entire Board of
Directors.
Subject to the terms of the Stock Option Plan, the Option Plan Committee
has authority to:
(i) construe and interpret the provisions of the Stock Option Plan or
of any Option or Option Agreement (as defined below), adopt, amend and
rescind all rules, regulations and procedures and otherwise make any
determinations which it deems necessary or advisable for the administration
of the Stock Option Plan, such interpretations, rule making and
determinations to be final, conclusive
and binding on all persons having any interest therein;
(ii) determine who shall be granted Options;
(iii) determine the number of shares with respect to which Options
shall be granted and the exercise price per share of any Options granted;
and
(iv) subject to the terms of the Stock Option Plan, specify the terms
and conditions of any Options granted, including, without limitation, (A)
prescribing the date or dates on which an Option becomes exercisable, (B)
providing that an Option accrues or becomes exercisable in installments
over a period of years or upon the attainment of stated goals, or both, and
(C) relating an Option to the continued employment of the Optionee for a
stated period of time, provided that such terms and conditions are not more
favorable to an Optionee than those expressly permitted in the Stock Option
Plan.
47
<PAGE>
<PAGE>
Stock Options. The Option Plan Committee may grant awards to Optionees
under the Stock Option Plan solely in the form of Options. With regard to each
Option, the Option Plan Committee determines the number of shares of Common
Stock subject to the Option, the exercise price of the Option, and the manner
and time of exercise of the Option. Options granted under the Stock Option Plan
are non-qualified stock options, which are not entitled to special tax treatment
afforded 'incentive stock options,' as defined in Section 422 of the Code.
The duration of the Options granted under the Stock Option Plan may be
specified pursuant to each respective stock option agreement ('Option
Agreement'), but in no event can any Option be exercisable after the expiration
of 10 years after the date of grant. The Option Plan Committee, in its
discretion, may provide that any Option is exercisable during its entire
duration or during any lesser period of time. The option exercise price may be
paid in cash, by certified or cashier's check, by money order, surrender of
Common Stock, or a combination of the foregoing. The Stock Option Plan includes
provisions that limit the duration of an Option following the termination of
employment of an Optionee for a reason other than death, disability (as defined)
or cause (as defined) and that terminate unexercised Options upon termination of
the Optionee's employment for cause (as defined). The resale of securities
obtained under the Stock Option Plan is subject to limitations of the Securities
Act and must be sold in connection with a registration statement or pursuant to
Rule 144 of the Securities Act. In addition, the Stock Option Plan is not
qualified under Section 401(a) of the Code.
As a condition of any sale or issuance of Shares upon exercise of any
Option, the Stock Option Committee may require such agreements or undertakings,
if any, as the Stock Option Committee may deem necessary or advisable to assure
compliance with any federal or state securities law or regulation including, but
not limited to, the following: (a) a representation and warranty by the Optionee
to the Company, at the time any Option is exercised, that such Optionee is
acquiring the shares to be issued to such Optionee for investment and not with a
view to, or for sale in connection with, the distribution of any such shares;
and (b) a representation, warranty or agreement to be bound by any legends that
are, in the opinion of the Stock Option Committee, necessary or appropriate to
comply with the provisions of any law or regulation deemed by the Stock Option
Committee to be applicable to the issuance of the shares and are endorsed upon
the Share certificates. Furthermore, an Option is only transferable by the
Optionee by will or the laws of descent and distribution.
The following description of the federal income tax consequences of Options
is general and does not purport to be complete.
Tax Treatment of Options. An Optionee realizes no taxable income when an
Option is granted. Instead, the difference between the fair market value of the
Common Stock subject to the Option and the exercise price paid is taxed as
ordinary compensation income when the Option is exercised. The difference is
measured and taxed as of the date of exercise if the stock is not subject to a
'substantial risk of forfeiture,' or as of the date or dates on which the risk
terminates in other cases. An Optionee may elect to be taxed on the difference
between the exercise price and the fair market value of the Common Stock on the
date of exercise, even though some or all of the Common Stock acquired is
subject to a substantial risk of forfeiture. Gain on the subsequent sale of the
Common Stock is taxed as capital gain. The Company receives no tax deduction on
the grant of an Option, but is entitled to a tax deduction when the Optionee
recognizes taxable income on or after exercise of the Option, in the same amount
as the income recognized by the Optionee.
Parachute Payments. Under certain circumstances, an accelerated vesting or
the cash out of Options in connection with the events discussed below might be
deemed an 'excess parachute payment' for purposes of the golden parachute tax
provisions of Section 280G of the Code. To the extent it is so considered, an
Optionee may be subject to a 20% excise tax and the Company may be denied an
income tax deduction.
Effect of Certain Corporate Transactions. Unless otherwise provided in any
Option Agreement, each outstanding Option shall become immediately and fully
exercisable (i) if there occurs any transaction (which shall include a series of
transactions occurring within 60 days or occurring pursuant to a plan), which
has the result that stockholders of the Company immediately before such
transaction cease to own at least 51% of the voting stock of the Company or of
any entity which results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any form of
48
<PAGE>
<PAGE>
corporate transaction; (ii) if the stockholders of the Company shall approve a
plan of merger, consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or (iii)
if the stockholders of the Company shall approve a plan for the sale, lease,
exchange or other disposition of all or substantially all the property and
assets of the Company (unless such plan is subsequently abandoned). The Stock
Option Committee may, in its sole discretion, accelerate the date on which any
Option may be exercised and may accelerate the vesting of an Option that is not
immediately exercisable. The Stock Option Committee, in its sole discretion, by
giving a written cancellation notice to all Optionees may cancel, effective upon
the date of the consummation of any corporate transaction described in clauses
(ii) and (iii), above, any Option which remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
stockholder approval of such corporate transaction.
Amendments to Stock Option Plan. The Board of Directors may modify, revise
or terminate the Stock Option Plan at any time and from time to time, except
that no amendment of the Stock Option Plan or any Option issued under the Stock
Option Plan shall substantially impair any Option previously granted to any
Optionee without the consent of such Optionee, or make any other change that
requires stockholder approval under applicable law.
Options Issuable to Directors
Pursuant to a resolution of the Board of Directors on November 29, 1995, in
April of each year commencing in April 1996, each Director who is then serving
in such capacity is granted options exercisable for 15,000 shares of Common
Stock at an exercise price equal to the market price of the Common Stock
prevailing on the date such options are granted. The right to receive such
options was suspended pursuant to a resolution of the Board of Directors on May
30, 1990 until additional shares of Common Stock were authorized, which
authorization was approved by resolution of the Board of Directors on June 6,
1996 and by the stockholders at a special meeting on August 14, 1996.
Employment Contracts
Effective as of July 1, 1995, the Company entered into a separate
employment agreement with each of Mr. Barry Peters and Mr. E. William Savage
providing for Mr. Peters' employment as Chairman of the Board and Chief
Executive Officer of the Company and for Mr. Savage's employment as President of
the Company, respectively. Each such agreement provides for an initial term of
employment of three years expiring on June 30, 1998 and is renewable for an
additional three-year term at the discretion of the employee covered thereby,
subject to termination as provided therein. The base salary for Mr. Peters
during the term of his employment agreement is $137,500 for the first year,
$195,000 for the second year and $270,500 for the third year. The base salary
for Mr. Savage during the term of his employment agreement is $125,000 for the
first year, $175,000 for the second year and $245,000 for the third year. In
addition, pursuant to the terms of the relevant employment agreement, each of
Mr. Peters and Mr. Savage has options to acquire 300,000 shares of Common Stock
at an exercise price of $2.50 per share for the first 150,000 shares and $3.00
per share for the remaining 150,000 shares, which exercise prices were set
pursuant to a resolution of the Board of Directors on September 26, 1996. At the
end of each year, or as otherwise may be deemed appropriate in the sole
discretion of the Board of Directors, each of Mr. Peters and Mr. Savage may be
paid a bonus, payable in whole or part in Common Stock at the election of the
employee. In addition, each year the Board of Directors may grant to each of Mr.
Peters and Mr. Savage such number of options to purchase shares of Common Stock
at such prices as the Board of Directors may determine from time to time to be
appropriate. During the first year of his employment, Mr. Peters elected to
receive less than the full amount of cash salary due to him under his employment
agreement and was paid a total of $100,626 in cash and $32,058 in the form of
16,029 shares of Common Stock. During the second year of Mr. Peters' employment
up to and including September 30, 1996, Mr. Peters again elected to receive less
than the full amount of cash salary due to him under his employment agreement
and was paid a total of $18,750 in cash. Similarly, during the first year of his
employment, Mr. Savage elected to receive less than the full amount of cash
salary due to
49
<PAGE>
<PAGE>
him under his employment agreement and was paid a total of $100,626 in cash and
$32,058 in the form of 16,029 shares of Common Stock. During the second year of
Mr. Savage's employment up to and including September 30, 1996, Mr. Savage again
elected to receive less than the full amount of cash salary due to him under his
employment agreement and was paid a total of $18,750 in cash. Each of Mr. Peters
and Mr. Savage has agreed in his respective employment agreement not to compete
with the Company or engage in any business similar to that of the Company during
the term of such employment agreement. In the event Mr. Peters or Mr. Savage, as
the case may be, is terminated for other than good cause, or if Mr. Peters or
Mr. Savage, as the case may be, resigns for 'good reason' (as defined below),
then Mr. Peters or Mr. Savage, as the case may be, will be entitled to receive
severance pay in an amount equal to (i) one year's base salary then in effect,
payable in accordance with normal payroll practices for the remainder of the
term, plus (ii) the amount determined under clause (i) but payable in a lump sum
on the effective date of such termination.
For purposes of each of Mr. Peters' and Mr. Savage's respective employment
agreement, 'good reason' includes a Change in Control of the Company (as defined
therein), which is deemed to occur if (a) after a merger or consolidation, the
Company is not the surviving corporation and the Company's stockholders do not
continue to own at least 80% of the Company's assets, (b) there is a sale of
substantially all of the assets of the Company, (c) the stockholders approve a
plan for the liquidation or dissolution of the Company, (d) any person becomes a
30% or more beneficial owner of the outstanding Common Stock, or (e) the
employee ceases to be a Director for any reason, other than his voluntary
resignation or voluntary election not to stand for re-election as a Director.
Effective as of April 25, 1995, SD&A entered into a separate employment
agreement with each of Mr. Stephen Dunn and Mr. Thomas Scheir providing for Mr.
Dunn's employment as President of SD&A and Mr. Scheir's employment as Chief
Financial Officer of SD&A, respectively. Each such agreement provides for an
initial term expiring on April 25, 1997 and is renewable for an additional
one-year term at the discretion of the employee covered thereby, subject to
termination as provided therein. The base salary for Mr. Dunn during the term of
his employment agreement is $225,000 for the first year, $250,000 for the second
year and $275,000 for the third year. The base salary for Mr. Scheir during the
term of his employment is $125,000 for the first year, $150,000 for the second
year and $175,000 for the third year. At the end of each year, in the sole
discretion of the board of directors of SD&A, each of Mr. Dunn and Mr. Scheir
may be paid a cash bonus. The agreements also provide for other fringe benefits
as may be approved by the board of directors of SD&A. Each of Mr. Dunn and Mr.
Scheir has agreed in his respective employment agreement not to (i) own, become
employed by, or become a partner of any similar business during the term of his
employment agreement, except that each may own 1% or less of any similar
business or (ii) compete with SD&A for a period of three years after the
termination of his employment.
Effective as of October 1, 1996, Metro entered into a separate employment
agreement with each of Mr. Jeremy Barbera, Mr. Robert Budlow and Ms. Janet
Sautkulis providing for Mr. Barbera's employment as President and Chief
Executive Officer of Metro, Mr. Budlow's employment as Executive Vice President
and Chief Operating Officer of Metro and Ms. Sautkulis' employment as Executive
Vice President and General Manager of Metro, respectively. Each such agreement
provides for an initial term expiring on September 30, 1999 (the 'Employment
Term') and is renewable for an additional three-year term unless Metro or the
employee gives written notice to the other party, at least sixty (60) days prior
to the expiration of the Employment Term, of its intention not to renew the
employment agreement. The base salary for Mr. Barbera during the Employment Term
is $150,000 for the first year, $200,000 for the second year and $250,000 for
the third year. Pursuant to the relevant employment agreement, the base salary
for each of Mr. Budlow and Ms. Sautkulis during the Employment Term is $125,000
for the first year, $165,000 for the second year and $200,000 for the third
year. Pursuant to the terms of the relevant agreement, during each year of the
Employment Term, Mr. Barbera, Mr. Budlow and Ms. Sautkulis are each eligible to
receive raises and bonuses based upon the achievement of earnings and other
targeted criteria if and as determined by the Compensation Committee of the
Board of Directors. The agreements also provide for the granting to Mr. Barbera,
Mr. Budlow and Ms. Sautkulis of options to acquire Common Stock if and as
determined by the Option Plan Committee. Each of Mr. Barbera, Mr. Budlow and Ms.
Sautkulis has agreed in his or her respective employment agreement (i) not to
compete with Metro or to be associated with any other similar business during
the
50
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Employment Term, except that Mr. Barbera, Mr. Budlow and Ms. Sautkulis may each
own up to 5% of the outstanding common stock of certain corporations, as
described more fully in the relevant employment agreement, and (ii) upon
termination of employment with Metro, not to solicit or encourage certain
clients of Metro (as more fully described in the relevant employment agreement),
to cease doing business with Metro, and not to do business with any other
similar business, for a period of three years from the date of such termination.
Metro has the right to terminate the employment of Mr. Barbera, Mr. Budlow or
Ms. Sautkulis, as the case may be, 'for cause' (as defined below), after giving
notice to such employee, in which event such employee will be entitled only to
receive his or her salary at the rate provided above to the date on which
termination takes effect, plus any compensation which is accrued but unpaid on
the date of termination. In the event of a disposition after October 1, 1996 of
the properties and business of Metro by merger, consolidation, sale of assets,
sale of stock, or otherwise, Metro has the right to assign each employment
agreement and all of Metro's rights and obligations thereunder to the acquiring
or surviving corporation. If, for any reason, such employment agreements are not
assigned to, or assumed by, such acquiring or surviving corporation, the
employee covered thereby may terminate such employment agreement by giving
written notice thereof within six months of the date of any such acquisition or
disposition, and upon such termination, or, if the employment agreement is
terminated by Metro without cause, such employee will be entitled to receive
severance pay consisting of a single lump sum distribution (with no present
value adjustment) equal to the base salary as provided above for the year then
in effect for a period of one year, notwithstanding that such one-year period
might extend beyond the Employment Term.
For purposes of each of Mr. Barbera's, Mr. Budlow's and Ms. Sautkulis'
respective employment contract, 'for cause' includes circumstances whereby the
relevant employee shall (i) be convicted of a felony crime, (ii) commit any act
or omit to take any action in bad faith and to the detriment of Metro, (iii)
commit an act of moral turpitude to the detriment of Metro, (iv) commit an act
of fraud against Metro, or (v) materially breach any term of the employment
agreement and fail to correct the breach within 10 days after written notice
thereof; provided that in the case of clauses (ii), (iii) or (iv) above, such
determination must be made by the Board of Directors after a meeting at which
such employee shall have been given an opportunity to explain such actions.
Consulting Agreements
On April 15, 1996, the Company entered into an agreement with Mr. Seymour
Jones to retain his services as a financial consultant and advisor to the
Company on a non-exclusive basis for a period of one year. Effective July 1996,
the agreement was terminated. Notwithstanding such termination, pursuant to the
terms of such agreement, in August 1996 Mr. Jones purchased from the Company,
for $2,500 in the aggregate, warrants exercisable for 50,000 shares of Common
Stock at an exercise price of $2.50 per share for the first 25,000 shares, $3.00
per share for the next 15,000 shares and $3.50 per share for the remaining
10,000 shares. The warrants are currently exercisable and expire on April 15,
2000.
On April 17, 1996, the Company entered into an agreement with Mr. James
Coppersmith to retain his services as a financial consultant and advisor to the
Company on a non-exclusive basis for a period of one year. Effective July 1996,
the agreement was terminated. Notwithstanding such termination, pursuant to the
terms of such agreement, in September 1996 Mr. Coppersmith purchased from the
Company, for $2,500 in the aggregate, warrants exercisable for 50,000 shares of
Common Stock at an exercise price of $2.50 per share for the first 25,000
shares, $3.00 per share for the next 15,000 shares and $3.50 per share for the
remaining 10,000 shares. The warrants are currently exercisable and expire on
May 15, 2000.
On June 3, 1996, the Company entered into an agreement with Mr. C. Anthony
Wainwright to retain his services as a financial consultant and advisor to the
Company on a non-exclusive basis for a period of two years. As compensation for
such services, Mr. Wainwright is entitled to receive the sum of $1,000 per month
for the term of the agreement plus all out-of-pocket expenses incurred by Mr.
Wainwright in the performance of such services, provided that prior
authorization from the Company shall have been received with respect to any such
expense. In addition, pursuant to the terms of such agreement, Mr. Wainwright
has the right, which right, as of the date hereof, has not been exercised, to
purchase from the Company, for $2,500 in the aggregate warrants exercisable for
50,000 shares of
51
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<PAGE>
Common Stock at an exercise price of $4.00 per share for the first 25,000
shares, $4.50 per share for the next 15,000 shares and $5.00 per share for the
remaining 10,000 shares. The warrants may be exercised over a four-year period
commencing June 3, 1996. The agreement is only assignable without the prior
written consent of the other party in the event of a sale of all or
substantially all of the business of the party desiring to assign the agreement.
The agreement also provides for indemnification of Mr. Wainwright and his
affiliates (and their respective directors, officers, stockholders, general and
limited partners, employees, agents and controlling persons and the successors
and assigns of all of the foregoing) by the Company for any losses or claims
arising out of the rendering of the services provided for in the agreement,
other than for negligence or willful misconduct.
CHANGE IN CONTROL PROVISIONS OF THE RESTATED ARTICLES
The Restated Articles require certain specified supermajority stockholder
approvals (the 'Business Combination Special Vote') for 'Business Combinations'
with an 'Other Entity,' which is defined generally as any corporation, person or
other entity (excluding certain employee plans) that is not controlled by or
under common control with the Company. Such Business Combinations include: (i)
any merger or consolidation of the Company, or any of its affiliates, with or
into any other corporation; (ii) any sale, lease, exchange, loan, distribution,
dividend or other disposition of all, or a substantial part, of the assets of
the Company; or (iii) any sale, lease, exchange, loan, distribution, dividend or
other disposition of all, or a substantial part, of the assets of another entity
in exchange for equity securities of the Company or its affiliates. The Business
Combination Special Vote required to approve a Business Combination is the
affirmative vote of both (i) the holders of 75% of the outstanding shares of
stock entitled to vote for the election of Directors, and (ii) the holders of a
majority of the outstanding shares of stock entitled to vote for the election of
Directors, other than those beneficially owned by the Other Entity.
A Business Combination Special Vote is not required to approve a Business
Combination, if certain conditions are met which include, but are not limited
to: (i) that the consideration to be received by the holders of the Common Stock
is not less than (a) the highest per share price paid by such Other Entity in
acquiring any shares of Common Stock and (b) the highest market price of the
Common Stock (I) during the 30 trading days immediately prior to the public
announcement of such Business Combination and (II) during the thirty trading
days immediately prior to the public announcement or the commencement, whichever
occurs first, of the acquisition of any Common Stock by such Other Entity; (ii)
that after such Other Entity has acquired 10% of the Common Stock, and prior to
the consummation of such Business Combination, the Board of Directors shall have
included at all times one or more Directors of the Company who shall have been
in office on October 1, 1988 (a 'Continuing Director'), or a Director designated
as a Continuing Director by such Director or other Continuing Directors; (iii)
that after such Other Entity has acquired 10% of the Common Stock, the Other
Entity has not (a) received the benefit, directly or indirectly (except
proportionately, as a stockholder), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax advantages
provided by the Company or (b) received the benefit, directly or indirectly, or
the extension of trade terms by the Company, which are less favorable to the
Company than those made available to a majority of the Company's clients for
similar products; and (iv) except as may have been approved by a unanimous vote
of the entire Board of Directors, made any major change in the Company's
business or equity capital structure.
The Restated Articles further provide that certain 'Reclassifications'
require the affirmative vote (the 'Reclassification Special Vote') of both (i)
the holders of 75% of the outstanding shares of stock entitled to vote for the
election of Directors and (ii) the holders of a majority of the outstanding
shares of stock entitled to vote for the election of Directors other than those
beneficially owned by any Other Entity. Such Reclassifications include (a) any
reclassification of securities (including any reverse stock split), reverse
capitalization, reorganization, issuer tender offer, purchase of shares by the
Company or by its affiliates, exchange offer by the Company or by any of its
affiliates, or any other transaction designed to reduce materially, or having
the effect of reducing materially, the percentage of Common Stock which is not
held by affiliates of the Company or (b) the adoption of any plan or proposal
for the liquidation or dissolution of the Company. The Reclassification Special
Vote is only required if there is
52
<PAGE>
<PAGE>
an Other Entity for which a Business Combination Special Vote would be required
in the event of a Business Combination, and it is not required if any such
amendment is unanimously recommended to the stockholders by the Continuing
Directors.
Other provisions of the Restated Articles and the By-Laws may have the
effect of limiting, or delaying, a change in control of the Company. These
provisions include: provisions of the By-Laws which provide for 60 days' notice
by the stockholders of any business they wish to conduct at a stockholders'
meeting, a prohibition of stockholder action by written consent, and provisions
of the Restated Articles that limit the ability to remove Directors. See 'Risk
Factors -- Certain Anti-Takeover Provisions' and ' -- Board of Directors.'
53
<PAGE>
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of October 10, 1996 and as adjusted to reflect the
sale of shares of Common Stock offered hereby by: (i) each Director and each of
the Named Executive Officers; (ii) all executive officers and Directors of the
Company as a group; (iii) each person known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock; (iv) each Selling
Stockholder; and (v) each Over-Allotment Selling Stockholder.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
AFTER THE OFFERING AFTER THE OFFERING
COMMON STOCK ASSUMING NO EXERCISE ASSUMING FULL
BENEFICIALLY OWNED OF THE UNDERWRITERS' EXERCISE OF THE
PRIOR TO THE OVER- ALLOTMENT UNDERWRITERS' OVER-
OFFERING SHARES OPTIONS ALLOTMENT OPTIONS
-------------------- BEING -------------------- --------------------
NAME(1) NUMBER PERCENT OFFERED NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------- --------- ------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Barry Peters(2)............................... 676,536 12.2% -- 676,536 9.7% 676,536 9.6%
E. William Savage(3).......................... 672,868 12.1 -- 672,868 9.7 672,868 9.6
S. James Coppersmith(4)....................... 50,000 1.0 -- 50,000 * 50,000 *
Seymour Jones(4).............................. 50,000 1.0 -- 50,000 * 50,000 *
C. Anthony Wainwright(5)...................... 68,408 1.3 -- 68,408 1.0 68,408 1.0
J. Jeremy Barbera(6).......................... 1,199,924 23.0 -- 1,199,924 18.1 1,199,924 18.0
Stephen Dunn.................................. 138,716 2.7 -- 138,716 2.1 138,716 2.1
Thomas Scheir(7).............................. 12,875 * -- 12,875 * 12,875 *
All Directors and Named Executive Officers as
a group (8 persons)......................... 2,869,327 45.5 -- 2,869,327 37.3 2,869,327 37.0
5% STOCKHOLDERS(8)
Naomi Bodner(9)............................... 2,011,500 28.3 -- 2,458,300 28.9 2,458,300 28.7
Laura Huberfeld(9)............................ 2,011,500 28.3 -- 2,458,300 28.9 2,458,300 28.7
Newark Sales Corp.(10)........................ 1,583,333 23.7 -- 1,583,333 19.6 1,583,333 19.4
Saleslink Ltd.(10)............................ 1,583,333 23.7 -- 1,583,333 19.6 1,583,333 19.4
Robert Budlow(11)............................. 599,962 11.6 -- 599,962 9.1 599,962 9.1
Seth Antine(12)............................... 360,000 6.6 -- 440,000 6.4 440,000 6.4
Irwin Gross(13)............................... 270,000 5.0 -- 270,000 4.0 270,000 3.9
SELLING STOCKHOLDERS AND OVER-ALLOTMENT
SELLING STOCKHOLDERS
Kenneth Berg(14).............................. 36,968 * 16,838 20,130 * -- --
Sheldon Finkel(14)............................ 6,722 * 3,062 3,660 * -- --
ForwardIssue Ltd.(14)(15)..................... 18,484 * -- 27,726 * 20,795 *
Juliet Gal(14)(16)............................ 9,242 * -- 13,863 * 7,863 *
Norton Herrick(14)............................ 110,902 2.2 50,513 60,839 * -- --
Harry Karten(14)(17).......................... 18,484 * -- 27,726 * 13,863 *
Millennium Capital Corp.(14)(18).............. 19,000 * 4,270 14,730 * 9,625 *
David Miller(14).............................. 18,484 * 8,419 10,065 * -- --
Mark Schachner(14)............................ 18,484 * 8,419 10,065 * -- --
Claudia Kaufmann Walters(14).................. 9,242 * 4,209 5,033 * -- --
Whale Securities Co., L.P. (14)(19)........... 19,300 * 4,270 15,030 * 9,925 *
Mark Zborowski(14)(20)........................ 19,722 * -- 29,583 * 15,720 *
Jewish Communal Fund, Inc.(14)(21)............ 35,416 * -- 53,124 * 26,561 *
</TABLE>
- ------------
* Less than 1%.
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Exchange Act. All information with respect to beneficial
ownership has been furnished by the respective Director, executive officer
or stockholder, as the case may be.
(2) Includes 450,000 beneficially owned shares of Common Stock issuable upon
the exercise of currently exercisable options and 31,375 beneficially owned
shares of Common Stock owned by family members with respect to which Mr.
Peters disclaims beneficial ownership.
(footnotes continued on next page)
54
<PAGE>
<PAGE>
(footnotes continued from previous page)
(3) Includes 450,000 beneficially owned shares of Common Stock issuable upon
the exercise of currently exercisable options and 21,878 beneficially owned
shares of Common Stock owned by family members with respect to which Mr.
Savage disclaims beneficial ownership.
(4) Includes 50,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(5) Includes 15,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable options and 50,000 beneficially owned
shares of Common Stock issuable upon the exercise of a contractual right to
purchase warrants exercisable for such Common Stock pursuant to Mr.
Wainwright's consulting agreement with the Company.
(6) Includes 111,524 beneficially owned shares of Common Stock issuable upon
conversion of a convertible promissory note of the Company in the aggregate
face amount of $600,000 issued to Mr. Barbera in connection with the
Company's acquisition of Metro.
(7) Includes 12,500 beneficially owned shares of Common Stock issuable upon
exercise of currently exercisable warrants.
(8) The address for each of the 5% Stockholders is as follows: c/o Broad
Capital Associates, Inc., 152 West 57th Street, New York, New York 10019.
(9) Prior to the Offering, 1,000,000 of this 5% Stockholder's total number of
beneficially owned shares of Common Stock are issuable upon exercise of
currently exercisable warrants and 800,000 beneficially owned shares of
Common Stock are issuable upon conversion of shares of Series B Preferred
Stock, subject in each case to this 5% Stockholder's sole investment power.
The remaining 211,500 beneficially owned shares of Common Stock are owned
by the Bodner/Huberfeld Partnership and are subject to a shared investment
power. After the Offering, 1,400,000 of this 5% Stockholder's total number
of beneficially owned shares of Common Stock will be issuable upon exercise
of then exercisable warrants and 800,000 beneficially owned shares of
Common Stock will be issuable upon conversion of shares of Series B
Preferred Stock, subject in each case to this 5% Stockholder's sole
investment power. The remaining 258,300 beneficially owned shares of Common
Stock will be beneficially owned by the Laura Huberfeld/Naomi Bodner
Partnership (the 'Bodner/Huberfeld Partnership'), consisting of 211,500
shares of Common Stock owned outright and 46,800 shares of Common Stock
issuable upon exercise of then exercisable warrants, in each case subject
to a shared investment power. Each of Naomi Bodner and Laura Huberfeld
disclaims beneficial ownership of the shares of Common Stock beneficially
owned by the other and the shares of Common Stock beneficially owned by the
Bodner/Huberfeld Partnership.
(10) 83,333 of this 5% Stockholder's total number of beneficially owned shares
of Common Stock are issuable upon conversion of shares of Series C
Preferred Stock and 1,500,000 beneficially owned shares of Common Stock
issuable upon exercise of currently exercisable warrants.
(11) Includes 55,762 beneficially owned shares of Common Stock issuable upon
conversion of a convertible promissory note of the Company in the aggregate
face amount of $300,000 issued to Mr. Budlow in connection with the
Company's acquisition of Metro.
(12) Prior to the Offering, 200,000 of this 5% Stockholder's total number of
beneficially owned shares of Common Stock issuable upon exercise of
currently exercisable warrants, and 160,000 beneficially owned shares of
Common Stock are issuable upon conversion of shares of Series B Preferred
Stock. After the Offering, 280,000 of this 5% Stockholder's total number of
beneficially owned shares of Common Stock will be issuable upon exercise of
then exercisable warrants and 160,000 beneficially owned shares of Common
Stock will be issuable upon conversion of shares of Series B Preferred
Stock.
(13) 150,000 of this 5% Stockholder's total number of beneficially owned shares
of Common Stock are issuable upon exercise of currently exercisable
warrants, and 120,000 beneficially owned shares of Common Stock are
issuable upon conversion of shares of Series B Preferred Stock.
(footnotes continued on next page)
55
<PAGE>
<PAGE>
(footnotes continued from previous page)
(14) The number of shares subject to the Underwriters' over-allotment option
from this stockholder is as set forth next to such stockholder's name
below:
<TABLE>
<CAPTION>
SHARES SUBJECT TO
NAME UNDERWRITERS OVER-ALLOTMENT OPTION
- ---------------------------------------------------------- ----------------------------------
<S> <C>
Kenneth Berg......................................... 20,130
Sheldon Finkel....................................... 3,660
ForwardIssue, Ltd.................................... 4,621
Juliet Gal........................................... 4,000
Norton Herrick....................................... 60,389
Harry Karten......................................... 9,242
Millennium Capital Corp.............................. 5,105
David Miller......................................... 10,065
Mark Schachner....................................... 10,065
Claudia Kaufmann Walters............................. 5,033
Whale Securities Co., L.P............................ 5,105
Mark Zborowski....................................... 9,242
Jewish Communal Fund, Inc............................ 17,708
----------
Total........................................... 160,635
----------
----------
</TABLE>
In addition, the Company has granted to the Underwriters an option to
purchase up to 60,635 shares of Common Stock to cover over-allotments, if
any. See 'Underwriting.'
(15) After the Offering, (i) assuming no exercise of the Underwriters'
over-allotment option, 9,242, and (ii) assuming full exercise of the
Underwriters' over-allotment option, 6,932, of this Over-Allotment Selling
Stockholder's total number of beneficially owned shares of Common Stock
will be issuable upon exercise of then exercisable warrants.
(16) After the Offering, (i) assuming no exercise of the Underwriters'
over-allotment option, 4,621, and (ii) assuming full exercise of the
Underwriters' over-allotment option, 2,621, of this Over-Allotment Selling
Stockholder's total number of beneficially owned shares of Common Stock
will be issuable upon exercise of then exercisable warrants.
(17) After the Offering, (i) assuming no exercise of the Underwriters'
over-allotment option, 9,242, and (ii) assuming full exercise of the
Underwriters' over-allotment option, 4,621, of this Over-Allotment Selling
Stockholder's total number of beneficially owned shares of Common Stock
will be issuable upon exercise of then exercisable warrants.
(18) 9,625 of this Selling Stockholder's total number of beneficially owned
shares of Common Stock are issuable upon exercise of currently exercisable
warrants.
(19) 9,925 of this Selling Stockholder's total number of beneficially owned
shares of Common Stock are issuable upon exercise of currently exercisable
warrants.
(20) 1,238 of this Over-Allotment Selling Stockholder's total number of
beneficially owned shares of Common Stock are issuable upon exercise of
currently exercisable warrants.
(21) After the Offering, (i) assuming no exercise of the Underwriters'
over-allotment option, 17,708, and (ii) assuming full exercise of the
Underwriters' over-allotment option, 8,854, of this Over-Allotment Selling
Stockholder's total number of beneficially owned shares of Common Stock
will be issuable upon exercise of then exercisable warrants.
56
<PAGE>
<PAGE>
DELAYED SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
DELAYED SELLING STOCKHOLDERS
The Company has agreed to include the Delayed Stock, for the benefit of the
holders thereof, in the Registration Statement of which this Prospectus is a
part.
The following table sets forth certain information regarding the beneficial
ownership of Common Stock by the Delayed Selling Stockholders as of October 10,
1996.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED COVERED BY THIS
AS OF OCTOBER 10, 1996 PROSPECTUS
NAME OF DELAYED ------------------------- -----------------------
SELLING STOCKHOLDER NUMBER PERCENT(1) NUMBER PERCENT(1)
- --------------------------------------------------------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Seth Antine(2)........................................... 360,000 6.6% 51,000 *
Bais Kaila Torah Preparatory H.S. for Girls(2)........... 22,500 * 3,200 *
Birdsall Corp., N.V.(2).................................. 45,000 * 6,400 *
Ezra Birnbaum(2)......................................... 4,500 * 640 *
Naomi Bodner(2)(3)....................................... 2,011,500 28.3 500,000 7.0
Congregation Ahavas Tzdokoh Vchesed, Inc.(2)............. 67,500 1.3 9,600 *
Israel A. Englander(2)................................... 180,000 3.4 26,000 *
Bryan I. Finkel(2)....................................... 18,000 * 2,500 *
Seth Fireman(2).......................................... 90,000 1.7 12,820 *
Rita Folger(2)........................................... 45,000 * 6,400 *
Friends of Kiryat Meor Chaim, Inc.(2).................... 45,000 * 6,400 *
Irwin L. Gross(2)........................................ 270,000 5.0 38,000 *
Laura Huberfeld(2)(3).................................... 2,011,500 28.3 500,000 7.0
Symour Huberfeld(2)...................................... 45,000 * 6,400 *
Keren M.Y.C.B. Elias Foundation(2)....................... 45,000 * 6,400 *
Chanie Lerner(2)......................................... 45,000 * 6,400 *
Jonathan Mayer(2)........................................ 13,500 * 2,000 *
Mighty Net, Inc.......................................... 57,500 * 57,500 *
Gloria Lee Morgan........................................ 9,242 * 9,242 *
Moshe Mueller(2)......................................... 54,000 1.1 7,000 *
The Nais Corp.(2)........................................ 45,000 * 6,400 *
Namax Corp.(2)........................................... 45,000 * 6,400 *
Charles Nebenzahl(2)..................................... 45,000 * 6,400 *
OHR Somayach Tanenbaum Educational Center(2)............. 45,000 * 6,400 *
Fred Rudy(2)............................................. 45,000 * 6,400 *
Malca Sand(2)............................................ 45,000 * 6,400 *
Joshua Schwartz(2)....................................... 4,500 * 640 *
Shekel Hakodesh(2)....................................... 54,000 1.1 7,000 *
Richard Stadtmauer(2).................................... 45,000 * 6,400 *
Gregory Welter........................................... 10,634 * 9,242 *
Brian Welter............................................. 9,242 * 9,242 *
Neil and Betty Joan Welter, as joint tenants............. 9,242 * 9,242 *
Yeshiva of Telshe Alumni(2).............................. 45,000 * 6,400 *
</TABLE>
- ------------
* Less than 1%
(1) Does not give effect to the Offering.
(2) All of this Delayed Selling Stockholder's shares of Common Stock covered by
this Prospectus are issuable upon conversion of shares of Series B Preferred
Stock. This Delayed Selling Stockholder's beneficially owned shares of
Common Stock as of October 10, 1996 consist of the number of shares
(footnotes continued on next page)
57
<PAGE>
<PAGE>
(footnotes continued from previous page)
of Common Stock issuable upon conversion of Series B Preferred Stock or
warrants as is set forth below next to such Delayed Selling Stockholder's
name:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION ISSUABLE UPON EXERCISE
NAME OF SERIES B PREFERRED STOCK OF WARRANTS
- ---------------------------------------------- --------------------------- ----------------------
<S> <C> <C>
Seth Antine................................... 160,000 200,000
Bais Kaila Torah Preparatory H.S. for Girls... 10,000 12,500
Birdsall Corp., N.V........................... 20,000 25,000
Ezra Birnbaum................................. 2,000 2,500
Naomi Bodner(A)............................... 1,011,000 1,000,000
Congregation Ahavas Tzdokoh Vchesed, Inc...... 30,000 37,500
Israel A. Englander........................... 80,000 100,000
Bryan I. Finkel............................... 8,000 10,000
Seth Fireman.................................. 40,000 50,000
Rita Folger................................... 20,000 25,000
Friends of Kiryat Meor Chaim, Inc............. 20,000 25,000
Irwin L. Gross................................ 120,000 150,000
Laura Huberfeld(A)............................ 1,011,000 1,000,000
Symour Huberfeld.............................. 20,000 25,000
Keren M.Y.C.B. Elias Foundation............... 20,000 25,000
Chanie Lerner................................. 20,000 25,000
Jonathan Mayer................................ 6,000 7,500
Moshe Mueller................................. 24,000 30,000
The Nais Corp. ............................... 20,000 25,000
Namax Corp.................................... 20,000 25,000
Charles Nebenzahl............................. 20,000 25,000
OHR Somayach Tanenbaum Educational Center..... 20,000 25,000
Fred Rudy..................................... 20,000 25,000
Malca Sand.................................... 20,000 25,000
Joshua Schwartz............................... 2,000 2,500
Shekel Hakodesh............................... 24,000 30,000
Richard Stadtmauer............................ 20,000 25,000
Yeshiva of Telshe Alumni...................... 20,000 25,000
</TABLE>
-------------------
(A) 211,500 of this Delayed Selling Stockholder's total number of
beneficially owned shares of Common Stock issuable upon conversion of
shares of Series B Preferred Stock are owned by the Bodner/Huberfeld
Partnership and are subject to a shared investment power. Each of
Naomi Bodner and Laura Huberfeld disclaims beneficial ownership of
the shares of Common Stock beneficially owned by the other and the
shares of Common Stock beneficially owned by the Bodner/Huberfeld
Partnership.
(3) 1,000,000 of this Delayed Selling Stockholder's total number of beneficially
owned shares of Common Stock are subject to warrants and 800,000
beneficially owned shares of Common Stock are convertible shares of Series B
Preferred Stock, subject in each case to this Delayed Selling Stockholder's
sole investment power. The remaining 211,500 beneficially owned shares of
Common Stock are owned by the Bodner/Huberfeld Partnership and are subject
to a shared investment power. Each of Naomi Bodner and Laura Huberfeld
disclaims beneficial ownership of the shares of Common Stock beneficially
owned by the other and the shares of Common Stock beneficially owned by the
Bodner/Huberfeld Partnership.
58
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
The shares of Delayed Stock covered by this Prospectus are being registered
by the Company for the account of the Delayed Selling Stockholders. The Company
has been informed by the Delayed Selling Stockholders that they intend to
distribute the Delayed Stock in the following manner.
The shares may be sold from time to time by the Delayed Selling
Stockholders, either directly in privately negotiated transactions or through
one or more brokers or dealers (which may include the Representative) on the
over-the-counter market, at such prices and upon such terms as may be
obtainable. In connection therewith, the Delayed Selling Stockholders and
participating brokers or dealers may be deemed to be 'underwriters' as that term
is defined in the Securities Act, and commissions or discounts or any profit
realized on the sale of shares received by the Delayed Selling Stockholders and
such brokers or dealers may be deemed to be underwriting commissions or
discounts within the meaning of the Securities Act. The Company has been
informed that the Delayed Selling Stockholders do not have, as of the date of
this Prospectus, any agreement, arrangement or understanding with any broker or
dealer concerning the distribution of the shares of Delayed Stock covered by
this Prospectus.
CERTAIN TRANSACTIONS
TRANSACTIONS UNDER CURRENT MANAGEMENT AFTER ALLIANCE ACQUISITION
Transactions with Mr. Dunn. In connection with the acquisition of SD&A on
April 25, 1995, Alliance issued promissory notes in an aggregate principal
amount of $4.5 million to Mr. Dunn. Interest on such notes was payable monthly
at a rate equal to the prime rate of Bank of America, N.T. & S.A., as in effect
from time to time, subject to a maximum of 10% and a minimum of 8%. Principal
payments were due quarterly, and originally $1.5 million was due in quarterly
installments during fiscal 1996. All of the outstanding common shares of SD&A
were initially pledged to collateralize such notes but were released in June
1996. In connection with such notes, an operating covenants agreement between
the Company and Mr. Dunn included, among other things, provisions requiring that
SD&A have a minimum level of working capital and cash levels, subject to
periodic increases based on sales, before dividend payments could be made to the
parent company. In June 1996, the operating covenants agreement was terminated.
Prior to October 1995, the Company made all principal payments when due.
Each of the principal payments due October 1, 1995, January 1, 1996 and April 1,
1996 were deferred as they became due and thereafter from time to time. In June
1996, principal payments of approximately $2.0 million were made and the
remaining obligations were restructured such that the remaining $2.1 million is
now payable in installments of $58,333 per month, plus interest at 8%, starting
September 19, 1996.
SD&A leases its corporate business premises from Mr. Dunn. The lease
requires monthly rental payments of $11,805 through January 1, 1999, with an
option to renew. SD&A incurs all costs of insurance, maintenance and utilities.
Total rent paid by SD&A to Mr. Dunn during 1996 and from the date of acquisition
to June 30, 1995 was approximately $138,000 and $26,000, respectively.
Indebtedness of Management. In February 1996, Mr. Barbera, then a
shareholder of Metro, borrowed $50,000 from Metro. Interest on such indebtedness
accrues at a rate of 6% per annum. The principal of such indebtedness, together
with accrued interest thereon, is repayable in four equal quarterly installments
starting March 31, 1998.
Bank Credit Line. Mr. Dunn is currently a guarantor of SD&A's unsecured
credit line. If such credit line is replaced with another credit facility, the
Company does not currently expect that Mr. Dunn would be a guarantor of such
replacement credit facility. See 'Management's Discussion of Financial Condition
and Results of Operations -- Liquidity and Capital Resources -- All-Comm Media
Corporation.'
Transactions With Certain 10% Stockholders. As consideration for their
agreement to certain lock-up arrangements for a period of nine months from the
date of this Prospectus with respect to shares of Common Stock issuable upon the
conversion of shares of Series B Preferred Stock or upon the exercise of
warrants issued in connection therewith, upon consummation of the Offering (the
'Closing'), the Company will issue warrants exercisable for 400,000, 400,000 and
46,800 shares of Common Stock to Naomi Bodner, in her individual capacity, Laura
Huberfeld, in her individual capacity, and the Bodner/Huberfeld Partnership,
respectively. As of October 10, 1996, each of Ms. Bodner and Ms. Huberfeld is a
beneficial holder of more than 10% of the Common Stock. See 'Principal and
Selling Stockholders.'
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TRANSACTIONS UNDER FORMER MANAGEMENT PRIOR TO ALLIANCE ACQUISITION
Former Company Counsel. Robert L. McDonald, Sr., a former director of the
Company who resigned in April 1995, is a senior partner of McDonald, Carano,
Wilson, McCune, Bergin, Frankovich & Hicks ('McDonald Carano'), former general
counsel to the Company. The total amount of fees paid by the Company for
services rendered by McDonald Carano for the fiscal years ended June 30, 1995
and 1994 did not exceed 5% of the firm's total revenues. Additionally, Mr. A.J.
Hicks, a partner in McDonald Carano, previously served as Assistant Secretary to
the Company and to its subsidiaries.
Investment Banking Services. Marshall S. Geller, a former director of the
Company who resigned in April 1995 and former chairman of its Executive
Committee, was a Senior Managing Director of Golenberg & Geller, Inc., a private
merchant banking firm. The former management of the Company retained Golenberg &
Geller, Inc. during the 1995 and 1994 fiscal years to perform investment banking
and financial advisory services. The amount of fees paid by the Company for
services rendered by Mr. Geller's firm for the fiscal years ended June 30, 1995
and 1994 were $5,700 and $21,000, respectively. At that time, the Company also
retained Golenberg & Geller, Inc. and Whale Securities Co., L.P. ('Whale') to
perform investment banking and financial advisory services in connection with
the acquisition by the Company of Alliance. In connection with the Company's
acquisition of Alliance, a finder's fee in the aggregate amount of $200,000 was
paid as follows: $100,000 to Golenberg & Geller, Inc.; $50,000 to Whale; and
$50,000 to Millennium Capital Corp., one of the co-finders in the transaction
('Millennium'). In addition, each of Mr. Geller, Mr. Golenberg, Whale and
Millennium received 9,375 shares of Common Stock and a warrant exercisable for
6,250 shares of Common Stock over a period of three years from the date of issue
at an exercise price of $8.00 per share in further payment for their services.
Florida Gaming Corporation Loan. On July 15, 1994, in order to fund the
exercise price of the warrant which the Company owned to acquire shares of
Florida Gaming Corporation ('FGC'), the former management of the Company entered
into a loan agreement (the 'FGC Loan') for $1,000,000 with a group of lenders
(the 'Lenders'), which included Messrs. Marshall Geller (former director),
Arnold Rosenstein (former president), and Neil Rosenstein (former Chairman of
the Board and Chief Executive Officer) (the 'Affiliated Lenders'). The Company
borrowed the $1,000,000 available under the Loan Agreement on July 22, 1994.
Borrowings were secured by a pledge of the common stock of FGC issuable upon
exercise of the warrant. Each of the Affiliated Lenders lent the Company 20% of
the total FGC Loan, or $200,000.
Pursuant to the terms of the FGC Loan, borrowings accrued interest at a
rate of 7.75% per annum. In addition, the Company was obligated to pay the
Lenders, pro rata, a commitment fee of $0.3 million, and to pay the Lenders'
attorneys' fees and other expenses incurred in connection with the extension of
the FGC Loan. The FGC Loan, including interest of $9,000 and the commitment fee,
was repaid prior to September 21, 1994. During the period from July 1994 to
March 1995, the Company sold the FGC common stock.
Mortgage Loan to Subsidiary. On June 9, 1994, under the former management
of the Company, All-Comm Holdings, Inc. (formerly named Bullhead Casino
Corporation), a wholly-owned subsidiary of the Company, borrowed $350,000 from
the Company's former chief executive officer and its president, evidenced by a
promissory note and secured by a mortgage on its parcel of land in Laughlin,
Nevada. All-Comm Holdings, Inc. loaned the borrowed funds to the Company. The
note was due July 31, 1995 with interest at the rate of 7.75% per annum, but was
repaid in October 1994.
Purchase of Property and Equipment. In April 1995, prior to the acquisition
of Alliance, the Company's former chairman purchased property and equipment, for
$11,000, owned by the Company having a cost of $160,000 and net book value of
$6,000.
Indebtedness of Former Management. Pursuant to the terms of his employment
agreement with the Company, which has expired, Arnold Rosenstein was issued
25,000 shares of Common Stock in exchange for a promissory note in the principal
amount of $0.2 million. The promissory note accrued interest at 10.5% per annum
payable at maturity on November 1, 1994. On January 21, 1994, Mr. Rosenstein
paid $133,333, per resolutions of the Company's Board of Directors, for the
early retirement of the $0.2 million note receivable for shares issued to him.
The $66,667 allowance was charged to additional paid-in capital in the 1994
fiscal year. Also, on December 31, 1993, accrued interest of $87,500 was
discounted to $58,334 and paid to the Company.
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DESCRIPTION OF CAPITAL STOCK
The following is a summary of certain of the material terms of the
Company's capital stock which are contained in the Restated Articles and the
By-Laws, which are filed as exhibits to the Registration Statement of which this
Prospectus is a part. Reference is made to such exhibits for a more complete
description of the Company's capital stock.
DESCRIPTION OF COMMON STOCK
General
The Company is authorized to issue 36,250,000 shares of Common Stock in
accordance with an amendment to its Restated Articles approved by the Company's
Board of Directors and stockholders effective August 1996.
Quorum and Voting Rights
Each share of Common Stock is entitled to one vote on all matters as to
which the holders of Common Stock are entitled to vote. The affirmative vote of
a majority of the stock having voting power present or represented by a proxy at
a meeting at which a quorum is present is required as to any matter which
requires the approval of the holders of Common Stock, other than (i) the
approval of certain Business Combinations and Reclassifications (as such terms
are defined above in 'Management -- Change in Control Provisions of the Restated
Articles'), (ii) the amendment of certain provisions of the Restated Articles,
and (iii) the amendment of certain provisions of the By-Laws, which require the
approval of 75% of the outstanding shares of stock entitled to vote for the
election of Directors. In the case of certain Business Combinations and
Reclassifications, the approval of a majority of the outstanding shares of stock
entitled to vote for the election of Directors other than those beneficially
owned by the other party to the Business Combination is required.
At any meeting of the stockholders of the Company at which the holders of
Common Stock are entitled to vote, the presence, in person or by proxy, of a
majority of the stock issued and outstanding, and entitled to vote thereat,
constitutes a quorum. No action may be taken at any meeting, other than to
adjourn such meeting, unless a quorum of each class entitled to vote is present.
Dividends
The Board of Directors may cause dividends to be paid to the holders of
Common Stock from time to time out of funds legally available therefor. When and
as dividends are declared, they may be payable in cash, in property or in shares
of Common Stock. See 'Risk Factors -- No Intention to Pay Dividends.'
DESCRIPTION OF PREFERRED STOCK
General
The Company has authorized 50,000 shares of Convertible Preferred Stock,
which the Company has issued from time to time in the form of designated series
as set forth below.
Series A Preferred Stock. In May 1996, the Company issued 10,000 shares of
Series A Preferred Stock. Subsequently, in June 1996 these shares were
repurchased and canceled as a condition precedent to the purchase of the Series
B Preferred Stock and the Series C Preferred Stock by the holders thereof, and
are currently held by the Company as authorized but unissued shares.
Series B Preferred Stock. In June 1996, the Company issued 6,200 shares of
Series B Preferred Stock. The holders of Series B Preferred Stock are entitled
to receive a dividend payable only on redemption or credited against conversion,
which shall accrue at the rate of 6% per annum. The Company also issued warrants
to holders of Series B Preferred Stock for 3,100,000 shares of Common Stock
exercisable at $2.50 per share for three years. The holders of the Series B
Preferred Stock have the right, at any time prior to the second anniversary of
the date of issuance, to convert, first, the outstanding accrued dividends, and
then the Series B Preferred Stock, in whole or in part, into a
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number of shares of Common Stock equal to the amount of dividends and redemption
value converted divided by the conversion price for the Series B Preferred
Stock. The conversion price for the Series B Preferred Stock means a price per
share equal to the lessor of (i) $1.25 and (ii) 80% of the average of the
closing bid price of the Common Stock during the five trading days prior to such
conversion. If not theretofore converted, the Series B Preferred Stock is
automatically deemed converted at such price on the second anniversary of the
date of issuance, unless (i) the Common Stock is not then trading on NASDAQ or
another U.S. securities exchange or (ii) the Company has not theretofore had
declared effective a registration statement with respect to the Common Stock
issuable upon conversion of the Series B Preferred Stock or the exercise of the
warrants issued to the holders of the Series B Preferred Stock. See 'Shares
Eligible for Future Sale -- Registration Rights and Certain Lock-up
Arrangements -- Holders of Series B Preferred Stock.' In such event, the Company
is required to redeem the Series B Preferred Stock at a redemption price payable
in cash equal to $5.00 per share plus all accrued and unpaid dividends thereon.
Series C Preferred Stock. In September 1996, the Company issued,
retroactive to June 1996, 2,000 shares of Series C Preferred Stock. The Company
also issued warrants to the holders of the Series C Preferred Stock for
3,000,000 shares of Common Stock exercisable at $3.00 per share for three years.
The holders of Series C Preferred Stock are entitled to receive a dividend
payable only on redemption or credited against conversion, which shall accrue at
the rate of 8% per annum. The holders of the Series C Preferred Stock have the
right, at any time prior to June 7, 1998, to convert, first, the outstanding
accrued dividends, and then the Series C Preferred Stock, in whole or in part,
into a number of shares of Common Stock equal to the amount of dividends and
redemption value converted divided by a conversion price equal to $6.00 per
share. If not theretofore converted, the Series C Preferred Stock is
automatically deemed converted at such price on June 7, 1998, unless (i) the
Common Stock is not then listed on NASDAQ (or another U.S. securities exchange)
or (ii) the Company has not theretofore had declared effective a registration
statement with respect to the Common Stock issuable upon conversion of the
Series C Preferred Stock or the exercise of the warrants issued to the holders
of the Series C Preferred Stock. In such event, the Company is required to
redeem the Series C Preferred Stock at a redemption price payable in cash equal
to $5.00 per share plus all accrued and unpaid dividends thereon. In addition,
if the Company has not had declared effective by October 7, 1996 such a
registration statement, the dividend rate is increased to 24% per annum and, at
the option of the holders of the Series C Preferred Stock, the Series C
Preferred Stock will not be redeemable by the Company, and will remain
convertible and accrue dividends, until the earlier of (x) the date designated
by such holders and (y) the date 180 days after such registration statement is
declared effective.This requirement to have such registration statement declared
effective by October 7, 1996 has been waived by the holders of the Series C
Preferred Stock until 120 days after the expiration of the lock-up arrangements
described under 'Shares Eligible for Future Sale -- Registration Rights and
Certain Lock-up Arrangements -- Holders of Series C Preferred Stock.'
OTHER OPTIONS AND WARRANTS
In addition to the warrants attached to the shares of Series B Preferred
Stock and Series C Preferred Stock described above, the Company, on various
dates ranging from April 21, 1995 to September 20, 1996, issued to several
persons 458,077 warrants that are fully vested as of the date of this Prospectus
including the Other Warrants as described under 'Shares Eligible for Future
Sale -- Registration Rights and Certain Lock-up Arrangements -- Warrants' (the
'Warrants'). Each Warrant entitles the holder to one share of Common Stock at
exercise prices ranging from $1.60 to $8.00 per share. The Warrants expire on
dates ranging from April 21, 1998 to February 26, 2001. The Company granted to
the holders of 118,077 of the Warrants piggyback registration rights, as
described more fully below.
Upon consummation of the Offering, the Company will issue warrants
exercisable for an aggregate of 1,192,913 shares of Common Stock to certain
stockholders as consideration for such stockholders' agreement to certain of the
lock-up arrangements described under 'Shares Eligible for Future Sale.'
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LIMITATION OF DIRECTORS LIABILITY; INDEMNIFICATION
The Restated Articles provide that Directors and officers of the Company
shall not be personally liable to the Company or its stockholders for damages
for breach of fiduciary duty as a Director or officer, except for (i) acts or
omissions which involve intentional misconduct, fraud, or a knowing violation of
law or (ii) the payment of dividends in violation of the provisions of Chapter
78 of the Nevada General Corporation Law, as amended (the 'NGCL'). The Restated
Articles further provide that, if the NGCL is amended to authorize corporate
action further eliminating or limiting the personal liability of Directors and
officers, then the liability of a Director or officer of the Company shall be
eliminated or limited to the full extent permitted by the NGCL. Any repeal or
modification of all or any portion of the limitation on liability contained in
the Restated Articles by the stockholders of the Company shall not adversely
affect any right or protection of a Director or officer of the Company with
respect to any acts or omissions occurring prior to the time of such repeal or
modification.
The By-Laws provide for indemnification of the officers and Directors of
the Company, as the case may be, against any liability, cost or expense incurred
by such Director or officer by reason of the fact that such person is or was a
Director, officer, employee or agent of the Company, except to the extent that
such indemnification is prohibited by Chapter 78 of the NGCL.
Section 78.751 of the NGCL provides that a corporation may, and in certain
cases, must, 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
(other than certain actions by, or in right of, the Corporation), by reason of
the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
and, in the case of a non-derivative action, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by such person, in connection
with the action, suit or proceeding, if, in either type of action, such person
acted in good faith and in a manner which such person reasonably believed to be
in, or not opposed to, the best interests of the corporation. 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 such
person 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,
such person had reasonable cause to believe that such person's conduct was
unlawful.
Indemnification may not be made, in a derivative action, for any claim,
issue or matter as to which such a person had 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 upon application
that, in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
The Company's By-Laws provide that the expenses of officers and Directors
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, upon receipt of an undertaking by, or on behalf of,
the Director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that such person is not entitled to be
indemnified by the corporation, unless ordered by a court or advanced (as
described above), any indemnification must be made by the corporation, only as
authorized in the specific case, upon a determination that the indemnification
of the Director, officer, employee or agent is proper in the circumstances. The
determination must be made either by the stockholders, or by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not
parties to the act, suit or proceeding. If a majority vote of a quorum
consisting of Directors who were not parties to the act, suit or proceeding so
orders, or if a quorum consisting of Directors who were not parties to the act,
suit or proceeding cannot be obtained, the determination must be made by
independent legal counsel in a written opinion.
Insofar as indemnification for Directors, officers and controlling persons
of the Company with respect to liabilities arising under the Securities Act may
be granted pursuant to the provisions described above, or otherwise, the Company
has been advised that, in the opinion of the Commission,
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such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
LISTING
The Common Stock is quoted on The Nasdaq SmallCap MarketSM, under the
symbol 'ALCM.'
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Continental Stock
Transfer & Trust Company and its address is 2 Broadway, New York, New York
10004.
SHARES ELIGIBLE FOR FUTURE SALE
The following discussion of shares eligible for future sale excludes up to
12,025,092 shares of Common Stock (subject to lock-up provisions described
below) which may be issued pursuant to currently outstanding options, warrants
and conversion rights. Upon completion of the Offering, the Company will have a
total of 6,505,407 shares of Common Stock outstanding (6,566,042 if the
Underwriters' over-allotment option is exercised in full). Immediately following
the Offering, 3,424,529 shares of the outstanding Common Stock, including the
1,500,000 shares of Common Stock offered hereby and the 1,344,468 shares of
Common Stock being sold by the Delayed Selling Stockholders, (plus an additional
225,000 shares if the Underwriters' over-allotment option is exercised in full),
will be freely tradeable without restriction or registration under the
Securities Act or will be eligible for sale in the public market without regard
to the availability of current public information, volume limitations, manner of
sale restrictions or notice requirements under Rule 144(k), in each case by
persons other than 'affiliates' (as defined under the Securities Act) of the
Company.
All the remaining 3,080,878 Restricted Shares were issued and sold by the
Company in private transactions in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act and are restricted securities
under Rule 144 of the Securities Act. Restricted Shares may not be sold unless
they are registered under the Securities Act or are sold pursuant to an
applicable exemption from registration, including pursuant to Rule 144. In
general, under Rule 144 as currently in effect, beginning 90 days after this
Offering a person (or persons whose shares are aggregated) who has beneficially
owned Restricted Shares for at least two years, including affiliates of the
Company, would be entitled to sell in brokers' transactions or to market makers
within any three-month period a number of Restricted shares that does not exceed
the greater of (i) 1% of the then outstanding shares of the Common Stock
(approximately 65,054 shares, based on the number of shares to be outstanding
after the Offering, assuming no exercise of the Underwriter's over-allotment
option) or (ii) the average weekly trading volume of the Common Stock on The
Nasdaq SmallCap MarketSM during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. A person who is
not an affiliate of the Company at any time during the 90 days preceding a sale,
and who has beneficially owned Restricted Shares for at least three years, is
currently entitled to sell such Restricted Shares under Rule 144(k) without
regard to the availability of current public information, volume limitations,
manner of sale restrictions or notice requirements. However, under Rule 144,
Restricted Shares held by affiliates must continue, after the three-year holding
period, to be sold in brokers' transactions or to market makers subject to the
volume limitations described above. The above is a summary of Rule 144 and is
not intended to be a complete description thereof. As of April 25, 1997,
approximately 935,532 Restricted Shares may become eligible for sale pursuant to
Rule 144, or continue to be eligible for sale under other exemptions from
registration, under the Securities Act.
The Company, its Directors and officers and certain of its stockholders and
holders of options, warrants, conversion or contractual rights to acquire Common
Stock, who will hold in the aggregate up to 14,142,237 Restricted Shares
outright or issuable upon exercise of such rights, depending on the extent to
which the Underwriters' over-allotment options are exercised, if at all
(14,119,831 Restricted Shares if the Underwriters' over-allotment options are
exercised in full), have agreed that they will not,
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directly or indirectly, offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise dispose of or transfer (or announce
any offer, sale, offer of sale, pledge, contract of sale, grant of any option to
purchase or other disposition or transfer of) any shares of Common Stock or any
capital stock or any other securities convertible into or exercisable for, or
any right to purchase or acquire, Common Stock or any other capital stock, for a
period of nine months after the date of this Prospectus, subject to termination
if the final Prospectus relating to the Offering is not filed with the
Commission by March 31, 1997 pursuant to Rule 424(b) under the Securities Act
(such period being the 'Lock-Up Period'), without the prior written consent of
LT Lawrence & Co., Inc., on behalf of the Underwriters, except (x) in the case
of the Company, with respect to (i) private issuances in connection with
acquisitions if the holders thereof agree to be bound by the foregoing
nine-month restriction to the same extent as the Company and (ii) grants of
Options and other rights pursuant to the Stock Option Plan and issuances of
Common Stock pursuant to the exercise of currently outstanding employee options
and (y) in the case of the holders, with respect to bona fide gifts of shares of
Common Stock or securities convertible into or exchangeable for Common Stock
provided that the donee agrees in writing to be bound by the foregoing
provisions. See ' -- Registration Rights and Certain Lock-up Arrangements.'
The Representative may from time to time in its sole discretion release
some or all of the stockholders who have executed such a lock-up agreement from
the restrictions thereof. The determination whether to grant such a release will
be made by the Representative on a case-by-case basis, based on such
considerations as the Representative may deem relevant, including but not
limited to market conditions and public demand for additional securities of the
Company. In connection with any such release, the Representative may negotiate
with any such stockholder for the purchase (for the Representative's own account
or the account of others) of the securities held by such stockholder at prices
which may or may not relate to the then current market price of the Common
Stock. As of the date of this Prospectus, no definitive agreement has been
reached between the Representative and any stockholder regarding the release of
any such lock-up agreement.
The Company currently expects to file a registration statement under the
Securities Act to register shares reserved for issuance under the Stock Option
Plan. Shares issued pursuant to the Stock Option Plan or upon exercise of
outstanding Options after the effective date of such registration statement,
other than shares held by affiliates of the Company (which are subject to the
resale restrictions of Rule 144), generally will be tradeable without
restriction under the Securities Act, subject to the lock-up provisions
described above.
REGISTRATION RIGHTS AND CERTAIN LOCK-UP ARRANGEMENTS
The following summaries are qualified in their entirety by the full text of
the various registration rights ageements and other registration rights
provisions filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
There are ten sources of registration rights applicable to the Company as
of the date of this Prospectus: (1) the registration rights granted to the
holders of Alliance common stock (the 'Reg D Investors') pursuant to the
Placement Memorandum dated February, 1995 (the 'Placement Memorandum'); (2) the
registration rights granted to Mr. Glenn Golenberg, Mr. Marshall Geller, Whale
Securities Co., L.P. ('Whale') and Millennium Capital Corp. ('Millennium')
pursuant to an aggrement dated February 7, 1995 among the Company, Whale and
Golenberg and Geller, Inc., and a letter dated March 21, 1995 from Whale to the
Company (the 'Finder's Fee Agreements') in connection with certain finder's fees
related to the Company's acquisition of Alliance; (3) the registration rights
granted to Mr. Golenberg and Mr. Geller pursuant to two agreements (the
'Golenberg/Geller Agreements') dated May 19, 1995 between the Company and Mr.
Golenberg and the Company and Mr. Geller, respectively; (4) the registration
rights attached to the 62,500 shares issued to Mighty Net, Inc. (previously
named Membership Development, Inc.) ('MNI') by the Company pursuant to a
Settlement and Release Agreement dated June 17, 1994 between the Company,
Sheldon Kasower ('Kasower') and MNI; (5) the registration rights granted to the
holders of the Series B Preferred Stock; (6) the registration rights granted to
the holders of Series C Preferred Stock; (7) the registration rights attached to
the warrants issued by the Company pursuant to various warrant certificates; (8)
the registration
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rights granted to Mr. Stephen Dunn pursuant to the Stock Purchase Agreement (the
'Stock Purchase Agreement') dated January 31, 1995 between Mr. Dunn and
Alliance; (9) the registration rights granted to Mr. Barbera, Mr. Budlow and Ms.
Sautkulis pursuant to the Registration Rights Agreement (the 'Registration
Agreement') dated as of October 9, 1996 between the Company, Mr. Barbera, Mr.
Budlow and Ms. Sautkulis; and (10) the registration rights attached to the
Representative's Warrants.
Reg D Investors. Subject to certain conditions and limitations, in
connection with the issuance of 563,750 shares of Common Stock pursuant to the
Placement Memorandum (the 'Reg D Registrable Securities'), the holders of an
aggregate of at least two-thirds of the Reg D Registrable Securities have the
right to require one time that the Company use its best efforts to effect a
registration of all the Reg D Registrable Securities. This demand registration
right may not be exercised before the date which is the earlier of (i) nine
months from the date of the closing of the 'Offering' (as defined in the
Placement Memorandum) and (ii) six months after a 'Qualified Public Offering'
(as defined in the Placement Memorandum).
Subject to certain conditions and limitations, the Reg D Investors also
have piggyback registration rights pursuant to which the Company must notify the
Reg D Investors of the Company's intention to register any Common Stock for its
own account and include in such registration all Reg D Registrable Securities
requested by the Reg D Investors to be so included.
All of the Reg D Registrable Securities of the Reg D Investors who are also
Delayed Selling Stockholders (an aggregate of 36,968 shares of Common Stock) are
being registered under the Securities Act by the registration statement of which
this Prospectus forms a part for resale on a delayed basis pursuant to Rule 415
under the Securities Act. See 'Delayed Selling Stockholders and Plan of
Distribution.'
Reg D Investors who are also Selling Stockholders have agreed, except as
set forth in the next sentence, to irrevocably waive any and all of their
piggyback and demand registration rights and not to sell any shares of Common
Stock or certain related securities except: (i) pursuant to the Offering or the
exercise of the Underwriters' over-allotment options; (ii) in accordance with
all of the applicable provisions of Rule 144 under the Securities Act; or (iii)
in transactions exempt from the registration requirements of the Securities Act.
Such agreements terminate if the final Prospectus relating to the Offering is
not filed with the Commission by March 31, 1997 pursuant to Rule 424(b) under
the Securities Act.
All of the Reg D Investors (other than the Reg D Investors who are also
Delayed Selling Stockholders or Selling Stockholders, as described in the
preceding two paragraphs), including the Reg D Investors who are also
Over-Allotment Selling Stockholders, have agreed not to exercise their demand or
piggyback registration rights and not to make sales of Common Stock or certain
related securities during the Lock-Up Period with respect to any Reg D
Registrable Securities held by them that are not sold pursuant to the Offering
or the exercise of the Underwriters' over-allotment options. As consideration
for these lock-ups, upon consummation of the Offering, the Company will issue to
the Reg D Investors agreeing thereto, warrants exercisable for one share of
Common Stock for each two shares of Common Stock that are subject to such
lock-ups (such new warrants to be exercisable for an aggregate of up to 145,133
shares of Common Stock). Such warrants will be exercisable for a period of two
years from the date of the Closing (except that, in the case of warrants
exercisable for up to 9,861 shares of Common Stock issued to one stockholder,
such warrants will be exercisable for a period of three years from the date of
issue thereof) at an exercise price equal to the initial public offering price
of the Common Stock in the Offering (except that, in the case of warrants
exercisable for up to 9,386 shares of Common Stock issued to two other
stockholders, the exercise price with respect to such warrants will be $1.00
above such initial public offering price).
Recipients of Finder's Fee. Subject to certain conditions and limitations
and pursuant to the Finder's Fee Agreements, Whale, Millennium, Mr. Golenberg
and Mr. Geller have piggyback registration rights with respect to an aggregate
of 37,500 shares of Common Stock owned outright and an aggregate of 25,000
shares of Common Stock issuable upon the exercise of warrants (the 'Finder's Fee
Warrants').
Whale and Millennium have agreed, except as set forth in the next sentence,
to irrevocably waive any and all of their piggyback registration rights and not
to sell any shares of Common Stock or certain
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related securities except: (i) pursuant to the Offering or the exercise of the
Underwriters' over-allotment options; (ii) in accordance with all of the
applicable provisions of Rule 144 under the Securities Act; or (iii) in
transactions exempt from the registration requirements of the Securities Act.
Such agreements terminate if the final Prospectus relating to the Offering is
not filed with the Commission by March 31, 1997 pursuant to Rule 424(b) under
the Securities Act.
Mr. Golenberg and Mr. Geller have agreed not to exercise their piggyback
registration rights and not to make sales of Common Stock or certain related
securities during the Lock-Up Period. As consideration for these lock-ups, upon
consummation of the Offering, the Company will issue to each of Mr. Golenberg
and Mr. Geller warrants exercisable for one share of Common Stock for each two
shares of Common Stock that are subject to such lock-ups (such new warrants to
be exercisable for an aggregate of 15,626 shares of Common Stock). Such warrants
will be exercisable for a period of three years from the date of the Closing at
an exercise price equal to the initial public offering price of the Common Stock
in the Offering.
Golenberg and Geller. Subject to certain conditions and limitations and
pursuant to the Golenberg/Geller Agreements, the Company agreed to include an
aggregate of 56,250 shares of Common Stock held by Mr. Golenberg and Mr. Geller
outright or issuable upon the exercise of warrants (the 'Golenberg/Geller
Warrants') in a registration statement to be filed on or before December 1,
1995.
Mr. Golenberg and Mr. Geller have agreed not to exercise their registration
rights and not to make sales of Common Stock or certain related securities
during the Lock-Up Period. As consideration for these lock-ups, upon
consummation of the Offering, the Company will issue to each of Mr. Golenberg
and Mr. Geller warrants exercisable for one share of Common Stock for each two
shares of Common Stock that are subject to such lock-ups (such new warrants to
be exercisable for an aggregate of 28,125 shares of Common Stock). Such warrants
will be exercisable for a period of three years from the date of the Closing at
an exercise price equal to the initial public offering price of the Common Stock
in the Offering.
Kasower and MNI. Pursuant to a Settlement and Release Agreement dated June
17, 1994 between the Company, Kasower and MNI, the Company agreed to file a
registration statement with respect to 15,625 shares of Common Stock delivered
to MNI in connection with such settlement and release not later than sixty (60)
days after the filing of the Company's Form 10-K for the fiscal year ended June
30, 1994.
Pursuant to such obligations, the Company filed a registration statement on
Form S-3 on June 17, 1995 and Amendment No. 1 thereto on July 25, 1996 (as
amended, the 'S-3') with respect to which the Company has submitted a letter to
the Commission requesting withdrawal. See ' -- S-3.' Kasower and MNI have agreed
to the Company's withdrawal of the S-3 and MNI has included 57,500 shares of
Common Stock in the registration statement of which this Prospectus forms a part
for resale on a delayed basis pursuant to Rule 415 under the Securities Act. See
'Delayed Selling Stockholders and Plan of Distribution.'
Holders of Series B Preferred Stock. Pursuant to an agreement dated June 7,
1996 with the holders of the Series B Preferred Stock, the Company agreed to
file a registration statement on Form S-3 or Form S-1 for the public resale of
all of the shares of Common Stock issuable on conversion of the Series B
Preferred Stock and all of the shares of Common Stock issuable upon exercise of
the warrants issued in connection with such Series B Preferred Stock (the
'Series B Warrants'). Subject to certain conditions and limitations, the Company
is required to use its best efforts to cause such registration statement to
become effective not later than 90 days after the date of filing, and to keep
such registration statement effective for two years, in the case of Common Stock
issued upon conversion of the Series B Preferred Stock, and for three years, in
the case of Common Stock issued upon exercise of the Series B Warrants.
Holders of the Series B Preferred Stock have agreed not to exercise their
registration rights and agreed not to make sales of Common Stock or certain
related securities during the Lock-Up Period. As consideration for certain of
the foregoing lock-ups, upon consummation of the Offering, the Company will
issue to certain holders of Series B Preferred Stock warrants exercisable for
one share of Common
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Stock for each two shares of Common Stock issuable upon exercise of the Series B
Warrants or conversion of Series B Preferred Stock that are subject to such
lock-ups (such new warrants to be exercisable for an aggregate of 946,800 shares
of Common Stock). The warrants will be exercisable for a period of two years
from the date of the Closing at an exercise price equal to the initial public
offering price of the Common Stock in the Offering. Certain holders of the
Series B Preferred Stock have included in the aggregate 1,250,000 shares of
Common Stock (issuable upon conversion of shares of Series B Preferred Stock) in
the registration statement of which this Prospectus forms a part for resale on a
delayed basis pursuant to Rule 415 under the Securities Act, which Common Stock
will be subject to such lock-ups. See 'Delayed Selling Stockholders and Plan of
Distribution' and 'Certain Transactions.'
Holders of Series C Preferred Stock. Pursuant to a Private Placement
Purchase Agreement dated September 10, 1996, the Company agreed to file a
registration statement on Form S-3 or Form S-1 for the public resale of all of
the shares of Common Stock issuable on conversion of the Series C Preferred
Stock and all of the shares of Common Stock issuable upon exercise of the
warrants issued in connection with such Series C Preferred Stock (the 'Series C
Warrants'). Subject to certain conditions and limitations, the Company is
required to use its best efforts to cause such registration statement to become
effective not later than 90 days after the date of filing, and to keep such
registration statement effective for two years, in the case of Common Stock
issued upon conversion of the Series C Preferred Stock, and for three years, in
the case of Common Stock issued upon exercise of the Series C Warrants.
Holders of the Series C Preferred Stock have agreed not to exercise their
registration rights and agreed not to make sales of Common Stock or certain
related securities during the Lock-Up Period.
Warrants. In addition to the Finder's Fee Warrants, the Golenberg/Geller
Warrants, the Series B Warrants and the Series C Warrants, the Company has
issued warrants containing registration rights (the 'Other Warrants'), as more
fully described below, exercisable for an aggregate of 40,577 shares of Common
Stock to various persons (the 'Warrant Holders'). The Other Warrants (and the
related registration rights) expire on various dates ranging from January 8,
1999 to July 15, 2000. Pursuant to such Other Warrants, the Company must provide
each Warrant Holder with at least forty-five (45) days prior written notice of
any registration of any securities of the Company. Subject to certain conditions
and limitations, all such Warrant Holders have the right to require the Company
to include such number of shares of Common Stock underlying the Other Warrants
held by them in any registered offering of Common Stock by the Company.
Such Warrant Holders have agreed not to exercise their piggyback
registration rights and agreed not to make sales of Common Stock or certain
related securities during the Lock-Up Period. As consideration for the foregoing
lock-ups, upon consummation of the Offering, the Company will issue to such
Warrant Holders, new warrants exercisable for one share of Common Stock for each
two shares of Common Stock issuable upon exercise of the Other Warrants held by
such Warrant Holders that are subject to such lock-ups (such new warrants to be
exercisable for an aggregate of 16,068 shares of Common Stock). These new
warrants will be exercisable for a period of two years from the date of the
Closing at an exercise price equal to the initial public offering price of the
Common Stock in the Offering.
In addition, pursuant to an option agreement dated October 1, 1995 between
the Company and the three individuals named therein, the Company agreed to file
with the Commission, on or before December 1, 1995, a shelf registration
statement with regard to 30,000 shares of Common Stock issuable to such persons
upon exercise of warrants granted to them in such option agreement. Subject to
certain conditions and limitations, the Company agreed to use its best efforts
to have such registration statement declared effective as soon as possible after
the filing thereof and to keep the shelf registration statement continuously
effective thorough December 31, 1996. In addition, in connection with the
extension of such option agreement in April 1996, the Company issued to such
three individuals warrants exercisable for 22,500 shares of Common Stock in the
aggregate, together with piggyback registration rights having terms and
conditions similar to those given to the Warrant Holders.
Each of such persons has agreed not to exercise his registration rights and
not to make sales of Common Stock or certain related securities during the
Lock-Up Period. As consideration for each of the foregoing lock-ups, the Company
will issue to each of such persons, new warrants exercisable for
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one share of Common Stock for each two shares of Common Stock issuable upon
exercise of the warrants granted to such person under the option agreement that
are subject to such lock-ups (such new warrants to be exercisable for an
aggregate of 26,250 shares of Common Stock). These warrants will be exercisable
for a period of two years from the date of the Closing at an exercise price
equal to the initial public offering price of the Common Stock in the Offering.
Stephen Dunn. Pursuant to a Stock Purchase Agreement dated January 31,
1995, the Company may satisfy any part of any contingent payment due in respect
of the purchase price for SD&A with restricted Common Stock. With respect to any
such Common Stock issued to Mr. Dunn in satisfaction of any such contingent
payment, Mr. Dunn has the right to make two demands, commencing in September
1997, that the Company prepare, file and cause to become effective a
registration statement as to such number of shares of Common Stock so issued to
Mr. Dunn as he may request to be included therein in a notice to the Company.
Mr. Dunn has agreed not to exercise such registration rights and agreed not
to make sales of Common Stock or certain related securities during the Lock-Up
Period.
Metro. In connection with the Company's acquisition of Metro, the Company
issued 1,814,000 shares of Common Stock to the former shareholders of Metro.
Pursuant to a Registration Rights Agreement dated as of October 9, 1996, subject
to certain conditions and limitations contained therein, commencing nine months
after the consummation of an underwritten public offering by the Company of its
securities, (or, if such an underwritten public offering has not been
consummated by March 31, 1997, commencing December 31, 1997), such former
shareholders or any permitted transferee or assignee thereof have piggyback
registration rights with respect to the Common Stock so issued to them in the
event the Company files a registration statement on any form that would permit
the registration of their Common Stock (other than on Form S-4 or S-8 or in
connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders). The Company is required to give such
stockholders or any permitted transferee or assignee thereof at least 40 days'
prior written notice of the filing of any such registration statement. In
addition, in the event that such a registration statement is not filed within
nine months of the consummation of an underwritten public offering by the
Company of its securities (or, if such an underwritten public offering has not
been consummated by March 31, 1997, prior to December 31, 1997), such former
shareholders or any permitted transferee or assignee thereof have the right to
demand one time that the Company file a registration statement with respect to
the Common Stock so issued to them and use its best efforts to have such
registration statement declared effective.
The former shareholders of Metro have agreed not to exercise their demand
registration rights and their piggyback registration rights and agreed not to
make sales of Common Stock or certain related securities during the Lock-Up
Period.
Representative's Warrants. Upon the completion of the Offering, the Company
will sell to the Representative, individually and not as representative of the
Underwriters, the Representative's Warrants for consideration of one mil ($.001)
per Representative's Warrant, exercisable for 150,000 shares of Common Stock in
the aggregate. Each Representative's Warrant shall (i) entitle the holder
thereof to purchase one share of Common Stock at an exercise price equal to 120%
of the initial public offering price per share of the Common Stock offered by
the Company hereby; (ii) be exercisable for a period of four years commencing
one year after the date of this Prospectus; and (iii) contain appropriate
anti-dilution provisions. Such anti-dilution provisions include protection
against dilution in both price and percentage of the Company (to the extent
permitted by the rules and regulations of the NASD upon (a) any issuance of
Common Stock, warrants or other securities convertible into Common Stock at a
price below the then market value of the Common Stock during a period of five
years from the date of this Prospectus; (b) any issuance of Common Stock,
warrants or other securities convertible into Common Stock as a dividend; or (c)
a subdivision or combination of the outstanding Common Stock, warrants or other
securities convertible into Common Stock as the result of a merger,
consolidation, spin-off or otherwise.
During the four-year period commencing one year from the date of this
Prospectus, the Company is required to use its best efforts to assist the
holders of the Representative's Warrants and the underlying securities in
publicly selling such Representative's Warrants and the underlying securities,
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when and if requested by the holders of a majority thereof. These best efforts
include the preparation and filing of one or more registration statements during
such four-year period at the demand of the holders of not less than a majority
of the Representative's Warrants or underlying securities, and the maintenance
of the effectiveness thereof for at least six months, the first of which such
filings is at the Company's sole cost and expense, including, without
limitation, blue sky fees and expenses and the fees and expenses (not to exceed
$15,000) of one counsel to the holders of the Representative's Warrants or
underlying securities, but not including any underwriting or selling
commissions, discounts or other charges of any broker-dealer acting on behalf of
such holders. In addition, for the period from the first through the seventh
anniversary of the date of this Prospectus, the Company is required to notify
all holders of the Representative's Warrants and underlying securities of the
Company's intention to undertake another public offering of the Company's
securities (whether by the Company or by any security holder of the Company). If
requested by any holder of Representative's Warrants, the Company is required to
include in such public offering any Representative's Warrants and underlying
securities of such requesting holder at the Company's sole cost and expense
(other than (i) fees and disbursements of counsel for any holder of
Representative's Warrants and (ii) any applicable underwriting discounts or
commissions, but including, without limitation, blue sky fees and expenses) and
maintain the effectiveness of any registration statement relating to such public
offering for at least six months after the date such registration statement is
declared effective. The Representative's Warrants will not be transferable,
saleable, assignable or hypothecatable for one year except that they may be
assigned in whole or in part during such year to any NASD member participating
in the Offering or any officer or representative of the Representative or any
such NASD member.
S-3. In addition to Kasower and MNI, all of the other persons referred to
in the S-3 as 'Selling Stockholders' have agreed to the Company's withdrawal of
the S-3.
Other Lock-Up Arrangements. The Company and its Directors and executive
officers have agreed not to make sales of Common Stock or certain related
securities during the Lock-Up Period.
New Warrants. All of the warrants to be issued by the Company upon
consummation of the Offering as consideration for certain of the lock-up
arrangements described above, exercisable for an aggregate of 1,192,193 shares
of Common Stock, will grant to the holders thereof the same registration rights
as the underlying securities subject to the lock-up arrangement in respect of
which such new warrants are being issued.
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UNDERWRITING
The Underwriters named below for whom LT Lawrence & Co., Inc. is acting as
the Representative have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company the number
of shares of Common Stock set forth below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
LT Lawrence & Co., Inc. .........................................................
---------
Total.................................................................. 1,500,000
---------
---------
</TABLE>
The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all of the shares of Common Stock
offered hereby through the Representative, if any are purchased.
Through the Representative, the Underwriters have advised the Company and
the Selling Stockholders that they propose initially to offer the shares of
Common Stock to the public on the terms set forth on the cover page of this
Prospectus. The Underwriters may allow a concession of not more than $. per
share to selected dealers; and the Underwriters may allow, and such dealers may
reallow, a concession of not more than $. per share to certain other
dealers. After the consummation of the Offering, the concession to selected
dealers and the reallowance to other dealers may be changed by the Underwriters.
The shares of Common Stock are offered subject to receipt and acceptance by the
Underwriters and to certain other conditions, including the right to reject
orders in whole or in part.
The Company, the Selling Stockholders and the Over-Allotment Selling
Stockholders have granted to the Underwriters options to purchase up to 225,000
additional shares of Common Stock solely to cover over-allotments, if any. The
options are exercisable within 45 days from the date of this Prospectus at the
initial public offering price, less the underwriting discount set forth on the
cover page of this Prospectus. To the extent the Representative exercises the
options, the Underwriters will be committed, subject to certain conditions, to
purchase the additional shares. The Company has agreed with the Selling
Stockholders and the Over-Allotment Selling Stockholders that the first 164,365
shares as to which the Underwriters' over-allotment options are exercised will
be sold by such Selling Stockholders and Over-Allotment Selling Stockholders on
a pro rata basis based on the relative amounts subject to sale by such persons
as set forth under 'Principal and Selling Stockholders,' and any of the
remaining 60,635 shares as to which the Underwriters' over-allotment options are
exercised will be sold by the Company.
See 'Shares Eligible for Future Sale' for a description of certain lock-up
agreements.
The Company, the Selling Stockholders and the Over-Allotment Selling
Stockholders have agreed to indemnify the Underwriters against, or contribute to
losses arising out of, certain liabilities, including liabilities arising under
the Securities Act.
The Representative was organized in February 1992 and was registered as a
broker-dealer in 1994. Prior to this Offering, the Representative has
participated as a sole or co-manager in four public offerings. See 'Risk
Factors -- Lack of Underwriting History.'
The Representative has informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
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VALIDITY OF SHARES
The validity of the securities offered hereby and certain other legal
matters are being passed upon for the Company by Lionel Sawyer & Collins, Las
Vegas, Nevada and Jones, Day, Reavis & Pogue, New York, New York and for the
Underwriters by Rubin Baum Levin Constant & Friedman, New York, New York.
EXPERTS
The Company's consolidated balance sheet as of June 30, 1996 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended June 30, 1996 included in this
Prospectus have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing. The balance sheet of SD&A as of December 31,
1994 and the statements of income, shareholder's equity and cash flows for the
year ended December 31, 1994 included in this Prospectus have been included
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing. Metro's balance sheet as of December 31, 1995 and the statements of
operations, shareholders' equity and cash flows for each of the two years in the
period ended December 31, 1995 included in this Prospectus have been included
herein in reliance on the report of Coopers & Lybrand L.L.P. independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549 a
Registration Statement on Form SB-2 under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information pertaining to the securities offered
hereby and to the Company, reference is made to the Registration Statement and
the exhibits and schedules filed therewith. Statements contained in the
Prospectus concerning the provisions of any document to which reference is made
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement. Each
such statement is qualified in its entirety by such reference. A copy of the
Registration Statement may be inspected without charge at the offices of the
Commission in Washington, D.C. 20549, and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon the payment of
the fees prescribed by the Commission.
The Company is subject to the informational reporting requirements of the
Securities Exchange Act, and accordingly, files, reports, proxy statements and
other information are filed with the Commission. Such reports, proxy statements
and other information filed with the Commission are available for inspection and
copying at the public reference facilities maintained by the Commission at Room
1025, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at
certain regional offices of the Commission, located at Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, IL 60621 and 7 World Trade
Center, New York, NY 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 upon the payment of the fees prescribed by the
Commission. In addition, the Commission maintains a website that contains
reports, proxy statements and other information filed with the Commission. The
address of such site is http://www.sec.gov.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF ALL-COMM MEDIA CORPORATION
Report of Independent Accountants..................................................................... F-2
Consolidated Balance Sheet
June 30, 1996....................................................................................... F-3
Consolidated Statements of Operations
Years Ended June 30, 1995 and 1996.................................................................. F-4
Consolidated Statements of Stockholders' Equity
Years Ended June 30, 1995 and 1996.................................................................. F-5
Consolidated Statements of Cash Flows
Years Ended June 30, 1995 and 1996.................................................................. F-6
Notes to Consolidated Financial Statements............................................................ F-8
FINANCIAL STATEMENTS OF METRO SERVICES GROUP, INC.
Report of Independent Accountants..................................................................... F-20
Balance Sheets
December 31, 1995 and June 30, 1996 (unaudited)..................................................... F-21
Statements of Operations
Years Ended December 31, 1994 and 1995 and Six Months Ended June 30, 1995 (unaudited) and 1996
(unaudited).......................................................................................... F-22
Statements of Shareholders' Equity (Deficit)
Years Ended December 31, 1994 and 1995 and Six Months Ended June 30, 1996 (unaudited)............... F-23
Statements of Cash Flows
Years Ended December 31, 1994 and 1995 and Six Months Ended June 30, 1995 (unaudited) and 1996
(unaudited).......................................................................................... F-24
Notes to Financial Statements......................................................................... F-25
SELECTED FINANCIAL STATEMENTS OF STEPHEN DUNN & ASSOCIATES, INC.
Audited
Report of Independent Accountants..................................................................... F-28
Balance Sheet
December 31, 1994................................................................................... F-29
Statement of Operations
Year Ended December 31, 1994........................................................................ F-30
Statement of Shareholder's Equity
Year Ended December 31, 1994........................................................................ F-31
Statement of Cash Flows
Year Ended December 31, 1994........................................................................ F-32
Notes to Financial Statements......................................................................... F-33
Unaudited
Balance Sheet
March 31, 1995...................................................................................... F-37
Statement of Operations
Three Months Ended March 31, 1995................................................................... F-38
Statement of Shareholder's Equity
Three Months Ended March 31, 1995................................................................... F-39
Statement of Cash Flows
Three Months Ended March 31, 1995................................................................... F-40
Notes to Interim Financial Statements................................................................. F-41
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders of
ALL-COMM MEDIA CORPORATION
We have audited the consolidated balance sheet of All-Comm Media
Corporation and Subsidiaries as of June 30, 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years in the period ended June 30, 1996. These financial statements are the
responsibility of All-Comm Media Corporation's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of All-Comm Media
Corporation and Subsidiaries as of June 30, 1996, and the consolidated results
of their operations and their cash flows for each of the two years in the period
ended June 30, 1996, in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
Los Angeles, California
September 19, 1996
F-2
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents..................................................................... $ 1,393,044
Accounts receivable, net of allowance for doubtful accounts of $34,906........................ 2,681,748
Land held for sale at cost.................................................................... 921,465
Other current assets.......................................................................... 107,658
-----------
Total current assets..................................................................... 5,103,915
Property and equipment at cost, net................................................................ 299,045
Intangible assets at cost, net..................................................................... 7,851,060
Other assets....................................................................................... 47,046
-----------
Total assets............................................................................. $13,301,066
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings......................................................................... $ 500,000
Trade accounts payable........................................................................ 470,706
Accrued salaries and wages.................................................................... 706,039
Other accrued expenses........................................................................ 758,112
Income taxes payable.......................................................................... 10,000
Long-term obligations to related party, current portion....................................... 583,333
Related party payable......................................................................... 425,000
-----------
Total current liabilities................................................................ 3,453,190
Long-term obligations to related party less current portion........................................ 1,516,667
Other liabilities.................................................................................. 80,315
-----------
Total liabilities........................................................................ 5,050,172
-----------
Commitments and contingencies
Stockholders' equity:
Convertible Preferred Stock, $.01 par value; 50,000 shares authorized consisting of: 6,200
shares of Series B Convertible Preferred Stock issued and outstanding; 2,000 shares of Series
C Convertible Preferred Stock issued and outstanding......................................... 82
Common stock -- authorized 6,250,000 shares of $.01 par value at June 30, 1996, increased in
August 1996 to 36,250,000; 3,198,534 shares issued........................................... 31,985
Additional paid-in capital.................................................................... 14,462,306
Accumulated deficit........................................................................... (6,108,010)
Less 11,800 shares of common stock in treasury, at cost....................................... (135,469)
-----------
Total stockholders' equity............................................................... 8,250,894
-----------
Total liabilities and stockholders' equity.......................................... $13,301,066
-----------
-----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Revenues........................................................................... $ 3,630,828 $15,889,210
----------- -----------
Operating costs and expenses:
Salaries and benefits......................................................... 3,139,232 12,712,150
Direct costs.................................................................. 102,052 807,057
Selling, general and administrative........................................... 1,121,023 1,843,236
Professional fees............................................................. 459,344 625,667
Amortization of intangible assets............................................. 65,101 361,537
----------- -----------
Total operating costs and expenses....................................... 4,886,752 16,349,647
----------- -----------
Loss from operations..................................................... (1,255,924) (460,437)
----------- -----------
Other income (expense):
Gain from sales of securities................................................. 1,579,539 --
Loan commitment fee........................................................... (300,000) --
Interest income............................................................... 13,679 12,276
Interest expense.............................................................. (94,200) (487,638)
Other, net.................................................................... 1,047 --
----------- -----------
Total.................................................................... 1,200,065 (475,362)
----------- -----------
Loss from continuing operations before income taxes........................... (55,859) (935,799)
Provision for income taxes.................................................... (75,000) (141,084)
----------- -----------
Loss from continuing operations before discontinued operations..................... (130,859) (1,076,883)
Gain on sale of discontinued operations............................................ 322,387 --
Loss from discontinued operations.................................................. (81,131) --
----------- -----------
Net income (loss)........................................................ $ 110,397 $(1,076,883)
----------- -----------
----------- -----------
Net income (loss) attributable to common stockholders.................... $ 110,397 $(1,094,373)
----------- -----------
----------- -----------
Income (loss) per common share:
From continuing operations.................................................... $ (.07) $ (.36)
From discontinued operations.................................................. $ .13 --
----------- -----------
Net income (loss) per common share................................................. $ .06 $ (.36)
----------- -----------
----------- -----------
Weighted average common and common equivalent shares outstanding................... 1,807,540 3,068,278
----------- -----------
----------- -----------
Primary and fully diluted income (loss) per common share are the same in fiscal years 1995 and 1996.
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
CONVERTIBLE GAIN ON TREASURY
PREFERRED STOCK COMMON STOCK ADDITIONAL AVAILABLE- STOCK
--------------- ------------------ PAID-IN FOR-SALE ACCUMULATED -------
SHARES AMOUNT SHARES AMOUNT CAPITAL INVESTMENTS DEFICIT SHARES
------- ------ --------- ------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance June 30, 1994 1,436,833 $14,368 $ 5,928,542 $(5,141,524) (11,800)
Effect of change in accounting
principle.............................. $ 1,579,539
Change in net unrealized gain on
available-for-sale investments......... (1,579,539)
Issuance of restricted shares for
litigation settlement.................. 37,500 375 149,625
Issuance of restricted shares for merger
with Alliance Media Corporation........ 1,025,000 10,250 2,734,750
Issuance of restricted shares as finder's
fees................................... 42,500 425 138,325
Private placement of shares -- cash...... 413,759 4,138 1,014,537
Shares issued upon exercise of stock
options and warrants................... 72,500 725 207,193
Discounts granted on exercise of
options................................ 127,875
Net income............................... 110,397
--------- ------- ----------- ----------- ----------- -------
Balance June 30, 1995.................... 3,028,092 30,281 10,300,847 -- (5,031,127) (11,800)
Issuance of common shares as compensation
to employees, directors and
consultants............................ 95,442 954 218,974
Sale of shares (including 12,500 to
related parties)....................... 75,000 750 119,250
Sale of Series A Convertible Preferred
Stock.................................. 10,000 $ 100 686,669
Sale of Series B Convertible Preferred
Stock.................................. 6,200 62 1,044,682
Sale of Series C Convertible Preferred
Stock.................................. 2,000 20 166,626
Repurchase of Series A Convertible
Preferred Stock........................ (10,000) (100) (812,400)
Warrants issued with Series B and Series
C Convertible Preferred Stock.......... 2,672,522
Warrants issued to consultants........... 82,626
Accrued dividends on Series B and Series
C Convertible Preferred Stock.......... (17,490)
Net loss................................. (1,076,883)
------- ------ --------- ------- ----------- ----------- ----------- -------
Balance June 30, 1996.................... 8,200 $ 82 3,198,534 $31,985 $14,462,306 $ -- $(6,108,010) (11,800)
------- ------ --------- ------- ----------- ----------- ----------- -------
------- ------ --------- ------- ----------- ----------- ----------- -------
<CAPTION>
TREASURY STOCK
--------------
AMOUNT TOTALS
--------- -----------
<S> <C> <C>
Balance June 30, 1994 $(135,469) $ 665,917
Effect of change in accounting
principle.............................. 1,579,539
Change in net unrealized gain on
available-for-sale investments......... (1,579,539)
Issuance of restricted shares for
litigation settlement.................. 150,000
Issuance of restricted shares for merger
with Alliance Media Corporation........ 2,745,000
Issuance of restricted shares as finder's
fees................................... 138,750
Private placement of shares -- cash...... 1,018,675
Shares issued upon exercise of stock
options and warrants................... 207,918
Discounts granted on exercise of
options................................ 127,875
Net income............................... 110,397
--------- -----------
Balance June 30, 1995.................... (135,469) 5,164,532
Issuance of common shares as compensation
to employees, directors and
consultants............................ 219,928
Sale of shares (including 12,500 to
related parties)....................... 120,000
Sale of Series A Convertible Preferred
Stock.................................. 686,769
Sale of Series B Convertible Preferred
Stock.................................. 1,044,744
Sale of Series C Convertible Preferred
Stock.................................. 166,646
Repurchase of Series A Convertible
Preferred Stock........................ (812,500)
Warrants issued with Series B and Series
C Convertible Preferred Stock.......... 2,672,522
Warrants issued to consultants........... 82,626
Accrued dividends on Series B and Series
C Convertible Preferred Stock.......... (17,490)
Net loss................................. (1,076,883)
--------- -----------
Balance June 30, 1996.................... $(135,469) $ 8,250,894
--------- -----------
--------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net income (loss)............................................................................. $ 110,397 $(1,076,883)
Adjustments to reconcile loss to net cash used in operating activities:
Gains from sales of securities........................................................... (1,579,539) --
Gain on sale of discontinued operations.................................................. (322,387) --
Depreciation............................................................................. 52,348 139,881
Amortization............................................................................. 65,101 361,537
Loss on disposal of assets............................................................... 30,319 --
Discount on exercise of options.......................................................... 127,875 --
Stock issuances to employees, directors and consultants.................................. -- 193,677
Warrant issuances to consultants......................................................... -- 82,626
Changes in assets and liabilities net of effects from acquisition:
Accounts receivable...................................................................... (377,631) (613,771)
Other current assets..................................................................... (16,844) 38,710
Other assets............................................................................. 20,519 (8,346)
Trade accounts payable................................................................... (147,360) 105,068
Accrued expenses and other current liabilities........................................... 6,757 (21,674)
Income taxes payable..................................................................... 55,000 (84,565)
Discontinued operations, net............................................................. (152,662) --
----------- -----------
Net cash used in operating activities.................................................... (2,128,107) (883,740)
----------- -----------
Investing activities:
Proceeds from sales of investments in securities.............................................. 2,682,811 --
Purchase of investment in securities.......................................................... (1,063,272) --
Proceeds from sale of discontinued operations................................................. 800,000 --
Proceeds from sales of fixed assets........................................................... 11,000 --
Acquisition of Alliance Media Corporation, net of cash acquired of $567,269................... 259,088 --
Payments relating to acquisition of Alliance and SD&A......................................... -- (477,704)
Purchase of property and equipment............................................................ (43,905) (94,772)
Land development costs........................................................................ (10,526) --
----------- -----------
Net cash provided by (used in) investing activities...................................... 2,635,196 (572,476)
----------- -----------
Financing activities:
Repurchase of Series A Convertible Preferred Stock............................................ -- (812,500)
Proceeds from issuances of common stock....................................................... 1,226,593 120,000
Proceeds from issuances of Series B and Series C Convertible Preferred Stock and warrants..... -- 4,570,682
Proceeds from land option..................................................................... -- 150,000
Proceeds from bank loans...................................................................... -- 500,000
Repayments of bank loans...................................................................... (513,059) (49,694)
Proceeds from note payable other.............................................................. 1,000,000 --
Repayments of note payable other.............................................................. (1,072,000) (72,000)
Related party repayment....................................................................... (350,000) (2,775,000)
----------- -----------
Net cash provided by financing activities..................................................... 291,534 1,631,488
----------- -----------
Net increase in cash and cash equivalents.......................................................... 798,623 175,272
Cash and cash equivalents at beginning of year................................................ 419,149 1,217,772
----------- -----------
Cash and cash equivalents at end of year........................................................... $ 1,217,772 $ 1,393,044
----------- -----------
----------- -----------
Supplemental disclosures of cash flow data:
Cash paid during the year for:
Interest................................................................................. $ 60,422 $ 455,276
Financing charge......................................................................... $ 300,000 --
Income taxes............................................................................. $ 15,000 $ 155,025
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
<PAGE>
Supplemental Schedule of Non-cash Investing and Financing Activities:
In fiscal 1995, the Company purchased all of the capital stock of
Alliance Media Corporation for 1,025,000 shares of common stock valued at
$2,745,000. Additionally, 37,500 shares of common stock valued at $100,000
were issued as a finder's fee. Other direct costs of the acquisition
totaled approximately $500,000. In conjunction with the acquisition, net
assets acquired and liabilities assumed, less payments prior to year end,
were:
<TABLE>
<S> <C>
Working capital, other than cash............................................... $ 601,729
Property and equipment......................................................... (326,320)
Costs in excess of net assets of companies acquired............................ (7,337,870)
Other assets................................................................... (23,451)
Long-term debt................................................................. 4,500,000
Common stock issued............................................................ 2,845,000
-----------
$ 259,088
-----------
-----------
</TABLE>
Five thousand shares of common stock valued at $38,750 were issued as
a commission on the sale of Sports-Tech International, Inc. during 1995.
The Company issued 37,500 shares of common stock valued at $150,000 in
fiscal 1995 in settlement of a 1994 liability for early termination of a
consulting agreement.
In October, 1995, in accordance with the acquisition agreement between
Alliance Media Corporation and the former owner of SD&A, the purchase price
was increased by $85,699.
In October, 1995, the Company issued 6,250 shares of common stock in
settlement of a liability of $26,250.
In November, 1995, a special county bond measure, with principal
totaling $154,814, was assessed on the Company's land and was recorded as a
land improvement, offset by a liability in accrued other expenses.
In April, 1996, the Company issued 89,192 shares of common stock in
settlement of liabilities to employees, directors and consultants of
$193,678.
During the year ended June 30, 1996, the Company issued warrants to
consultants valued at $82,626.
Accrued and unpaid dividends on shares of Convertible Preferred Stock
during fiscal 1996 totaled $17,490.
On June 30, 1996, intangible assets were increased by $425,000 for
accrued restricted common stock payable to the former owner of SD&A as an
additional payment resulting from achievement of defined results of
operations. See Note 3.
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
All-Comm Media Corporation (the 'Company') was formerly known as
Sports-Tech, Inc. The name change was approved at a Special Meeting of
Stockholders held on August 22, 1995. On April 25, 1995, the Company, through a
wholly-owned subsidiary, was merged with Alliance Media Corporation ('Alliance')
and its wholly-owned subsidiary, Stephen Dunn & Associates, Inc. ('SD&A'). The
shareholders of Alliance received 1,025,000 shares of the Company's common
stock, par value $.01 per share ('Common Stock'). Upon consummation of the
merger, the members of the board of directors of the Company ('Directors')
resigned and a new board was appointed. Through SD&A, the Company currently
operates in one industry segment, providing telemarketing and telefundraising to
not-for-profit arts and other organizations principally in the United States.
The Company's mission is to create a growth-oriented direct marketing and media
services company through acquisitions and internal growth. The Company also
owned approximately seven acres of undeveloped land in Laughlin, Nevada, which
was sold on August 16, 1996.
Prior to the merger with Alliance, the Company's principal activities were
the investigation of non-gaming acquisitions. In fiscal 1992, the Company
acquired a 100% interest in Sports-Tech International, Inc. ('STI'), and in
fiscal 1993 acquired 100% of the assets and certain liabilities of High School
Gridiron Report ('HSGR'). STI was engaged in the development, acquisition,
integration and sale of advanced computer software, computer equipment and
computer aided video systems used by sports programs at the professional,
collegiate and high school levels. HSGR provided academic and video data to aid
in pre-qualifying high school athletes to colleges and universities. In fiscal
1995, the Company discontinued the operations of STI and HSGR.
The Company believes that funds available from operations and from the
August, 1996 sale of the Laughlin, Nevada land will be adequate to finance its
current operations and meet interest and debt obligations in its fiscal year
ending June 30, 1997. Thereafter, and in conjunction with the Company's
acquisition and growth strategy, additional financing may be required to meet
potential acquisition payment requirements. The Company believes that it has the
ability to raise funds through private placements or public offerings of debt
and/or equity securities to meet these requirements. There can be no assurance,
however, that such capital will be required or available at terms acceptable to
the Company, if at all.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, All-Comm Holdings, Inc. (formerly Bullhead
Casino Corporation), All-Comm Acquisition Corporation (formerly BH Acquisitions,
Inc.), STI (sold during fiscal year 1995), HSGR (dissolved during fiscal year
1996), Alliance, SD&A and BRST Mining Company (dissolved during fiscal year
1996). STI and HSGR are presented as discontinued operations in the consolidated
financial statements. All material intercompany accounts and transactions are
eliminated in consolidation.
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 period. The estimates and assumptions made in the
preparation of the consolidated financial statements relate to the assessment of
the carrying value of assets and liabilities. Actual results could differ from
those estimates.
F-8
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents/Statement of Cash Flows
Highly liquid investments with an original maturity of three months or less
are considered to be cash equivalents.
Available-for-sale Investments
Pursuant to SFAS No. 115, 'Accounting for Certain Investments in Debt and
Equity Securities,' the Company's marketable equity securities are accounted for
at market value (Note 15). The fair market value of short- and long-term
investments is determined based on quoted market prices for those investments.
Land Held for Sale
The cost of acquiring, improving and planning the development of land was
capitalized. Costs related to development were written off when such plans were
abandoned. Interest cost was capitalized in periods in which activities
specifically related to the development of the land took place. The land was
valued at lower of cost or market. The land was sold on August 16, 1996. See
Note 6.
Property and Equipment
Property and equipment is recorded at cost less accumulated depreciation.
Maintenance and repairs are expensed as incurred. The cost and related
accumulated depreciation and amortization of property and equipment sold or
retired are removed from the accounts and resulting gains or losses are included
in current operations. Depreciation and amortization are provided on a
straight-line basis over the useful lives of the assets involved, limited as to
leasehold improvements by the term of the lease, as follows:
<TABLE>
<S> <C>
Equipment..................................... 5 years
Furniture and fixtures........................ 2 to 7 years
Computer equipment and software............... 3 to 5 years
Leasehold improvements........................ over the useful life of the assets or term of
the lease, whichever is shorter
</TABLE>
Intangible Assets
Excess of cost over net assets acquired in connection with the Alliance and
SD&A acquisitions are being amortized over the period of expected benefit of 40
years. Covenants not to compete are stated at cost and are amortized over the
period of expected benefit of five years. For each of its investments, the
Company assesses the recoverability of its goodwill by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through projected undiscounted future cash flows over the remaining amortization
period. If projected future cash flows indicate that unamortized goodwill will
not be recovered, an adjustment will be made to reduce the net goodwill to an
amount consistent with projected future cash flows discounted at the Company's
incremental borrowing rate. Cash flow projections are based on trends of
historical performance and management's estimate of future performance, giving
consideration to existing and anticipated competitive and economic conditions.
Revenue Recognition
Revenues represent fees earned by SD&A which are recorded when pledged cash
is received for on-site campaigns and when services are provided for off-site
campaigns.
F-9
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates and laws applicable to the years in which the differences are
expected to reverse. Valuation allowances, if any, are established when
necessary to reduce deferred tax assets to the amount that is more likely than
not to be realized. Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of temporary cash investments and trade
receivables. The Company restricts investment of temporary cash investments to
financial institutions with high credit standing. Credit risk on trade
receivables is minimized as a result of the large and diverse nature of the
Company's customer base.
Earnings (Loss) Per Share
Primary earnings (loss) per common and common equivalent share and earnings
per common and common equivalent share assuming full dilution are computed based
on the weighted average number of common shares outstanding and common share
equivalents attributable to the effects, if dilutive, of the assumed exercise of
outstanding stock options and warrants, and the conversion of all Convertible
Preferred Stock.
Reclassifications
Certain prior year items have been reclassified to conform with current
year presentation. Certain amounts have been reclassified to conform with
industry standards.
3. ACQUISITION OF ALLIANCE AND SD&A
On April 25, 1995, the Company, through a statutory merger, acquired all of
the outstanding common shares of Alliance. The purchase price was approximately
$2,745,000, consisting of issuance of 1,025,000 shares of restricted Common
Stock to former stockholders of Alliance valued at $2.68 per share. These shares
have registration rights as of December 1, 1995. Direct costs of the acquisition
approximated $500,000. Pursuant to the terms of the merger agreement, upon
consummation of the merger the then current Directors resigned, and a new board
consisting of six persons designated by Alliance was appointed.
The assets of Alliance acquired by the Company consisted primarily of: (i)
all the issued and outstanding stock of SD&A, which Alliance had acquired
simultaneously with the merger; (ii) a five year covenant not to compete with
the former owner of SD&A; and (iii) the cash proceeds of $1,509,750 (net of
certain payments, including the payment of $1.5 million made pursuant to the
acquisition of SD&A) of a private placement of equity securities of Alliance,
which securities, upon consummation of the merger, were converted into Common
Stock. The purchase price of SD&A paid by Alliance was $1.5 million in cash,
plus $4.5 million in long-term obligations yielding prime rate, payable over
four years. Additional contingent payments of up to $850,000 per year over the
period ending June 30, 1998 may be required based on the achievement of defined
results of operations of SD&A after its acquisition. At the Company's option, up
to one half of the additional contingent payments may be made with restricted
Common Stock. These additional shares have demand registration rights commencing
in September 1997. Alliance and SD&A entered into an operating covenant
agreement relating to the operations of SD&A and Alliance pledged all of the
common shares of SD&A acquired to collateralize its obligations under that
agreement.
F-10
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
These acquisition terms were revised pursuant to the Company private
placement financing which occurred on June 7, 1996 (see 'Stockholders'
Equity -- Preferred Stock') whereby the long-term obligations were revised and
approximately $2.0 million was paid in June, 1996. The balance of $2.1 million
is payable in 36 monthly principal payments of $58,333, plus interest at 8%,
starting September 19, 1996.
The assets of SD&A acquired by Alliance (and therefore by the Company upon
consummation of the merger) consisted primarily of cash and cash equivalents,
accounts receivable and furniture, fixtures and equipment.
These acquisitions were accounted for using the purchase method. The
purchase price was allocated to assets acquired based on their estimated fair
value. This treatment initially resulted in approximately $6.3 million of costs
in excess of net assets required, after recording a covenant not to compete of
approximately $1.0 million. The excess was increased by $850,000 on June 30,
1996, due to achievement of defined results of operations of SD&A for the year
ended June 30, 1996. Such excess, which may increase for any further contingent
payments, is being amortized over the remainder of the expected period of
benefit of 40 years.
The operating results of these acquisitions are included in the
consolidated results of operations from the date of acquisition. The following
summary, prepared on a pro forma basis, combines the consolidated results of
operations as if Alliance and SD&A had been acquired as of the beginning of the
period presented, after including the impact of certain adjustments, such as:
amortization of intangibles, increased interest on the acquisition debt, and
adjustment of officer salary for new contract.
<TABLE>
<CAPTION>
1995
-----------
(UNAUDITED)
<S> <C>
Revenues............................................................. $15,013,000
Income (loss) from continuing operations............................. (113,911)
Income (loss) from continuing operations per common share............ $(.04)
</TABLE>
The unaudited pro forma information is provided for informational purposes
only. It is based on historical information and is not necessarily indicative of
the actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined entities.
4. DISCONTINUED OPERATIONS
On December 7, 1994, the Company entered into a definitive agreement for
the sale of the Company's subsidiary, STI. The proposed purchase price for STI's
operations was $1,100,000 of which $300,000 was paid as of the agreement date.
By mutual agreement, the closing date was accelerated to March 8, 1995, and
the purchase price reduced to $800,000, a reduction of $300,000 on the original
sales price, out of which $80,000 was paid as a commission to STI's former
president. The former president of STI also received $38,750 in Common Stock and
warrants to purchase 2,500 shares of Common Stock at $8.00 per share in
connection with such transaction. The Company realized a gain on the sale of
$322,387. No tax is allocable to this gain due to net operating loss
carryforwards.
Concurrent with the closing of the sale of STI, all operations of HSGR
ceased and all unrecoverable assets were written off, which amounted to
approximately $22,000. Accordingly, STI and HSGR are reported as discontinued
operations at June 30, 1995, and the consolidated financial statements have been
reclassified to report separately the net assets, operating results, gain on
disposition and cash flows of these operations.
Revenues of these discontinued operations for fiscal 1995 were $1,147,829.
F-11
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment of continuing operations at June 30, 1996 consisted
of the following:
<TABLE>
<S> <C>
Office furnishings and equipment........................................ $302,607
Leasehold improvements.................................................. 169,771
--------
472,378
Less accumulated depreciation and amortization.......................... (173,333)
--------
$299,045
--------
--------
</TABLE>
6. LAND HELD FOR SALE
The Company, through its wholly-owned subsidiary, All-Comm Holdings, Inc.,
owned approximately seven acres of undeveloped land in Laughlin, Nevada, which
had a carrying value of $921,465 as of June 30, 1996. During fiscal 1996, a bond
measure was passed by Clark County, Nevada authorities, resulting in a special
assessment to fund improvements which would benefit the land. The principal
balance assessed to the Company totaled $154,814 plus interest at 6.4% and was
payable in semi-annual installments over twenty years. The principal was
capitalized by the Company in fiscal 1996. On August 16, 1996, the land was sold
to, and liability assumed by, an unaffiliated third party, by auction, for
$952,000 in cash, resulting in a net gain of approximately $114,000.
7. INTANGIBLE ASSETS
Intangible assets at June 30, 1996, consisted of the following:
<TABLE>
<S> <C>
Covenant not to compete............................................... $1,000,000
Goodwill.............................................................. 7,277,698
----------
8,277,698
Less accumulated amortization......................................... (426,638)
----------
$7,851,060
----------
----------
</TABLE>
Intangible assets increased during fiscal 1996 principally due to recording
of a contingent payment of $850,000 due to the former owner of SD&A subsequent
to the achievement of defined results of operations of SD&A during the year
ended June 30, 1996.
8. SHORT-TERM BORROWINGS AND NOTE PAYABLE TO BANK
During fiscal 1996, SD&A's $350,000 line of credit from a bank was
increased to $500,000 and was fully used at June 30, 1996. The line bears
interest at prime plus 1/2% (8.75% at June 30, 1996), is collateralized by
substantially all of SD&A's assets and is personally guaranteed by SD&A's
president. The line of credit also contains certain financial covenants,
including current ratio, working capital, debt and net worth, capital
expenditure, and cash flow requirements.
At June 30, 1995, SD&A had a note payable outstanding totaling $49,694,
which bore interest at the bank's prime rate plus 1.75%. The note payable
required monthly principal repayments of $6,529 plus interest and was paid in
full during 1996.
F-12
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. OTHER ACCRUED EXPENSES
Accrued expenses at June 30, 1996 consisted of the following:
<TABLE>
<S> <C>
Accrued professional fees............................................... $290,897
Other................................................................... 467,215
--------
Total.............................................................. $758,112
--------
--------
</TABLE>
10. LONG-TERM OBLIGATIONS TO RELATED PARTY
In connection with the acquisition of SD&A on April 25, 1995, Alliance
issued promissory notes totaling $4,500,000 to SD&A's current president and
former sole shareholder. The notes bore interest at prime rate, not to exceed
10% or drop below 8%, and were payable monthly. Principal payments were due
quarterly, and originally $1,500,000 was due in quarterly installments during
fiscal 1996. All the outstanding common shares of SD&A were initially pledged to
collateralize these notes but were released in June 1996. In connection with
these notes, an operating covenant agreement included, among other things,
provisions requiring that SD&A have a minimum level of working capital and cash
levels, subject to periodic increases based on sales, before dividend payments
could be made to the parent company. In June 1996 the operating covenant
agreement was terminated.
During 1996 the July 1, 1996 principal payment of $375,000 was made and the
long-term obligations were restructured to defer principal payments due October
1, 1995, January 1, 1996 and April 1, 1996, until June 1996. In June, 1996,
principal payments of $2,025,000 were made and the remaining obligations of
$2,100,000 are now payable at $58,333 per month, plus interest at 8%, starting
September 19, 1996.
11. EMPLOYMENT CONTRACTS
Subject to execution of definitive agreements, the Company has entered into
three-year employment arrangements with current officers of the Company. The
arrangements provide for annual base salaries, base increases, cash and option
bonuses which are payable if specified management goals are achieved, and
certain termination benefits. The aggregate liability in the event of
termination by the Company without cause or by the executives for 'good cause'
as defined in such employment agreements of these employees is approximately
$1,000,000 based on current salary levels.
The Company also had employment contracts with certain members of the prior
management of the Company. In fiscal 1995 severance payments totaling
approximately $60,000 were fully paid under the contracts. A contract with a
prior key member of management also required the issuance of 25,000 shares of
Common Stock in exchange for a $200,000 non-recourse promissory note receivable.
The note receivable was due on November 1, 1994, along with accrued interest at
10.5% per annum. In fiscal 1994, the Company's Directors approved discounting
the interest receivable and note receivable by one third. The discount of the
interest receivable of $29,166 was charged against operations and the $66,667
discount of the note receivable was charged to additional paid in capital.
12. COMMITMENTS AND CONTINGENCIES
Leases
SD&A leases its corporate business premises from its former owner, who is a
current stockholder and officer of the Company. The lease requires monthly
rental payments of $11,805 through January 1, 1999, with an option to renew.
SD&A incurs all costs of insurance, maintenance and utilities. Also, the Company
leases its corporate office space, copier, phones and automobiles under
long-term leases.
F-13
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum rental commitments under all non-cancelable leases, as of
fiscal years ending June 30, are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 324,978
1998........................................................ 310,968
1999........................................................ 199,609
2000........................................................ 130,858
2001........................................................ 130,858
----------
$1,097,271
----------
----------
</TABLE>
Rent expense for continuing operations was approximately $89,000 and
$297,000 for fiscal years 1995 and 1996, respectively. Total rent paid by SD&A
to its former owner from the date of acquisition to June 30, 1995 and during
1996 was approximately $26,000 and $138,000, respectively.
Litigation
Pursuant to a Settlement and Release Agreement dated June 17, 1994 with
Membership Development, Inc. ('MDI'), a non-affiliated direct marketing company
that was providing marketing services to STI, in fiscal 1994 the Company issued
25,000 shares of STI stock valued at $250,000, executed an unsecured
non-interest bearing promissory note for $144,000 and in fiscal 1995 issued an
additional 37,500 shares of stock valued at $150,000. In May 1995, MDI exercised
its right to require the Company to file a registration statement registering
these securities for sale. A registration statement was filed but has not yet
been declared effective. The entire $544,000 of consideration was expensed in
fiscal 1994 in discontinued operations.
The Company is party to various routine legal proceedings incidental to its
business. The outcomes of these legal proceedings are not expected to have a
material adverse effect on the financial condition or operation of the Company
based on the Company's current understanding of the relevant facts and law.
13. STOCKHOLDERS' EQUITY
Preferred Stock
On May 9, 1996, the Company completed the private placement with an
institutional investor of 10,000 shares of Series A Convertible Preferred Stock,
par value $.01 per share (the 'Series A Preferred Stock') for $750,000, $687,000
net after offering costs. The Series A Preferred Stock was convertible into
shares of Common Stock at the lesser of the price paid divided by $2.50, or 80%
of the average closing bid price of the Common Stock for the five trading days
immediately prior to the conversion date, and was subject to certain
restrictions.
On June 7, 1996, the Company completed the private placements with
accredited investors of 6,200 shares of Series B Convertible Preferred Stock,
par value $.01 per share (the 'Series B Preferred Stock') for $3,100,000. In
addition, the Company issued warrants in connection with the issuance of the
Series B Preferred Stock for 3,100,000 shares of Common Stock exercisable for
three years at $2.50 per share. The Series B Preferred Stock is preferred as to
the Company's assets over the Common Stock in the event of liquidation,
dissolution or winding-up of the Company, prior to distribution of assets to the
Company's common stockholders. The holders of the Series B Preferred Stock are
entitled to their original investment, plus accrued, unpaid dividends or, if
unavailable, a ratable distribution of existing assets. The holders of Series B
Preferred Stock are entitled to receive a dividend payable only on redemption or
credited against conversion, which shall accrue at the rate of 6% per annum. The
holders of the Series B Preferred Stock have the right, at any time prior to the
second anniversary of the date of issuance, to convert, first, the outstanding
accrued dividends, and then the Series B Preferred Stock, in
F-14
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
whole or in part, into a number of shares of the Common Stock equal to the
amount of dividends and redemption value converted divided by the conversion
price for the Series B Preferred Stock. The conversion price for the Series B
Preferred Stock means a price per share equal to the lessor of (i) $1.25 and
(ii) 80% of the average of the closing bid price of the Common Stock during the
five trading days prior to such conversion. If not theretofore converted, the
Series B Preferred Stock is automatically deemed converted at such price on the
second anniversary of the date of issuance, unless (i) the Common Stock is not
then trading on NASDAQ or another U.S. securities exchange or (ii) the Company
has not theretofore had declared effective a registration statement with respect
to the Common Stock issuable upon conversion of the Series B Preferred Stock or
the exercise of such warrants. See 'Shares Eligible for Future
Sale -- Registration Rights -- Holders of Series Preferred Stock.' In such
event, the Company is required to redeem the Series B Preferred Stock at a
redemption price payable in cash equal to $5.00 per share plus all accrued and
unpaid dividends thereon.
On June 7, 1996, the Company completed the private placements with
accredited investors of $1,000,000 of convertible notes and warrants for
3,000,000 shares of Common Stock. Subsequent to year end, the notes and warrants
were rescinded retroactive to June 7, 1996 and replaced with 2,000 shares of
Series C Convertible Preferred Stock, par value $.01 per share (the 'Series C
Preferred Stock') for $1,000,000. In addition, the Company issued warrants in
connection with the issuance of the Series C Preferred Stock for 3,000,000
shares of Common Stock exercisable at $3.00 per share for three years. The
Series C Preferred Stock is preferred as to the Company's assets over the Common
Stock in the event of liquidation, dissolution or winding-up of the Company,
prior to distribution of assets to the Company's common stockholders. The
holders of the Series C Preferred Stock are entitled to their original
investment, plus accrued unpaid dividends or, if unavailable, a ratable
distribution of existing assets. The holders of the Series C Preferred Stock are
entitled to receive a dividend payable only on redemption or credited against
conversion, which shall accrue at the rate of 8% per annum. The holders of the
Series C Preferred Stock have the right, at any time prior to June 7, 1998, to
convert, first, the outstanding accrued dividends, and then the Series C
Preferred Stock, in whole or in part, into a number of shares of Common Stock
equal to the amount of dividends and redemption value converted divided by a
conversion price equal to $6.00 per share. If not theretofore converted, the
Series C Preferred Stock is automatically deemed converted at such price on June
7, 1998, unless (i) the Common Stock is not then listed on NASDAQ (or another
U.S. securities exchange) or (ii) the Company has not theretofore had declared
effective a registration statement with respect to the Common Stock issuable
upon conversion of the Series C Preferred Stock or the exercise of such
warrants. See 'Shares Eligible for Future Sale -- Registration Rights -- Holders
of Series C Preferred Stock.' In such event, the Company is required to redeem
the Series C Preferred Stock at a redemption price payable in cash equal to
$5.00 per share plus all accrued and unpaid dividends thereon. In addition, if
the Company has not had declared effective by October 7, 1996 such registration
statement, the dividend rate is increased to 24% per annum and at the option of
the holders of the Series Preferred Stock, the Series C Preferred Stock shall
not be redeemable by the Company, and shall remain convertible and accrue
dividends, until the earlier of (x) the date designated by such holders and (y)
the date 180 days after such registration statement is declared effective.
The Company allocated the net proceeds received on the sales of each series
of preferred shares and warrants based on the relative fair values of the
securities at the time of issuance.
In connection with the June 7, 1996 transactions, the Company reacquired
the 10,000 shares of Series A Preferred Stock for $800,000 plus fees of $12,500.
Common Stock
The Directors approved a one-for-four reverse stock split of the Company's
authorized and issued Common Stock, effective August 22, 1995. The Directors
also approved reducing the number of authorized shares of Common Stock to
6,250,000 with a par value of $.01 per share, from the 25,000,000
F-15
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares of Common Stock previously authorized. Accordingly, all share and per
share data, as appropriate, reflect the effect of the reverse split.
Effective August 1996, the number of authorized shares of Common Stock was
increased from 6,250,000 to 36,250,000.
During 1996, the Company issued 95,442 shares of restricted Common Stock as
compensation to various employees, Directors and consultants.
In March 1996, the Company sold 75,000 shares of restricted Common Stock
for $120,000 to four individuals, including 12,500 shares to related parties.
In May 1995, the Company completed a private placement of 413,759 shares of
restricted Common Stock, at $2.68 per share. These shares have registration
rights as of December 1, 1995. Net proceeds from this offering totaled
$1,018,675.
As discussed in Note 3, in connection with the acquisition of Alliance and
SD&A, the Company issued 1,025,000 restricted shares of Common Stock to the
former shareholders of Alliance. These shares have registration rights. Also in
connection with the acquisition, the Company issued 37,500 restricted shares of
Common Stock valued at $100,000 and warrants to purchase 43,077 shares of Common
Stock at exercise prices ranging from $6.00 to $8.00 per share to investment
banking firms, a shareholder, a director and a law firm which represented the
Company. These warrants expire between April 25, 1998 and April 25, 2000.
In connection with the sale of STI, the Company approved the issuance to
its former president of 5,000 restricted shares of Common Stock valued at
$38,750 and warrants to purchase 2,500 shares of Common Stock at an exercise
price of $8.00 per share through April 25, 1995.
On July 26, 1991, the Company sold warrants to purchase up to 62,500 shares
of Common Stock to a private investor for $250 in cash, exercisable at $6.00 per
share through July 31, 1996. This investor was subsequently elected to the
Company's board of directors. On January 31, 1994, this Director exercised
warrants to purchase 25,000 shares of Common Stock at $4.00 per share (which had
previously been reduced by the Directors from $6.00 to $4.00) by paying $100,000
to the Company. On June 9, 1994, this Director sold, in a private transaction,
18,750 of these warrants to another stockholder of the Company. In May, 1995,
the Directors approved the temporary reduction of the exercise price of these
warrants from $6.00 to $2.68 and, on May 31, 1995, these 37,500 warrants were
exercised for $100,500 in cash payments.
As of June 30, 1996, the Company has the following outstanding warrants to
purchase 6,370,577 shares of Common Stock:
<TABLE>
<CAPTION>
DATE SHARES OF COMMON EXERCISE PRICE PER
DATE ISSUED EXERCISABLE STOCK UPON EXERCISE SHARE OF COMMON STOCK
- ------------------------------------ --------------- ------------------- ---------------------
<S> <C> <C> <C>
April 1995.......................... April 1995 33,750 $6.00 - $8.00
May 1995............................ May 1995 11,827 $6.00
October 1995........................ October 1995 30,000 $2.50
January 1996........................ January 1996 32,500 $3.375 - 8.00
February 1996....................... February 1996 15,000 $3.00 - 4.00
April 1996.......................... April 1996 22,500 $1.60
May 1996............................ May 1996 100,000 $4.50
June 1996........................... June 1996 25,000 $4.50
June 1996........................... August 1996 6,100,000 $2.50 - $3.00
-------------------
Total as of June 30, 1996........................ 6,370,577
-------------------
-------------------
</TABLE>
In addition, warrants for 150,000 shares at exercise prices ranging from
$2.50 to $3.50 per share, and exercisable at dates through May 2000, may be
purchased for a total of $7,500.
F-16
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Options
In 1991, the Company adopted a non-qualified stock option plan (the 'Stock
Option Plan') for key employees, officers, directors and consultants to purchase
up to 250,000 shares of Common Stock. In November, 1995, the Directors increased
the number of available shares by 600,000. The Stock Option Plan is administered
by the Directors, who have the authority to determine which officers and key
employees of the Company will be granted options to acquire Common Stock
('Options'), the exercise price of the Options and the term of the Options. In
no event shall an Option expire more than 10 years after grant.
The following summarizes the Option transactions under the Stock Option
Plan for the two fiscal years ended June 30, 1996:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Outstanding at June 30, 1994............................................. 107,892 $6.00 to $22.00
Granted............................................................. 8,750 $5.24 to $7.00
Exercised........................................................... (22,500) $2.68 to $5.24
Canceled............................................................ (3,334) $6.00
---------
Outstanding at June 30, 1995............................................. 90,808
Granted............................................................. 525,003 $2.00 to $3.00
Canceled............................................................ (91,004) $6.00 to $22.00
---------
Outstanding at June 30, 1996............................................. 524,807
---------
---------
</TABLE>
All the outstanding Options under the Stock Option Plan are exercisable and
expire as follows: fiscal 1998 -- 2,084, fiscal 2000 -- 5,000 and fiscal
2003 -- 517,723. All Options granted in fiscal years 1995 and 1996 were issued
at fair market value. In May, 1995, a $128,000 discount was given to a former
Director of the Company to exercise 18,750 Options and was recognized as
compensation expense. At June 30, 1996, 179,504 Options were available for
grant.
In addition to the Stock Option Plan, the Company has other option
agreements with former officers, directors, employees and owners of an acquired
company.
The following summarizes transactions outside the Stock Option Plan for the
two fiscal years ended June 30, 1996:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Outstanding at June 30, 1994............................................. 73,791 $3.00 to $16.00
Exercised........................................................... (12,500) $3.00
Canceled............................................................ (28,875) $6.00 to $16.00
---------
Outstanding at June 30, 1995............................................. 32,416
Canceled............................................................ (30,166) $4.50 to $6.00
---------
Outstanding at June 30, 1996............................................. 2,250
---------
---------
</TABLE>
All the outstanding Options under these agreements are exercisable and
expire in fiscal 1999. A one-third discount, totaling $86,334 was given to
non-affiliates when 36,083 Options were exercised in January 1994 and was
recognized as compensation expense.
Common Stock in Treasury
The Company has purchased 26,800 shares of its Common Stock for a total
cost of $214,579 (or an average of $8.00 per share). In connection with the
acquisition of HSGR assets, 15,000 shares were issued from the treasury stock.
The remaining treasury shares have a total cost of $135,469 (or an average of
$11.48 per share).
F-17
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. INCOME TAXES
Income tax expense from continuing operations is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------
1995 1996
------- --------
<S> <C> <C>
Current:
Federal.................................................................. -- --
State and local.......................................................... $75,000 $141,084
Deferred...................................................................... -- --
------- --------
Total............................................................... $75,000 $141,084
------- --------
------- --------
</TABLE>
A reconciliation of the federal statutory income tax rate to the effective
income tax rate based on pre-tax loss from continuing operations follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Statutory rate................................................................ (34)% (34)%
Increase (decrease) in tax rate resulting from:
Loss limitations and valuation allowance................................. 34 34
State income taxes....................................................... 134 15
------- -------
Effective rate........................................................... 134% 15%
------- -------
------- -------
</TABLE>
Deferred tax assets and liabilities at June 30, are as follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......................................... $ 374,000 $ 691,100
Amortization of intangibles.............................................. 133,000 142,300
Other.................................................................... 158,800 95,900
--------- ---------
Total deferred tax assets..................................................... 665,800 929,300
Valuation allowance...................................................... (364,400) (789,800)
--------- ---------
Net deferred tax assets....................................................... 301,400 139,500
--------- ---------
Deferred tax liabilities:
Cash to accrual adjustment............................................... (262,500) (139,500)
Other.................................................................... (38,900) --
--------- ---------
Total deferred tax liabilities...................................... (301,400) (139,500)
--------- ---------
Total deferred taxes, net........................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
The Company has a net operating loss of approximately $2,032,000 available
which expires from 2008 through 2011. These losses can only offset future
income.
No income taxes are allocable to the gain on sale of discontinued
operations during 1995 due to utilization of net operating loss carryforwards.
15. GAINS FROM SALES OF SECURITIES
In July, 1994, the Company borrowed $1,000,000 to fund the exercise by the
Company of a common stock purchase warrant. The loan was collateralized by a
pledge of such common stock pursuant to the terms of a pledge agreement. The
parties to the $1,000,000 loan included, among others, the Company's former
chairman, former president, a former director and a stockholder, who each
provided $200,000. The other lenders were non-affiliates. The lenders received
the repayment of the $1,000,000 loan, interest at 7.75% totaling $9,493 and a
$300,000 commitment fee from the proceeds of the subsequent sales of such common
stock. Effective July 1, 1994, the Company adopted SFAS No. 115, 'Accounting for
Certain Investments in Debt and Equity Securities.' In accordance with SFAS No.
115, the Company's marketable equity securities were considered
'available-for-sale' investments and were
F-18
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
carried at market value with the difference between cost and market value
recorded as a component of stockholders' equity. The cost of available-for-sale
investments that were sold was based on specific identification. The Company
subsequently sold all these securities and recognized a gain of $1,580,000 in
fiscal 1995.
16. RELATED PARTY TRANSACTIONS
A former Director of the Company is the senior managing director of a
private merchant banking firm, which was paid approximately $5,700 for
investment advisory services in fiscal 1995. In connection with the acquisition
of Alliance, a finder's fee totaling $100,000 was paid in fiscal 1995 to the
merchant banking firm. In addition, the former director and the other principal
owner of the merchant banking firm each received 9,375 restricted shares of
Common Stock valued at $2.67 per share and warrants to purchase 6,250 shares of
Common Stock exercisable at $8.00 per share.
On June 9, 1994, the Company borrowed $350,000 from the Company's former
chief executive officer and its former president and pledged its equity interest
in the Laughlin land as security for repayment of the loan. The note was due
July 31, 1995 with interest at the rate of 7.25% (the Bank of America Nevada
prime rate at the time of execution). The promissory note and interest of $8,695
were repaid in advance on October 4, 1994.
A former Director of the Company, and another person serving as assistant
secretary in 1993, were each partners in different law firms that provided legal
services for which the Company recognized expenses aggregating approximately
$31,000 in 1995.
In April 1995, the former chairman of the Company purchased property and
equipment owned by the Company with a cost of $160,109 and net book value of
$5,870 for a discounted appraised value of $11,000 in cash.
See Notes 3, 10, 11, 12, 13 and 15 for additional related party
transactions.
17. NEW ACCOUNTING PRONOUNCEMENTS
Adoption of the Financial and Accounting Standards Board ('FASB') Statement
of Financial Accounting No. 121, 'Accounting for the Impairment of Long-Lived
Assets for Long-Lived Assets to be Disposed of,' which is effective for
financial statements for fiscal years beginning after December 15, 1995, is not
anticipated to have a material effect on the Company's consolidated financial
statements.
The FASB recently issued Statement of Financial Accounting No. 123,
'Accounting for Stock-Based Compensation' ('SFAS 123'), which is effective for
financial statements for fiscal years beginning after December 15, 1995. SFAS
123 establishes new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation cost for
stock-based compensation under SFAS 123 or APB Opinion No. 25, 'Accounting for
Stock Issued to Employees.' The Company has elected to continue the accounting
treatment of such compensation pursuant to APB Opinion No. 25. However, starting
in the first quarter of fiscal 1997, the Company will be required to make pro
forma disclosure of net income and earnings per share as if the provisions of
SFAS 123 had been applied.
18. PENDING ACQUISITION
On May 30, 1996, the Company signed a letter of intent to acquire Metro
Services Group, Inc. ('Metro'). Metro is a private company based in New York,
New York, with offices in Michigan, Illinois and California. Metro develops and
markets a variety of direct marketing services. Terms of the acquisition call
for a tax-free exchange of stock and incentive option package for key employees,
as well as contingent payments based on operating profits and performance.
Consummation of the acquisition is subject to a number of conditions, including
the negotiation of a definitive agreement and completion of financing
arrangements. Accordingly, no assurance can be given that the acquisition will
be consummated. Metro provides information-based services to direct marketers.
F-19
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
METRO SERVICES GROUP, INC.:
We have audited the accompanying balance sheet of Metro Services Group,
Inc. as of December 31, 1995, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the two years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Metro Services Group, Inc.
at December 31, 1995, and the results of its operations, and its cash flows for
each of the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
New York, New York
August 29, 1996.
F-20
<PAGE>
<PAGE>
METRO SERVICES GROUP, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................................ $ 7,918 $ 138,004
Accounts receivable billed, net of allowance of $82,118 and $34,051 (unaudited),
respectively................................................................... 1,168,602 822,133
Accounts receivable, unbilled................................................... 1,233,596 589,977
Other........................................................................... 7,663 22,635
------------ -----------
Total current assets....................................................... 2,417,779 1,572,749
Due from shareholder............................................................ -- 50,000
Fixed assets, net............................................................... 87,522 81,637
------------ -----------
Total assets............................................................... $2,505,301 $ 1,704,386
------------ -----------
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................................ $2,142,688 $ 1,634,219
Due to shareholders and other related parties, net.............................. 31,797 31,797
Sales and income taxes payable.................................................. 65,273 15,367
------------ -----------
Total current liabilities.................................................. 2,239,758 1,681,383
Deferred rent........................................................................ 30,583 32,958
------------ -----------
Total liabilities.......................................................... 2,270,341 1,714,341
------------ -----------
Commitments
Shareholders' equity (deficit):
Common stock, no par value; 200 shares authorized, 100 shares issued and
outstanding.................................................................... 1,000 1,000
Retained earnings (accumulated deficit)......................................... 233,960 (10,955)
------------ -----------
Total shareholders' equity (deficit)....................................... 234,960 (9,955)
------------ -----------
Total liabilities and shareholders' equity (deficit).................. $2,505,301 $ 1,704,386
------------ -----------
------------ -----------
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-21
<PAGE>
<PAGE>
METRO SERVICES GROUP, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
THE (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------ --------------------------
1994 1995 1995 1996
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues................................................. $5,914,079 $8,096,307 $ 3,555,155 $ 3,552,708
---------- ---------- ----------- -----------
Operating expenses:
Direct costs........................................ 3,290,265 4,652,820 2,021,634 1,918,736
Salaries and benefits............................... 1,672,496 1,792,203 854,582 1,040,646
Selling, general and administrative................. 867,845 899,323 441,660 503,582
Professional fees................................... 133,073 175,855 99,275 104,236
---------- ---------- ----------- -----------
Total operating expenses....................... 5,963,679 7,520,201 3,417,151 3,567,200
---------- ---------- ----------- -----------
Income (loss) before provision for income
taxes........................................ (49,600) 576,106 138,004 (14,492)
Provision for income taxes............................... 7,072 35,490 6,540 --
---------- ---------- ----------- -----------
Net income (loss).............................. $ (56,672) $ 540,616 $ 131,464 $ (14,492)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Pro forma data (unaudited) (Note 10):
Historical income (loss) before provision for income
taxes............................................. $ (49,600) $ 576,106 $ 138,004 $ (14,492)
Pro forma benefit (provision) for income taxes...... (7,072) (224,681) (53,822) 5,652
---------- ---------- ----------- -----------
Pro forma net income (loss)......................... $ (56,672) $ 351,425 $ 84,182 $ (8,840)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-22
<PAGE>
<PAGE>
METRO SERVICES GROUP, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
THE (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
---------------- (ACCUMULATED
SHARES AMOUNT DEFICIT) TOTAL
------ ------ ------------- ---------
<S> <C> <C> <C> <C>
Balance at January 1, 1994........................................ 100 $1,000 $(249,984) $(248,984)
Net loss..................................................... -- -- (56,672) (56,672)
------ ------ ------------- ---------
Balance at December 31, 1994...................................... 100 1,000 (306,656) (305,656)
Net income................................................... -- -- 540,616 540,616
------ ------ ------------- ---------
Balance at December 31, 1995...................................... 100 1,000 233,960 234,960
Dividends paid............................................... -- -- (230,423) (230,423)
Net loss..................................................... -- -- (14,492) (14,492)
------ ------ ------------- ---------
Balance at June 30, 1996 (unaudited).............................. 100 $1,000 $ (10,955) $ (9,955)
------ ------ ------------- ---------
------ ------ ------------- ---------
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-23
<PAGE>
<PAGE>
METRO SERVICES GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
THE (UNAUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------- --------------------------
1994 1995 1995 1996
--------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ (56,672) $ 540,616 $ 131,464 $ (14,492)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for allowances.......................... 32,414 56,342 15,291 34,051
Depreciation...................................... 63,263 59,436 29,719 22,590
Deferred rent..................................... 10,833 19,750 9,875 2,375
Changes in assets and liabilities:
(Increase) decrease in accounts receivable... (331,821) (483,614) 13,188 956,037
Increase in other assets..................... (1,176) (848) (848) (14,972)
Increase (decrease) in accounts payable...... 266,272 18,917 18,110 (508,469)
Increase (decrease) in accrued expenses...... 87,915 (219,952) (219,952) --
(Decrease) increase in sales and income taxes
payable.................................... (17,425) 48,086 (185) (49,906)
--------- --------- ----------- -----------
Net cash provided by (used in) operating
activities............................ 53,603 38,733 (3,338) 427,214
--------- --------- ----------- -----------
Cash flows from investing activities:
Purchase of fixed assets............................... (78,344) (42,704) (1,887) (16,705)
--------- --------- ----------- -----------
Net cash used in investing activities... (78,344) (42,704) (1,887) (16,705)
--------- --------- ----------- -----------
Cash flows from financing activities:
Advance to shareholder................................. -- -- -- (50,000)
Dividends paid......................................... -- -- -- (230,423)
--------- --------- ----------- -----------
Net cash used in financing activities... -- -- -- (280,423)
--------- --------- ----------- -----------
Net (decrease) increase in cash......... (24,741) (3,971) (5,225) 130,086
Cash, beginning of period................................... 36,630 11,889 11,889 7,918
--------- --------- ----------- -----------
Cash, end of period......................................... $ 11,889 $ 7,918 $ 6,664 $ 138,004
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.......................................... $ 14,070 $ 24,405 $ 4,000 $ 4,610
Income taxes...................................... $ 665 $ 13,054 $ 11,525 $ 17,600
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-24
<PAGE>
<PAGE>
METRO SERVICES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO JUNE 30, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1995
AND 1996 IS UNAUDITED)
1. DESCRIPTION OF THE BUSINESS
Metro Services Group, Inc. ('Metro' or the 'Company') develops and markets
information-based services used primarily in direct marketing by a variety of
commercial and not-for-profit organizations principally in the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recognized as services are performed.
Unbilled receivables represent the portion of revenue recognized in excess
of revenue billed due to completion of services performed.
Fixed Assets
Fixed assets are stated at cost. Computer equipment and furniture and
fixtures are depreciated using the straight-line method over their estimated
useful lives of three to seven years.
Expenditures for maintenance and repairs, which do not materially extend
the useful lives of the assets, are charged to expense as incurred. The cost and
related accumulated depreciation of assets retired or sold are removed from the
respective accounts, and any gain or loss is recognized in income.
Income Taxes
The Company has elected to be treated as an S corporation for income tax
reporting purposes, which requires the Company's income or loss for federal and
certain state tax jurisdictions to be recognized by its shareholders.
Consequently, the Company provides for income taxes only in those jurisdictions
which do not recognize its S corporation status, mainly New York City. See Note
10.
The Company recognizes deferred taxes by the asset and liability method of
accounting for those jurisdictions which do not recognize its S corporation
status. Under the asset and liability method, deferred income taxes are
recognized for differences between the financial statement and tax bases of
assets and liabilities at enacted tax rates applicable to the years in which the
differences are expected to reverse. In addition, valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
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 and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Recently Issued Pronouncements
In March 1995, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of'
('SFAS 121'). SFAS 121 requires that an impairment loss be recognized for
long-lived assets and certain identifiable intangibles when the carrying amount
of these assets may not be recoverable. The Company believes that the adoption
of SFAS 121 in fiscal 1996 will not have a material impact on the Company's
results of operations or financial position.
F-25
<PAGE>
<PAGE>
METRO SERVICES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION PERTAINING TO JUNE 30, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1995
AND 1996 IS UNAUDITED)
3. FIXED ASSETS
Fixed assets comprise:
<TABLE>
<CAPTION>
JUNE 30, 1996
DECEMBER 31, 1995 -------------
----------------- (UNAUDITED)
<S> <C> <C>
Furniture and fixtures..................................... $ 37,327 $ 43,791
Computer equipment......................................... 273,463 283,704
----------------- -------------
Total................................................. 310,790 327,495
Less: Accumulated depreciation............................. (223,268) (245,858)
----------------- -------------
$ 87,522 $ 81,637
----------------- -------------
----------------- -------------
</TABLE>
Depreciation expense for the years ended December 31, 1994 and 1995 and the
six months ended June 30, 1995 and 1996 was $63,263, $59,436, $29,719
(unaudited) and $22,590 (unaudited), respectively.
4. COMMITMENTS
Operating Lease
Metro is obligated under a 10 year lease for office space. Rent expense for
the years ended December 31, 1994 and 1995 and the six months ended June 30,
1995 and 1996 amounted to $108,365, $162,262, $91,410 (unaudited), and $81,819
(unaudited), respectively.
Modified in June 1994, this lease includes rent escalations at the end of
the third, fourth and eighth years of this lease. At December 31, 1995 and June
30, 1996, Metro has recorded deferred rent expense of $19,750 and $2,375
(unaudited), respectively.
Minimum annual lease commitments under the terms of the noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, COMMITMENTS
- --------------------------------------- -----------
<S> <C>
1996................................ $ 155,250
1997................................ 164,000
1998................................ 164,000
1999................................ 164,000
2000................................ 167,708
Thereafter.......................... 269,958
-----------
$1,084,916
-----------
-----------
</TABLE>
Employment Contracts
In 1993, Metro had entered into a contractual arrangement with a consultant
to provide services to the Company. The contract provides for approximately
$11,000 per year in future minimum consulting compensation through 1997.
5. RELATED PARTIES
In January 1990, a related party loaned $50,000 to the Company in the form
of a promissory note (the '1990 Note'). The loan is collateralized by a portion
of the Company's receivables. The note bears interest at 12% per annum and is
due in equal monthly installments on the last day of each month. The principal
balance is payable at any time upon 30 days' written notice by either party. In
1993, the Company made a $25,000 advance to a party related to the owner of the
1990 Note, and in 1994, recorded the advance as a reduction of the 1990 Note.
Additionally, in 1993, approximately $18,000 of Metro's expenses were paid by a
shareholder related to the owner of the 1990 Note, and, in 1994, this
F-26
<PAGE>
<PAGE>
METRO SERVICES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION PERTAINING TO JUNE 30, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1995
AND 1996 IS UNAUDITED)
receivable was applied against the 1990 Note to reduce its outstanding principal
balance to approximately $7,000 at December 31, 1995. Interest expense incurred
and paid in connection with this loan for the years ended December 31, 1994 and
1995, was approximately $6,000 and $4,000, respectively.
In December 1992, a minority shareholder loaned $50,000 to the Company in
the form of a promissory note. The loan is collateralized by certain accounts
receivable. The note bears interest at 12% per year and is due in equal monthly
installments on the last day of each month. The principal balance is payable at
any time upon 30 day's written notice by either party. As of December 31, 1995
the outstanding principal balance relating to the loan was $25,000. Interest
expense incurred and paid relating to this note was $3,000 per year in 1994 and
1995.
6. MAJOR CUSTOMERS
For the years ended December 31, 1994 and 1995, sales to a single customer
amounted to 12% and 10% of revenues, respectively. Accounts receivable from this
customer at December 31, 1995 and June 30, 1996 totaled approximately $470,000
and $1,000, respectively. Subsequent to 1995, the Company ceased providing
services to this customer. However, management believes that there will not be
an adverse effect on the Company's financial position due to the loss of this
customer.
7. EMPLOYEE BENEFIT PLANS
On January 1, 1994, the Company established a 401(k) retirement plan (the
'Metro Retirement Plan') for certain of its employees to make qualified
contributions, in 1% increments, limited to 20% of the contributing
participant's annual compensation. The Company did not match any employee
contributions in 1994 and 1995. Effective May 1, 1996, Metro amended the Metro
Retirement Plan to provide for employer contributions to match up to 2% of an
employee's contribution.
8. SUBSEQUENT EVENTS
In February 1996, the Company declared and paid a dividend to its
shareholders in the aggregate amount of $230,423.
In May 1996, Metro entered into a non-binding letter of intent to be
acquired by All-Comm Media Corporation.
9. INTERIM FINANCIAL STATEMENTS (UNAUDITED)
(a) Basis of Presentation -- The interim unaudited financial statements
reflect adjustments, consisting only of normal recurring accruals,
which are, in the opinion of the Company's management, necessary for a
fair presentation of the financial position and results of operations
for the periods presented. Revenues and net income (loss) for any
interim period are not necessarily indicative of the results for a full
year.
(b) In February 1996, a shareholder of the Company borrowed $50,000 from
the Company.
(c) The Company is contingently liable for guarantees of lease payments
owed by a related party of approximately $28,000. The Company is of the
opinion that such related party will be able to perform its payment
obligations in connection with such guaranteed lease payments and that
no payments will be required and no losses will be incurred by the
Company under such guarantees.
10. PRO FORMA DATA (UNAUDITED)
The pro forma financial information is provided to show the significant
effects on the historical financial information had the Company operated as a C
corporation. Historically, the Company has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code of 1986, as amended, and
comparable provisions of state income tax laws.
F-27
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of
STEPHEN DUNN & ASSOCIATES, INC.
We have audited the balance sheet of Stephen Dunn & Associates, Inc. as of
December 31, 1994 and the related statements of income, shareholder's equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Stephen Dunn & Associates,
Inc. as of December 31, 1994 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
Los Angeles, California
June 2, 1995
F-28
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1994
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash........................................................................................... $ 164,910
Accounts receivable, less allowance for doubtful accounts of $8,000............................ 1,473,712
Prepaid expenses and other current assets...................................................... 58,818
----------
Total current assets...................................................................... 1,697,440
Property and equipment -- at cost, less accumulated depreciation of $702,842 -- Note 2.............. 352,309
Deposits............................................................................................ 23,452
----------
Total assets.............................................................................. $2,073,201
----------
----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................................................... $ 195,203
Accrued wages and payroll taxes................................................................ 262,586
Accrued expenses and other current liabilities................................................. 70,956
Current portion of long-term debt -- Note 5.................................................... 78,353
Income taxes payable........................................................................... 55,270
Deferred income taxes -- Note 8................................................................ 30,600
----------
Total current liabilities................................................................. 692,968
----------
Long-term liabilities:
Long-term debt, less current portion -- Note 5................................................. 10,517
Other taxes and licenses -- Note 6............................................................. 72,000
----------
Total long-term liabilities............................................................... 82,517
----------
Commitments and contingencies -- Notes 6 and 7
Shareholder's equity:
Common stock:
Authorized -- 1,000 shares of no par common stock, issued and
outstanding -- 400 shares.................................................................... 400
Retained earnings.............................................................................. 1,464,839
Loan receivable, shareholder................................................................... (167,523)
----------
Total shareholder's equity................................................................ 1,297,716
----------
Total liabilities and shareholder's equity........................................... $2,073,201
----------
----------
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-29
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
Revenues........................................................................................... $13,595,763
-----------
Salaries and benefits.............................................................................. 10,344,131
Direct costs....................................................................................... 497,383
Selling, general and administrative................................................................ 1,928,980
Professional fees.................................................................................. 99,012
-----------
Total operating expenses................................................................. 12,869,506
-----------
Income from operations................................................................... 726,257
Interest income............................................................................... 7,485
Interest expense.............................................................................. (36,855)
-----------
Income before income taxes............................................................... 696,887
Provision for income taxes......................................................................... (48,405)
-----------
Net income............................................................................... $ 648,482
-----------
-----------
Pro forma data (unaudited) (Note 10):
Historical income before income taxes......................................................... $ 696,887
Pro forma provision for income taxes.......................................................... (271,786)
-----------
Pro forma net income..................................................................... $ 425,101
-----------
-----------
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-30
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
COMMON RETAINED LOANS TO
STOCK EARNINGS SHAREHOLDER TOTAL
------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1993................................... $400 $ 816,357 $ -- $ 816,757
Net income.............................................. -- 648,482 -- 648,482
Loans to shareholder.................................... -- -- ($167,523) (167,523)
------ ---------- ----------- ----------
Balance, December 31, 1994................................... $400 $1,464,839 ($167,523) $1,297,716
------ ---------- ----------- ----------
------ ---------- ----------- ----------
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-31
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income....................................................................................... $648,482
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation................................................................................ 166,671
Provision for doubtful accounts............................................................. 2,000
Increase in:
Accounts receivable.................................................................... (380,219)
Prepaid expense and other current assets............................................... (31,739)
Increase (decrease) in:
Accounts payable....................................................................... 114,740
Accrued wages and payroll taxes........................................................ 73,483
Accrued expenses and other current liabilities......................................... 6,029
Income taxes payable................................................................... 54,205
Deferred income taxes.................................................................. 2,300
Other taxes and licenses............................................................... (4,300)
--------
Net cash provided by operating activities......................................... 651,652
--------
Cash flows from investing activities:
Purchase of equipment............................................................................ (84,444)
--------
Net cash used in investing activities............................................. (84,444)
--------
Cash flows from financing activities:
Payments to shareholder.......................................................................... (293,626)
Loans to shareholder............................................................................. (167,523)
Repayment of notes payable....................................................................... (78,353)
--------
Net cash used in financing activities............................................. (539,502)
--------
Net increase in cash.............................................................. 27,706
Cash at beginning of year............................................................................. 137,204
--------
Cash at end of year................................................................................... $164,910
--------
--------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................................................................................... $ 37,050
Income taxes................................................................................ 4,065
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-32
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Stephen Dunn & Associates, Inc. (the 'Company') provides telemarketing and
other services related to fund-raising campaigns for non-profit entities located
throughout the United States.
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 period. The estimates and assumptions made in the
preparation of the consolidated financial statements relate to the assessment of
the carrying value of assets and liabilities. Actual results could differ from
those estimates.
Recognition of Revenue
Revenues from on-site campaigns are earned when pledged cash is received.
Revenues from off-site campaigns are earned when the Company's services have
been provided.
Property and Depreciation
Property and equipment are reported at cost. Expenditures which improve or
extend the life of the asset are capitalized, while maintenance and repairs
which do not appreciably extend the useful lives of the related assets are
charged to expenses as incurred.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets.
Income Taxes
The Company has elected to be taxed under the provision of Subchapter S of
the Internal Revenue Code of 1986, as amended, and as a result the Company's
federal taxable income or loss and tax credits are passed through to the
individual shareholder -- see Note 10. However, the Company does have a
liability for income taxes on its net income in prior years to the extent of the
built-in gain which existed at the time of the S corporation election -- see
Note 6.
Some states either do not recognize the Company's S corporation status or
require income taxes at a reduced rate. The income tax provision relates to
income taxes due on taxable income for those states plus deferred taxes related
primarily to the differences that exist between the financial statement and the
tax bases of the assets and liabilities. These differences are primarily a
result of differences in depreciation methods and the use of the cash basis of
accounting for tax reporting.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.
F-33
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1994
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Office furniture and equipment.............................. $ 805,383
Automobile.................................................. 26,581
Leasehold improvements...................................... 223,187
----------
1,055,151
Less accumulated depreciation............................... (702,842)
----------
$ 352,309
----------
----------
</TABLE>
Depreciation expense for the year ended December 31, 1994 was $166,671.
3. RELATED PARTY
The Company was indebted to its sole shareholder in the amount of $293,626
as of December 31, 1993. Interest was payable at 10%. This amount was repaid in
1994. The debt at December 31, 1993 included unpaid interest of $331. Interest
expense for the year ended December 31, 1994 was $9,799.
The Company advanced funds to its sole shareholder in the amount of
$166,179 as of December 31, 1994. The advance accrues interest at 10% per annum,
does not have a specified maturity date, and is reflected as a reduction in
Shareholder's Equity. At December 31, 1994 the advance included unpaid interest
of $1,344. Interest income for the year ended December 31, 1994 was $1,344.
The Company leases its corporate business premises in Venice, California
from its sole shareholder requiring monthly rental payments of $9,905 through
January 1994 and $11,805 until the lease term expires on January 1, 1999, with
an option for renewal at such time. The Company incurs all costs of insurance,
maintenance and utilities. Total rent paid by the Company to its sole
shareholder for the year ended December 31, 1994 was $139,754. Future minimum
rental payments for this lease are as follows:
<TABLE>
<S> <C>
1995.......................................................... $141,654
1996.......................................................... 141,654
1997.......................................................... 141,654
1998.......................................................... 141,654
--------
$566,616
--------
--------
</TABLE>
4. CONCENTRATIONS OF CREDIT RISK
The Company maintains cash deposits with primarily one financial
institution amounting to $254,051 at December 31, 1994. These deposits are
insured for up to $100,000 by the U.S. Federal Deposit Insurance Corporation.
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Company's customer base, and
their dispersion across many different geographical regions within the United
States. At December 31, 1994, the Company had no significant concentrations of
credit risk.
5. LONG-TERM DEBT
During the year ended December 31, 1993, the Company refinanced two loans
into a single bank loan. The bank note payable requires monthly principal
payments of $6,529 plus interest based on the bank's prime rate of interest
(8.5% at December 31, 1994) plus 1.75%. The note matures on January 15, 1996.
The note is collateralized by substantially all of the Company's assets and is
guaranteed by the shareholder. The debt to the shareholder is subordinate to the
bank debt. The bank loan contains
F-34
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1994
financial covenants including current ratio and working capital, debt/net worth,
capital expenditure limits and cash flows.
Maturity of the bank note payable is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- ---------------------------------------------------------------
<S> <C>
1995........................................................ $78,353
1996........................................................ 10,517
-------
88,870
Less current maturities..................................... 78,353
-------
$10,517
-------
-------
</TABLE>
The Company also has available an unsecured $350,000 line of credit at
December 31, 1994. There were no borrowings from the line at December 31, 1994.
Total interest incurred during the year ended December 31, 1994 on bank
borrowings was $17,089.
6. COMMITMENTS AND CONTINGENCIES
Effective October 1, 1990, the Company elected to be taxed as an S
corporation. As a result, the Company is required to pay taxes on the built-in
gain which existed when the Company converted from a C corporation to an S
corporation. The Company estimates that the minimum tax on the built-in gain was
$25,500. The actual liability may be higher if goodwill for tax purposes is
determined to have existed at October 1, 1990. A provision for the minimum
expected liability has been made. Interest and penalties of $15,045 have been
estimated and recorded at December 31, 1994. Subsequent to December 31, 1994,
the Company will be taxed as a C corporation -- see Note 9.
7. LEASE COMMITMENTS
In addition to leasing corporate office space (Note 3), the Company leases
office space in Berkeley, California, requiring monthly rental payments of
$9,135. The lease term expired on October 22, 1994 and was extended to January
31, 1996 at $9,610 per month. There are no further options to renew this lease.
Total rent paid by the Company for this location for the year ended December 31,
1994 was $110,570. Future minimum rental payments for this lease are as follows:
<TABLE>
<S> <C>
1995.......................................................... $115,320
1996.......................................................... 9,610
--------
$124,930
--------
--------
</TABLE>
The Company also leases office space in New York, requiring monthly rental
payments of $550. Total rent paid by the Company for this location for the year
ended December 31, 1994 was $6,600.
8. INCOME TAXES
As of December 31, 1994, deferred state tax liabilities recognized for
taxable temporary differences totalled $30,600. There were no deferred state tax
assets or valuation allowances recognized as of December 31, 1994.
The provision for state income taxes consists of the following components:
<TABLE>
<S> <C>
Current taxes.................................................. $46,105
Deferred taxes................................................. 2,300
-------
$48,405
-------
-------
</TABLE>
F-35
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1994
The Company has a capital loss carryforward of $10,000 available for offset
against future capital gains.
9. SUBSEQUENT EVENTS
On April 25, 1995, all of the outstanding common stock of the Company was
acquired by Alliance Media Corporation ('Alliance') and subsequently by
Sports-Tech, Inc. ('Sports-Tech') upon consummation of the merger between STI
Merger Corporation, a wholly-owned subsidiary of Sports-Tech and Alliance. The
Company has consequently changed its fiscal year-end from December 31 to June
30, and as a result of the acquisition, the Company will be taxed as a C
corporation.
10. PRO FORMA DATA (UNAUDITED)
The pro forma financial information is provided to show the significant
effects on the historical financial information had the Company operated as a C
corporation. Historically, the Company has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code of 1986, as amended, and
comparable provisions of state income tax laws.
F-36
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
BALANCE SHEET
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash........................................................................................... $ 445,897
Accounts receivable, less allowance for doubtful accounts of $6,000............................ 1,578,099
Prepaid expenses and other current assets...................................................... 70,636
----------
Total current assets...................................................................... 2,094,632
Property and equipment -- at cost, less accumulated depreciation of $744,504........................ 317,958
Deposits............................................................................................ 23,452
----------
Total assets.............................................................................. $2,436,042
----------
----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................................................... $ 30,745
Accrued wages and payroll taxes................................................................ 628,413
Accrued expenses and other current liabilities................................................. 165,508
Current portion of long-term debt.............................................................. 78,353
Income taxes payable........................................................................... 55,270
Deferred income taxes.......................................................................... 30,600
----------
Total current liabilities................................................................. 988,889
Long-term liabilities:
Long-term debt, less current portion........................................................... 90,929
Other taxes and licenses....................................................................... 72,000
----------
Total liabilities......................................................................... 1,151,818
----------
Commitments and contingencies
Shareholder's equity:
Common stock:
Authorized -- 1,000 shares of no par common stock; issued and outstanding -- 400 shares....... 400
Retained earnings.............................................................................. 1,450,003
Loan receivable, shareholder................................................................... (166,179)
----------
Total shareholder's equity................................................................ 1,284,224
----------
Total liabilities and shareholder's equity........................................... $2,436,042
----------
----------
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-37
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Revenues............................................................................................ $3,551,095
----------
Salaries and benefits............................................................................... 2,620,585
Direct costs........................................................................................ 187,442
Selling, general and administrative................................................................. 666,322
Professional fees................................................................................... 89,418
----------
Total operating expenses....................................................................... 3,563,767
----------
Loss from operations................................................................................ (12,672)
Interest expense.................................................................................... (2,164)
----------
Loss before income taxes............................................................................ (14,836)
Provision for income taxes.......................................................................... 0
----------
Net loss............................................................................................ $ (14,836)
----------
----------
Pro forma data (Note 10):
Historical loss before income taxes................................................................. $ (14,836)
Pro forma benefit for income taxes.................................................................. 5,786
----------
Pro forma net loss.................................................................................. $ (9,050)
----------
----------
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-38
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON RETAINED LOANS TO
STOCK EARNINGS SHAREHOLDER TOTAL
------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994................................... $400 $1,464,839 ($167,523) $1,297,716
Net loss..................................................... -- (14,836) -- (14,836)
Payments by shareholder...................................... -- -- 1,344 1,344
------ ---------- ----------- ----------
Balance, March 31, 1995...................................... $400 $1,450,003 ($166,179) $1,284,224
------ ---------- ----------- ----------
------ ---------- ----------- ----------
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-39
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss......................................................................................... $(14,836)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation................................................................................ 41,952
Increase in:
Accounts receivable......................................................................... (104,387)
Prepaid expenses and other current assets................................................... (11,818)
Increase (decrease) in:
Accounts payable............................................................................ (164,458)
Accrued wages and payroll taxes............................................................. 365,827
Accrued expenses and other current liabilities.............................................. 94,552
--------
Net cash provided by operating activities.............................................. 206,832
--------
Cash flows from investing activities:
Purchase of equipment............................................................................ (7,601)
Payments by shareholder.......................................................................... 1,344
--------
Net cash used in investing activities.................................................. (6,257)
--------
Cash flows from financing activities:
Borrowings on bank line of credit................................................................ 100,000
Payments on bank line of credit.................................................................. (19,588)
--------
Net cash provided by financing activities.............................................. 80,412
--------
Net increase in cash.................................................................................. 280,987
Cash at beginning of period........................................................................... 164,910
--------
Cash at end of period................................................................................. $445,897
--------
--------
</TABLE>
The accompanying Notes are an integral part of these financial statements.
F-40
<PAGE>
<PAGE>
STEPHEN DUNN & ASSOCIATES, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
1. GENERAL
The interim financial statements included herein were prepared by Stephen
Dunn & Associates, Inc. (the 'Company') without audit. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The Company believes that the disclosures are adequate to make the
information presented not misleading. The interim financial statements reflect
all adjustments that are, in the opinion of management, necessary for the fair
presentation of the results for the interim period presented. All adjustments
are of a recurring nature. These interim financial statements should be read in
conjunction with the financial statements of the Company as of December 31, 1994
and the Notes thereto.
2. SUBSEQUENT EVENT
On April 25, 1995, all of the outstanding common stock of the Company was
acquired by Alliance Media Corporation ('Alliance') and subsequently by
Sports-Tech, Inc. ('Sports-Tech') upon consummation of the merger between STI
Merger Corporation, a wholly-owned subsidiary of Sports-Tech and Alliance. The
Company has consequently changed its fiscal year-end from December 31 to June 30
and, as a result of the acquisition, the Company will be taxed as a C
corporation.
3. PRO FORMA DATA
The pro forma financial information is provided to show the significant
effects on the historical financial information had the Company operated as a C
corporation. Historically, the Company has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code of 1986, as amended, and
comparable provisions of state income tax laws.
F-41
<PAGE>
<PAGE>
_______________________________ _______________________________
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 9
Special Note Regarding Forward-Looking
Statements................................... 15
Use of Proceeds................................ 15
Dividend Policy................................ 15
Price Range of Common Stock.................... 16
Capitalization................................. 17
Dilution....................................... 18
Pro Forma Condensed Combined Financial
Information.................................. 19
Selected Financial Data........................ 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 26
Business....................................... 33
Management..................................... 43
Principal and Selling Stockholders............. 54
Delayed Selling Stockholders and Plan of
Distribution................................. 57
Certain Transactions........................... 59
Description of Capital Stock................... 61
Shares Eligible for Future Sale................ 64
Underwriting................................... 71
Validity of Shares............................. 72
Experts........................................ 72
Available Information.......................... 72
Index to Financial Statements.................. F-1
</TABLE>
ALL-COMM MEDIA
CORPORATION
1,500,000 SHARES
OF
COMMON STOCK
1,344,468 SHARES
OF
COMMON STOCK
BY DELAYED SELLING STOCKHOLDERS
-------------------------
PROSPECTUS
-------------------------
LT LAWRENCE & CO., INC.
, 1996
_______________________________ _______________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law (the 'NGCL') provides,
in effect, that any person made a party to any action by reason of the fact that
such person is or was a director, officer, employee or agent of the Company may
and, in certain cases, must be indemnified by the Company against, in the case
of a non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorney's fees) incurred by such person as a
result of such action, and in the case of a derivative action, against expenses
(including attorney's fees), if in either type of action such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Company. This indemnification does not
apply, in a derivative action, to matters as to which it is adjudged that the
director, officer, employee or agent is liable to the Company, unless upon court
order it is determined that, despite such adjudication of liability, but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for expenses, and, in a non-derivative action, to any
criminal proceeding in which such person had reasonable cause to believe such
person's conduct was unlawful.
Article Seventh, Section 6 of the by-laws of the Company, as amended (the
'By-Laws') provides that the Company shall indemnify each person who is or was
an officer or director of the Company to the fullest extent permitted by Chapter
78 of the NGCL.
In addition, the Company maintains customary directors, officers and
corporate liability insurance policies.
Reference is made to Section of the Underwriting Agreement filed as
Exhibit 1 hereto, pursuant to which the Underwriters have agreed to indemnify
officers and directors of the Company against certain liabilities.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses, other than underwriting
discounts and commissions, paid or payable in connection with the issuance and
distribution of the Common Stock being registered hereby (as such expenses are
estimated except as noted):
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee....................................... $ 4,909*
National Association of Securities Dealers, Inc. Filing Fee............................... 1,368*
Nasdaq SmallCap MarketSM Listing Fee...................................................... **
Printing and Engraving Expenses........................................................... **
Legal Fees and Expenses................................................................... **
Accounting Fees and Expenses.............................................................. **
Blue Sky Fees and Expenses................................................................ **
Transfer Agent and Registrar Fees......................................................... **
Miscellaneous Fees and Expenses........................................................... **
--------
Total................................................................................ $ **
--------
--------
</TABLE>
- ------------
* Actual
** To be provided by Amendment.
II-1
<PAGE>
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
MERGERS WITH ALLIANCE
Common Stock
During fiscal 1996, the Company issued 95,441 shares of its common stock as
compensation to various employees, directors and consultants. These shares were
issued without registration under the Securities Act of 1933, as amended (the
'Securities Act'), pursuant to the exemption afforded by Section 4(2) of the
Securities Act.
In October 1996, the Company issued 1,814,000 shares of its common stock,
valued at $7,256,000 in the aggregate to the former shareholders of Metro
Services Group, Inc. ('Metro'), in connection with the Company's acquisition of
Metro. These shares were issued without registration under the Securities Act,
pursuant to the exemption afforded by Section 4(2) and Regulation D of the
Securities Act.
In March 1996, the Company issued 75,000 shares of its common stock to four
individuals, including 12,500 shares to related parties, for an aggregate
consideration of $120,000. There were no fees, commissions or discounts. These
shares were issued without registration under the Securities Act pursuant to the
exemption afforded by Section 4(2) and Regulation D of the Securities Act.
On May 31, 1995, the Company issued 413,759 shares of its common stock to
certain accredited investors for aggregate consideration of $1,108,875, less
fees, commissions and/or discounts aggregating $90,200. These shares were issued
without registration under the Securities Act pursuant to the exemption afforded
by Section 4(2) and Regulation S of the Securities Act.
On April 25, 1995, in connection with the merger with Alliance Media
Corporation ('Alliance') and pursuant to the Acquisition Agreement dated as of
February 7, 1995, as amended, relating thereto, the Company issued 1,025,000
shares of its common stock, valued at $2,745,000 in the aggregate, to the former
stockholders of Alliance. The Company also issued 37,500 shares of its common
stock, valued at $100,000 to former stockholders, to an investment banking firm
and to a former officer as payment for certain finders fees related to the
Merger. These shares and warrants were issued without registration under the
Securities Act pursuant to the exemption afforded by Section 4(2) and Regulation
D of the Securities Act.
Also on April 25, 1995, in connection with the sale of Sports-Tech
International, Inc. ('STI'), the Company issued 5,000 shares of its common
stock, valued at $38,750 in the aggregate, and warrants relating to 2,500 shares
of its common stock to the former president of STI. These shares and warrants
were issued without registration under the Securities Act, pursuant to the
exemption afforded by Section 4(2) of the Securities Act.
Convertible Preferred Stock
On May 9, 1996, the Company issued 10,000 shares of its Series A
Convertible Preferred Stock to an institutional investor, convertible into
300,000 shares of the Company's common stock, for aggregate consideration of
$750,000, less fees, commissions and/or discounts aggregating $63,000. These
shares were issued without registration under the Securities Act pursuant to the
exemption afforded by Section 4(2) and Regulation S of the Securities Act. On
June 7, 1996, in connection with the issuance of the Series B Preferred Stock
and the convertible notes referred to below, the Company repurchased all of the
outstanding shares of its Series A Preferred Stock for $800,000 plus fees of
$12,500.
On June 7, 1996, the Company issued 6,200 shares of its Series B
Convertible Preferred Stock, convertible into 2,480,000 shares of the Company's
common stock, for aggregate consideration of $3,100,000, less fees, commission
and/or discounts aggregating $218,914, and warrants relating to 3,100,000 shares
of its common stock to accredited investors. These shares and warrants were
issued without registration under the Securities Act pursuant to the exemption
afforded by Section 4(2) and Regulation D of the Securities Act.
Also on June 7, 1996, the Company issued $1,000,000 of convertible notes
due June 1, 1998 to two accredited investors and warrants relating to 3,000,000
shares of its common stock. There were no fees, commissions or discounts. These
notes and warrants were issued without registration under the
II-2
<PAGE>
<PAGE>
Securities Act pursuant to the exemption afforded by Section 4(2) and Regulation
D of the Securities Act.
On September 10, 1996, the convertible notes and the warrants issued to the
holders of the convertible notes referred to above were rescinded retroactive to
June 7, 1996 and replaced with 2,000 shares of the Company's Series C Preferred
Stock (as defined in the Prospectus), convertible into 166,666 shares of the
Company's common stock, for aggregate consideration of $1,000,000, and warrants
relating to 3,000,000 shares of the Company's common stock. There were no fees,
commissions or discounts. These shares and warrants were issued without
registration under the Securities Act pursuant to the exemption afforded by
Sections 4(2) and 3(a)(9) of the Securities Act.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM EXHIBIT
- --------- ------------------------------------------------------------------------------- --------------------
(SEE NOTES)(*)
<S> <C> <C> <C>
1.1 Form of Underwriting Agreement B
2.1 Acquisition Agreement dated as of February 7, 1995 between Sports-Tech, Inc.,
STI Merger Corporation and Alliance Media Corporation G (1)
2.2 Amendment No. 1 to the Acquisition Agreement dated April 21, 1995 H (2)
2.3 Merger Agreement dated as of April 21, 1995 between STI Merger Corporation and
Alliance Media Corporation H (3)
2.4 Stock Purchase Agreement dated as of January 31, 1995 between Alliance Media
Corporation and Mr. Stephen Dunn H (4)
2.5 Agreement and Plan of Merger dated as of October 1, 1996 between All-Comm Media
Corporation, Metro Services Group, Inc., Metro Merger Corp. and the
Shareholders named therein K (2.1)
3.1 Amended and Restated Articles of Incorporation C (3(a)(1))
3.2 Certificate of Amendment to the Amended and Restated Articles of Incorporation B
3.3 Certificate of Amendment to the Amended and Restated Articles of Incorporation D (3(iii))
3.4 Certificate of Amendment to the Amended and Restated Articles of Incorporation E (3(v))
3.5 By-Laws C (3(c)(2))
3.6 Certificate of Designation for Series B Convertible Preferred Stock, as amended A
3.7 Certificate of Designation for Series C Convertible Preferred Stock A
5.1 Opinion of Lionel Sawyer & Collins B
10.1 1991 Stock Option Plan F (28.1)
10.2 Operating Covenants Agreement dated April 25, 1995 between Alliance Media
Corporation and Mr. Stephen Dunn H (5)
10.3 Pledge Agreement dated as of April 25, 1995 between Alliance Media Corporation
and Mr. Stephen Dunn H (6)
10.4 Lease Agreement dated January 1, 1989 between Stephen Dunn & Associates, Inc.
and Mr. Stephen Dunn relating to 1728 Abbott Kinney Boulevard A
10.5 Form of promissory note of Alliance Media Corporation payable to Mr. Stephen
Dunn with respect to sale of SD&A (included in Exhibit 2.4) H (4)
10.6 Memorandums of Understanding relating to deferral of payments on long-term
obligations payable to seller of SD&A J (10.6)
10.7 Letter from Mr. Stephen Dunn agreeing to long-term obligation payment and
restructuring I (10.9)
10.8 Form of Private Placement Purchase Agreement for Convertible Notes I (10.8)
10.9 Form of Warrant Certificate (without registration rights) A
10.10 Form of promissory note of All-Comm Media Corporation issued to former
shareholders of Metro Services Group, Inc. (included in Exhibit 2.5) K (2.1)
</TABLE>
II-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM EXHIBIT
- --------- ------------------------------------------------------------------------------- --------------------
(SEE NOTES)(*)
<S> <C> <C> <C>
10.11(a) Form of Registration Rights Agreement dated as of October , 1996 between
All-Comm Media Corporation and the Shareholders named therein (included in
Exhibit 2.5) K
10.11(b) Amendment No. 1 to the Registration Rights Agreement dated as of October 9, 1996 B
10.12 Form of Employment Agreement between All-Comm Media Corporation and Mr. Barry
Peters A
10.13 Form of Employment Agreement between All-Comm Media Corporation and Mr. E.
William Savage A
10.14 Form of Employment Agreement between Stephen Dunn & Associates, Inc. and Mr.
Stephen Dunn (included in Exhibit 2.4) H (4)
10.15 Form of Employment Agreement between Stephen Dunn & Associates, Inc. and Mr.
Thomas Scheir (included in Exhibit 2.4) H (4)
10.16 Form of Employment Agreement between Metro Services Group, Inc. and Mr. J.
Jeremy Barbera (included in Exhibit 2.5) K (2.1)
10.17 Form of Employment Agreement between Metro Services Group, Inc. and Mr. Robert
M. Budlow (included in Exhibit 2.5) K (2.1)
10.18 Form of Employment Agreement between Metro Services Group, Inc. and Ms. Janet
Sautkulis (included in Exhibit 2.5) K (2.1)
10.19 Form of Consulting Agreement between All-Comm Media Corporation and Mr. Seymour
Jones A
10.20 Form of Consulting Agreement between All-Comm Media Corporation and Mr. S.
James Coppersmith A
10.21 Form of Consulting Agreement between All-Comm Media Corporation and Mr. C.
Anthony Wainwright A
10.22 Excerpt from Confidential Private Placement dated February 1995 Memorandum of
Alliance Media Corporation relating to Common Stock registration rights A
10.23(a) Letter agreement dated February 7, 1995 between Alliance Media Corporation,
Sports-Tech, Inc., Whale Securities Co., L.P. and Golenberg & Geller, Inc.
relating in part to Common Stock registration rights A
10.23(b) Letter agreement dated May 19, 1995 between All-Comm Media Corporation and
Marshall Geller relating in part to Common Stock registration rights A
10.23(c) Letter agreement dated May 19, 1995 between All-Comm Media Corporation and
Glenn Golenberg relating in part to Common Stock registration rights A
10.24(a) Settlement and Release Agreement dated as of June 17, 1994 between Sheldon
Kasower, Membership Development, Inc. and Sports-Tech, Inc. relating in part to
Common Stock registration rights A
10.24(b) Letter agreement dated January 13, 1995 between Membership Development, Inc.
and Sports-Tech, Inc. relating to Common Stock registration rights A
10.25 Form of Series B Convertible Preferred Stock Subscription Agreement relating in
part to Common Stock registration rights A
10.26 Form of Series C Convertible Preferred Stock Private Placement Purchase
Agreement A
10.27 Form of Warrant Certificate (with registration rights) A
10.28(a) Option Agreement dated as of October 1, 1995 between All-Comm Media Corporation
and certain individuals named therein D (10.4)
10.28(b) Amendment to Option Agreement dated April 19, 1996 J (10.5)
10.29 Form of Transfer and Registration Rights Agreement between Mr. Stephen Dunn and
Sports-Tech, Inc. (included in Exhibit 2.4) H (4)
11.1 Statement Regarding Computation of Net Income Per Share E (11)
21.1 List of Subsidiaries of the Company E (22.1)
23.1 Consent of Lionel Sawyer & Collins (included in Exhibit 5.1) B
23.2 Consent of Coopers & Lybrand L.L.P. (Los Angeles) A
23.3 Consent of Coopers & Lybrand L.L.P. (New York) A
</TABLE>
II-4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM EXHIBIT
- --------- ------------------------------------------------------------------------------- --------------------
(SEE NOTES)(*)
<S> <C> <C> <C>
24.1 Power of Attorney executed by Barry Peters, E. William Savage, Scott Anderson,
S. James Coppersmith, Seymour Jones, C. Anthony Wainwright and Jeremy Barbera L
27.1 Financial Data Schedule A
</TABLE>
(b) Financial Statement Schedules
None.
Notes relating to Exhibits
A Filed herewith.
B To be filed by amendment.
C Incorporated by reference to the Company's Registration Statement on
Form S-4 No. 33-45192, declared effective on February 12, 1992.
D Incorporated by reference to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1995.
E Incorporated by reference to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1996.
F Incorporated by reference to the Company's Registration Statement on
Form S-8 No. 33-43520, declared effective on .
G Incorporated by reference to the Company's Report on Form 8-K dated
February 7, 1995.
H Incorporated by reference to the Company's Report on Form 8-K dated
April 25, 1995.
I Incorporated by reference to the Company's Report on Form 8-K dated
June 7, 1996.
J Incorporated by reference to the Company's Report on Form 10-Q for the
quarter ended March 31, 1996.
K Incorporated by reference to the Company's Report on Form 8-K dated
October 11, 1996.
L Included on the signature page, at Page II-7, to this Registration
Statement on Form SB-2.
* Numbers in parentheses next to any of the above letters C through K refer to
the exhibit numbers within each document from which the Exhibit is
incorporated by reference herein.
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities registered, the Company 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 Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A
II-5
<PAGE>
<PAGE>
and contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
<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 for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Culver
City, in the State of California, on October 17, 1996.
ALL-COMM MEDIA CORPORATION
By: /s/ BARRY PETERS
............................
BARRY PETERS
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below does hereby constitute and appoint Barry Peters, E. William Savage, Robert
A. Zuccaro, and Pamela Monahan, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them, to do any and all acts and things in such person's respective
name and on such person's respective behalf in any and all capacities that they
or any of them may deem necessary or advisable to enable All-Comm Media
Corporation to comply with the Securities Act of 1933, as amended (the
'Securities Act'), and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with a Registration Statement on Form
SB-2 to be filed by All-Comm Media Corporation, including specifically, but not
limited to, power and authority to sign for such respective person any and all
amendments (including post-effective amendments and filings under Rule 462(b)
under the Securities Act) thereto and to file the same, with all exhibits
thereto and other documents therewith, with the Securities and Exchange
Commission; and each such person does hereby ratify and confirm all that they or
any of them, shall do or cause by virtue hereof. This power of attorney may be
signed in counterparts.
In accordance with the requirements of the Securities Act, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------ ---------------------------
<C> <S> <C>
/s/ BARRY PETERS Chairman of the Board and Chief Executive October 17, 1996
......................................... Officer
BARRY PETERS (Principal Executive Officer)
/s/ E. WILLIAM SAVAGE Director, President, Chief Operating October 17, 1996
......................................... Officer, Secretary and Treasurer (Chief
E. WILLIAM SAVAGE Operating Officer)
/s/ SCOTT ANDERSON Chief Financial Officer October 17, 1996
......................................... (Principal Financial and Accounting
SCOTT ANDERSON Officer)
/s/ S. JAMES COPPERSMITH Director October 17, 1996
.........................................
S. JAMES COPPERSMITH
/s/ SEYMOUR JONES Director October 17, 1996
.........................................
SEYMOUR JONES
/s/ C. ANTHONY WAINWRIGHT Director October 17, 1996
.........................................
C. ANTHONY WAINWRIGHT
/s/ JEREMY BARBERA Director October 17, 1996
.........................................
JEREMY BARBERA
</TABLE>
II-7
<PAGE>
<PAGE>
AMENDMENT TO CERTIFICATE OF THE DESIGNATIONS, VOTING
POWERS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SERIES B CONVERTIBLE
PREFERRED STOCK OF ALL-COMM MEDIA CORPORATION
('Amended Certificate of Designation')
The undersigned hereby certifies that he is the duly elected and acting
President and Secretary of ALL-COMM MEDIA CORPORATION, a Nevada corporation,
(the 'Company'), and pursuant to Nev. Rev. Stat. Section 78.1955, DOES HEREBY
CERTIFY:
I. That, a certificate of designation creating a series of Preferred Stock
designated as Series B Convertible Preferred Stock was filed with the Nevada
Secretary of State on June 7, 1996 ('Original Designation'). The Original
Designation is a follows:
SERIES B CONVERTIBLE PREFERRED STOCK
1. The shares of such series shall be designated as 'Series B Convertible
Preferred Stock' (the 'Preferred Stock') and the number of shares constituting
the Preferred Stock shall be 6,200. The holders of the Preferred Stock in
preference to the holders of Junior Stock (as hereinafter defined) shall be
entitled to receive a dividend payable only upon redemption or credited against
conversion which shall accrue at the rate of $30.00 (6%) per annum per share
(pro rated for any portion thereof) from and after the date of issuance.
2. The Preferred Stock shall be preferred as to assets over the Junior
Stock so that, in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of Preferred Stock shall
be entitled to have set apart for them or to be paid out of the assets of the
Company, before any distribution is made to, or set apart for, the holders of
Junior Stock, an amount in cash equal to, and in no event more than, $50,000 per
share of Preferred Stock, plus all accrued and unpaid dividends thereon. If,
upon such liquidation, dissolution or winding-up of the Company, the assets of
the Company available for distribution to the holders of its stock be
insufficient to permit the distribution in full of the amounts receivable as
aforesaid by the holders of Preferred Stock, then all such assets of the Company
shall be distributed ratably among the holders of Preferred Stock in proportion
to the amounts which each would have been entitled to receive if such assets
were sufficient to permit distribution in full as aforesaid. Neither the
consolidation nor merger of the Company, nor the sale, lease or transfer by the
Company of all, or any part of, its assets shall be deemed to be a liquidation,
dissolution or winding-up of the Company for the purposes of this paragraph.
3. The Company shall be obliged to redeem all of the Preferred Stock on the
second anniversary of the date of issuance of the Preferred Stock to the extent
that the Preferred Stock has not theretofore been converted under Section 4. The
Preferred Stock shall automatically be deemed converted under Section 4 on such
second anniversary unless the registration statement
1
<PAGE>
<PAGE>
referred to below has not theretofore been declared effective or unless the
Company's common stock is not then trading on NASDAQ. The redemption price shall
be payable in cash and shall be equal to $50,000 per share, plus all accrued and
unpaid dividends thereon. The registration statement means the registration
statement which the Company is required by separate agreement to file in respect
of the shares of common stock issuable on conversion of the Preferred Stock.
4. The holder shall have the right at any time prior to maturity, in its
sole discretion, to convert first the outstanding accrued dividends and then the
Preferred Stock, in whole or in part, into a number of shares (the 'Conversion
Shares') of the Company's common stock (the 'Common Stock') equal to the amount
of dividends and redemption value converted divided by the Conversion Price. The
Conversion Price means a price per share equal to the lesser of (1) $1.25 or (2)
80% of the average of the closing bid price of a share of Common Stock of the
Company during the five trading days prior to such conversion. In the event that
the holder elects to exercise its conversion rights hereunder, it shall give to
the Company written notice of such election and shall surrender his Preferred
Stock to the Company for cancellation. Notwithstanding anything else herein to
the contrary, the Preferred Stock shall be convertible, or be deemed converted,
as the case may be, only to the extent that authorized but unissued shares of
Common Stock of the Company are available for such conversion.
In case the Company shall issue common stock as a dividend upon common
stock or in payment of a dividend thereon, shall subdivide the number of
outstanding shares of its common stock into a greater number of shares or shall
contract the number of outstanding shares of its common stock into a lesser
number of shares, the number of Conversion Shares to which the holder is
entitled to receive shall be adjusted, effective at the close of business on the
date such shares of common stock are to be issued, so that the Conversion Shares
shall be equal to the product obtained by multiplying the Conversion Shares in
effect immediately prior to the close of business on such date by a fraction,
the denominator of which shall be the number of shares of common stock
outstanding immediately prior to such dividend, subdivision or contraction, and
the numerator of which shall be the number of shares of common stock outstanding
immediately after such dividend, subdivision, or contraction. If any capital
reorganization or reclassification of the common stock, or consolidation, or
merger of the Company with or into another corporation, or the sale or
conveyance of all or substantially all of its assets to another corporation
shall be effected, then, as a condition precedent of such reorganization or
sale, the following provision shall be made: The holder of the Preferred Stock
shall, from and after the date of such reorganization or sale, have the right to
receive (in lieu of the shares of common stock of the Company immediately
theretofore receivable with respect to such Preferred Stock, upon the exercise
of conversion rights), such shares of stock, securities or assets as would have
been issued or payable with respect to, or in exchange for, the number of
outstanding shares of such common stock immediately theretofore receivable with
respect to such Preferred Stock. In any such case, appropriate provision shall
be made with respect to the rights and interests of the holders to the end that
such conversion rights (including, without limitation, provisions for
appropriate adjustments) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise thereof.
2
<PAGE>
<PAGE>
5. The holders of the Preferred Stock shall have no voting rights except as
expressed provided by law.
6. The term 'Junior Stock' shall mean the Common Stock and those series
of Preferred Stock which, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall designate the special rights
and limitations of each such class and series of stock and series of Preferred
Stock, shall be subordinate to the Preferred Stock in respect of the right of
the holders thereof to receive dividends or to participate in the assets of the
Company distributable to stockholders upon any liquidation, dissolution or
winding-up of the Company.
7. Subject to the immediately proceeding provisions of this Certificate of
Designation, the Board of Directors of the Company may amend the powers
preferences and relative, participating, optional and other special rights of
the Preferred Stock as provided herein without vote of the shareholders.
II. That, pursuant to the authority conferred upon the Board of Directors of the
Company by ARTICLE VI of the Company's Amended and Restated Articles of
Incorporation (the 'Articles'), and paragraph 6 of the Original Designation
the Board of Directors of the Corporation by unanimous written consent adopted
a resolution amending the Original Designation ('New Designation'). The New
Designation is as follows:
SERIES B CONVERTIBLE PREFERRED STOCK
1. The shares of such series shall be designated as 'Series B Convertible
Preferred Stock' (the 'Preferred Stock') and the number of shares constituting
the Preferred Stock shall be 6,200. The holders of the Preferred Stock in
preference to the holders of Junior Stock (as hereinafter defined) shall be
entitled to receive a dividend payable only upon redemption or credited against
conversion which shall accrue at the rate of $30.00 [6%] per annum per share
(pro rated for any portion thereof) from and after the date of issuance.
2. The Preferred Stock shall be preferred as to assets over the Junior
Stock so that, in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of Preferred Stock shall
be entitled to have set apart for them or to be paid out of the assets of the
Company, before any distribution is made to, or set apart for, the holders of
Junior Stock, an amount in cash equal to, and in no event more than, $500 per
share of Preferred Stock, plus all accrued and unpaid dividends thereon. If,
upon such liquidation, dissolution or winding-up of the Company, the assets of
the Company available for distribution to the holders of its stock be
insufficient to permit the distribution in full of the amounts receivable as
aforesaid by the holders of Preferred Stock, then all such assets of the Company
shall be distributed ratably among the holders of Preferred Stock in proportion
to the amounts which each would have been entitled to receive if such assets
where sufficient to permit distribution in full as aforesaid. Neither the
consolidation nor merger of the Company, nor the sale, lease or transfer by the
Company of all, or any part of, its assets s hall be deemed to be a liquidation,
dissolution or winding-up of the Company for the purposes of this paragraph.
3
<PAGE>
<PAGE>
3. The Company shall be obliged to redeem all of the Preferred Stock on the
second anniversary of the date of issuance of the Preferred Stock to the extent
that the Preferred Stock has not theretofore been converted under Section 4. The
Preferred Stock shall automatically be deemed converted under Section 4 on such
second anniversary unless the registration statement referred to below has not
theretofore been declared effective or unless the Company's common stock is not
then trading on NASDAQ. The redemption price shall be payable in cash and shall
be equal to $500 per share, plus all accrued and unpaid dividends thereon. The
registration statement means the registration statement which the Company is
required by separate agreement to file in respect of the shares of common stock
issuable on conversion of the Preferred Stock.
4. The holder shall have the right at any time prior to maturity, in its
sole discretion, to convert first the outstanding accrued dividends and then the
Preferred Stock, in whole or in part, into a number of shares (the 'Conversion
Shares') of the Company's common stock (the 'Common Stock') equal to the amount
of dividends and redemption value converted divided by the Conversion Price.
The Conversion Price means a price per share equal to the lesser of (1) $1.25 or
(2) 80% of the average of the closing bid price of a share of Common Stock of
the Company during the five trading days prior to such conversion. In the event
that the holder elects to exercise its conversion rights hereunder, it shall
give to the Company written notice of such election and shall surrender his
Preferred Stock to the Company for cancellation. Notwithstanding anything else
herein to the contrary, the Preferred Stock shall be convertible, or be deemed
converted, as the case may be, only to the extent that authorized but unissued
shares of Common Stock of the Company are available for such conversion.
In case the Company shall issue common stock as a dividend upon common
stock or in payment of a dividend thereon, shall subdivide the number of
outstanding shares of its common stock into a greater number of shares or shall
contract the number of outstanding shares of its common stock into a lesser
number of shares, the number of Conversion Shares to which the holder is
entitled to receive shall be adjusted, effective at the close of business on the
date such shares of common stock are to be issued, so that the Conversion Shares
shall be equal to the product obtained by multiplying the Conversion Shares in
effect immediately prior to the close of business on such date by a fraction,
the denominator of which shall be the number of shares of common stock
outstanding immediately prior to such dividend, subdivision or contraction, and
the numerator of which shall be the number of shares of common stock outstanding
immediately after such dividend, subdivision, or contraction. If any capital
reorganization or reclassification of the common stock or consolidation or
merger of the Company with or into another corporation, or the sale or
conveyance of all or substantially all of its assets to another corporation
shall be effected, then, as a condition precedent of such reorganization or
sale, the following provision shall be made: The holder of the Preferred Stock
shall, from and after the date of such reorganization or sale, have the right to
receive (in lieu of the shares of common stock of the Company immediately
theretofore receivable with respect to such Preferred Stock, upon the exercise
of conversion rights), such shares of stock, securities or assets as would have
been issued or payable with respect to, or in exchange for, the number of
outstanding shares of such common stock immediately theretofore receivable with
respect to such Preferred Stock. In any such case, appropriate provision shall
be made with respect to the rights and interests of the
4
<PAGE>
<PAGE>
holders to the end that such conversion rights (including, without limitation,
provisions for appropriate adjustments) shall thereafter be applicable, as
nearly as may be practicable in relation to any shares of stock, securities or
assets thereafter deliverable upon the exercise thereof.
5. The holders of the Preferred Stock shall have no voting rights except as
expressly provided by law.
6. The term 'Junior Stock' shall mean the Common Stock and those series of
Preferred Stock which, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall designate the special rights
and limitations of each such class and series of stock and series of Preferred
Stock, shall be subordinate to the Preferred Stock in respect of the right of
the holders thereof to receive dividends or to participate in the assets of the
Company distributable to stockholders upon any liquidation, dissolution or
winding-up of the Company.
7. Subject to the immediately preceeding provisions of this Certificate of
Designation, the Board of Directors of the Company may amend the powers
preferences and relative, participating, optional and other special rights of
the Preferred Stock as provided herein without vote of the shareholders.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed in its corporate name on this 15th day of August 1996.
ALL-COMM MEDIA CORPORATION
By: E. WILLIAM SAVAGE
------------------------------------
Name: E. William Savage
Title: President and Secretary
State of California
County of Los Angeles
This instrument was acknowledged before me on August 15, 1996 by E. William
Savage, as President and Secretary of ALL-COMM MEDIA CORPORATION.
JAMES G. KING
-------------------------------------
Notary Public
My Commission expires 11/29/96
----------------
(seal) [seal]
5
<PAGE>
<PAGE>
CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SERIES C CONVERTIBLE PREFERRED
STOCK OF ALL-COMM MEDIA CORPORATION
("CERTIFICATE OF DESIGNATION")
The undersigned hereby certifies that he is the duly elected and acting
President and Secretary of ALL-COMM MEDIA CORPORATION, a Nevada corporation,
(the "Company"), and pursuant to Nev. Rev. Stat. Section 78.1955, DOES HEREBY
CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors of
the Company by ARTICLE VI of the Amended and Restated Articles of Incorporation
(the "Articles"), the Board of Directors of the Company by unanimous written
consent, adopted the following resolution creating a series of Preferred Stock
designated as Series C Convertible Preferred Stock:
RESOLVED that the designation of the above referenced stock shall be:
SERIES C CONVERTIBLE PREFERRED STOCK
1. The shares of such series shall be designated as "Series C Convertible
Preferred Stock" (the "Preferred Stock") and the number of shares constituting
the Preferred Stock shall be 2,000. The holders of the Preferred Stock in
preference to the holders of Junior Stock (as hereinafter defined) shall be
entitled to receive a dividend payable only upon redemption or credited against
conversion which shall accrue at the rate of $40.00 [8%] per annum per share
(pro rated for any portion thereof) from and after June 7, 1996. A separate
agreement provides for the filing by the Company of a registration statement for
the sale of the shares issuable on conversion of the Preferred Stock.
Notwithstanding anything to the contrary set forth herein, if the registration
statement is not effective by October 7, 1996, then, in addition to the holders'
other remedies:
a) the dividend rate under the Preferred Stock shall be increased to 24%
per annum (or, if less, the highest rate permitted by law) until the
registration statement is declared effective, and
b) at holders' option, the Preferred Stock shall not be redeemed by the
Company and shall remain convertible and accrue dividends, until such
date as is designated by Subscriber but not later than 180 days after
the effectiveness of the registration statement
2. The Preferred Stock shall be preferred as to assets over the Junior
Stock so that, in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of Preferred Stock shall
be entitled to have set apart for them or to be paid out of the assets of the
Company, before any distribution is made to or set apart for the holders of
Junior Stock, an amount in cash equal to, and in no event more than, $500 per
share or Preferred Stock,
1
<PAGE>
<PAGE>
plus all accrued and unpaid dividends thereon. If, upon such liquidation,
dissolution or winding-up of the Company, the assets of the Company available
for distribution to the holders of its stock be insufficient to permit the
distribution in full of the amounts receivable as aforesaid by the holders of
Preferred Stock, then all such assets of the Company shall be distributed
ratably among the holders of Preferred Stock in proportion to the amounts which
each would have been entitled to receive if such assets were sufficient to
permit distribution in full as aforesaid. Neither the consolidation nor merger
of the Company nor the sale, lease or transfer by the Company of all or any part
of its assets shall be deemed to be a liquidation, dissolution or winding-up of
the Company for the purposes of this paragraph.
3. The Company shall be obligated to redeem all of the Preferred Stock on
June 7, 1998 to the extent that the Preferred Stock has not theretofore been
converted under Section 4. The Preferred Stock shall automatically be deemed
converted under Section 4 on June 7, 1998 unless the registration statement
referred to below has not theretofore been declared effective, or unless the
Company's common stock is not then trading on NASDAQ. The redemption price shall
be payable in cash and shall be equal to $500 per share, plus all accrued and
unpaid dividends thereon. The registration statement means the registration
statement which the Company is required by separate agreement to file in respect
of the shares of common stock issuable on conversion of the Preferred Stock.
4. The holder shall have the right at any time prior to maturity, in its
sole discretion, to convert first then outstanding accrued dividends and then
the Preferred Stock, in whole or in part, into a number of shares (the
"Conversion Shares") of the Company's common stock (the "Common Stock") equal to
the amount of dividends and redemption value converted divided by the Conversion
Price. The Conversion Price means a price per share equal to $6.00 per share. In
the event that the holder elects to exercise its conversion rights hereunder, it
shall give to the Company written notice of such election and shall surrender
his Preferred Stock to the Company for cancellation. The Company shall at all
times reserve and keep available out of its authorized and unissued common
stock, solely for issuance upon the conversion of the Preferred Stock as herein
provided, such number number of shares of common stock as shall from time to
time be issuable upon the conversion of the Preferred Stock. The Preferred Stock
shall be convertible only to the extent that authorized but unissued shares of
Common Stock of the Company are available for such conversion.
In case the Company shall issue common stock as a dividend upon common
stock or in payment of a dividend thereon, shall subdivide the number of
outstanding shares of its common stock into a greater number of shares or shall
contract the number of outstanding shares of its common stock into a lesser
number of shares, the number of Conversion Shares to which the holder is
entitled to receive shall be adjusted, effective at the close of business on the
date such shares of common stock are to be issued, so that the Conversion Shares
shall be equal to the product obtained by multiplying the Conversion Shares in
effect immediately prior to the close of business on such date by a fraction,
the denominator of which shall be the number of shares of common stock
outstanding immediately prior to such dividend, subdivision, or contraction,
and the numerator of which shall be the number of shares of common stock
outstanding immediately after such dividend, subdivision or contraction. If
any capital reorganization or reclassification of the common stock, or
consolidation, or merger of the Company with or into another corporation, or
the sale or conveyance of all or substantially all of its assets to another
corporation shall
2
<PAGE>
<PAGE>
be effected, then, as a condition precedent of such reorganization or sale, the
following provision shall be made: The holder of the Preferred Stock shall from
and after the date of such reorganization or sale have the right to receive (in
lieu of the shares of common stock of the Company immediately theretofore
receivable with respect to such Preferred Stock, upon the exercise of conversion
rights), such shares of stock, securities or assets as would have been issued or
payable with respect in or in exchange for the number of outstanding shares of
such common stock immediately theretofore receivable with respect to such
Preferred Stock. In any such case, appropriate provision shall be made with
respect to the rights and interests of the holders to the end that such
conversion rights (including, without limitation, provisions for appropriated
adjustments) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise thereof.
5. The holders of the Preferred Stock shall have no voting rights except as
expressly provided by law.
6. The term "Junior Stock" shall mean the Common Stock and those series of
Preferred Stock which, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall designate the special rights
and limitations of each such class and series of stock and series of Preferred
Stock, shall be subordinate to the Preferred Stock in respect of the right of
the holders thereof to receive dividends or to participate in the assets of the
Company distributable to stockholders upon any liquidation, dissolution or
winding-up of the Company.
7. Subject to the immediately proceeding provisions of this Certificate of
Designation, the Board of Directors of the Company may amend the powers
preferences and relative, participating optional and other special rights of the
Preferred Stock as provided herein without vote of the shareholders.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed in its corporate name on this 10th day of September 1996.
ALL-COMM MEDIA CORPORATION
By /s/ E. William Savage
-----------------------------
Name: E. William Savage
Title: President and Secretary
State of California
County of Los Angeles
This instrument was acknowledged before me on September 10th, 1996 by E.
William Savage, as President and Secretary of ALL-COMM MEDIA CORPORATION.
[SEAL] /s/
-------------------------------------
Notary Public
My Commission expires 6/7/97
<PAGE>
<PAGE>
COMMERCIAL LEASE
This lease is made between Stephen Dunn, herein called Lessor, and Stephen
Dunn & Associates, Inc., herein called Lessee.
Lessee hereby offers to lease from Lessor the premises situated in the City
of Los Angeles, County of Los Angeles, State of California, described as 1728
Abbot Kinney Blvd., Venice, upon the following TERMS and CONDITIONS:
1. TERM AND RENT. Lessor demises the above premises for a term of (10) TEN
years, commencing Jan. 1st, 1989 and terminating on Jan 1st, 1999 or sooner as
provided herein at the annual rental of One Hundred Eighteen Thousand, Eight
Hundred Fifty Four Dollars ($118,854.-), payable in equal installments in
advance on the first day of each month for that month's rental, during the term
of this lease. All rental payments shall be made to Lessor, at the address
specified above.
2. USE. Lessee shall use and occupy the premises for office work. The premises
shall be used for no other purpose. Lessor represents that the premises may
lawfully be used for such purpose.
3. CARE AND MAINTENANCE OF PREMISES. Lessee acknowledges that the premises are
in good order and repair, unless otherwise indicated herein. Lessee shall, at
his own expense and at all times, maintain the premises in good and safe
condition, including plate glass, electrical wiring, plumbing and heating
installations and any other system or equipment upon the premises and shall
surrender the same, at termination hereof, in as good condition as received,
normal wear and tear excepted. Lessee shall be responsible for all repairs
required, excepting the roof, exterior walls, structural foundations, and:
, which shall be
maintained by Lessor. Lessee shall also maintain in good condition such portions
adjacent to the premises, such as sidewalks, driveways, lawns and shrubbery,
which would otherwise be required to be maintained by Lessor.
4. ALTERATIONS. Lessee shall not, without first obtaining the written consent of
Lessor, make any alterations, additions, or improvements, in, to or about the
premises.
5. ORDINANCES AND STATUTES. Lessee shall comply with all statutes, ordinances
and requirements of all municipal, state and federal authorities now in force,
or which may hereafter be in force, pertaining to the premises, occasioned by or
affecting the use thereof by Lessee.
6. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease or sublet any
portion of the premises without prior written consent of the Lessor, which shall
not be unreasonably withheld. Any such assignment or subletting without consent
shall be void and, at the option of the Lessor, may terminate this lease.
7. UTILITIES. All applications and connections for necessary utility services on
the demised premises shall be made in the name of Lessee only, and Lessee shall
be solely liable for utility charges as they become due, including those for
sewer, water, gas, electricity, and telephone services.
8. ENTRY AND INSPECTION. Lessee shall permit Lessor or Lessor's agents to enter
upon the premises at reasonable times and upon reasonable notice, for the
purpose of inspecting the same, and will permit Lessor at any time within sixty
(60) days prior to the expiration of this lease, to place upon the premises any
unusual 'To Let' or 'For Lease' signs, and permit persons desiring to lease the
same to inspect the premises thereafter.
9. POSSESSION. If Lessor is unable to deliver possession of the premises at the
commencement hereof, Lessor shall not be liable for any damage caused thereby,
nor shall this lease be void or voidable, but Lessee shall not be liable for any
rent until possession is delivered. Lessee may terminate this lease if
possession is not delivered within days of the commencement
of the term hereof.
10. INDEMNIFICATION OF LESSOR. Lessor shall not be liable for any damage or
injury to Lessee, or any other person, or to any property, occurring on the
demised premises or any part thereof, and Lessee agrees to hold Lessor harmless
from any claims for damages, no matter how caused.
11. INSURANCE. Lessee, at his expense, shall maintain plate glass and public
liability insurance including bodily injury and property damage insuring Lessee
and Lessor with minimum coverage as follows:
Lessee shall provide Lessor with a Certificate of Insurance showing Lessor
as additional insured. The Certificate shall provide for a ten-day written
notice to Lessor in the event of cancellation or material change of coverage. To
the maximum extent permitted by insurance policies which may be
owned by Lessor or Lessee, Lessee and Lessor, for the benefit of each other,
waive any and all rights of subrogation which might otherwise exist.
<PAGE>
<PAGE>
12. EMINENT DOMAIN. If the premises or any part thereof or any estate therein,
or any other part of the building materially affecting Lessee's use of the
premises, shall be taken by eminent domain, this lease shall terminate on the
date when title vests pursuant to such taking. The rent, and any additional
rent, shall be apportioned as of the termination date, and any rent paid for any
period beyond that date shall be repaid to Lessee. Lessee shall not be entitled
to any part of the award for such taking or any payment in lieu thereof, but
Lessee may file a claim for any taking of fixtures and improvements owned by
Lessee, and for moving expenses.
13. DESTRUCTION OF PREMISES. In the event of a partial destruction of the
premises during the term hereof, from any cause, Lessor shall forthwith repair
the same, provided that such repairs can be made within sixty (60) days under
existing governmental laws and regulations, but such partial destruction shall
not terminate this lease, except that Lessee shall be entitled to a
proportionate reduction of rent while such repairs are being made, based upon
the extent to which the making of such repairs shall interfere with the business
of Lessee on the premises. If such repairs cannot be made within said sixty (60)
days, Lessor, at his option, may make the same within a reasonable time, this
lease continuing in effect with the rent proportionately abated as aforesaid,
and in the event that Lessor shall not elect to make such repairs which cannot
be made within (60) days, this lease may be terminated at the option of either
party. In the event that the building in which the demised premises may be
situated is destroyed to an extent of not less than one-third of the replacement
costs thereof, Lessor may elect to terminate this lease whether the demised
premises be injured or not. A total destruction of the building in which the
premises may be situated shall terminate this lease.
14. LESSOR'S REMEDIES ON DEFAULT. If Lessee defaults in the payment of rent, or
any additional rent, or defaults in the performance of any of the other
covenants or conditions hereof, Lessor may give Lessee notice of such default
and if Lessee does not cure any such default within days, after the giving of
such notice (or if such default is of such nature that it cannot be completely
cured within such period, if Lessee does not commence such curing within such
days and thereafter proceed with reasonable diligence an in good faith to
cure such default), then Lessor may terminate this lease on not less than
days' notice to Lessee. On the date specified in such notice the term of this
lease shall terminate, and Lessee shall then quit and surrender the premises to
Lessor, but Lessee shall remain liable as hereinafter provided. If this lease
shall have been so terminated by Lessor, Lessor may at any time thereafter
resume possession of the premises by any lawful means and remove Lessee or other
occupants and their effects. No failure to enforce any term shall be deemed a
waiver.
15. SECURITY DEPOSIT. Lessee shall deposit with Lessor on the signing of this
lease the sum of Fifteen Thousand Three Hundred Ninety Nine Dollars ($15,399.00)
as security for the performance of Lessee's obligations under this lease,
including without limitation the surrender of possession of the premises to
Lessor as herein provided. If Lessor applies any part of the deposit to cure any
default of Lessee, Lessee shall on demand deposit with Lessor the amount so
applied so that Lessor shall have the full deposit on hand at all times during
the term of this lease.
16. TAX INCREASE. In the event there is any increase during any year of the term
of this lease in the City, County or State real estate taxes over and above the
amount of such taxes assessed for the tax year during which the term of this
lease commences, whether because of increased rate or valuation, Lessee shall
pay to Lessor upon presentation of paid tax bills an amount equal to % of
the increase in taxes upon the land and building in which the leased premises
are situated. In the event that such taxes are assessed for a tax year extending
beyond the term of the lease, the obligation of Lessee shall be proportionate to
the portion of the lease term included in such year.
17. COMMON AREA EXPENSES. In the event the demised premises are situated in a
shopping center or in a commercial building in which there are common areas,
Lessee agrees to pay his pro-rata share of maintenance, taxes, and insurance for
the common area.
18. ATTORNEY'S FEES. In case suit should be brought for recovery of the
premises, or for any sum due hereunder, or because of any act which may arise
out of the possession of the premises, by either party, the prevailing party
shall be entitled to all costs incurred in connection with such action,
including a reasonable attorney's fee.
19. NOTICES. Any notice which either party may or is required to give, shall be
given by mailing the same, postage prepaid, to Lessee at the premises, or Lessor
at the address shown below, or at such other places as may be designated by the
parties from time to time.
20. HEIRS, ASSIGNS, SUCCESSORS. This lease is binding upon and inures to the
benefit of the heirs, assigns and successors in interest to the parties.
21. OPTION TO RENEW. Provided that Lessee is not in default in the performance
of this lease, Lessee shall have the option to renew the lease for an additional
term of months commencing at the expiration of the initial lease term.
All of the terms and conditions of the lease shall apply during the renewal term
except that the monthly rent shall be the sum of $ . The option
shall be exercised by written notice given to Lessor not less than days
prior to the expiration of the initial lease term. If notice is not given in the
manner provided herein within the time specified, this option shall expire.
22. SUBORDINATION. This lease is and shall be subordinated to all existing and
future liens and encumbrances against the property.
23. ENTIRE AGREEMENT. The foregoing constitutes the entire agreement between the
parties and may be modified only by a writing signed by both parties. The
following Exhibits, if any, have been made a part of this lease before the
parties' execution hereof:
Signed this 1st day of Jan, 1989.
<TABLE>
<S> <C>
By__________________________________ By________________________________________
Lessee Lessor
</TABLE>
<PAGE>
<PAGE>
ADDENDUM
This addendum, dated February 1, 1994, modifies the Commercial Lease made and
entered into on January 1, 1989, between Stephen Dunn (Lessor), and Stephen Dunn
& Associates, Inc. (Lessee).
As of February 1, 1994, Stephen Dunn & Associates, Inc. will lease additional
office space (Suite 101) at 1728 Abbot Kinney Boulevard, Venice. Therefore, the
annual rent will increase to $141,654.00.
All other terms and conditions of the original Commercial Lease referred to
herein shall remain in full force and effect.
<TABLE>
<S> <C>
STEPHEN DUNN STEPHEN DUNN & ASSOCIATES
By: By: _____________________________________
__________________________________
</TABLE>
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE (the "Warrant Certificate") certifies that for
value received, , having an address at
(the "Holder") is the owner of this warrant
(the "Warrant"), which entitles the Holder thereof to purchase at any time on or
before the Expiration Date (as defined below) shares (the "Warrant
Shares") of fully paid non-assessable shares of the common stock, par value $.01
per share, (the "Common Stock"), of ALL-COMM MEDIA CORPORATION, a Nevada
corporation (the "Company"), at a purchase price of $________ per Warrant Share,
in lawful money of the United States of America by bank or certified check,
subject to adjustment as hereinafter provided.
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET
FORTH IN THIS CERTIFICATE. THIS WARRANT MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE
EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.
1. WARRANT; PURCHASE PRICE.
This Warrant shall entitle the Holder thereof to purchase
shares of Common Stock. The purchase price payable upon exercise of the Warrant
(the "Purchase Price") shall be $_______ per share. The Purchase Price and the
number of Warrant Shares evidenced by this Warrant Certificate are subject to
adjustment as provided in Article 6.
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<PAGE>
2. EXERCISE; EXPIRATION DATE.
(a) This Warrant is exercisable, at the option of the Holder, at any
time after date of issuance and on or before the Expiration Date (as defined
below) by delivering to the Company written notice of exercise (the "Exercise
Notice"), stating the number of Warrant Shares to be purchased thereby,
accompanied by bank or certified check payable to the order of the Company for
the Warrant Shares being purchased. Within twenty (20) business days of the
Company's receipt of the Exercise Notice accompanied by the consideration for
the Warrant Shares being purchased, the Company shall issue and deliver to the
Holder a certificate representing the Warrant Shares being purchased. In the
case of exercise for less than all of the Warrant Shares represented by this
Warrant Certificate, the Company shall cancel this Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate for
the balance of such Warrant Shares.
(b) Expiration. The term "Expiration Date" shall mean 5:00 p.m.,
California time, on or, if such date shall in the State of
California be a holiday or a day on which banks are authorized to close, then
5:00 p.m., California time, the next following day which in the State of
California is not a holiday or a day on which banks are authorized to close.
3. RESTRICTIONS ON TRANSFER.
(a) Restrictions. This Warrant, and the Warrant Shares or any other
security issuable upon exercise of this Warrant may not be assigned,
transferred, sold, or otherwise disposed of unless (i) there is in effect a
registration statement under the Act covering such sale, transfer, or other
disposition or (ii) the Holder furnishes to the Company an opinion of counsel,
reasonably acceptable to counsel for the Company, to the effect that the
proposed sale, transfer, or other disposition may be effected without
registration under the Act, as well as such other documentation incident to such
sale, transfer, or other disposition as the Company's counsel shall reasonably
request.
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<PAGE>
(b) Legend. Any Warrant Shares issued upon the exercise of this Warrant
shall bear the following legend:
"The shares evidenced by this certificate were issued upon
exercise of a Warrant and may not be sold, transferred, or
otherwise disposed of in the absence of an effective registration
under the Securities Act of 1933 (the "Act") or an opinion of
counsel, reasonably acceptable to counsel for the Company, to the
effect that the proposed sale, transfer, or disposition may be
effectuated without registration under the Act."
4. RESERVATION OF SHARES.
The Company covenants that it will at all time reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of this Warrant, such number of shares of Common Stock as shall
then be issuable upon the exercise of this Warrant. The Company covenants that
all shares of Common Stock which shall be issuable upon exercise of this Warrant
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens, and charges with respect to the issue thereof.
5. LOSS OR MUTILATION.
Upon receipt by the Company of reasonable evidence of the loss, theft,
destruction, or mutilation of this Warrant Certificate and, in the case of loss,
theft, or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Warrant Certificate, the Company shall execute and deliver in lieu thereof, a
new Warrant Certificate representing an equal number of Warrant Shares
exercisable thereunder.
6. ANTI-DILUTION PROVISIONS.
(a) The number of shares of Common Stock and the Purchase Price per
Warrant Share pursuant to this Warrant shall be subject to adjustment from time
to time as provided for in this Section 6(a). Notwithstanding any provision
contained herein, the aggregate Purchase Price for the total number of Warrant
Shares issuable pursuant to this Warrant shall remain unchanged. In case the
Company shall at
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<PAGE>
any time change as a whole, by subdivision or combination in any manner or by
the making of a stock dividend, the number of outstanding shares of Common Stock
into a different number of shares, (i) the number of shares which the Holder of
this Warrant shall have been entitled to purchase pursuant to this Warrant shall
be increased or decreased in direct proportion to such increase or decrease of
shares, as the case may be, and (ii) the Purchase Price per Warrant Share (but
not the aggregate Purchase Price) in effect immediately prior to such change
shall be increased or decreased in inverse proportion to such increase or
decrease of shares, as the case may be.
(b) In case of any capital reorganization or any reclassification of the
capital stock of the Company or in case of the consolidation or merger of the
Company with another corporation (or in the case of any sale, transfer, or other
disposition to another corporation of all or substantially all the property,
assets, business, and goodwill of the Company), the Holder of this Warrant shall
thereafter be entitled to purchase the kind and amount of shares of capital
stock which this Warrant entitled the Holder to purchase immediately prior to
such capital reorganization, reclassification of capital stock, consolidation,
merger, sale, transfer, or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Section 6
with respect to rights and interests thereafter of the Holder of this Warrant to
the end that the provisions of this Section 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of this Warrant.
(c) Fractional Shares - No certificate for fractional shares shall be
issued upon the exercise of this Warrant, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
(d) Rights of the Holder. The Holder of this Warrant shall not be
entitled to any rights of a shareholder of the Company in respect of any Warrant
Shares purchasable upon the exercise hereof until such Warrant Shares have been
paid for in full and issued to it. As soon as practicable after such exercise,
the Company shall deliver a certificate or certificates for the number of full
shares of Common Stock
<PAGE>
<PAGE>
issuable upon such exercise, to the person or persons entitled to receive the
same.
7. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Warrant, represents and warrants to,
and covenants and agrees with, the Company as follows;
(i) The Warrant is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
(ii) The Holder is aware that the Warrant is not registered under the
Act or any state securities or blue sky laws and, as a result, substantial
restrictions exist with respect to the transferability of the Warrant and the
Warrant Shares to be acquired upon exercise of the Warrant.
(iii) The Holder is an accredited investor, as defined in Rule 501(a)
of Regulation D under the Act and is a sophisticated investor familiar with the
type of risks inherent in the acquisition of securities such as the Warrant, and
its financial position is such that it can afford to retain the Warrant and the
Warrant Shares for an indefinite period of time without realizing any direct or
indirect cash return on this investment.
8. FURNISH INFORMATION.
The Company agrees that, upon receipt of written request, it shall
promptly deliver to the Holder copies of all financial statements, reports and
proxy statements which the Company is required to send to its shareholders
generally.
9. MISCELLANEOUS.
(a) Transfer Taxes; Expenses. The Holder shall pay any and all
underwriters' discounts, brokerage fees, and transfer taxes incident to the sale
or exercise of this Warrant or the sale of the underlying shares issuable
thereunder, and shall pay the fees and expenses of any special attorneys or
accountants retained by it.
<PAGE>
<PAGE>
(b) Notice. Any notice or other communication required or permitted to
be given to the Company shall be in writing and shall be delivered by certified
mail with return receipt or delivered in person against receipt, as follows:
ALL-COMM MEDIA CORPORATION
400 Corporate Pointe, Suite 780
Culver City, California 90230
(c) Governing Law. This Warrant Certificate shall be governed by, and
construed in accordance with, the laws of the State of Nevada, without reference
to the conflicts of laws.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the date set forth below.
ALL-COMM MEDIA CORPORATION
By: _______________________________
Name:
Title:
Attest: ___________________________
Name:
Title:
[SEAL]
Date:
<PAGE>
<PAGE>
FORM OF EXERCISE OF WARRANT
The undersigned hereby elects to exercise this Warrant as to ________
Common Shares covered thereby. Enclosed herewith is a bank or certified check in
the amount of $_______.
Date:__________________________ _______________________________
Name:
Address:
Signature
Guarantor:_____________________
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
1st day of July, 1996 but shall be deemed to have become effective on July 1,
1995 by and between All-Comm Media Corporation, a Nevada corporation (the
"Company"), and Barry Peters (Employee").
A. The Company is a holding company engaged in the business of
acquiring and operating direct marketing and media service companies.
B. The Company agreed, on May 30, 1996, to enter into certain equity
financing arrangements with Broad Capital Associates, Inc. and its affiliates,
which financing was conditional upon Employee accepting the terms of this
Agreement.
C. The Company desires to retain Employee as the President of the
Company, and Employee desires to accept such employment on the terms and
conditions set forth herein.
NOW, THEREFORE, based upon the following covenants, conditions and
promises the parties hereto do hereby agree as follows:
1. Employment and Duties. Subject to the terms and conditions set forth
herein, the Company hereby employs Employee, and Employee hereby accepts such
employment with the Company, as the Chairman and Chief Executive Officer of the
Company, and Employee's duties shall be consistent with such position.
2. Term of Employment. The term of Employee's employment with the
Company commenced prior to July 1, 1995 but shall, under this Agreement, be
deemed to have begun on July 1, 1995 and shall continue from that date for a
period of three (3) years, plus, at Employee's sole election, one additional
consecutive period of three (3) years, and, in any event, subject to early
termination as provided for elsewhere in this Agreement. The "term" of this
Agreement shall mean and refer to such three (3) year period plus, if Employee
so elects, such consecutive additional three (3) year period (or any earlier
termination thereof pursuant to the terms hereof). If Employee shall elect, in
its sole discretion, to extend the term of this Agreement by such consecutive
additional three (3) year period, then Employee shall do so, if at all, by
written notice given to the Company on or before the date occurring 90 days
prior to the date on which the term would otherwise expire.
3. Extent of Service. During the term hereof, Employee agrees to
devote, during regular business hours, Employee's full time to the performance
of Employee's duties hereunder, it being the intent of the parties hereto that
Employee shall devote Employee's best efforts to furthering, promoting and
developing the business and activities of the Company.
4. Compensation.
(a) As compensation for the services which Employee is to
render to the Company hereunder, the Company shall pay Employee the following
aggregate annual salary for and with respect to each year (annual periods ending
with the anniversary date of the date of this Agreement) during the term hereof:
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<PAGE>
Year Salary
---- ------
1 $137,500
2 $195,000; and
3 $270,500;
or such amounts as otherwise may be deemed acceptable by Employee.
If Employee elects to extend the term of this Agreement as provided in Paragraph
2, then the annual salary during each year of such extension period shall be
negotiated in good faith between the Board of Directors and Employee, but shall
not be less than $300,000 for the initial year of such extension period.
At the end of each year during the term hereof, or at any other time as may be
deemed appropriate by the Board of Directors of the Company, the Board of
Directors of the Company may review the compensation of Employee hereunder and
if it, in its sole discretion, believes it to be justified, may pay to Employee
a cash bonus plus a grant of common stock for and with respect to such year and
upon such terms as the Board of Directors of the Company may determine. In
addition, and subject to the prior written concurrence of Employee in Employee's
sole discretion, the Board of Directors, in its sole discretion, may elect to
cause some or all of any such cash bonus to be paid instead in stock of the
Company, whether registered or unregistered and otherwise valued at such price
per share as shall be agreed upon at such time by Employee and the Board of
Directors.
(b) The Board of Directors of the Company shall grant to
Employee, from time to time, each year so many options to purchase so many
shares of common stock of the Company and at such price or prices as the Board
of Directors may determine, from time to time, to be appropriate. In addition,
subject to and in accordance with the terms and conditions of the Company's
option plan, as it exists as of the date hereof and as it may be amended from
time to time hereafter and subject to the Company having a sufficient number of
authorized shares to effect the issuance of the underlying optioned shares at
the time of vesting of the options, the Company hereby grants to Employee two
tranches of options: an initial 150,000 options and, second, an additional
150,000 options, each option being for the purchase of 1 share of the Company's
common stock. The exercise price of each tranche of the options shall be the
same as the exercise price of each tranche of the common stock purchase warrants
issued to Broad Capital Associates, Inc. and/or its affiliates or clients as a
result of the financing agreement reached on the price measurement date of May
30, 1996. Therefore, the exercise price of the options, with respect to each of
the first 150,000 options, shall be $2.50 per share and the exercise price of
each of the additional 150,000 options shall be $3.00 per share. All of such
options shall be immediately vested and shall expire, if and to the extent not
previously exercised, on July 1, 2001. Employee shall be entitled to exercise
all or any portion of such options, from time to time and in such order, as
Employee may deem appropriate.
(c) The Company will provide Employee with such other fringe
benefits and compensation programs, as are within the Company's policy as
approved by the Board of Directors of the Company. Without limiting the
generality of the immediately preceding sentence, the Company will provide
Employee with 4 weeks of paid vacation per year plus the use of an automobile
and shall reimburse Employee for the insurance, maintenance and repair costs of
such automobile, promptly after presentation to the Company of receipts or other
documents evidencing the incurrence of such expenses. Additionally, the Company
shall reimburse Employee for expenses reasonably incurred by Employee in
carrying out Employee's duties hereunder, including travel,
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<PAGE>
lodging and reasonable entertainment expenses, promptly after presentation to
the Company of receipts or other documents evidencing the incurrence of such
expenses.
5. Termination of Employment for Good Cause. The Company may terminate
the employment of Employee for "good cause" by giving written notice thereof to
Employee. For the purposes of this Agreement, "good cause" shall mean only
Employee's (i) drug, alcohol or other substance abuse during regular business
hours or to such extent as to materially affect the performance of Employee's
duties hereunder, (ii) commission of a crime directly related to Employee's
employment hereunder, (iii) conviction of a felony involving moral turpitude,
(iv) negligence, gross mismanagement or willful misconduct in the management of
the business and affairs of the Company or failure to perform such duties as may
reasonably be directed by the Board of Directors and as may be reasonably
consistent with the duties and obligations of Employee's office, or (v) breach
of any material provision of this Agreement. In the event the employment of the
Employee is terminated pursuant to this Paragraph 5, the Company shall have no
further liability to Employee other than for compensation earned but not yet
paid. In the event the Company contends that it had good cause to terminate the
employment of Employee pursuant to clause (i), (ii) or (iii) of this Paragraph
5, the Company shall specify in said written notice the effective date of
termination of Employee's employment, which date may, in the Company's sole
discretion, be the date of such notice. In the event the Company contends that
it has good cause to terminate the employment of Employee pursuant to clause
(iv) or (v) of this Paragraph 5, the Company shall set forth in said written
notice reasonable details of Employee's acts or conduct which the Company
alleges constitutes a willful and gross mismanagement of business and affairs of
the Company or a breach of material provision of this Agreement, as the case may
be. The written notice shall also specify what, if anything, Employee could do
to cure or eliminate the alleged "good cause" for termination if the matter is
susceptible of cure. If Employee performs the required services or modifies
Employee's performance to correct the matters complained of within sixty (60)
days of receipt of the notice, Employee's breach will be deemed cured. However,
if the nature of the matters complained of are such that more than sixty (60)
days are reasonably required to correct the matters complained of, then
Employee's breach will be deemed cured if Employee commences to correct such
matters within the sixty (60) day period and thereafter diligently prosecutes
such correction to completion, but not to exceed one additional sixty (60) day
period. If Employee does not modify Employee's performance to correct or
commence to correct the matter complained of within the sixty (60) day period of
the extension thereof, the Company shall have the right to terminate this
Agreement at the end of such (60) day period or any extension thereof. It is
understood that Employee's performance hereunder shall not be deemed
unsatisfactory solely on the basis of any economic performance of the Company
because such performance will depend in part on a variety of factors over which
Employee has little control.
6. Termination of Employment by Death or Incapacity. The Company may
terminate the employment of Employee by written notice to Employee if, during
the term of this Agreement, Employee shall become incapable of fulfilling
Employee's obligations hereunder because of injury or physical or mental illness
which shall exist or may reasonably be anticipated to exist for a period of one
hundred fifty (150) consecutive days or for an aggregate of one hundred fifty
(150) days during the term hereof. Notwithstanding the foregoing, however, the
Company shall never be obligated to pay Employee for more than ninety (90) days,
in the aggregate, during the term during which Employee shall become incapable
of fulfilling Employee's obligations hereunder because of injury or physical
illness.The death of Employee shall automatically terminate the term of
Employee's employment. In the event the employment of Employee is terminated by
Employee's death or by the Company pursuant to this Paragraph 6 because of
injury or physical or mental illness, the Company shall pay Employee, or
Employee's heir(s) (in the event of death), all compensation of Employee
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earned but not yet paid up to and through the day upon which Employee's death
occurs or this Agreement is terminated by the Company due to Employee's
incapacity, as applicable, plus an amount equal to the greater of (i) such base
salary, less all lawfully required deductions and withholdings, as Employee
would have earned had Employee been employed for the balance of the term and
(ii) one year's base salary, at Employee's then current annual rate, again less
all lawfully required deductions and withholdings. Any amount paid pursuant to,
as applicable, the foregoing clauses (i) or (ii) shall be paid, from time to
time, in accordance with the Company's normal payroll practices.
7. Termination of Employment Without Good Cause or for Good Reason. If
the Company shall terminate the employment of Employee, other than for "good
cause" pursuant to Paragraph 5, for death or for disability pursuant to
Paragraph 6, or if Employee shall elect to resign from the employ of the Company
for "good reason" (as defined below), then Employee shall be entitled to
receive, in addition to any other amounts due Employee, from time to time, under
this Agreement, additional severance pay in an amount equal to (i) one year's
base salary, at the rate in effect on the date of termination or resignation, as
applicable, payable in accordance with the normal payroll practices of the
Company for the remainder of the term plus (ii) an amount equal to the amount
described in the immediately preceding clause (i), but payable on the effective
date of such termination or resignation, as applicable. Any payment required to
be made, from time to time, pursuant to either of the foregoing clauses (i) or
(ii) shall be net of all lawfully required deductions and withholdings. "Good
reason" shall mean a "change in control" of the Company, a removal of Employee
from his current position with the Company without his consent and without good
cause, or a material change in Employee's duties, responsibilities or status,
again without his consent and without good cause. A "change in control" of the
Company shall be deemed to occur if (a) there is a consolidation or merger of
the Company where the Company is not the surviving corporation and the
shareholders prior to such transaction do not continue to own at least 80% of
the common stock of the surviving corporation, (b) there is a sale of all or
substantially all of the assets of the Company, (c) the stockholders approve a
plan for the liquidation or dissolution of the Company, (d) any person becomes
the beneficial owner, directly or indirectly, of 30% or more of the Company's
outstanding common stock or (e) Employee shall cease to be a director of the
Company for any reason, other than Employee's voluntary resignation or voluntary
election not to stand for re-election as director of the Company.
8. Noncompetition; Nonsolicitation; Confidential Information.
(a) Except for any common stock of the Company, Employee
covenants and agrees that, during the term of this Agreement, Employee will not,
directly or indirectly, whether individually or as an officer, director,
employee or consultant, become employed by, or become a partner in or a
stockholder owning more than one percent (1%) of, any business which is engaged
in the business of providing direct marketing services or any other business
which is similar to or competitive with the business now or at any time during
the term of this Agreement being conducted by the Company.
(b) Employee acknowledges that it is the policy of the Company
(for purposes of this Paragraph 8, the term Company shall also refer to any
subsidiary, parent or other affiliate of the Company) to maintain as secret and
confidential all valuable and unique information heretofore or hereafter
acquired, developed or used by the Company relating to the business, operations,
employees, and/or clients of the Company which gives the Company a competitive
advantage in its industry, including, without limitation, information about net
costs, profits, markets, suppliers, sales products, key personnel, pricing
policies, operational methods, technical processes and other
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business affairs and methods and other information not readily available
to the public and plans for future developments, operating manuals, computer
software for any marketing tracking system of the Company, financial statements,
forecasts and operating data and business plans (all such information is
hereinafter referred to as "Confidential Information"). Employee recognizes that
the services to be performed by Employee are special and unique, and that by
reason of Employee's duties, Employee will acquire Confidential Information.
Employee recognizes that all such Confidential Information is the property of
the Company. In consideration of the Company's entering into this Agreement,
Employee agrees that: (i) Employee shall never, directly or indirectly, use,
publish, disseminate or otherwise disclose any Confidential Information
obtained during Employee's employment by the Company (whether obtained prior
to, during or after the term of this Agreement) without the prior written
consent of the Company's Board of Directors; and (ii) during the term of this
Agreement, Employee shall exercise all due and diligent precautions to protect
the integrity of the Company's mailing lists and sources thereof, statistical
data and compilations, agreements, contracts, manuals or other documents
embodying any Confidential Information. Upon termination of Employee's
employment by the Company and at any other time upon request of the Company,
Employee shall return all such documents (and copies thereof) embodying any
Confidential Information in Employee's possession or control. Employee agrees
that the provisions of this subparagraph (b) are reasonable and necessary to
protect the proprietary rights of the Company in the Confidential Information
and its trade secrets, goodwill and reputation. The provisions of this
subparagraph (b) shall not apply to Confidential Information (i) which is known
generally to the public, (ii) which otherwise comes into the public domain
without the fault of Employee, or (iii) which Employee obtains from sources
other than the Company (provided that such exception shall not be applicable to
Confidential Information disclosed to Employee in Employee's position as an
officer and employee of the Company).
9. Life Insurance. If requested by the Company, Employee shall submit
to such physical examinations and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company, at
its expense and for its own benefit, to obtain life insurance on the life of
Employee. Employee has no reason to believe that his life is not insurable with
a reputable insurance company at rates now prevailing in the City of Los Angeles
for healthy men of his age.
10. Employee's Rights, Benefits, and Obligations. The rights, benefits
and obligations of Employee under this Agreement are personal to Employee, and
no such rights, benefits or obligations shall be subject to voluntary or
involuntary alienation, assignment or transfer.
11. Entire Agreement; Modification; Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior written or oral agreements,
representations, understandings and/or discussion between the parties relating
thereto. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the party making the waiver.
12. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or three (3) business days after deposit in the United States mail, by
registered or certified mail (or air mail, if notice shall be sent outside the
United States), postage prepaid, return receipt requested or two (2) days after
delivery to a nationally known air courier or delivery company, addressed to the
applicable party hereto at the address specified below (or as otherwise directed
in a notice given in accordance herewith):
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<PAGE>
<PAGE>
If to Company, to: All-Comm Media Corporation
400 Corporate Pointe
Suite 780
Culver City, California 90230
If to Employee, to: Barry Peters
680 Harbor Street
Unit #6
Venice, California 90291
13. Effect of Headings. The subject headings of this Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
14. Attorneys' Fees. If any action or proceeding is brought to enforce
any provisions of this Agreement, the prevailing party shall be entitled to its
costs and expenses in connection therewith, including, without limitation,
reasonable attorneys' fees.
15. Applicable Law. The validity, interpretation and enforcement of
this Agreement shall be governed by the laws of the State of California.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same Agreement.
17. Severability. If any provision of this Agreement shall be declared
invalid, illegal and/or unenforceable, such provision shall be severed and the
remaining provisions shall continue in full force and effect.
18. Successor and Assigns. The provisions hereof shall inure to the
benefit of, be binding upon, and be enforceable by the successors and assigns of
the Company.
19. Further Assurances. The Company and Employee each agree to execute
and deliver any and all additional instruments and to perform any and all
additional acts deemed by either party to be necessary or proper to carry into
effect the terms, conditions and provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
EMPLOYEE:
THE COMPANY:
All-Comm Media Corporation,
a Nevada corporation
_______________________________
Barry Peters By:________________________________
______
Its:_______________________________
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<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of the 1st day of July,
1996 but shall be deemed to have become effective on July 1, 1995 by and between
All-Comm Media Corporation, a Nevada corporation (the "Company"), and William
Savage ("Employee").
A. The Company is a holding company engaged in the business of
acquiring and operating direct marketing and media service companies.
B. The Company agreed, on May 30, 1996, to enter into certain equity
financing arrangements with Broad Capital Associates, Inc. and its affiliates,
which financing was conditional upon Employee accepting the terms of this
Agreement.
C. The Company desires to retain Employee as the President of the
Company, and Employee desires to accept such employment on the terms and
conditions set forth herein.
NOW, THEREFORE, based upon the following covenants, conditions and
promises the parties hereto do hereby agree as follows:
1. Employment and Duties. Subject to the terms and conditions set forth
herein, the Company hereby employs Employee, and Employee hereby accepts such
employment with the Company, as the President of the Company, and Employee's
duties shall be consistent with such position.
2. Term of Employment. The term of Employee's employment with the
Company commenced prior to July 1, 1995 but shall, under this Agreement, be
deemed to have begun on July 1, 1995 and shall continue from that date for a
period of three (3) years, plus, at Employee's sole election, one additional
consecutive period of three (3) years, and, in any event, subject to early
termination as provided for elsewhere in this Agreement. The "term" of this
Agreement shall mean and refer to such three (3) year period, plus, if Employee
so elects, such consecutive additional three (3) year period (or any earlier
termination thereof pursuant to the terms hereof). If Employee shall elect, in
its sole discretion, to extend the term of this Agreement by such consecutive
additional three (3) year period, then Employee shall do so, if at all, by
written notice given to the Company on or before the date occurring 90 days
prior to the date on which the term would otherwise expire.
3. Extent of Service. During the term hereof, Employee agrees to
devote, during regular business hours, Employee's full time to the performance
of Employee's duties hereunder, it being the intent of the parties hereto that
Employee shall devote Employee's best efforts to furthering, promoting and
developing the business and activities of the Company.
4. Compensation.
(a) As compensation for the services which Employee is to
render to the Company hereunder, the Company shall pay Employee the following
aggregate annual salary for and with respect to each year (annual periods ending
with the anniversary date of the date of this Agreement) during the term hereof:
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<PAGE>
Year Salary
---- ------
1 $125,000;
2 $175,000; and
3 $245,000;
or such amounts as otherwise may be deemed acceptable by Employee.
If Employee elects to extend the term of this Agreement as provided in Paragraph
2, then the annual salary during each year of such extension period shall be
negotiated in good faith between the Board of Directors and Employee, but shall
not be less than $300,000 for the initial year of such extension period.
At the end of each year during the term hereof, or at any other time as may be
deemed appropriate by the Board of Directors of the Company, the Board of
Directors of the Company may review the compensation of Employee hereunder and
if it, in its sole discretion, believes it to be justified, may pay to Employee
a cash bonus plus a grant of common stock for and with respect to such year and
upon such terms as the Board of Directors of the Company may determine. In
addition, and subject to the prior written concurrence of Employee in Employee's
sole discretion, the Board of Directors, in its sole discretion, may elect to
cause some or all of any such cash bonus to be paid instead in stock of the
Company, whether registered or unregistered and otherwise valued at such price
per share as shall be agreed upon at such time by Employee and the Board of
Directors.
(b) The Board of Directors of the Company shall grant to
Employee, from time to time, each year so many options to purchase so many
shares of common stock of the Company and at such price or prices as the Board
of Directors may determine, from time to time, to be appropriate. In addition,
subject to and in accordance with the terms and conditions of the Company's
option plan, as it exists as of the date hereof and as it may be amended from
time to time hereafter and subject to the Company having a sufficient number of
authorized shares to effect the issuance of the underlying optioned shares at
the time of vesting of the options, the Company hereby grants to Employee two
tranches of options: an initial 150,000 options and, second, an additional
150,000 options, each option being for the purchase of 1 share of the Company's
common stock. The exercise price of each tranche of the options shall be the
same as the exercise price of each tranche of the common stock purchase warrants
issued to Broad Capital Associates, Inc. and/or its affiliates or clients as a
result of the financing agreement reached on the price measurement date of May
30, 1996. Therefore, the exercise price of the options, with respect to each of
the first 150,000 options, shall be $2.50 per share and the exercise price of
each of the additional 150,000 options shall be $3.00 per share. All of such
options shall be immediately vested and shall expire, if and to the extent not
previously exercised, on July 1, 2001. Employee shall be entitled to exercise
all or any portion of such options, from time to time and in such order, as
Employee may deem appropriate.
(c) The Company will provide Employee with such other fringe
benefits and compensation programs, as are within the Company's policy as
approved by the Board of Directors of the Company. Without limiting the
generality of the immediately preceding sentence, the Company will provide
Employee with 4 weeks of paid vacation per year plus the use of an automobile
and shall reimburse Employee for the insurance, maintenance and repair costs of
such automobile, promptly after presentation to the Company of receipts or other
documents evidencing the incurrence of such expenses. Additionally, the Company
shall reimburse Employee for expenses reasonably incurred by Employee in
carrying out Employee's duties hereunder, including travel,
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<PAGE>
lodging and reasonable entertainment expenses, promptly after presentation to
the Company of receipts or other documents evidencing the incurrence of such
expenses.
5. Termination of Employment for Good Cause. The Company may terminate
the employment of Employee for "good cause" by giving written notice thereof to
Employee. For the purposes of this Agreement, "good cause" shall mean only
Employee's (i) drug, alcohol or other substance abuse during regular business
hours or to such extent as to materially affect the performance of Employee's
duties hereunder, (ii) commission of a crime directly related to Employee's
employment hereunder, (iii) conviction of a felony involving moral turpitude,
(iv) negligence, gross mismanagement or willful misconduct in the management of
the business and affairs of the Company or failure to perform such duties as may
reasonably be directed by the Board of Directors and as may be reasonably
consistent with the duties and obligations of Employee's office, or (v) breach
of any material provision of this Agreement. In the event the employment of the
Employee is terminated pursuant to this Paragraph 5, the Company shall have no
further liability to Employee other than for compensation earned but not yet
paid. In the event the Company contends that it had good cause to terminate the
employment of Employee pursuant to clause (i), (ii) or (iii) of this Paragraph
5, the Company shall specify in said written notice the effective date of
termination of Employee's employment, which date may, in the Company's sole
discretion, be the date of such notice. In the event the Company contends that
it has good cause to terminate the employment of Employee pursuant to clause
(iv) or (v) of this Paragraph 5, the Company shall set forth in said written
notice reasonable details of Employee's acts or conduct which the Company
alleges constitutes a willful and gross mismanagement of business and affairs of
the Company or a breach of material provision of this Agreement, as the case may
be. The written notice shall also specify what, if anything, Employee could do
to cure or eliminate the alleged "good cause" for termination if the matter is
susceptible of cure. If Employee performs the required services or modifies
Employee's performance to correct the matters complained of within sixty (60)
days of receipt of the notice, Employee's breach will be deemed cured. However,
if the nature of the matters complained of are such that more than sixty (60)
days are reasonably required to correct the matters complained of, then
Employee's breach will be deemed cured if Employee commences to correct such
matters within the sixty (60) day period and thereafter diligently prosecutes
such correction to completion, but not to exceed one additional sixty (60) day
period. If Employee does not modify Employee's performance to correct or
commence to correct the matter complained of within the sixty (60) day period of
the extension thereof, the Company shall have the right to terminate this
Agreement at the end of such (60) day period or any extension thereof. It is
understood that Employee's performance hereunder shall not be deemed
unsatisfactory solely on the basis of any economic performance of the Company
because such performance will depend in part on a variety of factors over which
Employee has little control.
6. Termination of Employment by Death or Incapacity. The Company may
terminate the employment of Employee by written notice to Employee if, during
the term of this Agreement, Employee shall become incapable of fulfilling
Employee's obligations hereunder because of injury or physical or mental illness
which shall exist or may reasonably be anticipated to exist for a period of one
hundred fifty (150) consecutive days or for an aggregate of one hundred fifty
(150) days during the term hereof. Notwithstanding the foregoing, however, the
Company shall never be obligated to pay Employee for more than ninety (90) days,
in the aggregate, during the term during which Employee shall become incapable
of fulfilling Employee's obligations hereunder because of injury or physical
illness. The death of Employee shall automatically terminate the term of
Employee's employment. In the event the employment of Employee is terminated by
Employee's death or by the Company pursuant to this Paragraph 6 because of
injury or physical or mental illness, the Company shall pay Employee, or
Employee's heir(s) (in the event of death), all compensation of Employee
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<PAGE>
<PAGE>
earned but not yet paid up to and through the day upon which Employee's death
occurs or this Agreement is terminated by the Company due to Employee's
incapacity, as applicable, plus an amount equal to the greater of (i) such base
salary, less all lawfully required deductions and withholdings, as Employee
would have earned had Employee been employed for the balance of the term and
(ii) one year's base salary, at Employee's then current annual rate, again less
all lawfully required deductions and withholdings. Any amount paid pursuant to,
as applicable, the foregoing clauses (i) or (ii) shall be paid, from time to
time, in accordance with the Company's normal payroll practices.
7. Termination of Employment Without Good Cause or for Good Reason. If
the Company shall terminate the employment of Employee, other than for "good
cause" pursuant to Paragraph 5, for death or for disability pursuant to
Paragraph 6, or if Employee shall elect to resign from the employ of the Company
for "good reason" (as defined below), then Employee shall be entitled to
receive, in addition to any other amounts due Employee, from time to time, under
this Agreement, additional severance pay in an amount equal to (i) one year's
base salary, at the rate in effect on the date of termination or resignation, as
applicable, payable in accordance with the normal payroll practices of the
Company for the remainder of the term plus (ii) an amount equal to the amount
described in the immediately preceding clause (i), but payable on the effective
date of such termination or resignation, as applicable. Any payment required to
be made, from time to time, pursuant to either of the foregoing clauses (i) or
(ii) shall be net of all lawfully required deductions and withholdings. "Good
reason" shall mean a "change in control" of the Company, a removal of Employee
from his current position with the Company without his consent and without good
cause, or a material change in Employee's duties, responsibilities or status,
again without his consent and without good cause. A "change in control" of the
Company shall be deemed to occur if (a) there is a consolidation or merger of
the Company where the Company is not the surviving corporation and the
shareholders prior to such transaction do not continue to own at least 80% of
the common stock of the surviving corporation, (b) there is a sale of all or
substantially all of the assets of the Company, (c) the stockholders approve a
plan for the liquidation or dissolution of the Company, (d) any person becomes
the beneficial owner, directly or indirectly, of 30% or more of the Company's
outstanding common stock or (e) Employee shall cease to be a director of the
Company for any reason, other than Employee's voluntary resignation or voluntary
election not to stand for re-election as director of the Company.
8. Noncompetition; Nonsolicitation; Confidential Information.
(a) Except for any common stock of the Company, Employee
covenants and agrees that, during the term of this Agreement, Employee will not,
directly or indirectly, whether individually or as an officer, director,
employee or consultant, become employed by, or become a partner in or a
stockholder owning more than one percent (1%) of, any business which is engaged
in the business of providing direct marketing services or any other business
which is similar to or competitive with the business now or at any time during
the term of this Agreement being conducted by the Company.
(b) Employee acknowledges that it is the policy of the Company
(for purposes of this Paragraph 8, the term Company shall also refer to any
subsidiary, parent or other affiliate of the Company) to maintain as secret and
confidential all valuable and unique information heretofore or hereafter
acquired, developed or used by the Company relating to the business, operations,
employees, and/or clients of the Company which gives the Company a competitive
advantage in its industry, including, without limitation, information about net
costs, profits, markets, suppliers, sales products, key personnel, pricing
policies, operational methods, technical processes and other
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<PAGE>
<PAGE>
business affairs and methods and other information not readily available to the
public and plans for future developments, operating manuals, computer software
for any marketing tracking system of the Company, financial statements,
forecasts and operating data and business plans (all such information is
hereinafter referred to as "Confidential Information"). Employee recognizes that
the services to be performed by Employee are special and unique, and that by
reason of Employee's duties, Employee will acquire Confidential Information.
Employee recognizes that all such Confidential Information is the property of
the Company. In consideration of the Company's entering into this Agreement,
Employee agrees that: (i) Employee shall never, directly or indirectly, use,
publish, disseminate or otherwise disclose any Confidential Information obtained
during Employee's employment by the Company (whether obtained prior to, during
or after the term of this Agreement) without the prior written consent of the
Company's Board of Directors; and (ii) during the term of this Agreement,
Employee shall exercise all due and diligent precautions to protect the
integrity of the Company's mailing lists and sources thereof, statistical data
and compilations, agreements, contracts, manuals or other documents embodying
any Confidential Information. Upon termination of Employee's employment by the
Company and at any other time upon request of the Company, Employee shall return
all such documents (and copies thereof) embodying any Confidential Information
in Employee's possession or control. Employee agrees that the provisions of this
subparagraph (b) are reasonable and necessary to protect the proprietary rights
of the Company in the Confidential Information and its trade secrets, goodwill
and reputation. The provisions of this subparagraph (b) shall not apply to
Confidential Information (i) which is known generally to the public, (ii) which
otherwise comes into the public domain without the fault of Employee, or (iii)
which Employee obtains from sources other than the Company (provided that such
exception shall not be applicable to Confidential Information disclosed to
Employee in Employee's position as an officer and employee of the Company).
9. Life Insurance. If requested by the Company, Employee shall submit
to such physical examinations and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company, at
its expense and for its own benefit, to obtain life insurance on the life of
Employee. Employee has no reason to believe that his life is not insurable with
a reputable insurance company at rates now prevailing in the City of Los Angeles
for healthy men of his age.
10. Employee's Rights, Benefits, and Obligations. The rights, benefits
and obligations of Employee under this Agreement are personal to Employee, and
no such rights, benefits or obligations shall be subject to voluntary or
involuntary alienation, assignment or transfer.
11. Entire Agreement; Modification; Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior written or oral agreements,
representations, understandings and/or discussion between the parties relating
thereto. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the party making the waiver.
12. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or three (3) business days after deposit in the United States mail, by
registered or certified mail (or air mail, if notice shall be sent outside the
United States), postage prepaid, return receipt requested or two (2) days after
delivery to a nationally known air courier or delivery company, addressed to the
applicable party hereto at the address specified below (or as otherwise directed
in a notice given in accordance herewith):
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<PAGE>
If to Company, to: All-Comm Media Corporation
400 Corporate Pointe
Suite 780
Culver City, California 90230
If to Employee, to: William Savage
P.O. Box 9729
Marina del Rey, California 90295
13. Effect of Headings. The subject headings of this Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
14. Attorneys' Fees. If any action or proceeding is brought to enforce
any provisions of this Agreement, the prevailing party shall be entitled to its
costs and expenses in connection therewith, including, without limitation,
reasonable attorneys' fees.
15. Applicable Law. The validity, interpretation and enforcement of
this Agreement shall be governed by the laws of the State of California.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same Agreement.
17. Severability. If any provision of this Agreement shall be declared
invalid, illegal and/or unenforceable, such provision shall be severed and the
remaining provisions shall continue in full force and effect.
18. Successor and Assigns. The provisions hereof shall inure to the
benefit of, be binding upon, and be enforceable by the successors and assigns of
the Company.
19. Further Assurances. The Company and Employee each agree to execute
and deliver any and all additional instruments and to perform any and all
additional acts deemed by either party to be necessary or proper to carry into
effect the terms, conditions and provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
EMPLOYEE: THE COMPANY:
All-Comm Media Corporation,
a Nevada corporation
_______________________________ By:_____________________________
William Savage ______
Its: ___________________________
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<PAGE>
SEYMOUR JONES
4 WASHINGTON SQUARE VILLAGE, APT. K-12
NEW YORK, NY 10012
(212) 433-8699
Mr. Barry Peters April 15, 1996
Chairman/CEO
All-Comm Media Corporation
400 Corporate Pointe, Suite 780
Culver City, CA 90230
Dear Mr. Peters,
This will confirm the arrangements, terms, and conditions pursuant to which
Seymour Jones (the "Consultant") shall be retained to serve as a financial
consultant and advisor to All-Comm Media (the "Company"), on a non-exclusive
basis for a one (1) year period. The undersigned hereby agrees to the following
terms and conditions:
1. Duties of the Consultant: Consultant shall, at the request of the
Company, upon reasonable notice, render the following services to the Company
from time to time:
(a) Consulting Services: Consultant shall provide such financial
consulting services and advice pertaining to the Company's business affairs as
the Company may from time to time reasonably request, providing the Consultant
is reasonably available to provide such services. Without limiting the
generality of the foregoing, Consultant shall assist the Company in studying and
evaluating financing, merger and acquisitions proposals and assist in
negotiations and discussions pertaining thereto.
(b) Financial Liaison: Consultant shall, when appropriate, prepare
reports, arrange meetings between representatives of the Company, financial
institutions and acquisition candidates.
The services described in this Section 1 shall be rendered by Consultant without
any direct supervision by the Company and at such time and place and in such
manner (whether by conference, letter, or otherwise) as Consultant may
determine.
2. Compensation:
(a) As compensation for Consultant's services hereunder, the Company shall
pay to the Consultant or its designee the sum of $1,000 per month for a period
of twelve months.
(b) As further inducement to provide assistance to the Company,
Consultant shall be permitted to acquire a warrant certificate to purchase
50,000 shares of the common stock of the Company. The warrant certificate shall
provide for the warrants to be exercisable at $2.50 per share for the first
25,000 shares; $3.00 per share for the next 15,000 shares; and $3.50 per share
for the remaining 10,000 shares. The warrants may be exercised in such
transactions over a four year period and the warrants may be acquired upon
execution of this agreement, commencing April 15, 1996, for the sum of
$2,500.00.
(c) All reasonable out-of-pocket expenses incurred by Consultant in the
performance of the services to be rendered hereunder shall be borne by the
Company, provided prior authorization is received therefor.
<PAGE>
<PAGE>
Consulting Agreement
April 15, 1996
Page 2
3. Available Time: Consultant shall make available such time as is
reasonably necessary for the performance of its obligations under this
agreement.
4. Relationship: Nothing herein shall constitute Consultant as an employee
or agent of the Company, except to such extent as might hereafter be agreed upon
for a particular purpose. Except as might hereinafter be expressly agreed,
Consultant shall not have the authority to obligate or commit the Company in any
such matter whatsoever.
5. Assignment and Termination: This Agreement shall not be assignable by
any party for any reason whatsoever without the prior written consent of the
other party, which consent may be arbitrarily withheld by the party whose
consent is required, except that either party may assign this Agreement to
successors to all or substantially all of the business of such party.
6. Indemnification: Subject to the procedures set forth in the next
paragraph, the Company agrees to indemnify Consultant and its affiliates and
their respective directors, officers, stockholders, general and limited
partners, employees, agents, and controlling persons and the successor and
assigns of all of the foregoing (each such person being an "Indemnified Party")
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such Indemnified Party may become subject under any applicable
federal or state law, or otherwise, related to or arising out of Consultant's
rendering services pursuant to this Agreement, and will reimburse any
Indemnified Party periodically for all reasonable expenses (including reasonable
counsel fees and expenses) and the costs of and amount of any settlement, as
they are incurred in connection with the investigation of, preparation for or
defense of any pending or threatened claim or any action or proceeding arising
therefrom. The indemnification agreement contained in this paragraph, however,
shall not extend to any loss, claim damage, expense, liability or action or
right to reimbursement if and to the extent such loss, claim damage, expense,
liability or action or right to reimbursement arose (a) by reason of negligence
on Indemnified Party's part or (b) as a result of willful misconduct by an
Indemnified Party.
7. Governing Law: This agreement 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.
Please execute one copy of this letter agreement and return it to us.
Very truly yours,
SEYMOUR JONES
AGREED AND ACCEPTED:
All-Comm Media Corporation
by: _________________________ by: ________________________
Barry Peters Seymour Jones
Chairman and Chief Executive Officer Consultant
<PAGE>
<PAGE>
JAMES COPPERSMITH
7 Elmwood Road
Marblehead, MA 09145
Phone: (617) 631-2097 Fax: (617) 639-2986
Mr. Barry Peters April 17, 1996
Chairman/CEO
All-Comm Media Corporation
400 Corporate Pointe, Suite 780
Culver City, CA 90230
Dear Mr. Peters,
This will confirm the arrangements, terms and conditions pursuant to which James
Coppersmith (the "Consultant") shall be retained to serve as a financial
consultant and advisor to All-Comm Media Corporation (the "Company"), on a
non-exclusive basis, for a one (1) year period. The undersigned hereby agrees to
the following terms and conditions:
1. Duties of the Consultant: Consultant shall, at the request of the
Company, upon reasonable notice, render the following services to the Company
from time to time:
(a) Consulting Services: Consultant shall provide such financial
consulting services and advice pertaining to the Company's business affairs as
the Company may from time to time reasonably request, providing the Consultant
is reasonably available to provide such services. Without limiting the
generality of the foregoing, Consultant shall assist the Company in studying and
evaluating financing, merger and acquisitions proposals and assist in
negotiations and discussions pertaining thereto.
(b) Financial Liaison: Consultant shall, when appropriate, prepare
reports and arrange meetings between representatives of the Company, financial
institutions and acquisition candidates.
The services described in this Section 1 shall be rendered by Consultant without
any direct supervision by the Company and at such time and place and in such
manner (whether by conference, letter, or otherwise) as Consultant may
determine.
2. Compensation:
(a) As compensation for Consultant's services hereunder, the Company
shall pay to the Consultant or its designee the sum of $1,000 per month for a
period of twelve months.
(b) As further inducement to provide assistance to the Company,
Consultant shall be permitted to acquire a warrant certificate to purchase
50,000 shares of the common stock of the Company. The warrant certificate shall
provide for the warrants to be exercisable at $2.50 per share for the first
25,000 shares; $3.00 per share for the next 15,000 shares; and $3.50 per share
for the remaining 10,000 shares. The warrants may be exercised in such
transactions over a four year period and the warrants may be acquired upon
execution of this agreement, commencing May 15, 1996, for the sum of $2,500.00.
(c) All reasonable out-of-pocket expenses incurred by Consultant in the
performance of the services to be rendered hereunder shall be borne by the
Company, provided prior authorization is received therefor.
<PAGE>
<PAGE>
Consulting Agreement
April 17, 1996
Page 2
3. Available Time: Consultant shall make available such time as is
reasonably necessary for the performance of its obligations under this
agreement.
4. Relationship: Nothing herein shall constitute Consultant as an employee
or agent of the Company, except to such extent as might hereafter be agreed upon
for a particular purpose. Except as might hereinafter be expressly agreed,
Consultant shall not have the authority to obligate or commit the Company in any
such matter whatsoever.
5. Assignment and Termination: This Agreement shall not be assignable by
any party for any reason whatsoever without the prior written consent of the
other party, which consent may be arbitrarily withheld by the party whose
consent is required, except that either party may assign this Agreement to
successors to all or substantially all of the business of such party.
6. Indemnification: Subject to the procedures set forth in the next
paragraph, the Company agrees to indemnify Consultant and its affiliates and
their respective directors, officers, stockholders, general and limited
partners, employees, agents and controlling persons, and the successor and
assigns of all of the foregoing (each such person being an "Indemnified Party")
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such Indemnified Party may become subject under any applicable
federal or state law, or otherwise, related to or arising out of Consultant's
rendering services pursuant to this Agreement, and will reimburse any
Indemnified Party periodically for all reasonable expenses (including reasonable
counsel fees and expenses) and the costs of and amount of any settlement, as
they are incurred in connection with the investigation of, preparation for or
defense of any pending or threatened claim or any action or proceeding arising
therefrom. The indemnification agreement contained in this paragraph, however,
shall not extend to any loss, claim damage, expense, liability or action or
right to reimbursement if and to the extent such loss, claim damage, expense,
liability or action or right to reimbursement arose (a) by reason of negligence
on Indemnified Party's part or (b) as a result of willful misconduct by an
Indemnified Party.
7. Governing Law: This agreement 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.
Please execute one copy of this letter agreement and return it to us.
Very truly yours,
JAMES COPPERSMITH
AGREED AND ACCEPTED:
All-Comm Media Corporation
by: __________________________ by: ________________________
Barry Peters James Coppersmith
Chairman and Chief Executive Officer Consultant
<PAGE>
<PAGE>
C. ANTHONY WAINWRIGHT
898 Drury Place
W. Palm Beach, Florida 33411
Phone: (407) 791-2553 Fax: (407) 793-5361
Mr. Barry Peters June 3, 1996
Chairman/CEO
All-Comm Media Corporation
400 Corporate Pointe, Suite 780
Culver City, CA 90230
Dear Mr. Peters,
This will confirm the arrangements, terms, and conditions pursuant to which C.
Anthony Wainwright (the "Consultant") shall be retained to serve as a financial
consultant and advisor to All-Comm Media (the "Company"), on a non-exclusive
basis for a two (2) year period. The undersigned hereby agrees to the following
terms and conditions:
1. Duties of the Consultant: Consultant shall, at the request of the
Company, upon reasonable notice, render the following services to the Company
from time to time:
(a) Consulting Services: Consultant shall provide such financial
consulting services and advice pertaining to the Company's business affairs as
the Company may from time to time reasonably request, providing the Consultant
is reasonably available to provide such services. Without limiting the
generality of the foregoing, Consultant shall assist the Company in studying and
evaluating financing, merger and acquisitions proposals and assist in
negotiations and discussions pertaining thereto.
(b) Financial Liaison: Consultant shall, when appropriate, prepare
reports, arrange meetings between representatives of the Company, financial
institutions and acquisition candidates.
The services described in this Section 1 shall be rendered by Consultant without
any direct supervision by the Company and at such time and place and in such
manner (whether by conference, letter, or otherwise) as Consultant may
determine.
2. Compensation:
(a) As compensation for Consultant's services hereunder, the Company
shall pay to the Consultant or its designee the sum of $1,000 per month for a
period of twenty four months.
(b) As further inducement to provide assistance to the Company,
Consultant shall be permitted to acquire a warrant certificate to purchase
50,000 shares of the common stock of the Company. The warrant certificate shall
provide for the warrants to be exercisable at $4.00 per share for the first
25,000 shares; $4.50 per share for the next 15,000 shares; and $5.00 per share
for the remaining 10,000 shares. The warrants may be exercised in such
transactions over a four year period and the warrants may be acquired upon
execution of this agreement, commencing June 3, 1996, for the sum of $2,500.00.
(c) All reasonable out-of-pocket expenses incurred by Consultant in the
performance of the services to be rendered hereunder shall be borne by the
Company, provided prior authorization is received therefor.
<PAGE>
<PAGE>
Consulting Agreement
April 15, 1996
Page 2
3. Available Time: Consultant shall make available such time as is
reasonably necessary for the performance of its obligations under this
agreement.
4. Relationship: Nothing herein shall constitute Consultant as an employee
or agent of the Company, except to such extent as might hereafter be agreed upon
for a particular purpose. Except as might hereinafter be expressly agreed,
Consultant shall not have the authority to obligate or commit the Company in any
such matter whatsoever.
5. Assignment and Termination: This Agreement shall not be assignable by
any party for any reason whatsoever without the prior written consent of the
other party, which consent may be arbitrarily withheld by the party whose
consent is required, except that either party may assign this Agreement to
successors to all or substantially all of the business of such party.
6. Indemnification: Subject to the procedures set forth in the next
paragraph, the Company agrees to indemnify Consultant and its affiliates and
their respective directors, officers, stockholders, general and limited
partners, employees, agents, and controlling persons and the successor and
assigns of all of the foregoing (each such person being an "Indemnified Party")
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such Indemnified Party may become subject under any applicable
federal or state law, or otherwise, related to or arising out of Consultant's
rendering services pursuant to this Agreement, and will reimburse any
Indemnified Party periodically for all reasonable expenses (including reasonable
counsel fees and expenses) and the costs of and amount of any settlement, as
they are incurred in connection with the investigation of, preparation for or
defense of any pending or threatened claim or any action or proceeding arising
therefrom. The indemnification agreement contained in this paragraph, however,
shall not extend to any loss, claim damage, expense, liability or action or
right to reimbursement if and to the extent such loss, claim damage, expense,
liability or action or right to reimbursement arose (a) by reason of negligence
on Indemnified Party's part or (b) as a result of willful misconduct by an
Indemnified Party.
7. Governing Law: This agreement shall be deemed to be a contract made
under the laws of the State of Florida and for all purposes shall be construed
in accordance with the laws of said State.
Please execute one copy of this letter agreement and return it to us.
Very truly yours,
C. ANTHONY WAINWRIGHT
AGREED AND ACCEPTED:
All-Comm Media Corporation
by: _____________________________ by: ________________________
Barry Peters C. Anthony Wainwright
Chairman and Chief Executive Officer Consultant
<PAGE>
<PAGE>
Registration Rights
Commencing nine months from the date of the closing of the Offering or six
months after a Qualified Public Offering (as defined above), holders of an
aggregate of a least two-thirds or more of the Common Stock issued (the
"Registrable Securities") may require on one occasion that the Company to use
its best efforts to effect a registration under the Securities Act of 1933, as
amended (the "Act"), of all Registrable Securities. In addition, if the Company
proposes to register any of its securities under the Act for its own account,
the Company is required each such time to notify each holder of Registrable
Securities and to include in the registration all Registrable Securities which
such holders may request to be included. The registration rights of the holders
of the Registrable Securities are subject to certain conditions and limitations
including the right of an underwriter to limit the number of shares being
registered, and for the Company to complete its audited financial statements and
the requisite fining of its annual report (Form 10-K) with the Securities and
Exchange Commission.
<PAGE>
<PAGE>
WHALE SECURITIES CO., L.P.
Investment Bankers
650 Fifth Avenue
New York, NY 10019
(212) 484-2000
February 7, 1995
Mr. Neil Rosenstein
Chairman and Chief Executive Officer
Sports-Tech, Inc.
345 North Maple Drive
Suite 9-305
Beverly Hills, CA 90210
Dear Mr. Rosenstein:
This agreement will hereby confirm that Whale Securities Co., L.P.
("Whale") has introduced Sports-Tech, Inc. ("Sports-Tech") to Alliance Media
Corporation ("Alliance"). In consideration for the benefit received by
Sports-Tech by virtue of the foregoing introduction and for other good and
valuable consideration, if and only if Alliance is acquired by or merged into
Sports-Tech upon terms substantially equivalent to those set forth in the
Acquisition Agreement dated February 7, 1995 by and among Sports-Tech, a
subsidiary of Sports-Tech formed solely to participate in the merger and
Alliance (the "Agreement"), Sports-Tech agrees to pay Whale and Whale's
designee, Golenberg & Geller, Inc. ("Golenberg") or their respective designees
the following finder's fee:
1) $200,000 in cash;
2) 150,000 shares of common stock of the surviving entity following the
merger, acquisition, etc. All of the shares issued pursuant hereto
will be validly issued, fully paid and nonassessable and the holders
thereof will not be subject to personal liability solely by reason of
being a holder of such shares; and
3) a 3 year Warrant to purchase 150,000 [*] shares of common stock
exercisable at $2.00 subject to adjustment for stock splits, reverse
stock splits and recapitalizations.
Whale and Golenberg will be granted unlimited piggyback registration
rights with respect to the shares issuable hereunder and underlying the Warrants
on terms satisfactory to them. The finder's fee shall be due and payable at
closing. Whale and Golenberg have agreed to split this finder's fee equally and
will have the same rights of registration.
This agreement will be governed by the laws of the State
[* Subsequently reduced to 100,000]
<PAGE>
<PAGE>
of New York applicable to agreements made and to be performed entirely in New
York. The parities hereby waive trial by jury in any action or proceeding
involving, directly or indirectly, any matter in any way arising out of or in
connection with this agreement. This agreement shall be binding upon, and insure
to the benefit of, the parties hereto and their respective successors and
assigns.
Notwithstanding anything to the contrary herein, in the event a
closing fails to occur under the Agreement for any reason whatsoever, neither
Sports-Tech nor Alliance (nor any of their respective officers, directors,
stockholders or agents) shall have any liability to Whale or Golenberg
hereunder.
Please execute one copy of this two page letter agreement and return
it to me.
THIS AGREEMENT IS SUBJECT TO RECEIPT OF A "FAIRNESS AGREEMENT" AS
OUTLINED IN THE FEB 7, DOCUMENT REFERRED TO IN PARAGRAPH 1 /s/ /s/ /s/
Very truly yours,
WHALE SECURITIES CO., L.P.,
By: Whale Securities Corp.,
General Partner
By: /s/ William Walters
--------------------------------
William Walters
President
GOLENBERG & GELLER, INC.
By: /s/ Glenn Golenberg
-------------------------------------
Glenn Golenberg
President
Agreed this 7th day of February, 1995
SPORTS-TECH, INC.
By: /s/ Neil Rosenstein
- --------------------------------------
Neil Rosenstein, Chairman and
Chief Executive Officer
Agreed this 7th day of February, 1995
ALLIANCE MEDIA CORPORATION
By: E. William Savage
-----------------------------------
E. William Savage, President
<PAGE>
<PAGE>
ALL-COMM MEDIA
400 Corporate Pointe, Suite 780
Culver City, CA 90230
(310) 342-2800 FAX (310) 342-2801
M E M O R A N D U M
VIA FAX
May 19, 1995
TO: Marshall Gellar
FROM: Bill Savage
SUBJECT: Stock Options and Warrants
Dear Marshall:
This is to confirm that we have conferred with our board of directors regarding
the exercise of your warrants and options and have the authority to accept your
offer to exercise them at $.67 per share, providing they are exercised in their
entirety and payment occurs prior to June 1, 1995.
Moreover, this letter will serve to further confirm that the underlying shares
of the warrants and options exercised will be included in a registration
statement to be filed by the Company on or before December 1, 1995, and that
such underlying shares may not be sold prior to such registration.
If you wish to proceed, please counter-sign this letter and return a copy by fax
to our office to verify your understanding of the terms and conditions
associated with the exercise of the warrants and options.
Sincerely,
/s/ E. William Savage
- -----------------------------
E. William Savage
President
Agreed to this 19 day of May, 1995
By /s/ Marshall Geller
EWS:smk -----------------------------------------
<PAGE>
<PAGE>
[ALL-COMM MEDIA LETTERHEAD]
M E M O R A N D U M
VIA FAX
May 19, 1995
TO: Glenn Golenberg
FROM: Bill Savage
SUBJECT: Stock Warrants
Dear Glenn:
This is to confirm that we have conferred with our board of directors regarding
the exercise of your warrants and have the authority to accept your offer to
exercise them at $.67 per share, providing they are exercised in their entirety
and payment occurs prior to June 1, 1995.
Moreover, this letter will serve to further confirm that the underlying shares
of the warrants exercised will be included in a registration statement to be
filed by the Company on or before December 1, 1995, and that such underlying
shares may not be sold prior to such registration.
If you wish to proceed, please counter-sign this letter and return a copy by
fax to our office to verify your understanding of the terms and conditions
associated with the exercise of the warrants.
Sincerely,
E. WILLIAM SAVAGE
E. William Savage
President
Agreed to this 22nd day of May, 1995
By /s/ GLENN GOLENBERG
---------------------------------
Glenn Golenberg
EWS:smk
<PAGE>
<PAGE>
SETTLEMENT AND LEASE AGREEMENT
This Settlement and Lease Agreement ("Agreement") is made and entered into
as of June 17, 1994, by and between SHELDON KASOWER ("Kasower") and MEMBERSHIP
DEVELOPMENT, INC. ("MDI"), on the one hand and SPORTS-TECH, INC.
("Sports-Tech"), on the other hand.
RECITALS
A. Since on or about August 31, 1992, MDI has provided marketing consulting
and related services to Sports-Tech. Kasower, in his capacity as Chairman of
MDI, was involved in such marketing consulting and related services.
B. Pursuant to the arrangements for MDI to provide such services,
Sports-Tech has made certain payments to MDI and has undertaken to issue certain
shares of Sports-Tech's common stock to MDI in consideration of those services.
C. Disputes have arisen about the nature and terms of the parties'
relationship, and the parties have agreed to resolve all disputes and claims
between them under the terms of this Agreement.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
AGREEMENTS
1. Termination of All Existing Arrangements. Upon execution of this
Agreement, the parties shall have no further obligations to each other except as
specified in this Agreement. All arrangements for MDI to provide services of any
kind to Sports-Tech are terminated by mutual consent effective June 30, 1994,
and MDI shall have no further authority to act on behalf of Sports-Tech. MDI
represents and warrants that it has not made any commitment or incurred and
obligation on behalf of Sports-Tech on or after June 1, 1994.
2. Ownership of Equipment. MDI shall retain possession of and is hereby
granted all of Sports-Tech's right, title and interest in the computer
equipment and software now in MDI's possession. The equipment is accepted by MDI
"as is and where is." Sports-Tech gives no warranty whatsoever to MDI about such
equipment, including any warranties of merchantability, quality or fitness.
<PAGE>
<PAGE>
3. Ownership of Products and Services. All products, services, intellectual
property, data bases, goodwill, enhancements, trademarks, copyrights and other
materials developed by MDI for Sports-Tech relating to the High School Athletic
Pool, the Collegiate Athletic Network and Sports-Tech Sports Cards ("the
Properties") are and remain the exclusive property of Sports-Tech. MDI
acknowledges that it has no rights whatsoever in the Properties.
4. MDI's Covenant Not to Compete. In consideration of the payment by
Sports-Tech to MDI of the Sum of One Hundred Forty-Four Thousand Dollars
($144,000) in the manner specified in Paragraph 5, below, and in consideration
of the shares issued pursuant to Paragraph 7, below, MDI agrees that neither it
nor any of its officers, directors or shareholders shall, at any time during the
period from the date of this Agreement until June 30, 1997, in the United states
or its territories and possessions:
(a) Accept employment with, become involved with, or otherwise engaged,
directly or indirectly, in any business or venture involving development,
marketing or manufacturing of sports video editing systems or products or
services substantially identical to the Properties ("a Competitive Business");
(b) Solicit directly or indirectly customers or former customers of
Sports-Tech with the intent or effect of making them customers of a
substantially identical Competitive Business through the use of customer lists
or other devices which involve identification of present or former customers as
such; or
(c) For the purposes of employment in any substantially identical
Competitive Business, entice or offer employment to any employee who at that
time is employed by Sports-Tech.
These restrictions do not preclude MDI or its officers, directors and
shareholders from involvement in any other sports-related business which is not
a Competitive Business.
5. Installment Note Payable to MDI. Sports-Tech shall pay to MDI the sum of
Six Thousand Dollars ($6,000) per month for twenty-four (24) consecutive months,
beginning July 1, 1994. This obligation shall be evidenced by Sports-Tech's
unsecured promissory note in the amount of One Hundred Forty-Four Thousand
Dollars ($144,000), bearing no interest, in the form of Exhibit 1 attached
hereto. Payments shall be sent by Sports-Tech on the first business day of each
month to MDI at 23501 Park Sorrento, Suite 102, Calabasas, CA 91302, or to such
other address as MDI shall designate in writing. If any monthly payment is not
received by MDI by the seventh (7th) day of any month, then MDI shall notify
Sports-Tech by facsimile that the payment is past due. After such notice, the
promissory note shall be in default unless the overdue monthly payment is
transmitted to MDI by any method and received by
2
<PAGE>
<PAGE>
MDI on or before the fifteenth (15th) day of the month or unless the monthly
payment is transmitted by MDI by Sports-Tech via overnight courier service on
the fifteenth (15th) day of the month providing for delivery to MDI the
following business day. In the event of such default, MDI may accelerate the
balance due.
6. Cancellation of All Options and Warrants. All warrants and options held
by MDI with respect to any shares of Sports-Tech's common stock are hereby
canceled by mutual agreement.
7. Issuance of Shares to MDI. Concurrently with the execution of this
Agreement, Sports-Tech shall deliver 100,000 unregistered shares of
Sports-Tech's common stock, represented by Certificate No. SPTK 1009, dated June
9, 1994. Upon execution of this Agreement, Sports-Tech shall instruct its
transfer agent to immediately issue and deliver to MDI 150,000 additional
unregistered shares of Sports-Tech's common stock. Sports-Tech shall cause its
counsel to file a registration statement with the SEC as to these 250,000
unregistered shares ("the Shares") not later than sixty (60) days after the date
of filing Sports-Tech's Form 10-K for the fiscal year ended June 30, 1994. MDI
represents and warrants that it is acquiring the Shares for its own account as
principal, for investment purposes only, and not with a view to or for sale in
connection with any distribution thereof, within the meaning of the Securities
Act of 1933, as amended. MDI shall sign such documentation as may be required by
the SEC to obtain registration of the Shares. In the event litigation is filed
to enforce this paragraph 7, the prevailing party shall be entitled to recover
its attorneys' fees and litigation expenses.
8. Restriction on Sale of the Shares. During the period to and including
October 31, 1994, MDI shall sell no more than fifteen thousand (15,000) of the
Shares in any calendar month, except that, so long as the average trading volume
of Sports-Tech's common stock exceeds ten thousand (10,000) shares per day for
the ten (10) consecutive trading days ending the day prior to the date of a sale
by MDI, this restriction shall not apply. Any shares sold by MDI shall not be
included in the trading volume for purposes of determining this average. MDI
agrees and acknowledges that injunctive relief is one appropriate remedy for
violation of this provision. In the event litigation is filed to enforce this
paragraph 8, the prevailing party shall be entitled to recover its attorneys'
fees and litigation expenses.
9. MDI's Release of Sports-Tech. In consideration of the mutual promises
and releases exchanged herein, and except for the obligations expressly
undertaken in this Agreement, MDI, on behalf of itself, and on behalf of its
respective successors, trustees and assigns, hereby forever and fully releases
Sports-Tech, and its past and present employees, agents, representatives,
affiliates, successors, predecessors, assigns, partners, accountants, attorneys,
shareholders, officers and directors, from any and all, known
3
<PAGE>
<PAGE>
or unknown, anticipated or unanticipated, accrued or unaccrued, suspected or
unsuspected, or fixed, conditional or contingent actions or causes of action, at
law or in equity, suits, demands, debts, defenses, claims, contracts, covenants,
liens, liabilities, losses, costs, accounts, expenses and damages of every
nature, kind and description, existing as of the date of this Agreement.
10. Kasower's Release of Sports-Tech. In consideration of the mutual
promises and releases exchanged herein, and except for the obligations expressly
undertaken in this Agreement, Kasower, on behalf of himself, and on behalf of
his respective heirs, administrators, successors, trustees and assigns, hereby
forever and fully releases Sports-Tech, and its past and present employees,
agents, representatives, affiliates, successors, predecessors, assigns,
partners, accountants, attorneys, shareholders, officers and directors, from any
and all, known or unknown, anticipated or unanticipated, accrued or unaccrued,
suspected or unsuspected, or fixed, conditional or contingent actions or causes
of action, at law or in equity, suits, demands, debts, defenses, claims,
contracts, covenants, liens, liabilities, losses, costs, accounts, expenses and
damages of every nature, kind and description, existing as of the date of this
Agreement.
11. Sports-Tech's Release of Kasower and MDI. In consideration of the
mutual promises and releases exchanged herein, and except for the obligations
expressly undertaken in this Agreement, Sports-Tech on behalf of itself and its
successors, trustees and assigns, hereby fully and forever releases Kasower and
MDI, and each of them, and their respective past and present employees, agents,
representatives, affiliates, successors, predecessors, assigns, partners,
accountants, attorneys, shareholders, officers and directors, from any and all,
known or unknown, anticipated or unanticipated, accrued or unaccrued, suspected
or unsuspected, or fixed, conditional or contingent actions or causes of action,
at law or in equity, suits, demands, debts, defenses, claims, contracts,
covenants, liens, liabilities, losses, costs, accounts, expenses and damages of
every nature, kind and description, existing as of the date of this Agreement.
12. Waiver of Civil Code Section 1542. With respect to the releases given
in paragraphs 9, 10 and 11, of this Agreement, the parties expressly acknowledge
and agree that this Agreement fully and finally releases and forever resolves
the claims released and discharged in paragraphs 9, 10 and 11, including those
which are unknown, unanticipated or unsuspected or which may hereafter arise as
a result of the discovery of new or additional facts, and the parties to this
Agreement hereby expressly waive all of the benefits under Section 1542 of the
Civil Code of California, as well as under any other statutes, legal decisions,
or common law principles of similar effect, to the extent that such benefits may
contravene the provisions of paragraphs 9, 10 and 11, of this
4
<PAGE>
<PAGE>
Agreement. The parties acknowledge that they have read and understand Section
1542, which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
13. Warranty of No Assignment. The parties to this Agreement each warrant,
represent and agree that they have not heretofore assigned, subrogated,
licensed, pledged, hypothecated, sold or transferred to any person
whatsoever any claim or interest released in paragraphs 9, 19 and 11, of this
Agreement, and that they are authorized to execute this Agreement in all
respects. In the event any claim is made against any party because of any
purported assignment, subrogation, license, pledge, hypothecation, sale or
transfer of any claim or interest released in paragraphs 9, 10 and 11, of this
Agreement, the party who purportedly assigned, subrogated, pledged, licensed,
hypothecated, sold or transferred the claim or interest shall defend, indemnify
and hold harmless the party against whom the claim is made, from any loss,
damages, costs and attorneys' fees incurred.
14. Indemnity of MDI by Sports-Tech. Notwithstanding the general release
given is this Agreement, in the event a claim or suit is asserted against MDI by
a person not a party to this Agreement on the basis that MDI is liable on
account of any act or omission committed by Sports-Tech prior to the date of
this Agreement, Sports-Tech shall defend, indemnify and hold MDI harmless from
any loss, damage or attorneys' fees incurred.
15. Indemnity of Sports-Tech by MDI. Notwithstanding the general release
given in this Agreement, in the event a claim or suit is asserted against
Sports-Tech by a person not a party to this Agreement on the basis that
Sports-Tech is liable on account of any act or omission committed by MDI prior
to the date of this Agreement, or on the basis that Sports-Tech is liable for
any obligation or commitment undertaken by MDI on or after June 1, 1994, MDI
shall defend, indemnify and hold Sports-Tech harmless from any loss, damage or
attorneys' fees incurred.
16. No Admission of Liability. Each party expressly understands and
acknowledged that this Agreement is entered into for the purpose of compromising
disputed claims and avoiding the expense and inconvenience of litigation, and is
not, and shall not be construed to be, an admission on the part of any party of
any unlawful or wrongful conduct or any liability whatsoever.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties. Each party expressly acknowledges
5
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<PAGE>
that in entering into this Agreement, it or he has not relied upon any statement
or representation made by the other parties or the other parties' representative
which is not set forth herein. Without limiting the generality of the foregoing,
MDI expressly acknowledges that neither Sports-Tech nor any representative of
Sports-Tech has made any representations about the financial condition of the
company, the price or expected price of shares of the company's stock or the
solvency of the company now or in the future.
18. No Construction Against Any Party. Each of the parties hereto
acknowledges that this Agreement has been negotiated at arm's length among
persons knowledgeable in the matters dealt with herein, and that they have had
the opportunity to be represented by counsel in connection with the making and
execution of this Agreement, but that MDI elected voluntarily not to consult
with counsel. Any rule of law, including but not limited to, California Civil
Code Section 1654, or any other statutes, legal decisions or common law
principles of similar effect, that would require interpretation of any
ambiguities in this Agreement against the party who drafted it, is of no
application and is hereby expressly waived. The provisions of this Agreement
shall be interpreted in a reasonable manner to effect the intentions of the
parties hereto.
19. Inferences Not Permissible. Nothing in this Agreement shall be
construed to permit any inference that Kasower maintains any relationship with
MDI other than that of the duly elected Chairman of the Board serving at the
pleasure of the shareholders of MDI.
20. Applicable Law. The validity of this Agreement and any of its terms or
provisions, as well as the rights and duties of the parties hereunder, shall be
governed by the laws of the State of Nevada.
21. No Modification Unless in Writing. This Agreement may not be modified
except by a writing signed by all parties.
22. Further Assurances. The parties agree to cooperate with one another to
sign, execute and deliver any and all documents or writings necessary, proper or
helpful in order to carry out or effectuate any of the provisions of this
Agreement.
23. Severability. If any clause or paragraph or any part thereof in this
Agreement is held to be unenforceable, void or voidable, all remaining
provisions shall nevertheless continue in full force and effect.
24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same document.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
written above:
SPORTS-TECH, INC. MEMBERSHIP DEVELOPMENT, INC.
By /s/ ARNOLD ROSENSTEIN By /s/ SHELDON KASOWER
--------------------- ----------------------
President Chairman
/s/ SHELDON KASOWER
----------------------
Sheldon Kasower
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<PAGE>
PROMISSORY NOTE
$144,000 Beverly Hills, California
June 17, 1994
For value received, the undersigned promises to pay to Membership
Development, Inc. at Calabasas, California, in installments as herein stated,
the sum of One Hundred Forty-Four Thousand Dollars ($144,000), without interest.
Payment shall be made in installments of Six Thousand Dollars ($6,000) per month
for twenty-four (24) consecutive months, beginning July 1, 1994. Payment shall
be sent on the first business day of each month.
There shall be a default under this note if any installment is not received
by the holder of this note by the next business day after the fifteenth day of
the month, provided written default notice has been given to maker by facsimile
at (310) 274-3285 (or such other facsimile number as maker may designate) by the
seventh day of the month. Should default be made in the payment of any
installment, the whole unpaid sum balance shall become immediately due upon
notice at the option of the holder of this note.
This note may be prepaid at any time in whole or in part without premium or
penalty. If action be instituted on this note, the maker promises to pay
reasonable attorneys' fees to the holder.
SPORTS-TECH, INC.
By: /s/ ARNOLD ROSENSTEIN
------------------------
ARNOLD ROSENSTEIN
PRESIDENT
EXHIBIT 1
<PAGE>
<PAGE>
SPORTS-TECH, INC.
345 North Maple Drive
Suite 305
Beverly Hills, California 90210
Telephone: (310) 274-6688
Fax: (310) 274-274-3285
January 13, 1995
Membership Development, Inc.
23501 Park Sorrento
Suite 102
Calabasas, CA 91302
Gentlemen:
This letter modifies the Sports-Tech, Inc ('STI') contractual obligation to
file a registration statement with the Securities and Exchange Commission
covering 250,000 shares of STI common stock owned by Membership Development,
Inc. ('MDI'). The modifications described below are made solely because of STI's
pending negotiations for a combination of STI with Alliance Media Corporation
('Alliance').
STI agrees and covenants to MDI as follows:
1. STI will cause a registration statement covering the 250,000 shares of
STI common stock owned by MDI to be filed no later than June 1, 1995, which
date is an absolute date certain regardless of the STI combination with
Alliance.
2. Notwithstanding the STI commitment made in paragraph 1 immediately
above, in the event that negotiations between STI and Alliance terminate without
the execution and delivery of a definitive acquisition agreement by January 31,
1995, then STI agrees to file the registration statement referred to in
paragraph 1 immediately. Additionally, in the event that STI and Alliance have
executed and delivered a definitive acquisition agreement which is terminated,
whether by mutual agreement or otherwise, then STI agrees to file the
registration statement referred to in paragraph 1 above within five (5) business
days following the date of the termination of such agreement.
3. No registration statements will be filed by STI prior to the
registration statement to be filed covering the 250,000 shares of STI common
stock owned by MDI. By execution of this letter,
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<PAGE>
Membership Development, Inc.
January 13, 1995
Page 2
Alliance covenants and agrees to the commitment of STI set forth in the
immediately preceding sentence.
4. In the event that MDI is required to enforce its rights hereunder,
whether by judicial action or otherwise, STI agrees to pay all of MDI's
out-of-pocket costs (including reasonable legal fees and expenses) incurred in
litigating or otherwise settling or resolving any dispute hereunder. STI further
agrees that reasonable legal fees shall mean for purposes of this provision the
statement of fees and expenses as presented without adjustment to MDI from a law
firm or attorney with an 'Av' rating from Martindale-Hubbell, the national legal
rating and listing directory; provided only that such law firm or attorney's
statement has been prepared on the basis of such law firm or attorney's
customary billing rates and provided further that such counsel shall be entitled
to enforce directly against STI the right to legal fees and expenses provided
hereunder and to collect from STI its out-of-pocket costs of any such collection
action on the same basis as MDI.
Very truly yours,
SPORTS-TECH, INC.
By: /s/
----------------------
Neil Rosenstein
Chairman and Chief
Executive Officer
ACKNOWLEDGED AND AGREED:
MEMBERSHIP DEVELOPMENT, INC.
By:
----------------------
Sheldon Kasowar, a duly
authorized representative
The undersigned, ALLIANCE MEDIA CORPORATION, hereby acknowledges that it is
aware of the contractual obligation of STI to register the 250,000 shares
of STI common stock owned by MDI, and
<PAGE>
<PAGE>
Membership Development, Inc.
January 13, 1995
Page 3
in the event that the STI/Alliance combination is consummated, agrees to
paragraphs 1, 3, and 4 of the foregoing letter.
ALLIANCE MEDIA CORPORATION
By: /s/ Barry Peters 1/17/95
------------------------
Barry Peters, Chairman
<PAGE>
<PAGE>
EX.10.25
June 7, 1996
All-Comm Media Corporation
400 Corporate Pointe
Suite 780
Culver City, California 90230-7615
Gentlemen:
1. At a closing to occur at the offices of your company (the "Company")
simultaneously herewith, the undersigned ("Subscriber") will for $50,000 per
Unit (as defined below) purchase from you, and you will sell, the number of
Units set forth below opposite Subscriber's name below. Such purchase by
Subscriber is part of an offering in which an aggregate of 62 Units will be sold
simultaneously with such sale to Subscriber. Each Unit consists of 100 shares of
Series B Convertible Preferred Stock having a redemption value of $50,000 per
share (the "Preferred") and warrants to purchase 60,000 shares of common stock
of the Company (the "Warrants").
2. The Certificate of Designation for the Preferred shall be in the form of
Exhibit A. The Preferred shall at the option of the holder be convertible at any
time into common stock at the lesser of $1.25 per share or 80% of the average
closing sales price of the common stock on NASDAQ (or such other securities
exchange where the common stock may then be listed) during the last five trading
days prior to conversion. If not theretofore converted, the Preferred shall
automatically be deemed converted into common stock at such price on the second
anniversary of the date of issuance. However, the Preferred shall not be
redeemed under the preceding sentence, but shall instead be redeemed at
redemption value, together with dividends accruing thereon at 6% per annum, on
the second anniversary of the date of issuance if the Company's common stock is
not then trading on NASDAQ (or another U.S. securities exchange approved by the
Securities and Exchange Commission where the common stock may then be listed) or
if the registration statement referred to below has not theretofore been
declared effective. The Preferred shall also be entitled to priority over the
common stock in liquidation.
3. The Warrants shall be in the form of Exhibit B. The Warrants shall be
exercisable only to the extent that authorized but unissued shares of Common
Stock of the Company are available for such exercise. The Company shall as soon
as practicable call a special stockholders' meeting to approve the amendment of
the Certificate of Incorporation of the Company to authorize 30,000,000
additional shares of Common Stock and the directors of the Company shall
recommend to the stockholders that they vote in favor of such amendment. By
separate agreement, executive officers of the Company who own an aggregate of
11.4% of the Company's outstanding Common Stock have agreed to vote their shares
in favor of such amendment. If at any time thereafter that the Warrants are
exercised there are not a sufficient number of authorized but unissued shares of
Common Stock of the Company available for such exercise, the Company promptly
will take all necessary steps to secure the authorization of sufficient
additional shares of Common Stock to permit such exercise. The Warrants shall be
exercisable at $2.50 per share and shall expire on the third anniversary of the
date on which they are first exercisable or, if earlier, on the first (1st) date
on which both (a) and (b) shall be true, namely (a) the registration statement
referred to below shall be in effect and shall have been effective for not less
than the ninety consecutive days immediately preceding such date and (b) the
closing price per share of the Company's common stock on NASDAQ (or such other
securities exchange where the common stock may then be listed) shall not be less
than $8.00 per share and shall have been not less than $8.00 per share during
the twenty consecutive trading days immediately preceding such date. For
example, assume
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<PAGE>
that the closing price per share shall have been $9.00 per share through October
1, 1996, that the closing price per share shall have been $7.00 per share
through March 1, 1997, and that the closing price per share shall have been
$8.00 per share for 20 consecutive trading days thereafter. Assume further that
the Registration Statement shall have been in effect at all times from July 1,
1996. The expiration date of the Warrants shall be the close of business on the
20th trading day after March 31, 1997. All dates set forth in this paragraph
shall be extended by one day for each day after December 31. 1996 on which the
registration statement referred to in Section 3 is not in effect with respect to
the shares purchasable under the Warrants.
3a. The Company will on or before the 120th day after the date of this Agreement
file a registration statement on Form S-3 or Form S-l (the "Registration
Statement") for the public sale by the holders of the shares which are issuable
on conversion of the Preferred or upon exercise of the Warrants. The Company
shall use its best efforts to cause the Registration Statement to become
effective not later than 90 days after the date of filing, and to remain
effective for two years with respect to Common Stock issued upon conversion of
Preferred Stock and three years with respect to Common Stock issued upon
exercise of Warrants. The registration shall be accompanied by blue sky
clearances in such states as the holders may reasonably request. The Company
shall pay all expenses of the registration hereunder, other than the holders'
underwriting discounts. Registration rights may be assigned to assignees of the
Preferred, the Warrants or the underlying stock.
4. (a) Subscriber represents and warrants that it is purchasing the Units solely
for investment solely for its own account and not with a view to or for the
resale or distribution thereof.
(b) Subscriber understands that it may sell or otherwise transfer the
Units, the Preferred, the Warrants or the shares of Common Stock issuable on
conversion or exercise of the Preferred or the Warrants only if such transaction
is duly registered under the Securities Act of 1933, as amended, under the
Registration Statement or otherwise, or if Subscriber shall have received the
favorable opinion of counsel to the holder, which opinion shall be reasonably
satisfactory to counsel to the Company, to the effect that such sale or other
transfer may be made in the absence of registration under the Securities Act of
1933, as amended, and registration or qualification in every applicable state.
The certificates representing the aforesaid securities will be legended to
reflect these restrictions, and stop transfer instructions will apply.
Subscriber realizes that the Units are not a liquid investment.
5. (a) Subscriber has not relied upon the advice of a "Purchaser Representative"
(as defined in Regulation D of the Securities Act) in evaluating the risks and
merits of this investment. Subscriber has the knowledge and experience to
evaluate the Company and the risks and merits relating thereto.
(b) Subscriber represents and warrants that Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated
pursuant to the Securities Act of 1933, as amended, and shall be such on the
date any shares are issued to the holder; Subscriber acknowledges that
Subscriber is able to bear the economic risk of losing Subscriber's entire
investment in the shares and understands that an investment in the Company
involves substantial risks; Subscriber has the power and authority to enter into
this agreement, and the execution and delivery of, and performance under this
agreement shall not conflict with any rule, regulation, judgment or agreement
applicable to the Subscriber; and Subscriber has invested in previous
transactions involving restricted securities.
6. This Agreement may not be changed or terminated except by written agreement.
It shall be
2
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<PAGE>
binding on the parties and on their personal representatives and permitted
assigns. It sets forth all agreements of the parties. It shall be enforceable by
decrees of specific performance (without posting bond or other security) as well
as by other available remedies.
Subscriber: ALL-COMM MEDIA CORPORATION
_____________________________________ By: ____________________________________
Number of Units: ____________________ Title:
3
<PAGE>
<PAGE>
Exhibit A
Exhibit A intentionally omitted. See Exhibit 3.6, "Certificate of Designation
for Series B Convertible Preferred Stock, as amended."
<PAGE>
<PAGE>
Exhibit B
Neither this Warrant nor the shares of Common Stock issuable on exercise of this
Warrant have been registered under the Securities Act of 1933. None of such
securities may be transferred in the absence of registration under such Act or
an opinion of counsel to the effect that such registration is not required.
ALL-COMM MEDIA CORPORATION
WARRANT
DATED: June __, 1996
Number of Shares:
Holder:
Address:
__________________________________
THIS CERTIFIES THAT the holder of this Warrant ("Holder") is entitled to
purchase from ALL-COMM MEDIA CORPORATION, a Nevada corporation (hereinafter
called the "Company"), at the exercise price per share set forth below the
number of shares of the Company's common stock set forth above ("Common Stock").
The Warrants shall be exercisable only to the extent that authorized but
unissued shares of Common Stock of the Company are available for such exercise.
The Company shall as soon as practicable call a special stockholders' meeting to
approve the amendment of the Certificate of Incorporation of the Company to
authorize 30,000,000 additional shares of Common Stock and the directors of the
Company shall recommend to the stockholders that they vote in favor of such
amendment. By separate agreement, executive officers of the Company who own an
aggregate of 11.4% of the Company's outstanding Common Stock have agreed to vote
their shares in favor of such amendment. If at any time thereafter that the
Warrants are exercised there are not a sufficient number of authorized but
unissued shares of Common Stock of the Company available for such exercise, the
Company promptly will take all necessary steps to secure the authorization of
sufficient additional shares of Common Stock to permit such exercise. This
Warrant shall be exercisable at S2.50 per share until the third anniversary of
the date on which they are first exercisable or, if earlier, on the first date
on which both (a) and (b) shall be true, namely (a) the registration statement
referred to below shall be in effect and shall have been effective for not less
than the ninety consecutive days immediately preceding such date and (b) the
closing price per share of the company's common stock on Nasdaq shall not be
less than $8.00 per share and shall have been not less than $8.00 per share
during the twenty consecutive trading days immediately preceding such date. For
example, assume that the closing price per share shall have been $9.00 per share
through October 1, 1996, that the closing price per share shall have been $7.00
per share through March 1, 1997, and that the closing price per share shall have
been $8.00 per share for 20 consecutive trading days thereafter. Assume further
that the Registration Statement shall have been in effect at all times from July
1, 1996. The expiration date of the Warrants shall be the close of business on
6
<PAGE>
<PAGE>
the 20th trading day after March 31, 1997. All dates set forth in this paragraph
shall be extended by one day for each day after February 1, 1997 on which the
registration statement referred to in an agreement of even date herewith is not
in effect with respect to the shares purchasable under the Warrant.
1. This Warrant and the Common Stock issuable on exercise of this Warrant (the
"Underlying Shares") may be transferred, sold, assigned or hypothecated, only if
registered by the Company under the Securities Act of 1933 (the "Act") or if the
Company has received from counsel to the Company a written opinion to the effect
that registration of the Warrant or the Underlying Shares is not necessary in
connection with such transfer, sale, assignment or hypothecation. The Warrant
and the Underlying Shares shall be appropriately legended to reflect this
restriction and stop transfer instructions shall apply. The Holder shall through
its counsel provide such information as is reasonably necessary in connection
with such opinion.
2. The Holder is entitled to certain registration rights under an agreement of
even date herewith.
3. (a) Any permitted assignment of this Warrant shall be effected by the Holder
by (i) executing the form of assignment at the end hereof, (ii) surrendering the
Warrant for cancellation at the office of the Company, accompanied by the
opinion of counsel to the Company referred to above; and (iii) unless in
connection with an effective registration statement which covers the sale of
this Warrant and or the shares underlying the Warrant, delivery to the Company
of a statement by the transferee (in a form acceptable to the Company and its
counsel) that such Warrant is being acquired by the Holder for investment and
not with a view to its distribution or resale; whereupon the Company shall
issue, in the name or names specified by the Holder (including the Holder) new
Warrants representing in the aggregate rights to purchase the same number of
Shares as are purchasable under the Warrant surrendered. Such Warrants shall be
exercisable immediately upon any such assignment of the number of Warrants
assigned. The transferor will pay all relevant transfer taxes. Replacement
warrants shall bear the same legend as is borne by this Warrant.
4. The term "Holder" should be deemed to include any permitted record transferee
of this Warrant.
5. The Company covenants and agrees that all shares of Common Stock which may be
issued upon exercise hereof will, upon issuance, be duly and validly issued,
fully paid and non-assessable and no personal liability will attach to the
holder thereof. The Company further covenants and agrees that, during the
periods within which this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
for issuance upon exercise of this Warrant and all other Warrants.
6. This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
7. In the event that as a result of reorganization, merger, consolidation,
liquidation, recapitalization, stock split, combination of shares or stock
dividends payable with respect to such Common Stock, the outstanding shares of
Common Stock of the Company are at any time increased or decreased or changed
into or exchanged for a different number or kind of share or other security of
the Company or of another corporation, then appropriate adjustments in the
number and kind of such
7
<PAGE>
<PAGE>
securities then subject to this Warrant shall be made effective as of the date
of such occurrence so that the position of the Holder upon exercise will be the
same as it would have been had it owned immediately prior to the occurrence of
such events the Common Stock subject to this Warrant. Such adjustment shall be
made successively whenever any event listed above shall occur and the Company
will notify the Holder of the Warrant of each such adjustment. Any fraction of a
share resulting from any adjustment shall be eliminated and the price per share
of the remaining shares subject to this Warrant adjusted accordingly.
8. The rights represented by this Warrant may be exercised at any time within
the period above specified by (i) surrender of this Warrant (with the purchase
form at the end hereof properly executed) at the principal executive office of
the Company (or such other office or agency of the Company as it may designate
by notice in writing to the Holder at the address of the Holder appearing on the
books of the Company); (ii) payment to the Company of the exercise price for the
number of Shares specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any; and (iii) unless in connection with an
effective registration statement which covers the sale of the shares underlying
the Warrant, the delivery to the Company of a statement by the Holder (in a form
acceptable to the Company and its counsel) that such Shares are being acquired
by the Holder for investment and not with a view to their distribution or
resale.
The certificates for the Common Stock so purchased shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) business days after all
requisite documentation has been provided, after the rights represented by this
Warrant shall have been so exercised, and shall bear a restrictive legend with
respect to any applicable securities laws.
9. This Warrant shall be governed by and construed in accordance with the laws
of the State of California. The California courts shall have exclusive
jurisdiction over this instrument and the enforcement thereof. Service of
process shall be effective if by certified mail, return receipt requested. All
notices shall be in writing and shall be deemed given upon receipt by the party
to whom addressed. This instrument shall be enforceable by decrees of specific
performances well as other remedies.
IN WITNESS WHEREOF, ALL-COMM MEDIA CORPORATION has caused this Warrant to be
signed by its duly authorized officers under Its corporate seal, and to be dated
as of the date set forth above.
ALL-COMM MEDIA CORPORATION
By ____________________________________
Title:_________________________________
In the presence of:
8
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<PAGE>
PRIVATE PLACEMENT PURCHASE AGREEMENT
September 10, 1996, but
effective as of June 7, 1996
All-Comm Media Corporation
400 Corporate Pointe
Suite 780
Culver City, California, 90230-7615
Gentlemen;
1. At a closing to occur at the offices of your company (the "Company")
simultaneously herewith, the undersigned ("Subscriber") will for $50,000 per
Unit (as defined below) purchase from you, and you will sell, the number of
Units set forth below opposite Subscriber's name below. Such purchase by
Subscriber is part of an offering in which an aggregate of 20 Units will be sold
simultaneously with such sale to Subscriber. Each Unit consists of 100 shares of
Series C Convertible Preferred Stock having a redemption value of $500 per share
(the "Preferred") and warrants to purchase 150,000 shares of common stock of
the Company (the "Warrants").
2. The Certificate of Designation for the Preferred shall be in the form of
Exhibit A. The Preferred shall at the option of the holder be convertible at any
time into common stock at $6.00 per share. If not theretofore converted, the
Preferred shall automatically be deemed converted into common stock at such
price on June 7, 1998. However, the Preferred shall not be redeemed under the
preceding sentence, but shall instead be redeemed at redemption value, together
with dividends accruing thereon at 8% per annum, on June 7, 1998 if the
Company's common stock is not then trading on NASDAQ (or another U.S. securities
exchange approved by the Securities and Exchange Commission where the common
stock may then be listed) or if the registration statement referred to below has
not theretofore been declared effective. The Preferred shall also be entitled to
priority over the common stock in liquidation.
3. The Warrants shall be in the form of Exhibit B. The Warrants shall be
exercisable at $3.00 per share and shall expire on the third anniversary of the
date on which they are first exercisable or, if earlier, on the first (1st) date
on which both (a) and (b) shall be true, namely (a) the registration statement
referred to below shall be in effect and shall have been effective for not less
than the ninety consecutive days immediately preceding such date and (b) the
closing price per share of the Company's common stock on NASDAQ (or such other
securities exchange where the common stock may then be listed) shall not be less
than $8.00 per share and shall have been not less than $8.00 per share during
the twenty consecutive trading days immediately preceding such date. For
example, assume that the closing price per share shall have been $9.00 per share
through October 1, 1996, that the closing price per share shall have been $7.00
per share through March 1, 1997, and that the closing price per share shall have
been $8.00 per share for 20 consecutive trading days thereafter. Assume further
that the Registration Statement shall have been in effect at all times from July
1, 1996. The expiration date of the Warrants shall be the close of business on
the 20th trading day after March 1, 1997. All dates set forth in this paragraph
shall be extended by one day for each day after December 31, 1996 on which the
registration statement referred to in Section 3 is not in effect with respect to
the shares purchasable under the Warrants.
3a. The Company will on or before October 7, 1996 file a registration statement
on Form S-3 or Form S-l (the "Registration Statement") for the public sale by
the holders of the shares which are issuable on conversion of the Preferred or
upon exercise of the Warrants. The Company shall use its best efforts to cause
the Registration
53
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<PAGE>
Statement to become effective not later than 90 days after the date of
filing, and to remain effective for two years with respect to Common Stock
issued upon conversion of Preferred Stock and three years with respect to Common
Stock issued upon exercise of Warrants. The registration shall be accompanied
by blue sky clearances in such states as the holders may reasonably request. The
Company shall pay all expenses of the registration hereunder, other than the
holders' underwriting discounts. Registration rights may be assigned to
assignees of the Preferred, the Warrants or the underlying stock.
4. (a) Subscriber represents and warrants that it is purchasing the Units solely
for investment solely for its own account and not with a view to or for the
resale or distribution thereof.
(b) Subscriber understands that it may sell or otherwise transfer the
Units, the Preferred, the Warrants or the shares of Common Stock issuable on
conversion or exercise of the Preferred or the Warrants only if such transaction
is duly registered under the Securities Act of 1933, as amended, under the
Registration Statement or otherwise, or if Subscriber shall have received the
favorable opinion of counsel to the holder, which opinion shall be reasonably
satisfactory to counsel to the Company, to the effect that such sale or other
transfer may be made in the absence of registration under the Securities Act of
1933, as amended, and registration or qualification in every applicable state.
The certificates representing the aforesaid securities will be legended to
reflect these restrictions, and stop transfer instructions will apply.
Subscriber realizes that the Units are not a liquid investment.
5. (a) Subscriber has not relied upon the advice of a "Purchaser Representative"
(as defined in Regulation D of the Securities Act) in evaluating the risks and
merits of this investment. Subscriber has the knowledge and experience to
evaluate the Company and the risks and merits relating thereto.
(b) Subscriber represents and warrants that Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated
pursuant to the Securities Act of 1933, as amended, and shall be such on the
date any shares are issued to the holder; Subscriber acknowledges that
Subscriber is able to bear the economic risk of losing Subscriber's entire
investment in the shares and understands that an investment in the Company
involves substantial risks; Subscriber has the power and authority to enter into
this agreement, and the execution and delivery of, and performance under this
agreement shall not conflict with any rule, regulation, judgment or agreement
applicable to the Subscriber; and Subscriber has invested in previous
transactions involving restricted securities.
6. This Agreement may not be changed or terminated except by written agreement.
It shall be binding on the parties and on their personal representatives and
permitted assigns. It sets forth all agreements of the parties. It shall be
enforceable by decrees of specific performance (without posting bond or other
security) as well as by other available remedies.
Subscriber: ALL-COMM MEDIA CORPORATION
___________________________________ By:_________________________________
Barry Peters
Title: Chairman and CEO
Number of Units: _________ Units
54
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<PAGE>
Exhibit A
Exhibit A intentionally omitted. See Exhibit 3.7, "Certificate of Designation
for Series C Convertible Preferred Stock."
<PAGE>
<PAGE>
Exhibit B
Neither this Warrant nor the shares of Common Stock issuable on exercise of this
Warrant have been registered under the Securities Act of 1933. None of such
securities may be transferred in the absence of registration under such Act or
an opinion of counsel to the effect that such registration is not required.
ALL-COMM MEDIA CORPORATION
WARRANT
DATED: September 10, 1996
Number of Shares:
Holder:
Address:
______________________________________
THIS CERTIFIES THAT the holder of this Warrant (the "Holder") is entitled to
purchase from ALL-COMM MEDIA CORPORATION, a Nevada corporation (hereinafter
called the "Company"), at the exercise price per share set forth below the
number of shares of the Company's common stock set forth above (the "Common
Stock"). This Warrant shall be exercisable at $3.00 per share until August 14th,
1999 or, if earlier, on the first date on which both (a) and (b) shall be true
namely (a) the registration statement referred to below shall be in effect and
shall have been effective for not less than the ninety consecutive days
immediately preceding such date and (b) the closing price per share of the
company's common stock on Nasdaq shall not be less than $8.00 per share and
shall have been not less than $8.00 per share during the twenty consecutive
trading days immediately preceding such date. For example, assume that the
closing price per share shall have been $9.00 per share through October 1, 1996,
that the closing price per share shall have been $7.00 per share through March
1, 1997, and that the closing price per share shall have been $8.00 per share
for 20 consecutive trading days thereafter. Assume further that the Registration
Statement shall have been in effect at all times from July 1, 1996. The
expiration date of the Warrants shall be the close of business on the 20th
trading day after March 31, 1997. All dates set forth in this paragraph shall be
extended by one day for each day after February 1, 1997 on which the
registration statement referred to in an agreement of even date herewith is not
in effect with respect to the shares purchasable under the Warrant.
1. This Warrant and the Common Stock issuable on exercise of this Warrant
(the "Underlying Shares") may be transferred, sold, assigned or hypothecated,
only if registered by the Company under the Securities Act of 1933 (the "Act")
or if the Company has received from counsel to the Company a written opinion to
the effect that registration of the Warrant or the Underlying Shares is not
necessary in connection with such transfer, sale, assignment or hypothecation.
The Warrant and the Underlying Shares shall be appropriately legended to reflect
6
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<PAGE>
this restriction and stop transfer instructions shall apply. The Holder shall
through its counsel provide such information as is reasonably necessary in
connection with such opinion.
2. The Holder is entitled to certain registration rights under an agreement
of even date herewith.
3. (a) Any permitted assignment of this Warrant shall be effected by the
Holder by (i) executing the form of assignment at the end hereof, (ii)
surrendering the Warrant for cancellation at the office of the Company,
accompanied by the opinion of counsel to the Company referred to above; and
(iii) unless in connection with an effective registration statement which covers
the sale of this Warrant and or the shares underlying the Warrant, delivery to
the Company of a statement by the transferee (in a form acceptable to the
Company and its counsel) that such Warrant is being acquired by the Holder for
investment and not with a view to its distribution or resale; whereupon the
Company shall issue, in the name or names specified by the Holder (including the
Holder) new Warrants representing in the aggregate rights to purchase the same
number of Shares as are purchasable under the Warrant surrendered. Such Warrants
shall be exercisable immediately upon any such assignment of the number of
Warrants assigned. The transferor will pay all relevant transfer taxes.
Replacement warrants shall bear the same legend as is borne by this Warrant.
4. The term "Holder" should be deemed to include any permitted record
transferee of this Warrant
5. The Company covenants and agrees that all shares of Common Stock which
may be issued upon exercise hereof will, upon issuance, be duly and validly
issued, fully paid and non-assessable and no personal liability will attach to
the holder thereof. The Company further covenants and agrees that, during the
periods within which this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
for issuance upon exercise of this Warrant and all other Warrants.
6. This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
7. In the event that as a result of reorganization, merger, consolidation,
liquidation, recapitalization, stock split, combination of shares or stock
dividends payable with respect to such Common Stock, the outstanding shares of
Common Stock of the Company are at any time increased or decreased or changed
into or exchanged for a different number or kind of share or other security of
the Company or of another corporation, then appropriate adjustments in the
number and kind of such securities then subject to this Warrant shall be made
effective as of the date of such occurrence so that the position of the Holder
upon exercise will be the same as it would have been had it owned immediately
prior to the occurrence of such events the Common Stock subject to this Warrant.
Such adjustment shall be made successively whenever any event listed above shall
occur and the Company will notify the Holder of the Warrant of each such
adjustment. Any fraction of a share resulting from any adjustment shall be
eliminated and the price per share of the remaining shares subject to this
Warrant adjusted accordingly.
8. The rights represented by this Warrant may be exercised at any time
within the period above specified by (i) surrender of this Warrant (with the
purchase form at the end hereof properly executed) at the principal executive
office of the Company (or such other office or
7
<PAGE>
<PAGE>
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company); (ii) payment
to the Company of the exercise price for the number of Shares specified in the
above-mentioned purchase form together with applicable stock transfer taxes, if
any; and (iii) unless in connection with an effective registration statement
which covers the sale of the shares underlying the Warrant, the delivery to the
Company of a statement by the Holder (in a form acceptable to the Company and
its counsel) that such Shares are being acquired by the Holder for investment
and not with a view to their distribution or resale.
The certificates for the Common Stock so purchased shall be delivered to
the Holder within a reasonable time, not exceeding ten (10) business days after
all requisite documentation has been provided, after the rights represented by
this Warrant shall have been so exercised, and shall bear a restrictive legend
with respect to any applicable securities laws.
9. This Warrant shall be governed by and construed in accordance with the
laws of the State of Nevada. The Nevada courts shall have exclusive jurisdiction
over this instrument and the enforcement thereof; Service of process shall be
effective if by certified mail, return receipt requested. All notices shall be
in writing and shall be deemed given upon receipt by the party to whom
addressed. This instrument shall be enforceable by decrees of specific
performances well as other remedies.
IN WITNESS WHEREOF, ALL-COMM MEDIA CORPORATION has caused this Warrant to
be signed by its duly authorized officers under its corporate seal and to be
dated as of the date set forth above.
ALL-COMM MEDIA CORPORATION
By:______________________________________
Title: Chairman & CEO
In the presence of:
8
<PAGE>
<PAGE>
ALL-COMM MEDIA CORPORATION
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE (the "Warrant Certificate") certifies that for
value received, , having an address at
(the "Holder") is the owner of this warrant (the "Warrant"),
which entitles the Holder thereof to purchase at any time on or before the
Expiration Date (as defined below) shares
(the "Warrant Shares") of fully paid non-assessable shares of the common stock,
par value $.01 per share, (the "Common Stock"), of ALL-COMM MEDIA CORPORATION, a
Nevada corporation (the "Company"), at a purchase price of $__________ per
Warrant Share, in lawful money of the United States of America by bank or
certified check, subject to adjustment as hereinafter provided.
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET
FORTH IN THIS CERTIFICATE. THIS WARRANT MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE
EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.
1. WARRANT; PURCHASE PRICE.
This Warrant shall entitle the Holder thereof to purchase
shares of Common Stock. The purchase price payable upon exercise of the Warrant
(the "Purchase Price") shall be $__________ per share. The Purchase Price and
the number of Warrant Shares evidenced by this Warrant Certificate are subject
to adjustment as provided in Article 6.
<PAGE>
<PAGE>
2. EXERCISE; EXPIRATION DATE.
(a) This Warrant is exercisable, at the option of the Holder, at any
time after date of issuance and on or before the Expiration Date (as defined
below) by delivering to the Company written notice of exercise (the "Exercise
Notice"), stating the number of Warrant Shares to be purchased thereby,
accompanied by bank or certified check payable to the order of the Company for
the Warrant Shares being purchased. Within twenty (20) business days of the
Company's receipt of the Exercise Notice accompanied by the consideration for
the Warrant Shares being purchased, the Company shall issue and deliver to the
Holder a certificate representing the Warrant Shares being purchased. In the
case of exercise for less than all of the Warrant Shares represented by this
Warrant Certificate, the Company shall cancel this Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate for
the balance of such Warrant Shares.
(b) Expiration. The term "Expiration Date" shall mean 5:00 p.m.,
California time, on or, if such date shall in the State of
California be a holiday or a day on which banks are authorized to close, then
5:00 p.m., California time, the next following day which in the State of
California is not a holiday or a day on which banks are authorized to close.
3. RESTRICTIONS ON TRANSFER.
(a) Restrictions. This Warrant, and the Warrant Shares or any other
security issuable upon exercise of this Warrant may not be assigned,
transferred, sold, or otherwise disposed of unless (i) there is in effect a
registration statement under the Act covering such sale, transfer, or other
disposition or (ii) the Holder furnishes to the Company an opinion of counsel,
reasonably acceptable to counsel for the Company, to the effect that the
proposed sale, transfer, or other disposition may be effected without
registration under the Act, as well as such other documentation incident to such
sale, transfer, or other disposition as the Company's counsel shall reasonably
request.
<PAGE>
<PAGE>
(b) Legend. Any Warrant Shares issued upon the exercise of this Warrant
shall bear the following legend:
"The shares evidenced by this certificate were issued upon
exercise of a Warrant and may not be sold, transferred, or
otherwise disposed of in the absence of an effective registration
under the Securities Act of 1933 (the "Act") or an opinion of
counsel, reasonably acceptable to counsel for the Company, to the
effect that the proposed sale, transfer, or disposition may be
effectuated without registration under the Act."
4. RESERVATION OF SHARES.
The Company covenants that it will at all time reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of this Warrant, such number of shares of Common Stock as shall
then be issuable upon the exercise of this Warrant. The Company covenants that
all shares of Common Stock which shall be issuable upon exercise of this Warrant
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens, and charges with respect to the issue thereof.
5. LOSS OR MUTILATION.
Upon receipt by the Company of reasonable evidence of the loss, theft,
destruction, or mutilation of this Warrant Certificate and, in the case of loss,
theft, or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Warrant Certificate, the Company shall execute and deliver in lieu thereof, a
new Warrant Certificate representing an equal number of Warrant Shares
exercisable thereunder.
6. ANTI-DILUTION PROVISIONS.
(a) The number of shares of Common Stock and the Purchase Price per
Warrant Share pursuant to this Warrant shall be subject to adjustment from time
to time as provided for in this Section 6(a). Notwithstanding any provision
contained herein, the aggregate Purchase Price for the total number of Warrant
Shares issuable pursuant to this Warrant shall remain unchanged. In case the
Company shall at
<PAGE>
<PAGE>
any time change as a whole, by subdivision or combination in any manner or by
the making of a stock dividend, the number of outstanding shares of Common Stock
into a different number of shares, (i) the number of shares which the Holder of
this Warrant shall have been entitled to purchase pursuant to this Warrant shall
be increased or decreased in direct proportion to such increase or decrease of
shares, as the case may be, and (ii) the Purchase Price per Warrant Share (but
not the aggregate Purchase Price) in effect immediately prior to such change
shall be increased or decreased in inverse proportion to such increase or
decrease of shares, as the case may be.
(b) In case of any capital reorganization or any reclassification of the
capital stock of the Company or in case of the consolidation or merger of the
Company with another corporation (or in the case of any sale, transfer, or other
disposition to another corporation of all or substantially all the property,
assets, business, and goodwill of the Company), the Holder of this Warrant shall
thereafter be entitled to purchase the kind and amount of shares of capital
stock which this Warrant entitled the Holder to purchase immediately prior to
such capital reorganization, reclassification of capital stock, consolidation,
merger, sale, transfer, or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Section 6
with respect to rights and interests thereafter of the Holder of this Warrant to
the end that the provisions of this Section 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of this Warrant.
(c) Fractional Shares - No certificate for fractional shares shall be
issued upon the exercise of this Warrant, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
(d) Rights of the Holder. The Holder of this Warrant shall not be
entitled to any rights of a shareholder of the Company in respect of any Warrant
Shares purchasable upon the exercise hereof until such Warrant Shares have been
paid for in full and issued to it. As soon as practicable after such exercise,
the Company shall deliver a certificate or certificates for the number of full
shares of Common Stock
<PAGE>
<PAGE>
issuable upon such exercise, to the person or persons entitled to receive the
same.
7. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Warrant, represents and warrants to,
and covenants and agrees with, the Company as follows;
(i) The Warrant is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
(ii) The Holder is aware that the Warrant is not registered under the
Act or any state securities or blue sky laws and, as a result, substantial
restrictions exist with respect to the transferability of the Warrant and the
Warrant Shares to be acquired upon exercise of the Warrant.
(iii) The Holder is an accredited investor, as defined in Rule 501(a)
of Regulation D under the Act and is a sophisticated investor familiar with the
type of risks inherent in the acquisition of securities such as the Warrant, and
its financial position is such that it can afford to retain the Warrant and the
Warrant Shares for an indefinite period of time without realizing any direct or
indirect cash return on this investment.
8. REGISTRATION
(a) Piggyback Registration. The Company agrees that if, at any time on
or before the Expiration Date the Company registers any of its securities under
the Act, whether for its own account or on behalf of selling stockholders the
Company will provide the Holder with at least forty-five (45) days prior written
notice of such intention and, upon request from the Holder, will cause the
underlying shares issuable under this Warrant designated by the Holder to be
registered under the Act (such event, a "Piggyback Registration").
(b) Piggyback Registration Procedures. A registration statement
referred to in Section 8(a) shall be prepared and processed in accordance with
the following terms and conditions:
<PAGE>
<PAGE>
(i) The Holder agrees to cooperate in furnishing promptly to the
Company in writing any information requested by the Company in connection with
the preparation, filing, and processing of such registration statement.
(ii) The Company shall include in the registration statement the
shares of Common Stock proposed to be included in the Piggyback Registration,
subject to the limitations set forth in Section 8(c).
(iii) The Company shall prepare and file with the Securities and
Exchange Commission (the "SEC") such amendments and supplements to such
registration statement and the prospectuses used in connection therewith as may
be required to comply with the provisions of the Act.
(iv) The Company shall furnish to the Holder such number of copies of
each prospectus, including preliminary prospectuses, in conformity with the
requirements of the Act, and such other documents, as the Holder may reasonably
request in order to facilitate the public sale or other disposition of the
shares owned by it.
(v) The Company shall provide a transfer agent and registrar for all
such Common Stock registered pursuant to this Section 8 not later than the
Effective Date of such registration statement.
(vi) The Company shall, in connection with an underwritten offering,
enter into an underwriting agreement on terms customarily contained in
underwriting agreements with respect to secondary distributions or combined
primary and secondary distributions, as appropriate.
(vii) The Company shall make available for inspection upon reasonable
terms by the Holder, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant, or other agent
retained by any such Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney, accountant or agent in
connection with the preparation of such registration statement, provided that as
a condition precedent to such inspection, the Company may require such
inspecting party to execute and deliver a confidentiality agreement in a form to
be provided by the Company.
<PAGE>
<PAGE>
(viii) The Holder shall not (until further notice) effect sales of the
shares covered by the registration statement after receipt of telegraphic or
written notice from the Company to suspend sales to permit the Company to
correct or update a registration statement or prospectus.
(c) Limitations. Notwithstanding the foregoing, if a Piggyback
Registration is an underwritten offering and the managing underwriter advises
the Company in writing that in its opinion the total amount of securities
requested to be included in such registration exceeds the amount of securities
which can be sold in such offering, the Company will include in such
registration: (i) first, all securities the Company proposes to sell, and (ii)
second, up to such amount of securities requested to be included in such
registration by the Holders of the Company, which in the opinion of such
managing underwriter can be sold.
9. FURNISH INFORMATION.
The Company agrees that it shall promptly deliver to the Holder copies
of all financial statements, reports and proxy statements which the Company is
required to send to its shareholders generally.
10. INDEMNIFICATION.
(a) The Company may require, as a condition to including any Common
Stock in any Piggyback Registration pursuant to Section 8 hereof that the
Company shall have received an undertaking satisfactory to it from the Holder to
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall sign such registration statement, each person
who participates as an underwriter (if such underwriter so requests) in the
offering or sale of such securities and each other person, if any, who controls
such underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses, joint or several, to which such person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any
<PAGE>
<PAGE>
material fact contained in any registration statement under which such
securities were registered under the Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment thereof or
supplement thereto, or any document incorporated by reference therein, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such actual or alleged statement or omission described in (i) or (ii) above was
made in reliance upon and in conformity with written information furnished to
the Company by such Holder for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer, participating person or controlling person and shall survive
the transfer of such securities by such Holder.
(b) The Company shall agree, in connection with any registration
statement filed pursuant to Section 8 hereof, that the Company shall indemnify
each Holder selling Common Stock pursuant to such registration statement and
each other person, if any, who controls such Holder within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, against any losses,
claims, damages, liabilities or expenses, joint or several, to which such person
may become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment
thereof or supplement thereto or any document incorporated by referenced
therein, or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
<PAGE>
<PAGE>
information furnished to the Company by the Holder for use in preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement.
(c) If the indemnification provided for in Sections 10(a) or 10(b) above
is unavailable to an indemnified party in respect of any losses, claims, damages
or liabilities referred to therein, then each indemnifying party in lieu of
indemnifying such indemnified party thereunder shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
parties on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party, or by the indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Holder agree that it would not be just and equitable
if contribution pursuant to this Section 10(c) were determined by pro rata
allocation or by any her method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities or actions in respect thereof referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
11. MISCELLANEOUS.
<PAGE>
<PAGE>
(a) Transfer Taxes; Expenses. The Holder shall pay any and all
underwriters' discounts, brokerage fees, and transfer taxes incident to the sale
or exercise of this Warrant or the sale of the underlying shares issuable
thereunder, and shall pay the fees and expenses of any special attorneys or
accountants retained by it.
(b) Notice. Any notice or other communication required or permitted to
be given to the Company shall be in writing and shall be delivered by certified
mail with return receipt or delivered in person against receipt, as follows:
All-Comm Media Corporation
400 Corporate Pointe, Suite 780
Culver City, CA 90230
(c) Governing Law. This Warrant Certificate shall be governed by, and
construed in accordance with, the laws of the State of Nevada, without reference
to the conflicts of laws.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the date set forth below.
ALL-COMM MEDIA CORPORATION
By: ________________________________
Name:
Title:
Attest: ________________________
Name:
Title:
[SEAL]
Date: __________________________
<PAGE>
<PAGE>
FORM OF EXERCISE OF WARRANT
The undersigned hereby elects to exercise this Warrant as to ________
Common Shares covered thereby. Enclosed herewith is a bank or certified check in
the amount of $ .
Date: ________________________ _______________________________
Name:
Address:
Signature
Guarantor: ____________________
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 (File
No. 333- ) of our report dated September 19, 1996, on our audits of the
consolidated financial statements of All-Comm Media Corporation as of June 30,
1996 and for each of the two years ended June 30, 1996. We also consent to the
inclusion in this registration statement on Form SB-2 (File No. 333- ) of our
report dated June 2, 1995, on our audit of the financial statements of Stephen
Dunn & Associates, Inc. as of December 31, 1994 and for the year then ended. We
also consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
_______________________________________
Coopers & Lybrand L.L.P.
Los Angeles, California
October 16, 1996.
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 (File
No. 333- ) of our report dated August 29, 1996, on our audits of the financial
statements of Metro Services Group, Inc. as of December 31, 1995 and for each of
the two years ended December 31, 1995. We also consent to the reference to our
firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
_______________________________________
Coopers & Lybrand L.L.P.
New York, New York
October 16, 1996.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF METRO SERVICES GROUP, INC. AS OF AND FOR
THE YEARS ENDED DECEMBER 31, 1995, AND THE SIX MONTHS ENDED JUNE 30, 1996
INCLUDED IN THIS REGISTRATION STATEMENT ON FORM SB-2 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C> <C>
<CURRENCY> U.S. DOLLARS U.S. DOLLARS
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 JUN-30-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 7,918 138,004
<SECURITIES> 0 0
<RECEIVABLES> 2,484,316 1,446,161
<ALLOWANCES> (82,118) (34,051)
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,417,779 1,572,749
<PP&E> 310,790 327,495
<DEPRECIATION> (223,268) (245,858)
<TOTAL-ASSETS> 2,505,301 1,704,386
<CURRENT-LIABILITIES> 2,239,758 1,681,383
<BONDS> 30,583 32,958
<COMMON> 1,000 1,000
0 0
0 0
<OTHER-SE> 233,960 (10,955)
<TOTAL-LIABILITY-AND-EQUITY> 2,505,301 2,505,301
<SALES> 8,096,307 3,552,708
<TOTAL-REVENUES> 8,096,307 3,552,708
<CGS> 4,652,820 1,918,736
<TOTAL-COSTS> 4,652,820 1,918,736
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 15,291 34,051
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 576,106 (14,492)
<INCOME-TAX> 35,490 0
<INCOME-CONTINUING> 540,616 (14,492)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 540,616 (14,492)
<EPS-PRIMARY> 5,406.16 (144.92)
<EPS-DILUTED> 5,406.16 (144.92)
<PAGE>
