U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
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HYCOMP, INC.
(Name of Small Business Issuer in Its Charter)
Massachusetts 042451506
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
67 Wall Street, Suite 2411 10005
New York, New York
(Address of Principal Executive Offices) (Zip Code)
(212) 344-0351
Issuer's Telephone Number
Securities to be Registered under Section 12(b) of the Act:
- ---------------------------------------------- ---------------------------------
Title of Each Class to be so Registered Name of Each Exchange on Which
Each Class is to be Registered
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Common Stock, par value $0.01 None
- ---------------------------------------------- ---------------------------------
Securities to be Registered under Section 12(g) of the Act:
- --------------------------------------------------------------------------------
Common Stock, par value $0.01
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Title of Class
- --------------------------------------------------------------------------------
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Part I
Item 1. Description of Business.
The principal business of HyComp, Inc. ("HyComp" or the "Company") is
conducted through its wholly owned subsidiary, eieiHome.com Inc. ("eieiHome").
eieiHome operates an Internet service, information and e-commerce web site,
providing information and related products and services for homeowners, home
buyers, and home service providers. This Internet service was introduced in two
Canadian test markets, Vancouver and Toronto, in June 1999 with the intent of
expanding to additional metropolitan markets in Canada and the United States
over the next year. The Company sells advertising space to national and local
home service providers and manufacturers of home-related products. For local and
national accounts, the Company also provides Internet web hosting, web page
design, and e-mail services.
HyComp was incorporated in the Commonwealth of Massachusetts in 1969.
Through March 31, 1999, it was a designer, manufacturer and distributor of thin
film hybrid circuits, thin film resistor networks and various thin film
components mainly used for military purposes. In March 1999, HyComp sold all of
its assets, excluding cash and receivables. The buyer assumed all liabilities
other than commercial and inter-company debt.
On October 14, 1999 HyComp acquired all of the issued and outstanding
common stock of eieiHome from Simmonds Capital Limited ("SCL"). Following the
transaction, eieiHome was considered the acquiring party and the surviving
accounting entity because the former stockholders of eieiHome received an amount
of voting shares of the combined company which constituted an effective
controlling interest in the combined company. Accordingly, the transaction was
accounted for as a reverse acquisition and the discussion in "Item 2.
Management's Discussion and Analysis or Plan of Operation" and the financial
statements contained in this Form 10-SB present the historical financial
position and results of operations of eieiHome rather than the historical
financial position and results of operations of HyComp. Although the acquisition
of eieiHome formally closed on October 14, 1999, the Financial Statements
presented in this Form 10-SB have been prepared on the basis that the
transaction effectively occurred on September 30, 1999.
eieiHome (formerly Chargnet Inc.) was incorporated in June 1998 in the
province of Ontario, Canada. It operated as Chargnet until June 20,1999 when the
Company was acquired by SCL and its name was changed to eieiHome.com Inc.
eieiHome is in its first stage of development and operates an Internet web site
for consumers looking for home-related information, products and services.
1. Products and Markets
Through eieiHome, the Company operates an Internet web site providing
information for homeowners with local references for home products and services.
eieiHome distinguishes itself from other web sites by being both
category-specific in its information, and local in its directory references.
Other Internet web sites tend to be either broad in subject scope, as a general
directory, or narrow in subject scope with little, if any, local content.
The Company expects to receive revenue from the following sources:
o national advertising accounts, which purchase advertising and
exclusive sponsorship in one or more sub-categories of home
service or home products;
o local advertising accounts, which pay monthly listing fees,
monthly advertising fees as well as fees for the design of
customized web pages and e-mail;
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o banner advertising, which pay monthly fees appropriate for the
prevailing level of visits per day or month; and
o e-commerce capability, which is under development but which the Company
anticipates will provide additional revenue from the sale of
home-related products.
The Company currently has a direct sales force in Canada, which targets
national accounts for sponsorship and e-commerce programs. A local commission
sales force is used to solicit listing and advertising revenue for local
accounts. While the eieiHome web site design and database is national in scope,
the service is being introduced on a market-by-market basis. Promotion of the
eieiHome web site to Canadian consumers began in June 1999 in Toronto, Ontario
and Vancouver, British Columbia, with a radio and billboard advertising
campaign. eieiHome plans to expand its service to additional Canadian markets
and to introduce its services into selected US cities within the next year.
These plans are subject to both the successful completion of financing and the
firm commitments of national advertisers in each target market. It is not
certain that either will be available.
The eieiHome web site has been developed with a number of proprietary
designs and systems including the local mapping system, the user interface
designed by ColdFushion, and the database. Approximately one-half of the web
site is devoted to home-related information, including home tips and
do-it-yourself information, while the other half lists directory information for
local service providers and retail outlets of interest to homeowners. The site
is divided into 160 distinct home-related categories. These categories are
organized under five main sections: Real Estate, Renovation, Decorating,
Maintenance, and Electronics. For advertisers, each category is currently
offered on an exclusive basis, limited to one national advertiser plus three
local account references per category per market. In addition to information and
directory service, the eieiHome web site offers a number of other features to
promote user loyalty to increase the frequency of visits by consumers and
advertisers. These include: e-mail service for local accounts, group purchasing
discount benefits for local accounts to purchase business products or services
from third party providers, discussion sites for consumers and service or
product providers and a free local classified advertising section for consumers.
2. Competition
In broad terms, eieiHome competes with all other web sites with
revenues based on advertising for the attention of consumers and available
Internet advertising spending. Distinct from other Internet information or
reference web sites, eieiHome is both category specific in its information,
home-related products and services, and local in its directory references. Other
Internet web sites tend to be either broader in subject scope, as a general
directory, or vertically narrower in subject scope with little if any local
content. The following are some of eieiHome's competitors:
o Service Directories: A number of companies such as Yellow
Pages, GE Bigfoot and AT&T provide on-line business
directories. These Internet web sites are similar to a
telephone directory on-line, with a broad listing of
categories and limited value added information for the
consumer. There is no category exclusivity offered to
advertisers.
o City Guides: Most major metropolitan markets have established
city guide Internet web sites, in many cases owned by or
affiliated with a local newspaper. These sites typically
provide a broad base of local information, including weather
and entertainment, as well as lists of local merchants. They
are not focused on home product information or references.
o Housenet: The Housenet Internet web site provides information
on 12 home-related categories with an emphasis on gardening.
It does not offer local referrals for contractors or service
providers.
o Improvenet: The Improvenet Internet web site provides
information and solicits quotes for home improvement and
renovation projects.
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o Homestore.com: Homestore.com is a real estate focused Internet
web site which provides information and references on a
variety of related topics including real estate listings,
remodeling and home improvement, home builders, and
information for people relocating. There is no third party
advertising offered on the site, which acts as a referral
service.
o Home Depot: The Home Depot Internet web site provides value
added information on home-related products and is focused on
the do-it-yourself homeowner. The site primarily promotes the
sale of home building or hardware products through the local
Home Depot retail outlet.
o Sears: The Sears Internet web site provides home product and
service information. The focus is on selling products through
Sears retail outlets providing a telephone reference for Sears
home service products. Some products can be purchased on-line
for delivery in the continental U.S.
o Canadian Home Builders Association (CHBA): CHBA operates an
Internet web site which provides useful tips on how to secure
a contractor and negotiate a construction contract. The
service is provided free to consumers.
o Ourhouse.com: Ourhouse.com is a new home-related predominantly
e-commerce based Internet web site. Its most significant
feature is their partnership with ACE Hardware. Ourhouse.com
primarily promotes the ACE Hardware inventory.
Several of the Company's competitors have greater financial and marketing
resources. The competitors all have a market lead in the United States and
Canada, with an established or developing Internet web site and customer base.
The Company will depend for its competitive success on eieiHome's
ability to attract national and local advertiser support and to attract and
retain a consumer audience for its Internet web site. The Company hopes that the
potential size of the consumer base will interest advertisers and that the size
and relevance of the directory listing will attract consumers. Consequently,
when launching in a local market, the Company plans to explore a variety of
incentives, including free trial listings, to attract advertisers. The Company
intends to use local market mass media advertising plus strategic Internet
relationships to build consumer traffic to the site.
In the first three quarters of 1999, the Company was dependent upon
national account advertising for approximately 72% of its revenue and its top
three national accounts represented approximately 54% of overall revenues. Most
of the national accounts have their own Internet web sites to promote their own
brands and most also advertise on other informational Internet web sites. As the
Company's business develops in each market, the Company anticipates that the
proportion of its revenue represented by local accounts will increase.
3. Suppliers
Employees on staff and consultants under contract design and maintain
the eieiHome Internet web site and database. The software used by eieiHome is
all from a single source by vendors who are recognized in the computer software
industry. The Company uses a variety of different vendors for its computers and
server platforms. Similarly, the Company has a variety of choices regarding its
web hosting.
To the Company's knowledge all of the proprietary and third-party
software that it uses is Year 2000 compliant. As of January 12, 2000, the
Company was not aware of any Year 2000 problems that had materially affected its
systems or operations. However, there remains some minimal risk that the Company
may still discover or experience serious unanticipated negative consequences or
material costs caused by undetected errors or defects in the technology used in
our internal systems or by Year 2000 deficiencies in the products from third
party suppliers. (see Item 2 - Year 2000 disclosure in the Management's
Discussion and Analysis or Plan of Operations)
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4. Patents and Trademarks
The Company holds a Canadian trademark for eieiHome. The US trademark
application is pending. The Company currently holds no patents for its
intellectual property or designs.
5. Employees
The Company currently has eleven full time employees and three part
time consultants.
6. Proposed Changes
The Company's Board of Directors called for a Special Meeting of
Stockholders to take place on February 29, 2000 at the Marriott Boston Copley
Square, Boston Massachusetts 02116, to consider and vote on actions proposed by
the Board of Directors. The Company delivered to its stockholders a proxy
statement, dated February 7, 2000, detailing the Board of Directors' proposals,
which is attached as Exhibit 99.1 to this Registration Form 10 - SB (the "Proxy
Statement"). The proposals are:
(1) to change the jurisdiction of incorporation of the Company from the
Commonwealth of Massachusetts to the State of Delaware by merging the Company
with eieiHome.com Inc., a company to be incorporated in Delaware and to be a
wholly-owned subsidiary of the Company and, in connection with the move, to
adopt the Agreement and Plan of Merger attached to the Proxy Statement as
Appendix A;
(2) to change the Company's name from HyComp, Inc. to eieiHome.com
Inc.;
(3) to increase the number of shares that the Company is authorized to
issue from 20,000,000 shares of common stock, par value $0.01, to 75,000,000
shares of common stock, par value $0.001;
(4) to adopt the 2000 Stock Option Plan, as described in the Proxy
Statement;
(5) the re-election of the current directors of HyComp, Inc.
Please see the Proxy Statement for further details.
Item 2. Management's Discussion and Analysis or Plan of Operation.
1. Overview
The principal business of the Company is conducted through its wholly
owned subsidiary, eieiHome, a company in its first stage of development, which
operates an Internet web site for consumers seeking home-related information,
products and services.
eieiHome was incorporated on June 25, 1998 as Chargnet Inc. and at that
time launched its web site on the Internet. On June 21, 1999 the Company
launched its Canadian radio and billboard advertising campaign in the Toronto
and Vancouver markets. On July 14, 1999 Chargenet Inc. changed its name to
eieiHome and relaunched an improved Internet web site.
On March 31, 1999, the Company determined that it could no longer run
its previous business at a profit and sold substantially all of its assets and
select liabilities to SatCon Technology Corporation ("SatCon"). On October 14,
1999, the Company bought all of the issued and outstanding shares of the capital
stock of eieiHome and a $500,000 inter-company loan from SCL in exchange for 7.5
million newly issued shares of the common stock of the Company, par value $0.01
("Company Common Stock") (1,125,000 of which were issued to each of Paul Dutton
and Max Hahne, the founders of eieiHome, in consideration for the cancellation
of their options to repurchase up to 30% of eieiHome), a $500,000 demand
promissory note, a $2,000,000 convertible debenture and warrants to purchase up
to five million shares of Company Common Stock. Although the closing of the
acquisition of the shares of eieiHome occurred on October 14, 1999, the
financial statements presented have been prepared on the basis that the
transaction was effective as of September 30, 1999. The Company is now in the
process of raising the necessary funding to promote eieiHome in additional North
American markets.
The Company's Board of Directors proposes to undertake a number of
steps to strengthen the Company's ability to develope the business of its
wholly-owned Canadian subsidiary, eieiHome.com Inc. The Company's Board of
Directors called for a Special Meeting of Stockholders to take place on February
29, 2000 at the Marriott Boston Copley Square, Boston Massachusetts 02116, to
consider and vote on the Board of Director's proposals. See paragraph 6
"Proposed Changes" under "Item 1. Description of Business" and the Proxy
Statement for further details.
2. Results of Operations
Period from June 25, 1998 (Inception) to December 31, 1998
For the period June 25, 1998 to December 31, 1998, management was focused on
constructing an improved Internet web site, building strategic relationships
with key national accounts and refining the business plan prior to the relaunch
of the Internet web site. The construction of the web site was primarily
technical in nature involving mapping systems and code structure. Management
required a minimum number of key national accounts present on the Internet web
site in order to build its reputation and was able to sign Coldwell Banker, a
national real estate business, during October 1998.
Revenues for the period June 25, 1998 to December 31, 1998 were $2,501
consisting primarily of a small group of paying national accounts. Most national
accounts were allowed to advertise on the Internet web site without charge on
the understanding that once a media advertising campaign was launched and
minimum levels of traffic on the Internet web site were achieved that monthly
advertising fees would start to be payable.
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Operating expenses for the six month period ended December 31, 1998
were $120,182 with the bulk of these expenses allocated to the employment and
consulting costs of a small group of technicians required to build and make
improvements to the Internet web site.
The net loss for the period June 25, 1998 to December 31, 1998 was
$117,681.
Nine months ended September 30, 1999
The Company launched a new web site on June 21, 1999 and on July 14,
1999 changed the name of its subsidiary Chargenet Inc. to eieiHome.com Inc.
During the period January 1, 1999 to June 21, 1999, Management concentrated on
organizing and implementing the advertising strategy and reconfiguring the
design of the web site. On June 24, 1999, the Company launched an innovative
radio and billboard advertising campaigns in the Canadian markets of Toronto and
Vancouver capitalizing on the name change. These advertising campaigns were
considered by the Company to be a pilot program in order to assess the impact of
advertising on the results of the business.
On February 1, 1999, the Company moved to new office space located at
590 King Street West in Toronto.
In May 1999, the Company recruited a National Sales Manager to begin
organizing the local account sales force.
Revenues for the nine month period ended September 30, 1999 were
$45,529, consisting of $32,358 from national advertising accounts, $5,678 from
local advertising accounts, $3,925 from web site design for third parties and
$3,568 of miscellaneous income.
Operating expenses for the nine month period ended September 30, 1999
were $780,645 consisting of employment and consulting costs and the initial
advertising campaign.
Amortization of property and equipment and interest for the nine month
period ended September 30, 1999 was $6,210 and $78 respectively.
The net loss for the nine month period ended September 30, 1999 was
$741,403.
Period from June 25, 1998 (Inception) to September 30, 1998
The period from June 25, 1998 to September 30, 1998 was an
organizational phase for the Company and consisted of the initial incorporation
of Chargenet Inc. and the production of content required to the launch the
Chargnet Internet web site. Content development consisted of approximately 2,000
home-related tips and articles.
There were no revenues for the period June 25, 1998 to September 30,
1998.
Operating expenses for the period June 25, 1998 to September 30, 1998
were $58,336, consisting primarily of employment and consulting costs.
The net loss during the period June 25, 1998 to September 30, 1998 was
$58,336.
3. Financial Condition
As at December 31, 1998
Due to the Company's operation of the original Chargnet Internet web
site and the concomitant lack of significant revenue to December 31, 1998, the
Company's balance sheet, as of that date, did not contain any capital assets.
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Total assets as at December 31, 1998 were $299, total liabilities were
$20,479 and stockholders' equity consisted of a deficit of $20,180.
Total assets consisted of cash as of December 31, 1998. Liabilities
represented all accounts payable and accrued liabilities.
As at September 30, 1999
After launching the eieiHome Internet web site during the summer of
1999, the Company's balance sheet reflected a minimum level of operating assets
on September 30, 1999.
Total assets grew from $299 on December 31, 1998 to $65,024 on
September 30, 1999. Current assets totaled $27,972 consisting primarily of
account receivable and cash. As at September 30, 1999 the Company owned $37,052
in capital assets consisting of furniture and computer equipment.
Current liabilities totaled $826,607 as at September 30, 1999 and
consisted primarily of a note for $500,000 payable to SCL and accounts payable
and accrued liabilities. Amounts due to related parties consisted of $118,954
payable to SCL.
The stockholders' equity deficit increased from $20,180 at December 31,
1998 to $2,761,583 as of September 30, 1999. This deficit increase is
attributable to operating losses by the Company during that period and the
Company's issuance of a $2 million convertible debenture to SCL as part of the
eieiHome transaction.
The working capital deficit, excluding related party liabilities, at
September 30, 1999, was $179,681 indicating that additional funding will be
required by the Company in order to continue to operate and grow the business.
4. Liquidity and Capital Resources
The significant losses and working capital deficit at September 30,
1999 have called into question the Company's ability to continue to operate as a
going concern. The Company's ability to fund losses arising from costs and
expenses exceeding revenue is connected to its ability to raise external
financing prior to achieving a break-even level of operations. The Company's
only internal source of funding is from its Internet web site, which has
currently only been introduced in the Toronto and Vancouver markets. At this
time neither of those markets has reached full maturity.
eieiHome was historically funded by the initial capitalization in June
1998 and thereafter by SCL until October 1999 when it became a subsidiary of the
Company.
Each new market entered by the Company will require substantial media
advertising prior to generating revenue. The Company will have to raise
sufficient financing to meet its advertising needs. Pilot advertising programs
carried out in Toronto and Vancouver have indicated that the perception of value
by local and national accounts is heightened with high-profile radio advertising
preceding the launch.
The Company is in the process of organizing new financing through
either the issuance of equity securities or a convertible debenture. There can
be no assurance that the Company will be successful in obtaining funding as and
when required.
5. Foreign Currency
All financial statements in this Form 10-SB presented are expressed in
United States dollars. Hycomp financial statements are expressed in United
States dollars, however the functional and reporting currency for the Hycomp's
wholly owned subsidiary, eieiHome is Canadian dollars. The balance sheets of
eieiHome are translated
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into United States dollars at the exchange rates prevailing at the balance sheet
dates and the statements of operations and cash flows at the average rate for
the relevant periods.
6. Year 2000
Many older installed computer systems and software products are coded
to accept only two digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. If Year 2000 requirements
are not met, our software products and those of our suppliers could malfunction,
which could prevent or limit access to our online Internet site and could be
costly to remedy.
Year 2000 Assessment
The Company's operating business, eieiHome, which was established in
1998, is a relatively new company and does not have the same level of exposure
to Year 2000 issues as many older companies. As a matter of strategic direction,
the Company attempts to use only the most recently released versions or models
of in-house and third-party computer and software products. As of January 12,
2000, the Company was not aware of any material Year 2000 problems and, as a
result of our internal testing, we believe that our systems are Year 2000
compliant in all material respects. We have not incurred material costs to date
in our assessment of the Year 2000 issue, and currently do not believe that the
cost of additional actions will have a material effect on our results of
operations or financial condition. Although we are not aware of any material
operational issues or costs associated with preparing our internal systems for
the Year 2000, we may experience serious unanticipated negative consequences or
material costs caused by undetected errors or defects in the technology used in
our internal systems.
Third Party Equipment and Software
In addition, we use third-party equipment, software and content. While
we believe that this equipment and the third party suppliers are Year 2000
compliant and, as of January 12, 2000, the Company was not aware of any material
Year 2000 problems, failure of such third-party equipment, software or content
to operate properly with regard to the Year 2000 and thereafter could require us
to incur unanticipated expenses to remedy any problems. We are also subject to
external forces that might generally affect industry and commerce, such as
utility or telecommunications company Year 2000 failures and related service
interruptions.
Possible Consequences of Year 2000 Malfunctions
Despite efforts to address the Year 2000 risks, our business operations
could be adversely affected by Year 2000 problems. Any such Year 2000 problems
could result in:
o significant downtime for, or inaccuracies in, the Company's
Internet site or database, which could result in a loss of
users and sponsorship;
o an increase in the allocation of resources to address Year
2000 issues, which could result in decreased productivity in
our core operations; or
o an inability for consumers to access the Internet, which would
result in a loss of users and a corresponding reduction in
advertising revenue.
The occurrence of one or more of the foregoing could have a material adverse
effect on our business, results of operations, and financial condition. We do
not have a formal Year 2000 contingency plan in place, since we believe that the
most significant area of exposure is from third party vendors and suppliers, on
whose contingency plans we must rely. However, such contingency plans may not
adequately address Year 2000 risks.
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Item 3. Description of Property.
The Company occupies 4,762 square feet of office space in Toronto,
Ontario, Canada under the terms of a three year lease with an option to renew
for an additional five year period. This is the location for web site and
database design and maintenance, national account sales, and customer service.
The Company currently maintains a temporary office in New York, New York and
intends to lease executive office premises in the United States during the next
year from which it will direct its North American operations.
Item 4. Security Ownership of Certain Beneficial Owners and Management
(a) As of January 12, 2000 there were 18,198,770 shares of Company Common
Stock, par value, $.01, issued and outstanding. To the knowledge of the Company,
the following persons are the beneficial owners of more than five percent of the
Company's voting securities:
Title of Class Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Company common stock, Simmonds Capital Limited 8,401,700(1) 39.6%(2)
par value $0.01 580 Granite Court
Pickering, ON L1W-3Z4
CANADA
Company common stock, Paul Dutton 1,375,000 7.6%
par value $0.01 590 King St., Suite 403
Toronto, ON M5V 1M3
CANADA
Company common stock, Max Hahne 1,375,000 7.6%
par value $0.01 590 King St., Suite 403
Toronto, ON M5V 1M3
CANADA
(1) This number includes 5,401,700 shares of Company Common Stock, the
right to receive 2,000,000 shares of Company Common Stock upon conversion of a
convertible debenture, and the exercise of warrants to purchase 1,000,000 shares
of Company Common Stock, not all of which may be converted or exercised, as the
case may be, until after the shareholders of the Company have approved an
increase in the Company's authorized capital stock. It is anticipated that a
meeting of shareholders will be held to consider this matter on or before March
1, 2000. See "Certain Relationships and Related Transactions".
(2) The beneficial ownership percent is based upon a total of 21,198,770
shares of Company Common Stock assuming the conversion of the debenture and the
exercise of the warrants.
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(b) As of January 12, 2000, Directors and Officers of the Company had the
following beneficial interest in the shares of Company Common Stock:
Title of Class Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Company common stock, Angelo G. MacDonald 1,000 0.01%
par value $0.01 Director and Chief
Executive Officer
124 West 60th Suite 42H
New York, NY 10023
Company common stock, David C. O'Kell 2.7%
par value $0.01 Director and Secretary 500,000
185 Glencairn Ave.
Toronto, ON M4R 1N3
CANADA
Company common stock, Paul K. Hickey 250,000(1) 1.4%
par value $0.01 Director and Chairman
888 7th Avenue
New York, NY 10106
Company common stock, Lawrence Fox 2.7%
par value $0.01 Director 500,000
212 Crystal Court
Bluebell, PA 19422
Company common stock, John G. Simmonds(2) 3.6%
par value $0.01 Director 650,000
13980 Jane St.
King City, ON L7B 1A3
CANADA
Total Directors and Officers 5,151,000 27.9%
(1) This number includes options to purchase 250,000 shares of Company
Common Stock at $0.013 per share.
(2) This number includes shares of Company Common Stock held by Deborah
Simmonds and shares of Company Common Stock held in trust for Jack
Simmonds.
Item 5. Directors, Executive Officers, Promoters, and Control Persons.
Paul Hickey, 67, has been a Director of the Company since July, 1979. He was
appointed Chairman of the Company effective September 15, 1999. Mr. Hickey is a
former licensed stock broker in New York. He is currently an investment banker
in New York, NY. Mr. Hickey also serves as a director on the boards of Gregory
and Howe Incorporated, American Homeowners Association and Diopsys, Inc.
Angelo G. MacDonald, 41, was appointed Chief Executive Officer and a Director of
the Company effective November 1, 1999. Mr. MacDonald holds a J.D. degree from
Villanova University School of Law. He is member of the bar in New York and New
Jersey, the Southern and Eastern federal districts of
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New York, the United States Tax Court, the United States Court of International
Trade, and the Court of Appeals for the Armed Services. From 1986 to November
1999, Mr. MacDonald was a Senior Trial Assistant District Attorney with the
Office of the District Attorney, Bronx county, New York City.
David C. O'Kell, 48, was appointed secretary and a Director of the Company
effective November 1, 1999. Mr. O'Kell is the Executive Vice President and
Secretary and a Director of SCL, a Toronto Stock Exchange listed company . Mr.
O'Kell joined SCL in July 1991 as Vice President Business Development. Prior to
joining SCL, Mr. O'Kell was the Vice President and Director of Business
Development with the Canadian head office of a multinational advertising agency.
Between September 1995 and November 1997, Mr. O'Kell served as the president and
a Director of Ventel, Inc., a Vancouver Stock Exchange listed venture capital
company. Mr. O'Kell resigned as a Director upon the acquisition by Ventel of
Fifty-Plus.net in June, 1999.
Lawrence Fox, 34, has been a Director of the Company since September 15, 1999.
Mr. Fox is an active private investor. He has provided merger and acquisition
advisory services, including structuring acquisitions and venture capital
investments to a number of public and private companies.
John G. Simmonds, 49, has been a Director of the Company since October 15, 1999.
Mr. Simmonds is the founder of SCL. Since 1991, Mr. Simmonds has served as
Chairman, President and Chief Executive Officer of SCL. SCL is a diversified
management company with strategic investments in contract manufacturing,
electronics distribution, wireless communications, and internet service markets
including both equity investments and wholly owned operations. From 1994 to
1996, Mr. John Simmonds served as Director and Chief Executive Officer of INTEK
Global Corporation (formerly Intek Diversified Corp.), a Nasdaq-listed
(Small-Cap) company. Intek is involved in the US Specialized Mobile Radio market
which owns and manages SMR licenses in the 200 MHz frequency. Between September
1995 and November 1997, Mr. Simmonds served as the Chairman and a Director of
Ventel Inc., a Vancouver Stock Exchange listed company. Ventel provides secured
loans to developing companies in the US SMR market. Mr. Simmonds resigned from
the Board of Directors of Intek during 1998 and resigned from the Board of
Directors of Ventel, upon the acquisition by Ventel of Fifty-Plus.net in June,
1999.
Gary N. Hokkanen, 43, was appointed Chief Financial Officer of the Company
effective November 1, 1999. Mr. Hokkanen's principal occupation is an accountant
and he holds a Certified Management Accountant ("CMA") designation from Society
of Management Accountants of Ontario. Mr. Hokkanen also is Vice President,
Finance/Chief Financial Officer of SCL. He has held this position since July
1997. For the period April 1996 to July 1997, Mr. Hokkanen was Treasurer of
SCL. For the period June 1994 to April 1996 he was Manager, Finance & Treasury.
Prior to June 1994, Mr. Hokkanen was Manager, Financial Planning & Analysis,
with CUC Broadcasting Limited ("CUC"). CUC, prior to being acquired by Shaw
Communications Inc., was a privately owned Canadian cable TV multiple system
operator.
11
<PAGE>
Item 6. Executive Compensation
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------- ------- --------------------------------------------- ----------------- ------------------
Long-Term
Annual Compensation Compensation
Awards
- ---------------------------- ------- --------------------------------------------- -----------------
Other Annual All Other
Name and Principal Year Salary Bonus Compensation Compensation
Position ($) ($) ($) ($)
- ---------------------------- ------- ------------- ------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
George Riley, President 1999 --- --- --- ---
and Chief Executive 1998 110,000 --- --- ---
Officer(1) 1997 110,000 --- --- ---
- ---------------------------- ------- ------------- ------------- ----------------- ----------------- ------------------
Gary N. Hokkanen, Chief 1999 --- --- --- ---
Financial Officer(2) 1998 --- --- --- ---
1997 --- --- --- ---
- ---------------------------- ------- ------------- ------------- ----------------- ----------------- ------------------
David C. O'Kell, 1999 --- --- --- ---
Secretary(2) 1998 --- --- --- ---
1997 --- --- --- ---
- ---------------------------- ------- ------------- ------------- ----------------- ----------------- ------------------
Angelo G. MacDonald, 1999 14,250 --- --- ---
Chief Executive Officer(3) 1998 --- --- --- ---
1997 --- --- --- ---
- ---------------------------- ------- ------------- ------------- ----------------- ----------------- ------------------
</TABLE>
(1) Mr. Riley resigned from HyComp effective March 31,1999. The Company
operated without the services of a full time CEO until Mr. Angelo MacDonald was
appointed effective November 1, 1999. Mr. Hickey served as interim CEO from
August 10, 1999 to October 15, 1999. Mr. Simmonds served as interim CEO from
October 15 to November 15, 1999.
(2) Effective October 15, 1999, Mr. David O'Kell was appointed Secretary of
the Company and Mr. Gary Hokkanen was appointed Chief Financial Officer of the
Company. The services of Mr. Hokkanen and Mr. O'Kell are provided to the Company
as part of the services pursuant to the management services contract with SCL.
Both Mr. Hokkanen and Mr. O'Kell are officers of SCL.
(3) Effective November 1, 1999 Mr. MacDonald was appointed C.E.O. of the
Company with an annual salary of $114,000.
Item 7. Certain Relationships and Related Transactions
During the past three fiscal years and to the date of this registration
statement, there have been no material transactions in which the Company or any
of its subsidiaries was a party, and in which any director or officer of the
Company had a direct or indirect material interest, except as set forth below.
On October 13, 1999, a group of investors, which included SCL and
certain officers and directors both of the Company and of SCL entered into a
Stock Purchase Agreement with MicroTel International, Inc.("MicroTel") and XIT
Corporation (formerly known as XCEL Corporation), a wholly owned subsidiary of
MicroTel, pursuant to which the investors listed on Schedule I thereto (the
"Investors") purchased 9,041,498 shares of Company Common Stock (representing
approximately 90% of the then outstanding shares of Company Common Stock) for
US$150,000, with John G. Simmonds acting as representative of the Buyers. Each
of the Investors acquired the shares of Company Common Stock for his or her own
account and there are no contracts, agreements or understandings with respect to
the holding , disposition or voting of any of such shares among the Investors.
12
<PAGE>
On October 14, 1999, SCL entered into a Stock Purchase Agreement with
the Company for the purchase of 120,000 shares of common stock, no par value, of
eieiHome, which constituted all of the issued and outstanding shares of capital
stock of eieiHome and a $500,000 inter-company loan made by SCL to eieiHome, in
exchange for:
(a) 5,250,000 shares of Company Common Stock;
(b) A demand promissory note in the amount of U.S. $500,000;
(c) A convertible debenture in the principal amount of U.S.
$2,000,000, convertible into shares of Company Common Stock at
a conversion price of $1.00 per share (subject to adjustment
as provided therein); and
(d) Five year warrants for the purchase of an aggregate of
5,000,000 shares of Company Common Stock (subject to
adjustment as provided therein), as follows: (i) 1,000,000
shares of Company Common Stock at an exercise price of $1.00
per share exercisable immediately after the Closing; (ii)
1,000,000 shares of Company Common Stock at an exercise price
of $1.50 per share exercisable after one year from the
Closing; (iii) 1,000,000 shares of Company Common Stock at an
exercise price of $2.00 per share exercisable after two years
after the Closing; (iv) 1,000,000 shares of Company Common
Stock at an exercise price of $2.50 per share exercisable
after three years after the Closing; and (v) 1,000,000 shares
of Company Common Stock at an exercise price of $3.00 per
share exercisable after four years after the Closing.
In addition, HyComp issued 1,125,000 million shares of Company Common Stock to
each of the two founding shareholders of eieiHome, Paul Dutton and Max Hahne, as
consideration for the cancellation of their option to repurchase up to 30% of
eieiHome. The 1,125,000 shares of Company Common Stock held by each of Mr.
Dutton and Mr. Hahn constitute approximately 6.2% of the outstanding Company
Common Stock. In connection with the sale of eieiHome to the Company, the
Company also issued 500,000 restricted shares of Company Common Stock to
Lawrence Fox for services rendered in connection with the sale.
The 12,250,000 shares of Company Common Stock acquired by SCL in this
transaction, together with the 151,700 shares of Company Common Stock they
acquired in the transaction with MicroTel, constitute approximately 48% of the
outstanding shares of Company Common Stock, assuming the conversion of the
debenture and the exercise of all of the warrants. As of January 12, 2000, the
Company's authorized capital stock was not sufficient for it to issue the
12,250,000 shares of Company Common Stock SCL may be entitled to. However,
pursuant to an agreement between the Company and SCL, SCL agrees not to exercise
any of its warrants or to convert any portion of the debenture which would
require the Company to issue shares of Company Common Stock in excess of its
current authorized capital, subject to the Company's undertaking to hold a
meeting of its shareholders' on or before March 1, 2000 to ask the shareholders
to increase the number of shares of Company Common Stock that the Company is
authorized to issue to an amount that is sufficient to cover the number of
shares of Company Common Stock that SCL would be entitled to were it to exercise
all of its warrants and to convert the entire debenture.
HyComp entered into a Management Services Agreement with SCL as of
October 14, 1999 to pay $15,000 per month for certain management services
including the part time services of Mr. Hokkanen, Mr. O'Kell, and Mr. Simmonds.
During the past three years, no relatives, spouses or relatives of
spouses of officers or directors were involved in material transactions with
HyComp, and no such transaction is currently proposed.
During the past three fiscal years and the current fiscal year, no
officer or director and no associate of any officer or director, has been
indebted to HyComp.
Item 8. Description of Securities
The authorized capital of HyComp consists of 20,000,000 shares of
common stock, par value $0.01, of which there were 18,198,770 common shares
issued and outstanding as of January 12, 2000, and 2,000 shares of
13
<PAGE>
Preferred Stock, of which none are currently issued and outstanding. In
addition, the Company has reserved 750,000 shares of Company Common Stock for
issuance upon the exercise of employee stock options.
The holders of shares of Company Common Stock are entitled to receive
notice of, attend and vote at all meetings of the shareholders of HyComp. Each
share of Company Common Stock carries one vote at such meetings. In the event of
the voluntary or involuntary liquidation, dissolution or winding-up of HyComp,
after payment of all outstanding debts, the remaining assets of HyComp available
for distribution will be distributed to the holders of shares of Company Common
Stock. Dividends may be declared and paid on the shares of Company Common Stock
in such amounts and at such times as the directors shall determine in their
discretion in accordance with the laws of the Commonwealth of Massachusetts.
There are no pre-emptive rights, conversion rights, redemption provisions or
sinking fund provisions attaching to shares of Company Common Stock. Shares of
Company Common Stock are not liable to further calls or to assessment by HyComp.
The by-laws of HyComp provide that the holders of a majority in
interest of all stock issued, outstanding and entitled to vote at any meeting of
Shareholders shall constitute a quorum for the transaction of business at such
meeting.
If shares of the Preferred Stock are issued by HyComp, the holders of
such Preferred Stock would be entitled to receive, out of legally available
funds, cash dividends at the rate of 8% of the par value thereof per annum,
before any dividends of any kind may be declared on the Common Stock. Such
annual dividends on the issued and outstanding Preferred Stock shall be
cumulative and shall be deemed to accrue from and after the date of issuance,
whether or not said dividends shall have been declared. In the event of the
voluntary or involuntary liquidation, dissolution or winding-up of HyComp, the
holders of Preferred Stock would be entitled to receive payment at the rate of
the par value thereof plus an amount equal to all unpaid annual dividends,
without interest, whether or not declared, which have accrued, before any
payments shall be made to any holders of Common Stock. HyComp may, at the
authorization of its Board of Directors and in conformity with the governing
statutes, at any time redeem all or a part of the issued and outstanding
Preferred Stock by paying the holders thereof the par value of each such share
plus an amount equal to all unpaid annual dividends, whether or not declared.
Each Preferred Stock shall be convertible into 100 shares, or an adjusted
amount, of Common Stock, at the option of the holder. The holder of Preferred
Stock shall not be entitled to vote or participate at any meeting of the
shareholders.
A debenture in the amount of $2,000,000 is convertible at the option of
the holder into shares of Company Common Stock at the rate of $1.00 per share
(subject to adjustment as provided therein).
There are outstanding warrants to purchase up to 5,000,000 shares of
Company Common Stock (subject to adjustment as provided therein) on the
following basis: (i) 1,000,000 shares of Company Common Stock at an exercise
price of $1.00 per share exercisable after October 14, 1999; (ii) 1,000,000
shares of Company Common Stock at an exercise price of $1.50 per share
exercisable after October 14, 2000; (iii) 1,000,000 shares of Company Common
Stock at an exercise price of $2.00 per share exercisable after October 14,
2001; (iv) 1,000,000 shares of Company Common Stock at an exercise price of
$2.50 per share exercisable after October 14, 2002; and (v) 1,000,000 shares of
Company Common Stock at an exercise price of $3.00 per share exercisable after
October 14, 2003.
14
<PAGE>
Part II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
The price per share of Company Common Stock was quoted on the NASD's
OTC Bulletin Board under the symbol "HYCP" prior to December 15, 1999 when the
new OTC Bulletin Board Eligibility Rule went into effect. This rule eliminates
listing of companies that were not previously subject to the reporting
requirements of the United States Securities and Exchange Commission. This
registration statement is being filed in order to comply with those reporting
requirements. As this registration statement was not effective prior to December
15, 1999, trading in shares of Company Common Stock is currently being quoted in
the "pink sheets" published by the National Quotation Bureau, Inc. until the
requirements for quotation on the NASD's OTC Bulletin Board have been met.
The following table sets forth for the periods indicated the high and low Bid
and Ask prices for the Common Shares in U.S. Dollars:
Quarter Ended Closing Bid Closing Ask
High Low High Low
March 31, 1997 $0.03125 $0.03125 $0.5625 $0.5625
June 30, 1997 $0.03125 $0.03125 $0.5625 $0.5625
September 30, 1997 $0.03125 $0.03125 $0.5625 $0.5625
December 31, 1997 $0.09375 $0.03125 $0.5625 $0.53125
March 31, 1998 $0.09375 $0.09375 $0.53125 $0.53125
June 30, 1998 $0.09375 $0.09375 $0.53125 $0.28125
September 30, 1998 $0.09375 $0.0625 $0.5625 $0.28125
December 31, 1998 $0.0625 $0.03125 $0.5625 $0.53125
March 31, 1999 $0.0500 $0.0300 $0.53125 $0.1300
June 30, 1999 $0.0500 $0.0400 $0.5100 $0.2500
September 30, 1999 $1.4375 $0.0400 $2.4375 $0.5100
On December 15, 1999, the last date on which the Company Common Stock was quoted
on the NASD's OTC Bulletin Board, the closing sale price was $1.25. On that date
there were 331 shareholders of record.
Item 2. Legal Proceedings
To the knowledge of the Company, there are no current or pending legal
proceedings to which the Company is a party other than the following.
The Company has been advised by MicroTel that a claim is being made
against MicroTel by SatCon for warranty reimbursement in connection with the
Asset Purchase Agreement by and between HyComp and HyComp Acquisition Corp.
dated March 31, 1999 (the "SatCon Sale").
Prior to the SatCon Sale, the Company, then a subsidiary of MicroTel,
manufactured products for sale to Honeywell International, Inc. ("Honeywell") in
November and December of 1998 under purchase orders in the amount of
$157,859.80. The Company is advised that, after the consummation of the SatCon
Sale, MicroTel became aware of a claim by Honeywell that some of the products
were defective. On September 30, 1999, SatCon invoiced MicroTel for $185,660.76
for costs it alleges it incurred in repairing the defective products sold to
Honeywell. MicroTel has agreed to accept responsibility for this claim and to
indemnify the Company should it be found to be liable in any respect. The
Company is advised that SatCon and MicroTel are attempting to negotiate a
settlement.
15
<PAGE>
Item 3. Changes in and Disagreements with Accountants
None.
Item 4. Recent Sales of Unregistered Securities
On October 15, 1999, HyComp issued 5,250,000 shares of Company Common
Stock to SCL as partial consideration for the acquisition from SCL of all of the
shares of eieiHome and 1,125,000 shares of Company Common Stock each to Mr. Paul
Dutton and Mr. Max Hahne as consideration for the cancellation of their option
to acquire a 30% interest in eieiHome. On January 12, 2000 (effective December
17, 1999), the Company also issued 500,000 restricted shares of Company Common
Stock to Lawrence Fox for services rendered in connection with the sale of
eieiHome to the Company.
Item 5. Indemnification of Directors and Officers
The by-laws provide for indemnification of directors, officers,
employees and certain other agents of the Company (the "Personnel") serving the
Company or serving any other corporation at the request of the Company. The
Personnel shall be indemnified by the Company against all costs, expenses and
liabilities other than with respect to a proceeding as to which it shall have
been adjudicated that he or she did not act in good faith in the reasonable
belief that his or her action was in the best interests of the Company (the
"Good Faith Standard"). In the event of a proceeding that is settled so as to
impose any liability or obligation on the Personnel, he or she shall not be
indemnified if it is determined by a majority vote of the disinterested
directors then in office, or in their absence or at their request, by the
holders of a majority of the outstanding stock entitled to vote for directors,
exclusive of any stock owned by any interested director or officer, or in
certain circumstances, in the written opinion of independent legal counsel, that
the Personnel did not meet the Good Faith Standard. To the extent authorized by
the Board of Directors, the Company may advance sums on account of
indemnification to the Personnel in advance of a final disposition upon a
proceeding, upon receipt of an undertaking by the Personnel that he or she will
repay such sums if necessary, as provided above. The Board of Directors may
authorize the purchase and maintenance of insurance on behalf of any Personnel
for any costs, expenses or liabilities, whether or not the Company could
indemnify such amounts. The Company anticipates that the Board of Directors will
authorize the purchase of such insurance in the near future.
16
<PAGE>
Part F/S
HYCOMP, INC.
1998/99 Financial Statements
Contents
Page
Independent Auditors' Report 18
Balance Sheet 19
Statement of Operations 20
Statement of Changes in Stockholders' (Deficit) 21
Statement of Cash Flows 22
Notes to Financial Statements 23 - 27
17
<PAGE>
Independent Auditors' Report
To the Directors of
HyComp, Inc.
We have audited the balance sheet of HyComp, Inc. (note 1) at December 31, 1998
and the related statements of operations, changes in stockholders' (deficit) and
cash flows for the period June 25, 1998 (inception) to December 31, 1998. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in both Canada and the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance 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 HyComp, Inc. as of December 31,
1998 and the results of its operations and its cash flows for the period June
25, 1998 (inception) to December 31, 1998 in accordance with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in note 1, the company
has incurred significant losses since inception and at September 30, 1999 the
company has a working capital deficit of $798,635 (unaudited) and a
stockholders' (deficit) of $2,761,583 (unaudited). These conditions raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. Management plans in regard to these matters are
also described in note 1.
PKF Hill LLP
Toronto, Canada
September 21, 1999
18
<PAGE>
HYCOMP, INC.
Balance Sheet
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash $ 299 $ 7,277
Accounts receivable -- 16,580
Prepaid expenses -- 4,115
- ------------------------------------------------------------------------------------------------------------
Total current assets 299 27,972
- ------------------------------------------------------------------------------------------------------------
Property and equipment (note 1)
Furniture and equipment -- 22,304
Data processing equipment -- 20,958
- ------------------------------------------------------------------------------------------------------------
-- 43,262
Less: accumulated depreciation -- (6,210)
- ------------------------------------------------------------------------------------------------------------
-- 37,052
- ------------------------------------------------------------------------------------------------------------
Total assets $ 299 $ 65,024
============================================================================================================
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities
Accounts payable and accrued liabilities $ 20,479 $ 204,613
Deferred revenue (note 1) -- 3,040
Note payable (note 2) -- 500,000
Due to related parties (note 3) -- 118,954
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 20,479 826,607
- ------------------------------------------------------------------------------------------------------------
Long term debt
Convertible debenture (note 4) -- 2,000,000
- ------------------------------------------------------------------------------------------------------------
Stockholders' (deficit)
Common stock, $.01 par value, 20,000,000 shares authorized, 8,000,000 and
18,198,770 shares issued and outstanding
at December 31, 1998 and September 30, 1999, respectively 80,000 181,988
Preferred stock, $100 par value, 8%, non-voting, convertible, redeemable
2,000 shares authorized, Nil shares issued
Additional paid-in capital 17,501 --
Accumulated (deficit) (117,681) (2,943,571)
- ------------------------------------------------------------------------------------------------------------
Total stockholders' (deficit) (20,180) (2,761,583)
- ------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' (deficit) $ 299 $ 65,024
============================================================================================================
</TABLE>
See accompanying notes
19
<PAGE>
HYCOMP, INC.
Statement of Operations
<TABLE>
<CAPTION>
Period from Period from
June 25, 1998 June 25, 1998
(inception) to Nine months ended (inception) to
December 31, September 30, September 30,
1998 1999 1998
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue $ 2,501 $ 45,529 $ --
- --------------------------------------------------------------------------------------------------------------
Expenses
Selling, general and administrative 117,571 742,093 58,336
Occupancy 2,611 38,551 --
Interest -- 78 --
Depreciation - property and equipment -- 6,210 --
- --------------------------------------------------------------------------------------------------------------
120,182 786,932 58,336
- --------------------------------------------------------------------------------------------------------------
Net loss $ (117,681) $ (741,403) $ (58,336)
==============================================================================================================
Basic net loss per share of common stock (note 1) $ (0.01) $ (0.09) $ (0.01)
==============================================================================================================
Weighted average number of common shares
outstanding (note 1) 8,000,000 8,000,000 8,000,000
==============================================================================================================
</TABLE>
See accompanying notes
20
<PAGE>
HYCOMP, INC.
Statement of Changes in Stockholders' (Deficit) For the Period from June 25,
1998 (Inception) to September 30, 1999
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------------- Paid-In Accumulated Stockholders'
Shares Amount Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C>
Balances at June 25, 1998 (inception)
as restated (note 1) 8,000,000 $ 80,000 $ 17,501 $ -- $ 97,501
Net loss for the period -- -- -- (117,681) (117,681)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 8,000,000 80,000 17,501 (117,681) (20,180)
Issuance of common stock in
connection with reverse
acquisition (note 1) 10,198,770 101,988 (17,501) (2,084,487) (2,000,000)
Net loss for nine months ended
September 30, 1999 -- -- -- (741,403) (741,403)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999
(unaudited) $18,198,770 $ 181,988 $ -- $(2,943,571) $(2,761,583)
=============================================================================================================================
</TABLE>
See accompanying notes
21
<PAGE>
HYCOMP, INC.
Statement of Cash Flows
<TABLE>
<CAPTION>
Period from Period from
June 25, 1998 June 25, 1998
(inception) to Nine months ended (inception) to
December 31, September 30, September 30,
1998 1999 1998
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows used in operating activities
Net loss $(117,681) $(741,403) $ (58,336)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation - property and equipment -- 6,210 --
- -----------------------------------------------------------------------------------------------------------------------------
(117,681) (735,193) (58,336)
- -----------------------------------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities
Other receivables -- -- (6,318)
Accounts receivable -- (16,580) --
Prepaid expenses -- (4,115) --
Deferred revenue -- 3,040 --
Accounts payable and accrued liabilities 20,479 184,134 --
- -----------------------------------------------------------------------------------------------------------------------------
20,479 166,479 (6,318)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash flows used in operating
activities (97,202) (568,714) (64,654)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities
Purchase of property and equipment -- (43,262) --
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities -- (43,262) --
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Increase in bank indebtedness -- -- 232
Proceeds from issuance of common stock 97,501 -- 64,422
Increase in note payable -- 500,000 --
Increase in due to related parties -- 118,954 --
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows provided by financing activities 97,501 618,954 64,654
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in cash 299 6,978 --
Cash, beginning of period -- 299 --
- -----------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 299 $ 7,277 $ --
=============================================================================================================================
Supplemental disclosure of cash flow:
information::
Cash paid for interest $ -- $ 78 $ --
=============================================================================================================================
Supplemental disclosure of non-cash financing activities:
Common stock and convertible debentures were issued
as part of the reverse acquisition (refer note 1)
</TABLE>
See accompanying notes
22
<PAGE>
HYCOMP, INC.
Notes to Financial Statements - December 31, 1998
(Information as of September 30, 1999 and for the nine months then ended is
unaudited)
1. Summary of Significant Accounting Policies
Description of Business
The principal business of HyComp, Inc. (HyComp) is conducted through its
wholly owned subsidiary eieiHome, which operates an Internet service,
information and e-commerce web site. The web site provides information and
related products and services for homeowners, home buyers, and home
service providers. This Internet service was introduced in two Canadian
test markets, Vancouver and Toronto, in June 1999 with the intent of
expanding to additional metropolitan markets in Canada and the United
States over the next year. Operations, while currently in Canada will be
rolled out into the United States beginning in spring 2000. The business
plan calls for 40 U.S. cities within three years. The Company sells
advertising space to national and local home service providers and
manufacturers of home-related products. For local and national accounts,
the Company also provides Internet web hosting, web page design, and
e-mail services.
Basis of Presentation
On October 14, 1999, a Massachusetts corporation then known as HyComp
acquired all of the issued and outstanding common stock of eieiHome.com
Inc. (eieiHome) (formerly Chargnet Inc.) in exchange for 5,250,000 common
shares of HyComp, a $2,000,000 convertible debenture (note 4), and five
year warrants (note 5). In addition, HyComp issued 1,125,000 common shares
to each of the two founding shareholders of eieiHome in consideration for
the cancellation of their option to repurchase up to 30% of eieiHome in
the event that eieiHome was sold to another party. HyComp have also agreed
to issue 500,000 common shares to a non-related party as a finders fee.
All preferred stock (53 shares) of the Company was redeemed for $5,300.
Although the acquisition of eieiHome occurred on October 14, 1999, the
financial statements presented have been prepared on the basis that the
transaction effectively occurred on September 30, 1999. At the time of the
1999 acquisition, HyComp had no significant assets or operations.
eieiHome is accounted for as the acquiring party and the surviving
accounting entity because the former stockholders of eieiHome received an
amount of voting shares which constitutes an effective controlling
interest in the combined corporation. The shares issued by HyComp pursuant
to the 1999 acquisition have been accounted for as if those shares had
been issued upon the organization of eieiHome. The outstanding capital
stock of HyComp immediately prior to the 1999 acquisition has been
accounted for as shares issued by eieiHome to effect the reverse
acquisition as of September 30, 1999.
Because eieiHome is the accounting survivor, the financial statements
presented for all periods are those of eieiHome. All intercompany accounts
and transactions are eliminated on consolidation. All financial statements
are in the currency of the United States.
At September 30, 1999, additional paid-in capital ($17,501) and
accumulated deficit ($84,487) have been adjusted to effect the difference
in par value of HyComp and eieiHome. Additionally, the $2,000,000
convertible debenture (note 4) has been recorded as a distribution to
shareholders at September 30, 1999.
The outstanding common stock at the time of the 1999 acquisition was held
principally by Officers of the combined corporation.
The financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the liquidation of
liabilities in the ordinary course of business. As shown in the
accompanying financial statements, the company has a working capital
deficit of $798,635 and a stockholders' (deficit) of $2,761,583 at
September 30, 1999. As a result, doubt exists about the Company's ability
to continue to fund future operations using its existing resources. The
Company is currently being financed by a related party, but substantial
doubt exists about the related party's ability to fund future operations
using its existing resources.
23
<PAGE>
HYCOMP, INC.
Notes to Financial Statements - December 31, 1998
(Information as of September 30, 1999 and for the nine months then ended is
unaudited)
1. Summary of Significant Accounting Policies - continued
Management plans to begin executing the expanded business plan during the
fiscal year ended December 31, 2000. In order to do so the Company will
have to raise substantial financing to provide the necessary funding for a
media advertising campaign in each new market.
The Board of Directors has authorized a new issue of subordinated
convertible debt to a maximum of $250,000, of which a portion has been
received by the Company prior to December 31, 1999. Management is
confident that the debenture will be fully subscribed for during the month
of January 2000. It is anticipated that the proceeds of this financing
will provide the necessary funding to operate the business for
approximately sixty days, after which additional third party financing
will be required. Management is in discussions with several parties on a
substantial permanent financing, which will provide funding to begin
executing the business plan. Although management expects to be successful
in raising the required funds, there is no assurance that the required
funds will be raised.
Unaudited interim financial information
The accompanying interim financial statements as of September 30, 1999 and
for the periods ended September 30, 1999 and September 30, 1998 are
unaudited but include all adjustments, consisting of only normal recurring
adjustments, which management considers necessary to present fairly, in
all material respects, the financial position and results of operations
and cash flows for the periods ended September 30, 1999 and 1998. Results
of the period ended September 30, 1999 are not necessarily indicative of
results for the entire year.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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
date of the financial statements and the reported amounts of revenue and
expenses during the period. Actual results could differ from these
estimates, and such differences could be material.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the declining balance method, ranging from 20% to 30% per annum, over the
estimated useful lives of the related assets.
Advertising and Marketing Costs
The Company expenses the costs of advertising and marketing as incurred.
The Company incurred $398,000 of advertising and marketing expenses for
the nine month period ended September 30, 1999 which are included in
selling, general and administrative expenses.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
determined based on temporary differences between the financial statement
and tax bases of assets and liabilities and net operating loss and credit
carryforwards using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized. A provision for income tax expense is recognized for income
taxes payable for the current period, plus the net changes in deferred tax
amounts.
24
<PAGE>
HYCOMP, INC.
Notes to Financial Statements - December 31, 1998
(Information as of September 30, 1999 and for the nine months then ended is
unaudited)
1. Summary of Significant Accounting Policies - continued
Revenue recognition and deferred revenue
The Company earns revenue from corporate advertisers by charging fees for
banner advertisements on the web site in addition to charging fees for
merchants to advertise their home renovations expertise on the web site.
The Company recognizes revenues when the earning activities take place and
the revenue is measurable and collectable. Monies paid in advance are
recorded as deferred revenue and recognized when earned.
Business risk
The Company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by
companies in new and rapidly evolving markets for internet products and
services. These risks include the failure to develop and extend the
Company's online data base, the rejection of the Company's services by web
consumers and/or advertisers and the inability of the Company to maintain
and increase the levels of traffic on its online services, as well as
other risks and uncertainties. Failure to address these risks successfully
may have a material adverse impact on the Company's operations and
financial position.
Financial Instruments
The fair values of the financial assets and liabilities are indicated by
their carrying value.
Net loss per share
For the purpose of computing earnings per share, the number of shares
outstanding for the period from the beginning of the fiscal period to the
date of the reverse acquisition (note 1) is deemed to be the number of
shares issued by the legal parent (HyComp). Convertible debentures,
warrants and options to purchase stock are included as common stock
equivalents when dilutive.
Foreign currency
The functional currency of the Company is the Canadian dollar.
For reporting purposes, the financial statements are presented in United
States dollars and in accordance with Statement of Financial Accounting
Standard No. 52, "Foreign Currency Translation". The balance sheets are
translated into United States dollars at the exchange rates prevailing at
the balance sheet dates and the statements of operations and cash flows at
the average rates for the relevant periods. Gains and losses resulting
from translation will be included as a component of accumulated other
comprehensive income (loss). To date such transactions have not been
material.
2. Note Payable
Note payable consists of an unsecured demand note to a shareholder in the
amount of $500,000, bearing interest at 8% per annum and repayable in full
upon the completion of a debt or equity financing of not less than
$1,000,000.
3. Due to Related Parties and Related Party Transactions
Due to related parties consists of amounts due to companies under common
control and are non-interest bearing with no specific terms for repayment.
25
<PAGE>
HYCOMP, INC.
Notes to Financial Statements - December 31, 1998
(Information as of September 30, 1999 and for the nine months then ended is
unaudited)
4. Convertible Debenture
The convertible debenture was issued as part of the reverse acquisition
(note 1) and consists of an unsecured debenture to a shareholder in the
amount of $2,000,000, bearing interest at 8% per annum, repayable in
principal payments of $200,000 plus interest in quarterly instalments
commencing October 15, 2000 until the maturity date of April 15, 2003.
This debenture is convertible at the option of the holder at $1 per share
for all or any part of the outstanding part of the principal plus accrued
and unpaid interest. Management has determined that the value attached to
the conversion feature is insignificant and therefore no amount has been
recorded in the accounts.
5. Warrants
Included as consideration for the 1999 reverse acquisition (note 1),
5,000,000 five year warrants to purchase an aggregate of 5,000,000 common
shares, at exercise prices of between $1 per share and $3 per share, were
issued to a shareholder as follows:
Number of Exercise
Exercise date Expiry date shares price
October 14, 1999 October 14, 2004 1,000,000 $ 1.00
October 14, 2000 October 14, 2005 1,000,000 1.50
October 14, 2001 October 14, 2006 1,000,000 2.00
October 14, 2002 October 14, 2007 1,000,000 2.50
October 14, 2003 October 14, 2008 1,000,000 3.00
Management has determined that the value attached to the warrants is
insignificant and therefore no amount has been recorded in the accounts.
6. Capital Structure
Liquidation preference
In the event of liquidation, dissolution or winding up of the Company,
after payment of all outstanding debts, the remaining assets of the
Company available for distribution will be distributed to the holders of
common stock.
Voting rights
The holders of shares of Common Stock are entitled to receive notice of,
attend and vote at all meetings of the shareholders of HyComp. Each share
of common stock carries one vote at such meetings.
Stock options
The Company has established a Compensatory Stock Option Plan (CSO) for
employees, directors and consultants or other advisors. The Company has
issued options to purchase 1,100,000 common shares granted under the CSO
plan to former directors and officers of the Company. The expiration date
for exercising these options has been extended to provide sufficient time
for the former directors and officers to evaluate the effect of the
reverse acquisition (note 1) on the Company. The option price is $.013 per
share and at September 30, 1999, 250,000 options have been exercised,
100,000 options have been cancelled and 750,000 options remain.
26
<PAGE>
7. Income Taxes
Deferred tax assets result from net operating loss carryforwards of
$735,000, as of September 30, 1999 (unaudited) and net operating loss
carryforwards of $115,000 as of December 31, 1998. These operating loss
carryforwards expire in 2006 and 2005, respectively.
The deferred tax assets and valuation allowances are as follows:
<TABLE>
<CAPTION>
Period from
June 25, 1998 Nine months
(inception) to ended
December 31, September 30,
1998 1999
(Unaudited)
<S> <C> <C>
Deferred tax assets resulting from loss carryforwards $ 51,000 $ 326,000
Valuation allowance (51,000) (326,000)
----------------------------------------------------------------------------------------------------
$ -- $ --
====================================================================================================
</TABLE>
The Company has recorded a 100% valuation allowance against the deferred
tax assets due to uncertainties surrounding their realization.
8. Commitments and Contingencies
Commitments
The Company is committed under an operating lease for rental of premises
to May 30, 2002. Future minimum annual payments required over the next
three years are as follows:
2000 $ 49,382
2001 49,382
2002 32,921
As part of the reverse acquisition (note 1), the Company entered into a
management services agreement with Simmonds Capital Limited (SCL), a
controlling shareholder, with the Company paying SCL $15,000 per month for
certain management services.
Legal Contingency
The Company has been advised by MicroTel International, Inc. (MicroTel),
their former parent company, that a claim is being made against MicroTel
for warranty reimbursement for defective products in the amount of
$185,661. MicroTel has agreed to accept responsibility for this claim and
to indemnify the Company should it be found to be liable in any respect.
The Company is advised that the third party and MicroTel are attempting to
negotiate a settlement. Management believes that the outcome of such
actions or proceedings is not expected to have any material adverse effect
on the financial position or results of operations of the Company and
accordingly, no provision has been made in these financial statements.
27
<PAGE>
Part III
Item 1. Index to Exhibits.
The following exhibits are filed as part of this registration statement as
Attachment B hereto:
Exhibit 3.1 Articles of Organization as currently in
effect.
Exhibit 3.2 By-Laws as currently in effect.
Exhibit 4.1 Specimen Certificate for Company Common Stock.
Exhibit 4.2 U.S. $2,000,000 8% Convertible Debenture due
April 15, 2003 issued by HyComp, Inc. to
Simmonds Capital Limited.
Exhibit 4.3 U.S. $500,000 Demand Promissory Note issued
by HyComp, Inc. to Simmonds Capital Limited.
Exhibit 4.4 Warrants for the purchase of up to 1,000,000
shares of Common Stock of HyComp, Inc.
issued by HyComp, Inc. to Simmonds Capital
Limited as of October 14, 1999 for $.01 per
share.
Exhibit 4.5 Warrants for the purchase of up to 1,000,000
shares of Common Stock of HyComp, Inc.
issued by HyComp, Inc. to Simmonds Capital
Limited as of October 14, 2000 for $.01 per
share.
Exhibit 4.6 Warrants for the purchase of up to 1,000,000
shares of Common Stock of HyComp, Inc.
issued by HyComp, Inc. to Simmonds Capital
Limited as of October 14, 2001 for $.01 per
share.
Exhibit 4.7 Warrants for the purchase of up to 1,000,000
shares of Common Stock of HyComp, Inc.
issued by HyComp, Inc. to Simmonds Capital
Limited as of October 14, 2002 for $.01 per
share.
Exhibit 4.8 Warrants for the purchase of up to 1,000,000
shares of Common Stock of HyComp, Inc.
issued by HyComp, Inc. to Simmonds Capital
Limited as of October 14, 2003 for $.01 per
share.
Exhibit 10.1 Stock Purchase Agreement, dated as of
October 14, 1999, by and between Simmonds
Capital Limited and HyComp, Inc.
Exhibit 10.2 Management Services Agreement dated as of
October 14, 1999, by and between Simmonds
Capital Limited and HyComp, Inc.
Exhibit 10.3 Stock Purchase Agreement, dated as of
October 13, 1999, by and among MicroTel
International, Inc., XIT Corporation
(formerly known as XCEL Corporation), a
wholly owned subsidiary of MicroTel
International, Inc. as Seller, each of the
persons listed in Schedule I thereto as
Buyers and John G. Simmonds, as
representative of the Buyers.
Exhibit 10.4 Assignment, Assumption and Indemnification
Agreement dated as of October 13, 1999, by
and between MicroTel International, Inc.,
XIT Corporation and HyComp, Inc.
28
<PAGE>
Exhibit 10.5 Lease for 590 King Street West, Toronto,
dated as of February 1, 1999, by and between
Match Pair Inc. and Chargenet Inc.
Exhibit 21.1 Subsidiaries of the registrant
Exhibit 27.1 Financial Data Schedule
Exhibit 99.1 Proxy Statement, dated February 7, 2000, in respect
of the Special Meeting of Stockholders.
29
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Amendment No. 2 to this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 17, 2000
HYCOMP, INC.
By: /s/ Angelo MacDonald
-------------------------------------
Name: Angelo MacDonald
Title: Director and Chief Executive
Officer
30
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Angelo MacDonald Chief Executive Officer February 17, 2000
- --------------------------- and Director
Angelo MacDonald
/s/ Paul Hickey Chairman and Director February 17, 2000
- ---------------------------
Paul Hickey
/s/ David O'Kell Secretary and Director February 17, 2000
- ---------------------------
David O'Kell
/s/ Larry Fox Director February 17, 2000
- ---------------------------
Larry Fox
/s/ John Simmonds Director February 17, 2000
- ---------------------------
John Simmonds
31
EXHIBIT 3.1
The Commonwealth of Massachusetts
JOHN F. X. DAVOREN
Secretary of the Commonwealth
STATE HOUSE
BOSTON, MASS.
ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
NAME
-----
(including given name in full) POST OFFICE ADDRESS
We, Richard J. Gurski Boyce Farm Road
Lincoln, Massachusetts
Robert L. Lenington Boyce Farm Road
Lincoln, Massachusetts
John P. Driscoll, Jr. 118 Prospect Street
Belmont, Massachusetts
do hereby associate ourselves as incorporators with the intention of forming a
corporation under the provisions of General Laws, Chapter 156B.
1. The name by which the corporation shall be known is:
HyComp, Inc.
2. The purposes for which the corporation is formed are as follows:
To engage in the design, engineering, research, development,
manufacture, sales, construction and installation of computers; computer
systems; software and hardware systems; analog, digital and hybrid computers and
subsystems; components; peripherals; terminals; controls and control systems;
instrumentation and signal conditioners; actuators and other prime movers;
interfacing devices; function modules; components for data acquisition and
distribution systems; data processing systems; manipulation systems;
instrumentation, and industrial process controls.
To design, engineer, manufacture, assemble, market and sell electronic
systems, devices and components for the computer peripheral equipment market,
and generally engage in electrical and electronic engineering, mechanical
engineering, and computer sciences and technology.
<PAGE>
To design, engineer, manufacture and sell proprietary products in the
external memory and other segments of the computer peripheral equipment market,
and to engage in systems design engineering and research development, and to
CONTINUED ON PAGE 2A
NOTE: If provisions for which the space provided under Articles 2, 4, 5
and 6 is not sufficient additions should be set out on continuation
sheets to be numbered 2A, 2B, etc. Indicate under each Article where
the provision is set out. Continuation sheets shall be on 81/2" x 11"
paper and must have a left-hand margin 1 inch wide for binding. Only
one side should be used.
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CLASS OF STOCK WITHOUT PAR VALUE WITH PAR VALUE
NUMBER OF SHARES NUMBER OF SHARES PAR AMOUNT
VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Preferred none none $
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common none 1,000,000 20(cent) $200,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
4. * If more than one class is authorized, a description of each
of the different classes of stock with, if any, the
preferences, voting powers, qualifications, special or
relative rights or privileges as to each class thereof and any
series now established:
none
5. * The restrictions, if any, imposed by the Articles of
Organization upon the transfer of shares of stock of any class
are as follows:
Any stockholder, including the heirs,
assigns, executors or administrators of a deceased
stockholder, desiring to sell or transfer such stock
owned by him or them, shall first offer it to the
corporation through the Board of Directors, in the
manner following:
He shall notify the directors of his desire
to sell or transfer by notice in writing, which
notice shall contain the price at which he is willing
to sell or transfer and the name of one arbitrator.
The directors shall within thirty days thereafter
either accept the offer, or by notice to him in
writing name a second arbitrator and these two shall
name a third. It shall then be the duty of the
arbitrators to ascertain the value of the
<PAGE>
stock, and if any arbitrator shall neglect or refuse
to appear at any meeting appointed by the
arbitrators, a majority may act in the absence of
such arbitrator.
After the acceptance of the offer, or the
report of the arbitrators as to the value of the
stock, the directors shall have thirty days within
which to purchase the same at such valuation, but if
at the expiration of thirty days, the corporation
shall not have exercised the right so to purchase,
the owner of the stock shall be at liberty to dispose
of the same in any manner he may see fit. CONTINUED
ON PAGE 2B
6. * Other lawful provisions, if any, for the conduct and
regulation of the business and affairs of the corporation, for
its voluntary dissolution, or for limiting, defining, or
regulating the powers of the corporation, or of its directors
or stockholders, or of any class of stockholders:
The directors may make, amend, or repeal the
By-Laws in whole or in part, except with respect to
any provision thereof which by law or the By-Laws
requires action by the stockholders.
7. The first meeting of the incorporators was duly held on the
twenty-seventh day of May 1969 at which by-laws of the
corporation were duly adopted and at which the initial
directors, president, treasurer and clerk, whose names are set
out below, were duly elected.
8. The following information shall not for any purpose be treated
as a permanent part of the Articles of Organization of the
corporation.
a. The post office address of the initial principal
office of the corporation in Massachusetts is: Post
Office Box 250, Maynard, Massachusetts
b. The name, residence, and post office address of each
of the initial directors and following officers of
the corporation elected at the first meeting are as
follows:
NAME RESIDENCE POST OFFICE ADDRESS
---- --------- -------------------
President: Richard J. Gurski Boyce Farm Road Same
Lincoln, Massachusetts
Treasurer: Robert L. Lenington Boyce Farm Road
Lincoln, Massachusetts Same
Clerk Arnold J. Grever 60 Birch Hill Road Same
Northboro, Massachusetts
Directors: Richard J. Gurski Boyce Farm Road Same
Lincoln, Massachusetts
<PAGE>
NAME RESIDENCE POST OFFICE ADDRESS
---- --------- -------------------
Robert L. Lenington Boyce Farm Road Same
Lincoln, Massachusetts
Arnold J. Grever 60 Birch Hill Road Same
Northboro, Massachusetts
Norman S. Palazzini 130 Cedar Street Same
Holliston, Massachusetts
c. The date initially adopted on which the corporation's
fiscal year ends is:
December thirty-first
d. The date initially fixed in the by-laws for the
annual meeting of stockholders of the corporation is:
Fourth Monday in April
e. The name and business address of the resident agent, if
any, of the corporation is:
None
*If there are no provisions state "None".
IN WITNESS WHEREOF, and under the penalties of perjury, we, the
above-named INCORPORATORS, hereto sign our names, this twenty-seventh day of May
1969.
/s/ Richard J. Gurski
-----------------------------------
/s/ Robert L. Lenington
-----------------------------------
/s/ John P. Driscoll, Jr.
-----------------------------------
<PAGE>
PAGE 2A
HyCOMP, INC
ARTICLE 2 -- CONTINUED
engage in microelectronic engineering and manufacturing; to own, lease or
otherwise acquire, use or dispose of laboratories, plants, factories, or work
shops for experimenting, manufacturing, distribution and development purposes;
and to do everything necessary for the accomplishment and furtherance of the
powers set forth herein.
<PAGE>
PAGE 2B
HyCOMP, INC
ARTICLE 5 -- CONTINUED
No shares of stock shall be sold or transferred on the books
of the corporation until these provisions have been complied with, but the Board
of Directors may in any particular instance waive the requirement.
<PAGE>
TO CHANGE the number of shares and the par value, if any, of each class of stock
within the corporation fill in the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
WITH PAR VALUE PAR
KIND OF STOCK NO PAR VALUE NUMBER OF SHARES NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON 10,000,000 $0.01
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PREFERRED 2,000 $100.00
- -------------------------------------------------------------------------------------------------------
CHANGE the total to:
- -------------------------------------------------------------------------------------------------------
WITH PAR VALUE PAR
KIND OF STOCK NO PAR VALUE NUMBER OF SHARES NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common 20,000,000 $0.01
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PREFERRED 2,000 $100.00
- -------------------------------------------------------------------------------------------------------
</TABLE>
The forgoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 1568, Section 6 of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this
12th day of October____________, in the year 1999.
/s/ Paul K. Hickey....................................................President/
Paul K. Hickey
..........................................................................Clerk/
[Illegible]
<PAGE>
The Commonwealth of Massachusetts
MICHAEL JOSEPH CONNOLLY
Secretary of State
State House, Boston, Mass.
CERTIFICATE OF CHANGE OF PRINCIPAL OFFICE
General Laws, Chapter 156B, Section 14
I, NICHOLAS F. CARUSO Assistant Clerk of
HyComp, Inc.
(Name of Corporation)
having in principal office at 146 Main Street P.O. Box 250
(Post Office Address)
Maynard, Massachusetts 01754
(Number and Street, City or Town)
do hereby certify that pursuant to General Laws, Chapter 156B, Section 14, the
directors of said corporation have changed the principal office of the
corporation to
75 Union Avenue P.O. Box 49
(Post Office Address)
Sudbury, Massachusetts 01776
(Number and Street, City or Town)
SUBSCRIBED THIS 21st day of May 1981 UNDER THE PENALTIES OF PERJURY.
Clerk or
SIGNATURE /s/ Nicholas F. Caruso Assistant Clerk
----------------------------------
<PAGE>
Amend Article 3 to be and read as follows:
3. The aggregate number of shares which the corporation shall
have authority to issue is 10,002,000 which are divided into 2,000 Preferred
shares of a par value of $100 Dollars each and 10,000,000 Common shares with a
par value of $0.01 per share.
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 1568, Section 6 of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this
17th day of April , in the year 1981.
/s/ Richard J. Gurski................................................President/
Richard J. Gurski Vice President
/s/ Nicholas F. Caruso...................................................Clerk/
Nicholas F. Caruso Assistant Clerk
<PAGE>
Amend Articles 3 and 4 to be and read as follows:
3. The aggregate number of shares which the corporation shall have
authority to issue is 2,002,000 which are divided into 2,000 Preferred shares of
a par value of $100 Dollars each and 2,000,000 Common shares of a par value of
$0.20 Dollars each.
4. The statement of the relative rights, preferences, and limitations
of the shares of each class is as follows:
Each issued and outstanding Preferred share shall entitle the
holder of record thereof to receive out of funds legally available
therefor, when and as declared by the Board of Directors, dividends in
cash at the rate of 8 per centum of the par value thereof per annum,
which shall be payable annually on such date(s) in each calendar year
as the Board of Directors shall deem advisable, and which shall be
declared and set apart or paid before dividends of any kind may be
declared upon the Common shares and before distributions of any kind
may be made upon the issued and outstanding Common shares. Said annual
dividends upon the issued and outstanding Preferred shares shall be
cumulative and shall be deemed to accrue from and after the date of
issuance, whether earned, or whether there be funds legally available
therefor, or whether said dividends shall have been declared. Whenever
full dividends upon the issued and outstanding Preferred shares as
aforesaid for all past annual dividend periods shall have been paid,
without interest, and whenever full dividends upon the issued and
outstanding Preferred shares as aforesaid for the then current annual
dividend periods shall have been paid, without interest, and whenever
full dividends upon the issued and outstanding Preferred shares as
aforesaid for the then current annual dividend period shall have been
declared and either paid or a sum sufficient for the payment thereof
set aside in full, without interest, the Board of Directors may
declare, set aside, or pay additional cash dividends, and/or may make
share distributions of the authorized but unissued Common shares of the
corporation and/or its treasury Common shares, if any, and/or may make
distributions of bonds or property of the corporation, including the
shares or bonds of other corporations. The holders of record of the
issued and outstanding Common shares shall be entitled in respect of
said Common shares exclusively to receive any such additional cash
dividends which may be declared and/or any such distributions which may
be made, each issued and outstanding Common share entitling the holder
of record thereof to receive an equal proportion of said dividends
and/or distributions. Any reference to "distributions" in this
paragraph contained shall not be deemed to include any distributions
made in connection with any liquidation, dissolution, or winding up of
the corporation, whether voluntary or involuntary; nor shall any such
reference to "distributions" in relation to issued and outstanding
shares be deemed to limit, curtail, or divest the authority of the
Board of Directors to make any proper distributions, including
distribution of authorized but unissued Common shares, in relation to
its treasury Common shares, if any.
The corporation may, through its Board of Directors and in
conformity with the provisions of the General Laws, Chapter 156 B, at
any time or from time to time, redeem all or any part of the issued and
outstanding Preferred shares by paying the holders of records thereof,
out of funds legally therefor, the par value for each such share to be
<PAGE>
redeemed plus an amount equivalent to all unpaid annual dividends,
whether or not earned or declared, which have accrued to the dated
fixed for redemption. In the event of such redemption, a notice fixing
the time and place of redemption shall be mailed not less than thirty
days prior to the date so fixed to each holder of record of the
Preferred shares to be redeemed at his address as it appears on the
record of shareholders. In the event that less than all of the issued
and outstanding Preferred shares are to be redeemed, the shares to be
redeemed shall be chosen by lot pro rata, or by such equitable method
as the Board of Directors may determine. On and after the date fixed
for such redemption, the holders of the shares so called for redemption
shall not be entitled to any dividends and shall not have any rights or
interests as holders of said shares except to receive the payment or
payments herein designated, without interest thereon, upon presentation
and surrender of their certificates therefor.
In the event of any liquidation, dissolution, or winding up of
the affairs of the corporation, whether voluntary or involuntary, each
issued and outstanding Preferred share shall entitle the holder of
record thereof to payment at the rate of the par value thereof plus an
amount equal to all unpaid annual dividends, without interest, whether
or not earned or declared, which have accrued thereon to the date of
payment before any payment or distribution of the net assets of the
corporation (whether stated capital or surplus) shall be made to or set
apart for the holders of record of the issued and
CONTINUED PAGES 2a, b and c.
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 1568, Section 6 of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this
18th day of December , in the year 1979
/s/ Richard J. Gurski..................................................President
/s/ Norman S. Palazzini....................................................Clerk
<PAGE>
outstanding Common shares in respect of said Common shares. After
setting apart or paying in full the preferential amounts aforesaid to
the holders of record of the issued and outstanding Preferred shares;
the remaining net assets (whether stated capital or surplus), if any,
shall be distributed exclusively to the holders of records of the
issued and outstanding Common shares, each issued and outstanding
Common share entitling the holder of record thereof to receive an equal
proportion of said remaining net assets. If the net assets of the
corporation shall be insufficient to pay in full the preferential
amounts among the holders of the Preferred shares as aforesaid, then
each issued and outstanding Preferred share shall entitle the holder of
record thereof to an equal proportion of said net assets, and the
holders of the Common shares shall in no event be entitled to
participate in the distribution of said net assets in respect of their
Common shares. Without excluding any other proceeding which does not in
fact effect a liquidation, dissolution, or winding up of the
corporation, a merger or consolidation of the corporation into or with
any other corporation, a merger of any other corporation into the
corporation, or a sale, lease, mortgage, pledge, exchange, transfer, or
other disposition by the corporation of all or substantially all of its
assets shall not be deemed, for the purposes of this paragraph, to be a
liquidation, dissolution, or winding up of the corporation.
On and after December 31, 1979, and subject to any conditions,
herein contained, any or all of the Preferred shares of the corporation
shall be convertible at any time, and from time to time, at the option
of any one or more of the holders of record thereof into fully paid and
nonassessable Common shares of the corporation upon surrender to the
corporation or its designee of the certificate or certificates
representing the Preferred share or shares to be converted, together
with a written notice of election to convert, and, upon receipt by the
corporation or its designee of such notice and of such surrendered
certificate or certificates with any appropriate endorsement thereon as
may be prescribed by the Board of Directors, any such holder shall be
entitled to receive a certificate or certificates representing the
Common share(s) into which such Preferred share is convertible, and any
such holder shall be deemed to be a holder of record of said Common
shares(s) as of the time of said receipt by the corporation or its
designee. The basis for such conversion shall be 100 Common shares(s)
for each Preferred share which is converted. In connection with
effecting any transfer to the corporation for cancellation of any
Preferred shares upon conversion of the same into Common shares, the
corporation may, but shall not be obliged to, issue a certificate or
certificates for fractions of a Common share. Any Preferred shares
which have been converted shall be cancelled and shall not be reissued.
Except as such requirement may otherwise be dispensed with by law, the
Board of Directors of the corporation shall at all times reserve a
sufficient number of authorized but unissued Common shares, which shall
be issued only in satisfaction of
2a
<PAGE>
the conversion rights and privileges aforesaid. Whenever the
corporation shall determine to redeem any or all of the outstanding
Preferred shares, the notice of redemption in that connection shall
include a statement to the effect that the rights and privileges of
each holder of said Preferred shares to convert the same will cease at
the close of business on the day prior to the date of redemption
specified in the notice of redemption. Whenever the corporation shall
issue any shares (other than the Preferred shares aforesaid), bonds,
securities, or obligations which are convertible into or changeable for
Common shares, shall issue any warrants, options or similar rights
which entitle the holders thereof to subscribe for purchase, or
otherwise acquire Common shares, shall subdivide, combine, or otherwise
change its Common shares, or shall take or permit to be taken any other
action which will result in the dilution of the conversion rights and
privileges of the Preferred shares, the Board of Directors of the
corporation shall forthwith cause to be made any such adjustment on the
basis of conversion as it shall determine to be necessary to preserve
to said holders of the Preferred shares those rights and privileges
which are substantially proportionate to the rights and privileges of
the Preferred shares existing prior to said event or events. After any
reorganization or any consolidation or merger of the corporation or any
sale, lease, mortgage, pledge, exchange, transfer, or other disposition
of all or substantially all of the assets of the corporation, the
holder of the Preferred shares shall thereafter be entitled to receive,
upon conversion, the kind and amount of shares or other securities or
property which they would have been entitled to receive had they
converted such Preferred share into Common shares of the corporation as
of the record date for the determination of Common shareholders
entitled to cast their votes for or against or to express any dissent
to such reorganization, consolidation, merger, sale, lease, exchange,
or other disposition; and, after the happening of one or more of the
aforesaid events, if any, the rights of such holders of the Preferred
shares with respect to the adjustment of basis of conversion shall be
appropriately continued and preserved in order to afford, as nearly as
possible, protection against dilution of the conversion rights and
privileges comparable to those conferred herein. In the event of a
judicial or non-judicial dissolution of the corporation, the conversion
rights and privileges of the holders of the Preferred shares shall
terminate on a date, as fixed by the Board of Directors of the
corporation, not more than 50 days and not less than 10 days before the
date of such dissolution. The reference to Common shares herein shall
be deemed to include shares of any
2b
<PAGE>
class into which said Common shares may be changed. Notwithstanding any
provision of this certificate of incorporation or of law, by reason of
which limited or unlimited preemptive rights are otherwise conferred
upon the holders of any class of shares of the corporation, no
preemptive right shall accrue solely by reason of the issuance by the
corporation of shares in satisfaction of the conversion rights and
privileges of the holders of the Preferred shares as aforesaid.
Each issued and outstanding Common share shall entitle the
holder thereof to full voting power. Except as any provision of law may
otherwise require, no Preferred share shall entitle the holder thereof
to any voting power, to participate in any meeting of shareholders, or
to have notice of any meeting of shareholders.
2c
<PAGE>
RESOLVED, that Article 5 of the Corporation's Articles of
Organization be, and it hereby is, amended by striking said Article 5
in its entirety and not substituting any provision in its place.
The forgoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 1568, Section 6 of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this
24th day of April , in the year 1972.
/s/ Robert L. Lenington...............................................President
Robert L. Lenington
/s/ Arnold J. Grever......................................................Clerk
Arnold J. Grever
EXHIBIT 3.2
BY-LAWS
OF
HYCOMP, INC.
ARTICLE 1
STOCKHOLDERS
1. Annual Meeting. The annual meeting of stockholders shall be held on the
fourth Monday in July in each year at 3:00 p.m., unless a different hour is
fixed by the Directors or the President and stated in the notice of the meeting.
The purposes for which the annual meeting is to be held, in addition to those
prescribed by law, by the Articles of Organization or by these By-Laws, may be
specified by the Directors or the President. If no annual meeting is held in
accordance with the foregoing provisions, a special meeting may be held in lieu
thereof, and any action taken at such meeting shall have the same effect as if
taken at the Annual Meeting.
2. Special Meeting. Special meetings of stockholders may be called by the
President or by the Directors. Upon written application of one or more
stockholders who hold at least 10% of the capital stock entitled to vote at the
meeting, special meetings shall be called by the Clerk, or in the case of the
death, absence, incapacity or refusal of the Clerk, by any other officer. The
call for the meeting shall state the date, hour and place and the purposes of
the meeting.
3. Place of Meeting. All meetings of stockholders shall be held at the principal
office of the corporation unless a different place is fixed by the Directors of
the President and stated in the notice of the meeting.
4. Notice of Meetings. A written notice of every meeting of stockholders,
stating the place, date and hour thereof, and the purposes for which the meeting
is to be held, shall be given by the Clerk or by the person calling the meeting
at least seven days before the meeting to each stockholder entitled to vote
thereat and to each stockholder, who by law, by the Articles of Organization, or
by these By-laws is entitled to such notice, by leaving such notice with him or
at his residence or usual place of business, or by mailing it postage prepaid
and addressed to such stockholders at his address as it appears upon the books
of the corporation. No notice need be given to any stockholder if a written
waiver of notice, executed before or after the meeting by the stockholder or his
attorney thereunto authorized, is filed with the records of the meeting.
5. Quorum. The holders of a majority in interest of all stock issued,
outstanding and entitled to vote at a meeting shall constitute a quorum, but a
lesser number may adjourn any meeting from time to time without further notice;
except that, if two or more classes of stock are outstanding and entitled to
vote as separate classes, then in the case of each such class, a quorum shall
consist of the holders of a majority in interest of the stock of that class
issued, outstanding and entitled to vote.
-1-
<PAGE>
6. Voting and Proxies. Each stockholder shall have one vote for each share of
stock entitled to vote held by him of record according to the records of the
corporation, unless otherwise provided by the Articles of Organization.
Stockholders may vote either in person or by written proxy dated not more than
six months before the meeting named therein. Proxies shall be filed with the
Clerk of the meeting, or of any adjournment thereof, before being voted. Except
as otherwise limited therein, proxies shall entitle the persons named therein to
vote at any adjournment of such meeting but shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by one of them unless at or prior
to exercise of the proxy the corporation receives a specific written notice to
the contrary from any of them. A proxy purporting to be executed by or on behalf
of a stockholder shall be deemed valid unless challenged at or prior to its
exercise.
7. Action at Meeting. When a quorum is present, the holders of a majority of the
stock present or represented and voting on a matter, (or if there are two or
more classes of stock entitled to vote as separate classes, then in the case of
each such class, the holders of a majority of the stock of that class present or
represented and voting on a matter) except where a larger vote is required by
law, the Articles of Organization or these By-Laws, shall decide any matter to
be voted on by the stockholders. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election. No ballot shall be required for such election unless requested
by a stockholder present or represented at the meeting and entitled to vote in
the election. The corporation shall not directly or indirectly vote any share of
its stock.
8. Action Without Meeting. Any action to be taken by stockholders may be taken
without a meeting if all stockholders entitled to vote on the matter consent to
the action by writing filed with the records of the meetings of stockholders.
Such consent shall be treated for all purposes as a vote at a meeting.
ARTICLE II
DIRECTORS
1. Powers. The business of the corporation shall be managed by a Board of
Directors who may exercise all the powers of the corporation except as otherwise
provided by law, by the Articles of Organization or by these By-Laws. In the
event of a vacancy in the Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the full Board until the
vacancy is filled.
2. Election. A Board of Directors of such number, not less than three nor more
than nine, as shall be fixed by the stockholders, shall be elected by the
stockholders at the annual meeting.
3. Vacancies. Any vacancy in the Board of Directors, other than a vacancy
resulting from the enlargement of the Board, may be filled by the stockholders
or, in the absence of stockholder action, by the Directors.
4. Enlargement of the Board. The number of the Board of Directors may be
increased and one or more additional Directors elected at any special meeting of
the stockholders or by the Directors by vote of a majority of the Directors then
in office.
-2-
<PAGE>
5. Tenure. Except as otherwise provided by law, by the Articles of Organization
or by these By-Laws, Directors shall hold office until the next annual meeting
of stockholders and thereafter until their successors are chosen and qualified.
Any Director may resign by delivering his written resignation to the corporation
at its principal office or to the President, Clerk or Secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
6. Removal. A Director may be removed from office (a) with or without cause by
vote of a majority of the stockholders entitled to vote in the election of
Directors, provided that the Directors of a class elected by a particular class
of stockholders may be removed only by the vote of the holders of a majority of
the shares of such class, or (b) for cause by vote of a majority of the
Directors then in office. A Director may be removed for cause only after
reasonable notice and opportunity to be heard before the body proposing to
remove him.
7. Meetings. Regular meetings of the Directors may be held without call or
notice at such places and at such times as the Directors may from time to time
determine, provided that any Director who is absent when such determination is
made shall be given notice of the determination. A regular meeting of the
Directors may be held without a call or notice at the same place as the annual
meeting of stockholders, or the special meeting held in lieu thereof, following
such meeting of stockholders.
Special meetings of the Directors may be held at any time and place designated
in a call by the President, Treasurer or three or more Directors.
8. Notice of Meetings. Notice of all special meetings of the Directors shall be
given to each Director by the Secretary, or if there be no Secretary, by the
Clerk, or in the case of the death, absence, incapacity or refusal of such
persons, by the officer of one of the Directors calling the meeting. Notice
shall be given to each Director in person or by telephone or by telegram sent to
his business or home address at least twenty-four hours in advance of the
meeting or by written notice mailed to his business or home address at least
forty-eight hours in advance of the meeting. Notice need not be given to any
Director if a written waiver of notice, executed by him before or after the
meetings, is filed with the records of the meeting, or to any Director who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him. A notice or waiver of notice of a Directors' meeting need
not specify the purposes of the meeting.
9. Quorum. At any meeting of the Directors, a majority of the Directors then in
office shall constitute a quorum. Less than a quorum may adjourn any meeting
from time to time without further notice.
10. Action at Meeting. At any meeting of the Directors at which a quorum is
present, the vote of a majority of those present, unless a different vote is
specified by law, by the Articles of Organization, or by these By-Laws, shall be
sufficient to decide such matter.
11. Action by Consent. Any action by the Directors may be taken without a
meeting if a written consent thereto is signed by all the Directors and filed
with the records of the Directors' meetings. Such consent shall be treated as a
vote of the Directors for all purposes.
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<PAGE>
ARTICLE III
OFFICERS
1. Enumeration. The officers of the corporation shall consist of a Chairman, a
President, a Treasurer, a Clerk and such other officers, including one or more
Vice Presidents, Assistant Treasurer, Assistant Clerk and Secretary, as the
Directors may determine.
2. Election. The Chairman, President, Treasurer and Clerk shall be elected
annually by the Directors at their first meeting following the annual meeting of
stockholders. Other officers may be chosen by the Directors at such meeting or
at any other meeting.
3. Qualification. The Chairman will be a Director. The President may, but need
not be a Director. Any two or more offices may be held by the same person,
provided that the President and Clerk shall not be the same person. The Clerk
shall be a resident of Massachusetts unless the corporation has a resident agent
appointed for the purpose of service of process. Any officer may be required by
the Directors to give bond for the faithful performance of his duties to the
corporation in such amount and with such sureties as the Directors may
determine.
4. Tenure. Except as otherwise provided by law, by the Articles of Organization
or by these By-Laws, the Chairman, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the annual meeting of
stockholders and thereafter until his successor is chosen and qualified; and all
other officers shall hold office until the first meeting of the Directors
following the annual meeting of stockholders, unless a shorter term is specified
in the vote choosing or appointing them. Any officer may resign by delivering
his written resignation to the corporation at its principal office or to the
Chairman, President, Clerk or Secretary, and such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
5. Removal. The Directors may remove any officer with or without cause by a vote
of majority of the entire number of Directors then in office, provided, that an
officer may be removed for cause only after reasonable notice and opportunity to
be heard by the Board of Directors prior to action thereon.
6. Chairman. The Chairman shall be the Chief Executive Officer of the
corporation and shall, subject to the direction of the Directors, have overall
responsibility for the management of the corporation and the establishment of
corporate plans and policies. He shall preside at all meetings of the
stockholders and Board of Directors.
7. President. The President shall be the Chief Operating Officer of the
corporation and shall, subject to the direction of the Chairman, be responsible
for the management of all operating units of the corporation. He shall act as
Chief Executive Officer in the absence of the Chairman.
8. Treasurer. The Treasurer shall, subject to the direction of the Directors,
have general charge of the financial affairs of the corporation and shall cause
to be kept accurate books of
-4-
<PAGE>
account. He shall have custody of all funds, securities, and valuable documents
of the corporation, except as the Directors may otherwise provide.
9. Clerk. The Clerk shall keep a record of the meetings of stockholders. Unless
a Transfer Agent is appointed, the Clerk shall keep or cause to be kept in
Massachusetts, at the principal office of the corporation or at his office, the
stock and transfer records of the corporation, in which are contained the names
of all stockholders and the record address, and the amount of stock held by
each. In case a Secretary is not elected, the Clerk shall keep a record of the
meetings of the Directors.
10. Other Powers and Duties. Each officer shall, subject to these By-Laws, have
in addition to the duties and powers specifically act forth in these By-Laws,
such duties and powers as are customarily incident to his office, and such
duties and powers as the Directors may from time to time designate.
ARTICLE IV
CAPITAL STOCK
1. Certificates of Stock. Each stockholder shall be entitled to a certificate of
the capital stock of the corporation in such form as may be prescribed from time
to time by the Directors. The certificate shall be signed by the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, but when a
certificate is countersigned by a transfer agent or a registrar, other than a
Director, officer or employee of the corporation, such signatures may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same affect
as if he were such officer at the time of its issue. Every certificate for
shares of stock which are subject to any restriction on transfer pursuant to the
Articles of Organization, the By-Laws or any agreement to which the corporation
is a party, shall have the restriction noted conspicuously on the certificate
and shall also set forth on the face or back either the full text of the
restriction or a statement of the existence of such restriction and a statement
that the corporation will furnish a copy to the holder of such certificate upon
written request and without charge. Every certificate issued when the
corporation is authorized to issue more than one class or series of stock shall
set forth on its face or back either the full text of the preferences, voting
powers, qualifications and special and relative rights of the shares of each
class and series authorized to be issued or a statement of the existence of such
preferences, powers, qualifications and rights, and a statement that the
corporation will furnish a copy thereof of the holder of such certificate upon
written request and without charge.
2. Transfers. Any stockholder, including the heirs, assigns, executors or
administrators of a deceased stockholder, desiring to sell or transfer such
stock owned by him or them, shall first offer it to the corporation through the
Board of Directors, in the manner following:
He shall notify the directors of his desire to sell or transfer by notice in
writing, which notice shall contain the price at which he is willing to sell or
transfer and the name of one arbitrator. The directors shall within thirty days
thereafter either accept the offer, or by notice to him in writing name a second
arbitrator and these two shall name a third. It shall then be the duty of the
arbitrators to ascertain the value of the stock, and if any arbitrator shall
neglect or refuse to
-5-
<PAGE>
appear at any meeting appointed by the arbitrators, a majority may act in the
absence of such arbitrator.
After the acceptance of the offer, or the report of the arbitrators as to the
value of the stock, the directors shall have thirty days within which to
purchase the same at such valuation, but if a the expiration of thirty days, the
corporation shall not have exercised the right so to purchase, the owner of the
stock shall be at liberty to dispose of the same in any manner he may see fit.
No shares of stock shall be sold or transferred on the books of the corporation
until these provisions have been complied with, but the Board of Directors may
in any particular instance waive the requirement.
Except as may be otherwise required by law, by the Articles of Organization or
by these By-Laws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote with respect thereto,
regardless of any transfer, pledge or other disposition of such stock, until the
shares have been transferred on the books of the corporation in accordance with
the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the corporation of his post
office address.
3. Record Date. The Directors may fix in advance a time of not more than sixty
days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend or the making of any distribution to stockholders or the
last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date for determining the stockholders
having the right to notice of and to vote at such meeting, and any adjournment
thereof, or the right to receive such dividend or distribution or the right to
give such consent or dissent. In such case only stockholders of record on such
record date shall have such right, notwithstanding any transfer of stock on the
books of the corporation after the record date. Without fixing such record date,
the Directors may for any of such purposes close the transfer books for all or
any part of such period.
4. Replacement of Certificates. In case of the alleged loss or destruction or
the mutilation of a certificate of stock, a duplicate certificate may be issued
in place thereof, upon such terms as the Directors may prescribe.
ARTICLE V
MISCELLANEOUS PROVISIONS
1. Fiscal Year. Except as from time to time otherwise determined by the
Directors, the fiscal year of the corporation shall be the twelve months ending
December thirty-first.
2. Seal. The seal of the corporation shall, subject to alteration by the
Directors, bear its name, the word "Massachusetts," and the year of its
incorporation.
3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds,
notes and other obligations authorized to be executed by an officer of the
corporation in its behalf shall be signed by the President or the Treasurer
except as the Directors may generally or in particular cases otherwise
determine.
-6-
<PAGE>
4. Voting of Securities. Except as the Directors may otherwise designate, the
President or Treasurer may waive notice of, and appoint any person or persons to
act as proxy or attorney in fact for this corporation (with or without power of
substitution) at any meeting of stockholders of shareholders of any other
corporation or organization, the securities of which may be held by this
corporation.
5. Corporate Records. The original, or attested copies, of the Articles of
Organization, By-Laws and records of all meetings of the incorporators and
stockholders, and the stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by each
shall be kept in Massachusetts at the principal office of the corporation, or at
an office of its transfer agent or the Clerk. Said copies and records need not
all be kept in the same office. They shall be available at all reasonable times
to the inspection of any stockholder for any proper purpose but not to secure a
list of stockholders for the purpose of selling said list or copies thereof or
of using the same for a purpose other than in the interest of the applicant, as
a stockholder, relative to the affairs of the corporation.
6. Article of Organization. All references in these By-Laws to the Articles of
Organization shall be deemed to refer to the Articles of Organization of the
corporation, as amended and in effect from time to time.
7. Amendments. These By-Laws may at any time be amended by vote of the
stockholders, provided that notice of the substance of the proposed amendment is
stated in the notice of the meeting, or may be amended by vote of a majority of
the Directors then in office, except that no amendment may be made by the
Directors which changes the date of the annual meeting of stockholders or which
alters the provisions of these By-Laws. No change in the date of the annual
meeting may be made within sixty days before the date fixed in these By-Laws.
Not later than the time of giving notice of the meeting of stockholders next
following the making, amending or repealing by the Directors of any By-Laws,
notice thereof stating the substance of such change shall be given to all
stockholders entitled to vote on amending the By-laws.
ARTICLE VI
There is no Article VI in existence.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OTHERS
1. Definitions. For purposes of this Article 7:
(a) "Director/Officer" means any person who is serving or has at any time
after the adoption of this Article 7 served as a Director, officer, employee or
other agent of the corporation appointed or elected by the Board of Directors or
the stockholders of the corporation, or who is serving or has so served at the
request of the corporation as a Director, officer, trustee, principal, partner,
employee or other agent of any other corporation.
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<PAGE>
(b) "Proceeding" means any action, suit or proceeding, civil or criminal,
brought or threatened in or before any court, tribunal, administrative or
legislative body or agency.
(c) "Expense" means any fine or penalty, and any liability fixed by a
judgment, order, decree or award in a Proceeding, any amount reasonably paid in
settlement of a Proceeding and any professional fees and other disbursements
reasonably incurred in connection with a Proceeding
2. Right to Indemnification. Except as limited by law or as provided in Sections
3 and 4 of this Article 7, each Director/Officer (and his heirs and personal
representatives) shall be indemnified by the corporation against all Expenses
incurred by him in connection with each Proceeding in which he is involved as a
result of his serving or having served as a Director/Officer.
3. Indemnification not Available. No indemnification shall be provided to a
Director/Officer with respect to a Proceeding as to which it shall have been
adjudicated that he did not act in good faith in the reasonable belief that his
action was in the best interests of the corporation.
4. Compromise or Settlement. In the event that a Proceeding is compromised or
settled so as to impose any liability or obligation on a Director/Officer or
upon the corporation, no indemnification shall be provided as to said
Director/Officer with respect to such Proceeding if it is a determined (i) by a
majority of the disinterested Directors then in office or (ii) in the absence of
any disinterested Directors or at the request of a majority of the disinterested
Directors, by the holders of a majority of the outstanding stock entitled to
vote for Directors, voting as a single class, exclusive of any stock owned by
any interested Director/Officer, that with respect to the matter involved in
such Proceeding said Director/Officer did not act in good faith in the
reasonable belief that his action was in the best interests of the corporation.
In lieu of submitting the question to a vote of disinterested Directors or
stockholders, as provided above, the corporation may deny indemnification to
said Director/Officer with respect to such Proceeding, if there has been
obtained at the request of a majority of the Directors then in office, an
opinion in writing of independent legal counsel, other than counsel to the
corporation, to the effect that said Director/Officer did not act in good faith
in the reasonable belief that his action was in the best interests of the
corporation.
5. Advances. To the extent authorized by the Board of Directors, the corporation
may pay sums on account of indemnification in advance of a final disposition of
a Proceeding, upon receipt of an undertaking by the Director/ Officer to repay
such sums if it is subsequently established that he is not entitled to
indemnification pursuant to Sections 7.3 and 7.4 hereof.
6. Not Exclusive. Nothing in this Article 7 shall limit any lawful rights to
indemnification existing independently of this Article 7.
7. Insurance. The provisions of this Article 7 shall not limit the power of the
Board of Directors to authorize the purchase and maintenance of insurance on
behalf of any Director/Officer against any Expense, whether or not the
corporation would have the power to indemnify him against such Expense under
this Article 7.
-8-
EXHIBIT 4.1
FORM OF SPECIMEN STOCK CERTIFICATE OF HYCOMP, INC.
Number Shares
- -------- --------
HYCOMP, INC.
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
COMMON STOCK
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
This Certifies That ______________ is the owner of _______________
CUSIP 448615 10 4
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE
OF ONE ($.01) CENT PER SHARE OF
HYCOMP, INC.
(herein called the "Corporation"), transferable on the books of the Corporation
by the holder hereof in person or by duly authorized attorney upon surrender of
the certificate properly endorsed.
This Certificate is not valid unless countersigned by the Transfer Agent
and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[Corporate Seal of HYCOMP, Inc.]
- ---------------- ------------------
Secretary President
<PAGE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-- as tenants in common UNIF GIFT MIN ACT-- Custodian
------------------
TEN ENT-- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants, with right of under Uniform Gifts
survivorship and not as tenants to Minors
in common Act________________
Additional abbreviations may also (State)
be used through not in the above list.
FOR VALUE RECEIVED ...............hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
| |
| |
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
of the common stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
Attorney
- --------------------------------------------------------------------------------
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
-------------------------
X
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NOTICE: The Signature to this
assignment must correspond with
the name as written upon the
face of the Certificate in every
particular, without alteration
or enlargement, or any change
whatever.
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THIS SPACE MUST NOT BE COVERED IN ANY WAY
EXHIBIT 4.2
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND NEITHER THEY NOR ANY INTERESTS THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS IS EFFECTIVE AND CURRENT WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE, TRANSFER, PLEDGE OR OTHER
DISPOSAL.
No. 1
8% CONVERTIBLE DEBENTURE DUE APRIL 15, 2003
THIS 8% CONVERTIBLE DEBENTURE is a duly authorized issue of Debentures
of HYCOMP, INC., a corporation organized under the laws of the Commonwealth of
Massachusetts and having its principal address at 67 Wall Street, Suite 2411,
New York, New York 10005 (the "Company"), designated as its 8% Convertible
Debenture due April 15, 2003 in an aggregate principal amount not exceeding Two
Million United States Dollars (U.S. $2,000,000) (the "Debenture").
FOR VALUE RECEIVED, the Company promises to pay to the order of
SIMMONDS CAPITAL LIMITED, having an address at 580 Granite Court, Pickering,
Ontario, L1W-3Z2, CANADA, the holder hereof, or its registered assigns (the
"Holder"), the principal sum of Two Million United States Dollars (U.S.
$2,000,000) on April 15, 2003 (the "Maturity Date") and to pay interest on the
principal sum outstanding under the Debenture, at the rate of 8% per annum.
Payments of Two Hundred Thousand United States Dollars (U.S. $200,000)
constituting principal and interest in arrears shall be payable quarterly on
October 15th, January 15th, April 15th and July 15th of each year, commencing on
October 15, 2000 (each such date, a "Quarterly Payment Date") with the remainder
outstanding due on the Maturity Date. Interest shall be calculated based on a
360 day year with 12 months of 30 days each. Interest shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance and shall continue until the following
Quarterly Payment Date. The interest so payable will be paid to the person in
whose name the Debenture is registered on the records of the Company regarding
registration and transfers of the Debentures (the "Debenture Register") at the
close of business on the record date for interest payable on such Quarterly
Payment Date. The record date for any interest payment is the close of business
on the date fifteen days prior to the Quarterly Payment Date, unless such date
shall not be a business day, in which case on the next preceding business day.
The Company shall be entitled to withhold from all payments of interest on the
Debenture any amounts required to be withheld under the applicable provisions of
<PAGE>
the United States or Canadian income tax laws as evidenced by an opinion of
counsel of the Company.
The principal and interest of the Debenture are payable in United
States Dollars at the address last appearing on the Debenture Register of the
Company as designated in writing by the Holder hereof from time to time.
The Debenture is subject to the following additional provisions:
1. Definitions. For purposes hereof, the following terms shall
have the following meanings:
"Common Stock" shall mean the common shares, par value $0.01,
of the Company and any other security into which such common stock shall be
converted or for which it shall be exchanged pursuant to any recapitalization,
reorganization, merger, consolidation, share exchange or similar transaction.
"Conversion Notice" shall have the meaning set forth in
Paragraph 2(c)
"Conversion Rate" shall have the meaning set forth in
Paragraph 2(b).
"Equity Offerings" shall mean the issuance or sale by the
Company of any Common Stock or securities which are convertible into or
exchangeable for Common Stock, or any warrants or other rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock or any such
convertible or exchangeable securities (other than shares or options issued or
which may be issued pursuant to the Company's employee or director option plans
or shares issued upon exercise of options, warrants or rights outstanding on the
Closing Date and listed in the Company's filings with the SEC).
"Event of Default" shall have the meaning set forth in
Paragraph 10.
"Holder Conversion Date" shall have the meaning set forth in
Paragraph 2(c)(i).
"Issue Date" shall mean the date of original issuance of the
Debenture.
"Market Price" shall mean, as of any relevant date, the
closing price per share of Common Stock on the principal United States Stock
Exchange (including the Nasdaq Stock Market) on which the Common Stock is then
listed, or, if the Common Stock is not then listed on a stock exchange but is
quoted on the Nasdaq Bulletin Board, the lowest price per share for the Common
Stock quoted thereon on such date.
"Outstanding Amount" shall mean the principal sum outstanding
under the Debenture and all accrued but unpaid interest thereon to the most
recent Quarterly Payment Date.
"Person" shall mean an individual, partnership, venture,
unincorporated association, organization, syndicate, corporation, limited
liability company, or other entity, trust
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<PAGE>
and trustee, executor, administrator or other legal or personal representative
or any government or any agency or political subdivision thereof.
"Quarterly Payment Date" shall have the meaning set forth in
the Preamble.
"Regulation D" shall mean Regulation D promulgated under the
Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
2. Conversion.
a. Holder's Right to Convert. The Debenture shall be convertible at
any time and from time to time after the Issue Date, in whole or in part, at the
option of the Holder hereof, into fully paid, validly issued and nonassessable
shares of Common Stock.
b. Accrued But Unpaid Interest. Notwithstanding anything in the
Debenture to the contrary, the Outstanding Amount of the Debenture on any Holder
Conversion Date shall include, without limitation, all accrued but unpaid
interest under the Debenture through such date.
c. Conversion Price for Holder Converted Shares. The Outstanding
Amount of the Debenture shall be convertible into the number of validly issued,
fully paid and non-assessable shares of Common Stock determined by dividing the
aggregate amount of the Debenture being converted by $1.00, as adjusted pursuant
to Section 3.
The number of shares of Common Stock into which the Outstanding Amount
of the Debenture may be converted pursuant to this paragraph is herein referred
to as the "Conversion Rate."
d. i. Mechanics of Conversion by Holder. In order to convert the
Debenture (in whole or in part) into shares of Common Stock, the Holder shall
surrender the Debenture, duly endorsed, to the Company, and shall give written
notice in the form of Exhibit A hereto (the "Conversion Notice") to the Company
that the Holder elects to convert all or the portion of the Outstanding Amount
of the Debenture specified therein (with any such conversion being first applied
to accrued but unpaid interest and then to principal), which notice and election
shall be irrevocable by the Holder unless the Company shall default in or fail
to fulfill any or all of its obligations arising hereunder or otherwise by
reason of such notice or election, in which case, in addition to and not in lieu
of any and all other rights and remedies to which the Holder may thereby be and
become entitled, such notice and election, by further notice to the Company may
be revoked and rescinded at the election of the Holder exercised in its sole
discretion; provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion
unless the Debenture with evidence of the principal amount hereof to be
converted is delivered to the Company as provided above. The effective date and
the time of the conversion shall be the close of business on the date that the
Conversion Notice is actually received by the Company or, if the date of
delivery is not a business day, the next succeeding business day.
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<PAGE>
ii. Issuance of Certificates. Following any Conversion Notice
given by the Holder, the Company shall cause the Company's transfer agent for
the Common Stock to issue and deliver as promptly as practicable to the Holder
or to its designee, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled, together with a Debenture
for the principal amount not submitted for conversion or forced to convert, as
the case may be. The person entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the record holder
of such shares of Common Stock on the Holder Conversion Date.
3. Adjustment of Conversion Rate. The number and kind of
securities issuable upon the conversion of this Debenture and the Conversion
Rate shall be subject to adjustment from time to time upon the happening of
certain events, in each case occurring on and after the date hereof, as
hereinafter described.
a. Adjustment. The number and kind of securities issuable upon
the conversion of this Debenture and the Conversion Rate shall be subject to
adjustment as follows:
i. In case the Company shall (1) pay a dividend on its
outstanding Common Stock in shares of Common Stock or make a distribution to all
holders of its outstanding Common Stock in shares of Common Stock, (2) subdivide
its outstanding shares of Common Stock into a greater number of shares of Common
Stock, (3) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock or (4) issue by reclassification of its shares of
Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of shares of Common Stock
issuable upon conversion hereof immediately prior thereto shall be adjusted so
that the Holder upon conversion hereof shall be entitled to receive the kind and
number of such shares of Common Stock or other securities of the Company which
it would have owned or have been entitled to receive after the happening of any
of the events described above had this Debenture been converted immediately
prior to the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (i) shall become effective on the
date of the dividend payment, subdivision, combination or issuance retroactive
to the record date with respect thereto, if any, for such event. Such adjustment
shall be made successively whenever such an issuance is made.
ii. In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of its indebtedness or assets or securities
other than such Common Stock (excluding regular cash dividends and dividends or
distributions referred to in paragraph (i) above) or rights, options or
warrants, or convertible or exchangeable securities, containing the right to
subscribe for or purchase shares of Common Stock, then in each case the number
of shares of Common Stock thereafter issuable upon the conversion of this
Debenture shall be determined by multiplying the number of such shares of Common
Stock theretofore issuable upon the conversion of this Debenture by a fraction,
of which the numerator shall be the then current market price per share of
Common Stock (as determined in accordance with paragraph (iv)(3) below), less
the then fair value per share of outstanding Common Stock (as determined by the
Board of Directors of the Company, whose good faith determination shall be
conclusive) of the evidences of indebtedness, assets or securities so
distributed or of such rights, options or warrants, or of such convertible or
exchangeable securities, and of which the denominator shall
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<PAGE>
be the then current market price per share of Common Stock on the date of such
distribution. Such adjustment shall be made successively whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of stockholders entitled to
receive such distribution. No further adjustment shall be made for the actual
issuance of Common Stock upon the conversion, exercise or exchange of any
rights, options, warrants or other securities in respect of which adjustment has
been made pursuant to this paragraph (b).
iii. After the Common Shares are first traded on a national
securities exchange (including the Nasdaq Stock Market), in case the Company
shall issue shares of Common Stock (or rights, options, warrants or other
securities convertible into or exercisable or exchangeable for Common Stock)
(excluding (1) shares of Common Stock issued in or as a result of any of the
transactions described in paragraph (i) or (ii) above, (2) shares of Common
Stock issuable upon exercise of stock options or similar rights granted or to be
granted to directors, employees, consultants, contractors or other agents,
representatives or professionals of the Company pursuant to a stock option or
similar plan approved by the stockholders of the Company, (3) shares of Common
Stock issued to directors, employees, consultants, contractors, licensees or
other agents, representatives or professionals of the Company pursuant to any
compensation plan or agreement approved by the stockholders of the Company, (4)
shares of Common Stock issued pursuant to a dividend or interest reinvestment
plan, or (5) shares of Common Stock issued in a public offering at a price per
share that is not less than 95% of the then current market price) at a price per
share below the then current market price, then in each such case the number of
shares of Common Stock thereafter issuable upon the conversion of this Debenture
shall be determined by multiplying the number of shares of Common Stock
theretofore purchasable upon the conversion of this Debenture by a fraction, the
numerator of which shall be an amount equal to the sum of (X) the total number
of shares of Common Stock outstanding immediately prior to such issuance plus
(Y) the number of shares which the aggregate consideration received for such
issuance would purchase at the current market price per share of Common Stock
(as determined in accordance with paragraph (iv)(3) below) at such record date
and the denominator of which shall be the number of shares of Common Stock
outstanding on the date of such issuance (including the shares of Common Stock
issued on the date of such issuance).
iv. (1) For the purposes of paragraph (iii) above, if the
Company shall issue any security, option, warrant or other right which directly
or indirectly may be converted into or exercised or exchanged for shares of
Common Stock, the Common Stock issuable upon conversion, exercise or exchange of
such securities or rights shall thereupon be deemed to have been issued and to
be outstanding, and the relevant price per share of Common Stock and the
consideration received by the Company upon conversion, exercise or exchange of
such securities or rights shall be deemed to include the sum of the
consideration received for the issuance of such securities or rights and the
minimum additional consideration payable upon the conversion, exercise or
exchange of such securities or rights. No further adjustment shall be made for
the actual issuance of Common Stock upon the conversion, exercise or exchange of
any such security or right.
(2) For purposes of paragraph (iii) above, the following
shall also be applicable: In case the Company shall issue shares of its Common
Stock for a consideration wholly or partly other than cash, the amount of the
consideration other than cash received by the
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<PAGE>
Company shall be deemed to be the fair value of such consideration as determined
in good faith by the Board of Directors of the Company. Consideration received
by the Company for issuance of its Common Stock shall be determined in all cases
without deduction therefrom of any expenses, underwriting commissions or
concessions incurred in connection therewith.
(3) For the purpose of any computation under paragraph
(ii) or (iii) of this Section, the "current market price per share" of Common
Stock at any date shall be the average of the daily closing prices for 20
consecutive trading days commencing 30 trading days before the date of such
computation. The "closing price" for each day shall be the last such reported
sales price regular way or, in case no such reported sale takes place on such
day, the average of the closing bid and asked prices regular way for such day,
in each case on the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading or, if not listed or admitted
to trading, the average of the high bid and low asked prices of the Common Stock
in the over-the-counter market as reported by NASDAQ or any comparable system.
In the absence of one or more such quotations, the Board of Directors of the
Company shall in good faith determine the current market price on the basis of
such quotations or formula as it considers appropriate, which determination
shall be conclusive.
v. In any case in which this Section 3 shall require that any
adjustment in the number of shares of Common Stock issuable upon conversion of
this Debenture be made effective as of immediately after a record date for a
specified event, the Company may elect to defer until the occurrence of the
event the issuing to the Holder of shares of Common Stock or other capital stock
of the Company issuable upon the conversion over and above the shares of Common
Stock or other capital stock of the Company issuable upon the conversion of this
Debenture prior to such adjustment; provided, however, that the Company shall
deliver to the Holder a due bill or other appropriate instrument evidencing the
Holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
vi. No adjustment in the number of shares of Common Stock
issuable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the number of shares of
Common Stock issuable upon the conversion of this Debenture; provided, however,
that any adjustments which by reason of this paragraph (vi) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one one-hundredth of a
share.
vii. No adjustment in the number of shares of Common Stock
issuable upon conversion of this Debenture need be made under paragraph (ii) of
this Section if the Company issues or distributes to the Holder the rights,
options, warrants, convertible or exchangeable securities, evidences of
indebtedness or assets referred to in those paragraphs which the Holder would
have been entitled to receive had the Debenture been converted prior to the
happening of such event or the record date with respect thereto. No adjustment
need be made for a change in the par value of the Common Stock.
viii. For the purpose of this subsection 3(a), the term
"shares of Common Stock", shall mean (A) the class of stock designated as the
Common Stock of the Company, par value $.01 per share, or (B) any other class of
stock resulting from successive changes or reclassifications of such respective
classes of shares consisting solely of changes in par value, or
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<PAGE>
from par value to no par value, or from no par value to par value. In the event
that at any time, as a result of an adjustment made pursuant to paragraph
3(a)(i) above, the Holder shall become entitled upon conversion to any
securities other than shares of Common Stock, thereafter the number of such
other securities so issuable upon conversion of this Debenture and the
Conversion Rate of such securities shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Common Stock contained in paragraphs
(i) through (vii), inclusive, above, and the provisions of subsections 3(b)
through 3(f), inclusive, with respect to the shares of Common Stock, shall apply
on like terms to any such other securities.
b. Notice of Adjustment. Whenever the number of shares of
Common Stock issuable upon conversion of this Debenture or the Conversion Rate
of such shares is adjusted, as herein provided, the Company shall promptly mail
by first class, postage prepaid, to the Holder notice of such adjustment or
adjustments.
c. No Adjustment for Dividends. Except as provided in
subsection 3(a), no adjustment in respect of any dividends or other payments or
distributions made to holders of securities shall be made during the term of
this Debenture or upon the conversion of this Debenture.
d. Preservation of Conversion Rights upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company with or into another entity (whether or not the Company is the
surviving corporation) or in case of any sale, transfer or lease to another
entity of all or substantially all the property of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute an
agreement that the Holder shall have the right thereafter upon conversion of
this Debenture at the Conversion Rate in effect immediately prior to such action
to be issued the kind and amount of securities, cash and property which it would
have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had this Debenture been converted
immediately prior to such action. Upon the execution of such agreement, this
Debenture shall be convertible only for such securities, cash and property. The
Company shall furnish to the Holder notice of the execution of any such
agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 3. The provisions of this subsection 3(d) shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
e. Other Adjustment. If any event occurs as to which in the
reasonable opinion of the Holder, in good faith, the other provisions of this
Section 3 are not strictly applicable but the lack of any adjustment of the
Conversion Rate or of the number or kind of securities issuable upon conversion
of this Debenture would not in the opinion of the Holder fairly protect the
rights of the Holder in accordance with the basic intent and principles of such
provisions, or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the basic intent and principles of such provisions,
then the Holder may appoint a firm of independent certified public accountants
of recognized national standing (which may be the independent auditors of the
Company), which shall give their opinion upon the necessity and form of any
required adjustment to the number of shares issuable upon conversion of this
Debenture and the Conversion Rate, on a basis consistent with the basic intent
and principles
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<PAGE>
established in the other provisions of this Section 3 necessary to preserve,
without dilution, the exercise rights of the Holder. Upon receipt of such
opinion, the Company shall forthwith make the adjustments described therein.
4. Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issuable
hereunder. The number of shares of Common Stock that are issuable upon any
conversion shall be rounded up or down to the nearest whole share.
5. Reservation of Stock Issuable Upon Conversion.
a. Reservation Requirement. The Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue shares of its Common Stock upon
conversion of the Debenture. The number of shares so reserved shall be increased
or decreased proportionally to reflect stock splits, stock dividends and other
distributions. In the event that the number of shares so reserved shall be
insufficient for issuance upon conversion of the Debenture (without giving
effect to any applicable conversion restrictions), or if the Holder would at any
time upon conversion of the Debenture be entitled to the issuance of shares of
Common Stock in excess of the limitation in Paragraph 5(b) herein, then in
either case, upon receipt by the Company of notice from the Holder, the Company
shall use its best efforts and all due diligence to increase the number of
shares so reserved (without giving effect to any applicable conversion
restrictions) to cure all such deficiencies and, if necessary, to obtain the
approval by its shareholders therefor.
b. Conversion Deficiency. If, upon receipt of a Conversion
Notice, the Company does not have a sufficient number of shares of Common Stock
available to satisfy the Company's obligations to issue Common Stock upon
conversion of the Debenture the Company shall promptly notify the Holder and the
Holder shall have the right to demand from the Company immediate redemption of
any portion of the Debenture with respect to which the Company does not have a
sufficient number of shares available to satisfy such conversion obligations, in
cash at the Redemption Price pursuant to Paragraph 3(b) hereof; provided that
this Paragraph 5(b) shall not apply until the first anniversary date of the
issuance of the Debenture.
6. Holder's Acknowledgements. Holder acknowledges, agrees,
represents and warrants as follows:
a. The Debenture will not be registered under the Securities
Act, or any state securities laws, and will be issued in reliance upon available
exemptions from registration. The Debenture may not be sold, transferred or
assigned by the Holder, in whole or in part, without the consent of the Company
except in accordance with the terms described herein. The Common Stock
receivable upon conversion hereof may not be sold, transferred, assigned or
otherwise disposed of without an effective registration statement covering the
Common Stock under the Securities Act and any applicable state securities laws,
or an opinion of counsel satisfactory to the Company that registration is not
required under the Securities Act and applicable state securities laws.
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b. Because of the restrictions imposed by law upon the
transfer and resale of such Common Stock, the Holder may be required to hold
such shares of Common Stock for an extended period of time or indefinitely
unless such shares are subsequently registered under the Securities Act and
applicable state securities laws, or an exemption from such registration is
available.
c. A legend in substantially the following form shall be
placed on the certificates for shares of Common Stock purchased upon conversion
of the Debenture:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS
AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
UNLESS (1) A REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS IS EFFECTIVE AND CURRENT WITH
RESPECT THERETO, OR (2) AN EXEMPTION FROM REGISTRATION UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN
CONNECTION WITH SUCH OFFER, SALE, TRANSFER, PLEDGE OR OTHER
DISPOSAL AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, TO SUCH EFFECT.
HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT.
d. The Debenture and the shares of Common Stock receivable
upon conversion thereof are being acquired for its own account, not as a nominee
or agent for any other Person, and without a view to the distribution or resale
of such shares or any interest therein in violation of the Securities Act.
e. The Holder is an "accredited investor" within the meaning
of Rule 501(a) under Regulation D, as presently in effect, and has such
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of an investment in the Common Stock, and the
Holder is capable of bearing the economic risks of such investment and is able
to bear the complete loss of an investment in the Common Stock.
f. The execution, delivery, and performance of the Debenture
is within its powers (corporate or otherwise) and has been duly authorized by
all requisite action (corporate or otherwise) and that the Debenture constitutes
the legal, valid and binding obligation of the Holder, enforceable against the
Holder in accordance with its terms subject, as to enforceability,
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<PAGE>
to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other laws of general applicability affecting the rights of creditors and to
general principles of equity.
g. The Holder's principal place of business is in the state or
other jurisdiction so designated in Section 16(a) herein.
h. The Holder has received all documents and information
relating to an investment in the Debenture and the Common Stock requested by or
on behalf of the Holder, including such information relating to the Company as
the Holder has deemed appropriate in making a decision to invest in the
Debenture and the Common Stock.
7. Obligations Absolute. No provision of the Debenture, other
than those provisions relating to the conversion of the Debenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, the Debenture at the time, place and
rate, and in the manner, herein prescribed.
8. Waivers of Demand, Etc. The Company hereby expressly waives
demand and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of intent to accelerate, prior notice of
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and will be directly and primarily liable for the payments of all
sums owing and to be owing hereon, regardless of and without any notice (except
as required by law), diligence, act or omission as or with respect to the
collection of any amount called for hereunder.
9. Replacement Debentures. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of the Debenture, and, in the case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the Debenture, if mutilated, the Company will make and deliver a
replacement Debenture of like tenor, in lieu of the Debenture. Further, if the
Holder exercises the conversion rights granted hereunder in part but not in
whole, the Company agrees that it will deliver to the Holder a replacement
Debenture which will entitle the Holder thereof to convert the Debenture into
the number of shares of Common Stock that remain as yet unconverted under the
Debenture on the terms and conditions set forth herein.
10. Defaults. If one or more of the following events hereinafter
called "Events of Default") shall occur:
a. The Company shall fail to make any payments of
principal or interest when due under the Debenture or
upon redemption of the Debenture when due or fail to
issue shares of Common Stock upon conversion of the
Debenture (other than in accordance with the terms of
the Debenture), and such failure shall continue
uncured for a period of five (5) business days after
notice from the Holder of such failure; or
b. The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under the
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Debenture, and such failure shall continue uncured
for a period of twenty (20) business days after
notice from the Holder of such failure; or
c. The Company shall (i) become insolvent; (ii) admit in
writing its inability to pay its debts generally as
they mature; (iii) make a general assignment for the
benefit of creditors or commence proceedings for its
dissolution; or (iv) apply for or consent to the
appointment of a trustee, liquidator or receiver for
it or for a substantial part of its property or
business; or
d. A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
e. Any governmental agency or any court of competent
jurisdiction shall assume custody or control of the
whole or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
f. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any
bankruptcy law or any law for the relief of debt,
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution, or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit to any material allegations
of, or default in answering a petition filed in, any
such proceeding;
then, or at any time thereafter prior to the date on which all continuing Events
of Default have been cured, and in each and every such case, unless such Event
of Default shall have been waived in writing by the Holder (which waiver shall
not be deemed to be a waiver of any subsequent default) at the option of the
Holder and in the Holder's sole discretion, the Holder may, by notice to the
Company declare the Debenture immediately due and payable, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law.
11. Savings Clause. In case any provision of the Debenture is held
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of the Debenture will
not in any way be materially affected or impaired thereby.
12. Entire Agreement. The Debenture and the agreements referred to
in the Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof. Neither
the Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
-11-
<PAGE>
13. Transfer, Assignment Etc. The Holder may transfer or assign
the Debenture or any interest herein; provided, however, that it shall be a
condition of such transfer or assignment (other than a transfer or assignment
pursuant to an effective registration statement) that the Holder furnish the
Company in advance with an opinion of counsel, in form and substance reasonably
acceptable to the Company, to the effect that such transfer or assignment is
exempt from the registration requirements under the Securities Act and
applicable state securities laws. The Debenture shall be binding upon the
Company and its successors and shall inure to the benefit of the Holder and its
successors and assigns. Prior to due presentment for transfer of the Debenture,
the Company may treat the person in whose name the Debenture is duly registered
on the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and all other purposes, whether or not the
Debenture is then overdue, and the Company shall not be affected by notice to
the contrary.
14. No Waiver. No failure on the part of the Holder to exercise,
and no delay in exercising, any right, remedy or power hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by the Holder of
any right, remedy or power hereunder preclude any other or future exercise of
any other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
15. No Rights as Shareholders; Notices to Holders. Nothing
contained in this Debenture shall be construed as conferring upon the Holder the
right to vote or to receive dividends or to consent or to receive notice as a
shareholder in respect of any meeting of shareholders of the Company for the
election of the directors of the Company or any matter, or any rights whatsoever
as a shareholder of the Company. If, however, at any time prior to the
expiration of this Debenture and prior to its exercise, any of the following
events shall occur:
(a) the Company shall declare any dividend payable in cash or
in any securities upon its shares of Common Stock or make any
distribution to the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe for or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer
or lease of all or substantially all of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events the Company shall give notice to the
Holder as provided in Section 16(a) hereof, such giving of notice to be
completed at least 10 days prior to the record date in the event of a
transaction described in clause (a) above and at least 20 days prior to the
record date in the case of a transaction referred to in clause (b) or (c) above
fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution, or
subscription rights, or for the determination of the shareholders entitled to
vote on such proposed dissolution, liquidation or winding up. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to mail or
-12-
<PAGE>
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or such proposed dissolution, liquidation
or winding up.
16. Miscellaneous.
a. Unless otherwise provided herein, all notices, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given or made if (i) sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) hand delivered, (iii) sent
by prepaid overnight carrier, with a record of receipt or (iv) sent by facsimile
(with confirmation of receipt). Each notice or other communication shall be
deemed to have been given on the date received. Copies of notices shall be sent:
To the Company at: HyComp, Inc.
67 Wall Street, Suite 2411
New York, New York 10005
Attn: Chief Executive Officer
To the Holder at: Simmonds Capital Limited
580 Granite Court
Pickering, Ontario, L1W-3Z2, CANADA
Attn: John G. Simmonds
b. Whenever the sense of the Debenture requires, words in the
singular shall be deemed to include the plural and words in the plural shall be
deemed to include the singular. Paragraph headings are for convenience only and
shall not affect the meaning of this document.
17. Choice of Law and Venue: Waiver of Jury Trial. THE DEBENTURE
SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW THEREOF. The Company hereby (i)
irrevocably submits to the jurisdiction of the United States District Court for
the Southern District of New York and the courts of the State of New York in the
Borough of Manhattan for the purposes of any suit, action or proceeding arising
out of or relating to the Debenture and (ii) waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. The Company consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to the Company at the
address in effect for notices to it under the Debenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this paragraph shall affect or limit any right to serve
process in any other manner permitted by law.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed as of October 14, 1999.
HYCOMP, INC.
-13-
<PAGE>
By: /s/ Paul Hickey
---------------------------------
Name: Paul Hickey
Title: Chairman and Chief Executive
Officer
ATTEST:
_____________________________
-14-
<PAGE>
EXHIBIT A
(To Be Executed by Registered Holder
in order to Convert Debenture)
CONVERSION NOTICE
FOR
8% CONVERTIBLE DEBENTURES DUE APRIL 15, 2003
The undersigned, as Holder of the 8% Convertible Debenture Due April 15, 2003 of
HyComp, Inc. (the "Company"), No. 1, in the outstanding principal amount of
U.S.$2,000,000 (the "Debenture"), hereby irrevocably elects to convert
U.S.$___________ of the outstanding principal amount of the Debenture accrued
but unpaid under the Debenture into shares of the common stock, par value $0.01,
of the Company (the "Common Stock"), according to the conditions of the
Debenture as of the date this Conversion Notice is delivered to the Company. The
undersigned hereby requests that share certificates for the Common Stock to be
issued to the undersigned pursuant to this Conversion Notice, be issued in the
name of, and delivered to, the undersigned or its nominee as indicated below. If
shares are to be issued in the name of a nominee, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
undersigned in respect of the conversion, except for transfer taxes, if any.
The undersigned represents and warrants to the Company that:
(i) the shares of Common Stock received upon conversion hereby
are being acquired for its own account, not as a nominee or agent for
any other Person, and without a view to the distribution or resale of
such shares or any interest therein in violation of the Securities Act;
and
(ii) if the shares of Common Stock received upon conversion
hereby are to be issued in the name of a Person other than the Holder,
such record owner is acting solely as the nominee of the Holder; and
(iii) the undersigned is an "accredited investor" within the
meaning of Rule 501(a) under Regulation D, as presently in effect, and
has such knowledge and experience in financial and business matters so
as to be capable of evaluating the merits and risks of an investment in
the Common Stock, and the Holder is capable of bearing the economic
risks of such investment and is able to bear the complete loss of an
investment in the Common Stock.
The undersigned further represents that the execution, delivery, and
performance of this Conversion Notice is within its powers (corporate or
otherwise) and has been duly authorized by all requisite action (corporate or
otherwise) and that this Conversion Notice constitutes the legal, valid and
binding obligation of the undersigned, enforceable against it in accordance with
its terms subject, as to enforceability, to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other laws of general applicability
affecting the rights of creditors and to general principles of equity.
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<PAGE>
If the undersigned is an individual, the undersigned's principal place
of residence is in the state or other jurisdiction so designated below his name,
and if the undersigned is not an individual, the undersigned's principal place
of business is in the state or other jurisdiction so designated below its name.
The undersigned acknowledges that it has received all documents and
information relating to an investment in the Common Stock requested by or on
behalf of the undersigned, including such information relating to the Company as
the undersigned has deemed appropriate in making a decision to invest in the
Common Stock.
NAME OF HOLDER_____________________________
By:________________________________
Print Name:
Print Title:
Print Address of Holder:
___________________________________
___________________________________
Issue Common Stock to:______________
at:_________________________________
-16-
EXHIBIT 4.3
THIS IS A NON-TRANSFERABLE NOTE. THIS NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENTS UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS.
DEMAND PROMISSORY NOTE
$500,000.00 October 14, 1999
ON DEMAND, for value received, HYCOMP, INC., a corporation organized under the
laws of the Commonwealth of Massachusetts (the "Maker"), does hereby promise to
pay to the order of SIMMONDS CAPITAL LIMITED, an Ontario corporation (the
"Holder"), the principal amount of FIVE HUNDRED THOUSAND UNITED STATES DOLLARS
(U.S. $500,000.00), together with interest on the unpaid principal amount hereof
from time to time outstanding at the rate of 8% per annum compounded quarterly
commencing on the date hereof to the date of maturity or accelerated maturity
and thereafter at the rate of 12% compounded quarterly.
This Note has been executed and delivered pursuant to a Stock Purchase Agreement
dated as of October 14, 1999 (the "Stock Purchase Agreement"), between the Maker
and the Holder. Interest on the Note shall be payable quarterly in arrears on
the last business day of each calendar quarter and at maturity or accelerated
maturity, and following maturity or accelerated maturity.
1. Payments of Principal Amount. The entire principal amount hereof shall be and
payable on the date that is the earlier of (i) October 14, 2000 (the "Maturity
Date"), or (ii) the date upon which indebtedness becomes immediately due and
payable by reason of any of the following:
(a) consummation of an offering by the Holder of either its equity or debt
securities for cash, which, together with all such other offerings of debt or
equity securities occurring from and after the date hereof, shall total in net
amount of proceeds to the Maker an amount equal or exceeding $1,000,000; or
(b) the default by Maker in the payment of any amount of interest payable
hereunder when due and such default shall continued for a period of 15 days
after written demand therefor by the Holder; or
<PAGE>
(c) the occurrence of an event of default ("Events of
Default"), as described in Section 2 below.
Section 2. Events of Default. Without limiting any of the above, the
Holder may, by written notice to Maker, declare this Note immediately due and
payable, whereupon this Note and all sums due hereunder shall become immediately
due and payable without protest, presentment, demand or notice, all of which are
expressly waived by Maker, if any of the following Events of Default occur:
(a) principal, interest or any other amount due under the Note
shall not be paid as and when due (after any applicable grace period), whether
at maturity, by declaration or otherwise;
(b) Maker shall become insolvent or any proceeding shall be
instituted by the Maker seeking relief on its behalf as debtor, or to adjudicate
it a bankrupt, or insolvent, or seeking reorganization, arrangement, adjustment
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property or Maker shall consent by answer or otherwise
to the institution of any such proceeding against it;
(c) any proceeding is instituted against the Maker seeking to
have an order for relief entered against it as debtor or to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency,
or reorganization or relief to debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property which either (i) results in any such entry of an order for
relief, adjudication or bankruptcy or insolvency or issuance or entry of any
other order having a similar effect or (ii) remains undismissed for a period of
thirty (30) days;
(d) a receiver, trustee or other custodian is appointed for
any substantial part of Maker's assets;
(e) any assignment is made for the benefit of Maker's
creditors; or
(f) the dissolution or other winding up of Maker.
3. Prepayment. This Note may be prepaid by Maker, in whole or in part,
at any time without penalty, provided that any such payment shall be applied
first to the payment of accrued but unpaid interest and thereafter to the
outstanding principal.
4. Certain Costs and Expenses. Maker agrees to pay all expenses
incurred by the Holder hereof in connection with the collection and enforcement
of this Note, including, without limitation, reasonable attorneys' fees and
disbursements.
5. Certain Payment Provisions. All payments shall be made to the Holder
at its offices located at 580 Granite Court, Pickering, Ontario, L1W 3Z4,
CANADA, or such other location as the Holder shall designate in writing to
Maker. Whenever any payment to be made
-2-
<PAGE>
hereunder shall be stated to be due on a day that is not a Business Day, such
payment shall be due instead on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of such
payment of interest and not in the computation of the succeeding payment of
interest. For the purposes of this Note, the phrase "Business Day" means any day
that is not a Saturday, Sunday or a legal holiday on which banks are authorized
or required to be closed in New York, New York.
6. Waivers. Maker hereby waives diligence, presentment,
protest and notice of any kind, forbearance or other indulgence, and agrees to
pay all costs of collection when incurred, including reasonable attorney's fees,
and to perform and comply with each of the covenants, conditions, provisions and
agreements contained in every instrument evidencing said indebtedness. No
extension of the time for payment of this Note made by agreement with any person
now or hereafter liable for the payment of this Note shall operate to release,
discharge, modify, change or affect the original liability under this Note,
either in whole or in part, of the Maker unless Holder and Maker shall be
parties to such agreement.
7. Modifications; Amendments. This Note may not be changed,
modified or terminated orally, but only by an agreement in writing signed by the
party to be charged.
8. Assignments. This Note shall be binding upon the Maker and
its successors and assigns and for the benefit of the Holder and his successors
and assigns. The rights of the Holder and the obligations of the Maker under
this Note may not be assigned, modified, altered, amended, terminated or waived,
except in writing signed by the Maker and the Holder.
9. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
principles of conflict of laws thereof. If a provision of this Note shall be
held invalid, illegal or unenforceable, the validity of all the other provisions
herein shall in no way be affected thereby.
10. Jurisdiction; Venue. The Maker irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out of
or relating to this Note, any document or instrument delivered pursuant to, in
connection with or simultaneously with this Note, or a breach of this Note or
any such document or instrument. In any such action or proceeding, the Maker
waives personal service of any summons, complaint or other process and agrees
that service thereof may be made in accordance with the applicable provisions
for service of process by mail set forth in the New York Civil Practice Laws and
Rules.
11. Waiver of Jury Trial. Maker hereby irrevocably waives all
rights to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to this Note or the
negotiation, administration, performance or enforcement hereof.
12. Severability. If any item or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions herein shall in no way be affected thereby.
-3-
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this instrument to be
duly executed this 14th day of October, 1999.
HYCOMP, INC.
By: /s/ Paul K. Hickey
----------------------------------
Name: Paul K. Hickey
Title: Chairman and Chief Executive
Officer
-4-
EXHIBIT 4.4
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW, AND NEITHER THEY NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER.
No. 1
COMMON STOCK PURCHASE WARRANT
For the purchase of up to
-1,000,000-
Shares of Common Stock
of
HYCOMP, INC.
This certifies that, for value received, SIMMONDS CAPITAL
LIMITED, an Ontario corporation (the "Holder"), is entitled to purchase from
HYCOMP, INC., a corporation organized under the laws of the Commonwealth of
Massachusetts (the "Company"), the aggregate number of shares of Common Stock,
at the option of the Holder, shown above at any time after 9:00 a.m., New York
City time, on October 14, 1999 (the "Issue Date") until 5:00 p.m., New York City
time, on the Expiration Date, at a purchase price per share equal to the Warrant
Price.
Section 1. Definitions. As used in this Warrant, and unless
the context requires otherwise, the following terms have the meaning indicated:
"Common Stock" means the Common Stock of the Company, par
value $.01 per share.
"Expiration Date" means the Fifth anniversary of the Issue
Date.
"Warrant Price" has the meaning assigned in Section 8 hereof,
subject to adjustment as provided in Section 9.
<PAGE>
"Warrant" means this Warrant, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Warrant Shares" means the shares of Common Stock issued or
issuable upon exercise of this Warrant.
Section 2. Term of Warrant; Exercise of Warrant.
2.1 Term of Warrant. Subject to the terms hereof, the Holder
shall have the right, which may be exercised at any time from and after 9:00
a.m., New York City time, on the Issue Date and until 5:00 p.m., New York City
time, on the Expiration Date, to purchase from the Company the number of fully
paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise hereof. If and to the extent this Warrant is
not exercised prior to 5:00 p.m., New York City time, on the Expiration Date, it
shall become void and all rights hereunder and all rights in respect hereof
shall cease as of such time.
2.2 Exercise of Warrant. The Warrant may be exercised upon
surrender to the Company at its office at:
67 Wall Street, Suite 2411
New York, New York, 10005
Attn: Chief Executive Officer
or such other office as the Company shall notify the Holder, in writing, of this
Warrant, together with the Purchase Form included herein duly completed and
signed and upon payment to the Company of the Warrant Price (as defined in and
determined in accordance with the provisions of Sections 8 and 9 hereof), for
the number of Warrant Shares in respect of which this Warrant is then being
exercised.
Unless otherwise agreed to by the Company, all payments of
such Warrant Price shall be made by certified or official bank check payable to
the order of the Company.
Subject to Section 3 hereof, upon the surrender of the Warrant
and payment of the Warrant Price as aforesaid, the Company shall cause to be
issued and delivered with all reasonable dispatch to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of this Warrant, together with cash, as provided in Section 10
hereof, in respect of any fractional Warrant Shares otherwise issuable upon
surrender. If permitted by applicable law, such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of this Warrant and payment of the Warrant
Price, as aforesaid. Each share of Common Stock that may be issued upon exercise
of this Warrant will, upon such issuance, be validly issued, fully paid,
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The rights of purchase represented by this Warrant shall be
exercisable, at the election of the Holder hereof (subject to Section 2.1
hereof), either in full or from time to time in part and, in the event that this
Warrant is exercised in respect of less than all of the Warrant Shares
purchasable on such exercise at any time prior to
-2-
<PAGE>
the Expiration Date, a new Warrant evidencing the right to purchase the
remaining Warrant Shares will be issued.
Section 3. Payment of Taxes. The Company will pay all
documentary stamp and other taxes, if any, attributable to the initial issuance
of Warrant Shares upon the exercise hereof; provided, however, that the Company
shall not be required to pay any tax or other governmental charge which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates or certificates for Warrant Shares in a name other than that of the
Holder, and the Company shall not register any such transfer or issue any such
certificate until such tax or governmental charge, if required, shall have been
paid.
Section 4. Transfer. Subject to compliance with the
restrictions on transfer set forth herein and subject to Section 3, this Warrant
shall be transferable upon delivery of the Warrant duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or a
copy thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion.
Section 5. Exchange of Warrant Certificates. Subject to the
restrictions on transfer contained herein and to such requirements as the
Company may reasonably request to ensure compliance with applicable law, this
Warrant may be exchanged for another certificate or certificates entitling the
Holder hereof to purchase a like aggregate number of Warrant Shares as this
Warrant shall then entitle the Holder to purchase. The Holder shall make such
request in writing delivered to the Company, and shall surrender this Warrant,
properly endorsed. Thereupon, the Company shall countersign and deliver to the
Holder a new certificate or certificates, as the case may be, as so requested.
Section 6. Mutilated or Missing Warrants. In case this Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall issue,
countersign and deliver in exchange or substitution hereof, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon, in
case this Warrant is lost, stolen or destroyed, receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and a reasonable
indemnity therefor. The Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 7. Reservation of Warrant Shares; Purchase of
Warrants.
7.1 Reservation of Warrant Shares. The Company shall reserve
out of its authorized Common Stock the number of shares of Common Stock set
forth on the first page hereof for issuance upon exercise of this Warrant. The
Company shall at all times hereafter until the Expiration Date keep reserved out
of its authorized Common Stock, for issuance upon exercise of this Warrant, all
of the shares not theretofore issued upon such exercise. If at any time the
number of shares of authorized Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company will take such corporate action as may
be necessary to
-3-
<PAGE>
increase its authorized but unissued Common Stock, to such number of shares as
shall be sufficient for such purpose.
Section 8. Warrant Price. Subject to Section 9 hereof, the
price at which Warrant Shares shall be purchasable upon exercise of Warrants
(the "Warrant Price) shall be $1.00 per share.
Section 9. Adjustment of Warrant Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, in each case occurring on and after the
date hereof, as hereinafter described.
9.1 Adjustment. The number and kind of securities purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend on its
outstanding Common Stock in shares of Common Stock or make a distribution to all
holders of its outstanding Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of Warrant Shares purchasable
upon exercise hereof immediately prior thereto shall be adjusted so that the
Holder upon exercise hereof shall be entitled to receive the kind and number of
such Warrant Shares or other securities of the Company which it would have owned
or have been entitled to receive after the happening of any of the events
described above had this Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective on the date of the
dividend payment, subdivision, combination or issuance retroactive to the record
date with respect thereto, if any, for such event. Such adjustment shall be made
successively whenever such an issuance is made.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of its indebtedness or assets or securities
other than such Common Stock (excluding regular cash dividends and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants, or convertible or exchangeable securities, containing the right to
subscribe for or purchase shares of Common Stock, then in each case the number
of Warrant Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of such Warrant Shares theretofore
purchasable upon the exercise of this Warrant by a fraction, of which the
numerator shall be the then current market price per share of Common Stock (as
determined in accordance with paragraph (d)(3) below) on the date of such
distribution, and of which the denominator shall be the then current market
price per share of Common Stock, less the then fair value per share of
outstanding Common Stock (as determined by the Board of Directors of the
Company, whose good faith determination shall be conclusive) of the evidences of
indebtedness, assets or securities so distributed or of such rights, options or
warrants, or of such convertible or exchangeable securities. Such adjustment
shall be made successively whenever any such distribution is made, and shall
become effective on the date of
-4-
<PAGE>
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. No further adjustment shall
be made for the actual issuance of Common Stock upon the conversion, exercise or
exchange of any rights, options, warrants or other securities in respect of
which adjustment has been made pursuant to this paragraph (b).
(c) After the Common Stock is first traded on a national
securities exchange (including the NASDAQ Stock Market), in case the Company
shall issue shares of Common Stock (or rights, options, warrants or other
securities convertible into or exercisable or exchangeable for Common Stock)
(excluding (i) shares of Common Stock issued in or as a result of any of the
transactions described in paragraph (a) or (b) above, (ii) shares of Common
Stock issuable upon exercise of stock options or similar rights granted or to be
granted to directors, employees, consultants, contractors or other agents,
representatives or professionals of the Company pursuant to a stock option or
similar plan approved by the shareholders of the Company, (iii) shares of Common
Stock issued to directors, employees, consultants, contractors, licensees or
other agents, representatives or professionals of the Company pursuant to any
compensation plan or agreement approved by the shareholders of the Company, (iv)
shares of Common Stock issued pursuant to a dividend or interest reinvestment
plan, or (v) shares of Common Stock issued in a public offering at a price per
share that is not less than 95% of the then current market price) at a price per
share below the then current market price, then in each such case the number of
Warrant Shares thereafter purchasable upon the exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of this Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of such issuance
(including the shares of Common Stock issued on the date of such issuance) and
the denominator of which shall be an amount equal to the sum of (i) the total
number of shares of Common Stock outstanding immediately prior to such issuance
plus (ii) the number of shares which the aggregate consideration received for
such issuance would purchase at the current market price per share of Common
Stock (as determined in accordance with paragraph (d)(3) below) at such record
date.
(d) (1) For the purposes of paragraph (c) above, if the
Company shall issue any security, option, warrant or other right which directly
or indirectly may be converted into or exercised or exchanged for shares of
Common Stock, the Common Stock issuable upon conversion, exercise or exchange of
such securities or rights shall thereupon be deemed to have been issued and to
be outstanding, and the relevant price per share of Common Stock and the
consideration received by the Company upon conversion, exercise or exchange of
such securities or rights shall be deemed to include the sum of the
consideration received for the issuance of such securities or rights and the
minimum additional consideration payable upon the conversion, exercise or
exchange of such securities or rights. No further adjustment shall be made for
the actual issuance of Common Stock upon the conversion, exercise or exchange of
any such security or right.
(2) For purposes of paragraph (c) above, the following
shall also be applicable: In case the Company shall issue shares of its Common
Stock for a consideration wholly or partly other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company. Consideration received by the Company for issuance
-5-
<PAGE>
of its Common Stock shall be determined in all cases without deduction therefrom
of any expenses, underwriting commissions or concessions incurred in connection
therewith.
(3) For the purpose of any computation under paragraph
(b) or (c) of this Section, the "current market price per share" of Common Stock
at any date shall be the average of the daily closing prices for 20 consecutive
trading days commencing 30 trading days before the date of such computation. The
"closing price" for each day shall be the last such reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if not listed or admitted to trading, the
average of the high bid and low asked prices of the Common Stock in the
over-the-counter market as reported by NASDAQ or any comparable system. In the
absence of one or more such quotations, the Board of Directors of the Company
shall in good faith determine the current market price on the basis of such
quotations or formula as it considers appropriate, which determination shall be
conclusive.
(e) In any case in which this Section 9.1 shall require that
any adjustment in the number of Warrant Shares be made effective as of
immediately after a record date for a specified event, the Company may elect to
defer until the occurrence of the event the issuing to the Holder of the Warrant
Shares or other capital stock of the Company issuable upon the exercise over and
above the Warrant Shares or other capital stock of the Company issuable upon the
exercise of this Warrant prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(f) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of this Warrant; provided, however, that any
adjustments which by reason of this paragraph (f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one one-hundredth of a share.
(g) Whenever the number of shares of the Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as provided in
paragraph (a), (b) or (c) of this Section, the Warrant Price payable upon
exercise of this Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of such Warrant Shares purchasable immediately thereafter; provided,
however, that in no event shall the Warrant Price be less than the par value, if
any, of a share of Common Stock.
(h) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) of this
Section if the Company issues or distributes to the Holder the rights, options,
warrants, convertible or exchangeable securities, evidences of indebtedness or
assets referred to in those paragraphs which the Holder would have been entitled
to receive had the Warrant been exercised prior to the happening of such event
or
-6-
<PAGE>
the record date with respect thereto. No adjustment need be made for a change in
the par value of the Warrant Shares.
(i) For the purpose of this subsection 9.1, the term "shares
of Common Stock", shall mean (i) the class of stock designated as the Common
Stock of the Company, par value $.01 per share, or (ii) any other class of stock
resulting from successive changes or reclassifications of such respective
classes of shares consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to paragraph (a) above, the
Holder shall become entitled to purchase any securities other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of this Warrant and the Warrant Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in paragraphs (a) through (h), inclusive, above, and the provisions of
Section 3 and subsections 9.2 through 9.6, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other securities.
9.2 Notice of Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of this Warrant or the Warrant Price of
such Warrant Shares is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to the Holder notice of such adjustment or
adjustments.
9.3 No Adjustment for Dividends. Except as provided in
subsection 9.1, no adjustment in respect of any dividends or other payments or
distributions made to holders of securities shall be made during the term of
this Warrant or upon the exercise of this Warrant.
9.4 Preservation of Purchase Rights upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company with or into another entity (whether or not the Company is the
surviving corporation) or in case of any sale, transfer or lease to another
entity of all or substantially all the property of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute an
agreement that the Holder shall have the right thereafter upon payment of the
Warrant Price in effect immediately prior to such action to purchase upon
exercise of this Warrant the kind and amount of securities, cash and property
which it would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, transfer or lease had this Warrant been
exercised immediately prior to such action. Upon the execution of such
agreement, this Warrant shall be exercisable only for such securities, cash and
property. The Company shall furnish to the Holder notice of the execution of any
such agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 9. The provisions of this subsection 9.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
9.5 Other Adjustment. If any event occurs as to which in the
reasonable opinion of the Holder, in good faith, the other provisions of this
Section 9 are not strictly applicable but the lack of any adjustment of the
number or kind of securities issuable upon exercise of this Warrant and the
Warrant Price would not in the opinion of the Holder fairly protect the rights
of the Holder in accordance with the basic intent and principles of such
provisions, or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the basic intent and principles of such
-7-
<PAGE>
provisions, then the Holder may appoint a firm of independent certified public
accountants of recognized national standing (which may be the independent
auditors of the Company), which shall give their opinion upon the necessity and
form of any required adjustment to the number of Warrant Shares issuable upon
exercise of this Warrant and the Warrant Price, on a basis consistent with the
basic intent and principles established in the other provisions of this Section
9 necessary to preserve, without dilution, the exercise rights of the Holder.
Upon receipt of such opinion, the Company shall forthwith make the adjustments
described therein.
9.6 Statement on Warrant. Irrespective of any adjustments in
the Warrant Price or the number or kind of securities purchasable upon the
exercise of this Warrant, this Warrant may continue to express the same price
and number and kind of shares as are stated herein.
Section 10. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of this Warrant. If
(a) any fraction of a Warrant Share would, except for the provisions of this
Section 10, be issuable on the exercise of this Warrant (or specified portion
thereof), and (b) the Holder shall have paid the amount due upon such exercise
with respect to such fractional share, then the Company shall return to such
Holder the amount so paid with respect to such fractional Warrant Share.
Section 11. Registration under the Securities Act. The Holder
represents and warrants to the Company that it will not dispose of this Warrant
or any Warrant Shares except pursuant to (i) an effective registration
statement, or (ii) an opinion of counsel, reasonably satisfactory to counsel for
the Company, that the proposed disposition of the Warrant or Warrant Shares
would not be in violation of the registration requirements of the Securities Act
or any state securities laws. The Holder represents and warrants that it is
acquiring the Warrant and will acquire the Warrant Shares for its own account
and with no intention of distributing or reselling this Warrant or Warrant
Shares or any part thereof in any transaction that would be in violation of the
registration requirements of the securities laws of the United States of America
or any state, without prejudice, however, to its rights, consistent with the
provisions of this Warrant, to sell or otherwise dispose of all or any part of
this Warrant or any Warrant Shares under an effective registration statement
under the Securities Act or under an exemption from such registration available
under the Securities Act.
Section 12. Certificates to Bear Legends. The Warrant Shares
or other securities issued upon exercise of this Warrant shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Warrant Shares or securities shall bear the following legend by which the Holder
thereof shall be bound:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND NEITHER THEY NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN
EXEMPTION
-8-
<PAGE>
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT."
Section 13. No Rights as Shareholders; Notices to Holders.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or to receive
notice as a shareholder in respect of any meeting of shareholders of the Company
for the election of the directors of the Company or any matter, or any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of this Warrant and prior to its exercise, any of the following
events shall occur:
(a) the Company shall declare any dividend payable in cash or
in any securities upon its shares of Common Stock or make any
distribution to the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe for or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer
or lease of all or substantially all of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events the Company shall give notice to the
Holder as provided in Section 14 hereof, such giving of notice to be completed
at least 10 days prior to the record date in the event of a transaction
described in clause (a) above and at least 20 days prior to the record date in
the case of a transaction referred to in clause (b) or (c) above fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to such dividend, distribution, or subscription
rights, or for the determination of the shareholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or such proposed
dissolution, liquidation or winding up.
Section 14. Notices. Any notice pursuant to this Warrant shall
be in writing and shall be given by first class, registered or certified mail,
return receipt requested, telecopy, courier service or personal delivery, if to
the Company, at:
67 Wall Street, Suite 2411
New York, New York 10005
Attn: Chief Executive Officer
(or such other address as shall be communicated by the Company to the Holder by
notice in accordance with this Section 14), and if to the Holder, at such
address as shall be communicated
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<PAGE>
by the Holder to the Company by notice in accordance with this Section 14 (or,
in the absence of such notice, at such address as otherwise appears on the books
and records of the Company).
Section 15. Supplements and Amendments. The provisions of this
Warrant may not be amended, modified or supplemented, and waiver or consents to
departures from the provisions hereof may not be given, without the written
consent of the Holder.
Section 16. Successors. All the covenants and provisions of
this Warrant by or for the benefit of the Company and the Holder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder, provided that the Company may not assign its rights and obligations
hereunder except by operation of law.
Section 17. Applicable Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws. The United States District
Court for the Southern District of New York or the courts of the State of New
York shall have jurisdiction in any action or proceeding arising out of or
relating to this Warrant.
Section 18. Benefits of this Agreement. Nothing in this
Warrant shall be construed to give to any person or entity other than the
Company and the Holder, any legal or equitable right, remedy or claim under this
Warrant.
Section 19. Captions. The captions of the Sections and
subsections of this Warrant have been inserted for convenience only and shall
have no substantive effect.
IN WITNESS WHEREOF, this Warrant has been duly executed, as of
October 14, 1999.
HYCOMP, INC.
By: /s/ Paul K. Hickey
------------------------------------
Name: Paul K. Hickey
Title: Chairman and Chief Executive
Officer
-10-
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, ______________ hereby sells, assigns and
transfers unto ____________ this Warrant, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_______________ attorney, to transfer this Warrant on the books of the
within-named Company with respect to the number of Warrant Shares set forth
below, with full power of substitution:
Name(s) of No. of
Assignee(s) Address Warrant Shares
And if said number of Warrant Shares shall not be all the
Warrant Shares issuable upon exercise of this Warrant, a new certificate is to
be issued in the name of said undersigned for the balance remaining of the
Warrant Shares issuable upon exercise of this Warrant.
Dated:________________, 19____
__________________________ NOTE: The above signature should correspond
exactly with the name on the face of
this Warrant.
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<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
HyComp, Inc.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by this Warrant for, and to purchase hereunder,
______________ shares of Common Stock, as provided for herein, and tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in the amount of $________ .
Please issue a certificate or certificates for such shares of
Common Stock in the name of:
Name:______________________
Address:_______________________________
_______________________________________
Social Security Number: ________________
And if said number of shares shall not be all the shares issuable under
this Warrant, a new certificate is to be issued in the name of said undersigned
for the balance remaining of the shares issuable thereunder.
Signature:__________________________
NOTE: The above signature should
correspond exactly with the name on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form
above.
-12-
EXHIBIT 4.5
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW, AND NEITHER THEY NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER.
No. 2
COMMON STOCK PURCHASE WARRANT
For the purchase of up to
-1,000,000-
Shares of Common Stock
of
HYCOMP, INC.
This certifies that, for value received, SIMMONDS CAPITAL
LIMITED, an Ontario corporation (the "Holder"), is entitled to purchase from
HYCOMP, INC., a corporation organized under the laws of the Commonwealth of
Massachusetts (the "Company"), the aggregate number of shares of Common Stock,
at the option of the Holder, shown above at any time after 9:00 a.m., New York
City time, on October 14, 2000 (the "Issue Date") until 5:00 p.m., New York City
time, on the Expiration Date, at a purchase price per share equal to the Warrant
Price.
Section 1. Definitions. As used in this Warrant, and unless
the context requires otherwise, the following terms have the meaning indicated:
"Common Stock" means the Common Stock of the Company, par
value $.01 per share.
"Expiration Date" means the Fifth anniversary of the Issue
Date.
"Warrant Price" has the meaning assigned in Section 8 hereof,
subject to adjustment as provided in Section 9.
<PAGE>
"Warrant" means this Warrant, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Warrant Shares" means the shares of Common Stock issued or
issuable upon exercise of this Warrant.
Section 2. Term of Warrant; Exercise of Warrant.
2.1 Term of Warrant. Subject to the terms hereof, the Holder
shall have the right, which may be exercised at any time from and after 9:00
a.m., New York City time, on the Issue Date and until 5:00 p.m., New York City
time, on the Expiration Date, to purchase from the Company the number of fully
paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise hereof. If and to the extent this Warrant is
not exercised prior to 5:00 p.m., New York City time, on the Expiration Date, it
shall become void and all rights hereunder and all rights in respect hereof
shall cease as of such time.
2.2 Exercise of Warrant. The Warrant may be exercised upon
surrender to the Company at its office at:
67 Wall Street, Suite 2411
New York, New York, 10005
Attn: Chief Executive Officer
or such other office as the Company shall notify the Holder, in writing, of this
Warrant, together with the Purchase Form included herein duly completed and
signed and upon payment to the Company of the Warrant Price (as defined in and
determined in accordance with the provisions of Sections 8 and 9 hereof), for
the number of Warrant Shares in respect of which this Warrant is then being
exercised.
Unless otherwise agreed to by the Company, all payments of
such Warrant Price shall be made by certified or official bank check payable to
the order of the Company.
Subject to Section 3 hereof, upon the surrender of the Warrant
and payment of the Warrant Price as aforesaid, the Company shall cause to be
issued and delivered with all reasonable dispatch to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of this Warrant, together with cash, as provided in Section 10
hereof, in respect of any fractional Warrant Shares otherwise issuable upon
surrender. If permitted by applicable law, such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of this Warrant and payment of the Warrant
Price, as aforesaid. Each share of Common Stock that may be issued upon exercise
of this Warrant will, upon such issuance, be validly issued, fully paid,
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The rights of purchase represented by this Warrant shall be
exercisable, at the election of the Holder hereof (subject to Section 2.1
hereof), either in full or from time to time in part and, in the event that this
Warrant is exercised in respect of less than all of the Warrant Shares
purchasable on such exercise at any time prior to
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<PAGE>
the Expiration Date, a new Warrant evidencing the right to purchase the
remaining Warrant Shares will be issued.
Section 3. Payment of Taxes. The Company will pay all
documentary stamp and other taxes, if any, attributable to the initial issuance
of Warrant Shares upon the exercise hereof; provided, however, that the Company
shall not be required to pay any tax or other governmental charge which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates or certificates for Warrant Shares in a name other than that of the
Holder, and the Company shall not register any such transfer or issue any such
certificate until such tax or governmental charge, if required, shall have been
paid.
Section 4. Transfer. Subject to compliance with the
restrictions on transfer set forth herein and subject to Section 3, this Warrant
shall be transferable upon delivery of the Warrant duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or a
copy thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion.
Section 5. Exchange of Warrant Certificates. Subject to the
restrictions on transfer contained herein and to such requirements as the
Company may reasonably request to ensure compliance with applicable law, this
Warrant may be exchanged for another certificate or certificates entitling the
Holder hereof to purchase a like aggregate number of Warrant Shares as this
Warrant shall then entitle the Holder to purchase. The Holder shall make such
request in writing delivered to the Company, and shall surrender this Warrant,
properly endorsed. Thereupon, the Company shall countersign and deliver to the
Holder a new certificate or certificates, as the case may be, as so requested.
Section 6. Mutilated or Missing Warrants. In case this Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall issue,
countersign and deliver in exchange or substitution hereof, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon, in
case this Warrant is lost, stolen or destroyed, receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and a reasonable
indemnity therefor. The Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 7. Reservation of Warrant Shares; Purchase of
Warrants.
7.1 Reservation of Warrant Shares. The Company shall reserve
out of its authorized Common Stock the number of shares of Common Stock set
forth on the first page hereof for issuance upon exercise of this Warrant. The
Company shall at all times hereafter until the Expiration Date keep reserved out
of its authorized Common Stock, for issuance upon exercise of this Warrant, all
of the shares not theretofore issued upon such exercise. If at any time the
number of shares of authorized Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company will take such corporate action as may
be necessary to
-3-
<PAGE>
increase its authorized but unissued Common Stock, to such number of shares as
shall be sufficient for such purpose.
Section 8. Warrant Price. Subject to Section 9 hereof, the
price at which Warrant Shares shall be purchasable upon exercise of Warrants
(the "Warrant Price) shall be $1.50 per share.
Section 9. Adjustment of Warrant Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, in each case occurring on and after the
date hereof, as hereinafter described.
9.1 Adjustment. The number and kind of securities purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend on its
outstanding Common Stock in shares of Common Stock or make a distribution to all
holders of its outstanding Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of Warrant Shares purchasable
upon exercise hereof immediately prior thereto shall be adjusted so that the
Holder upon exercise hereof shall be entitled to receive the kind and number of
such Warrant Shares or other securities of the Company which it would have owned
or have been entitled to receive after the happening of any of the events
described above had this Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective on the date of the
dividend payment, subdivision, combination or issuance retroactive to the record
date with respect thereto, if any, for such event. Such adjustment shall be made
successively whenever such an issuance is made.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of its indebtedness or assets or securities
other than such Common Stock (excluding regular cash dividends and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants, or convertible or exchangeable securities, containing the right to
subscribe for or purchase shares of Common Stock, then in each case the number
of Warrant Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of such Warrant Shares theretofore
purchasable upon the exercise of this Warrant by a fraction, of which the
numerator shall be the then current market price per share of Common Stock (as
determined in accordance with paragraph (d)(3) below) on the date of such
distribution, and of which the denominator shall be the then current market
price per share of Common Stock, less the then fair value per share of
outstanding Common Stock (as determined by the Board of Directors of the
Company, whose good faith determination shall be conclusive) of the evidences of
indebtedness, assets or securities so distributed or of such rights, options or
warrants, or of such convertible or exchangeable securities. Such adjustment
shall be made successively whenever any such distribution is made, and shall
become effective on the date of
-4-
<PAGE>
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. No further adjustment shall
be made for the actual issuance of Common Stock upon the conversion, exercise or
exchange of any rights, options, warrants or other securities in respect of
which adjustment has been made pursuant to this paragraph (b).
(c) After the Common Stock is first traded on a national
securities exchange (including the NASDAQ Stock Market), in case the Company
shall issue shares of Common Stock (or rights, options, warrants or other
securities convertible into or exercisable or exchangeable for Common Stock)
(excluding (i) shares of Common Stock issued in or as a result of any of the
transactions described in paragraph (a) or (b) above, (ii) shares of Common
Stock issuable upon exercise of stock options or similar rights granted or to be
granted to directors, employees, consultants, contractors or other agents,
representatives or professionals of the Company pursuant to a stock option or
similar plan approved by the shareholders of the Company, (iii) shares of Common
Stock issued to directors, employees, consultants, contractors, licensees or
other agents, representatives or professionals of the Company pursuant to any
compensation plan or agreement approved by the shareholders of the Company, (iv)
shares of Common Stock issued pursuant to a dividend or interest reinvestment
plan, or (v) shares of Common Stock issued in a public offering at a price per
share that is not less than 95% of the then current market price) at a price per
share below the then current market price, then in each such case the number of
Warrant Shares thereafter purchasable upon the exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of this Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of such issuance
(including the shares of Common Stock issued on the date of such issuance) and
the denominator of which shall be an amount equal to the sum of (i) the total
number of shares of Common Stock outstanding immediately prior to such issuance
plus (ii) the number of shares which the aggregate consideration received for
such issuance would purchase at the current market price per share of Common
Stock (as determined in accordance with paragraph (d)(3) below) at such record
date.
(d) (1) For the purposes of paragraph (c) above, if the
Company shall issue any security, option, warrant or other right which directly
or indirectly may be converted into or exercised or exchanged for shares of
Common Stock, the Common Stock issuable upon conversion, exercise or exchange of
such securities or rights shall thereupon be deemed to have been issued and to
be outstanding, and the relevant price per share of Common Stock and the
consideration received by the Company upon conversion, exercise or exchange of
such securities or rights shall be deemed to include the sum of the
consideration received for the issuance of such securities or rights and the
minimum additional consideration payable upon the conversion, exercise or
exchange of such securities or rights. No further adjustment shall be made for
the actual issuance of Common Stock upon the conversion, exercise or exchange of
any such security or right.
(2) For purposes of paragraph (c) above, the following
shall also be applicable: In case the Company shall issue shares of its Common
Stock for a consideration wholly or partly other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company. Consideration received by the Company for issuance
-5-
<PAGE>
of its Common Stock shall be determined in all cases without deduction therefrom
of any expenses, underwriting commissions or concessions incurred in connection
therewith.
(3) For the purpose of any computation under paragraph
(b) or (c) of this Section, the "current market price per share" of Common Stock
at any date shall be the average of the daily closing prices for 20 consecutive
trading days commencing 30 trading days before the date of such computation. The
"closing price" for each day shall be the last such reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if not listed or admitted to trading, the
average of the high bid and low asked prices of the Common Stock in the
over-the-counter market as reported by NASDAQ or any comparable system. In the
absence of one or more such quotations, the Board of Directors of the Company
shall in good faith determine the current market price on the basis of such
quotations or formula as it considers appropriate, which determination shall be
conclusive.
(e) In any case in which this Section 9.1 shall require that
any adjustment in the number of Warrant Shares be made effective as of
immediately after a record date for a specified event, the Company may elect to
defer until the occurrence of the event the issuing to the Holder of the Warrant
Shares or other capital stock of the Company issuable upon the exercise over and
above the Warrant Shares or other capital stock of the Company issuable upon the
exercise of this Warrant prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(f) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of this Warrant; provided, however, that any
adjustments which by reason of this paragraph (f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one one-hundredth of a share.
(g) Whenever the number of shares of the Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as provided in
paragraph (a), (b) or (c) of this Section, the Warrant Price payable upon
exercise of this Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of such Warrant Shares purchasable immediately thereafter; provided,
however, that in no event shall the Warrant Price be less than the par value, if
any, of a share of Common Stock.
(h) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) of this
Section if the Company issues or distributes to the Holder the rights, options,
warrants, convertible or exchangeable securities, evidences of indebtedness or
assets referred to in those paragraphs which the Holder would have been entitled
to receive had the Warrant been exercised prior to the happening of such event
or
-6-
<PAGE>
the record date with respect thereto. No adjustment need be made for a change in
the par value of the Warrant Shares.
(i) For the purpose of this subsection 9.1, the term "shares
of Common Stock", shall mean (i) the class of stock designated as the Common
Stock of the Company, par value $.01 per share, or (ii) any other class of stock
resulting from successive changes or reclassifications of such respective
classes of shares consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to paragraph (a) above, the
Holder shall become entitled to purchase any securities other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of this Warrant and the Warrant Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in paragraphs (a) through (h), inclusive, above, and the provisions of
Section 3 and subsections 9.2 through 9.6, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other securities.
9.2 Notice of Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of this Warrant or the Warrant Price of
such Warrant Shares is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to the Holder notice of such adjustment or
adjustments.
9.3 No Adjustment for Dividends. Except as provided in
subsection 9.1, no adjustment in respect of any dividends or other payments or
distributions made to holders of securities shall be made during the term of
this Warrant or upon the exercise of this Warrant.
9.4 Preservation of Purchase Rights upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company with or into another entity (whether or not the Company is the
surviving corporation) or in case of any sale, transfer or lease to another
entity of all or substantially all the property of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute an
agreement that the Holder shall have the right thereafter upon payment of the
Warrant Price in effect immediately prior to such action to purchase upon
exercise of this Warrant the kind and amount of securities, cash and property
which it would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, transfer or lease had this Warrant been
exercised immediately prior to such action. Upon the execution of such
agreement, this Warrant shall be exercisable only for such securities, cash and
property. The Company shall furnish to the Holder notice of the execution of any
such agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 9. The provisions of this subsection 9.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
9.5 Other Adjustment. If any event occurs as to which in the
reasonable opinion of the Holder, in good faith, the other provisions of this
Section 9 are not strictly applicable but the lack of any adjustment of the
number or kind of securities issuable upon exercise of this Warrant and the
Warrant Price would not in the opinion of the Holder fairly protect the rights
of the Holder in accordance with the basic intent and principles of such
-7-
<PAGE>
provisions, or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the basic intent and principles of such provisions,
then the Holder may appoint a firm of independent certified public accountants
of recognized national standing (which may be the independent auditors of the
Company), which shall give their opinion upon the necessity and form of any
required adjustment to the number of Warrant Shares issuable upon exercise of
this Warrant and the Warrant Price, on a basis consistent with the basic intent
and principles established in the other provisions of this Section 9 necessary
to preserve, without dilution, the exercise rights of the Holder. Upon receipt
of such opinion, the Company shall forthwith make the adjustments described
therein.
9.6 Statement on Warrant. Irrespective of any adjustments in
the Warrant Price or the number or kind of securities purchasable upon the
exercise of this Warrant, this Warrant may continue to express the same price
and number and kind of shares as are stated herein.
Section 10. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of this Warrant. If
(a) any fraction of a Warrant Share would, except for the provisions of this
Section 10, be issuable on the exercise of this Warrant (or specified portion
thereof), and (b) the Holder shall have paid the amount due upon such exercise
with respect to such fractional share, then the Company shall return to such
Holder the amount so paid with respect to such fractional Warrant Share.
Section 11. Registration under the Securities Act. The Holder
represents and warrants to the Company that it will not dispose of this Warrant
or any Warrant Shares except pursuant to (i) an effective registration
statement, or (ii) an opinion of counsel, reasonably satisfactory to counsel for
the Company, that the proposed disposition of the Warrant or Warrant Shares
would not be in violation of the registration requirements of the Securities Act
or any state securities laws. The Holder represents and warrants that it is
acquiring the Warrant and will acquire the Warrant Shares for its own account
and with no intention of distributing or reselling this Warrant or Warrant
Shares or any part thereof in any transaction that would be in violation of the
registration requirements of the securities laws of the United States of America
or any state, without prejudice, however, to its rights, consistent with the
provisions of this Warrant, to sell or otherwise dispose of all or any part of
this Warrant or any Warrant Shares under an effective registration statement
under the Securities Act or under an exemption from such registration available
under the Securities Act.
Section 12. Certificates to Bear Legends. The Warrant Shares
or other securities issued upon exercise of this Warrant shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Warrant Shares or securities shall bear the following legend by which the Holder
thereof shall be bound:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND NEITHER THEY NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN
EXEMPTION
-8-
<PAGE>
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT."
Section 13. No Rights as Shareholders; Notices to Holders.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or to receive
notice as a shareholder in respect of any meeting of shareholders of the Company
for the election of the directors of the Company or any matter, or any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of this Warrant and prior to its exercise, any of the following
events shall occur:
(a) the Company shall declare any dividend payable in cash or
in any securities upon its shares of Common Stock or make any
distribution to the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe for or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer
or lease of all or substantially all of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events the Company shall give notice to the
Holder as provided in Section 14 hereof, such giving of notice to be completed
at least 10 days prior to the record date in the event of a transaction
described in clause (a) above and at least 20 days prior to the record date in
the case of a transaction referred to in clause (b) or (c) above fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to such dividend, distribution, or subscription
rights, or for the determination of the shareholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or such proposed
dissolution, liquidation or winding up.
Section 14. Notices. Any notice pursuant to this Warrant shall
be in writing and shall be given by first class, registered or certified mail,
return receipt requested, telecopy, courier service or personal delivery, if to
the Company, at:
67 Wall Street, Suite 2411
New York, New York 10005
Attn: Chief Executive Officer
(or such other address as shall be communicated by the Company to the Holder by
notice in accordance with this Section 14), and if to the Holder, at such
address as shall be communicated
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<PAGE>
by the Holder to the Company by notice in accordance with this Section 14 (or,
in the absence of such notice, at such address as otherwise appears on the books
and records of the Company).
Section 15. Supplements and Amendments. The provisions of this
Warrant may not be amended, modified or supplemented, and waiver or consents to
departures from the provisions hereof may not be given, without the written
consent of the Holder.
Section 16. Successors. All the covenants and provisions of
this Warrant by or for the benefit of the Company and the Holder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder, provided that the Company may not assign its rights and obligations
hereunder except by operation of law.
Section 17. Applicable Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws. The United States District
Court for the Southern District of New York or the courts of the State of New
York shall have jurisdiction in any action or proceeding arising out of or
relating to this Warrant.
Section 18. Benefits of this Agreement. Nothing in this
Warrant shall be construed to give to any person or entity other than the
Company and the Holder, any legal or equitable right, remedy or claim under this
Warrant.
Section 19. Captions. The captions of the Sections and
subsections of this Warrant have been inserted for convenience only and shall
have no substantive effect.
IN WITNESS WHEREOF, this Warrant has been duly executed, as of
October 14, 1999.
HYCOMP, INC.
By: /s/ Paul K. Hickey
--------------------------------
Name: Paul K. Hickey
Title: Chairman and Chief Executive
Officer
-10-
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _________________________ hereby sells,
assigns and transfers unto________________________ this Warrant, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint _______________________ attorney, to transfer this Warrant on the
books of the within-named Company with respect to the number of Warrant Shares
set forth below, with full power of substitution:
Name(s) of No. of
Assignee(s) Address Warrant Shares
----------- ------- --------------
And if said number of Warrant Shares shall not be all the
Warrant Shares issuable upon exercise of this Warrant, a new certificate is to
be issued in the name of said undersigned for the balance remaining of the
Warrant Shares issuable upon exercise of this Warrant.
Dated:______________, 19____
____________________________ NOTE: The above signature should correspond
exactly with the name on the face of
this Warrant.
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<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
HyComp, Inc.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by this Warrant for, and to purchase hereunder,
______________ shares of Common Stock, as provided for herein, and tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in the amount of $ .
Please issue a certificate or certificates for such shares of
Common Stock in the name of:
Name: __________________________
Address:___________________________________
Social Security Number: ____________________
And if said number of shares shall not be all the shares issuable under
this Warrant, a new certificate is to be issued in the name of said undersigned
for the balance remaining of the shares issuable thereunder.
Signature:_____________________________
NOTE: The above signature should correspond
exactly with the name on the first page
of this Warrant or with the name of the
assignee appearing in the assignment
form above.
-12-
EXHIBIT 4.6
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW, AND NEITHER THEY NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER.
No. 3
COMMON STOCK PURCHASE WARRANT
For the purchase of up to
-1,000,000-
Shares of Common Stock
of
HYCOMP, INC.
This certifies that, for value received, SIMMONDS CAPITAL
LIMITED, an Ontario corporation (the "Holder"), is entitled to purchase from
HYCOMP, INC., a corporation organized under the laws of the Commonwealth of
Massachusetts (the "Company"), the aggregate number of shares of Common Stock,
at the option of the Holder, shown above at any time after 9:00 a.m., New York
City time, on October 14, 2001 (the "Issue Date") until 5:00 p.m., New York City
time, on the Expiration Date, at a purchase price per share equal to the Warrant
Price.
Section 1. Definitions. As used in this Warrant, and unless
the context requires otherwise, the following terms have the meaning indicated:
"Common Stock" means the Common Stock of the Company, par
value $.01 per share.
"Expiration Date" means the Fifth anniversary of the Issue
Date.
"Warrant Price" has the meaning assigned in Section 8 hereof,
subject to adjustment as provided in Section 9.
<PAGE>
"Warrant" means this Warrant, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Warrant Shares" means the shares of Common Stock issued or
issuable upon exercise of this Warrant.
Section 2. Term of Warrant; Exercise of Warrant.
2.1 Term of Warrant. Subject to the terms hereof, the Holder
shall have the right, which may be exercised at any time from and after 9:00
a.m., New York City time, on the Issue Date and until 5:00 p.m., New York City
time, on the Expiration Date, to purchase from the Company the number of fully
paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise hereof. If and to the extent this Warrant is
not exercised prior to 5:00 p.m., New York City time, on the Expiration Date, it
shall become void and all rights hereunder and all rights in respect hereof
shall cease as of such time.
2.2 Exercise of Warrant. The Warrant may be exercised upon
surrender to the Company at its office at:
67 Wall Street, Suite 2411
New York, New York, 10005
Attn: Chief Executive Officer
or such other office as the Company shall notify the Holder, in writing, of this
Warrant, together with the Purchase Form included herein duly completed and
signed and upon payment to the Company of the Warrant Price (as defined in and
determined in accordance with the provisions of Sections 8 and 9 hereof), for
the number of Warrant Shares in respect of which this Warrant is then being
exercised.
Unless otherwise agreed to by the Company, all payments of
such Warrant Price shall be made by certified or official bank check payable to
the order of the Company.
Subject to Section 3 hereof, upon the surrender of the Warrant
and payment of the Warrant Price as aforesaid, the Company shall cause to be
issued and delivered with all reasonable dispatch to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of this Warrant, together with cash, as provided in Section 10
hereof, in respect of any fractional Warrant Shares otherwise issuable upon
surrender. If permitted by applicable law, such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of this Warrant and payment of the Warrant
Price, as aforesaid. Each share of Common Stock that may be issued upon exercise
of this Warrant will, upon such issuance, be validly issued, fully paid,
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The rights of purchase represented by this Warrant shall be
exercisable, at the election of the Holder hereof (subject to Section 2.1
hereof), either in full or from time to time in part and, in the event that this
Warrant is exercised in respect of less than all of the Warrant Shares
purchasable on such exercise at any time prior to
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<PAGE>
the Expiration Date, a new Warrant evidencing the right to purchase the
remaining Warrant Shares will be issued.
Section 3. Payment of Taxes. The Company will pay all
documentary stamp and other taxes, if any, attributable to the initial issuance
of Warrant Shares upon the exercise hereof; provided, however, that the Company
shall not be required to pay any tax or other governmental charge which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates or certificates for Warrant Shares in a name other than that of the
Holder, and the Company shall not register any such transfer or issue any such
certificate until such tax or governmental charge, if required, shall have been
paid.
Section 4. Transfer. Subject to compliance with the
restrictions on transfer set forth herein and subject to Section 3, this Warrant
shall be transferable upon delivery of the Warrant duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or a
copy thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion.
Section 5. Exchange of Warrant Certificates. Subject to the
restrictions on transfer contained herein and to such requirements as the
Company may reasonably request to ensure compliance with applicable law, this
Warrant may be exchanged for another certificate or certificates entitling the
Holder hereof to purchase a like aggregate number of Warrant Shares as this
Warrant shall then entitle the Holder to purchase. The Holder shall make such
request in writing delivered to the Company, and shall surrender this Warrant,
properly endorsed. Thereupon, the Company shall countersign and deliver to the
Holder a new certificate or certificates, as the case may be, as so requested.
Section 6. Mutilated or Missing Warrants. In case this Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall issue,
countersign and deliver in exchange or substitution hereof, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon, in
case this Warrant is lost, stolen or destroyed, receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and a reasonable
indemnity therefor. The Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 7. Reservation of Warrant Shares; Purchase of
Warrants.
7.1 Reservation of Warrant Shares. The Company shall reserve
out of its authorized Common Stock the number of shares of Common Stock set
forth on the first page hereof for issuance upon exercise of this Warrant. The
Company shall at all times hereafter until the Expiration Date keep reserved out
of its authorized Common Stock, for issuance upon exercise of this Warrant, all
of the shares not theretofore issued upon such exercise. If at any time the
number of shares of authorized Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company will take such corporate action as may
be necessary to
-3-
<PAGE>
increase its authorized but unissued Common Stock, to such number of shares as
shall be sufficient for such purpose.
Section 8. Warrant Price. Subject to Section 9 hereof, the
price at which Warrant Shares shall be purchasable upon exercise of Warrants
(the "Warrant Price) shall be $2.00 per share.
Section 9. Adjustment of Warrant Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, in each case occurring on and after the
date hereof, as hereinafter described.
9.1 Adjustment. The number and kind of securities purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend on its
outstanding Common Stock in shares of Common Stock or make a distribution to all
holders of its outstanding Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of Warrant Shares purchasable
upon exercise hereof immediately prior thereto shall be adjusted so that the
Holder upon exercise hereof shall be entitled to receive the kind and number of
such Warrant Shares or other securities of the Company which it would have owned
or have been entitled to receive after the happening of any of the events
described above had this Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective on the date of the
dividend payment, subdivision, combination or issuance retroactive to the record
date with respect thereto, if any, for such event. Such adjustment shall be made
successively whenever such an issuance is made.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of its indebtedness or assets or securities
other than such Common Stock (excluding regular cash dividends and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants, or convertible or exchangeable securities, containing the right to
subscribe for or purchase shares of Common Stock, then in each case the number
of Warrant Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of such Warrant Shares theretofore
purchasable upon the exercise of this Warrant by a fraction, of which the
numerator shall be the then current market price per share of Common Stock (as
determined in accordance with paragraph (d)(3) below) on the date of such
distribution, and of which the denominator shall be the then current market
price per share of Common Stock, less the then fair value per share of
outstanding Common Stock (as determined by the Board of Directors of the
Company, whose good faith determination shall be conclusive) of the evidences of
indebtedness, assets or securities so distributed or of such rights, options or
warrants, or of such convertible or exchangeable securities. Such adjustment
shall be made successively whenever any such distribution is made, and shall
become effective on the date of
-4-
<PAGE>
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. No further adjustment shall
be made for the actual issuance of Common Stock upon the conversion, exercise or
exchange of any rights, options, warrants or other securities in respect of
which adjustment has been made pursuant to this paragraph (b).
(c) After the Common Stock is first traded on a national
securities exchange (including the NASDAQ Stock Market), in case the Company
shall issue shares of Common Stock (or rights, options, warrants or other
securities convertible into or exercisable or exchangeable for Common Stock)
(excluding (i) shares of Common Stock issued in or as a result of any of the
transactions described in paragraph (a) or (b) above, (ii) shares of Common
Stock issuable upon exercise of stock options or similar rights granted or to be
granted to directors, employees, consultants, contractors or other agents,
representatives or professionals of the Company pursuant to a stock option or
similar plan approved by the shareholders of the Company, (iii) shares of Common
Stock issued to directors, employees, consultants, contractors, licensees or
other agents, representatives or professionals of the Company pursuant to any
compensation plan or agreement approved by the shareholders of the Company, (iv)
shares of Common Stock issued pursuant to a dividend or interest reinvestment
plan, or (v) shares of Common Stock issued in a public offering at a price per
share that is not less than 95% of the then current market price) at a price per
share below the then current market price, then in each such case the number of
Warrant Shares thereafter purchasable upon the exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of this Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of such issuance
(including the shares of Common Stock issued on the date of such issuance) and
the denominator of which shall be an amount equal to the sum of (i) the total
number of shares of Common Stock outstanding immediately prior to such issuance
plus (ii) the number of shares which the aggregate consideration received for
such issuance would purchase at the current market price per share of Common
Stock (as determined in accordance with paragraph (d)(3) below) at such record
date.
(d) (1) For the purposes of paragraph (c) above, if the
Company shall issue any security, option, warrant or other right which directly
or indirectly may be converted into or exercised or exchanged for shares of
Common Stock, the Common Stock issuable upon conversion, exercise or exchange of
such securities or rights shall thereupon be deemed to have been issued and to
be outstanding, and the relevant price per share of Common Stock and the
consideration received by the Company upon conversion, exercise or exchange of
such securities or rights shall be deemed to include the sum of the
consideration received for the issuance of such securities or rights and the
minimum additional consideration payable upon the conversion, exercise or
exchange of such securities or rights. No further adjustment shall be made for
the actual issuance of Common Stock upon the conversion, exercise or exchange of
any such security or right.
(2) For purposes of paragraph (c) above, the
following shall also be applicable: In case the Company shall issue shares of
its Common Stock for a consideration wholly or partly other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company. Consideration received by the Company for
issuance
-5-
<PAGE>
of its Common Stock shall be determined in all cases without deduction therefrom
of any expenses, underwriting commissions or concessions incurred in connection
therewith.
(3) For the purpose of any computation under
paragraph (b) or (c) of this Section, the "current market price per share" of
Common Stock at any date shall be the average of the daily closing prices for 20
consecutive trading days commencing 30 trading days before the date of such
computation. The "closing price" for each day shall be the last such reported
sales price regular way or, in case no such reported sale takes place on such
day, the average of the closing bid and asked prices regular way for such day,
in each case on the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading or, if not listed or admitted
to trading, the average of the high bid and low asked prices of the Common Stock
in the over-the-counter market as reported by NASDAQ or any comparable system.
In the absence of one or more such quotations, the Board of Directors of the
Company shall in good faith determine the current market price on the basis of
such quotations or formula as it considers appropriate, which determination
shall be conclusive.
(e) In any case in which this Section 9.1 shall require that
any adjustment in the number of Warrant Shares be made effective as of
immediately after a record date for a specified event, the Company may elect to
defer until the occurrence of the event the issuing to the Holder of the Warrant
Shares or other capital stock of the Company issuable upon the exercise over and
above the Warrant Shares or other capital stock of the Company issuable upon the
exercise of this Warrant prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(f) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of this Warrant; provided, however, that any
adjustments which by reason of this paragraph (f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one one-hundredth of a share.
(g) Whenever the number of shares of the Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as provided in
paragraph (a), (b) or (c) of this Section, the Warrant Price payable upon
exercise of this Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of such Warrant Shares purchasable immediately thereafter; provided,
however, that in no event shall the Warrant Price be less than the par value, if
any, of a share of Common Stock.
(h) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) of this
Section if the Company issues or distributes to the Holder the rights, options,
warrants, convertible or exchangeable securities, evidences of indebtedness or
assets referred to in those paragraphs which the Holder would have been entitled
to receive had the Warrant been exercised prior to the happening of such event
or
-6-
<PAGE>
the record date with respect thereto. No adjustment need be made for a change in
the par value of the Warrant Shares.
(i) For the purpose of this subsection 9.1, the term "shares
of Common Stock", shall mean (i) the class of stock designated as the Common
Stock of the Company, par value $.01 per share, or (ii) any other class of stock
resulting from successive changes or reclassifications of such respective
classes of shares consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to paragraph (a) above, the
Holder shall become entitled to purchase any securities other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of this Warrant and the Warrant Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in paragraphs (a) through (h), inclusive, above, and the provisions of
Section 3 and subsections 9.2 through 9.6, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other securities.
9.2 Notice of Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of this Warrant or the Warrant Price of
such Warrant Shares is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to the Holder notice of such adjustment or
adjustments.
9.3 No Adjustment for Dividends. Except as provided in
subsection 9.1, no adjustment in respect of any dividends or other payments or
distributions made to holders of securities shall be made during the term of
this Warrant or upon the exercise of this Warrant.
9.4 Preservation of Purchase Rights upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company with or into another entity (whether or not the Company is the
surviving corporation) or in case of any sale, transfer or lease to another
entity of all or substantially all the property of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute an
agreement that the Holder shall have the right thereafter upon payment of the
Warrant Price in effect immediately prior to such action to purchase upon
exercise of this Warrant the kind and amount of securities, cash and property
which it would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, transfer or lease had this Warrant been
exercised immediately prior to such action. Upon the execution of such
agreement, this Warrant shall be exercisable only for such securities, cash and
property. The Company shall furnish to the Holder notice of the execution of any
such agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 9. The provisions of this subsection 9.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
9.5 Other Adjustment. If any event occurs as to which in the
reasonable opinion of the Holder, in good faith, the other provisions of this
Section 9 are not strictly applicable but the lack of any adjustment of the
number or kind of securities issuable upon exercise of this Warrant and the
Warrant Price would not in the opinion of the Holder fairly protect the rights
of the Holder in accordance with the basic intent and principles of such
-7-
<PAGE>
provisions, or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the basic intent and principles of such provisions,
then the Holder may appoint a firm of independent certified public accountants
of recognized national standing (which may be the independent auditors of the
Company), which shall give their opinion upon the necessity and form of any
required adjustment to the number of Warrant Shares issuable upon exercise of
this Warrant and the Warrant Price, on a basis consistent with the basic intent
and principles established in the other provisions of this Section 9 necessary
to preserve, without dilution, the exercise rights of the Holder. Upon receipt
of such opinion, the Company shall forthwith make the adjustments described
therein.
9.6 Statement on Warrant. Irrespective of any adjustments in
the Warrant Price or the number or kind of securities purchasable upon the
exercise of this Warrant, this Warrant may continue to express the same price
and number and kind of shares as are stated herein.
Section 10. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of this Warrant. If
(a) any fraction of a Warrant Share would, except for the provisions of this
Section 10, be issuable on the exercise of this Warrant (or specified portion
thereof), and (b) the Holder shall have paid the amount due upon such exercise
with respect to such fractional share, then the Company shall return to such
Holder the amount so paid with respect to such fractional Warrant Share.
Section 11. Registration under the Securities Act. The Holder
represents and warrants to the Company that it will not dispose of this Warrant
or any Warrant Shares except pursuant to (i) an effective registration
statement, or (ii) an opinion of counsel, reasonably satisfactory to counsel for
the Company, that the proposed disposition of the Warrant or Warrant Shares
would not be in violation of the registration requirements of the Securities Act
or any state securities laws. The Holder represents and warrants that it is
acquiring the Warrant and will acquire the Warrant Shares for its own account
and with no intention of distributing or reselling this Warrant or Warrant
Shares or any part thereof in any transaction that would be in violation of the
registration requirements of the securities laws of the United States of America
or any state, without prejudice, however, to its rights, consistent with the
provisions of this Warrant, to sell or otherwise dispose of all or any part of
this Warrant or any Warrant Shares under an effective registration statement
under the Securities Act or under an exemption from such registration available
under the Securities Act.
Section 12. Certificates to Bear Legends. The Warrant Shares
or other securities issued upon exercise of this Warrant shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Warrant Shares or securities shall bear the following legend by which the Holder
thereof shall be bound:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND NEITHER THEY NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN
EXEMPTION
-8-
<PAGE>
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT."
Section 13. No Rights as Shareholders; Notices to Holders.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or to receive
notice as a shareholder in respect of any meeting of shareholders of the Company
for the election of the directors of the Company or any matter, or any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of this Warrant and prior to its exercise, any of the following
events shall occur:
(a) the Company shall declare any dividend payable in cash or
in any securities upon its shares of Common Stock or make any
distribution to the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe for or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer
or lease of all or substantially all of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events the Company shall give notice to the
Holder as provided in Section 14 hereof, such giving of notice to be completed
at least 10 days prior to the record date in the event of a transaction
described in clause (a) above and at least 20 days prior to the record date in
the case of a transaction referred to in clause (b) or (c) above fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to such dividend, distribution, or subscription
rights, or for the determination of the shareholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or such proposed
dissolution, liquidation or winding up.
Section 14. Notices. Any notice pursuant to this Warrant shall
be in writing and shall be given by first class, registered or certified mail,
return receipt requested, telecopy, courier service or personal delivery, if to
the Company, at:
67 Wall Street, Suite 2411
New York, New York 10005
Attn: Chief Executive Officer
(or such other address as shall be communicated by the Company to the Holder by
notice in accordance with this Section 14), and if to the Holder, at such
address as shall be communicated
-9-
<PAGE>
by the Holder to the Company by notice in accordance with this Section 14 (or,
in the absence of such notice, at such address as otherwise appears on the books
and records of the Company).
Section 15. Supplements and Amendments. The provisions of this
Warrant may not be amended, modified or supplemented, and waiver or consents to
departures from the provisions hereof may not be given, without the written
consent of the Holder.
Section 16. Successors. All the covenants and provisions of
this Warrant by or for the benefit of the Company and the Holder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder, provided that the Company may not assign its rights and obligations
hereunder except by operation of law.
Section 17. Applicable Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws. The United States District
Court for the Southern District of New York or the courts of the State of New
York shall have jurisdiction in any action or proceeding arising out of or
relating to this Warrant.
Section 18. Benefits of this Agreement. Nothing in this
Warrant shall be construed to give to any person or entity other than the
Company and the Holder, any legal or equitable right, remedy or claim under this
Warrant.
Section 19. Captions. The captions of the Sections and
subsections of this Warrant have been inserted for convenience only and shall
have no substantive effect.
IN WITNESS WHEREOF, this Warrant has been duly executed, as of
October 14, 1999.
HYCOMP, INC.
By: /s/ Paul K. Hickey
----------------------------------------
Name: Paul K. Hickey
Title:Chairman and Chief Executive Officer
-10-
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _________________hereby sells, assigns and
transfers unto________________________this Warrant, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
____________________________________attorney, to transfer this Warrant on the
books of the within-named Company with respect to the number of Warrant Shares
set forth below, with full power of substitution:
Name(s) of No. of
Assignee(s) Address Warrant Shares
----------- ------- --------------
And if said number of Warrant Shares shall not be all the
Warrant Shares issuable upon exercise of this Warrant, a new certificate is to
be issued in the name of said undersigned for the balance remaining of the
Warrant Shares issuable upon exercise of this Warrant.
Dated: ______________, 19____
_____________________________ NOTE: The above signature should
correspond exactly with the
name on the face of this
Warrant.
-11-
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
HyComp, Inc.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by this Warrant for, and to purchase hereunder,
______________ shares of Common Stock, as provided for herein, and tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in the amount of $__________________ .
Please issue a certificate or certificates for such shares of
Common Stock in the name of:
Name: ______________________________
Address:_____________________________
______________________________
Social Security Number: _______________________
And if said number of shares shall not be all the shares issuable under
this Warrant, a new certificate is to be issued in the name of said undersigned
for the balance remaining of the shares issuable thereunder.
Signature: _______________________
NOTE: The above signature should correspond
exactly with the name on the first
page of this Warrant or with the name
of the assignee appearing in the
assignment form above.
-12-
EXHIBIT 4.7
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW, AND NEITHER THEY NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER.
No. 4
COMMON STOCK PURCHASE WARRANT
For the purchase of up to
-1,000,000-
Shares of Common Stock
of
HYCOMP, INC.
This certifies that, for value received, SIMMONDS CAPITAL
LIMITED, an Ontario corporation (the "Holder"), is entitled to purchase from
HYCOMP, INC., a corporation organized under the laws of the Commonwealth of
Massachusetts (the "Company"), the aggregate number of shares of Common Stock,
at the option of the Holder, shown above at any time after 9:00 a.m., New York
City time, on October 14, 2002 (the "Issue Date") until 5:00 p.m., New York City
time, on the Expiration Date, at a purchase price per share equal to the Warrant
Price.
Section 1. Definitions. As used in this Warrant, and unless
the context requires otherwise, the following terms have the meaning indicated:
"Common Stock" means the Common Stock of the Company, par
value $.01 per share.
"Expiration Date" means the Fifth anniversary of the Issue
Date.
"Warrant Price" has the meaning assigned in Section 8 hereof,
subject to adjustment as provided in Section 9.
<PAGE>
"Warrant" means this Warrant, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Warrant Shares" means the shares of Common Stock issued or
issuable upon exercise of this Warrant.
Section 2. Term of Warrant; Exercise of Warrant.
2.1 Term of Warrant. Subject to the terms hereof, the Holder
shall have the right, which may be exercised at any time from and after 9:00
a.m., New York City time, on the Issue Date and until 5:00 p.m., New York City
time, on the Expiration Date, to purchase from the Company the number of fully
paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise hereof. If and to the extent this Warrant is
not exercised prior to 5:00 p.m., New York City time, on the Expiration Date, it
shall become void and all rights hereunder and all rights in respect hereof
shall cease as of such time.
2.2 Exercise of Warrant. The Warrant may be exercised upon
surrender to the Company at its office at:
67 Wall Street, Suite 2411
New York, New York, 10005
Attn: Chief Executive Officer
or such other office as the Company shall notify the Holder, in writing, of this
Warrant, together with the Purchase Form included herein duly completed and
signed and upon payment to the Company of the Warrant Price (as defined in and
determined in accordance with the provisions of Sections 8 and 9 hereof), for
the number of Warrant Shares in respect of which this Warrant is then being
exercised.
Unless otherwise agreed to by the Company, all payments of
such Warrant Price shall be made by certified or official bank check payable to
the order of the Company.
Subject to Section 3 hereof, upon the surrender of the Warrant
and payment of the Warrant Price as aforesaid, the Company shall cause to be
issued and delivered with all reasonable dispatch to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of this Warrant, together with cash, as provided in Section 10
hereof, in respect of any fractional Warrant Shares otherwise issuable upon
surrender. If permitted by applicable law, such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of this Warrant and payment of the Warrant
Price, as aforesaid. Each share of Common Stock that may be issued upon exercise
of this Warrant will, upon such issuance, be validly issued, fully paid,
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The rights of purchase represented by this Warrant shall be
exercisable, at the election of the Holder hereof (subject to Section 2.1
hereof), either in full or from time to time in part and, in the event that this
Warrant is exercised in respect of less than all of the Warrant Shares
purchasable on such exercise at any time prior to
-2-
<PAGE>
the Expiration Date, a new Warrant evidencing the right to purchase the
remaining Warrant Shares will be issued.
Section 3. Payment of Taxes. The Company will pay all
documentary stamp and other taxes, if any, attributable to the initial issuance
of Warrant Shares upon the exercise hereof; provided, however, that the Company
shall not be required to pay any tax or other governmental charge which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates or certificates for Warrant Shares in a name other than that of the
Holder, and the Company shall not register any such transfer or issue any such
certificate until such tax or governmental charge, if required, shall have been
paid.
Section 4. Transfer. Subject to compliance with the
restrictions on transfer set forth herein and subject to Section 3, this Warrant
shall be transferable upon delivery of the Warrant duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or a
copy thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion.
Section 5. Exchange of Warrant Certificates. Subject to the
restrictions on transfer contained herein and to such requirements as the
Company may reasonably request to ensure compliance with applicable law, this
Warrant may be exchanged for another certificate or certificates entitling the
Holder hereof to purchase a like aggregate number of Warrant Shares as this
Warrant shall then entitle the Holder to purchase. The Holder shall make such
request in writing delivered to the Company, and shall surrender this Warrant,
properly endorsed. Thereupon, the Company shall countersign and deliver to the
Holder a new certificate or certificates, as the case may be, as so requested.
Section 6. Mutilated or Missing Warrants. In case this Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall issue,
countersign and deliver in exchange or substitution hereof, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon, in
case this Warrant is lost, stolen or destroyed, receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and a reasonable
indemnity therefor. The Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 7. Reservation of Warrant Shares; Purchase of
Warrants.
7.1 Reservation of Warrant Shares. The Company shall reserve
out of its authorized Common Stock the number of shares of Common Stock set
forth on the first page hereof for issuance upon exercise of this Warrant. The
Company shall at all times hereafter until the Expiration Date keep reserved out
of its authorized Common Stock, for issuance upon exercise of this Warrant, all
of the shares not theretofore issued upon such exercise. If at any time the
number of shares of authorized Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company will take such corporate action as may
be necessary to
-3-
<PAGE>
increase its authorized but unissued Common Stock, to such number of shares as
shall be sufficient for such purpose.
Section 8. Warrant Price. Subject to Section 9 hereof, the
price at which Warrant Shares shall be purchasable upon exercise of Warrants
(the "Warrant Price) shall be $2.50 per share.
Section 9. Adjustment of Warrant Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, in each case occurring on and after the
date hereof, as hereinafter described.
9.1 Adjustment. The number and kind of securities purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend on its
outstanding Common Stock in shares of Common Stock or make a distribution to all
holders of its outstanding Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of Warrant Shares purchasable
upon exercise hereof immediately prior thereto shall be adjusted so that the
Holder upon exercise hereof shall be entitled to receive the kind and number of
such Warrant Shares or other securities of the Company which it would have owned
or have been entitled to receive after the happening of any of the events
described above had this Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective on the date of the
dividend payment, subdivision, combination or issuance retroactive to the record
date with respect thereto, if any, for such event. Such adjustment shall be made
successively whenever such an issuance is made.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of its indebtedness or assets or securities
other than such Common Stock (excluding regular cash dividends and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants, or convertible or exchangeable securities, containing the right to
subscribe for or purchase shares of Common Stock, then in each case the number
of Warrant Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of such Warrant Shares theretofore
purchasable upon the exercise of this Warrant by a fraction, of which the
numerator shall be the then current market price per share of Common Stock (as
determined in accordance with paragraph (d)(3) below) on the date of such
distribution, and of which the denominator shall be the then current market
price per share of Common Stock, less the then fair value per share of
outstanding Common Stock (as determined by the Board of Directors of the
Company, whose good faith determination shall be conclusive) of the evidences of
indebtedness, assets or securities so distributed or of such rights, options or
warrants, or of such convertible or exchangeable securities. Such adjustment
shall be made successively whenever any such distribution is made, and shall
become effective on the date of
-4-
<PAGE>
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. No further adjustment shall
be made for the actual issuance of Common Stock upon the conversion, exercise or
exchange of any rights, options, warrants or other securities in respect of
which adjustment has been made pursuant to this paragraph (b).
(c) After the Common Stock is first traded on a national
securities exchange (including the NASDAQ Stock Market), in case the Company
shall issue shares of Common Stock (or rights, options, warrants or other
securities convertible into or exercisable or exchangeable for Common Stock)
(excluding (i) shares of Common Stock issued in or as a result of any of the
transactions described in paragraph (a) or (b) above, (ii) shares of Common
Stock issuable upon exercise of stock options or similar rights granted or to be
granted to directors, employees, consultants, contractors or other agents,
representatives or professionals of the Company pursuant to a stock option or
similar plan approved by the shareholders of the Company, (iii) shares of Common
Stock issued to directors, employees, consultants, contractors, licensees or
other agents, representatives or professionals of the Company pursuant to any
compensation plan or agreement approved by the shareholders of the Company, (iv)
shares of Common Stock issued pursuant to a dividend or interest reinvestment
plan, or (v) shares of Common Stock issued in a public offering at a price per
share that is not less than 95% of the then current market price) at a price per
share below the then current market price, then in each such case the number of
Warrant Shares thereafter purchasable upon the exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of this Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of such issuance
(including the shares of Common Stock issued on the date of such issuance) and
the denominator of which shall be an amount equal to the sum of (i) the total
number of shares of Common Stock outstanding immediately prior to such issuance
plus (ii) the number of shares which the aggregate consideration received for
such issuance would purchase at the current market price per share of Common
Stock (as determined in accordance with paragraph (d)(3) below) at such record
date.
(d) (1) For the purposes of paragraph (c) above, if the
Company shall issue any security, option, warrant or other right which directly
or indirectly may be converted into or exercised or exchanged for shares of
Common Stock, the Common Stock issuable upon conversion, exercise or exchange of
such securities or rights shall thereupon be deemed to have been issued and to
be outstanding, and the relevant price per share of Common Stock and the
consideration received by the Company upon conversion, exercise or exchange of
such securities or rights shall be deemed to include the sum of the
consideration received for the issuance of such securities or rights and the
minimum additional consideration payable upon the conversion, exercise or
exchange of such securities or rights. No further adjustment shall be made for
the actual issuance of Common Stock upon the conversion, exercise or exchange of
any such security or right.
(2) For purposes of paragraph (c) above, the following
shall also be applicable: In case the Company shall issue shares of its Common
Stock for a consideration wholly or partly other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company. Consideration received by the Company for issuance
-5-
<PAGE>
of its Common Stock shall be determined in all cases without deduction therefrom
of any expenses, underwriting commissions or concessions incurred in connection
therewith.
(3) For the purpose of any computation under paragraph
(b) or (c) of this Section, the "current market price per share" of Common Stock
at any date shall be the average of the daily closing prices for 20 consecutive
trading days commencing 30 trading days before the date of such computation. The
"closing price" for each day shall be the last such reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if not listed or admitted to trading, the
average of the high bid and low asked prices of the Common Stock in the
over-the-counter market as reported by NASDAQ or any comparable system. In the
absence of one or more such quotations, the Board of Directors of the Company
shall in good faith determine the current market price on the basis of such
quotations or formula as it considers appropriate, which determination shall be
conclusive.
(e) In any case in which this Section 9.1 shall require that
any adjustment in the number of Warrant Shares be made effective as of
immediately after a record date for a specified event, the Company may elect to
defer until the occurrence of the event the issuing to the Holder of the Warrant
Shares or other capital stock of the Company issuable upon the exercise over and
above the Warrant Shares or other capital stock of the Company issuable upon the
exercise of this Warrant prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(f) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of this Warrant; provided, however, that any
adjustments which by reason of this paragraph (f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one one-hundredth of a share.
(g) Whenever the number of shares of the Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as provided in
paragraph (a), (b) or (c) of this Section, the Warrant Price payable upon
exercise of this Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of such Warrant Shares purchasable immediately thereafter; provided,
however, that in no event shall the Warrant Price be less than the par value, if
any, of a share of Common Stock.
(h) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) of this
Section if the Company issues or distributes to the Holder the rights, options,
warrants, convertible or exchangeable securities, evidences of indebtedness or
assets referred to in those paragraphs which the Holder would have been entitled
to receive had the Warrant been exercised prior to the happening of such event
or
-6-
<PAGE>
the record date with respect thereto. No adjustment need be made for a change in
the par value of the Warrant Shares.
(i) For the purpose of this subsection 9.1, the term "shares
of Common Stock", shall mean (i) the class of stock designated as the Common
Stock of the Company, par value $.01 per share, or (ii) any other class of stock
resulting from successive changes or reclassifications of such respective
classes of shares consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to paragraph (a) above, the
Holder shall become entitled to purchase any securities other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of this Warrant and the Warrant Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in paragraphs (a) through (h), inclusive, above, and the provisions of
Section 3 and subsections 9.2 through 9.6, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other securities.
9.2 Notice of Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of this Warrant or the Warrant Price of
such Warrant Shares is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to the Holder notice of such adjustment or
adjustments.
9.3 No Adjustment for Dividends. Except as provided in
subsection 9.1, no adjustment in respect of any dividends or other payments or
distributions made to holders of securities shall be made during the term of
this Warrant or upon the exercise of this Warrant.
9.4 Preservation of Purchase Rights upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company with or into another entity (whether or not the Company is the
surviving corporation) or in case of any sale, transfer or lease to another
entity of all or substantially all the property of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute an
agreement that the Holder shall have the right thereafter upon payment of the
Warrant Price in effect immediately prior to such action to purchase upon
exercise of this Warrant the kind and amount of securities, cash and property
which it would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, transfer or lease had this Warrant been
exercised immediately prior to such action. Upon the execution of such
agreement, this Warrant shall be exercisable only for such securities, cash and
property. The Company shall furnish to the Holder notice of the execution of any
such agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 9. The provisions of this subsection 9.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
9.5 Other Adjustment. If any event occurs as to which in the
reasonable opinion of the Holder, in good faith, the other provisions of this
Section 9 are not strictly applicable but the lack of any adjustment of the
number or kind of securities issuable upon exercise of this Warrant and the
Warrant Price would not in the opinion of the Holder fairly protect the rights
of the Holder in accordance with the basic intent and principles of such
-7-
<PAGE>
provisions, or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the basic intent and principles of such provisions,
then the Holder may appoint a firm of independent certified public accountants
of recognized national standing (which may be the independent auditors of the
Company), which shall give their opinion upon the necessity and form of any
required adjustment to the number of Warrant Shares issuable upon exercise of
this Warrant and the Warrant Price, on a basis consistent with the basic intent
and principles established in the other provisions of this Section 9 necessary
to preserve, without dilution, the exercise rights of the Holder. Upon receipt
of such opinion, the Company shall forthwith make the adjustments described
therein.
9.6 Statement on Warrant. Irrespective of any adjustments in
the Warrant Price or the number or kind of securities purchasable upon the
exercise of this Warrant, this Warrant may continue to express the same price
and number and kind of shares as are stated herein.
Section 10. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of this Warrant. If
(a) any fraction of a Warrant Share would, except for the provisions of this
Section 10, be issuable on the exercise of this Warrant (or specified portion
thereof), and (b) the Holder shall have paid the amount due upon such exercise
with respect to such fractional share, then the Company shall return to such
Holder the amount so paid with respect to such fractional Warrant Share.
Section 11. Registration under the Securities Act. The Holder
represents and warrants to the Company that it will not dispose of this Warrant
or any Warrant Shares except pursuant to (i) an effective registration
statement, or (ii) an opinion of counsel, reasonably satisfactory to counsel for
the Company, that the proposed disposition of the Warrant or Warrant Shares
would not be in violation of the registration requirements of the Securities Act
or any state securities laws. The Holder represents and warrants that it is
acquiring the Warrant and will acquire the Warrant Shares for its own account
and with no intention of distributing or reselling this Warrant or Warrant
Shares or any part thereof in any transaction that would be in violation of the
registration requirements of the securities laws of the United States of America
or any state, without prejudice, however, to its rights, consistent with the
provisions of this Warrant, to sell or otherwise dispose of all or any part of
this Warrant or any Warrant Shares under an effective registration statement
under the Securities Act or under an exemption from such registration available
under the Securities Act.
Section 12. Certificates to Bear Legends. The Warrant Shares
or other securities issued upon exercise of this Warrant shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Warrant Shares or securities shall bear the following legend by which the Holder
thereof shall be bound:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND NEITHER THEY NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN
EXEMPTION
-8-
<PAGE>
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT."
Section 13. No Rights as Shareholders; Notices to Holders.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or to receive
notice as a shareholder in respect of any meeting of shareholders of the Company
for the election of the directors of the Company or any matter, or any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of this Warrant and prior to its exercise, any of the following
events shall occur:
(a) the Company shall declare any dividend payable in cash or
in any securities upon its shares of Common Stock or make any
distribution to the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe for or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer
or lease of all or substantially all of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events the Company shall give notice to the
Holder as provided in Section 14 hereof, such giving of notice to be completed
at least 10 days prior to the record date in the event of a transaction
described in clause (a) above and at least 20 days prior to the record date in
the case of a transaction referred to in clause (b) or (c) above fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to such dividend, distribution, or subscription
rights, or for the determination of the shareholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or such proposed
dissolution, liquidation or winding up.
Section 14. Notices. Any notice pursuant to this Warrant shall
be in writing and shall be given by first class, registered or certified mail,
return receipt requested, telecopy, courier service or personal delivery, if to
the Company, at:
67 Wall Street, Suite 2411
New York, New York 10005
Attn: Chief Executive Officer
(or such other address as shall be communicated by the Company to the Holder by
notice in accordance with this Section 14), and if to the Holder, at such
address as shall be communicated
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<PAGE>
by the Holder to the Company by notice in accordance with this Section 14 (or,
in the absence of such notice, at such address as otherwise appears on the books
and records of the Company).
Section 15. Supplements and Amendments. The provisions of this
Warrant may not be amended, modified or supplemented, and waiver or consents to
departures from the provisions hereof may not be given, without the written
consent of the Holder.
Section 16. Successors. All the covenants and provisions of
this Warrant by or for the benefit of the Company and the Holder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder, provided that the Company may not assign its rights and obligations
hereunder except by operation of law.
Section 17. Applicable Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws. The United States District
Court for the Southern District of New York or the courts of the State of New
York shall have jurisdiction in any action or proceeding arising out of or
relating to this Warrant.
Section 18. Benefits of this Agreement. Nothing in this
Warrant shall be construed to give to any person or entity other than the
Company and the Holder, any legal or equitable right, remedy or claim under this
Warrant.
Section 19. Captions. The captions of the Sections and
subsections of this Warrant have been inserted for convenience only and shall
have no substantive effect. IN WITNESS WHEREOF, this Warrant has been duly
executed, as of October 14, 1999.
HYCOMP, INC.
By: /s/ Paul K. Hickey
----------------------------------------
Name: Paul K. Hickey
Title: Chairman and Chief Executive Officer
-10-
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received,________________ hereby sells, assigns and
transfers unto _______________ this Warrant, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_________________ attorney, to transfer this Warrant on the books of the
within-named Company with respect to the number of Warrant Shares set forth
below, with full power of substitution:
Name(s) of No. of
Assignee(s) Address Warrant Shares
----------- ------- --------------
And if said number of Warrant Shares shall not be all the
Warrant Shares issuable upon exercise of this Warrant, a new certificate is to
be issued in the name of said undersigned for the balance remaining of the
Warrant Shares issuable upon exercise of this Warrant.
Dated:_________________, 19____
__________________________ NOTE: The above signature should
correspond exactly with the name on
the face of this Warrant.
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<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
HyComp, Inc.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by this Warrant for, and to purchase hereunder,
______________ shares of Common Stock, as provided for herein, and tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in the amount of $________ .
Please issue a certificate or certificates for such shares of
Common Stock in the name of:
Name:______________________
Address:__________________________________
Social Security Number: __________________
And if said number of shares shall not be all the shares issuable under
this Warrant, a new certificate is to be issued in the name of said undersigned
for the balance remaining of the shares issuable thereunder.
Signature:_______________________
NOTE: The above signature should
correspond exactly with the name on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form
above.
-12-
EXHIBIT 4.8
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW, AND NEITHER THEY NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER.
No. 5
COMMON STOCK PURCHASE WARRANT
For the purchase of up to
-1,000,000-
Shares of Common Stock
of
HYCOMP, INC.
This certifies that, for value received, SIMMONDS CAPITAL
LIMITED, an Ontario corporation (the "Holder"), is entitled to purchase from
HYCOMP, INC., a corporation organized under the laws of the Commonwealth of
Massachusetts (the "Company"), the aggregate number of shares of Common Stock,
at the option of the Holder, shown above at any time after 9:00 a.m., New York
City time, on October 14, 2003 (the "Issue Date") until 5:00 p.m., New York City
time, on the Expiration Date, at a purchase price per share equal to the Warrant
Price.
Section 1. Definitions. As used in this Warrant, and unless
the context requires otherwise, the following terms have the meaning indicated:
"Common Stock" means the Common Stock of the Company, par
value $.01 per share.
"Expiration Date" means the Fifth anniversary of the Issue
Date.
"Warrant Price" has the meaning assigned in Section 8 hereof,
subject to adjustment as provided in Section 9.
<PAGE>
"Warrant" means this Warrant, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Warrant Shares" means the shares of Common Stock issued or
issuable upon exercise of this Warrant.
Section 2. Term of Warrant; Exercise of Warrant.
2.1 Term of Warrant. Subject to the terms hereof, the Holder
shall have the right, which may be exercised at any time from and after 9:00
a.m., New York City time, on the Issue Date and until 5:00 p.m., New York City
time, on the Expiration Date, to purchase from the Company the number of fully
paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise hereof. If and to the extent this Warrant is
not exercised prior to 5:00 p.m., New York City time, on the Expiration Date, it
shall become void and all rights hereunder and all rights in respect hereof
shall cease as of such time.
2.2 Exercise of Warrant. The Warrant may be exercised upon
surrender to the Company at its office at:
67 Wall Street, Suite 2411
New York, New York, 10005
Attn: Chief Executive Officer
or such other office as the Company shall notify the Holder, in writing, of this
Warrant, together with the Purchase Form included herein duly completed and
signed and upon payment to the Company of the Warrant Price (as defined in and
determined in accordance with the provisions of Sections 8 and 9 hereof), for
the number of Warrant Shares in respect of which this Warrant is then being
exercised.
Unless otherwise agreed to by the Company, all payments of
such Warrant Price shall be made by certified or official bank check payable to
the order of the Company.
Subject to Section 3 hereof, upon the surrender of the Warrant
and payment of the Warrant Price as aforesaid, the Company shall cause to be
issued and delivered with all reasonable dispatch to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of this Warrant, together with cash, as provided in Section 10
hereof, in respect of any fractional Warrant Shares otherwise issuable upon
surrender. If permitted by applicable law, such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of this Warrant and payment of the Warrant
Price, as aforesaid. Each share of Common Stock that may be issued upon exercise
of this Warrant will, upon such issuance, be validly issued, fully paid,
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The rights of purchase represented by this Warrant shall be
exercisable, at the election of the Holder hereof (subject to Section 2.1
hereof), either in full or from time to time in part and, in the event that this
Warrant is exercised in respect of less than all of the Warrant Shares
purchasable on such exercise at any time prior to
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<PAGE>
the Expiration Date, a new Warrant evidencing the right to purchase the
remaining Warrant Shares will be issued.
Section 3. Payment of Taxes. The Company will pay all
documentary stamp and other taxes, if any, attributable to the initial issuance
of Warrant Shares upon the exercise hereof; provided, however, that the Company
shall not be required to pay any tax or other governmental charge which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates or certificates for Warrant Shares in a name other than that of the
Holder, and the Company shall not register any such transfer or issue any such
certificate until such tax or governmental charge, if required, shall have been
paid.
Section 4. Transfer. Subject to compliance with the
restrictions on transfer set forth herein and subject to Section 3, this Warrant
shall be transferable upon delivery of the Warrant duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or a
copy thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion.
Section 5. Exchange of Warrant Certificates. Subject to the
restrictions on transfer contained herein and to such requirements as the
Company may reasonably request to ensure compliance with applicable law, this
Warrant may be exchanged for another certificate or certificates entitling the
Holder hereof to purchase a like aggregate number of Warrant Shares as this
Warrant shall then entitle the Holder to purchase. The Holder shall make such
request in writing delivered to the Company, and shall surrender this Warrant,
properly endorsed. Thereupon, the Company shall countersign and deliver to the
Holder a new certificate or certificates, as the case may be, as so requested.
Section 6. Mutilated or Missing Warrants. In case this Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall issue,
countersign and deliver in exchange or substitution hereof, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon, in
case this Warrant is lost, stolen or destroyed, receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and a reasonable
indemnity therefor. The Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 7. Reservation of Warrant Shares; Purchase of
Warrants.
7.1 Reservation of Warrant Shares. The Company shall reserve
out of its authorized Common Stock the number of shares of Common Stock set
forth on the first page hereof for issuance upon exercise of this Warrant. The
Company shall at all times hereafter until the Expiration Date keep reserved out
of its authorized Common Stock, for issuance upon exercise of this Warrant, all
of the shares not theretofore issued upon such exercise. If at any time the
number of shares of authorized Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company will take such corporate action as may
be necessary to
-3-
<PAGE>
increase its authorized but unissued Common Stock, to such number of shares as
shall be sufficient for such purpose.
Section 8. Warrant Price. Subject to Section 9 hereof, the
price at which Warrant Shares shall be purchasable upon exercise of Warrants
(the "Warrant Price) shall be $3.00 per share.
Section 9. Adjustment of Warrant Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, in each case occurring on and after the
date hereof, as hereinafter described.
9.1 Adjustment. The number and kind of securities purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend on its
outstanding Common Stock in shares of Common Stock or make a distribution to all
holders of its outstanding Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of Warrant Shares purchasable
upon exercise hereof immediately prior thereto shall be adjusted so that the
Holder upon exercise hereof shall be entitled to receive the kind and number of
such Warrant Shares or other securities of the Company which it would have owned
or have been entitled to receive after the happening of any of the events
described above had this Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective on the date of the
dividend payment, subdivision, combination or issuance retroactive to the record
date with respect thereto, if any, for such event. Such adjustment shall be made
successively whenever such an issuance is made.
(b) In case the Company shall distribute to all holders of its
outstanding Common Stock evidences of its indebtedness or assets or securities
other than such Common Stock (excluding regular cash dividends and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants, or convertible or exchangeable securities, containing the right to
subscribe for or purchase shares of Common Stock, then in each case the number
of Warrant Shares thereafter purchasable upon the exercise of this Warrant shall
be determined by multiplying the number of such Warrant Shares theretofore
purchasable upon the exercise of this Warrant by a fraction, of which the
numerator shall be the then current market price per share of Common Stock (as
determined in accordance with paragraph (d)(3) below) on the date of such
distribution, and of which the denominator shall be the then current market
price per share of Common Stock, less the then fair value per share of
outstanding Common Stock (as determined by the Board of Directors of the
Company, whose good faith determination shall be conclusive) of the evidences of
indebtedness, assets or securities so distributed or of such rights, options or
warrants, or of such convertible or exchangeable securities. Such adjustment
shall be made successively whenever any such distribution is made, and shall
become effective on the date of
-4-
<PAGE>
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution. No further adjustment shall
be made for the actual issuance of Common Stock upon the conversion, exercise or
exchange of any rights, options, warrants or other securities in respect of
which adjustment has been made pursuant to this paragraph (b).
(c) After the Common Stock is first traded on a national
securities exchange (including the NASDAQ Stock Market), in case the Company
shall issue shares of Common Stock (or rights, options, warrants or other
securities convertible into or exercisable or exchangeable for Common Stock)
(excluding (i) shares of Common Stock issued in or as a result of any of the
transactions described in paragraph (a) or (b) above, (ii) shares of Common
Stock issuable upon exercise of stock options or similar rights granted or to be
granted to directors, employees, consultants, contractors or other agents,
representatives or professionals of the Company pursuant to a stock option or
similar plan approved by the shareholders of the Company, (iii) shares of Common
Stock issued to directors, employees, consultants, contractors, licensees or
other agents, representatives or professionals of the Company pursuant to any
compensation plan or agreement approved by the shareholders of the Company, (iv)
shares of Common Stock issued pursuant to a dividend or interest reinvestment
plan, or (v) shares of Common Stock issued in a public offering at a price per
share that is not less than 95% of the then current market price) at a price per
share below the then current market price, then in each such case the number of
Warrant Shares thereafter purchasable upon the exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of this Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of such issuance
(including the shares of Common Stock issued on the date of such issuance) and
the denominator of which shall be an amount equal to the sum of (i) the total
number of shares of Common Stock outstanding immediately prior to such issuance
plus (ii) the number of shares which the aggregate consideration received for
such issuance would purchase at the current market price per share of Common
Stock (as determined in accordance with paragraph (d)(3) below) at such record
date.
(d) (1) For the purposes of paragraph (c) above, if the
Company shall issue any security, option, warrant or other right which directly
or indirectly may be converted into or exercised or exchanged for shares of
Common Stock, the Common Stock issuable upon conversion, exercise or exchange of
such securities or rights shall thereupon be deemed to have been issued and to
be outstanding, and the relevant price per share of Common Stock and the
consideration received by the Company upon conversion, exercise or exchange of
such securities or rights shall be deemed to include the sum of the
consideration received for the issuance of such securities or rights and the
minimum additional consideration payable upon the conversion, exercise or
exchange of such securities or rights. No further adjustment shall be made for
the actual issuance of Common Stock upon the conversion, exercise or exchange of
any such security or right.
(2) For purposes of paragraph (c) above, the following shall
also be applicable: In case the Company shall issue shares of its Common Stock
for a consideration wholly or partly other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company. Consideration received by the Company for issuance
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<PAGE>
of its Common Stock shall be determined in all cases without deduction therefrom
of any expenses, underwriting commissions or concessions incurred in connection
therewith.
(3) For the purpose of any computation under paragraph (b)
or (c) of this Section, the "current market price per share" of Common Stock at
any date shall be the average of the daily closing prices for 20 consecutive
trading days commencing 30 trading days before the date of such computation. The
"closing price" for each day shall be the last such reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if not listed or admitted to trading, the
average of the high bid and low asked prices of the Common Stock in the
over-the-counter market as reported by NASDAQ or any comparable system. In the
absence of one or more such quotations, the Board of Directors of the Company
shall in good faith determine the current market price on the basis of such
quotations or formula as it considers appropriate, which determination shall be
conclusive.
(e) In any case in which this Section 9.1 shall require that
any adjustment in the number of Warrant Shares be made effective as of
immediately after a record date for a specified event, the Company may elect to
defer until the occurrence of the event the issuing to the Holder of the Warrant
Shares or other capital stock of the Company issuable upon the exercise over and
above the Warrant Shares or other capital stock of the Company issuable upon the
exercise of this Warrant prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(f) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of this Warrant; provided, however, that any
adjustments which by reason of this paragraph (f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one one-hundredth of a share.
(g) Whenever the number of shares of the Warrant Shares
purchasable upon the exercise of this Warrant is adjusted, as provided in
paragraph (a), (b) or (c) of this Section, the Warrant Price payable upon
exercise of this Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of such Warrant Shares purchasable immediately thereafter; provided,
however, that in no event shall the Warrant Price be less than the par value, if
any, of a share of Common Stock.
(h) No adjustment in the number of Warrant Shares purchasable
upon the exercise of this Warrant need be made under paragraph (b) of this
Section if the Company issues or distributes to the Holder the rights, options,
warrants, convertible or exchangeable securities, evidences of indebtedness or
assets referred to in those paragraphs which the Holder would have been entitled
to receive had the Warrant been exercised prior to the happening of such event
or
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<PAGE>
the record date with respect thereto. No adjustment need be made for a change in
the par value of the Warrant Shares.
(i) For the purpose of this subsection 9.1, the term "shares
of Common Stock", shall mean (i) the class of stock designated as the Common
Stock of the Company, par value $.01 per share, or (ii) any other class of stock
resulting from successive changes or reclassifications of such respective
classes of shares consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to paragraph (a) above, the
Holder shall become entitled to purchase any securities other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of this Warrant and the Warrant Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in paragraphs (a) through (h), inclusive, above, and the provisions of
Section 3 and subsections 9.2 through 9.6, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other securities.
9.2 Notice of Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of this Warrant or the Warrant Price of
such Warrant Shares is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to the Holder notice of such adjustment or
adjustments.
9.3 No Adjustment for Dividends. Except as provided in
subsection 9.1, no adjustment in respect of any dividends or other payments or
distributions made to holders of securities shall be made during the term of
this Warrant or upon the exercise of this Warrant.
9.4 Preservation of Purchase Rights upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company with or into another entity (whether or not the Company is the
surviving corporation) or in case of any sale, transfer or lease to another
entity of all or substantially all the property of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute an
agreement that the Holder shall have the right thereafter upon payment of the
Warrant Price in effect immediately prior to such action to purchase upon
exercise of this Warrant the kind and amount of securities, cash and property
which it would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, transfer or lease had this Warrant been
exercised immediately prior to such action. Upon the execution of such
agreement, this Warrant shall be exercisable only for such securities, cash and
property. The Company shall furnish to the Holder notice of the execution of any
such agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 9. The provisions of this subsection 9.4 shall similarly apply to
successive consolidations, mergers, sales, transfers or leases.
9.5 Other Adjustment. If any event occurs as to which in the
reasonable opinion of the Holder, in good faith, the other provisions of this
Section 9 are not strictly applicable but the lack of any adjustment of the
number or kind of securities issuable upon exercise of this Warrant and the
Warrant Price would not in the opinion of the Holder fairly protect the rights
of the Holder in accordance with the basic intent and principles of such
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<PAGE>
provisions, or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the basic intent and principles of such provisions,
then the Holder may appoint a firm of independent certified public accountants
of recognized national standing (which may be the independent auditors of the
Company), which shall give their opinion upon the necessity and form of any
required adjustment to the number of Warrant Shares issuable upon exercise of
this Warrant and the Warrant Price, on a basis consistent with the basic intent
and principles established in the other provisions of this Section 9 necessary
to preserve, without dilution, the exercise rights of the Holder. Upon receipt
of such opinion, the Company shall forthwith make the adjustments described
therein.
9.6 Statement on Warrant. Irrespective of any adjustments in
the Warrant Price or the number or kind of securities purchasable upon the
exercise of this Warrant, this Warrant may continue to express the same price
and number and kind of shares as are stated herein.
Section 10. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of this Warrant. If
(a) any fraction of a Warrant Share would, except for the provisions of this
Section 10, be issuable on the exercise of this Warrant (or specified portion
thereof), and (b) the Holder shall have paid the amount due upon such exercise
with respect to such fractional share, then the Company shall return to such
Holder the amount so paid with respect to such fractional Warrant Share.
Section 11. Registration under the Securities Act. The Holder
represents and warrants to the Company that it will not dispose of this Warrant
or any Warrant Shares except pursuant to (i) an effective registration
statement, or (ii) an opinion of counsel, reasonably satisfactory to counsel for
the Company, that the proposed disposition of the Warrant or Warrant Shares
would not be in violation of the registration requirements of the Securities Act
or any state securities laws. The Holder represents and warrants that it is
acquiring the Warrant and will acquire the Warrant Shares for its own account
and with no intention of distributing or reselling this Warrant or Warrant
Shares or any part thereof in any transaction that would be in violation of the
registration requirements of the securities laws of the United States of America
or any state, without prejudice, however, to its rights, consistent with the
provisions of this Warrant, to sell or otherwise dispose of all or any part of
this Warrant or any Warrant Shares under an effective registration statement
under the Securities Act or under an exemption from such registration available
under the Securities Act.
Section 12. Certificates to Bear Legends. The Warrant Shares
or other securities issued upon exercise of this Warrant shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Warrant Shares or securities shall bear the following legend by which the Holder
thereof shall be bound:
"THE SHARES [OR OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW, AND NEITHER THEY NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, THAT AN
EXEMPTION
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<PAGE>
FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR OTHER TRANSFER. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT."
Section 13. No Rights as Shareholders; Notices to Holders.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or to receive
notice as a shareholder in respect of any meeting of shareholders of the Company
for the election of the directors of the Company or any matter, or any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of this Warrant and prior to its exercise, any of the following
events shall occur:
(a) the Company shall declare any dividend payable in cash or
in any securities upon its shares of Common Stock or make any
distribution to the holders of its shares of Common Stock;
(b) the Company shall offer to all holders of its shares of
Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe for or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, sale, transfer
or lease of all or substantially all of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events the Company shall give notice to the
Holder as provided in Section 14 hereof, such giving of notice to be completed
at least 10 days prior to the record date in the event of a transaction
described in clause (a) above and at least 20 days prior to the record date in
the case of a transaction referred to in clause (b) or (c) above fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to such dividend, distribution, or subscription
rights, or for the determination of the shareholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or such proposed
dissolution, liquidation or winding up.
Section 14. Notices. Any notice pursuant to this Warrant shall
be in writing and shall be given by first class, registered or certified mail,
return receipt requested, telecopy, courier service or personal delivery, if to
the Company, at:
67 Wall Street, Suite 2411
New York, New York 10005
Attn: Chief Executive Officer
(or such other address as shall be communicated by the Company to the Holder by
notice in accordance with this Section 14), and if to the Holder, at such
address as shall be communicated
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<PAGE>
by the Holder to the Company by notice in accordance with this Section 14 (or,
in the absence of such notice, at such address as otherwise appears on the books
and records of the Company).
Section 15. Supplements and Amendments. The provisions of this
Warrant may not be amended, modified or supplemented, and waiver or consents to
departures from the provisions hereof may not be given, without the written
consent of the Holder.
Section 16. Successors. All the covenants and provisions of
this Warrant by or for the benefit of the Company and the Holder shall bind and
inure to the benefit of their respective successors and permitted assigns
hereunder, provided that the Company may not assign its rights and obligations
hereunder except by operation of law.
Section 17. Applicable Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws. The United States District
Court for the Southern District of New York or the courts of the State of New
York shall have jurisdiction in any action or proceeding arising out of or
relating to this Warrant.
Section 18. Benefits of this Agreement. Nothing in this
Warrant shall be construed to give to any person or entity other than the
Company and the Holder, any legal or equitable right, remedy or claim under this
Warrant.
Section 19. Captions. The captions of the Sections and
subsections of this Warrant have been inserted for convenience only and shall
have no substantive effect.
IN WITNESS WHEREOF, this Warrant has been duly executed, as of
October 14, 1999.
HYCOMP, INC.
By:/s/ Paul K. Hickey
----------------------------------
Name: Paul K. Hickey
Title: Chairman and Chief Executive Officer
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<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _________________________ hereby sells,
assigns and transfers unto ______________________________ this Warrant, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ______________________________ attorney, to transfer this
Warrant on the books of the within-named Company with respect to the number of
Warrant Shares set forth below, with full power of substitution:
Name(s) of No. of
Assignee(s) Address Warrant Shares
And if said number of Warrant Shares shall not be all the
Warrant Shares issuable upon exercise of this Warrant, a new certificate is to
be issued in the name of said undersigned for the balance remaining of the
Warrant Shares issuable upon exercise of this Warrant.
Dated: , 19____
_____________________________
NOTE: The above signature should
correspond exactly with the name on
the face of this Warrant.
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<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
HyComp, Inc.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by this Warrant for, and to purchase hereunder,
______________ shares of Common Stock, as provided for herein, and tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in the amount of $____________.
Please issue a certificate or certificates for such shares of
Common Stock in the name of:
Name:__________________________
Address:________________________________
________________________________________
Social Security Number: ____________________
And if said number of shares shall not be all the shares issuable under
this Warrant, a new certificate is to be issued in the name of said undersigned
for the balance remaining of the shares issuable thereunder.
Signature:________________________
NOTE: The above signature should
correspond exactly with the name on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form
above.
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
by and between
SIMMONDS CAPITAL LIMITED
and
HYCOMP, INC.
relating to all of the
outstanding capital stock
of
EIEIHOME.COM, INC.
dated as of
October 14, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
October 14, 1999, by and between SIMMONDS CAPITAL LIMITED, an Ontario
corporation (the "Seller") and HYCOMP, INC., a corporation organized under the
laws of the Commonwealth of Massachusetts (the "Buyer" or "HyComp").
WHEREAS, Seller owns 120,000 shares of common stock, no par value,
constituting all of the issued and outstanding shares of capital stock of
EieiHome.com, Inc. an Ontario corporation (the "Company"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller all of the Securities upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and on the basis of
the respective representations, warranties, covenants, agreements, undertakings
and obligations set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale of Securities. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
2), Buyer agrees to purchase and accept delivery from Seller, and Seller agrees
to sell, assign, transfer and deliver to Buyer, all of the Securities, free of
all liens, pledges, mortgages, security interests, charges, restrictions,
adverse claims or other encumbrances of any kind whatsoever ("Encumbrances"),
for the consideration specified in Section 1.2.
1.2 Consideration; Payment. At the Closing, in full payment for the
Securities, Buyer shall deliver to Seller:
(a) 7,500,000 validly authorized, fully paid and
non-assessable shares of HyComp common stock, $0.01 par value per share ("HyComp
Shares"), free and clear of any Encumbrances;
(b) A demand promissory note in the amount of U.S. $500,000
(the "Note"), in the form attached as Exhibit 1 to this Agreement;
(c) A convertible debenture in the principal amount of U.S.
$2,000,000 ("Debenture"), convertible into HyComp Shares at a conversion price
of $1.00 per share (subject to adjustment as provided therein), in the form
attached as Exhibit 2 to this Agreement.
(d) Five year warrants (the "Warrants issued pursuant to a
warrant agreement (the "Warrant Agreement") in the form attached as Exhibit 3 to
this Agreement for the purchase of an aggregate of 5,000,000 HyComp Shares
(subject to adjustment as provided therein, as follows: (i) 1,000,000 HyComp
Shares at an exercise price of $1.00 per share exercisable
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<PAGE>
immediately after the Closing; (ii) 1,000,000 HyComp Shares at an exercise price
of $1.50 per share exercisable after one year from the Closing; (iii) 1,000,000
HyComp Shares at an exercise price of $2.00 per share exercisable after two
years after the Closing; (iv) 1,000,000 HyComp Shares at an exercise price of
$2.50 per share exercisable after three years after the Closing; and (v)
1,000,000 HyComp Shares at an exercise price of $3.00 per share exercisable
after four years after the Closing.
ARTICLE 2
CLOSING
2.1 Closing. The purchase and sale of the Securities will take place at
the offices of Kramer, Levin, Naftalis & Frankel LLP, 919 Third Avenue, New
York, New York 10022, at 4:00p.m. on the date hereof, or at such other time and
place as the parties may agree (the "Closing").
2.2 Closing Obligations. At the Closing:
(a) Seller shall deliver, or cause to be delivered, to Buyer the
following:
(i) Certificates representing the Securities, duly
endorsed in blank (or accompanied by duly executed
blank stock powers) and all other documents or
instruments, including, any and all necessary
transfer stamps which are necessary to vest all of
Seller's right, title and interest in and into the
Securities in Buyer;
(ii) The Warrant Agreement duly executed on behalf of
Seller; and
(iii) Such other documents as Buyer may reasonably require.
(b) Buyer shall deliver, or cause to be delivered, to Seller the
following:
(i) Certificates representing HyComp Shares in accordance
with Article 1, duly endorsed in blank (or
accompanied by duly executed blank stock powers) and
all other documents or instruments, including, any
and all necessary transfer stamps which are necessary
to vest all of Buyer's right title and interest in
and into the HyComp Shares in Seller;
(ii) The Note, Debenture, the Warrant Agreement and the
Warrants, each duly executed on behalf of Buyer, in
accordance with Article 1 of this Agreement; and
(iii) Such other documents as Seller may reasonably
require.
(c) The parties shall mutually agree to the terms of a two year
management services agreement in accordance with Section 2.3
of this Agreement.
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<PAGE>
2.3 Management Service Agreement. Upon the Closing, Seller and Buyer shall
enter into a management services agreement in the form attached as Exhibit 4 to
this Agreement (the "Management Services Agreement" and together with this
Agreement, the Note, the Debenture, the Warrants and the Warrant Agreement, the
"Transaction Documents"), pursuant to which Seller shall provide to Buyer senior
management, finance, personnel, business development and investor relations
services.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
3. Representations and Warranties of Seller and Company. Seller represents
and warrants to Buyer as follows:
3.1 Organization and Good Standing.
(a) Each of the Seller and the Company is a corporation duly
organized and validly existing under the laws of Ontario, Canada and has all
requisite corporate or other power and authority to enter into this Agreement
and perform its obligations hereunder.
(b) The execution, delivery and performance of this Agreement and
the other Transaction Documents by Seller, and the transactions contemplated
hereby, including the sale of the Securities pursuant hereto, have been duly
authorized by all necessary corporate or other action required on the part of
Seller and Company. This Agreement has been duly executed and delivered by
Seller. This Agreement constitutes, and when duly executed and delivered by
Seller, the Warrant Agreement and the Management Services Agreement, will
constitute the legal, valid and binding obligation of Seller enforceable against
Seller in accordance with their respective terms, subject to bankruptcy,
insolvency and other similar laws relating to or affecting the enforceability of
creditors' rights generally, and to general principles of equity.
3.2 Securities.
(a) The Securities constitute all of the issued and outstanding
capital stock of the Company, as more fully set forth in Section 3.4 of this
Agreement.
(b) Seller has good and valid title to the Securities, free and
clear of any Encumbrances, and Seller shall deliver to Buyer good and valid
title to the Securities free and clear of any Encumbrances.
(c) The Securities are owned of record and beneficially by Seller.
Seller has sole power of disposition with respect to the Securities, with no
restrictions, subject to United States and other applicable securities laws, on
Seller's rights of disposition pertaining thereto.
3.3 Authority; No Conflict.
(a) The execution and delivery of this Agreement and other
Transaction Documents by Seller, and the sale of the Securities pursuant hereto,
have been duly authorized by all necessary corporate or other action required on
the part of Seller. This Agreement has
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<PAGE>
been duly executed and delivered by Seller and constitutes the legal, valid and
binding obligation of Seller enforceable against Seller in accordance with its
terms, subject to bankruptcy, insolvency and other similar laws relating to or
affecting the enforceability of creditors' rights generally, and to general
principles of equity.
(b) The execution, delivery and performance of this Agreement and
other Transaction Documents by Seller, and the consummation by Seller of the
transactions contemplated hereby, will not (i) conflict with or violate the
organizational documents of Seller or the Company, or (ii) conflict with,
violate, result in the breach of any term of, constitute a default under, or
require the consent of or any notice to or filing with any third party or
governmental authority under, any agreement or instrument to which Seller or the
Company is a party or any law, order, rule, regulation, decree, writ or
injunction of any governmental body having jurisdiction over Seller or the
Company or their respective properties, except for such consents or filings as
have been obtained or made.
3.4 Capitalization of the Company. The authorized equity securities of the
Company consist of an unlimited number of shares of common stock, no par value,
of which 120,000 shares are issued and outstanding. All of the outstanding
equity securities of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no outstanding or authorized
options, warrants, calls, rights, commitments, conversion rights or agreements
of any character to which the Company is a party or by which the Company is
bound which could require the Company to issue, deliver, sell or otherwise
transfer or cause to be issued, delivered, sold, transferred or offered for sale
or transfer, any shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company or
that could require the Company to grant, extend or enter into any such option,
warrant, call, right, commitment, conversion right or agreement. None of the
outstanding equity securities or other securities of the Company were issued in
violation of the United States Securities Act of 1933, as amended (the
"Securities Act") or any other applicable legal requirement. the Company is
under no obligation to register any of its securities under the securities laws
of any jurisdiction. No person has any preemptive rights with respect to any
security of the Company.
3.5 Financial Statements; No Undisclosed Liabilities.
(a) The financial statements of the Company dated as of and for the
periods ended June 30, 1999 (the "Company Financial Statements") are true and
correct in all material respects have been prepared in accordance with Canadian
generally accepted accounting principles and accurately present the financial
condition and results of operation of the Company as of the dates and for the
periods set forth therein.
(b) Except as and to the extent (i) reflected in the Company
Financial Statement, or (ii) set forth on Schedule I (the "Disclosure Schedule")
attached to this Agreement, the Company does not have any liability or
obligation, which individually or in the aggregate is material to the business,
operations, assets or financial condition of the Company.
3.6 Books and Records. Except as disclosed in the Disclosure Schedule, the
books of account and other records of the Company, all of which have been made
available to Buyer,
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<PAGE>
are true and correct. Except as disclosed in the Disclosure Schedule, the minute
books of the Company contain true, correct and, since June 22, 1999, complete
records of all meetings held of, and corporate action taken by, the
shareholders, the Board of Directors, and committees of the Board of Directors
of the Company. At the Closing, all of such books and records will be in the
possession of the Company.
3.7 Brokers or Finders. Except as disclosed in the disclosure schedule,
Seller and its agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commission or other similar
payment in connection with this Agreement or other transactions contemplated
hereby.
3.8 Investment Representations. Seller acknowledges that the HyComp Shares
issuable by the Buyer at the Closing, upon conversion of the Debenture or upon
exercise of the Warrants (i) have not been registered under the Securities Act,
or any state securities laws, and cannot be sold or otherwise disposed of except
in a transaction registered under the Securities Act and any applicable state
securities laws, or that is exempt from such registration, and (ii) so long as
required by law, each certificate representing the HyComp Shares will bear a
legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS."
(b) Seller, together with its officers, directors and
advisors, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the acquisition of the
HyComp Shares.
(c) The HyComp Shares are being acquired by Seller for its own
account and not for any other person or entity, for investment only and with no
intention of distributing or reselling (and will not distribute or resell) such
HyComp Shares or any part thereof or interest therein in any transaction that
would violate the registration requirements of the Securities Act or other
applicable securities laws.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
4.1 Organization and Good Standing.
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<PAGE>
(a) Buyer is a corporation duly organized and validly existing
under the laws of the Commonwealth of Massachusetts and has all requisite
corporate or other power and authority to enter into this Agreement and perform
its obligations hereunder.
(b) The execution, delivery and performance of this Agreement
and the other Transaction Documents by Buyer, and the consummation of the
transactions contemplated hereby including the purchase of the Securities of the
Company pursuant hereto, have been duly authorized by all necessary corporate or
other action required on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer. This Agreement constitutes, and when the other
Transaction Documents are executed and delivered by Buyer such documents will
constitute, the legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with their respective terms, subject to bankruptcy,
insolvency and other similar laws relating to or affecting the enforceability of
creditors' rights generally, and to general principles of equity.
4.2 Securities.
(a) Buyer has good and valid title to the HyComp Shares, free
and clear of any Encumbrances, and Buyer shall deliver to Seller good and valid
title to the HyComp Shares free and clear of any Encumbrances.
(b) The HyComp Shares issuable by Buyer upon conversion of the
Debenture and the exercise of the Warrants will be valid, free and clear of any
Encumbrances, and upon conversion of the Debenture and the exercise of the
Warrants, Buyer shall deliver to Seller good and valid title to the HyComp
Shares free and clear of any Encumbrances. The HyComp Shares issuable pursuant
to subparagraph (a) above are owned of record and beneficially by Buyer. Buyer
has sole power of disposition with respect to the HyComp Shares, with no
restrictions, subject to United States and other applicable securities laws, on
Buyer's rights of disposition pertaining thereto.
4.3 Authority; No Conflict.
(a) The execution and delivery of this Agreement and other
Transaction Documents by Buyer, and the issuance of the HyComp Shares pursuant
hereto, have been duly authorized by all necessary corporate or other action
required on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms, subject to
bankruptcy, insolvency and other similar laws relating to or affecting the
enforceability of creditors' rights generally, and to general principles of
equity.
(b) The execution, delivery and performance of this Agreement
and other Transaction Documents by Buyer, and the consummation by Buyer of the
transactions contemplated hereby, will not (i) conflict with or violate the
organizational documents of Buyer, or (ii) conflict with, violate, result in the
breach of any term of, constitute a default under, or require the consent of or
any notice to or filing with any third party or governmental authority under,
any agreement or instrument to which Buyer is a party or any law, order, rule,
regulation,
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<PAGE>
decree, writ or injunction of any governmental body having jurisdiction over
Buyer or its respective properties, except for such consents or filings as have
been obtained or made.
4.4 Capitalization of Buyer. The authorized equity securities of Buyer
consist of (i) 20,000,000 shares of common stock, $.01 par value per share, of
which 10,197,070 shares are issued and outstanding; (ii) 2,000 shares of
non-voting 8% convertible redeemable preferred stock, $100 par value per share,
of which 53 shares are currently issued and outstanding but which are to be
either redeemed or converted on or before November 10. All of the outstanding
equity securities of the Buyer have been duly authorized and validly issued and
are fully paid and nonassessable. There are options outstanding to purchase
850,000 shares of common stock of Buyer, exercisable at $.013 per share,
pursuant to Buyer's 1985 Stock Option Plan (the "1985 Plan"). Except as set
forth in the preceding sentence pursuant to the 1985 Plan, there are no other
outstanding or authorized options, warrants, calls, rights, commitments,
conversion rights or agreements of any character to which Buyer is a party or by
which Buyer is bound which could require Buyer to issue, deliver, sell or
otherwise transfer or cause to be issued, delivered, sold, transferred or
offered for sale or transfer, any shares of capital stock of Buyer or securities
convertible into or exchangeable for shares of capital stock of Buyer or that
could require either Buyer to grant, extend or enter into any such option,
warrant, call, right, commitment, conversion right or agreement. None of the
outstanding equity securities or other securities of Buyer were issued in
violation of the United States Securities Act of 1933, as amended (the
"Securities Act") or any other legal requirement. Buyer is under no obligation
to register any of its securities under the Securities Act or securities laws of
any other jurisdiction. No person has any preemptive rights with respect to any
security of Buyer.
4.5 Balance Sheet; Absence of Undisclosed Liabilities.
(a) The balance sheet of Buyer, dated as of September 30, 1999
and attached hereto as Exhibit 5 (the "Balance Sheet"), fairly and accurately
reflects the financial condition of Buyer as of the date thereof, and
(b) Except as and to the extent (i) reflected and reserved on
the Balance Sheet, or (ii) set forth on Disclosure Schedule attached hereto, as
of the date of this Agreement, Buyer does not have any liability or obligation,
secured or unsecured, whether accrued, absolute, contingent, unasserted or
otherwise, which individually or in the aggregate is material to Buyer. For
purposes of this Section 4.5, "material" means any amount in excess of $20,000.
4.6 Product Liability and Recalls. Without limiting the representation
contained in Section 4.5, except as disclosed in the Disclosure Schedule,
(a) There is no claim, and Buyer is not aware of the basis of
any claim, against Buyer for injury to person or property of employees or any
third parties suffered as a result of the manufacture, sale or distribution of
any product or the performance of any service by Buyer, including claims arising
out of the allegedly defective or unsafe nature of the products sold or
distributed by Buyer;
(b) There is no pending or, to the best knowledge of Buyer,
threatened recall or investigation of any product sold or distributed by Buyer;
and
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<PAGE>
(c) There are no liabilities of, or threatened claims against,
Buyer for (i) product returns, (ii) warranty obligations, or (iii) product
services.
4.7 No Activities. Except as set forth in the Disclosure Schedule,
(a) Since the sale of assets to Satcon Technology Corporation,
a Delaware corporation ("Satcon") on April 12, 1999, Buyer has engaged in no
business activity other than incident to such sale, the settlement of claims
identified on the Disclosure Schedule and the maintenance of Buyer's corporate
existence, and
(b) Buyer is not a party to any contract, agreement or other
arrangement, whether or not in writing, that requires any payment or performance
by Buyer after the date of this Agreement.
4.8 Absences of Reporting Obligations. Buyer is not now and has never
in the past been subject to the reporting obligations of Section 13 or 15(d) of
the United States Securities Exchange Act of 1934, as amended, or similar
securities laws of any other jurisdiction.
4.9 Books and Records. Except as disclosed in the Disclosure Schedule,
the books of account and other records of Buyer, all of which have been made
available to Seller, are true and correct. Except as disclosed in the Disclosure
Schedule, the minute books of Buyer contain true, correct and, since February
29, 1984, complete records of all meetings held of, and corporate action taken
by, the shareholders, the Board of Directors, and committees of the Board of
Directors of Buyer. The stock books of Buyer are true, accurate and complete. At
the Closing, all of such books and records will be in the possession of Buyer.
4.10 Brokers or Finders. Except as disclosed in the Disclosure
Schedule, Buyer and its agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commission or
other similar payment in connection with this Agreement or other transactions
contemplated hereby.
4.11 Investment Representations.
(a) Buyer acknowledges that (i) the Securities have not been
registered under the Securities Act, or any state securities laws, and cannot be
sold or otherwise disposed of except in a transaction registered under the
Securities Act and any applicable state securities laws, or that is exempt from
such registration, and (ii) so long as required by law, each certificate
representing the Securities will bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH LAWS."
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<PAGE>
(b) Buyer, together with its officers, directors and advisors,
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the acquisition of the Securities.
(c) The Securities are being acquired by Buyer for its own
account and not for any other person or entity, for investment only and with no
intention of distributing or reselling (and will not distribute or resell) such
Securities or any part thereof or interest therein in any transaction that would
violate the registration requirements of the Securities Act or other applicable
securities laws.
4.12 Reservation of Shares. Buyer shall at all times reserve out of its
authorized and unissued shares of capital stock sufficient HyComp Shares to
provide for the conversion of the Debenture and the exercise of the Warrants.
ARTICLE 5
INDEMNIFICATION AND REMEDIES
5. Indemnification; Remedies
5.1 By Seller.
(a) Seller hereby agrees promptly upon demand to indemnify and
hold harmless Buyer and its affiliates and their respective officers, director,
employees and agents against all claims, damages, losses, liabilities, costs and
expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) reasonably incurred by such persons in connection with or
arising out of each and all of the following:
(i) Any breach by Seller or any representations,
warranty of Seller in this Agreement;
(ii) Any breach of any covenant, agreement or
obligation of Seller contained in this Agreement;
(iii) The operation of the business of the Company prior
to the Closing; and
(iv) Any claim by any person for brokerage or finder's
fees or commissions or similar payments based upon
any agreement or understanding alleged to have
been made by any such person with Seller or the
Company in connection with the transactions
contemplated hereby.
5.2 Indemnification by Buyer.
(a) Buyer hereby agrees promptly upon demand to indemnify and
hold harmless Seller and its affiliates and their respective officers,
directors, employees and agents
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<PAGE>
against all claims, damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any legal, accounting or other expenses
for investigating or defending any actions or threatened actions) reasonably
incurred by such persons, in connection with each and all of the following:
(i) Any breach by Buyer of any representation or
warranty of Buyer in this Agreement;
(ii) Any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement;
and
(iii) Any claim by any person for brokerage or finder's
fees or commissions or similar payments based upon
any agreement or understanding alleged to have
been made by any such person with Buyer in
connection with the transactions contemplated
hereby.
5.3 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder the party seeking indemnification (the "Indemnified
Party"), shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third-party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to Indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld. The
Indemnifying Party shall not settle or compromise any such claim unless such
settlement or compromise is without any cost to, and provides for a full and
unconditional release of, the Indemnified Party.
5.4 Defense of Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
preceding by a third-party, the Indemnifying Party at its sole cost and expense
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding with counsel of its choice who shall be
reasonably acceptable to the Indemnified Party. In such case, the Indemnified
Party shall be entitled to participate in (but not control) the defense of any
such claim or legal proceeding, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or legal
proceeding within thirty (30) days after the date the Indemnified Party delivers
notice of such claim to the Indemnifying Party, (a) the Indemnified Party may,
upon written notice to the Indemnifying Party, defend against such claim or
legal proceeding with counsel of its choice who shall be reasonably acceptable
to the Indemnifying Party, at the cost and expense of the Indemnifying Party,
payable to the Indemnified Party on demand as incurred, and (b) the Indemnifying
Party shall be entitled to participate in (but not control) the defense of such
claim or legal proceeding, with its counsel and at its own cost and expense.
ARTICLE 6
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<PAGE>
MISCELLANEOUS
6.1 Further Assurances. By its signature hereto, each party consents
and agrees to all of the transactions contemplated hereby. Each party hereto
shall execute, deliver, file and record any and all instruments, certificates,
agreements and other documents, and take any and all other actions, as
reasonably requested by any other party hereto in order to consummate the
transactions contemplated hereby.
6.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made if (i) sent by registered or certified mail, return receipt requested,
postage prepaid, (ii) hand delivered, (iii) sent by prepaid overnight carrier,
with a record of receipt or (iv) sent by facsimile (with confirmation of
receipt), to the parties at the following address (or at such other addresses as
shall be specified by the parties by like notice):
(i) To Buyer:
HyComp, Inc.
67 Wall Street, Suite 2411
New York, New York 10005
Attn: Chief Executive Officer
(ii) To Seller:
Simmonds Capital Limited
580 Granite Court
Pickering, Ontario L1W 3Z4
CANADA
Attention: John G. Simmonds
with a copy to:
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Scott S. Rosenblum, Esq.
Each notice or other communication shall be deemed to have been given on the
date received.
6.3. Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, permitted
assigns, personal representatives, heirs, executors and estates.
6.4 Severability. Any provision in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability at such time
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction at such time shall not invalidate or
render unenforceable such provision in any other jurisdiction or in the same
jurisdiction at any other time, so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. To the extent permitted by
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<PAGE>
applicable law, the parties hereto waive any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
6.5. Amendment; Waiver; Extension Waiver. This Agreement may be
amended, supplemented or otherwise modified only by the written agreement of the
parties hereto. Any waiver of any provision of this Agreement shall be in
writing and executed by the parties hereto, and any such waiver shall be
effective only for the specific purpose for which it is given and for the
specific time period, if any, contemplated therein. The parties hereto may
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument singed on behalf of all parties.
6.6 Counterparts. This Agreement may be executed in both counterparts
each of which when so executed and delivered shall be deemed an original and all
of which taken together shall constitute one agreement. This Agreement may be
delivered by facsimile transmission with the same effect as if delivered in
person.
6.7 Waiver of Jury Trial. The parties hereto hereby unconditionally
waive trial by jury in any suit, action or proceeding relating to this
Agreement.
6.8 Specific Performance. Each party hereto recognizes and acknowledges
that a breach by such party of any covenants or agreements contained in this
Agreement will cause the other party to sustain damages for which they would not
have an adequate remedy at law for money damages, and therefore each party
agrees that in the event of any such breach the non-breaching party shall be
entitled to the remedy of specific performance of such covenant and agreement
and injunctive and other equitable relief in addition to any other remedy to
which such non-breaching party may be entitled, at law or in equity, without the
posting of any bond and without proving that damages would be inadequate.
6.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
contracts made and to be wholly performed within such State, without reference
to principles of conflicts of laws.
6.10 Jurisdiction; Venue. The parties hereto irrevocably and
unconditionally submit to the jurisdiction of any State or Federal court sitting
in the City of New York, Borough of Manhattan, over any suit, action or
proceeding arising out of or relating to this Agreement. Service of any process,
summons, notice or document by registered mail addressed to any party as
provided in Section 6.2 hereof shall be effective service of process for any
suit, action or proceeding brought against such party in any such court. The
parties hereto irrevocably and unconditionally waive any objection to the laying
of venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. A final judgment in any suit, action or
proceeding brought in any such court shall be conclusive and binding upon the
parties and may be enforced in any other courts to whose jurisdiction a party is
or may be subject, by suit upon such judgment.
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<PAGE>
6.11 Entire Agreement; Interpretation. This Agreement and the other
Transaction Documents contain the entire agreement between the parties relating
to the subject matter hereof and supersedes all oral statements and prior
writings with respect thereto. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. A reference to a gender in this Agreement
shall be interpreted to include the masculine, feminine and/or neutral gender,
as applicable.
6.12 Certain Costs and Expenses. Except as expressly provided in this
Agreement, each party to this Agreement shall bear its representative expenses
incurred in connection with the preparation, execution and performance of this
Agreement, including all fees and expenses of agents, representatives, counsel
and accountants.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
SELLER:
SIMMONDS CAPITAL LIMITED
By: /s/ John G. Simmonds
-------------------------------------
Name: John G. Simmonds
Title: Chairman, President and Chief
Executive Officer
BUYER:
HYCOMP, INC.
By: /s/ Paul K. Hickey
---------------------------------------
Name: Paul K. Hickey
Title: Chairman and Chief Executive
Officer
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<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE
Upon the Closing (as therein defined) of the Stock Purchase Agreement by and
between SIMMONDS CAPITAL LIMITED and HYCOMP, INC. relating to all of the
outstanding capital stock of EIEIHOME.COM, INC. dated as of October 14, 1999,
HyComp, Inc. has agreed to issue Lawrence Fox 500,000 shares of HyComp, Inc.
common stock, par value $0.01 per share.
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<PAGE>
Exhibit 1
Form of Promissory Note
-----------------------
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<PAGE>
Exhibit 2
Form of Debenture
-----------------
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<PAGE>
Exhibit 3
Form of Warrant
---------------
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<PAGE>
Exhibit 4
Form of Management Services Agreement
-------------------------------------
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<PAGE>
Exhibit 5
Balance Sheet of HyComp, Inc.
-----------------------------
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EXHIBIT 10.2
Management Services Agreement
This Management Services Agreement (this "Agreement") made as
of the 14th day of October, 1999, by and between SIMMONDS CAPITAL LIMITED, an
Ontario corporation (hereinafter "Provider"), and HYCOMP, INC., a corporation
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Company").
WHEREAS, the Company has the need for certain executive,
accounting, human resources, information technology and other general management
and administrative services relating to its operations, including personnel
services, business development and investor relations; and
WHEREAS, Provider has agreed to provide such executive,
accounting, human resources, information technology and other general management
and administrative services to the Company; and
WHEREAS, the Company has agreed to reimburse Provider for the
cost of such executive, accounting, human resources, information technology and
other general management and administrative services as provided in this
Agreement.
NOW, THEREFORE, for and in consideration of the foregoing and
the terms and conditions contained hereinafter, the parties hereto agree as
follows:
1. Term. The term of this agreement shall be from the date
hereof to March 31, 2000; provided, however, that it may be terminated by either
party on 45 days prior written notice at any time after the Company has hired a
full time Chief Executive Officer.
2. Services.
2.1 Provider agrees to provide, and the Company
agrees to accept, the executive, accounting, human resources, information
technology and other general management and administrative services described in
Exhibit A attached hereto and as otherwise mutually agreed by Provider and the
Company (the "Services").
2.2 If not otherwise agreed, the specification of
particular methods for rendering the Services and the assignment of personnel
therefore will be determined by Provider in such manner as in Provider's
judgment will best serve the objectives indicated by the Company. Such methods
may include, but are not limited to: (a) remote consulting (by telephone, fax,
E-mail, video conferencing, etc.); (b) written advice; (c) participation in
meetings, seminars and workshops; (d) secondment of employees for specific
activities; (e) supply of technical materials, studies and other information;
(f) introduction to persons, firms/companies which may be of interest to the
Company; and (g) other means mutually agreement agreed upon from time to time.
3. Compensation. In consideration for the Services, the
Company shall pay Provider a fee of U.S.$15,000 per month, payable in arrears on
the 5th day of each calendar
<PAGE>
month. The Company shall also reimburse Provider for its reasonable
out-of-pocket expenses incurred in connection with the Services, payable within
30 days after Providers' invoice thereof.
4. Obligations.
4.1 The Company agrees to fully cooperate with
Provider and to supply Provider with any and all information reasonably
necessary to enable Provider to perform the Services hereunder, in such form as
may be reasonably requested. The Company will give Provider representatives free
access to any and all sources of information reasonably necessary to enable
Provider to satisfactorily perform the Services.
4.2 Provider agrees to fully cooperate with the
Company and to supply the Company with any and all information reasonably
necessary to enable the Company to meet its legal and tax requirements.
5. Liability. Provider shall have no liability to the Company
except to the extent of the actual damages (excluding lost profits or special or
punitive damages) suffered by the Company as a direct result of the gross
negligence or greater culpability of Provider.
6. Indemnity. The Company shall indemnify Provider and its
officers, directors, employees, independent contractors, agents and
representatives, in their capacities as such (each, an "Indemnified Party"),
against and hold them harmless from any and all damage, claim, loss, liability
and expense (including, without limitation, reasonable attorneys' fees and
expenses) incurred or suffered by any Indemnified Party arising out of or
relating to the Services, except to the extent that such damage, claim, loss,
liability or expense is found in a final non-appealable judgment to have
resulted from Provider's gross negligence or willful misconduct.
7. Independent Contractor. The relationship between Provider
and the Company is that of independent contractor. Neither Provider nor the
Company is, or may hold itself out as, an agent for or employee of the other.
Neither Provider nor the Company shall have any authority to take, and neither
shall take, any action which binds, or purports to bind, the other. Without
limiting the foregoing, no employee of Provider may make any claim, demand or
application to or for any right or privilege applicable to an officer or
employee of the Company, including but not limited to workmen's compensation
coverage, unemployment insurance benefits, social security coverage, health plan
or insurance benefit, any other insurance benefit or any retirement benefit.
8. Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be (i) sent by
registered or certified mail, return receipt requested, (ii) hand delivered,
(iii) sent by electronic mail, or (iv) sent by prepaid overnight carrier, with a
record of receipt, to the parties at the following addresses (or at such other
addresses as shall be specified by the parties by like notice):
(1) if to Provider:
Simmonds Capital Limited
580 Granite Court
Pickering, Ontario L1W 3Z4
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<PAGE>
CANADA
Attn: John G. Simmonds
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Attn: Scott S. Rosenblum, Esq.
(2) if to the Company:
HyComp, Inc.
67 Wall Street, Suite 2411
New York, N.Y. 10005
Attn: Chief Executive Officer
Each notice or communication shall be deemed to have been given on the date
received.
9. Miscellaneous Provisions.
9.1 This Agreement contains the complete
understanding of the parties hereto and there are no understandings,
representations, or warranties of any kind, express or implied not specifically
set forth herein. This Agreement may be amended only by written documents signed
by duly authorized representatives of each of the parties hereto.
9.2 This Agreement shall be governed, construed and
interpreted in accordance with the laws of New York.
9.3 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute a single agreement.
9.4 This Agreement shall be for the benefit of
Provider and the Company and shall be binding upon the parties and their
respective successors and permitted assigns.
9.5 Every provision of this Agreement is intended to
be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such term or provision shall be enforced to the maximum
extent permitted by law and, in any event, such illegality or invalidity shall
not affect the validity of the remainder of the Agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the day and year first above written.
SIMMONDS CAPITAL LIMITED
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<PAGE>
By: /s/ John G. Simmonds
-----------------------------------
Name: John G. Simmonds
Title: Chairman, President and Chief
Executive Officer
HYCOMP, INC.
By: /s/ Paul K. Hickey
----------------------------------
Name: Paul K. Hickey
Title: Chairman and Chief Executive Officer
-4-
<PAGE>
EXHIBIT A
The Services to be rendered under this Agreement include, without limitation,
the following:
1. Assistance, advice and support in strategic policy, preparation of
regular operating reviews, attendance at board meetings and the
provision of operations consultancy and support;
2. Assistance, advice and support in new and existing services
including technical support, quality controls, market research and
development;
3. Assistance, advice and support in business organization,
administration and logistics;
4. Assistance, advice and support in business development, marketing,
promotion, advertising and investor relations;
5. Assistance, advice and support in purchasing, including selection
and identification of suppliers;
6. Assistance, advice and support in human resources and training,
including personnel recruitment, training and management as well
as advice and assistance in human resource policies and
procedures; also to engage and remunerate executive, secretarial,
clerical and other non executive staff and make them available to
the Company. This may include making available the services of
existing executive personnel.
7. Assistance and advice in financial matters, including access to
funds, cooperation with banks, cash management and treasury
management;
8. Assistance, advise and support in accounting, including
preparation of business plans, budgets, forecasts, management
accounts and project cost accounts;
9. Assistance, advice and support in risk management and insurance
matters;
10. Assistance, advice and support in information and communication
services ("ICS") (i.e. electronic data processing and
communication systems), especially selection, installation and
support of ICS systems and software;
11. Assistance, advice and support in legal and tax matters;
12. Assistance, advice and support in negotiating agreements with
third parties;
13. Provider may make available to the Company the services of such of
Provider's directors or executives for any purposes of the
business including taking up appointments as directors, whether
executive or non executive, of the Company.
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EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
by and among
XIT CORPORATION, as Seller,
and
MICROTEL INTERNATIONAL, INC.
and the
PERSONS LISTED IN SCHEDULE I, as Buyers,
and
JOHN G. SIMMONDS, as Buyer Representative,
with respect to the sale of
all of the capital stock owned by Seller of
HYCOMP, INC.
dated as of
October 13, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
October 13, 1999, by and among Microtel International, Inc., a corporation
organized under the laws of the State of Delaware ("MicroTel"), XIT Corporation
(formerly known as XCEL Corporation), a New Jersey corporation and a
wholly-owned subsidiary of MicroTel (the "Seller"), each of the persons listed
in Schedule I hereto (individually a "Buyer" and collectively, the "Buyers") and
John G. Simmonds, as representative of the Buyers (the "Buyer Representative").
WHEREAS, as of the date hereof, Seller is the record holder and
beneficial owner of 9,041,498 shares of common stock, par value $.01 per share
(the "Securities"), of HyComp, Inc., a corporation organized under the laws of
the Commonwealth of Massachusetts ("HyComp"), which Securities represent all of
the issued and outstanding shares of common stock and other securities of HyComp
owned by Seller;
WHEREAS, each of the Buyers desires to purchase from Seller, and Seller
desires to sell to each of the Buyers, for consideration hereinafter provided,
the number of Securities set forth opposite such Buyer's name on Schedule I
hereto, all upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and on the basis of
the respective representations, warranties, covenants, agreements, undertakings
and obligations set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale of Securities. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
2), Buyers agree to purchase and accept delivery from Seller, and Seller agrees
to sell, assign, transfer and deliver to Buyers, all of the Securities of HyComp
beneficially owned by Seller, free of all liens, pledges, mortgages, security
interests, charges, restrictions, adverse claims or other encumbrances of any
kind or nature whatsoever ("Encumbrances"), for the consideration specified in
Section 1.2.
1.2 Purchase Price. The purchase price for the Securities shall be the
sum of U.S.$150,000 (the "Purchase Price"), payable by the Buyers at the
Closing. The Securities shall be purchased by Buyers and shall be allocated
among Buyers in proportion to their respective holding of the Securities, as set
forth opposite such Buyer's name on Schedule I hereto.
ARTICLE 2
CLOSING
2.1 Closing. The purchase and sale of the Securities provided for in
this Agreement will take place at the offices of Kramer, Levin, Naftalis &
Frankel LLP, 919 Third Avenue, New York, New York
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10022, at 4:00 p.m. on the date hereof, or at such other time and place as the
parties may agree (the "Closing").
2.2 Closing Obligations. At the Closing:
(a) Seller shall deliver, or cause to be delivered, to the
Buyer Representative for the ratable benefit of Buyers the following:
(i) Certificates representing the Securities,
duly endorsed in blank (or accompanied by
duly executed blank stock powers) and all
other documents or instruments, including,
any and all necessary transfer stamps which
are necessary to vest all of Seller's right,
title and interest in and into the
Securities in Buyers;
(ii) Such legal opinions from Seller's counsel as
the Buyer Representative shall reasonably
request; and
(iii) Such other documents as the Buyer
Representative may reasonably require.
(b) Buyers shall deliver, or cause to be delivered, to Seller
the following:
(i) The Purchase Price, in accordance with
Article 1 of this Agreement; and
(ii) Such other documents as Seller may
reasonably require.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND MICROTEL
3. Representations and Warranties of Seller and MicroTel. Seller and
MicroTel, jointly and severally, represent and warrant to Buyers as follows:
3.1 Organization and Good Standing. Seller is a corporation duly
organized and validly existing under the laws of New Jersey and has all
requisite corporate or other power and authority to enter into this Agreement
and perform its obligations hereunder. MicroTel is a corporation duly organized
and validly existing under the laws of Delaware and has all requisite corporate
or other power and authority to enter into this Agreement and perform its
obligations hereunder.
3.2 The Securities.
(a) Seller has good and valid title to the Securities, free
and clear of any Encumbrances, and Seller shall deliver to Buyers good and valid
title to the Securities free and clear of any Encumbrances.
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(b) The Securities are owned of record and beneficially by
Seller. Seller has sole power of disposition with respect to the Securities,
with no restrictions, subject to United States and other applicable securities
laws, on Seller's rights of disposition pertaining thereto.
3.3 Authority; No Conflict.
(a) The execution and delivery of this Agreement by Seller and
MicroTel, and the sale of the Securities pursuant hereto, have been duly
authorized by all necessary corporate or other action required on the part of
Seller and MicroTel. This Agreement has been duly executed and delivered by
Seller and MicroTel and constitutes the legal, valid and binding obligation of
each of them enforceable against both of them in accordance with its terms,
subject to bankruptcy, insolvency and other similar laws relating to or
affecting the enforceability of creditors' rights generally, and to general
principles of equity.
(b) The execution, delivery and performance of this Agreement
by Seller and MicroTel, and the consummation by Seller and MicroTel of the
transactions contemplated hereby, will not (i) conflict with or violate the
organizational documents of Seller, MicroTel or HyComp, or (ii) conflict with,
violate, result in the breach of any term of, constitute a default under, or
require the consent of or any notice to or filing with any third party or
governmental authority under, any agreement or instrument to which Seller,
MicroTel or HyComp is a party or any law, order, rule, regulation, decree, writ
or injunction of any governmental body having jurisdiction over Seller, MicroTel
or HyComp or their respective properties, except for such consents or filings as
have been obtained or made.
3.4 Capitalization of HyComp. The authorized equity securities of
HyComp consist of (i) 20,000,000 shares of common stock, $.01 par value per
share, of which 10,197,070 shares are issued and outstanding; (ii) 2,000 shares
of non-voting 8% convertible redeemable preferred stock, $100 par value per
share, of which 53 shares of preferred stock are currently issued and
outstanding, but which are to be either redeemed or converted on or before
November 10,1999. All of the outstanding equity securities of HyComp have been
duly authorized and validly issued and are fully paid and nonassessable. There
are options outstanding to purchase 850,000 shares of common stock of HyComp,
exercisable at $.013 per share, pursuant to HyComp's 1985 Stock Option Plan (the
"1985 Plan"). Except as set forth in the preceding sentence pursuant to the 1985
Plan, there are no other outstanding or authorized options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to which
HyComp is a party or by which HyComp is bound which could require HyComp to
issue, deliver, sell or otherwise transfer or cause to be issued, delivered,
sold, transferred or offered for sale or transfer, any shares of capital stock
of HyComp or securities convertible into or exchangeable for shares of capital
stock of HyComp or that could require either HyComp to grant, extend or enter
into any such option, warrant, call, right, commitment, conversion right or
agreement. None of the outstanding equity securities or other securities of
HyComp were issued in violation of the Securities Act or any other legal
requirement. HyComp is under no obligation to register any of its securities
under the United States Securities Act of 1933, as amended (the "Securities
Act") or securities laws of any other jurisdiction. No person has any preemptive
rights with respect to any security of HyComp.
3.5 Balance Sheet; Absence of Undisclosed Liabilities.
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<PAGE>
(a) The balance sheet of HyComp, dated as of September 30,
1999 and attached hereto as Exhibit A (the "Balance Sheet"), fairly and
accurately reflects the financial condition of HyComp as of the date thereof,
and
(b) Except as and to the extent (i) reflected and reserved on
the Balance Sheet, or (ii) set forth on Schedule II (the "Disclosure Schedule")
attached hereto, as of the date of this Agreement, HyComp does not have any
liability or obligation, secured or unsecured, whether accrued, absolute,
contingent, unasserted or otherwise, which individually or in the aggregate is
material to HyComp. For purposes of this Section 3.5, "material" means any
amount in excess of $20,000.
3.6 Product Liability and Recalls. Without limiting the representation
contained in Section 3.5, except as disclosed in the Disclosure Schedule,
(a) There is no claim, and neither HyComp, MicroTel nor the
Seller is aware of the basis of any claim, against HyComp for injury to person
or property of employees or any third parties suffered as a result of the
manufacture, sale or distribution of any product or the performance of any
service by HyComp, including claims arising out of the allegedly defective or
unsafe nature of the products sold or distributed by HyComp;
(b) There is no pending or, to the best knowledge of HyComp,
MicroTel or the Seller, threatened recall or investigation of any product sold
or distributed by HyComp; and
(c) There are no liabilities of, or threatened claims against,
HyComp for (i) product returns, (ii) warranty obligations, or (iii) product
services.
3.7 No Activities. Except as set forth in the Disclosure Schedule,
(a) Since the sale of assets to Satcon Technology Corporation,
a Delaware corporation ("Satcon") on April 12, 1999 (the "Satcon Sale"), HyComp
has engaged in no business activity other than incident to such sale, the
settlement of claims identified on the Disclosure Schedule and the maintenance
of HyComp's corporate existence; and
(b) HyComp is not a party to any contract, agreement or other
arrangement, whether or not in writing, that requires any payment or performance
by HyComp after the date of this Agreement.
3.8 Taxes. HyComp (or Seller or MicroTel) has timely filed with the
appropriate taxing authorities all tax returns required to be filed by, or with
respect to, Hycomp (taking into account any extension of time to file). The
information on such tax returns is complete and accurate in all material
respects. HyComp, or Seller or MicroTel, has paid on a timely basis all taxes
due and payable. There are no liens for taxes upon the assets of HyComp. None of
HyComp, Seller or MicroTel has received any notice from any taxing or other
governmental authority claiming, proposing or assessing deficiencies for taxes
with respect to the HyComp and neither MicroTel nor the Seller has any knowledge
that there exists any unpaid (or unreserved in accordance with GAAP)
deficiencies for taxes with respect to HyComp. There are no pending or, to the
knowledge of either MicroTel or Seller, threatened audits, investigations or
claims or issued and outstanding assessments for or relating to any liability in
respect of taxes of HyComp.
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<PAGE>
3.9 Authorization of Satcon Sale and Distribution of Proceeds of Sale.
The Satcon Sale, the execution and delivery of all documents and all other
actions taken in connection therewith and the distribution of the proceeds of
the Satcon Sale were duly authorized by all necessary corporate action on the
part of Seller.
3.10 Absences of Reporting Obligations. HyComp is not now and has never
in the past been subject to the reporting obligations of Section 13 or 15(d) of
the United States Securities Exchange Act of 1934, as amended, or similar
securities laws of any other jurisdiction.
3.11 No Subsidiaries. HyComp has no subsidiaries or affiliates and has
no ownership or other interest, direct or indirect, in any other corporate
entity, including, without limitation, HyComp Limited, a United Kingdom
corporation.
3.11 Directors and Officers of HyComp.
(a) Paul Hickey and Lawrence Fox are the only officers of
HyComp. Paul Hickey, George Riley and Lawrence Fox are the only directors of
HyComp. HyComp has no other officers or directors.
(b) MicroTel and Seller shall obtain the resignation of all
directors and officers of HyComp identified in subparagraph (a) above, to be
effective as of the Closing or such later time as Buyers shall designate.
3.12 Books and Records. Except as disclosed in the Disclosure Schedule,
the books of account and other records of HyComp, all of which have been made
available to Buyers, are true and correct. Except as disclosed in the Disclosure
Schedule, the minute books of HyComp contain true, correct and, since February
29, 1984, complete records of all meetings held of, and corporate action taken
by, the shareholders, the Board of Directors, and committees of the Board of
Directors of HyComp. The stock books of HyComp are true, accurate and complete.
At the Closing, all of such books and records will be in the possession of
HyComp.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4. Representations and Warranties of Buyer. Each Buyer, individually as
to such Buyer only, hereby represents and warrants to Seller as follows:
4.1 Authority; No Conflict.
(a) If Buyer is an individual, Buyer has the legal capacity to
enter into and perform all of Buyer's obligations under this Agreement.
(b) If Buyer is a corporation, it is duly organized and
validly existing under the laws of its respective jurisdiction and has all
requisite corporate or other power and authority to enter into this Agreement
and perform its obligation hereunder.
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<PAGE>
(d) If Buyer is a corporation, (i) the execution and delivery
of this Agreement by Buyer, and the purchase of the Securities pursuant hereto,
have been duly authorized by all necessary corporate or other action required on
the part of Buyer. This Agreement has been duly executed and delivered by Buyer
and constitutes the legal, valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms, subject to bankruptcy, insolvency
and other similar laws relating to or affecting the enforceability of creditors'
rights generally, and to general principles of equity, and (ii) The execution,
delivery and performance of this Agreement by Buyer, and the consummation by
Seller of the transactions contemplated hereby, will not conflict with or
violate the organizational documents of Buyer, or conflict with, violate, result
in the breach of any term of, constitute a default under, or require the consent
of or any notice to or filing with any third party or governmental authority
under, any agreement or instrument to which Buyer is a party or any law, order,
rule, regulation, decree, writ or injunction of any governmental body having
jurisdiction over Buyer or its respective properties, except for such consents
or filings as have been obtained or made.
4.2 Investment Representations.
(a) Buyer acknowledges that (i) the Securities have not been
registered under the Securities Act, or any state securities laws, and cannot be
sold or otherwise disposed of except in a transaction registered under the
Securities Act and any applicable state securities laws, or that is exempt from
such registration, and (ii) so long as required by law, each certificate
representing the Securities will bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH LAWS."
(b) Buyer either:
(i) certifies that it is an accredited investor as that term is
defined in Rule 501 promulgated under the Securities Act, or
(ii) certifies that it: (A) is not a U.S. person as that term is
defined in Rule 902 promulgated under the Securities Act;
(B) is not acquiring the Securities for the account or
benefit of any U.S. person; (C) agrees to resell the
Securities only in accordance with the provisions of
Regulation S promulgated under the Securities Act, pursuant
to registration under the Securities Act, or pursuant to an
available exemption from registration under the Securities
Act; and (D) agrees not to engage in hedging transactions
involving the Securities except in accordance with the
Securities Act and acknowledges that, so long as required by
law, the certificates representing the Securities will bear
a legend to the following effect:
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<PAGE>
"HEDGING TRANSACTIONS INVOLVING THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT."
(c) The Securities are being acquired by Buyer for his own
account and not for any other person or entity, for investment only and with no
intention of distributing or reselling (and will not distribute or resell) such
Securities or any part thereof or interest therein in any transaction that would
violate the registration requirements of the Securities Act or other applicable
securities laws.
4.3 Distribution of Satcon Proceeds. Buyer acknowledges that Seller is
entitled to its ratable share of the net proceeds from the Satcon Sale, and if
the distribution of such proceeds to HyComp's shareholders is made after the
Closing, Buyers will hold in trust for and promptly pay over to Seller any of
such proceeds received by Buyer following the Closing on account of Buyer's
ownership interest in HyComp.
ARTICLE 5
COVENANTS OF SELLER AND MICROTEL
5.1 Filing of Tax Returns. Seller, and/or MicroTel shall prepare and
file all tax returns of HyComp with respect to all periods ending on or prior to
the Closing Date and shall pay all taxes with respect to such periods and with
respect to the pre-Closing Date portion of any taxable period of HyComp that
includes but does not end on the Closing Date.
ARTICLE 6
INDEMNIFICATION AND REMEDIES
6. Indemnification; Remedies.
6.1 By Seller and MicroTel.
(a) Seller and MicroTel, jointly and severally, hereby agree
promptly upon demand to indemnify and hold harmless Buyers and their affiliates
and their respective officers, director, employees and agents against all
claims, damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any legal, accounting or other expenses for
investigating or defending any actions or threatened actions) reasonably
incurred by such persons in connection with or arising out of each and all of
the following:
(i) Any breach by Seller or MicroTel of any
representation or warranty of Seller or MicroTel
in this Agreement;
(ii) Any breach of any covenant, agreement or
obligation of Seller or MicroTel contained in this
Agreement;
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(iii) The operation of the business of HyComp prior to
the Closing Date, including any warranty claim or
product liability claim relating to products
manufactured or sold by HyComp prior to the
Closing;
(iv) Unpaid debts, liabilities or obligations of HyComp
incurred prior to the Closing Date, including,
without limitation, liabilities or obligations
resulting or arising from either: (i) claims for
personal injury, property damage, employment
matters, intercompany accounts payable and notes
payable to lenders; or (ii) non-performance of any
contract, commitment or obligation imposed by law
or otherwise;
(v) Any claim by any person or other liabilities or
obligations relating to: (A) the Satcon Sale or
the authorization or consummation thereof; (B) the
breach of any representation, warranty, covenant,
agreement or obligation of Seller, MicroTel or
HyComp relating to the Satcon Sale or any
documents in connection therewith, including,
without limitation, any claims made in connection
with the Asset Purchase Agreement by and between
HyComp and HyComp Acquisition Corp. dated March
31, 1999; or (C) the distribution of the proceeds
of the Satcon Sale;
(vi) Any claims by any person or other liabilities or
obligations relating to any preferred stock of
HyComp issued and outstanding prior to the Closing
Date, the redemption or conversion thereof or
dividends accrued in respect thereof prior to the
Closing Date;
(vii) All taxes that may be imposed upon or assessed
against HyComp (including taxes imposed pursuant
to Treas. Reg.ss.1.1502-6) or the assets thereof
with respect to all taxable periods of HyComp or
portion thereof ending on or prior to the Closing
Date, and with respect to all taxable periods of
the Seller, MicroTel and their subsidiaries (other
than HyComp) ending prior to or including the
Closing Date, or arising by reason of any breach
by MicroTel or Seller of any representation or
warranty of Seller or MicroTel in this Agreement
and any losses, damages, liabilities, obligations,
deficiencies, costs and expenses incurred in
connection therewith; and
(viii) Any claim by any person for brokerage or finder's
fees or commissions or similar payments based upon
any agreement or understanding alleged to have
been made by any such person with Seller, MicroTel
or HyComp in connection with the transactions
contemplated hereby.
6.2 Indemnification by Buyers.
(a) Each Buyer, severally as to such Buyer only, hereby agrees
promptly upon demand to indemnify and hold harmless Seller and its affiliates
and their respective officers, directors, employees and agents against all
claims, damages, losses, liabilities, costs and expenses (including,
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<PAGE>
without limitation, settlement costs and any legal, accounting or other expenses
for investigating or defending any actions or threatened actions) reasonably
incurred by such persons, in connection with each and all of the following:
(i) Any breach by Buyer of any representation or
warranty of Buyer in this Agreement;
(ii) Any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement;
and
(iii) Any claim by any person for brokerage or finder's
fees or commissions or similar payments based upon
any agreement or understanding alleged to have
been made by any such person with Buyer in
connection with the transactions contemplated
hereby.
6.3 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder the party seeking indemnification (the "Indemnified
Party"), shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third-party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to Indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld. The
Indemnifying Party shall not settle or compromise any such claim unless such
settlement or compromise is without any cost to, and provides for a full and
unconditional release of, the Indemnified Party.
6.4 Defense of Indemnifying Party. In connection with any indemnity
hereunder resulting from or arising out of any claim or legal preceding by a
third-party, the Indemnifying Party at its sole cost and expense may, upon
written notice to the Indemnified Party, assume the defense of any such claim or
legal proceeding with counsel of its choice who shall be reasonably acceptable
to the Indemnified Party. In such case, the Indemnified Party shall be entitled
to participate in (but not control) the defense of any such claim or legal
proceeding, with its counsel and at its own expense. If the Indemnifying Party
does not assume the defense of any such claim or legal proceeding within thirty
(30) days after the date the Indemnified Party delivers notice of such claim to
the Indemnifying Party, (a) the Indemnified Party may, upon written notice to
the Indemnifying Party, defend against such claim or legal proceeding with
counsel of its choice who shall be reasonably acceptable to the Indemnifying
Party, at the cost and expense of the Indemnifying Party, payable to the
Indemnified Party on demand as incurred, and (b) the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such claim or legal
proceeding with its counsel and at its own cost and expense.
ARTICLE 7
MISCELLANEOUS
7.1 Further Assurances. By its signature hereto, each party consents
and agrees to all of the transactions contemplated hereby. Each party hereto
shall execute, deliver, file and record any and all
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instruments, certificates, agreements and other documents, and take any and all
other actions, as reasonably requested by any other party hereto in order to
consummate the transactions contemplated hereby.
7.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made if (i) sent by registered or certified mail, return receipt requested,
postage prepaid, (ii) hand delivered, (iii) sent by prepaid overnight carrier,
with a record of receipt or (iv) sent by facsimile (with confirmation of
receipt), to the parties at the following address (or at such other addresses as
shall be specified by the parties by like notice):
(i) To Seller or MicroTel:
Microtel International, Inc.
4290 East Brickell Street
Ontario, California 91761-1511
Attention: Carmine T. Oliva
(ii) To Buyers:
Simmonds Capital Limited
580 Granite Court
Pickering, Ontario L1W 3Z4
CANADA
Attention: John G. Simmonds
with a copy to:
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Scott S. Rosenblum, Esq.
Each notice or other communication shall be deemed to have been given on the
date received.
7.3. Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, permitted
assigns, personal representatives, heirs, executors and estates.
7.4 Severability. Any provision in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability at such time
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction at such time shall not invalidate or
render unenforceable such provision in any other jurisdiction or in the same
jurisdiction at any other time, so long as the economic or legal substance of
the transactions contemplated hereby is not affect in any manner materially
adverse to any party. To the extent permitted by applicable law, the parties
hereto waive any provision of law which renders any provision hereof prohibited
or unenforceable in any respect.
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7.5 Amendment; Waiver; Extension Waiver. This Agreement may be amended,
supplemented or otherwise modified only by the written agreement of the parties
hereto. Any waiver of any provision of this Agreement shall be in writing and
executed by the parties hereto, and any such waiver shall be effective only for
the specific purpose for which it is given and for the specific time period, if
any, contemplated therein. The parties hereto may extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto and waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument singed on behalf of all parties.
7.6 Counterparts. This Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original and all of which taken together shall constitute one agreement. This
Agreement may be delivered by facsimile transmission with the same effect as if
delivered in person.
7.7 Buyer Representative; Execution. The Buyer Representative is
empowered to act on behalf of any or all of the Buyers under this Agreement and,
unless a Buyer notifies Seller and MicroTel to the contrary, Seller and MicroTel
shall regard the Buyer Representative as the agent of such Buyer for all
purposes under this Agreement.
7.8 Waiver of Jury Trial. The parties hereto hereby unconditionally
waive trial by jury in any suit, action or proceeding relating to this
Agreement.
7.9 Specific Performance. Each party hereto recognizes and acknowledges
that a breach by such party of any covenants or agreements contained in this
Agreement will cause the other parties to sustain damages for which they would
not have an adequate remedy at law for money damages, and therefore each party
agrees that in the event of any such breach the non-breaching parties shall be
entitled to the remedy of specific performance of such covenant and agreement
and injunctive and other equitable relief in addition to any other remedy to
which such non-breaching parties may be entitled, at law or in equity, without
the posting of any bond and without proving that damages would be inadequate.
7.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
contracts made and to be wholly performed within such State, without reference
to principles of conflicts of laws.
7.11 Jurisdiction; Venue. The parties hereto irrevocably and
unconditionally submit to the jurisdiction of any State or Federal court sitting
in the City of New York, Borough of Manhattan, over any suit, action or
proceeding arising out of or relating to this Agreement. Service of any process,
summons, notice or document by registered mail addressed to any party as
provided in Section 6.2 hereof shall be effective service of process for any
suit, action or proceeding brought against such party in any such court. The
parties hereto irrevocably and unconditionally waive any objection to the laying
of venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. A final judgment in any suit, action or
proceeding brought in any such court shall be conclusive and binding
-12-
<PAGE>
upon the parties and may be enforced in any other courts to whose jurisdiction a
party is or may be subject, by suit upon such judgment.
7.12 Entire Agreement; Interpretation. This Agreement contains the
entire agreement between the parties relating to the subject matter hereof and
supersedes all oral statements and prior writings with respect thereto. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. A
reference to a gender in this Agreement shall be interpreted to include the
masculine, feminine and/or neutral gender, as applicable.
7.13 Certain Costs and Expenses. Each party hereto shall pay its own
costs in connection with the preparation and execution of this Agreement.
-13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
SELLER:
XIT CORPORATION
/s/ Carmine T. Oliva
Name: Carmine T. Oliva
Title: Chairman and Chief Executive Officer
MICROTEL INTERNATIONAL, INC.
/s/ Carmine T. Oliva
Name: Carmine T. Oliva
Title: Chairman and Chief Executive Officer
BUYERS:
/s/ Lawrence Aziz
Lawrence Aziz
/s/ Rabbi Beck
Rabbi Beck
/s/ Andrew Buck
Andrew Buck
/s/ Buckingham Securities
Buckingham Securities
/s/ Richard Cole
Richard Cole
/s/ Robert Douglas
Robert Douglas
-14-
<PAGE>
/s/ Paul Dutton
------------------------------------
Paul Dutton
/s/ Scott Geram
------------------------------------
Scott Geram
/s/ Chris Green
------------------------------------
Chris Green
/s/ Mark Gregory
------------------------------------
Mark Gregory
/s/ Max Hahne
------------------------------------
Max Hahne
/s/ Doug Haslam
------------------------------------
Doug Haslam
/s/ Scott Henderson
------------------------------------
Scott Henderson
/s/ Gary Hokkanen
------------------------------------
Gary Hokkanen
/s/ Ian Macdonald
------------------------------------
Ian Macdonald
/s/ Ted Markovitz
------------------------------------
Ted Markovitz
/s/ Richard Mason
------------------------------------
Richard Mason
-15-
<PAGE>
/s/ Cathy Masulka
------------------------------------
Cathy Masulka
/s/ Jim McLean
------------------------------------
Jim McLean
/s/ David O'Kell
------------------------------------
David O'Kell
/s/ Andrew Penichev
------------------------------------
Andrew Penichev
/s/ Rich Reda
------------------------------------
Rich Reda
/s/ Robert Sali
------------------------------------
Robert Sali
/s/ Cliff Schmitt
------------------------------------
Cliff Schmitt
/s/ Claude Simmonds
------------------------------------
Claude Simmonds
/s/ Deborah Simmonds
------------------------------------
Deborah Simmonds
/s/ Graham Simmonds
------------------------------------
Graham Simmonds
/s/ Jack Simmonds
------------------------------------
Jack Simmonds
-16-
<PAGE>
/s/ John Simmonds
------------------------------------
John Simmonds
/s/ Tony Smith
------------------------------------
Tony Smith
/s/ Christopher Smith
------------------------------------
Christopher Smith
/s/ Arnold Smolen
------------------------------------
Arnold Smolen
/s/ Robert Sturgess
------------------------------------
Robert Sturgess
/s/ David Tingley
------------------------------------
David Tingley
/s/ Carrie Weiler
------------------------------------
Carrie Weiler
-17-
<PAGE>
SCHEDULE I
Number of
Shares Purchased
Name and Address of Buyer
Lawrence Aziz 250,000
1305 Morningside Ave, Unit 15
Scarborough, ON M1B 4Z5
Rabbi Beck 500,000
Andrew Buck 50,000
15 Maple Ave., Unit 3
Toronto, ON M4W 2T5
Buckingham Securities 40,000
130 King St. W., Suite 1310
Toronto, ON M5X 1E2
Richard Cole 50,000
c/o Jones Gable
110 Yonge St.
Toronto, ON M5C 1T4
Robert Douglas 75,000
100-21650 Oxnard St.
Woodland Hills, CA 91367
Paul Dutton 250,000
590 King St., Suite 403
Toronto, ON M5V 1M3
Scott Geram 500,000
c/o Weatherly Securities
Two World Trade Center
New York, New York 10048
Chris Green 250,000
580 Granite Court
Pickering, ON L1W 3Z4
Mark Gregory 100,000
580 Granite Court
Pickering, ON L1W 3Z4
-18-
<PAGE>
Number of
Shares Purchased
Name and Address of Buyer
Max Hahne 250,000
590 King St., Suite 403
Toronto, ON M5V 1M3
Doug Haslam 500,000
4577 Lighthouse Lane
Naples, Fl 34112
Scott Henderson 500,000
157 Dickens St.
Coppell, TX 75019
Gary Hokkanen 500,000
580 Granite Court
Pickering, ON L1W 3Z4
Ian Macdonald 500,000
243 Dalwish Ave.
North York, ON M4N 1J2
Ted Markovitz 500,000
14 Blue Forest Drive
Toronto, ON M3H 4W2
Richard Mason 50,000
c/o Nesbitt Burns
1 First Canadian Place
Toronto, ON M5X 1H3
Cathy Masulka 14,798
580 Granite Court
Pickering, ON L1W 3Z4
Jim McLean 50,000
c/o Nesbitt Burns
1 First Canadian Place
Toronto, ON M5X 1H3
David O'Kell 500,000
580 Granite Court
Pickering, ON L1W 3Z4
-19-
<PAGE>
Number of
Shares Purchased
Name and Address of Buyer
Andrew Penichev 85,000
31 Esgore Dr.
Toronto, ON M5M 3R2
Rich Reda 500,000
c/o Weatherly Securities
Two World Trade Center
New York, New York 10048
Robert Sali 50,000
c/o 666 Burrard St.
Suite 1690
Vancouver, BC V6C 2X8
Cliff Schmitt 25,000
1214 Maple Gate Rd.
Pickering, ON L1X 1S7
Claude Simmonds 200,000
580 Granite Court
Pickering, ON L1W 3Z4
Deborah Simmonds 100,000
580 Granite Court
Pickering, ON L1W 3Z4
Graham Simmonds 500,000
580 Granite Court
Pickering, ON L1W 3Z4
Jack Simmonds 50,000
580 Granite Court
Pickering, ON L1W 3Z4
John Simmonds 500,000
580 Granite Court
Pickering, ON L1W 3Z4
Tony Smith 250,000
580 Granite Court
Pickering, ON L1W 3Z4
-20-
<PAGE>
Number of
Shares Purchased
Name and Address of Buyer
Christopher Smith 50,000
c/o Goepel McDermid
151 Yonge St., Suite 1300
Toronto, ON M5C 3A2
Arnold Smolen 100,000
2515 Boston St., Unit 1103
Baltimore, MD 21224
Robert Sturgess 500,000
c/o Michael Stern Associates
70 University Ave., Suite 370
Toronto, ON MAJ M
David Tingley 50,000
c/o 580 Granite Court
Pickering, ON L1W 3Z4
Carrie Weiler 500,000
580 Granite Court
Pickering, ON L1W 3Z4
Simmonds Capital Limited 151,700
580 Granite Court
Pickering, ON L1W 324
Total 9,041,498
-21-
<PAGE>
SCHEDULE II
DISCLOSURE SCHEDULE
Upon the Closing (as therein defined) of the Stock Purchase Agreement by and
between SIMMONDS CAPITAL LIMITED and HYCOMP, INC. relating to all of the
outstanding capital stock of EIEIHOME.COM, INC. dated as of October 14, 1999,
HyComp, Inc. has agreed to issue Lawrence Fox 500,000 shares of HyComp, Inc.
common stock, par value $0.01 per share.
-22-
<PAGE>
Exhibit A
-23
EXHIBIT 10.4
ASSIGNMENT, ASSUMPTION AND INDEMNIFICATION AGREEMENT
This Assignment, Assumption and Indemnification Agreement ("Agreement")
is entered into by and among HyComp, Inc., a corporation organized under the
laws of the Commonwealth of Massachusetts ("Assignor"), Microtel International,
Inc., a corporation organized under the laws of the State of Delaware
("Assignee"), XIT Corporation (formerly known as XCEL Corporation), a
corporation organized under the laws of the State of New Jersey and a
wholly-owned subsidiary of Assignee (the "XIT").
WHEREAS, certain equipment and other assets of Assignor were purchased
pursuant to that certain Asset Purchase Agreement by and between Assignor and
HyComp Acquisition Corp., a Delaware corporation ("Acquisition Corp."), dated
March 31, 1999 (the "Satcon Agreement"), which provided, among other things,
that Acquisition Corp. pay Assignor a royalty (the "Royalty") of 5% of all sales
made to customers of Assignor who were not also customers as of the Closing Date
(as therein defined) of Acquisition Corp. for a period of 52 weeks following
such Closing Date;
WHEREAS, all of the issued and outstanding shares of common stock and
other securities of Assignor owned by XIT are to be sold to a group of buyers
represented by John G. Simmonds pursuant to that certain Stock Purchase
Agreement (the "Stock Purchase Agreement") entered into as of October 13, 1999,
by and among Microtel, XIT, each of the persons listed in Schedule I thereto and
John G. Simmonds;
WHEREAS, Assignee wishes to acquire the Royalty from Assignor in
exchange for Assignee's agreement to assume certain liabilities of Assignor; and
WHEREAS, in order to induce the Buyers (as defined in the Stock
Purchase Agreement) to enter into the Stock Purchase Agreement, Assignee has
agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and on the basis of
the respective representations, warranties, covenants, agreements, undertakings
and obligations set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
1. Assignment. Assignor hereby assigns and transfers to Assignee,
without recourse of any kind, all right, title and interest to and in the
Royalty.
2. Assumption. Assignee and XIT, jointly and severally, hereby
undertake, assume and agree to pay, perform and discharge when due those
liabilities and obligations set forth on the Assumed Liabilities and Obligations
schedule attached hereto as Schedule A (the "Assumed Obligations").
3. Indemnification. Assignee and XIT, jointly and severally, hereby
agree promptly upon demand to indemnify and hold harmless Assignor and its
affiliates and their respective officers, director, employees and agents against
all claims, damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any legal, accounting or other
<PAGE>
expenses for investigating or defending any actions or threatened actions)
reasonably incurred by such persons in connection with or arising out of each
and all of the Assumed Obligations.
4. Further Assurances. On and after the Closing Date, each party shall,
from time to time at the other party's reasonable request and cost, execute such
further documentation as is necessary and appropriate to effectuate the
assignment, transfer and assumption of the Assumed Obligations.
5. Counterparts. Facsimile transmission of any signed original document
and/or retransmission of any signed facsimile transmission will be deemed the
same as delivery of an original. At the request of any party, the parties will
confirm facsimile transmission by signing a duplicate original document. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute but one and the same instrument.
6. Governing Law. This instrument shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
regard to its choice-of-law principles.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed as of the 13th day of October, 1999.
ASSIGNOR
HYCOMP, INC.
By:/s/ Paul K. Hickey
- --------------------------------
Name: Paul K. Hickey
Title: Chairman, President and
Chief Executive Officer
ASSIGNEE:
MICROTEL INTERNATIONAL, INC.
By:/s/ Carmine T. Oliva
- --------------------------------
Name: Carmine T. Oliva
Title: Chairman and
Chief Executive Officer
XIT CORPORATION
(formerly known as XCEL CORPORATION)
By:/s/ Carmine T. Oliva
- -------------------------------
Name: Carmine T. Oliva
Title: Chairman and
Chief Executive Officer
-2-
<PAGE>
SCHEDULE A
ASSUMED LIABILITIES AND OBLIGATIONS
(i) Unpaid debts, liabilities or obligations of HyComp incurred prior to
the Closing of the Stock Purchase Agreement, including, without
limitation, liabilities or obligations resulting or arising from
either: (i) claims for personal injury, property damage, employment
matters, intercompany accounts payable and notes payable to lenders; or
(ii) non-performance of any contract, commitment or obligation imposed
by law or otherwise;
(ii) Any claim by any person or other liabilities or obligations relating
to: (A) the Satcon Agreement or the authorization or consummation
thereof; (B) the breach of any representation, warranty, covenant,
agreement or obligation of Assignee, XIT or Assignor relating to the
Satcon Agreement or any documents in connection therewith; or (C) the
distribution of the proceeds of the sale of assets following the
consummation of the Satcon Agreement;
(iii) Any claims by any person or other liabilities or obligations relating
to any preferred stock of Assignor issued and outstanding prior to the
Closing of the Stock Purchase Agreement, the redemption or conversion
thereof or dividends accrued in respect thereof prior to such Closing;
(iv) All taxes that may be imposed upon or assessed against Assignor or the
assets thereof with respect to all taxable periods ending on or prior
to the Closing of the Stock Purchase Agreement and any losses, damages,
liabilities, obligations, deficiencies, costs and expenses incurred in
connection therewith; and
(v) Any claim by any person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged
to have been made by any such person with Assignee or XIT in connection
with the transactions contemplated by the Stock Purchase Agreement;
(vi) Any warranty claim or product liability claim relating to products
manufactured or sold by HyComp prior to the Closing of the Stock
Purchase Agreement; and
(vii) All other libilities arising out of the operation of the business of
Assignor prior to the Closing of the Stock Purchase Agreement.
-3-
EXHIBIT 10.5
AGREEMENT
THIS AGREEMENT made as of and effective from the 1st day of February, 1999.
BETWEEN:
MATCH PAIR INC.,
(the "Sublandlord")
OF THE FIRST PART
- and -
CHARGENET INC,
(the "Subtenant")
OF THE SECOND PART
W H E R E A S:
A. By a lease made as of the 1st day of June, 1997, 738489 Ontario Limited (the
"Landlord") leased to the Sublandlord as Tenant, certain premises (the "Leased
Premises"), located on the fourth floor of the building municipally known as 590
King Street West, Toronto, and comprising approximately 4,762 square feet.
B. Pursuant to an Offer to Sublease dated January 13th 1999 (the "Offer") the
Sublandlord has agreed to sublet the Leased Premises to the Subtenant for a term
commencing on the date of this agreement and expiring May 30, 2002.
D. The appropriate consent of the Landlord to the sublease of the Leased
Premises has been obtained;
E. This agreement is to be effective as of the date first above written (the
"Effective Date"), subject to the terms and conditions herein set out.
1. CONSIDERATION - The consideration for this Agreement is the mutual
covenants and agreements between the parties to this Agreement and the sum
of Ten Dollars ($10.00) that has been paid by each of the parties to each
of the others, the receipt and sufficiency of which is hereby
acknowledged.
2. SUBTENANT'S COVENANTS - The Subtenant hereby covenants and agrees with the
Landlord that:
(a) It will at all times during the balance of the Term of the sublease
pay the Minimum Rent and Additional Rent (the "Rent") set out in the Offer
together with any escalation thereof as contemplated in the Offer and\or the
Lease and all other payments covenanted to be paid by the Tenant in the Lease
and at the times and in the manner provided for in the Offer or the Lease as the
case may be, and will observe and perform all of the other terms, covenants and
conditions contained in the Lease on the part of the Tenant therein to be
observed and performed as and when the same are required to be observed and
performed as provided by the Lease.
2. The Subtenant acknowledges that it has received and reviewed the Lease
annexed hereto as Schedule A and is familiar with (and correspondingly shall be
bound by) the terms, covenants and conditions contained therein.
4. CONFIRMATION - The parties hereto do in all other respects hereby confirm
that the Lease is in full force and effect, unchanged and unmodified except in
accordance with this
<PAGE>
-2-
Agreement. It is understood and agreed that all terms and expressions when used
in this Agreement have the same meaning as they have in the Lease.
5. BINDING EFFECT - This Agreement shall enure to the benefit of the Sublandlord
and its successors and assigns, and shall be binding upon the Subtenant and its
permitted successors and permitted assigns, respectively.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement as of the day and year first above written, by affixing their
respective corporate seals under the hands of their proper signing officers duly
authorized in that behalf
MATCH PAIR INC.
PER:/s/ Giovani Vernich
------------------------------
Authorized Signing Officer
CHARGENET INC.
PER:/s/ Paul Dutton
-----------------------------
Authorized Signing Officer
<PAGE>
Schedule "A"
C:NEWMATCH.LSE
THIS LEASE AGREEMENT made as of the first day of June, 1997
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT
B E T W E E N :
738489 ONTARIO LIMITED
(the "Landlord")
OF THE FIRST PART;
- and -
MATCH PAIR INC.
(the "Tenant")
OF THE SECOND PART;
WITNESSETH that in consideration of the rents, covenants and
agreements hereinafter reserved and contained on the part of the Tenant to be
paid, observed and performed, the Landlord does demise and lease unto the Tenant
the premises, herein called the "Leased Premises" or the "Demised Premises"
situated in the building (590 King Street West in the City of Toronto)
hereinafter called the "Building" and hereinafter defined. The Leased Premises
comprise approximately 4,762 square feet, being the part of the north east
section of the fourth Floor of the building as shown outlined on the plan hereto
attached and marked Schedule "A". The exterior face of the Building is expressly
excluded from the Leased Premises hereby demised.
I TERM
TO HAVE AND TO HOLD the leased premises for and during the
term, hereinafter called the "Term" of Five (5) years to be computed from the
1st day of June, 1997 and from thenceforth next ensuing and fully to be complete
and ended on the last day of May, 2002.
If the Tenant shall continue to occupy the Leased Premises
after expiration of the term, or any renewals of the term, without any further
written agreement, it shall be deemed to be an overloading tenant at will at a
daily occupation rent of l50% of the daily rate during the last month of the
term, notwithstanding that the Landlord may have received monthly rent.
II MINIMUM RENT
YIELDING AND PAYING THEREFOR unto the Landlord at 329 Spadina
Avenue, Toronto, Ontario M5T 2E9, or at such other place as the Landlord shall
hereafter designate, in lawful money of Canada.
(a) For the period commencing on the 1st day of June 1997 and
ending on the last day of May. 2002, at an Annual Rental of $34, 286.40 payable
in advance in equal consecutive monthly installments of $2,857.20 on the first
day of each and every month.
The Landlord acknowledges receipt of $6,114.41 (including GST)
towards the first and last month's rental, provided that breach by the Tenant of
payment of rent or performance of covenants at any time prior to maturity shall
entitle the Landlord to apply the last month's rent toward any rents or other
tenant's obligations property due and owing.
1
<PAGE>
The Tenant shall be able to occupy the Premises until May 31,
1997 at no rent. There also shall be no base rental for May 1999 and May 2000.
III ADDITIONAL RENT
The Tenant acknowledges and agrees that the Tenant shall be
responsible during the term of the Lease for any costs, charges, expenses and
outlays of any nature whatsoever in respect of the Demised Premises, or their
contents, excepting only the Landlord's income tax in respect of income received
from leasing the premises; corporation tax; principal and interest payments to
be made in connection with any mortgage or mortgages placed on the lands and
premises by the Landlord; Base Year Real Property Taxes and Operating Costs; or
any specific obligation of the Landlord under this Lease. Notwithstanding the
generality of the foregoing, the Tenant covenants with the Landlord to pay as
additional rent the sums set out in Articles IV, V and VI of this Lease, and any
other payments required to be made pursuant to the terms of this Lease.
IV UTILITIES
The Tenant shall pay all utilities including:
(a) The cost of electrical current and including cost and
maintenance of hot water, - supplied to the leased
premises;
(b) The total cost of replacement of any electric light
bulbs, tubes, starters, and ballasts in the leased
premises. The Tenant shall have the right to attend to
such replacement.
V TENANT'S TAXES
The Tenant shall pay the following taxes:
(a) In the event that any tax, whether categorized as a
multistage sales tax, a modified retail sales tax, a
value added tax, or a goods and services tax (the
"G.S.T." is levied or charged with respect to the Lease
or any payments to be made by the Tenant to the Landlord
under the Lease by any governmental authority including,
without limiting the generality of the foregoing, the
Federal Government, the Provincial Government, or any of
their agencies, the Tenant shall be solely responsible
for payment and/or reimbursement to the Landlord for
such G.S.T. whether or not the legislation imposing such
tax places the primary responsibility for payment of
same on the Landlord, and the Landlord will be entitled
to require the Tenant to pay to it the amount of any
such G.S.T. on the date and dates on which rent or any
other monies are payable to the Landlord under this
Lease.
(b) To pay to the charging authority all taxes levied, made
or imposed against the Demised Premises or the Landlord
in respect of the business or other activity of the
Tenant the use or occupation of the Tenant the income or
property of the Tenant and on or against or as a result
of any improvements, equipment or facilities of the
Tenant.
(c) If the Tenant or any subtenant or licensee of the Tenant
shall elect to have the leased premises or any part
thereof assessed for Separate School taxes, the Tenant
shall pay to the Landlord, as additional rent, so soon
as the amount of the Separate School taxes is
ascertained.
VI REAL PROPERTY TAX ESCALATION
6.01 In this paragraph
(a) "Tax" means all taxes, rates, duties, levies and
assessments whatsoever whether municipal, parliamentary
or otherwise, charged upon the Building and the land
appurtenant thereto or upon the Landlord on account
thereof including all taxes, rates, duties and
assessments for local improvements
2
<PAGE>
but excluding the amount by which separate School taxes
(if any should be payable) exceed the amount which would
have been payable for school taxes if no assessment for
Separate Schools had been made and excluding any tax
which has been attracted by Tenant's improvements and
excluding such taxes as corporate income, profits or
excess profits taxes assessed upon the income of the
Landlord, and shall also include any and all taxes which
may in future be levied in lieu of Tax as hereinbefore
defined.
(b) "Base Year" means the calendar year 1997
(c) "Tax for the Base Year" means the amount of tax which
would result by applying the mill rate prevailing in the
Base Year to the assessment, taxes, charges, including
local improvement or similar rates, upon or in respect
of the Building and lands appurtenant thereto.
(d) "Subsequent Period" means each year following the Base
Year, the whole or part of which year is included within
the Term.
(e) "Tax for the Subsequent Period" shall mean tax as
hereinbefore defined charged upon the Building and the
land appurtenant thereto for each Subsequent Period.
(f) "Taxes attracted by Tenant's Improvements" means all
taxes and assessments attributable to all improvements,
equipment and facilities of the Tenant on or in the
premises (whether installed by the Tenant, his
predecessor tenant, or by the Landlord on behalf of the
Tenant, unless there is an increase because of the
windows in the tenant's premises then the Landlord will
pay for that part of the increase of the realty tax.
(g) "Proportionate Share" shall mean 3.2%, unless otherwise
specified.
6.02 If Tax for any Subsequent Period is more than tax for the
Base Year, the Tenant shall pay the Landlord as additional rent the
Proportionate Share of any such increase during the Subsequent Period. Prior to
the payment of rent for the first month of each Subsequent Period, the Landlord
shall estimate the amount of the Tenant's Proportionate Share of any increase
for such Subsequent Period. Thereafter, commencing with the payment of rent for
the first month of such Subsequent Period, the Tenant shall pay one twelfth
(1/12th) of the Landlord's estimate of the Tenant's Proportionate Share of such
increase. On the first day of the month in each Subsequent Period next following
the date of mailing of the tax bill or in which such increase occurs or so soon
thereafter as such amount can be determined, the Tenant shall pay the Landlord
his Proportionate Share of such increase after first giving credit for the
monthly payments of the estimated amount of such Period shall be reduced
proportionately. If the Term ends on a date after the beginning of a Subsequent
Period, any such amount payable for the final Subsequent Period shall be paid on
such date and such amount shall be based on the Tax for the immediately
preceding Subsequent Period.
Within a reasonable period of time after the end of the period for which such
estimated payments have been made, the Landlord shall deliver to the Tenant a
statement of actual Realty Taxes and the Tenant's proportionate share thereof,
and, if necessary, an adjustment shall be made between the parties within thirty
(30) days after delivery of such statement.
6.03 Notwithstanding the foregoing, the Tenant shall pay to the
Landlord the full amount (rather than Proportionate Share) of:
(a) any Separate School Tax resulting from an election by
the Tenant or its subtenant or assignee to have the
Demised Premises so assessed, where such Separate School
Tax exceeds the Tax otherwise payable in the absence of
the election.
(b) any Taxes attracted by Tenant's Improvements.
VII OPERATING COSTS ESCALATION
7.01 In this paragraph:
3
<PAGE>
(a) "Common Areas" means the exterior of the building and
those areas, facilities, utilities, improvements and
installations in, on or about the lands and buildings
other than rentable areas.
(b) "Operating Costs" means the total cost and expense
incurred:
i) in managing, operating, repairing, insuring, and
maintaining the common areas, excluding only the
original acquisition costs and financing and
mortgage charges; and
ii) in providing heat, services, utilities,
maintenance or repairs to common areas.
Without limiting the generality of the foregoing
Operating Cost shall include all moneys paid to persons,
firms or corporations employed or retained in the
repair, maintenance and security; all employee
benefits', workmans' compensation or other sums paid on
behalf of persons employed in the repair, maintenance
and security; the cost of utilities; the cost of such
insurance as the Landlord deems necessary; elevator
maintenance and repair costs, costs of capital
improvements and other costs determined by the
Landlord's auditor to be properly chargeable to the
capital account and to be amortized over their useful
life according to general accounting principles, to the
extent that such improvements reduce or avoid operating
costs; accounting services and operational costs;
auditing fees to the extent required to determine and
assess operating costs; the cost of repairing or
maintaining all outside areas; the costs of repairing or
replacing all installations, fixtures, equipment and
facilities comprising the common areas or servicing the
rentable areas which by their nature require periodic or
substantial repair or replacement, and which are not
charged fully to the tenants in the year in which they
are incurred at rates to be determined by the Landlord
in accordance with sound accounting principles; and an
administration and management fee of 15% of the total of
all Operating Costs.
(c) "Base Year" shall have the same meaning as Article VI
hereof.
(d) "Subsequent Period" means each year following the Base
Year, the whole or part of which year is included within
the Term.
(e) "Proportionate Share" shall have the same meaning as
Article VI hereof.
7.02 If the Operating Costs for any Subsequent Period are more than the
Operating Costs for the Base Year, the Tenant shall pay the Landlord as
additional rent for the Proportionate Share of any such increase for the
Subsequent Period. Prior to the payment of rent for the first month of each
Subsequent Period, the Landlord shall estimate the amount of the Tenant's
Proportionate Share of any increase for such Subsequent Period. Thereafter,
commencing with payment of rent for the first month of such Subsequent Period,
the Tenant shall pay one-twelfth (1/12th) of the Landlord's estimate of the
Tenant's Proportionate Share of such increase. On the first day of the month in
each Subsequent Period next following the date on which the amount of such
increase can be determined, the Tenant shall pay to the Landlord its
Proportionate Share of such increase after giving credit for the monthly
payments of the estimated amount of such increase. If the final Subsequent
Period is a period of which part only is included within the Term, any such
amount payable for such period shall be reduced proportionately. If the Term
ends on a date after the beginning of a Subsequent Period and before the
determination of the increase for such Subsequent Period, any such amount
payable for the final Subsequent Period shall be paid on such date and such
amount shall be based on the increase for the immediately preceding Subsequent
Period.
Within a reasonable period of time after the end of the period for which such
estimated payments have been made, the Landlord shall deliver to the Tenant a
statement of actual Operating Costs and the Tenant's proportionate share
thereof, and, if necessary, an adjustment shall be made between the parties
within thirty (30) days after delivery of such statement.
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VIII REPAIRS
8.01 The Tenant covenants to repair and maintain the Leased Premises including,
without limiting the generality of the foregoing, all plumbing, electrical, and,
air-conditioning, systems, facilities and equipment in the Leased Premises, and
all windows, as would a prudent owner, reasonable wear and tear and damage, by
fire, lightning, tempest and structural defect or weakness only excepted. The
Landlord may enter and view state of repair and that the Tenant will repair and
maintain according to notice in writing; provided that if the Tenant neglects to
make such repairs or maintenance within a reasonable time after notice, the
Landlord may, at its option, make such repairs or maintenance at the expense of
the Tenant, and in any and every such case the Tenant covenants with the
Landlord to pay to the Landlord forthwith as additional rent, all sums which the
Landlord may have expended making such repairs and maintenance, and shall not
have previously received from the Tenant; and provided further that the making
of any repairs or maintenance by the Landlord shall not relieve the Tenant from
the obligation to repair.
8.02 If the Building or any part thereof, become damaged or destroyed through
the negligence, carelessness or misuse of the Tenant, his servants, agents,
employees or anyone permitted by him to be in the Building, or through him or
them in any way stopping up or injuring the heating apparatus, elevators, water
pipes, drainage pipes or other equipment or part of the Building, the expense of
the necessary repairs, replacements or alterations shall be borne by the Tenant
who shall pay the same to the Landlord on demand, as additional rent.
8.03 The Tenant shall leave the Leased Premises in such state of repair and
maintenance as is required under this Lease, reasonable wear and tear excepted.
IX MAINTENANCE
9.01 The Tenant shall not:
(a) install any equipment which will exceed or overload the
capacity or any utility, electrical or mechanical facilities
in the Leased Premises and the Tenant will not bring into the
Leased Premises or install any utility, electrical or
mechanical facility or service which the Landlord does not
approve. The Tenant agrees that if any equipment installed by
the Tenant requires additional utility, electrical or
mechanical facilities, the Landlord may in its sole discretion
if they are available elect to install them at the Tenant's
expense and in accordance with plans and specifications to be
approved in advance in writing by the Landlord.
(b) bring upon the Demised Premises any machinery, equipment,
article or thing that by reason of its weight or size may
damage the Leased Premises, and will not at any time overload
the floors. If any damage is caused to the Demised Premises by
any machinery, equipment, article or thing or by overloading
the floors or by any act, neglect or misuse on the part of the
Tenant or any of the Tenant's services, agents, employees or
invitees the Tenant will forthwith repair the damage.
(c) allow any refuse, waste material, debris, rubbish, garbage or
other loose or objectionable material to accumulate on or
around the Demised Premises and at all times to keep the
Demised Premises in a neat and broom-clean condition. Upon the
termination or surrender of this Lease, the Tenant shall leave
the Leased Premises neat, broom-clean, free and clear of all
waste materials, debris and rubbish, all of which work is to
be done to the satisfaction of the Landlord.
(d) do or suffer any waste or damage, disfiguration or injury to
the Leased Premises or the fixtures and equipment thereof use
or permit to be used any part of the Leased Premises for any
dangerous, noxious or offensive trade or business and not to
cause or permit any nuisance in, at or on the Leased Premises.
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9.02 The Tenant shall:
(a) comply promptly with the requirements of every
applicable statute, law and ordinance, and with every
applicable lawful regulation and order with respect to
the condition, equipment, maintenance, use or occupation
of the Demised Premises and to comply with the
applicable regulation or order of the Insurers Advisory
Organization of Canada or of any body having similar
functions or of any liability or fire insurance company
by which the Tenant and/or the Landlord may be insured,
and except as herein provided, to assume the sole
responsibility for the condition, operation, maintenance
and management of the Leased Premises. If the Landlord
is required to pay or expend any monies as a result of a
failure by the Tenant to comply with the terms of this
paragraph, the Landlord may add the amount paid to the
rent due for the next ensuing month.
(b) replace with as good quality and size of any glass
broken on the Leased Premises during the continuance of
this lease, unless such breakage is the result of
negligence of the Landlord, his employees, servants,
agents or contractors.
(c) otherwise reasonably maintain the Leased Premises,
reasonable wear and tear and damage by fire, lightning,
tempest and structural defects or weakness only
excepted.
X USE
10.01 The Leased Premises shall be used only for footwear wholesale office and
related business the Tenant shall not carry on or permit to be carried on
therein any other trade or business, and the Tenant shall not do or omit or
permit to be done or omitted upon the Leased Premises anything which shall cause
the rate of insurance upon the Building to be increased and if the rate of
insurance on the Building shall be increased by reason of the use made of the
Leased Premises or by reason of anything done or omitted or permitted to be done
or omitted by the Tenant or by anyone permitted by the Tenant to be upon the
Leased Premises, the Tenant shall on demand pay to the Landlord the amount of
such increase.
10.02 The Tenant will not carry on its use in a manner which the Landlord shall,
acting reasonably, deem to constitute a nuisance and more specifically, will not
cause the emission of such noise, vibrations, odors or fumes as will
unreasonably interfere with normal usage of the Building in which the Leased
Premises are situate by other users and occupiers of the Building.1
10.03 The Tenant and his employees and all persons visiting or doing business
with him on the Leased Premises shall be bound by and shall observe the Rules
and Regulations attached to this lease and any further and other reasonable
Rules and Regulations made hereafter by the Landlord of which notice in writing
shall be given to the Tenant and all such Rules and Regulations shall be deemed
to be incorporated into and form part of this lease.
10.04 The Tenant's use of the Leased Premises and the Building shall at all
times be in strict compliance with all governmental and municipal laws, by-laws
and regulations relating to health, safety and protection of the environment
(the "Environmental Laws").
More specifically, the Tenant will not use or permit to be
used, or store, manufacture or dispose of any Hazardous Material in or about the
Leased Premises and the Landlord's Property (the "Hazardous Use"), unless
specifically permitted in this Lease or unless approved in writing by the
Landlord, which approval may be unreasonably withheld. For the purposes of this
paragraph, a Hazardous Material shall be any contaminant or pollutant or other
substance or material which any Environmental Laws define to be dangerous,
hazardous, toxic or environmentally unsafe, or which require special treatment,
recovery or disposal procedures pursuant to any Environmental Laws.
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(1) The Landlord acknowledges that the manner of use of the premises by the
Tenant from June 1997 through December 1998 is not deemed by the Landlord to
constitute a nuisance.
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If the use of the Leased Premise s as permitted in this lease
includes a Hazardous Use, or if the Landlord approves a Hazardous Use in
writing, then the Tenant shall carry on such Hazardous Use in such manner as may
be required by the Environmental Laws and the Landlord so as to assure that
there will be no leakage, seepage, release, emission or discharge or Hazardous
Material into the environment or into any part of the Lease Premises or the
Building.
If any use of the Leased Premises or the Building by the
Tenant, or anyone for whom the Tenant is at law responsible, results in a
leakage, seepage, release, emission or discharge of Hazardous Material, whether
so defined by Environmental Laws in force at the time of the use, or subsequent
thereto, the Tenant:
(i) shall be responsible and liable for the cost of any
cleanup treatment, recovery, disposal, repair or
replacement and any other remedial action that may be
necessary to return the Leased Premises, the
Landlord's Property or any other affected lands,
structures and building to a safe and environmentally
clean condition in accordance with the requirements
of any Environmental Laws, or that may be required by
any governmental or municipal authority or agency,
and;
(ii) shall indemnify and save the Landlord harmless
against all direct or indirect claims, demands,
obligations, fines, expenses, expenditures,
liabilities and damages that the Landlord may incur
as a result of, or arising from, or attributable to
the Tenant's use.
The provisions of this paragraph shall survive the termination
of this lease, whether by affluxion of time or otherwise, and shall remain in
full force and effect thereafter.
XI ASSIGNMENT
11.01 (a) The Tenant shall not assign this lease or sublet the
Leased Premises or any part thereof without the prior
consent in writing of the Landlord which consent shall
not be unreasonably withheld or delayed. At the time the
Tenant requests the consent of the Landlord, the Tenant
shall deliver to the Landlord a copy of any offer or
agreement to assign or sublet or the sublease or
assignment, the name, address, nature of business and
the most recent financial statements and or audited, (if
available) of the proposed assignee or subtenant and
forthwith upon request such, additional information, if
any, as the Landlord may reasonably require (all of
which is herein referred to as "Required Information").
(b) The Landlord's consent to any assignment may be
conditional upon the assignee entering into an agreement
in a form satisfactory to the Landlord to perform,
observe and keep each and every covenant, condition and
agreement in this lease on the part of the Tenant to be
performed, observed and kept, including payment of rent
and all other sums and payments agreed to be paid or
payable under this lease on the days and at the times
and in the manner specified.
(c) In no event shall any assignment or subletting to which
the Landlord may have consented alter, release or
relieve the Tenant from its obligations fully to perform
all the Tenant's covenants, conditions and agreements of
this lease. The Tenant shall pay on demand the
Landlord's reasonable costs incurred in connection with
the Tenant's request for such consent.
11.02 The Landlord may, in its sole and uncontrolled discretion, refuse to give
its consent to any sub-letting, sub-leasing or parting by the Tenant of less
than the whole of the Demised Premises, notwithstanding any act or rule of law
or regulation now or hereafter in force to the contrary.
Notwithstanding the foregoing provided that upon reasonable approval of Landlord
obtained in accordance with subparagraph (a) above, Tenant shall be entitled to
up three, but not more than three, sub-tenancies.
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11.03 If the sale, assignment, transfer or other disposition of any of the
issued and outstanding capital stock of the Tenant (or any successor or assignee
of the Tenant which is a corporation), shall result in changing the control of
the Tenant, such sale, assignment, transfer or other disposition shall be deemed
an assignment of this lease and shall be subject to all of the provisions of
this lease with respect to assignments by the Tenant. Provided, however, that
the Landlord's consent shall not be required to any assignment or transfer of
the issued and outstanding capital stock of the Tenant:
(a) to a corporation controlled by or subject to the same
control as the assignor or transferor;
(b) to a member or members of the family of the assignor or
transferor; or
(c) in the case of devolution through death.
For the purposes of this paragraph "control" of any
corporation shall be deemed to be vested in the person or persons owing more
than fifty (50%) percent of the voting power or the election of the Board of
Directors of such corporation and a "member or members" of the family of any
assignor or transferor shall include his spouse, parents, brothers, sisters and
issue.
XII ALTERATIONS AND FIXTURES
12.01 The Tenant will not make or erect in or to the Leased Premises any
installations, alterations, additions or partitions without submitting plans and
specifications to the Landlord and obtaining the Landlord's prior written
consent in each instance (and the Tenant must further obtain the Landlord's
prior written consent to any change or changes in such plans and specifications
submitted as aforesaid, subject to payment of the cost to the Landlord of having
its architects approve of such changes, prior to proceeding with any work based
on such plans or specifications): such work may be performed by contractors
engaged by the Tenant but in each case only under written contract approved in
writing by the Landlord and subject to all conditions which the Landlord may
impose, provided nevertheless that the Landlord may at its option require that
the Landlord's contractors be engage for any such work; without limiting the
generality of the foregoing any work performed by or for the Tenant shall be
performed by competent workmen whose labour union affiliations are not
incompatible with those of any workmen who may be employed in the Building by
the Landlord, its contractors or subcontractors; the Tenant shall submit to the
Landlord's supervision over construction and promptly pay to the Landlord's or
the Tenant's contractors, as the case may be, when due, the cost of all such
work and of all materials, labour and services involved therein and of all
decoration and all changes in the Building, its equipment or services,
necessitated thereby. The Tenant covenants that he will not suffer or permit
during the Term hereof any Mechanic's or other liens for work, labour, services
or materials ordered by him or for the cost of which he may be in any way
obligated to attach to the Leased Premises or the Building and that whenever and
so often as any such liens shall attach or claims therefor shall be filed, the
Tenant shall within ten (10) days after the Tenant has notice or the claim for
lien procure a discharge thereof by payment or by giving security or in such
other manner as is or may be required or permitted by law.
12.02 All changes, alterations, additions and improvements shall comply with all
applicable statutes, regulations and/or by-laws of any municipal, provincial,
federal or other authority.
12.03 All changes, alterations, additions and improvements by or on behalf of
the Tenant shall be performed in a clean and tidy manner, in such manner as to
keep common areas free of dirt, refuse, waste material, debris, rubbish,
garbage, other loose or objectionable material and building materials, tools and
supplies. Should the Tenant, its contractors or workmen fail to comply with this
requirement the Landlord shall provide the Tenant written notice to rectify the
same immediately, and should the Tenant not comply the Landlord may rectify the
breach and charge the Tenant the cost thereof, plus an administrative fee of
fifteen (15%) percent of cost, as additional rent.
12.04 The Tenant shall pay to the Landlord the amount of the increase of any
insurance premium of policy covering the Leased Premises, to the extent that
such increase is strictly attributable to an action by the Tenant under this
paragraph and that such insurance shall not
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thereby be made liable to voidance or cancellation by the insurer. The Tenant
should be provided with the insurer's letter.
12.05 If the Tenant has paid the rent and performed its obligations, the Tenant
shall have the right at the expiration or other termination of the lease to
remove trade fixtures, the Tenant's special lights and shelving, provided that
the Tenant makes good any damage or injury to the Demised Premises installation
and removal.
12.06 Upon termination of this Lease, all alterations, additions and
improvements that are affixed to any part of the Demised Premises (other than
trade fixtures) shall remain with and be surrendered with the Demised Premises.
If any new locks have been installed, the Tenant shall forthwith upon
installation provide keys to the same to the Landlord and the locks and their
keys shall be surrendered on termination of this Lease.
The Landlord may, in the alternative, require the Tenant to
remove any alterations, additions, improvements and signs and to restore the
Demised Premises to the same condition as they were at the commencement of the
Lease.
XIII SIGNS
13.01 The Tenant shall not paint, display, inscribe, place or affix any sign,
picture, advertisement, notice, letter in or direction on any part of the
outside of the Building or visible from the outside of the Building. The Tenant
shall not paint, display, inscribe, place or affix any sign, picture,
advertisement, notice, lettering or direction on the outside of the Leased
Premises or elsewhere in the Building without the written consent of the
Landlord. The Tenant on ceasing to be the Tenant of the demised premises will,
before leaving them cause any sign, advertisement or notice as aforesaid to be
removed or obliterated at his own expense and in a workmanlike manner. Landlord
approves Tenant's signs in existence as at January 199[_][illegible].
XIV INDEMNITY
14.01 The Landlord shall not be liable nor responsible in any way, for any
personal or consequential injury of any nature whatsoever, that may be suffered
or sustained by the Tenant or by any employee, agent, invitee or licensee of the
Tenant or any other person who may be upon the Demised Premises or the lands and
buildings of which the Demised Premises form a part; or for any loss of or
damage, or injury to, any property belonging to the Tenant or to its employees
or to any other person while such property is on the Demised Premises, or the
lands and buildings of which the Demised Premises form a part; and, in
particular (but without limiting the generality of the foregoing), the Landlord
shall not be liable for any loss or damage, or damages of any nature whatsoever,
to any property caused by theft or breakage or other cause, failure to supply
adequate drainage, snow or ice removal, or by reason of the interruption of any
public utility or service or in the event of steam, water, rain or snow which
may leak into, issue or flow from any part of the Demised Premises of the lands
and buildings of which the Demised Premises form a part or from the water,
sprinkler, or drainage pipes or plumbing works of the same, or from any other
place or quarter or for any damage caused by anything done or omitted to be done
by any tenant, nor shall the Tenant be entitled to any abatement of rent in
respect of any such condition or interruption of service. The Landlord's
exemption from Liability will not apply in case of gross negligence of Landlord
in performing its duties.
14.02 Notwithstanding the foregoing provision, the Tenant shall indemnify and
save harmless the Landlord from all liabilities, damages, costs, claims, suits
or actions arising out of:
(a) any breach, violation or non-performance of any covenant
herein contained on the part of the Tenant;
(b) any damage to property howsoever occasioned by the use
and occupation of the Demised Premises; or
(c) any injury to any person or persons, including death,
resulting at any time therefrom, occurring in or about
the Demised Premises or any part thereof, or resulting
from the use and occupation of the Demised Premises
during the term of this Lease , by Tenant, its
employees, agents or invitees from any cause whatsoever.
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XV LANDLORD'S COVENANTS
15.01 The Landlord covenants with the Tenant as follows:
(a) for quiet enjoyment;
(b) to pay, subject to the provisions of Articles V and
VI all taxes and rates, municipal, parliamentary or
otherwise, levied against the Leased Premises or
against the Landlord on account thereof:
(c) to provide heating for the Leased Premises to an
extent sufficient to maintain therein at all times
during normal business hours, except during the
making of repairs, a reasonable temperature; but
should the Landlord make default in so doing, it
shall not be liable for indirect or consequential
damage or damages for personal discomfort or illness;
(d) to furnish, except when repairs are being made,
passenger elevator service during normal business hours,
and limited elevator service at other times;
operator-less automatic elevator service, if used, shall
be deemed "elevator service" within the meaning of this
paragraph; and to permit the Tenant and the employees of
the Tenant to have the free use of such elevator service
in common with others, but the Tenant and such employees
and all other persons using the same shall do so at
their sole risk and under no circumstances shall the
Landlord be held responsible for any damage or injury
happening to any person while using the same or
occasioned to any person by any elevator or any of its
appurtenances. All deliveries to the Leased Premises
shall be made by the elevator designated from time to
time by the Landlord;
(e) to permit the Tenant and the employees of the Tenant and
all persons lawfully requiring communication with them
to have the use during normal business hours on business
days in common with others of the maintenance and the
stairways, corridors, and elevators leading to the
Leased Premises. At times other than during normal
business hours the Tenant and the employees of the
Tenant and persons lawfully requiring communication with
the Tenant shall have access to the Building and to the
Leased Premises and use of the elevators only in
accordance with the Rules and Regulations;
In this lease, "business day" shall mean Monday to
Friday inclusive (other than Statutory holidays) and
"normal business hours" shall mean from 7:00 a.m. to
6:00 p.m.; and
(f) to permit the Tenant and the employees of the Tenant in
common with others entitled thereto to use the washrooms
in the Building on the floor or floors in which the
Leased Premises are situate.
XVI INSURANCE
16.01 The Landlord will:
(a) insure and keep insured during the term of this Lease
the building against loss by fire and such other perils
as may from time to time be included in the standard
fire insurance additional perils supplementary contract
generally available in the Province of Ontario, for its
full insurable value, with loss, if any, payable to the
Landlord or as the Landlord may direct.
(b) maintain pressure vessel insurance in respect of all
steam boilers and such other pressure vessels, including
hot water tanks, as the Landlord may from time to time
deem it necessary to insure, with loss, if any, payable
to the Landlord or as the Landlord may direct, in such
amount and in respect of such risks as may be
recommended by the Landlord's Insurance Underwriters.
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(c) maintain rental insurance against loss of rent due to
fire or such other perils as may from time to time be
included in the standard fire insurance additional
perils supplementary contract generally available in the
Province of Ontario for one year's rent, plus the
Tenant's share of the annual taxes on the Landlord's
Property, naming the Landlord as security for the
payment of such net rent and additional rent hereunder,
until the restoration of the Demised Premises as herein
required by the Tenant. To the extent that the Landlord
receives the proceeds of such insurance policies, the
rental insurance proceeds received shall be applied
against the rent payable herein.
16.02 The fire insurance policy hereinbefore referred to shall contain a waiver
of subrogation against the Tenant and the Landlord waives, and releases all
rights of action and recourse which it may now or hereafter have against the
Tenant in tort or negligence for any loss or damage to the Landlord or to the
Demised Premises or to the building in which the Demised Premises are situate,
by any of the perils insured against by the Landlord or which the Landlord has
agreed to insure against and, to cause all policy or policies of insurance held
by it in respect of the Demised Premises and the building in which same are
situate, to be endorsed with a waiver of any and all subrogation rights against
the Tenant which might otherwise vest in the insurer of such policy or policies
of insurance.
In the event the "Waiver of Subrogation" endorsement contained
in any policy or policies of fire insurance is cancelled by the insurance
company or companies and the Landlord, using its best efforts, is unable to
obtain a fire insurance policy or policies endorsed with "Waiver of Subrogation"
rights, the terms and covenants contained in this paragraph shall be deleted and
no longer effective and the within Lease shall be deemed to have been amended
accordingly.
16.03 The Tenant will:
(a) insure and keep insured the glass windows on the Demised
Premises, and will deposit certificates with respect to
such insurance with the Landlord.
(b) carry public liability insurance in such amounts as
shall from time to time be reasonable (but in no event
less than $2,000,000.00 inclusive of all injuries or
death to persons or damage to property of others arising
from any one occurrence), in the name of both the
Landlord and the Tenant.
(c) any other form of insurance as the Landlord or the
Landlord's mortgagee requires from time to time in
amounts and for risks against which a prudent tenant
would insure.
The Tenant will pay the premiums for each of the above
insurances when due and will deposit certificates of insurance with the
Landlord. The above insurances are to be carried in a company or companies
satisfactory to the Landlord and are to be in a type and form satisfactory to
the Landlord.
16.04 The Tenant agrees that it will not carry on or permit to be carried on any
business in the Demised Premises which will make void or voidable any insurance
held by the Landlord. As long as the use in the Premises is the same as the use
when the Tenant moved in.
If any insurance policy shall be cancelled, or the coverage
therein reduced in any way by the insurer by reason of the use and occupation of
the Demised Premises by the Tenant, or by any assignee or sub-tenant of the
Tenant, or by anyone permitted by the Tenant to be upon the said Demised
Premises, and if the Tenant fails to remedy the condition giving rise to such
cancellation or reduction of coverage within ten (10) days after notice thereof
by the Landlord, the Landlord may, at its option, either:
(a) determine this Lease forthwith by leaving upon the
Demised Premises a notice in writing of its intention so
to do and thereupon rent and any other payments for
which the Tenant is liable under this Lease shall be
apportioned and paid in full to the date of such
determination of the Lease
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and the Tenant shall immediately deliver up vacant
possession of the Demised Premises to the Landlord; or
(b) enter upon the Demised Premises and remedy the condition
giving rise to such cancellation or reduction and the
Tenant shall forthwith pay the cost thereof to the
Landlord, which cost may be collected by the Landlord as
rent in arrears.
XVII DESTRUCTION
17.01 If, during the term of this Lease, the building (or any part thereof) of
which the Demised Premises forms a part shall be damaged by fire or such other
perils as may from time to time be included in the standard fire insurance
additional perils supplementary contract generally available in the Province of
Ontario, the following provisions shall have effect:
(a) if the building is incapable of being rebuilt, repaired
or restored with reasonable diligence within 120 days of
the occurrence of the damage then either the Tenant or
the Landlord may terminate the Lease by notice in
writing to the other within thirty (30) days of the date
of damage. On the giving of this notice the Lease shall
cease and terminate from the date of the damage, the
Tenant shall forthwith surrender the Demised Premises
and all its interest in the Demised Premises to the
Landlord, the rent and the additional rent shall be
apportioned and payable by the Tenant only to the date
of the damage and the Landlord may re-enter and
re-possess the Demised Premises discharged of this
Lease. If the Tenant does not forthwith surrender the
Demised Premises then the Tenant shall continue to pay
the rent and additional rent specified in this Lease as
occupancy rent until surrender.
(b) If the Lease is not terminated pursuant to sub-paragraph
(a) or if the building is capable with reasonable
diligence of being rebuilt, repaired or restored within
120 days of the occurrence of the damage then the
Landlord shall proceed to rebuild, restore or repair the
Demised Premises with reasonable promptness subject to
any periods of delay caused by strikes, walk-outs,
slowdowns, shortages of material, acts of God, acts of
war, inclement weather or any other occurrences which
are beyond the reasonable control of the Landlord and
the rent shall abate in the following manner:
(i) if the Demised Premises are rendered partially
unfit for occupancy by the Tenant, the rent
reserved including additional rent prorata for the
period shall abate in the proportion that the part
of the Demised Premises rendered unfit for
occupancy by the Tenant bears the whole of the
Demised Premises;
(ii) if the Demised Premises are rendered wholly unit
for occupancy by the Tenant, the rent reserved
shall be fully suspended until the Demised
Premises have been rebuilt, repaired or restored;
(c) nothing in this clause shall in any way be deemed to
affect the obligation of the Tenant to repair, maintain,
replace or rebuild the Demised Premises, or to be liable
to the Landlord for any damages suffered by the Landlord
if the occurrence of damage is caused by the Tenant, or
is a result of the Tenant's breach or non-performance of
any of its obligations under this Lease, and the
Landlord is not compensated therefor out of the
insurance proceeds;
(d) the decision of the Landlord's architect or engineer
shall be final and binding upon the parties as to all
determinations relating to matters of construction.
XVIII DEFAULT AND REMEDIES
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18.01 If the Tenant does not pay any taxes, rates, services and utilities, or
other amounts which the Tenant has covenanted to pay, the Landlord may pay the
same and recover from the Tenant the amounts so paid as rent in arrears.
18.02 If the Tenant, after seven (7) days' written notice from the Landlord,
does not rectify and make good any damage, repairs or maintenance for which the
Tenant is liable under this Lease, the Landlord may enter upon the Demised
Premises (without being liable for any disturbance or damage so caused), rectify
and make good any such damage, repairs or maintenance, and recover the cost from
the Tenant as rent in arrears.
18.03 If the Tenant does not insure and keep insured as required, the Landlord
shall be free to effect the required insurance and to recover the cost from the
Tenant as rent in arrears.
18.04 The Tenant covenants not to permit any construction or other liens for
work, labour, services or materials ordered by the Tenant or for the cost of
which it may be in any way obligated to attach to the Demised Premises. If such
a lien is attached the Tenant shall, within twenty (20) days after the Tenant
has notice of the claim for lien, procure a discharge of the lien. If the Tenant
fails to comply with the terms of this paragraph, the Landlord, at its option,
may pay and discharge the lien and all monies paid by the Landlord, including
all expenses incurred, shall be charge to, and paid by the Tenant and may be
collected as additional rent due on the next ensuing rent day.
18.05 If, upon the termination or surrender of this Lease, the Demised Premises
are not left in the state of cleanliness and repair as required, the Landlord
may carry out any work required to rectify the default as agent of and at the
expense of the Tenant, and recover the cost from the Tenant as rent in arrears.
18.06 All arrears of rent and any monies overdue and owing to the Landlord
herein shall bear interest at the rate of 1% above the prime commercial lending
rate charged by the Landlord's bank from the time the arrears become due until
paid to the Landlord.
18.07 In addition to any other remedies set out in this Lease and available at
law, the Tenant agrees that:
(a) in case of non-payment of rent or other monies at the
time provided; three (3) business days notice will be
given on two occasions only during each calendar year or
(b) if the Tenant falls, after seven (7) days' written
notice from the Landlord, commence to make repairs and
diligently proceed to make good and complete any damage,
repairs or maintenance, for which the Tenant is liable;
or
(c) if the demised Premises be used by any other person
other than those entitled to use them under the terms of
this Lease; or
(d) if the term hereby granted or any of the goods or
chattels of the Tenant on the Demised Premises shall be
at any time during the said term seized or taken in
execution or attachment by any creditor of the Tenant:
or
(f) if the Tenant shall make any assignment for the benefit
of creditors or shall on becoming bankrupt or insolvent
take the benefit of any Act now or hereafter in force
for bankrupt or insolvent debtors; or
(g) if any order shall be made for the winding up of the
Tenant; or
(h) if the Tenant shall make any attempt to sell or dispose
of its goods or chattels or to remove them or any of
them from the Demised Premises so that there would not
remain in the Demised Premises in the event of such sale
or disposal sufficient goods subject to distress to
satisfy the rent then due or accruing due; or
(i) if the Tenant is in breach of, or fails to fulfil any of
its other obligations under this Lease, following expiry
of any applicable grace periods then,
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and in every such case, the then current months' rent
and the next ensuing three months' rent and the Tenant's
share of the Taxes for the then current year (to be
reckoned on the rate for the next preceding year, in
case the rate shall not have been fixed for the then
current year), shall immediately become due and be paid
and be recoverable by the Landlord in the same manner as
if the same were rent in arrears;
and the Landlord shall further have the right to either:
(i) re-enter and take possession of the Demised Premises as
though the Tenant or any other occupants of the Demised
Premises were holding over after the expiration of the
term and the term shall, at the option of the Landlord,
forthwith become forfeited and determined; or
(ii) re-enter as agent of the Tenant, either by force or
otherwise without being liable for prosecution. On such
re-entry, the Landlord may rent the whole or any part of
the Demised Premises as agent of the Tenant and receive
the rent payable on the re-rental. This Landlord may
re-rent for a period equal to or greater or lesser than
the remainder of the then current term to any tenant
which the Landlord may deem suitable and satisfactory,
for any use or purpose which the Landlord may deem
appropriate and on any other terms as the Landlord may
deem suitable and satisfactory. The Landlord may also
make such changes in the character of the improvements
of the Demised Premises as the Landlord may determine to
be appropriate or helpful in the re-rental.
The Landlord may also as agent of the Tenant take possession
of any chattels, fixtures or other property on the Demised Premises and sell the
same at public or private sale, subject to the laws of distress applied in
accordance with this lease.
Any proceeds of the sale of equipment or fixtures or any rent
derived from re-renting the Demised Premises shall be applied (minus any costs
incurred in selling or re-renting) upon account of the rent or other monies due
under this Lease and the Tenant shall remain liable to the Landlord for any
difference. It is the intention of the parties that nothing in this Lease and no
entry or seizure made by the Landlord under this clause shall in any way release
the Tenant from its obligation to pay rent during the term beyond any sum which
may be realized by the Landlord by re-renting the Demised Premises or selling
chattels and fixtures; nor shall the Landlord be required to pay to the Tenant
any surplus of any sums received by the Landlord on the sale of chattels or
fixtures or on the re-renting of the Demised Premises in excess of the rent
required to be paid by the Tenant under this Lease.
18.08 (a) Notwithstanding anything contained in any statute or
regulation in force, none of the goods or chattels of
the Tenant situate on the Demised Premises shall at any
time during the term be exempt from levy by distress for
rent in arrears. If any claim for exemption is made by
the Tenant, or if distress is being made by the
Landlord, this clause may be pleaded as an estoppel
against the Tenant in any action brought to test the
right of the Landlord to the levy upon goods claimed to
be exempt and the Tenant waives every exemption benefit
that might have accrued to the Tenant under any
legislation.
(b) If the Tenant removes any goods or chattels from the
Demised Premises, other than in the ordinary course of
business, the Landlord may follow them for thirty (30)
days in the same manner as is provided for in any Act
respecting the fraudulent and clandestine removal of
goods. (c) Any condoning, excusing or overlooking by the
either party of any breach, default or non-performance
by the other party at any time of any of its obligations
under the Lease shall not operate to waive such party
rights under this Lease in the event of any later
default, breach or non-performance and all rights and
remedies of such party shall be deemed to be cumulative,
not alternative.
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(d) Every payment by the Tenant, or receipt by the Landlord,
of a lesser amount than the monthly rent shall be deemed
to be on account of the earliest stipulated rent. Any
endorsement or statement on any cheque or any letter
accompanying any cheque or payment as rent shall not be
deemed an accord and satisfaction, and the Landlord may
accept the cheque or payment without prejudice to the
Landlord's right to recover the balance of the rent or
pursue any other remedy in this Lease.
(e) No reference to, nor exercise of, any specific right or
remedy by the Landlord shall preclude or prejudice the
Landlord in exercising any other right, or remedy or
maintaining any other action to which it may be entitled
either at law or in equity. The Landlord's failure to
insist upon a strict performance of any covenant of this
Lease agreement or to exercise any option or right shall
not be a waiver or relinquishment for the future of the
covenant, right or option which shall remain in full
force and effect.
XIX PRIOR INTERESTS
19.01 This lease is subject and subordinate to all mortgages or deeds of trust
and all renewals, modifications, consolations, replacements and extensions
thereof which may now or at any time hereafter affect the Premises in whole or
in part or the Building in whole or in part and whether or not such mortgages or
deeds of trust shall affect only the Premises or the Building of which the
Premises shall form a part or shall be blanket mortgages or deeds of trust
affecting other Premises as well. The Tenant shall at any time on notice from
the Landlord attorn to and become a Tenant of a mortgagee or trustee under any
such mortgage or deed of trust upon the same terms and conditions set forth in
this lease and subject to the mortgagee recognizing Tenant's leasehold interest
and shall execute promptly on request by the Landlord and in any event within
five (5) days after such request, any certificates, instruments of postponement
or attornment or other instruments from time to time requested to give full
effect to this requirement or to set out the status of this lease and the state
of accounts between the Landlord and the Tenant and the Tenant hereby
constitutes the Landlord as the agent or attorney of the Tenant for the purpose
of executing any such certificates, instruments of postponement or attornment or
other instruments necessary to give full effect to this clause. To best of
Landlord's knowledge, the current mortgagee requires Tenant to execute a form of
subordination agreement which includes non-disturbance provision.
XX RIGHT TO RELOCATE
20.01 (a) The Landlord shall have the right, at any time during
the term of this lease, to relocate the Tenant to other
premises of approximately the same area within the
Building. Such right shall be exercised by the giving of
not less than sixty (60) days' notice in writing to the
Tenant.
(b) The Landlord shall be responsible for the expenses of
such relocation, including the cost of partitioning the
new premises, but such costs shall include the costs of
the physical movement of the Tenant's chattels and the
relocation of Leasehold Improvements only and the
Landlord shall not be liable for any other costs
including without limitation the cost of printing
stationery nor shall the Landlord be liable for any loss
occasioned by the interruption of the Tenant's business.
(c) If the Landlord relocates the Tenant as aforesaid, this
lease shall continue in full force with the following
amendments:
(i) The description of the Premises in Schedule "A"
and in page one of this lease shall be amended to
contain a description of the premises to which the
Tenant has been relocated;
(ii) The area of the Premises as described on page one
of this lease shall be amended to indicate the
area of the premises as a result of amendment (i)
above mentioned; and
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(iii) The annual rent set forth in subclause 3(a) hereof
shall be amended by increasing it or decreasing it
by a percentage equal to the percentage increase
or decrease in the area of the Premises as a
result of amendment (ii) above mentioned.
(d) If the Tenant refuses to allow the Landlord to relocate
the Tenant as aforesaid or if the Tenant attempts to
obstruct such relocation in any manner, the Landlord
may, at its option, terminate this lease with notice to
the Tenant, without prejudice to any other rights or
remedies it may have, and rent and any other payments
for which the Tenant is liable shall be apportioned and
paid to the date of such termination together the
reasonable expenses of the Landlord attributable to the
termination of the lease and the Tenant shall
immediately deliver possession of the Premises to the
Landlord.
(e) at any time during the last year of the lease term,
Landlord shall have the option to terminate in lieu of
relocating.
XXI RIGHT OF ENTRY
21.01 The Tenant shall permit the Landlord and the Landlord's agents during the
term of this lease to enter the Leased Premises to:
(a) examine the condition of the Leased Premises and to
effect all required repairs and maintenance on
reasonable notice;
(b) show the Leased Premises for the purpose of inspection
by prospective Purchasers and mortgagees, and during the
last six (6) months of the term, by prospective Tenants
on reasonable notice;
(c) perform all other acts permitted or required to be
performed by the Landlord under this lease on reasonable
notice; and
(d) to remove any article or remedy any condition which in
the reasonable opinion of the Landlord would likely lead
to the cancellation of any policy of insurance, if
possible the Landlord will give the Tenant written
notice to remedy in seven (7) days.
XXII EXPROPRIATION AND TERMINATION
22.01 If during the term all or part of either the Premises or the Building is
expropriated, then at the option of the Landlord, the term of the lease shall
cease and terminate upon possession being required and all rent, additional rent
and other charges shall be paid up to that date so that the Tenant shall have no
claim against the Landlord for the value of any unexpired term of the lease, or
for damages or for any reason whatsoever. The Tenant shall not be entitled to
any part of the award or compensation paid for such expropriation and the
Landlord is to receive the full amount of any such award or compensation, the
Tenant hereby expressly waiving any right or claim to any part thereof. However,
the Tenant shall have the right to claim and recover from the expropriating
authority, but not from the Landlord, such compensation as may be separately
awarded to the Tenant in respect of its fixtures.
22.02 Notwithstanding any other provisions in this lease, the Landlord shall
have the right to terminate this lease by notice in writing to the Tenant if the
Landlord determines to remodel or demolish the Building or a substantial part
thereof or if the Landlord enters into a bona fide arm's length sale of the
Building. Such termination shall be effective on the date named in such notice,
which shall be the last day of a month not less than three (3) months following
the giving of such notice or at the Landlord's option on one month notice and
the Landlord to pay the tenant one month rent. Such notice may be given by the
Landlord, at any time after the Landlord determines to demolish or remodel the
building, or, in the event of a sale of the building, by the Landlord or the
Purchaser (new Landlord), at any time the Landlord enters into an agreement for
such sale to a date that is thirty (30) days after completion of such sale
transaction.
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XXIII NOTICES
23.01 All notices, demands and requests which may be or are required to be given
under this Lease shall be in writing and shall be served personally or by
facsimile or sent by registered mail addressed in the case of the Landlord, to
it at: 329 Spadina Ave. Second Floor, Toronto, Ontario, M5T 2E9 Fax (416)
977-3451 and in the case of the Tenant to it at the Demised Premises or at such
other place or places as such parties may from time to time designate by written
notice to the other.
Notices, demands and request which are served in the manner
aforesaid shall be deemed sufficiently served or given for all purposes of this
Lease, in the case of those personally served, on the date of such service, and,
in the case of those given by registered mail, on the third postal delivery day
following the mailing thereof.
Provided, however, that in the event that normal mail service
shall be interrupted by strikes, slow-down, force majeure or other cause, then
the party sending the notice or request shall utilize any similar service which
has not been so interrupted in order to ensure prompt receipt of such notice,
request or demand by the other party and for the purposes of this paragraph such
service shall be deemed to be personal service. In the event of disruption of
mail service for any reason whatsoever, payments required to be made by the
Tenant to the Landlord shall be delivered to the Landlord at the address
hereinbefore set out.
XXIV LESSEE NOT EXCEED OR TO OVERLOAD FACILITIES
24.01 The Tenant shall not install any equipment which will overload the
capacity or any utility, electrical or mechanical facilities in the Leased
Premises and the Tenant will not bring into the Leased Premises or install any
utility, electrical or mechanical facility or service which the Landlord does
not approve. The Tenant agrees that if any equipment installed by the Tenant
requires additional utility, electrical or mechanical facilities, the Landlord
may in its sole discretion if they are available elect to install them at the
Tenant's expense and in accordance with plans and specifications to approved in
advance in writing by the Landlord.
XXV LESSEE NOT TO OVERLOAD FLOORS
25.01 The Tenant shall not bring upon the Leased Premises or any part thereof,
any machinery, equipment, article or thing that by reason of its weight, size or
use, might in the opinion of the Landlord damage the Leased Premises by any
machinery, equipment, object or thing or by overloading, or by any act, neglect
or misuse on the part of the Landlord, or any of its servants, agents or
employees, or any person having business with the Tenant, the Tenant will
forthwith repair the same, or at the option of the Landlord, pay the Landlord
forth with on demand the cost of making good the same.
XXVI CLEANLINESS
26.01 The Tenant covenants with the Landlord to clean the premises daily, and to
maintain the premises in a standard of cleanliness as befits a commercial
office. Tenant, and those for whom Tenant is responsible, shall not cause or
permit accumulations of garbage or other refuse within or without the premises,
or cause or permit objectable odours to emanate or to be dispelled from the
premises; And Tenant and those for whom Tenant is responsible shall in
particular ensure that any food or food wastes brought into the premises, are
removed daily, and Tenant shall take all reasonable precautions to prevent the
onset of rodents, vermin, cockroaches, or insects of any kind, resulting from
the presence of food or foodwastes. Landlord shall have the right to enter the
premises from time to time and view the state of cleanliness. In the event that
the Premises shall not have been maintained in accordance with the standard of
cleanliness required by Landlord, then Landlord shall have the right to arrange
for daily cleaning of the Premises by the Landlord's Janitorial contractor and
the cost of such cleaning shall be payable by "Tenant as additional rent".
XXVII RENEWAL
27.01 The Tenant has the option to renew for another five (5) years at a
mutually agreed upon rate.
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XXIII PARKING:
28.01 The Tenant shall have the right to one parking space in the outdoor
parking lot during the initial term of the lease at $25.00 per month for the
spot, another spot at no charge, and two other parking spots that the Tenant
shall rent form the Landlord $50.00 per month per spot. Notwithstanding should
the Landlord sell the parking lot or build a building the Landlord shall no
longer be obligated to provide the parking spaces.
XIX MISCELLANEOUS
29.01 (a) The Tenant covenants to register an executed copy of
this Lease against the title of the Demised Premises, or
a Notice thereof, in the Registry Office or Land Titles
Office in which the Lands are registered if so requested
by the Landlord.
(b) This Lease sets out all the covenants, promises,
agreements, conditions and understanding between the
Landlord and the Tenant concerning the Demised Premises
and there are no covenants, promises, agreements,
conditions or understanding, either oral or written,
between them, other than as are set out in this Lease.
(c) This Lease agreement shall be construed under the laws
of the Province of Ontario.
(d) The Landlord and Tenant expressly acknowledge and
declare that the sole relationship between them created
by this Lease is that of Landlord and Tenant. This Lease
does not and shall not in any way create a partnership,
agency, joint venture, or any relationship other than
that of Landlord and Tenant.
(e) The headings to the various paragraphs of this Lease and
any paragraph numbers appearing in this Lease are
inserted only as a matter of convenience, and in no way
define, limit, construe or describe the scope or intent
of such paragraphs of this Lease, nor in any way affect
this Lease.
(f) The word "Tenant" shall be deemed to mean each and every
person or party mentioned as a tenant. If there is more
than one Tenant, any notice required or permitted by the
terms of this Lease may be given by or to any one of
them, and shall have the same force and effect as if
given by or to all. The use of the neuter singular
person to refer to the Landlord or the Tenant shall be
deemed a proper reference even though the Landlord or
the Tenant may be an individual, a partnership, a
corporation or a group of two (2) or more individuals or
corporations.
The necessary grammatical changes required to make the
provisions of this Lease apply in the plural sense where
there is more than one Landlord or Tenant and either
corporations, associations, partnerships of individuals,
males or females, shall, in all instances be assumed as
though in each case fully expressed.
(g) The Tenant agrees that it will at any time and from time
to time upon not less than ten (10) days prior notice
execute and deliver to the Landlord as a statement in
writing certifying that this lease is unmodified and in
full force and effect (or, if modified, stating the
modifications and that the same is in full force and
effect as modified), the amount of the annual rent then
being paid hereunder, the dates to which the same, by
installments or otherwise, and other charges hereunder
have been paid, and whether or not there is any existing
default on the part of the Landlord of which the Tenant
has notice.
(h) All rights and liabilities given to, or imposed upon,
the respective parties, shall extend to and bind the
several respective heirs, executors, administrators,
successors and assigns of the parties. If there is more
than one Tenant, they shall all be bound jointly and
severally by the terms,
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covenants and agreements of the Lease. No rights,
however, shall enure to the benefit of any assignee of
the Tenant unless the assignment to such assignee has
been approved by the Landlord in writing as provided for
in Article XI of this Lease.
(i) Notwithstanding anything herein contained, in the event
that the Landlord or Tenant is delayed or hindered in or
prevented from the performance of any act required of
Landlord or Tenant hereunder by reason of any: strike;
civil commotion; lock-out; labour trouble; inability to
procure materials, equipment, labour or service; act of
God; weather; fire; flood; restrictive governmental laws
or regulations; riot; insurrection; war; or any reason
whether or not of the foregoing nature beyond the
reasonable control of the Landlord or Tenant, then the
period for the performance of any such act shall be
extended for a period equivalent to the period of the
delay.
(j) Time shall be of the essence of this Lease in all
respects.
(k) See Page 21,22,23 and Schedule "A", "B", and "C" annexed
hereto forming part of this lease.
IN WITNESS WHEREOF each of the parties herein have duly and
properly executed this Agreement.
SIGNED, SEALED AND DELIVERED ) 738489 ONTARIO LIMITED
IN THE PRESENCE OF )
)
) /s/ [Illegible]
- ------------------------------------ --------------------------------
WITNESS
SIGNED, SEALED AND DELIVERED ) MATCH PAIR INC.
IN THE PRESENCE OF )
)
) /s/ Giovani Vernich
- ------------------------------------ --------------------------------
WITNESS Giovani Vernich A.S.O.
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SCHEDULE "B"
The Tenant at its own expense shall sand the floor, sand blast the brick, build
offices, set up their electrical and mechanical needs (save and except what the
Landlord is doing in Schedule "C"). All such work shall be done as set out in
the terms set out in the lease.
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SCHEDULE "C"
The Landlord at its own expense shall:
1) Repair and replace all windows with clear glass on the east side of the
space.
2) Create new openings and supply and install new window units 5' x 7'
between every other pillar bay, at locations agreed upon by both Landlord
and tenant with a minimum of four windows on the east side.
3) Provide a circuit breaker box with a minimum of 150 Amp service at 220v.
4) Supply and install a man' and woman's washroom (washroom to include toilet
and sink) within the unit, to be in the north west corner of the demised
premises, and rough in hot and cold water with drainage to allow for the
Tenant to install kitchen sink.
5) To make an opening through the brick wall for double door and supply and
install one double fire rated steel door with dead bolt at a location
specified by the Tenant.
6) Repair all rad's and pipes so they function properly and do not leak, this
to include replacing shut off valves and steam traps where required.
7) Remove all unnecessary wiring and supply and install at locations
specified by the Tenant 20 110 volt outlets. Use steel conduit when wiring
is not going through walls or are not concealed.
8) Supply and install a sound insulated demising wall at the south section of
the space as indicated on Schedule "A".
9) Supply and install a wall that encloses the A/C units at the north end of
the space and the duct work at the north end of the demised premises.
10) To repair and make sure A/C unit is in working condition, work to be done
prior to April 30th or sooner if weather is warmer and move the A/C unit
to a location specified by the Tenant, or as close as possible provided
that it is possible.
11) Remove any unnecessary pipes within the Demised Premises.
Match.wps/bm
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SCHEDULE OF RULES AND REGULATIONS
FORMING PART OF THE WITHIN LEASE
1. The sidewalks, entrances, elevators, stairways and corridors of the
building shall not be obstructed by any tenants or used by them for any other
purpose than for ingress and egress to and from their respective offices, and no
tenant shall place or allow to be placed in the hallways, corridors or
stairways; any waste paper, dust garbage, refuse or any thing whatever that
shall tend to make them appear unclean, untidy or filthy;
2. The floors, sky-lights and window that reflect or admit light into
passageways or into any place in the said building shall not be covered or
obstructed by any of the tenants, and no awnings shall be put over any window;
the water closets and other water apparatus shall not be used for any purpose
other than those for which they were constructed, and no sweepings, rubbish,
rags, ashes or other substance shall be thrown therein, and any damage resulting
to them from misuse shall be borne by the tenant by whom or by whose employee
the damage was caused.
3. All window signs, interior signs on glass doors must be approved in
writing by the Lessor before the Lessee engages a sign contractor to paint said
signs, and all such signs shall painted in the form previously so approved by
the Lessor.
4. In the event that the Lessor provides and installs a Public
Directory Board inside the main entrance to the building, the tenant's or
tenants' name or names shall be placed on the said Board at the expense of such
tenant or tenants, same to be charged to the tenant or tenants in the month's
bill for rent next rendered, and shall be recoverable as rent.
5. If any sign, advertisement or notice shall be inscribed, painted or
affixed by the Lessee on or to any part of the said building whatever, then the
Lessor shall be at liberty to enter on said premises and pull down and take away
any such sign, advertisement or notice, and the expense thereof shall be payable
by the Lessee.
6. If by reason of any alterations which the Lessee way make or may
permit to be made, with or without the consent of the Lessor, to any part of the
demised premises or to any fixtures in the demised premises, the addition of any
equipment or the use of any material which the Lessees. Its employees or other
parsons permitted by the Lessee to be on the premises may use or keep in the
said premises, or any change in the type of occupancy of the demised premises
which the Lessee may make or permit to be made, there is any increase in the
insurance premiums payable by the Lessor on any fire insurance which may be in
effect or which the Lessor may hereafter place upon the building of which the
demise premises form a part, the Lessee agrees to pay to the Lessor the amount.
of such increase, and the parties agree that a statement by the insurance broker
of the Lessor of the amount of such increase shall be final and binding upon the
parties.
7. No safes, machinery, equipment, heavy merchandise or anything liable
to injure or destroy any part of the building shall be takes into it without the
consent of the Lessor in writing, and the Lessor shall in all cases retain the
power to limit the weight and indicate the place where such safe or the like is
to stand, and the cost of repairing any and all damage done to the building by
taking in or putting out such safe or the like or during the time it is in or on
the premises, shall be paid for on demand by the tenant who so causes it. No
tenant shall load any floor beyond its reasonable weight carrying capacity as
set forth in the municipal or other codes applicable to the building.
8. In order that the demised premises may be kept in a good state of
preservation and cleanliness, the tenant shall during the continuance of its
lease permit the janitor or caretaker of the Lessor to take charge of and clean
the demised premises.
9. No tenant shall employ any person or persons other than the janitor
or caretaker of the Lessor for the purpose of such cleaning or of taking charge
of said premises, it being understood and agreed that the Lessor shall be in no
wise responsible to any tenant for any loss of property from the demised
premises, however occurring, or any damage done to the furniture or other
effects of any tenant by the janitor or caretaker or any of its employees.
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alterations was it shall deem necessary for the safety and preservation of the
building, and also during the three months previous to the expiration of the
lease of the demised premises, to exhibit the said premises, to exhibit the said
premises to be let and put upon then its usual notice "For Rent", which said
notice shall not be removed by any tenant.
11. Nothing shall be thrown by the tenants, their clerks or servants,
out of the windows or doors or down the passages and sky-lights of the building.
12. No animals shall be kept in or about the premises.
13. If the Lessee desires telegraph or telephone, call bell or other
private signal connections, the Lessor reserves the right to direct the
electricians or other workmen as to where and how the wires are to introduced
and without such directions no boring or cutting for wires shall take place. No
other wires of any kind shall he introduced without the written consent of the
Lessor.
14. No one shall use the leased premises for sleeping apartments or
residential purposes.
15. Tenants and their employees shall not make or commit any improper
noise in the building, or in any way interfere with or annoy other tenants or
those having business with them.
16. All tenants must observe strict care, not to allow their windows to
remain open so as to admit rain or snow, or so as to interfere with the heating
of the building. The tenants neglecting this rule will be responsible for any
injury caused to the property of other tenants or to the property of the Lessor
by such carelessness. The Lessee, when closing offices for business, day or
evening, shall close all window and lock all doors.
17. The Lessee agrees not to place any additional locks upon any doors
of the demised premises and not to permit any duplicate keys to be made
therefore; but to use only additional keys obtained from the Lessor, at the
expense of the Lessee, and to surrender to Lessor on the termination of the
lease all keys of the said premises.
18. The Lessee shall give to the Lessor prompt written notice of any
accident or any defect in the water pipes, gas pipes, heating apparatus,
telephone or electric light, or other wires in any part of said building.
19. No inflammable oils or other inflammable, dangerous or explosive
materials shall be kept or permitted to be kept in the demised premises.
20. The caretaker will have charge of all radiators and will give all
information for the management of the same, and the Lessee shall give to the
Lessor prompt written notice of any accident to or defects in the water pipes or
heating apparatus.
21. No vehicles shall be brought within the building or upon the
Lessor's property, including any lane or courtyard.
22. Nothing shall be placed on the outside of windows or projections of
the demised premises. No air-conditioning equipment shall be placed at the
windows of the demised premises without the consent in writing of the Lessor.
23. Spikes, hooks, nails, screws or knobs shall not be put into the
walls or woodwork.
24. No freight, furniture or packages will be received in the building
or carried up or down in the elevator between the hours of 8 a.m. and 6 p.m.
25. All glass, locks and trimmings in or upon the doors or windows of
the demised premises shall be kept whole and whenever any part thereof shall
become broken, the same shall be immediately replaced or repaired under the
direction and to the satisfaction of the Lessor, and such replacements and
repairs shall be paid for by the Lessee.
26. No heavy equipment of any kind shall be moved within the building
without skids being placed under the same, and without the consent of the Lessor
in writing.
23
<PAGE>
27. Any alterations, additions, renewals or changes made in the
partition or divisions of the rooms or linoleum floors during the currency of
this lease shall, if made at the request of the Lessee, be done by the Lessor at
the expense, of the Lessees, and shall be subject to the approval in writing at
direction of the Lessor.
28. The Lessor shall not be liable for any damage to any property at
any time on the demised premises, nor for the theft of any of the said property,
nor shall it be liable for an escape or leakage of smoke, gas, water, rain or
snow howsoever caused, nor for any accident to the property of the Lessee.
29. Any person entering upon the roof of the building does so at his
own risk.
30. The Lessee shall not enter into any contract with any person or
persons or corporations for the purpose of supplying towels, soap or sanitary
supplies etc., ice or spring water, unless the said person or persons or
corporation agree that the time and place of delivery of such articles and the
elevator service to be used in connection therewith shall be subject to such
rules and regulations as the Lessor may from time to time prescribe.
31. Tenants, their agents and employees shall not take food into the
elevator or into public or rented portions of the building unless such food is
carried in covered receptacles approved by the Lessor in writing.
32. The Lessor reserves the right to restrict the use of the demised
premises to the Lessee and/or its employees after 6 p.m.
33. No tenant shall make a door-to-door canvas of the building for the
purpose of selling any products or services to the other tenants without the
written consent of the Lessor.
34. No tenant shall be permitted to do cooking or to operate cooking
apparatus except in a portion of the building rented for the purpose.
35. The Lessor shall have the right to make such other and further
reasonable rules and regulations and to alter, amend or cancel all rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the building and for the preservation of good order
therein and the same shall be kept and observed by the tenants, their clerks and
servants. The Lessor may from time to time waive any of such rules and
regulations as applied to particular tenants and is not liable to the Lessee for
breaches thereof by other tenants.
24
Exhibit 21.1
Subsidiaries of the registrant
- --------------------------- --------------------------- ------------------------
Name Jurisdiction of Names under which
Incorporation company does business
- --------------------------- --------------------------- ------------------------
eieiHome.com, Inc. Ontario, Canada eieiHome.com, Inc.
- --------------------------- --------------------------- ------------------------
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<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,277
<SECURITIES> 0
<RECEIVABLES> 16,580
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,972
<PP&E> 43,262
<DEPRECIATION> 6,210
<TOTAL-ASSETS> 65,024
<CURRENT-LIABILITIES> 826,607
<BONDS> 0
0
0
<COMMON> 181,988
<OTHER-SE> (2,943,571)
<TOTAL-LIABILITY-AND-EQUITY> 65,024
<SALES> 45,529
<TOTAL-REVENUES> 45,529
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 786,854
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> (741,403)
<INCOME-TAX> 0
<INCOME-CONTINUING> (741,403)
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<EPS-BASIC> (.09)
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</TABLE>
HYCOMP, INC.
67 Wall Street, Suite 2411
New York, New York 10005
SPECIAL MEETING OF STOCKHOLDERS
--YOUR VOTE IS VERY IMPORTANT--
The Board of Directors of HyComp, Inc. proposes to undertake a number
of steps to strengthen the Company's ability to develop the business of its
wholly-owned Canadian subsidiary, eieiHome.com Inc. Several of the steps require
stockholder approval and the Company is holding a special meeting of
stockholders on February 29, 2000 in Boston, Massachusetts to allow you to
consider and vote for the following proposals: (i) changing the Company's
jurisdiction of incorporation from Massachusetts to Delaware by merging the
Company into a to be formed Delaware company also called eieiHome.com Inc.; (ii)
changing the Company's name to eieiHome.com Inc.; (iii) increasing the number of
authorized shares of common stock of the Company; (iv) adopting the 2000 Stock
Option Plan; and (v) re-electing the current directors.
The affirmative vote of stockholders entitled to exercise two thirds of
the voting power of HyComp, Inc. is required to adopt the merger agreement which
will effect the change of the Company's jurisdiction of incorporation from
Massachusetts to Delaware. The affirmative vote of stockholders entitled to
exercise a majority of the voting power of HyComp, Inc. is required to approve
the name change and to increase the Company's authorized capital. The
affirmative vote of the holders of a majority of the shares of common stock
voting on the matter is required to adopt the 2000 Stock Option Plan and the
affirmative vote of a plurality is required for the election of directors.
Your vote is very important. Whether or not you plan to attend the
special meeting of stockholders, please take the time to vote by completing and
mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you want to vote, we will vote your proxy in favor
of each of the motions and in favor of re-electing all five directors. If you
fail to return your card, unless you appear in person at the special meeting of
stockholders, the effect may be that a quorum will not be present at the special
meeting of stockholders and no business will be able to be conducted.
The date, time and place of the special meeting of stockholders are as
follows:
February 29, 2000
11:00 a.m. (local time)
Marriott Boston Copley Square
Boston, Massachusetts 02116
This proxy statement provides you with detailed information about the
proposals and a copy of the merger agreement is attached as Appendix A to the
proxy statement. You may also obtain information about HyComp, Inc. from
documents filed with the United States Securities and Exchange Commission. We
encourage you to read this entire document, including the appendices, completely
and carefully.
After careful consideration, your Board of Directors has determined that
the proposals are fair to and in the best interests of HyComp, Inc. and its
stockholders. Your Board of Directors has approved the Reincorporation Proposal,
the Change of Name Proposal, the Increase in Common Stock Proposal, and the 2000
Stock Option Plan Proposal and it recommends that you vote "FOR" each of the
proposals at the special meeting.
This proxy statement is dated February 7, 2000 and is first being mailed
to stockholders on or about February 8, 2000.
Sincerely,
/s/ Angelo G. Macdonald
ANGELO G. MACDONALD
Chief Executive Officer
<PAGE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the transactions described in this
proxy statement, or passed upon the fairness or merits of the transactions or
the adequacy or accuracy of this proxy statement. Any representation to the
contrary is a criminal offense.
We have not authorized anyone to give any information or make any
representation about the Company or its plans that differs from or adds to the
information in this proxy statement or in our documents that are publicly filed
with the Securities and Exchange Commission. Therefore, if anyone does give you
different or additional information, you should not rely on it.
The information contained in this proxy statement speaks only as of its
date unless the information specifically indicates that another date applies.
As allowed by the rules of the Securities and Exchange Commission, this
proxy statement incorporates important business and financial information about
HyComp, Inc. which is not included in or delivered with the proxy statement.
This information is available to HyComp, Inc. stockholders without charge upon
written request to Angelo G. MacDonald, HyComp, Inc., 67 Wall Street, Suite
2411, New York, New York, 10005. Telephone requests may be directed to Angelo G.
MacDonald at (212) 344-0351. To obtain timely delivery, stockholders must
request this information no later than February 20, 2000.
<PAGE>
HYCOMP, INC.
67 Wall Street, Suite 2411
New York, New York 10005
-----
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 29, 2000
-----
To Our Stockholders:
You are cordially invited to attend the Special Meeting of the
Stockholders of HyComp, Inc., a corporation organized under the laws of
the Commonwealth of Massachusetts, which will be held at 11:00 a.m.,
local time, on February 29, 2000, at the Marriott Boston Copley Square,
Boston, Massachusetts 02116, to consider and vote upon the following:
1. a proposal to change the jurisdiction of incorporation of the Company
from the Commonwealth of Massachusetts to the State of Delaware by
merging the Company with eieiHome.com Inc., a company to be incorporated
in Delaware and to be a wholly-owned subsidiary of the Company and, in
connection with the move, to adopt the Agreement and Plan of Merger
attached to the proxy statement as Appendix A;
2. a proposal to change the Company's name from HyComp, Inc. to eieiHome.com
Inc.;
3. a proposal to increase the number of shares that the Company is
authorized to issue from 20,000,000 shares of common stock, par value
$0.01, to 75,000,000 shares of common stock, par value $0.001;
4. a proposal to adopt the 2000 Stock Option Plan, as described in the proxy
statement;
5. the re-election of the current directors of HyComp, Inc.; and
6. the transaction of any other business that may properly come before the
special meeting or any adjournment or postponement of the special
meeting.
Only stockholders of record at the close of business on February
2, 2000 are entitled to notice of and to vote at the special meeting or
any adjournment or postponement of the special meeting.
All stockholders are cordially invited to attend the special
meeting. To ensure your representation at the special meeting, please
complete and promptly mail your proxy in the return envelope enclosed.
This will not prevent you from voting in person, but will help to secure
a quorum and avoid added solicitation costs. Your proxy may be revoked at
any time before it is voted. A return envelope is included for your
convenience. If your shares are held in "street name" by your broker or
other nominee, only that holder can vote your shares. You should follow
the directions provided by your broker or nominee regarding how to
instruct them to vote your shares.
By Order of the Board of Directors
/s/ ANGELO G. MACDONALD
ANGELO G. MACDONALD
Chief Executive Officer
New York, New York
February 7, 2000
IMPORTANT
Please mark, sign, date and return your proxy promptly, whether or not
you plan to attend the special meeting.
If you use the enclosed envelope addressed to HyComp, Inc.,
no postage is required.
<PAGE>
TABLE OF CONTENTS
Page
----
Questions And Answers About The Meeting........................................1
The Special Meeting............................................................3
Date, Time And Place Of Special Meeting.....................................3
Purpose Of The Special Meeting..............................................3
Recommendation Of The HyComp Board..........................................3
Solicitation Of Proxies.....................................................3
Record Date; Quorum; Voting Rights; Proxies.................................4
Other Information...........................................................5
Information About The Company..................................................5
Security Ownership Of Certain Beneficial Owners And Management..............6
The Proposals
Proposal 1: To Change The State Of Incorporation From Massachusetts
To Delaware......................................................8
Principal Reasons For Changing The State Of Incorporation...................9
The Merger..................................................................9
Closing And Effective Time Of The Merger...................................10
The Surviving Corporation..................................................10
Board Of Directors And Executive Officers Of eieiHome Following The Merger.10
Description Of The Surviving Corporation's Capital Stock...................11
Comparison Of The Rights Of Holders........................................11
Changes In Certificate Of Incorporation And By-Laws........................11
Principal Differences Between Massachusetts And Delaware Corporation Laws..12
Rights Of Dissenting Stockholders..........................................18
Material United States Federal Income Tax Consequences.....................20
Vote Required For Approval Of The Reincorporation Proposal.................21
Proposal 2: To Approve The Change In The Company's Name To eieiHome.com Inc.22
Vote Required For Approval Of The Change Of Name Proposal..................22
Proposal 3: To Increase The Authorized Common Stock Of The Company By
55,000,000 Shares...............................................22
Vote Required For Approval Of The Increase In Common Stock Proposal........23
Proposal 4: Approval Of The 2000 Stock Option Plan And The Authorization Of
3,000,000 Shares For Issuance Under The Plan....................23
Vote Required For Approval Of The 2000 Stock Option Plan Proposal..........25
Proposal 5: Election Of Directors.......................................25
Stockholder Proposals.........................................................26
Other Matters ............................................................26
Where You Can Find More Information...........................................27
APPENDICES
Appendix A--Agreement And Plan Of Merger......................................28
Appendix B-- Form Of Certificate Of Incorporation Of eieiHome.com Inc.........33
Appendix C--Form Of By-Laws Of eieiHome.com Inc...............................35
Appendix D--2000 Stock Option Plan............................................41
Appendix E--Provisions Of The General Laws Of Massachusetts Relating To
The Rights Of Dissenting Stockholders.............................47
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MEETING
Q: Why am I receiving these materials?
A: The Board of Directors of HyComp, Inc. (which we refer to as either
"HyComp" or the "Company") is providing these proxy materials to give you
information to determine how to vote at a special meeting of HyComp
stockholders. The special meeting will take place on February 29, 2000 at 11:00
a.m. (local time) at the Marriott Boston Copley Square, Boston, Massachusetts
02116.
Q: What will be voted on at the special meeting?
A: There will be a vote on each of the proposals discussed in this proxy
statement, which we refer to as the Reincorporation Proposal, the Change of Name
Proposal, the Increase in Common Stock Proposal, the 2000 Stock Option Plan
Proposal and the re-election of directors.
Q: What is the effect of voting in favor of the Reincorporation Proposal?
A: If the Reincorporation Proposal is approved by the stockholders, then
the stockholders will effectively have approved each of the remaining proposals
as well. The Reincorporation Proposal includes the adoption of a merger
agreement, which changes the state of incorporation of HyComp from the
Commonwealth of Massachusetts to the State of Delaware by merging HyComp with
its to be formed wholly-owned subsidiary eieiHome.com Inc., a Delaware
corporation (which we refer to as "eieiHome" or the "surviving corporation").
The surviving corporation will be a Delaware corporation, its name will be
eieiHome.com Inc., it will have 75,000,000 authorized shares of common stock
(although its par value will be $0.001 rather than $0.01), it will have adopted
the 2000 Stock Option Plan in the form proposed in this proxy statement, and its
directors will be the same five directors proposed for election as directors of
HyComp in this proxy statement (i.e. making the remaining proposals, the Change
of Name Proposal, the Increase in Common Stock Proposal, the 2000 Stock Option
Plan Proposal, and the re-election of directors redundant if the Reincorporation
Proposal is approved by the stockholders).
Q: Why do I need to vote on each of the Proposals separately?
A: While the Company believes that the Reincorporation Proposal is in the
best interests of stockholders, it does require the vote of a greater number of
stockholders than the other proposals. As the Company also believes that it is
important to go ahead with the remaining proposals even if the Reincorporation
Proposal is not approved, you are being asked to vote on each of the other
proposals separately in case the Reincorporation Proposal is not approved.
Q: Will I still hold shares of HyComp common stock after the merger?
A: No. In the reincorporation merger, each share of HyComp common stock,
par value $0.01 (which we refer to as "HyComp common stock") will become one
share of eieiHome common stock, par value $0.001 (which we refer to as "eieiHome
common stock") except for shares held by stockholders who seek dissenter's
rights under Massachusetts law.
Q: Why will the new eieiHome capital stock have a different par value?
A: The change in par value of the HyComp capital stock does not have any
material effect on your rights as a stockholder or on the value of your shares
of HyComp common stock. The purpose and effect of the change in par value is to
minimize the annual franchise tax payable by the Company.
Q: Will any other matters be voted on at the special meeting?
A: Any other business that properly comes before the special meeting or
any adjournment or postponement of the special meeting may also be voted on.
However, we are currently not aware of any other business.
<PAGE>
Q: Who can vote at the special meeting?
A: All stockholders of record as of the close of business on February 2,
2000.
Q: What should I do now?
A: After carefully reading and considering the information contained in
this document, please vote. You are invited to attend the special meeting.
However, you should fill out and mail your signed and dated proxy card in the
enclosed envelope as soon as possible, so that your shares will be represented
at the special meeting in case you are unable to attend.
Q: What does it mean if I receive more than one proxy or voting
instruction card?
A: It means your shares are registered differently or are held in more
than one account. Please provide voting instructions for each proxy card that
you receive in the space provided for that on each proxy card.
Q: How can I vote shares held in my broker's name?
A: If your broker holds your shares in its name (or in what is commonly
called "street name"), then you should give your broker instructions on how to
vote. You should follow the directions provided by your broker regarding how to
instruct your broker to vote your shares. Without instructions, your broker is
not entitled to vote your shares and your shares will not be voted.
Q: Can I change my vote?
A: You may change your proxy instructions at any time prior to the vote
at the special meeting. For shares held directly in your name, you may
accomplish this by completing a new proxy or by attending the special meeting
and voting in person. Attendance at the special meeting alone will not cause
your previously granted proxy to be revoked unless you vote in person. For
shares held in "street name," you may accomplish this by submitting new voting
instructions to your broker or nominee.
Q: Do I need to send in my stock certificates with my proxy?
A: No. Do not send in your HyComp stock certificates now. Your old stock
certificate will remain valid and will represent an equal number of shares of
eieiHome common stock. If you wish to exchange your HyComp stock certificate for
a new eieiHome stock certificate, then you should contact eieiHome after the
merger is completed to receive written instructions on how to exchange.
Q: What vote is required to approve the proposals?
A: The affirmative vote of stockholders entitled to exercise two thirds
of the voting power is required to approve the Reincorporation Proposal. The
affirmative vote of stockholders entitled to exercise a majority of the voting
power is required to approve the Change of Name Proposal and the Increase in
Common Stock Proposal. The affirmative vote of the holders of a majority of the
shares of common stock voting on the matter is required to adopt the 2000 Stock
Option Plan Proposal and a plurality is required for the election of directors.
Q: Will I have dissenter's rights?
A: Yes. You will be entitled to dissenter's rights under Massachusetts
law as a result of the proposed reorganization merger. See the discussion at
page 18 of this proxy statement for further details.
Q: Who can help answer any questions I have?
A: If you have any questions about the mergers, please contact Angelo G.
MacDonald, HyComp, Inc., 67 Wall Street, Suite 2411, New York, New York 10005.
<PAGE>
THE SPECIAL MEETING
Date, Time and Place of Special Meeting
The special meeting of the HyComp stockholders will be held on February
29, 2000 at 11:00 a.m. local time at the Marriott Boston Copley Square, Boston,
Massachusetts 02116.
Purpose of the Special Meeting
At the special meeting, HyComp stockholders will consider and vote
upon:
1. a proposal to change the jurisdiction of incorporation of the
Company from the Commonwealth of Massachusetts to the State of
Delaware by merging the Company with eieiHome.com Inc., a company
to be incorporated in Delaware and to be a wholly-owned subsidiary
of the Company and, in connection with the move, to adopt the
Agreement and Plan of Merger attached as Appendix A to this proxy
statement and to approve the merger and the transactions
contemplated by the Merger Agreement (we refer to this proposal as
the "Reincorporation Proposal");
2. a proposal to change the Company's name from HyComp, Inc. to
eieiHome.com Inc. (we refer to this proposal as the "Change of
Name Proposal");
3. a proposal to increase the number of shares of common stock that
the Company is authorized to issue from 20,000,000 to 75,000,000
(we refer to this proposal as the "Increase in Common Stock
Proposal");
4. a proposal to adopt the 2000 Stock Option Plan, as described in
the proxy statement and to reserve 3,000,000 shares of HyComp
common stock for issuance under the plan (we refer to this
proposal as the "2000 Stock Option Plan Proposal");
5. the re-election of the current directors of HyComp, Inc. (we refer
to this proposal as the "re-election of directors"); and
6. the transaction of any other business that may properly come
before the special meeting or any adjournment or postponement of
the special meeting.
Recommendation of the HyComp Board
Your Board of Directors has approved the Reincorporation Proposal, the
Change of Name Proposal, the Increase in Common Stock Proposal and the 2000
Stock Option Plan Proposal, believes that each is fair and in the best interests
of HyComp and the HyComp stockholders, and recommends that you vote "FOR" each
of the proposals. For more information, see the discussion concerning
"Recommendations to Stockholders" with respect to each of the proposals.
Solicitation of Proxies
The solicitation of proxies in the form enclosed is made on behalf of
the Board of Directors. The expenses of the solicitation of proxies, including
preparing, handling, printing and mailing the proxy soliciting material, will be
borne by the Company. Solicitation will be made by use of the mail and, if
necessary, by electronic telecommunications or in person. In soliciting proxies,
the Company's management may use the services of its directors, officers and
employees, who will not receive any additional compensation, but who will be
reimbursed for their out-of-pocket expenses. The Company will reimburse banks,
brokers, nominees, custodians and fiduciaries for their expenses in forwarding
copies of the proxy soliciting material to the beneficial owners of the stock
held by these persons and in requesting authority for the execution of proxies.
-3-
<PAGE>
Record Date; Quorum; Voting Rights; Proxies
Record Date
Only stockholders of record of HyComp common stock at the close of
business on the record date of February 2, 2000 are entitled to notice of and to
vote at the special meeting of stockholders or any adjournment or postponement
of the special meeting.
As of the record date, there were 18,198,770 issued and outstanding
shares of HyComp common stock held by approximately 331 holders of record, each
of which is entitled to one vote per share on any matter that properly comes
before the special meeting.
Quorum
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of HyComp common stock entitled to
vote is necessary to constitute a quorum at the special meeting.
Voting Rights
Assuming a quorum is present in person or represented by proxy at the
special meeting, the General Laws of Massachusetts and the Articles of
Incorporation of HyComp require the affirmative vote of stockholders entitled to
exercise two thirds of the voting power of HyComp to approve the Reincorporation
Proposal. The affirmative vote of stockholders entitled to exercise a majority
of the voting power of HyComp is required to approve the Change of Name Proposal
and the Increase in Common Stock Proposal. The affirmative vote of the holders
of a majority of the shares of HyComp common stock voting on the matter is
required to approve the 2000 Stock Option Plan Proposal and a plurality is
required for the election of directors.
Proxies
If you are a HyComp stockholder, you may use the accompanying proxy if
you are unable to attend the special meeting in person or wish to have your
shares voted by proxy even if you do attend the special meeting. If your broker
has been instructed to vote your shares, you must follow directions received
from your broker.
All shares of HyComp common stock represented by properly executed
proxies will, unless these proxies have been previously revoked, be voted in
accordance with the instructions indicated in the proxies. If no instructions
are indicated on the proxies, these shares of HyComp common stock will be voted
in favor of the Reincorporation Proposal, the Change of Name Proposal, the
Increase in Common Stock Proposal and the 2000 Stock Option Plan Proposal and
for the re-election of each of the Company's five current directors.
HyComp does not know of any matters that are to come before the special
meeting other than the proposals set forth in this proxy. If any other matter is
properly presented for action at the special meeting, including a motion to
adjourn the meeting to another time or place, the persons named in the enclosed
form of proxy will have the discretion to vote on that matter in accordance with
their best judgment, unless authorization is withheld by notation on the proxy.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise by written notice of revocation to the secretary of HyComp, by signing
and returning a later dated proxy, or by voting in person at the special
meeting. However, mere attendance at the special meeting will not have the
effect of revoking the proxy.
Votes cast by proxy or in person at the special meeting will be
tabulated by the election inspectors appointed for the meeting, who will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any matter submitted to the stockholders for a vote.
Accordingly, since the affirmative vote of stockholders entitled to exercise two
thirds of the voting power of HyComp is required, an abstention will constitute
a vote against the Reincorporation Proposal. Similarly, since the affirmative
vote of stockholders entitled to exercise a majority of the voting power of
HyComp is required to
-4-
<PAGE>
approve the Change of Name Proposal and the Increase in Common Stock Proposal,
an abstention will constitute a vote against these proposals. If a broker
indicates on the proxy that it does not have authority to vote some shares on a
particular matter, those shares will be counted for purposes of determining the
presence of a quorum but will not be entitled to vote on that matter and will
constitute a vote against the relevant proposal. Without instruction from the
beneficial owner, brokers will not have authority to vote shares held in "street
name" at the special meeting.
Because approval of the Reincorporation Proposal requires the affirmative
vote of the holders of two thirds of outstanding shares of HyComp common stock,
abstentions and broker non-votes will have the same effect as negative votes.
Accordingly, the HyComp Board of Directors urges HyComp stockholders to
complete, date and sign the accompanying proxy and return it promptly in the
enclosed, postage-paid envelope.
Other Information
On the record date, the directors and officers of HyComp had voting
power regarding a total of 5,151,000 shares of HyComp common stock or
approximately 27.9% of the shares of HyComp common stock then outstanding.
HyComp currently expects that its directors and officers will vote all of these
shares in favor of each of the proposals.
HyComp also currently expects that its largest stockholder, Simmonds
Capital Limited, will vote all of the shares of HyComp common stock owned by
them in favor of each of the proposals. As of the record date, Simmonds Capital
Limited owned and had the right to vote a total of 5,401,700 shares of HyComp
common stock, or approximately 29.7% of the total shares outstanding on the
record date.
The matters to be considered at the special meeting are of great
importance to the HyComp stockholders. Accordingly, HyComp stockholders are
urged to read completely and carefully consider the information presented in
this proxy statement and the attached appendices and to complete, sign, date and
promptly return the enclosed proxy in the enclosed postage pre-paid return
envelope.
INFORMATION ABOUT THE COMPANY
The principal business of HyComp, Inc. (referred to as "HyComp" or the
"Company") is conducted through its wholly owned Canadian subsidiary,
eieiHome.com Inc. (referred to as "eieiHome (Canada)"). eieiHome (Canada)
operates an Internet service, information and e-commerce web site, providing
information and related products and services for homeowners, home buyers, and
home service providers. This Internet service was introduced in two Canadian
test markets, Vancouver and Toronto, in June 1999 with the intent of expanding
to additional metropolitan markets in Canada and the United States over the next
year. The Company sells advertising space to national and local home service
providers and manufacturers of home-related products. For local and national
accounts, the Company also provides Internet web hosting, web page design, and
e-mail services.
HyComp was incorporated in the Commonwealth of Massachusetts in 1969.
Through March 31, 1999, it was a designer, manufacturer and distributor of thin
film hybrid circuits, thin film resistor networks and various thin film
components mainly used for military purposes. In March 1999, HyComp sold all of
its assets, excluding cash and receivables. The buyer assumed all liabilities
other than commercial and inter-company debt.
On October 14, 1999 HyComp acquired all of the issued and outstanding
common stock of eieiHome (Canada) from Simmonds Capital Limited (referred to as
"SCL"). eieiHome (Canada) was incorporated in June 1998 in the province of
Ontario, Canada. It operated as Chargnet until June 20,1999 when it was acquired
by SCL and its name was changed to eieiHome.com Inc. eieiHome (Canada) is in its
first stage of development and operates an Internet web site for consumers
looking for home-related information, products and services.
See "Where You Can Find More Information" for additional information on
HyComp which is incorporated by reference into this proxy statement.
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Other Information Regarding Directors and Executive Officers.
Information relating to executive compensation, various benefit plans, including
HyComp's stock option plan and stock incentive plan, certain relationships and
related transactions and other related matters as to HyComp is contained in
HyComp's Report on Form 10-SB filed with the SEC on January 19, 2000, which is
incorporated in this proxy statement by reference.
Security Ownership of Certain Beneficial Owners and Management
The following tables set forth information regarding the beneficial
ownership of HyComp, Inc.'s common stock on January 12, 2000 by each beneficial
owner of more than five percent of the common stock, each director and each
named executive officer individually and all directors and executive officers as
a group. Unless otherwise indicated, all shares are owned directly and the
indicated owner has sole voting and dispositive power regarding these shares.
(a) As of January 12, 2000 there were 18,198,770 shares of HyComp
common stock issued and outstanding. To the knowledge of the Company, the
following persons are the beneficial owners of more than five percent of the
Company's voting securities:
Title of Class Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Company common stock, Simmonds Capital Limited 8,401,700(1) 39.6%(2)
par value $0.01 580 Granite Court
Pickering, ON L1W-3Z4
CANADA
Company common stock, Paul Dutton 1,375,000 7.6%
par value $0.01 590 King St., Suite 403
Toronto, ON M5V 1M3
CANADA
Company common stock, Max Hahne 1,375,000 7.6%
par value $0.01 590 King St., Suite 403
Toronto, ON M5V 1M3
CANADA
(1) This number includes 5,401,700 shares of HyComp
common stock, the right to receive 2,000,000 shares
of HyComp common stock upon conversion of a
convertible debenture, and the exercise of warrants
to purchase 1,000,000 shares of HyComp common stock,
not all of which may be converted or exercised, as
the case may be, until after the stockholders of the
Company have approved an increase in the Company's
authorized capital stock. It is anticipated that a
meeting of stockholders will be held to consider this
matter on or before March 1, 2000. See "Certain
Relationships and Related Transactions".
(2) The beneficial ownership percent is based upon a
total of 21,198,770 shares of HyComp common stock
assuming the conversion of the debenture and the
exercise of the warrants.
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(b) As of January 12, 2000, Directors and Officers of the Company had
the following beneficial interest in the shares of HyComp common stock:
Title of Class Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Company common stock, Angelo G. MacDonald 1,000 0.01%
par value $0.01 Director and Chief Executive
Officer
124 West 60th Suite 42H
New York, NY 10023
Company common stock, David C. O'Kell 2.7%
par value $0.01 Director and Secretary 500,000
185 Glencairn Ave.
Toronto, ON M4R 1N3
CANADA
Company common stock, Paul K. Hickey 250,000(1) 1.4%
par value $0.01 Director and Chairman
888 7th Avenue
New York, NY 10106
Company common stock, Lawrence Fox 2.7%
par value $0.01 Director 500,000
212 Crystal Court
Bluebell, PA 19422
Company common stock, John G. Simmonds(2) 3.6%
par value $0.01 Director 650,000
13980 Jane St.
King City, ON L7B 1A3
CANADA
Total Directors and Officers 5,151,000 27.9%
(8_persons)
(1) This number includes options to purchase 250,000
shares of HyComp common stock at $0.013 per share.
(2) This number includes shares of HyComp common stock
held by Deborah Simmonds and shares of HyComp common
stock held in trust for Jack Simmonds.
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THE PROPOSALS
The Company's Board of Directors has unanimously approved all of the
Proposals, including the Reincorporation Proposal, the Change of Name Proposal
and the Increase in Common Stock Proposal, which, although related, will be
voted upon separately by stockholders. The first matter is the change of the
Company's state of incorporation to Delaware from Massachusetts, which will be
effected by merging the Company with and into a wholly-owned Delaware subsidiary
of the Company which would be the surviving corporation (we refer to this as the
"Merger"). The second matter is the change of the Company's name to eieiHome.com
Inc., which would be effected by retaining the name of the Delaware subsidiary
as the name of the surviving corporation or, if the Reincorporation Proposal is
not approved, by changing the name of the Company. The third matter is the
authorization of an additional 55,000,000 shares of HyComp common stock which
would be effected by retaining the capitalization of the Delaware subsidiary as
the capitalization of the surviving corporation, or by changing the
capitalization of the Company if the Reincorporation Proposal is not approved.
If sufficient stockholders approve the Reincorporation Proposal, the
Change of Name Proposal, the Increase in Preferred Stock Proposal and the
Increase in Common Stock Proposal, the Board of Directors will consummate the
Merger and adopt the Certificate of Incorporation of the Delaware subsidiary
attached as Appendix B to this proxy statement as the Certificate of
Incorporation of the surviving corporation, thereby reincorporating the Company
in Delaware, changing its name to eieiHome.com Inc. and authorizing the
additional shares of HyComp common stock. If the stockholders approve the Change
of Name Proposal and/or the Increase in Common Stock Proposal, but fail to
approve the Reincorporation Proposal, the Board of Directors will consummate the
change in the Company's name and/or capitalization by amending its Massachusetts
Articles of Organization. If sufficient stockholders approve the Reincorporation
Proposal, but fail to approve the Change of Name Proposal and/or the Increase in
Common Stock Proposal, the Board of Directors will cause the Delaware
subsidiary's Certificate of Incorporation to be amended prior to the Merger so
that the name of the surviving corporation will be HyComp, Inc. and/or its
capitalization will be that of the Company. Even if sufficient stockholders
approve the Reincorporation Proposal, the Board of Directors has reserved the
right to terminate and abandon the Merger as described below.
If the stockholders approve the 2000 Stock Option Plan Proposal, the
Board of Directors will effect such Proposal by adopting the 2000 Stock Option
Plan and reserving 3,000,000 shares of common stock of the Company for issuance
pursuant to the Plan.
PROPOSAL 1: TO CHANGE THE STATE OF INCORPORATION
FROM MASSACHUSETTS TO DELAWARE
The proposed reincorporation will be effected by the merger of the
Company into a wholly-owned Delaware subsidiary of the Company organized for
such purpose. The Delaware corporation will be the surviving corporation in the
Merger. The Reincorporation Proposal will effect a change in the legal domicile
of the Company and other changes of a legal nature, the material aspects of
which are described in this Proxy Statement. Reincorporation will NOT result in
any significant change in the Company's business, management, fiscal year,
location of principal executive offices, telephone number, net worth, assets or
liabilities and the surviving corporation will assume all of the obligations of
the Company. The directors and officers of the surviving corporation will be the
same as those of the Company.
The form of Agreement and Plan of Merger (referred to as the "Merger
Agreement") attached as Appendix A to this proxy statement providing for the
Merger has been unanimously approved by the Company's Board of Directors. You
should note that the Merger Agreement allows the Board of Directors to terminate
the Merger Agreement and abandon the Merger if for any reason the Board of
Directors determines that it is inadvisable to proceed with the Merger. The
reasons may include, but are not limited to, the number of shares for which
appraisal rights have been exercised and the cost to the Company of the
exercise. See the discussion of "Rights of Dissenting Stockholders" below.
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Principal Reasons for Changing the State of Incorporation
For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are periodically updated
and revised to meet changing business needs. As a result, many corporations
initially choose Delaware as their domicile and many others have reincorporated
in Delaware in a manner similar to that proposed by the Company. Because of
Delaware's long-standing policy of encouraging incorporation in that state, and
its consequent preeminence as the state of incorporation for many major
corporations, the Delaware courts have developed a considerable expertise in
dealing with corporate issues and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
Delaware corporations. It is anticipated that Delaware corporate law will
continue to be interpreted and explained in a number of significant court
decisions which may provide greater predictability with respect to the Company's
corporate legal affairs. Certain aspects of Delaware corporate law have,
however, been publicly criticized on the ground that they do not afford minority
stockholders the same substantive rights and protection as are available in a
number of other states. In addition, franchise taxes in Delaware will be greater
than in Massachusetts.
For a discussion of certain differences in stockholders' rights and the
powers of management under the Delaware General Corporation Law (referred to as
the "Delaware GCL") and the General Laws of Massachusetts (the "Massachusetts
GCL") see the discussions concerning "Principal Differences Between
Massachusetts and Delaware Corporation Laws" and "Changes in Certificate of
Incorporation and By-Laws" below.
In the event the Reincorporation Proposal is not approved, the Company
will remain a Massachusetts corporation.
The Merger
The discussion of the Merger and the Merger Agreement in this proxy
statement is a summary and may not contain all the information that may be
important to you. You should read carefully the entire copy of the merger
agreement, which, with the exception of schedules and exhibits, is attached as
Appendix A to this proxy statement, before you decide how to vote.
The Certificate of Incorporation of the surviving corporation is
attached to this proxy statement as Appendix B and provides for the
authorization of 75,002,000 shares of capital stock of which (i) 75,000,000
shares are common stock, par value $0.001 per share and (ii) 2,000 shares are
preferred stock, par value $0.001 per share. Pursuant to the Merger Agreement,
each outstanding share of HyComp common stock will be converted into a fully
paid and non-assessable share of common stock of the surviving corporation.
Outstanding options, warrants and debentures to purchase or convert into any
number of shares of HyComp common stock will be converted into options, warrants
or debentures to purchase or convert into the same number of shares of the
surviving corporation's common stock at the same exercise price or conversion
rate. IT WILL NOT BE NECESSARY FOR STOCKHOLDERS TO EXCHANGE THEIR EXISTING STOCK
CERTIFICATES FOR STOCK CERTIFICATES OF THE SURVIVING CORPORATION. OUTSTANDING
CERTIFICATES FOR SHARES OF COMMON STOCK OF THE COMPANY SHOULD NOT BE DESTROYED
OR SENT TO THE COMPANY.
The price per share of HyComp common stock was quoted on the NASD's OTC
Bulletin Board under the symbol "HYCP" prior to December 15, 1999 when the new
OTC Bulletin Board Eligibility Rule went into effect. This rule eliminates
listing of companies that were not previously subject to the reporting
requirements of the United States Securities and Exchange Commission (referred
to as the "SEC"). On January 19, 2000, HyComp filed a Form 10-SB registration
statement with the SEC, which will be amended following the Merger. The
Company's Board of Directors currently anticipates that the common stock of the
surviving corporation will be quoted on the NASD OTC Bulletin Board as soon as
practicable once the registration statement has been declared "effective" by the
SEC. Until the registration statement is effective, the Company's Board of
Directors anticipates that trading in shares of the common stock of the
surviving corporation will be quoted in the "pink sheets" published by the
National Quotation Bureau, Inc.
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Delivery of certificates for HyComp common stock issued prior to the
effectiveness of the Merger will constitute "good delivery" of shares in
transactions subsequent to the Merger. Certificates representing shares of the
surviving corporation's common stock will be issued with respect to transfers
consummated after the Merger. New certificates will also be issued upon the
request of any stockholder, subject to normal requirements as to proper
endorsement, signature guarantee, if required, and payment of applicable taxes.
AT THE EFFECTIVE TIME OF THE MERGER, THE COMPANY WILL BE GOVERNED BY
DELAWARE LAW, BY A NEW CERTIFICATE OF INCORPORATION AND NEW BY-LAWS, EACH OF
WHICH WILL RESULT IN CHANGES IN THE RIGHTS OF THE STOCKHOLDERS.
For additional information and details relating to these and other
changes, please refer to the Certificate of Incorporation and By-Laws for the
surviving corporation, which are attached to this proxy statement as Appendices
B and C respectively, and to the discussions in this Proxy Statement under
"Principal Reasons for Changing the State of Incorporation," "Principal
Differences Between Massachusetts and Delaware Corporation Laws" and "Changes in
Certificate of Incorporation and By-Laws." The discussion in this proxy
statement of the provisions of the surviving corporation's Certificate of
Incorporation and By-Laws are subject to, and qualified in their entirety by
reference to, all the provisions of the Certificate of Incorporation and
By-Laws, which are attached to this proxy statement as Appendices B and C,
respectively. Copies of the Articles of Organization and By-Laws of HyComp are
available for inspection at the principal office of the Company and copies will
be sent to stockholders upon request.
Closing and Effective Time of the Merger
We expect that the closing of the Merger will take place as soon as
practicable after the approval of HyComp stockholders at the special meeting
and, at the latest, in the first calendar quarter of 2000 or early in the second
calendar quarter of 2000. The Merger will become effective upon the filing of a
certificate of merger with the Secretary of State of the State of Massachusetts
or a later date as is specified in the certificate of merger. The filing of the
certificate of merger will occur as soon as practicable after the closing of the
Merger.
The Surviving Corporation
Board of Directors and Executive Officers of eieiHome Following the Merger
At the effective time of the Merger, the five current directors, and
the executive officers of HyComp will resign and will be re-appointed to serve
as the directors and executive officers of eieiHome. We list below the name, age
and position of each of the persons whom we expect will serve as a director or
executive officer of eieiHome following the merger:
Name Age Position
- ---- --- --------
Paul K. Hickey 67 Director and Chairman of the Board
Angelo G. MacDonald 41 Director and Chief Executive Officer
David C. O'Kell 48 Director and Secretary
Lawrence Fox 34 Director
John G. Simmonds 49 Director
Gary Hokkanen 43 Chief Financial Officer
For information about the experience of each of the proposed directors, see the
descriptions contained in the discussion of "Election of Directors" in this
proxy statement. For information about the experience of Gary Hokkanen, see the
information contained in the Form 10-SB filed by the Company with the SEC on
January 19,2000, a copy of which will be provided by the Company upon request
(see also "Where You Can Get More Information"). For information about the
security ownership of the proposed directors and executive officers, see the
section on "Information about the Company - Security Ownership of Certain
Beneficial Owners and Management."
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Description of the Surviving Corporation's Capital Stock
Common Stock
The surviving corporation's certificate of incorporation will authorize
it to issue up to 75,000,000 shares of common stock, par value $.001 per share.
Voting Rights
Holders of the surviving corporation common stock will be entitled to
one vote per share on all matters submitted to a vote of the stockholders
generally.
Dividend Rights
Dividends may be declared and paid on the common stock at the time and
in the amount that the Board of Directors of the surviving corporation in its
discretion will determine, subject to applicable law and the rights, if any, of
the holders of any outstanding series of preferred stock or any class or series
of stock having a preference over or the right to participate with the common
stock regarding the payment of dividends.
Liquidation Rights
Upon the dissolution, liquidation or winding up of the surviving
corporation, the holders of common stock will be entitled to receive the assets
of the corporation available for distribution to its stockholders ratably in
proportion to the number of shares held by them, subject to the rights of
holders of preferred stock or other securities having a preference over the
rights of holders of common stock regarding the dissolution, liquidation or
winding up of the surviving corporation.
Preferred Stock
The surviving corporation's Certificate of Incorporation will authorize
it to issue up to 2,000 shares of preferred stock, par value $.001 per share,
none of which will be issued and outstanding following the Merger.
Comparison of the Rights of Holders
As a consequence of the closing of the Merger, stockholders of HyComp,
a Massachusetts corporation, will become stockholders of eieiHome, a Delaware
corporation. As a result, the rights of a HyComp stockholder will change in the
following two principal ways:
o First, rights will be governed by the Certificate of
Incorporation and By-Laws of eieiHome instead of the amended
articles of incorporation and By-Laws of HyComp.
o Second, rights and the documents described above will be
governed by the DGCL, which governs Delaware corporations,
instead of the General Laws of Massachusetts, which governs
Massachusetts corporations.
The following comparison is a summary of the material differences
between the rights of HyComp stockholders and eieiHome stockholders. Because the
summary is not a complete statement of these rights, we urge you to read the
Certificate of Incorporation and By-Laws of eieiHome, which are attached to this
proxy statement as Appendices B and C, and the relevant provisions of the DGCL.
Changes in Certificate of Incorporation and By-Laws
The Certificate of Incorporation of the surviving corporation differs
from the Articles of Organization of the Company primarily as a result of
differences between the Delaware GCL and the Massachusetts GCL. The By-
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Laws of the two corporations likewise differ primarily as a result of
differences between the Delaware GCL and the Massachusetts GCL and the
Certificate of Incorporation of the surviving corporation and the Articles of
Organization of the Company. Set forth below is a discussion of certain
significant changes set forth in the Certificate of Incorporation of the
surviving corporation.
Change of Company Purposes. The purpose for which the Company was
formed as set forth in its Articles of Organization initially adopted in 1969
included purposes primarily related to the design, manufacture and distribution
of thin film hybrid circuits, thin film resistor networks and various thin film
components mainly used for military purposes. In March 1999, HyComp sold all of
its assets, excluding cash and receivables and discontinued all previous
operations. The Company is now engaged primarily in the business of its
wholly-owned Canadian subsidiary, which operates an Internet service,
information and e-commerce web site, providing information and related products
and services for homeowners, home buyers, and home service providers. Moreover,
the Company may elect to pursue other activities in the future. The surviving
corporation's Certificate of Incorporation states broadly that the Company's
purpose is to engage in any lawful activity, which is the customary purpose
clause for modern corporations.
Changes in Number and Par Value of Authorized Capital Stock. The
surviving corporation's Certificate of Incorporation authorizes the Company to
issue the same number of shares of Preferred Stock as does the Certificate of
Incorporation of the Company, but increases the number of authorized shares of
common stock from 20,000,000 to 75,000,000. The reasons for this change are
discussed in detail below as Proposal #2, the Increase in Common Stock Proposal.
The surviving corporation's Certificate of Incorporation also sets the par value
of both the common stock and the preferred stock at par value $0.001 per share
instead of the $0.01 par value per share of common stock and $100 par value per
share of preferred stock set forth in the Company's Articles of Organization.
The purpose and effect of this change is to minimize the annual franchise tax
payable by the Company.
Indemnification and Elimination of Liability. The Delaware Certificate
and the By-Laws of the Delaware Company contain indemnification provisions
requiring indemnification and advancement of expenses to directors and officers
and eliminating the personal liability of directors to the fullest extent
permitted by the Delaware GCL. The provision is parallel to the provision of the
Company's Articles of Organization eliminating the liability of directors of the
Company to the extent permitted by the Massachusetts GCL.
Principal Differences Between Massachusetts and Delaware Corporation Laws
The Merger will effect several changes in the rights of stockholders as
a result of differences between the Massachusetts GCL and the Delaware GCL. The
provisions of the Massachusetts GCL and Delaware GCL differ in many respects.
Summarized below are certain of the principal differences which could materially
affect the rights of stockholders. The following discussion summarizes the more
important differences in the corporation laws of Delaware and Massachusetts and
does not purport to be an exhaustive discussion of all of the differences. Such
differences can only be determined in full by reference to the Massachusetts
General Laws and to the Delaware General Corporation Law and to the case law
interpreting these statutes. In addition, both Massachusetts and Delaware law
provide that many of the statutory provisions, as they affect various rights of
holders of shares, may be modified by provisions in the charter or By-Laws of
the corporation.
Exculpation of Directors. Under Massachusetts law, a corporation's
Articles of Organization may limit the personal liability of its directors for
breaches of their fiduciary duties. This limitation is generally unavailable for
acts or omissions by a director that (i) were in violation of such director's
duty of loyalty, (ii) were in bad faith or that involved intentional misconduct
or a knowing violation of law or (iii) involved a financial profit or other
advantage to which the director was not legally entitled. Massachusetts law also
prohibits the elimination or limitation of director liability for unauthorized
loans to insiders or distributions that occur when a corporation is, or that
render a corporation, insolvent.
Delaware law permits a corporation to provide in its Certificate of
Incorporation that a director shall not be personally liable for monetary
damages stemming from breaches of fiduciary duties. Under Delaware law, a
charter provision limiting directorial liability cannot relieve a director of
personal liability for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
that involve
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intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or unlawful repurchases or redemptions of stock or (iv) any
transactions from which the director derived an improper personal benefit.
The Certificate of Incorporation of the surviving corporation provide
for limitations on director's liability to the fullest extent permitted by
Delaware law.
Indemnification of Directors, Officers and Others. Delaware law
generally permits indemnification of officers, directors, employees and agents
of a Delaware corporation against expenses (including attorneys' fees) incurred
in connection with a derivative action and against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements incurred in
connection with a third party action, provided there is a determination by a
majority vote of disinterested directors or by a committee of such directors
designated by a majority vote of such directors, even though less than a quorum,
or, if there are no such directors, or if such directors so direct, by
independent legal counsel or by the stockholders that the person seeking
indemnification acted in good faith and in a manner reasonably believed to be
in, or not opposed to, the best interests of the corporation (and, with respect
to any third party criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful). However, when the individual being
indemnified has successfully defended the action on the merits or otherwise,
Delaware law requires indemnification. In addition, without court approval no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable to the corporation. Finally, Delaware law, unlike
Massachusetts law, does not permit a corporation to indemnify persons against
judgments in actions brought by or in the right of the corporation (although it
does permit indemnification in such situations if approved by the Delaware Court
of Chancery and for expenses of such actions).
Massachusetts law similarly permits indemnification of expenses in a
derivative or third party action, except that no indemnification shall be
provided for any person with respect to any matter as to which he shall have
been adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the corporation or, to the extent that
such matter relates to service with respect to any employee benefit plan, in the
best interests of the participants or beneficiaries of such benefit plan. Such
indemnification is permitted to the extent authorized in the corporation's
Articles of Organization or its By-Laws or as set forth in a stockholders' vote.
Expenses incurred by an officer or director in defending an action may
be paid in advance under Delaware and Massachusetts law if such director or
officer undertakes to repay such amounts should it be determined ultimately that
he is not entitled to indemnification. Delaware law also permits the advancement
of expenses to employees and agents of the corporation without such an
undertaking to repay such amounts. In addition, both Delaware and Massachusetts
law permit a corporation to purchase indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
The SEC has expressed its position that the indemnification of
directors, officers and controlling persons against liabilities arising under
the Securities Act, is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
The indemnification and limitation of liability provisions of
Massachusetts law, and not Delaware law, will apply to actions of the Company's
directors, officers, employees and agents taken prior to its merger into the
surviving corporation.
The By-Laws of the Company provide for indemnification. The By-Laws
also add that that in the event of a compromise or settlement, no
indemnification shall be provided if it is determined by a majority of the
disinterested directors then in office, or in their absence or at the request of
a majority of them, by the holders of a majority of the outstanding stock
entitled to vote for directors, voting as a single class, exclusive of any stock
owned by any interested person, that the person entitled to indemnification did
not act in good faith in the reasonable belief that his action was in the best
interest of the corporation. In lieu of the above, the corporation may deny
indemnification upon such a finding by independent legal counsel, if there has
been obtained, at the request of a majority of the directors then in office,
such an opinion in writing.
The Certificate of Incorporation of the surviving corporation provides
for indemnification to the fullest extent possible under Delaware law. The
By-Laws of the surviving corporation provide for indemnification. The
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By-Laws also add that, anything in the By-Laws notwithstanding, no elimination
of this bylaw, and no amendment of this bylaw adversely affecting the right of
any person entitled to indemnification shall be effective until the 60th day
following notice to such person of such action, and shall not thereafter deprive
any person of his or her rights arising our of alleged occurrences prior to such
60th day.
Approval of Business Combinations and Asset Sales: State Law.
Massachusetts law generally requires approval of mergers and consolidations and
sales, mortgages, leases or exchanges of all or substantially all of a
corporation's property by a vote of two-thirds of the shares of each class of
stock outstanding and entitled to vote thereon, except that (i) the Articles of
Organization may provide for a vote of a lesser proportion but not less than a
majority of each such class and (ii) unless required by the corporation's
articles of organization, an agreement providing for a merger need not be
submitted to the stockholders of a corporation surviving a merger but may be
approved by vote of its directors if (a) the agreement of merger does not change
the name, the amount of shares authorized of any class of stock or other
provisions of the Articles of Organization of such corporation, (b) the
authorized unissued shares or shares held in the treasury of such corporation of
any class of stock of such corporation to be issued or delivered pursuant to the
agreement of merger do not exceed 15% of the shares of such corporation of the
same class outstanding immediately prior to the effective date of the merger,
and (c) the issue by vote of the directors of any unissued stock to be issued
pursuant to the agreement of merger has been authorized in accordance with the
provision of Massachusetts law governing the issue of authorized but unissued
capital stock.
Delaware law generally requires that mergers and consolidations, and
sales, leases or exchanges of all or substantially all of a corporation's
property and assets, be approved both by the directors and by a vote of the
holders of a majority of the outstanding stock entitled to vote, though a
corporation's Certificate of Incorporation may require a greater-than-majority
vote. The Certificate of Incorporation of the surviving corporation will not so
provide. Under Delaware law, a corporation that is the surviving corporation in
a merger need not have stockholder approval for the merger if (i) each share of
the surviving corporation's stock outstanding prior to the merger remains
outstanding in identical form after the merger, (ii) there is no amendment to
its Certificate of Incorporation and (iii) the consideration going to
stockholders of the non-surviving corporation is not common stock (or securities
convertible into common stock) of the surviving corporation or, if it is such
stock or securities convertible into such stock, the aggregate number of shares
of common stock actually issued or delivered, or initially issuable upon
conversion, does not exceed 20% of the shares of the surviving corporation's
common stock outstanding immediately prior to the effective date of the merger.
Action By Consent of Stockholders. Under Massachusetts law, any action
to be taken by stockholders may be taken without a meeting only if all
stockholders entitled to vote on the matter consent to the action in writing,
and a corporation may not provide otherwise in its charter documents or By-Laws.
Under Delaware law and the surviving corporation's By-Laws, any action to be
taken by the stockholders may be taken without a meeting, without prior notice
and without a vote, if the stockholders having the number of votes that would be
necessary to take such action at a meeting at which all of the stockholders were
present and voted consent to the action in writing.
Dissenters' Rights. Under Massachusetts law, unless a vote of the
stockholders was not required to approve the action, dissenting stockholders who
follow prescribed statutory procedures are entitled to receive the appraised
value of their shares in connection with any merger or sale of substantially all
the assets of a corporation and in connection with certain mergers,
reclassifications and other transactions which may adversely affect the rights
or preferences of stockholders. There will be such dissenters' rights for the
merger pursuant to this Reincorporation Proposal. See "Rights of Dissenting
Stockholders" below.
Delaware law provides similar rights in the case of a merger or
consolidation of a corporation except that such rights are not provided when a
corporation will survive the merger or consolidation and no vote of its
stockholders is required to approve the merger. Also, such rights are not
provided as to shares of a corporation listed on a national securities exchange,
designated as a national market system security on an inter-dealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders where such stockholders are required to accept
in such a merger only (i) shares of the surviving or resulting corporation, (ii)
shares of a corporation listed on a national securities exchange or held of
record by more than 2,000 holders, (iii) cash in lieu of fractional shares, or
(iv) any combination thereof. Delaware law does not provide dissenters' rights
in connection with sales of substantially all of the assets of a corporation,
reclassifications of stock or other amendments to the Certificate of
Incorporation which adversely affect a class of stock; provided, however,
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that a corporation may provide in its Certificate of Incorporation that
appraisal rights shall be available as a result of an amendment to its
Certificate of Incorporation, a merger or a sale of all or substantially all of
its assets. The surviving corporation's Certificate of Incorporation, however,
does not provide for the appraisal rights described in the preceding sentence.
Interested Director Transactions. Delaware law provides that no
transaction between a corporation and a director or officer or any entity in
which any of them have an interest, is void or voidable solely for that reason,
solely because the director or officer is present at or participates in the
meeting of the board or committee which authorizes the contract or transaction,
or solely because his or their votes are counted for such purpose if (i) after
full disclosure of the material facts as to the interested director's or
officer's relationship or interest and as to the transaction, the transaction is
approved in good faith by the disinterested directors, which may be less than a
quorum, or the stockholders or (ii) the transaction is fair to the corporation
at the time it is approved. Delaware law also permits interested directors to be
counted in determining the presence of a quorum at a meeting of the board or of
a committee that authorizes an interested director or officer transaction.
Massachusetts law contains no provision comparable to that of Delaware,
expressly providing only that directors who vote for and officers who knowingly
participate in loans to officers or directors are jointly and severally liable
to the corporation for any part of the loan which is not repaid, unless (i) a
majority of the directors who are not direct or indirect recipients of such
loans or (ii) the holders of a majority of the shares entitled to vote for such
directors, have approved or ratified the loan as one which in the judgment of
such directors or stockholders, as the case may be, may reasonably be expected
to benefit the corporation.
Anti-Takeover Statutes. Business Combination Statutes. Delaware's
"business combination" statute is substantially similar to its Massachusetts
counterpart. However, whereas Delaware law provides that, if a person acquires
15% or more of the stock of a Delaware corporation without the approval of the
board of directors of that corporation, such person may not engage in certain
transactions with the corporation for a period of three years, in Massachusetts,
the threshold is only 5%, with certain persons being excluded. Both the Delaware
and Massachusetts statutes include certain exceptions to this prohibition. If,
for example, the board of directors approves the stock acquisition or the
transaction prior to the time that the person becomes an interested stockholder,
or if the interested stockholder acquires 85% (under the Delaware statute) or
90% (under the Massachusetts statute) of the voting stock of the corporation
(excluding voting stock owned by directors who are also officers and by certain
employee stock plans) in one transaction, or if the transaction is approved by
the board of directors and by the affirmative vote of two-thirds of the
outstanding voting stock that is not owned by the interested stockholder, then
the prohibition on business combinations is not applicable.
Massachusetts Control Share Acquisition Statute. Under the
Massachusetts Control Share Acquisition statute for Massachusetts corporations,
a person who acquires beneficial ownership of shares of stock of a corporation
in a threshold amount equal to or greater than one-fifth, one-third, or a
majority of the voting stock of the corporation (a "control share acquisition")
must obtain the approval of a majority of shares entitled to vote generally in
the election of directors (excluding (i) any shares owned by such person
acquiring or proposing to acquire beneficial ownership of shares in a control
share acquisition, (ii) any shares owned by any officer of the corporation and
(iii) any shares owned by any employee of the corporation who is also a director
of the corporation) in order to vote the shares that such person acquires in
crossing the foregoing thresholds. The statute does not require that such person
consummate the purchase before the stockholder vote is taken. Certain
transactions are excluded from the definition of "control share acquisition,"
including shares acquired pursuant to a tender offer, merger or consolidation if
the transaction is pursuant to an agreement of merger or consolidation to which
the corporation issuing the shares is a party.
The Massachusetts Control Share Acquisition statute permits, to the
extent authorized by a corporation's Articles of Organization or By-Laws,
redemption of all shares acquired by an acquiring person in a control share
acquisition for fair value (which is to be determined in accordance with
procedures adopted by the corporation) if (i) no control acquisition statement
is delivered by the acquiring person or (ii) a control share acquisition
statement has been delivered and voting rights were not authorized for such
shares by the stockholders in accordance with applicable law. The Massachusetts
Control Share Acquisition statute permits a Massachusetts corporation to elect
not to be governed by the statute's provisions, by including a provision in the
corporation's Articles of Organization or By-Laws pursuant to which the
corporation opts out of the statute.
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Dividends and Stock Repurchases. Under Massachusetts law, the directors
of a corporation will be jointly and severally liable if a payment of dividends
or a repurchase of a corporation's stock is (i) made when the corporation is
insolvent, (ii) renders the corporation insolvent or (iii) violates the
corporation's Articles of Organization. Stockholders to whom a corporation makes
any distribution (except a distribution of stock of the corporation) if the
corporation is, or is thereby rendered, insolvent, are liable to the corporation
for the amount of such distribution made, or for the amount of such distribution
that exceeds that which could have been made without rendering the corporation
insolvent, but in either event only to the extent of the amount paid or
distribution to them, respectively. In such event, a stockholder who pays more
than such holder's proportionate share of such distribution or excess shall have
a claim for contribution against the other stockholders.
Under Delaware law, the directors of a corporation are jointly and
severally liable for negligently or willfully making improper dividend payments,
stock repurchases or redemptions. Directors held to be liable pursuant to this
provision of Delaware law are entitled to be subrogated to the rights of the
corporation against stockholders receiving dividends on, or assets for the sale
or redemption of, their stock with knowledge that such dividend, repurchase or
redemption was unlawful. Under Delaware law, a corporation generally is
permitted to declare and pay dividends out of surplus or out of net profits for
the current and/or preceding fiscal year, provided that the capital of the
corporation is not less than the aggregate amount of capital represented by the
issued and outstanding stock of all classes having a preference upon the
distribution of assets. For purposes of declaring and paying dividends, the
board of directors of a Delaware corporation may increase the corporation's
surplus pursuant to a revaluation thereto in accordance with Delaware law. In
addition, a corporation may generally redeem or repurchase shares of its stock
if the capital of the corporation is not impaired and if such redemption or
repurchase will not impair the capital of the corporation.
Inspection Rights. Inspection rights under Delaware law are more
extensive than under Massachusetts law. Under Massachusetts law, a corporation's
stockholders have a right to inspect only the corporation's charter, By-Laws,
records of all meetings of incorporators and stockholders and transfer records.
Under Delaware law, stockholders, upon the demonstration of a proper purpose,
have the right to inspect a corporation's stock ledger, stockholder lists and
other books and records.
Annual Meeting of Stockholders. Under Massachusetts law, the notice of
the annual meeting must contain the purpose of the meeting, while the purpose of
the annual meeting need not be included in the notice of the annual meeting
under Delaware law. The By-Laws of the Company require that the notice of the
annual meeting be given at least seven days before the meeting, while the
surviving corporation's By-Laws require that such notice be given at least ten
days before the annual meeting.
Special Meetings of Stockholders. A special meeting of stockholders of
a Massachusetts corporation with a class of voting stock registered under the
Securities Exchange Act of 1934, as amended, may be called by the holders of
shares entitled to cast not less than 40% of the votes at the meeting.
Stockholders of a Delaware corporation do not have a right to call special
meetings unless it is conferred in the corporation's Certificate of
Incorporation or By-Laws. The surviving corporation's By-Laws permit a special
meeting of the stockholders to be called at any time by the board of directors
or the President.
Proxies. Massachusetts law permits the authorization by a stockholder
to vote by proxy to be valid for no more than six months. Delaware law permits a
proxy to be valid for up to three years unless the proxy provides for a longer
period.
Classified Board. Massachusetts law requires, unless a corporation
chooses otherwise, and Delaware law permits, but does not require, a board of
directors to be divided into classes with each class having a term of office
longer than one year. Massachusetts law limits the term of directors on a
classified board to five (5) years. The Company has not historically had a
classified board and the surviving corporation does not currently intend to have
a classified board.
Removal of Directors. Under Massachusetts law, any director or the
entire board of directors may be removed, except as otherwise provided in the
Articles of Organization or By-Laws, with or without cause, by the holders of a
majority of the shares entitled to vote at an election of directors, except that
directors of a class elected by a particular
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class of stockholders may be removed only by the vote of a majority of the
shares of the particular class of stockholders entitled to vote for the election
of such directors. In addition, a director may be removed for cause by a vote of
the majority of the directors then in office. Massachusetts law and the
Company's By-Laws add that a director may be removed for cause only after
receiving reasonable notice and being given opportunity to be heard before the
body proposing to remove him or her.
Under Delaware law, a director serving on a board which is not
classified may be removed with or without cause by a majority of the outstanding
shares entitled to vote at an election of directors. In the case of a Delaware
corporation whose board is classified, holders of a majority of the outstanding
shares entitled to vote at an election of directors may effect such removal only
for cause unless the Certificate of Incorporation otherwise provides. The
surviving corporation will not have a classified Board of Directors. The By-Laws
of the surviving corporation state that stockholders can remove directors with
or without cause.
Change in Number of Directors. Under Massachusetts law, the number of
directors is determined in the manner provided in the corporation's By-Laws. The
board of directors may be enlarged by the stockholders or, if authorized by the
By-Laws, by vote of a majority of directors. The Company's By-Laws fix the
number of directors at not less than three nor more than nine. The number of
Directors of the Company is currently fixed at five.
Under Delaware law, the number of directors shall be fixed by or in the
manner provided in the By-Laws unless the number of directors is fixed in the
corporation's Certificate of Incorporation. The By-Laws of the surviving
corporation require that it have one or more directors, the number of which
shall be determined from time to time by the directors. Upon the consummation of
its merger with the Company, the surviving corporation will have five directors.
Filling Vacancies on the Board of Directors. Under Massachusetts law,
unless the Articles of Organization provide otherwise, any vacancy in the board
of directors, however occurring, including a vacancy resulting from enlargement
of the board and any vacancy in any other office, may be filled in the manner
prescribed in the By-Laws, or, in the absence of any such provision in the
By-Laws, by the directors. The Company's By-Laws state that by any vacancy in
the board of directors, other than a vacancy resulting from the enlargement of
the board of directors, may be filled the stockholder or, in the absence of
stockholders action, by the directors.
Under Delaware law, vacancies and newly created directorships may be
filled by a majority of directors then in office, unless otherwise provided in
the corporation's Certificate of Incorporation or By-Laws, provided that if, at
the time of filling any vacancy or newly created directorship, the directors
then in office constitute less than a majority of the entire board as
constituted immediately prior to any increase, the Delaware Court of Chancery
may, upon application of any stockholder or stockholders holding at least 10% of
the total number of shares at the time outstanding having the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships or to replace the directors chosen by
the directors then in office. The By-Laws of the surviving corporation state
that any vacancy may be filled for the balance of the term by a majority of the
directors then in office (even if they constitute less than a quorum) or by a
sole remaining director, or if the board of directors has not filled such
vacancy, by the stockholders.
Charter Amendments. Under Massachusetts law, a majority vote of each
class of stock outstanding and entitled to vote thereon is required to authorize
an amendment of the Articles of Organization effecting one or more of the
following: (i) an increase or reduction of the capital stock of any authorized
class; (ii) a change in the par value of authorized shares with par value, or
any class thereof; (iii) a change of authorized shares (or any class thereof)
from shares with par value to shares without par value, or from shares without
par value to shares with par value; (iv) certain changes in the number of
authorized shares (or any class thereof); or (v) a corporate name change.
Subject to certain conditions, a two-thirds vote of each class of stock
outstanding and entitled to vote thereon is required to authorize any other
amendment of the Articles of Organization, or, if the Articles of Organization
so provide for a vote of a lesser proportion but not less than a majority of
each class of stock outstanding and entitled to vote thereon. If any amendment
requiring a two-thirds vote would adversely affect the rights of any class or
series of stock a two-thirds vote of such class voting separately, or a
two-thirds vote of such series, voting together with any other series of the
same class adversely affected in the same manner, is also necessary to authorize
such amendment.
Under Delaware law, charter amendments require the approval of the
board of directors and both a general vote of a majority of all outstanding
shares entitled to vote thereon, and a class vote of a majority of outstanding
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shares of each class entitled to vote as a class. In addition, Delaware law
requires a class vote when, among other things, an amendment will adversely
affect the powers, preferences or special rights of a particular class of stock.
Under Delaware law, a provision in a corporation's Certificate of Incorporation
requiring a supermajority vote of the Board of Directors or stockholders may be
amended only by such supermajority vote. The Articles of Incorporation of the
surviving corporation state that the corporation reserves all rights to repeal
in any manner now or hereafter prescribed by statute.
Amendments to By-Laws. Both Delaware and Massachusetts law provide that
stockholders may amend a corporation's By-Laws and, if so provided in its
charter, the board of directors may also have this power. Under Delaware law,
the power to adopt, amend or repeal By-Laws lies in the stockholders entitled to
vote; provided, however, that any corporation may, in its Certificate of
Incorporation, confer the power to adopt, amend or repeal By-Laws upon the
directors. Under Massachusetts law, the power to make, amend or repeal By-Laws
also lies in the stockholders entitled to vote; provided, that the directors may
also make, amend or repeal the By-Laws, except with respect to any provision
which the Articles of Organization or the By-Laws requires action by the
stockholders. Under the Articles of Organization of the Company the directors
are granted the power to amend or repeal the By-Laws, except with respect to any
provision thereof which by-law or the by-laws requires the action of the
stockholders. Under the Certificate of Incorporation of the surviving
corporation, the directors are granted the power to amend the By-Laws, subject
to the power of the stockholders to alter or repeal the By-Laws made or altered
by the board of directors. The By-Laws of the surviving corporation state that
the board of directors may make, alter or repeal the By-Laws, subject to the
power of the stockholders to repeal the By-Laws made or altered by the board of
directors.
Voting Requirements and Quorums for Stockholder Meetings. Under
Massachusetts law, unless the Articles of Organization or By-Laws provide
otherwise, a majority of the issued and outstanding stock entitled to vote at
any meeting constitutes a quorum. Except for the election of directors and other
fundamental matters, Massachusetts law does not prescribe the percentage vote
required for stockholder action.
Under the By-Laws of the Company, a majority of the shares entitled to
vote constitutes a quorum for the transaction of business. The Company's By-Laws
provide that (except where a larger vote is required by law, the Articles of
Organization of the Company or the By-Laws of the Company) action of the
stockholders on any matter properly brought before a meeting requires, and may
be effected by, the affirmative vote of the holders of a majority of the shares
of stock present or represented and entitled to vote and voting on such matter.
Under Delaware law, a majority of the issued and outstanding stock
entitled to vote at any meeting of stockholders shall constitute a quorum for
the transaction of business at such meeting, unless the Certificate of
Incorporation or By-Laws specify a different percentage, but in no event may a
quorum consist of less than one-third of the shares entitled to vote at the
meeting. Under Delaware law, the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter is deemed to be the
act of the stockholders, unless Delaware law, the Certificate of Incorporation
or the By-Laws specify a different voting requirement.
The By-Laws of the surviving corporation provide that, except as
otherwise provided by law or in the Certificate of Incorporation, the holders of
one third of the shares entitled to vote at a meeting of the shareholders shall
constitute a quorum for the transaction of business. The By-Laws of the
surviving corporation provide that when a quorum is present, action on a matter
is approved by the affirmative vote of a majority of the total vote cast, unless
the Certificate of Incorporation of the surviving corporation or Delaware law
requires a higher percentage of affirmative votes.
Rights of Dissenting Stockholders
Because the Company will not be technically the "surviving
corporation," stockholders of the Company who do not vote in favor of the
Reincorporation Proposal may have the right to seek to obtain payment in cash of
the fair value of their shares by complying with the requirements of Sections 86
through 98, inclusive, of Chapter 156B of the General Laws of Massachusetts.
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The following summary of the rights of dissenting stockholders is
qualified in its entirety by reference to the provisions of Sections 86 through
98, inclusive, of Chapter 156B of the General Laws of Massachusetts, a copy of
which is attached hereto as Appendix E.
Any stockholder (i) who files with the Company before the taking of the
vote on the approval of the Reincorporation Proposal written objection to the
proposed action stating that such stockholder intends to demand payment for such
stockholder's shares if the action is taken, and (ii) whose shares are not voted
in favor of such action, has or may have the right to demand in writing from the
surviving corporation within 20 days after the date of mailing to such
stockholder of notice in writing that the corporate action has become effective,
payment for his shares and an appraisal of the value thereof. The surviving
corporation and any such stockholder shall in such case have the rights and
duties and shall follow the procedure set forth in Sections 88 to 98, inclusive,
of Chapter 156B of the General Laws of Massachusetts.
A stockholder intending to exercise his dissenter's right to receive
payment for such stockholder's shares must file with the Company written
objection to the Reincorporation Proposal before the taking of the vote by the
stockholders on such Proposal and must not vote in favor of the Reincorporation
Proposal at the Special Meeting. A stockholder's failure to vote against the
Reincorporation Proposal will not constitute a waiver of such stockholder's
appraisal rights with respect to the Reincorporation Proposal, provided that
such stockholder does not vote in favor of the Reincorporation Proposal; and
provided, further, that a vote against the Reincorporation Proposal without the
filing of a written objection with the Company as described above will not be
deemed to satisfy notice requirements under Massachusetts law with respect to
appraisal rights. The written objection must state that the stockholder intends
to demand payment for such stockholder's shares if the Reincorporation Proposal
is consummated. Within 10 days after the reincorporation becomes effective, the
surviving corporation will give written notice of the effectiveness by
registered or certified mail to each stockholder who filed a written objection
and who did not vote in favor of the Reincorporation Proposal. Within 20 days
after the mailing of that notice, any stockholder to whom the surviving
corporation was required to give that notice may make written demand for payment
for such stockholder's shares from the surviving corporation and the surviving
corporation will be required to pay to such stockholder the fair market value of
such stockholder's shares within 30 days after the expiration of the 20-day
period.
If during the 30-day period the surviving corporation and the
dissenting stockholder do not agree as to the fair value of the shares, the
surviving corporation or the stockholder may, within four months after the end
of the 30-day period, have the fair value of stock of all dissenting
stockholders determined by judicial proceedings by filing a bill in equity in
the Superior Court in Middlesex County, Massachusetts. For the purposes of the
Superior Court's determination, the value of the shares of the Company would be
determined as of the date preceding the date of the vote of the stockholders
approving the Reincorporation Proposal and would be exclusive of any element of
value arising from the expectation or accomplishment of the reincorporation.
Upon making written demand for payment, the dissenting stockholder will not
thereafter be entitled to notices of meetings of stockholders, to vote, or to
dividends unless (i) no suit is filed within four months to determine the value
of the stock, (ii) any suit is dismissed as to that stockholder, or (iii) the
stockholder, with the written approval of the surviving corporation, withdraws
the objection in writing.
The enforcement by an objecting stockholder of his appraisal rights as
set forth in Sections 85 through 98, inclusive, of Chapter 156B of the
Massachusetts General Laws shall be an exclusive remedy except for the right of
any such objecting stockholder to bring or maintain an appropriate proceeding to
obtain relief on the ground that the merger will be or is illegal or fraudulent
as to such objecting stockholder.
The provisions of Sections 85 through 98 of Chapter 156B of the
Massachusetts General Laws are technical in nature and are complex. Any
stockholder desiring to exercise his appraisal rights should consult legal
counsel for assistance since the failure to comply strictly with the provisions
may nullify such appraisal rights.
The foregoing does not purport to be a complete statement of the
provisions of Sections 85 through 98 of Chapter 156B of the Massachusetts
General Laws and is qualified in its entirety by reference to the Sections of
Chapter 156B.
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Because the Reincorporation Proposal does not involve any change in the
nature of the Company's business but is a technical matter only, the Board of
Directors hopes that no stockholder will exercise a dissenter's right. Under the
Merger Agreement, the Board of Directors may abandon the Merger, even after
stockholder approval, if for any reason the Board of Directors determines that
it is inadvisable to proceed with the Merger, including considering the number
of shares for which appraisal rights have been exercised and the cost to the
Company of the exercise. THE BOARD OF DIRECTORS CURRENTLY INTENDS TO ABANDON THE
MERGER IN THE EVENT THAT ITS CONSUMMATION WOULD RESULT IN STOCKHOLDERS
REPRESENTING MORE THAN A NOMINAL NUMBER OF SHARES BEING ENTITLED TO APPRAISAL
RIGHTS.
Material United States Federal Income Tax Consequences
The following discussion summarizes the material United States federal
income tax consequences of the Merger to HyComp and the shareholders of HyComp.
The discussion deals only with shareholders that hold shares of HyComp's common
stock as capital assets, which generally means property held for investment. The
discussion does not address all aspects of federal income taxation that may be
relevant to particular shareholders in light of their personal circumstances or
to some types of shareholders who are subject to special treatment under the
federal income tax laws, including some financial institutions, broker dealers,
insurance companies, tax-exempt organizations, foreign persons and persons
acquiring shares of HyComp's common stock pursuant to the exercise of employee
stock options or otherwise as compensation. In addition, the discussion does not
address any state, local or foreign tax consequences of any aspect of the
mergers. The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), applicable Treasury regulations promulgated under the
Code, judicial decisions and current administrative pronouncements, all as in
effect as of the date of this proxy statement-prospectus, and which may change
at any time, potentially with retroactive effect. No ruling from the Internal
Revenue Service will be applied for with respect to the federal income tax
consequences discussed in this proxy statement-prospectus and, accordingly,
there can be no assurance that the Internal Revenue Service will agree with the
conclusions stated in this proxy statement-prospectus.
Although this discussion summarizes all material U.S. federal income
tax considerations generally applicable to shareholders of HyComp as a
consequence of the Merger, the discussion does not address every U.S. federal
income tax concern that may be applicable to a particular holder of HyComp
common stock in light of such holder's particular circumstances. All
shareholders are urged to consult their own tax advisors as to the particular
tax consequences to them of the mergers, including the applicable federal,
state, local and foreign tax consequences.
Characterization of the Merger for United States Federal Income Tax Purposes
The Merger Agreement contemplates a transaction that is intended to
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986. The material federal income tax consequences of
the characterization of the Merger as a tax-free reorganization are as follows:
Tax Consequences to the HyComp Shareholders
Holders of HyComp common stock who do not exercise their dissenters'
rights will not recognize gain or loss for United States federal income tax
purposes as a result of the Merger and the conversion of their shares into
shares of the surviving corporation. The basis of the shares of the surviving
corporation in the hands of each stockholder will be the same as the basis of
the holder's shares of HyComp, and the holding period for the shares of the
surviving corporation will include the holding period for shares of HyComp.
HyComp shareholders who exercise dissenters' rights under applicable
state law will recognize gain or loss equal to the difference between the
proceeds received and the shareholders' stock bases. Such gain or loss will be
long-term capital gain or loss if the shares of HyComp were held for more than
one year, and if recognized by individual shareholders will be subject to a
maximum federal income tax rate of 20%. There are limitations on the
deductibility of capital losses.
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Tax Consequences to HyComp and the Surviving Corporation
Neither HyComp nor the surviving corporation will recognize any gain or
loss as a result of the Merger.
Information Reporting Requirements and Backup Withholding Tax
Under circumstances specified by the IRS, U.S. persons, as defined
under Section 7701 of the Code, may be subject to backup withholding at a rate
of 31% on payments made with respect to, or cash proceeds of a sale or exchange
of a capital asset. Backup withholding will apply only if the holder:
1. fails to furnish his or her taxpayer identification number
("TIN") which, for an individual, would be his or her Social
Security Number;
2. furnishes an incorrect TIN;
3. is notified by the IRS that he or she has failed properly to
report payments of interest and dividends or is otherwise
subject to backup withholding; or
4. under circumstances specified by the IRS, fails to certify,
under penalties of perjury, that he or she has furnishes a
correct TIN and (i) that he or she has not been notified by
the IRS that he or she is subject to backup withholding for
failure to report interest and dividend payments; or (ii) that
he or she has been notified by the IRS that he or she is no
longer subject to backup withholding. Backup withholding will
not apply with respect to payments made to recipients that are
exempt from such withholding, such as corporations and
tax-exempt organizations.
U.S. persons should consult their own tax advisors regarding their
qualifications for exemption from backup withholding and the procedure for
obtaining such an exemption. Backup withholding is not an additional tax.
Rather, the amount of any backup withholding with respect to a payment to a U.S.
person will be allowed as a credit against the U.S. person's United States
federal income tax liability and may entitle the U.S. person to a refund.
provided that the required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and
backup withholding for HyComp shareholders that are not U.S. persons. Non-U.S.
persons should consult their own tax advisors with regard to U.S. information
reporting and backup withholding.
Shareholders Should Seek Their Own Tax Advice
The preceding summary describes the material federal income tax
considerations potentially affecting HyComp shareholders and HyComp. This
discussion is based on the current state of the law, which is subject to
legislative, administrative or judicial actions, which may apply retroactively.
Moreover, as noted in the beginning of this section, the discussion does not
address considerations that may adversely affect the treatment of some
shareholders. All shareholders are urged to consult their own tax advisors as to
the particular tax consequences to them of the mergers.
Vote Required for Approval of the Reincorporation Proposal
Approval of the Reincorporation Proposal will require the affirmative
vote of the holders of two-thirds of the outstanding shares of common stock of
HyComp entitled to vote at the Special Meeting. Proxies solicited by the Board
of Directors will be voted for the Reincorporation Proposal, unless stockholders
specify otherwise.
The Board of Directors unanimously recommends that stockholders vote
FOR the Reincorporation Proposal.
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PROPOSAL 2: TO APPROVE THE CHANGE IN THE COMPANY'S NAME TO
EIEIHOME.COM INC.
In January 1995, the Board of Directors adopted, subject to stockholder
approval, an amendment of the Company's Articles of Organization to change the
name of the Company to "eieiHome.com Inc." The current name of the Company is
HyComp, Inc.
The Company was incorporated under the name HyComp, Inc. in 1969. As
the Company has discontinued its prior business and entered a new business, the
Board of Directors believe it is appropriate to change the Company's name to
identify it with its principal business, the operation of the eieiHome.com
Internet web site.
There will be relatively little cost associated with the name change.
Virtually no advertising will be required, for example, because the Company's
operations are already conducted under the name of its wholly-owned Canadian
subsidiary, also named eieiHome.com Inc.
If the Change of Name Proposal is adopted by the Company's
stockholders, such proposal will become effective on the date the Merger is
effected if the Reincorporation Proposal is approved by the Company's
stockholders, and on the date an amendment to the Company's Articles of
Organization is filed in Massachusetts, the Company's state of incorporation, if
the Reincorporation Proposal is not approved.
Vote Required For Approval of the Change of Name Proposal
Approval of the Change of Name Proposal requires the affirmative vote
of the holders of a majority of the outstanding shares of HyComp common stock
entitled to vote at the Special Meeting. Proxies solicited by the Board of
Directors will be voted for the Change of Name Proposal, unless stockholders
specify otherwise.
The Board of Directors unanimously recommends a vote FOR the change in
the Company's name.
PROPOSAL 3: TO INCREASE THE AUTHORIZED COMMON STOCK OF THE
COMPANY BY 55,000,000 SHARES
The Company's Articles of Organization currently authorizes the Company
to issue up to 20,000,000 shares of common stock. The Company currently has
issued and outstanding 18,198,770 shares of common stock and has reserved an
additional 750,000 shares of common stock for issuance upon exercise of options
authorized for issuance under the Company's stock option plans.
In addition, as part of the consideration for the Company's purchase of
its Canadian subsidiary eieiHome.com Inc., the Company gave Simmonds Capital
Limited a convertible debenture in the principal amount of U.S. $2,000,000,
convertible into shares of shares of HyComp common stock at a conversion price
of $1.00 per share (subject to adjustment as provided therein) and five year
warrants for the purchase of an aggregate of 5,000,000 shares of shares of
HyComp common stock (subject to adjustment as provided therein). The current
authorized number of shares of common stock of the Company is not sufficient to
cover the number of shares the Company may be required to issue upon conversion
of the debenture or exercise of the warrants. As a result, Simmonds Capital
Limited has agreed not to exercise any of its warrants or to convert any portion
of the debenture which would require the Company to issue shares of HyComp
common stock in excess of its current authorized capital, subject to the
Company's undertaking to hold this special meeting of its shareholders to ask
the shareholders to increase the number of shares of common stock that the
Company is authorized to issue to an amount that is sufficient to cover the
number of shares SCL would be entitled to were it to exercise all of its
warrants and to convert the entire debenture. If the shareholders do not approve
such an increase, then the Company may be in default under the agreement by
which it originally purchased its interest in eieiHome.com Inc.
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As the Company does not have enough authorized, non-designated shares
of common stock available for issuance by the Company to meet its current
commitments, it is likely not to have the ability to issue any additional shares
in the future. Hence, the Company has little or no flexibility with respect to
possible future stock splits, equity financings, stock-for-stock acquisitions,
stock dividends or other transactions that involve the issuance of common stock.
As the Company is currently in urgent need of financing to develop the
eieiHome.com Internet web site and to introduce it into U.S. markets, the
Company is negotiating with a number of parties interested in participating in a
convertible debenture issuance, in which the proposed terms provide 8% interest
paid semi-annually in arrears and allow the sale of a minimum of U.S. $250,000
up to 4,000,000 units, with each unit consisting of a convertible note
exercisable at any time at $0.25 per share plus a full warrant exercisable for
three years at $0.50 per share. Subject to the approval of this proposal by the
Company's shareholders, the issuance is expected to close on or about March 1,
2000.
The Increase in Common Stock Proposal, if adopted, will allow the
Company to increase the shares of authorized common stock to 75,000,000 from
20,000,000 and increase the number of authorized unissued and undesignated
shares of common stock to 56,051,230, which would cover the Company's current
commitments, allow it to consummate the proposed convertible debenture offering
and restore its ability to enter into future transactions that involve the
issuance of common stock..
If the Increase in Common Stock Proposal is adopted by the Company's
stockholders, such proposal will become effective on the date the Merger is
effected if the Reincorporation Proposal is approved by the Company's
stockholders, and on the date an amendment to the Company's Articles of
Organization is filed in Massachusetts, the Company's state of incorporation, if
the Reincorporation Proposal is not approved. If the Increase in Common Stock
Proposal is effected as part of the Merger, the par value of the new eieiHome
common stock will change from $0.01 to $0.001 per share. See the discussion in
"Proposal 1: To Change the State of Incorporation from Massachusetts to
Delaware" for further details.
Vote Required For Approval of the Increase in Common Stock Proposal
Approval of the Increase in Common Stock Proposal requires the
affirmative vote of the holders of a majority of the outstanding shares of
HyComp common stock entitled to vote thereon at the Special Meeting. Proxies
solicited by the Board of Directors will be voted for the Increase in Common
Stock Proposal, unless stockholders specify otherwise.
The Board of Directors unanimously recommends a vote FOR the
authorization of the additional shares of common stock.
PROPOSAL 4: APPROVAL OF THE 2000 STOCK OPTION PLAN AND THE
AUTHORIZATION OF 3,000,000 SHARES FOR ISSUANCE UNDER THE PLAN
On January 5, 2000, the Board of Directors adopted the 2000 Stock
Option Plan (the "Plan") effective as of January 5, 2000 and terminating on
January 5, 2010, subject to stockholder approval. The following discussion of
the Plan is qualified by and remains subject to the terms of the Plan, a copy of
which is attached to this proxy statement as Appendix D. All capitalized terms
used in the following discussion which have not been defined earlier in this
proxy statement have the meanings given to them in the Plan.
The Plan is intended to help the Company attract and retain employees
(including officers), directors, consultants and independent contractors of the
Company (or its subsidiaries or affiliates) and to furnish additional incentives
to such persons to enhance the value of the Company over the long term
encouraging them to acquire a proprietary interest in the Company. Provided that
the Increase in Common Stock Proposal is passed by the stockholders, the Board
of Directors also proposes to authorize for issuance under the Plan 3,000,000
shares of common stock, subject to the restriction that no single person may
hold more than 25% of the aggregate number of shares reserved for issuance under
the Plan.
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Provided that either the Reincorporation Proposal or the Change of Name
Proposal is passed by the stockholders, the Plan will be a plan of eieiHome.com
Inc. If neither proposal is passed, then the Plan will be a plan of HyComp, Inc.
The Board of Directors believes that in order to continue to retain and
attract qualified candidates for such positions who can contribute to the
Company's growth and development, and in light of the officers' and directors'
compensation being paid by other public companies, the Board of Directors
granted the following options, subject to stockholder approval: (i) to each of
the Company's five directors, options to purchase 300,000 shares of common stock
at the price of $0.25 per share, which vest immediately upon the receipt of
stockholder approval and remain exercisable anytime prior to January 5, 2003;
and (ii) to the Company's Chief Executive Officer, Angelo G. MacDonald, options
to purchase 400,000 shares of common stock at the price of $0.25 per share,
50,000 of which vest immediately upon the receipt of stockholder approval and
50,000 of which vest every six months from the date of the grant (subject to Mr.
MacDonald's continued employment by the Company or its successor and subject to
the immediate vesting of all options upon a change of control as defined in the
Plan or his termination other than for cause) and all of which remain
exercisable for a period of five years from the date of vesting. The price per
share of $0.25 was determined by the Board of Directors to be a reasonable
estimate of fair market value on the date of the grant based on the fact that
the Company had just negotiated $0.25 as the conversion rate per share for an
issuance of convertible debentures currently expected to close on or about March
1, 2000.
General
The Plan provides for the discretionary grant of options to purchase
shares of common stock to employees (including officers), directors, consultants
and independent contractors of the Company and its present or future
Subsidiaries and Affiliates (as defined in the Plan). The Plan shall be
administered by a Committee of the Board of Directors, which has the authority
to grant Options and to determine, subject to certain restrictions, the exercise
price per share of common stock purchasable under an Option and the term of each
Option. The Committee may also make rules relating to Options and may impose
additional terms, conditions, restrictions and performance criteria relating to
any Option or its exercise. The Committee may decide under what circumstances
Options may be settled, canceled, forfeited, exchanged or surrendered and has
the authority to make adjustments in the terms and conditions of, and the
criteria and performance objectives included in, Options in recognition of
unusual or non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any Subsidiary or
Affiliate, or in response to changes in applicable laws, regulations or
accounting principles. The Committee determines the terms and provisions of the
Stock Option Agreement (which need not be identical for each Optionee); and
makes all other determinations deemed necessary or advisable for the
administration of the Plan. The date on which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such Option is
granted.
In general, an Option may only be exercised if the Optionee is then in
the employ or a director of, or then maintains an independent contractor
relationship with, the Company or any Subsidiary or Affiliate (or a company or a
parent or subsidiary company of such company issuing or assuming the Option in a
transaction to which Section 424(a) of the Internal Revenue Code applies), and
unless the Optionee has continuously maintained any of such relationships since
the date of grant of the Option; provided that, the Stock Option Agreement may
contain provisions extending the exercisability of Options, in the event or
specified terminations, to a date not later than the expiration date of such
Option. The Committee may establish a period during which the Beneficiaries of
an Optionee who died while an employee, director or independent contractor of
the Company or any Subsidiary or Affiliate or during any extended period
referred to in the immediately preceding proviso may exercise those Options
which were exercisable on the date of the Optionee's death; provided that no
Option shall be exercisable after its expiration date.
In the event of a Change in Control, any and all Options then
outstanding shall become fully exercisable and vested, whether or not
theretofore vested and exercisable.
The exercise price per share payable upon the exercise of each Option
granted under the Plan is to be determined by the Committee in good faith upon
the grant of such Option, subject to certain restrictions contained in the Plan.
You should examine the provisions of the Plan for details of these provisions.
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The Plan currently provides for the issuance of a total of up to
3,000,000 authorized and unissued shares of common stock, treasury shares and/or
shares acquired by the Company for purposes of the Plan. Generally, shares
subject to an option that remain unissued upon expiration or cancellation of the
option are available for other grants under the Plan. In the event of a stock
dividend, stock split, recapitalization or the like, the Committee of the Board
of Directors will equitably adjust the aggregate number of shares subject to the
Plan, the number of shares subject to each outstanding option, and the exercise
price of each outstanding option.
Vote Required for Approval of the 2000 Stock Option Plan Proposal
Approval of the 2000 Stock Option Plan Proposal and the authorization
of 3,000,000 shares of common stock for issuance under the Plan requires the
affirmative vote of the holders of a majority of the outstanding shares of
HyComp common stock entitled to vote thereon at the Special Meeting. Proxies
solicited by the Board of Directors will be voted for the 2000 Stock Option Plan
Proposal, unless stockholders specify otherwise.
The Board of Directors unanimously recommends a vote FOR the
authorization of the Plan Increase.
PROPOSAL 5: ELECTION OF DIRECTORS
The Board of Directors has nominated the individuals listed below
(referred to as the "Nominees") to serve as Directors of the Company (or the
surviving corporation if the Merger is consummated) until their successors have
been duly elected and qualified. We list below the name, age, current position
and business experience of each of the five Nominees:
Name Age Position
- ---- --- --------
Lawrence Fox 34 Director
Paul K. Hickey 67 Director and Chairman of the Board
Angelo G. MacDonald 41 Director and Chief Executive Officer
David C. O'Kell 48 Director and Secretary
John G. Simmonds 49 Director
Lawrence Fox, 34, has been a director of the Company since September 15, 1999.
Mr. Fox is an active private investor. He has provided merger and acquisition
advisory services, including structuring acquisitions and venture capital
investments to a number of public and private companies.
Paul K. Hickey, 67, has been a Director of the Company since July, 1979. He was
appointed Chairman of the Company effective September 15, 1999. Mr. Hickey is a
former licensed stock broker in New York. He is currently an investment banker
in New York, NY. Mr. Hickey also serves as a director on the boards of Gregory
and Howe Incorporated, American Homeowners Association and Diopsys, Inc.
Angelo G. MacDonald, 41, was appointed Chief Executive Officer and a Director of
the Company effective November 1, 1999. Mr. MacDonald holds a J.D. degree from
Villanova University School of Law. He is member of the bar in New York and New
Jersey, the Southern and Eastern federal districts of New York, the United
States Tax Court, the United States Court of International Trade, and the Court
of Appeals for the Armed Services. From 1986 to November 1999, Mr. MacDonald was
a Senior Trial Assistant District Attorney with the Office of the District
Attorney, Bronx county, New York City.
David C. O'Kell, 48, was appointed secretary and a Director of the Company
effective November 1, 1999. Mr. O'Kell is the Executive Vice President and
Secretary and a Director of SCL, a Toronto Stock Exchange listed company . Mr.
O'Kell joined SCL in July 1991 as Vice President Business Development. Prior to
joining SCL, Mr. O'Kell was the Vice President and Director of Business
Development with the Canadian head office of a multinational advertising agency.
Between September 1995 and November 1997, Mr. O'Kell served as the
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president and a Director of Ventel, Inc., a Vancouver Stock Exchange listed
venture capital company. Mr. O'Kell resigned as a Director upon the acquisition
by Ventel of Fifty-Plus.net in June, 1999.
John G. Simmonds, 49, has been a Director of the Company since October 15, 1999.
Mr. Simmonds is the founder of SCL. Since 1991, Mr. Simmonds has served as
Chairman, President and Chief Executive Officer of SCL. SCL is a diversified
management company with strategic investments in contract manufacturing,
electronics distribution, wireless communications, and internet service markets
including both equity investments and wholly owned operations. Since 1998, Mr.
Simmonds has been a director and the Chief Executive Officer of TrackPower,
Inc., an OTC Bulletin Board company which provides live horse racing video
service in the continental United States. From 1994 to 1996, Mr. John Simmonds
served as Director and Chief Executive Officer of INTEK Global Corporation
(formerly Intek Diversified Corp.), a Nasdaq-listed (Small-Cap) company. Intek
is involved in the US Specialized Mobile Radio market which owns and manages SMR
licenses in the 200 MHz frequency. Between September 1995 and November 1997, Mr.
Simmonds served as the Chairman and a Director of Ventel Inc., a Vancouver Stock
Exchange listed venture capital company. Mr. Simmonds resigned from the Board of
Directors of Intek during 1998 and resigned from the Board of Directors of
Ventel, upon the acquisition by Ventel of Fifty-Plus.net in June, 1999.
Compensation of Directors. The Board of Directors of the Company has
not yet approved any compensation for Directors at this time in recognition of
the Company's current financial condition, although Directors are reimbursed for
expenses incurred in connection with their attendance of meetings or conduct of
other Company business. Subject to shareholder approval of the 2000 Stock Option
Plan, the Directors will be granted stock options as an incentive to enhance
shareholder value. See discussion in "Proposal 4: Approval of the 2000 Stock
Option Plan and the Authorization of 3,000,000 Shares for Issuance Under the
Plan" and the 2000 Stock Option Plan attached as Appendix D for further
information. Following the Special Meeting of shareholders, the Board of
Directors will review the compensation scheme and may approve a compensation
plan for Directors. Such compensation plan will be consistent with compensation
plans for internet companies at a comparable development stage.
For information about the security ownership of the proposed Nominees,
see the section on "Information about the Company - Security Ownership of
Certain Beneficial Owners and Management."
Vote Required for the Election of Directors
Directors are elected by a plurality of the votes cast at the special
meeting, in person or by proxy. Proxies solicited by the Board of Directors will
be voted for the re-election of all five of the current directors of HyComp,
unless stockholders specify otherwise. Each of the Nominees has consented to
serve if elected and we know of no reason why any of the Nominees listed below
would be unable to serve if elected. If any of the Nominees is unable to serve
for any reason, proxies solicited by the Board of Directors will be voted for
another Nominee or Nominees selected by the Board of Directors.
STOCKHOLDER PROPOSALS
The Company will hold its 2000 annual meeting of HyComp stockholders
only if the Merger is not consummated. In the event that this meeting is held,
any proposals of stockholders intended to be presented at the 2000 annual
meeting of HyComp stockholders must be received by the Clerk of HyComp no later
than February 28, 2000 in order to be considered for inclusion in the HyComp
2000 annual meeting proxy materials.
OTHER MATTERS
Other than the matters specified above, the Company is unaware of any
matter that will be brought before the meeting. However, if other matters
properly come before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote the proxy in accordance with their best
judgment.
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WHERE YOU CAN FIND MORE INFORMATION
HyComp has filed a Form 10-SB Registration Statement and anticipates
filing annual, quarterly and special reports, proxy statements and other
information with the SEC following the effective date of the Registration
Statement. You may read and copy any reports, statements or other information
that HyComp files with the SEC at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. These
SEC filings are also available to the public from commercial document retrieval
services at the Internet world wide web site maintained by the SEC at
"http://www.sec.gov."
You should rely only on the information contained or incorporated by
reference in this proxy statement. HyComp has not authorized anyone to provide
you with information that is different from what is contained in this proxy
statement. You should not assume that the information contained in this proxy
statement is accurate as of any date other than February 7, 2000 or any other
date that this proxy statement indicates. The mailing of this proxy statement to
HyComp stockholders does not create any implication to the contrary.
The SEC allows HyComp to "incorporate by reference" information into
this proxy statement, which means that HyComp can disclose important information
to you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered part of this proxy
statement, except for any information superseded by information contained
directly in this proxy statement or in later filed documents incorporated by
reference in this proxy statement. This proxy statement incorporates by
reference the Form 10-SB that HyComp filed with the SEC on January 19, 2000.
This document contains important information about HyComp and its finances and
should be reviewed carefully and completely.
All documents filed by HyComp under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 after the date of this proxy statement
and prior to the date of the special meeting will be considered to be
incorporated in this proxy statement by reference and to be a part of this proxy
statement from the date of their filing. Any statement contained in this proxy
statement or in a document incorporated or considered to be incorporated in this
proxy statement by reference will be considered to be modified or superseded for
purposes of this proxy statement to the extent that a statement contained in
this proxy statement or in any other subsequently filed document which also is,
or is deemed to be, incorporated in this proxy statement modifies or supersedes
that statement. Any statement so modified or superseded will not be considered
to constitute a part of this proxy statement, except as so modified or
superseded.
Any documents filed by HyComp with the SEC and incorporated by
reference, excluding exhibits, unless specifically incorporated in this proxy
statement, are available without charge upon written request to Angelo G.
MacDonald, HyComp, Inc., 67 Wall Street, Suite 2411, New York, New York 10005.
Telephone requests may be directed to Angelo MacDonald at 212-344-0351.
If you would like to receive documents from HyComp, please request them
by February 20, 2000, in order to receive them before the special meeting.
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Appendix A--Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is made and entered into as of this
__ day of ___________, 2000 pursuant to Section 79 of the Massachusetts Business
Corporation Law and Section 252 of the Delaware General Corporation Law, by and
between eieiHome.com Inc., a Delaware corporation ("eieiHome") and HyComp, Inc.,
a Massachusetts corporation ("HyComp").
WITNESSETH:
WHEREAS, eieiHome and HyComp (individually sometimes called a
"Constituent Corporation" and together called the "Constituent Corporations")
desire that HyComp merge with and into eieiHome;
WHEREAS, the Certificate of Incorporation of eieiHome was filed in the
office of the Secretary of State of the State of Delaware on ______________,
2000;
WHEREAS, eieiHome has authorized capital stock of 75,000,000 shares of
Common Stock, par value $.001 per share (the "eieiHome Common Stock"), of which
one share is issued and outstanding as of the date hereof, and 2,000 shares of
Preferred Stock, par value $.001 per share (the "eieiHome Preferred Stock"), of
which no shares are issued and outstanding as of the date hereof;
WHEREAS, the Articles of Organization of HyComp were filed in the
office of the Secretary of State of the Commonwealth of Massachusetts on May 27,
1969 and HyComp has an authorized capital stock of 20,000,000 shares of Common
Stock, $.01 par value (the "HyComp Common Stock"), of which 18,198,770 shares
are issued and outstanding as of the date hereof, and 2,000 shares of Preferred
Stock, $100 par value (the "HyComp Preferred Stock"), of which no shares are
issued and outstanding as of the date hereof;
WHEREAS, the registered office of eieiHome in the State of Delaware is
located at 1209 Orange Street, Wilmington, Delaware and the name and address of
its registered agent is The Corporation Trust Company; and the principal office
of HyComp in the Commonwealth of Massachusetts is located at 67 Wall Street,
Suite 2411, New York, New York 10005; and
WHEREAS, the respective Boards of Directors of the Constituent
Corporations desire that the merger provided for herein be a tax-free
reorganization pursuant to Section 386(a) of the International Revenue Code of
1986, as amended;
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and provisions hereinafter contained, the Constituent Corporations do hereby
prescribe the terms and conditions of said merger and mode of carrying the same
into effect as follows:
FIRST: eieiHome hereby merges into itself HyComp and HyComp shall be
and hereby is merged with and into eieiHome, which shall be the surviving
corporation.
SECOND: The Certificate of Incorporation of eieiHome, as in effect on
the date of the merger provided for in this Agreement (the "Merger"), shall
continue in full force and effect as the Certificate of Incorporation of the
surviving corporation.
THIRD: The manner of converting the outstanding shares of the capital
stock of each of the Constituent Corporations into the shares or other
securities of the surviving corporation shall be as follows:
(a) Each share of HyComp Common Stock, $.01 Par Value that is issued
and outstanding (other than shares of HyComp Common Stock, if any, held in the
treasury of HyComp on the date on which the Merger of HyComp with and into
eieiHome shall become effective shall, by virtue of the Merger and without
further action,
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cease to exist and shall be converted into one share of eieiHome Common Stock,
$.001 Par Value Per Share. There shall not be any issued and outstanding stock
of HyComp that will not be so converted.
(b) Each share of HyComp Common Stock, if any, that shall then be
held in the treasury of HyComp on the effective date of the Merger shall, by
virtue of the Merger and without further action, cease to exist and all
certificates representing such shares shall be cancelled.
(c) After the effective date of the Merger, each holder of an
outstanding certificate representing shares of HyComp Common Stock may surrender
the same to eieiHome and each holder shall be entitled upon such surrender to
receive certificates for an equal number of shares of eieiHome Common Stock on
the basis provided herein. Until so surrendered, the outstanding shares of the
common stock of HyComp to be converted into the common stock of eieiHome as
provided herein may be treated by eieiHome for all corporate purposes as
evidencing the ownership of shares of eieiHome, as though said surrender and
exchange had taken place.
(d) Each share of Common Stock of eieiHome issued and outstanding
immediately prior to the Merger shall cease to exist and shall be cancelled.
(e) Each holder of an option to purchase HyComp Common Stock which
shall be outstanding immediately prior to the Merger (the "Options") shall be
entitled upon exercise, in accordance with the terms of such Options, to
purchase after the effective date of the Merger that number of shares of
eieiHome Common Stock as is equal to the number of shares of HyComp Common Stock
for which such Options are currently exercisable at a price per share equal to
the price per share provided in such Options. Each such Option shall otherwise
remain subject to the same terms and conditions after the effective date of the
Merger (including, without limitation, the date and extent of exercisability) as
were applicable to such Option immediately prior to the effective date of the
Merger.
FOURTH: The other terms and conditions of the Merger are as follows:
(a) The By-Laws of eieiHome as they shall exist on the effective
date of the Merger shall be and remain the By-Laws of the surviving corporation
until the same shall be altered, amended or repealed as therein provided.
(b) The directors and officers of eieiHome as of the effective date
of the Merger shall be the directors and officers of the surviving corporation
and shall continue in office as provided in the By-Laws and charter of eieiHome.
(c) The Merger shall become effective upon filing with the
Secretary of State of Delaware a Certificate of Merger pursuant to Section 252
of the General Corporation Law of the State of Delaware and with the Secretary
of State of Massachusetts Articles of Merger pursuant to paragraph (c) of
Section 79 of the Massachusetts Business Corporation Law.
(d) Upon the effective date of the Merger, all property, rights,
privileges, franchises, patents, trademarks, licenses, registrations and other
assets of every kind and description of HyComp shall be transferred to, vested
in and devolved upon eieiHome without further act or deed and all property
rights, and every other interest of eieiHome and HyComp shall be as effectively
the property of eieiHome as they were of eieiHome and HyComp, respectively. All
rights of creditors of HyComp and all liens upon any property of HyComp shall be
preserved unimpaired, and all debts, liabilities, obligations and duties of
HyComp, including all liabilities and obligations under Options of HyComp,
subject to ARTICLE THIRD hereof, may be enforced against eieiHome to the same
extent as if said debts, liabilities, obligations and duties had been incurred
or contracted by it. At any time, or from time to time, after the effective date
of the Merger, the last acting officers of HyComp, or the corresponding officers
of eieiHome, may, in the name of HyComp, execute and deliver or cause to be
executed and delivered all such deeds and instruments and to take or cause to be
taken such further or other actions as eieiHome may deem necessary or desirable
in order to vest in eieiHome title to and possession of any property of HyComp
acquired or to be acquired by reason of or as a result of the Merger and
otherwise to carry out the intents and purposes hereof, and the proper
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officers and directors of eieiHome are fully authorized in the name of HyComp or
otherwise to take any and all such action.
(e) eieiHome hereby (i) agrees that it may be served with process
in the Commonwealth of Massachusetts in any proceeding for the enforcement of
any obligation of HyComp and in any proceeding for the enforcement of the rights
of a dissenting stockholder of HyComp pursuant to Section 85 of the
Massachusetts Business Corporation Law; and (ii) irrevocably appoints the
Secretary of State of the Commonwealth of Massachusetts as its agent to accept
service of process in any such proceeding.
FIFTH: Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated and abandoned by the Board of Directors of the
Constituent Corporations at any time prior to the date that the requisite
Certificate of Merger and Articles of Merger are filed in the office of the
Secretary of State of the State of Delaware and the Secretary of State of the
Commonwealth of Massachusetts, respectively. This Agreement may be amended by
the Boards of Directors of the Constituent Corporations at any time prior to the
date on which the requisite Certificate of Merger and Articles of Merger are
filed in the office of the Secretary of State of Delaware and the Secretary of
State of Massachusetts, respectively, provided that an amendment made subsequent
to the approval of this Agreement by the stockholders of either Constituent
Corporation shall not (1) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (2) alter or change any term of the Certificate of
Incorporation of the surviving corporation to be effected by the Merger, or (3)
alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class thereof of
such Constituent Corporation.
SIXTH:
(a) This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the State of
Delaware.
(b) eieiHome and HyComp each agrees to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties to this Agreement, pursuant to the
approval and authority duly given by resolutions adopted by their respective
Boards of Directors, have caused this Agreement to be executed by the President
and attested to by the Secretary or Clerk of each party hereto as the respective
act, deed and agreement of each of said corporation, as of the __ day of
_______________, 2000.
EIEIHOME.COM INC.
ATTEST: (Delaware)
By:______________________ By:_____________________________
Name: Name:
Title: Title:
[CORPORATE SEAL]
ATTEST: HYCOMP, INC.
(Massachusetts)
By:______________________ By:_____________________________
Name: Name:
Title: Title:
[CORPORATE SEAL]
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I, ______________, Secretary of eieiHome.com Inc., a corporation
organized and existing under the laws of the State of Delaware, hereby certify
that the Agreement and Plan of Merger to which this certificate is attached,
after having been first duly signed on behalf of said corporation and having
been signed on behalf of HyComp, Inc., a corporation organized and existing
under the laws of the Commonwealth of Massachusetts, was duly submitted to the
stockholders of eieiHome.com Inc. by written action of said stockholders held
pursuant to Sections 228 and 252 of the General Corporation Law of Delaware on
the __ day of ________________, 2000 and that the Agreement and Plan of Merger
was approved by the affirmative vote of stockholders representing at least
two-thirds of the outstanding stock of said corporation entitled to vote
thereon.
WITNESS my hand on this __ day of ____________, 2000.
______________________________
Name:
Secretary
I, ____________________, Clerk of HyComp, Inc., a corporation organized
and existing under the laws of the Commonwealth of Massachusetts, hereby certify
that the Agreement and Plan of Merger to which this certificate is attached,
after having been first duly signed on behalf of said corporation and having
been signed on behalf of eieiHome.com Inc., a corporation organized and existing
under the laws of the State of Delaware, was duly submitted to the stockholders
of HyComp, Inc. by written action of said stockholders held pursuant to Sections
43 and 79 of the Business Corporation Law of the Commonwealth of Massachusetts
on the __ day of _________, 2000; and that the Agreement and Plan of Merger was
approved by the affirmative vote of stockholders representing at least
two-thirds of the outstanding stock of said corporation entitled to vote
thereon.
WITNESS my hand on this __ day of ____________, 2000.
______________________________
Name:
Clerk
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Appendix B-- Form of Certificate of Incorporation of eieiHome.com Inc.
CERTIFICATE OF INCORPORATION
OF
EIEIHOME.COM INC.
FIRST. The name of the Corporation is: eieiHome.com Inc.
SECOND. The address of its registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, and the name of its registered agent at such address is The Corporation
Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law (the "Delaware General Corporation Law").
FOURTH. The total number of shares of stock which the Corporation is
authorized to issue is 75,000,000 shares of Common Stock, par value $.001 per
share and 2,000 shares of Preferred Stock, par value $.001 per share.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
Delaware General Corporation Law. The Board of Directors is authorized to define
the terms of the Preferred Stock and to increase or decrease the number of
authorized shares of Preferred Stock by the affirmative vote of a majority of
the Board of Directors of the Corporation.
FIFTH. The name and mailing address of the Sole Incorporator are as follows:
Name Mailing Address
---- ---------------
Dara R. Bernstein c/o Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
SIXTH. Except as required in the By-Laws, no election of Directors need
be by written ballot.
SEVENTH. The Board of Directors shall have the power to make, alter, or
repeal By-Laws subject to the power of the stockholders to alter or repeal the
By-Laws made or altered by the Board of Directors.
EIGHTH. The personal liability of the Directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of ss. 102 of the Delaware General Corporation Law. If the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a Director, then the liability of
a Director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
NINTH. The Corporation, to the fullest extent permitted by the
provisions of ss. 145 of the Delaware General Corporation Law, as the same may
be amended and supplemented, shall indemnify each person who is or was an
officer or Director of the Corporation and may indemnify any and all other
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a Director or officer and shall inure to the benefit
of the heirs, executors, and administrators of such a person.
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TENTH. The Corporation may purchase and maintain insurance , at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
ELEVENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation and all rights conferred upon stockholders herein are granted
subject to this reservation
Signed at New York, New York
on ____________ ____, 2000
-----------------------
Dara R. Bernstein
Sole Incorporator
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Appendix C--Form of By-Laws of eieiHome.com Inc.
BY-LAWS
OF
EIEIHOME.COM INC.
(A Delaware Corporation)
ARTICLE I
Stockholders
Section 1. Place of Meetings. Meetings of stockholders shall be held at
such place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors or the President.
Section 2. Annual Meetings. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Board of Directors or the President (which date shall not be a legal holiday
in the place where the meeting is to be held) at the time and place to be fixed
by the Board of Directors or the President and stated in the notice of the
meeting. If no annual meeting is held in accordance with the foregoing
provisions, the Board of Directors shall cause the meeting to be held as soon
thereafter as convenient. If no annual meeting is held in accordance with the
foregoing provisions, a special meeting may be held in lieu of the annual
meeting, and any action taken at that special meeting shall have the same effect
as if it had been taken at the annual meeting, and in such case all references
in these By-Laws to the annual meeting of the stockholders shall be deemed to
refer to such special meeting.
Section 3. Special Meetings. Special meetings of the stockholders may
be called at any time by the Board of Directors or the President.
Section 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notices of all
meetings shall state the place, date and hour of the meeting. The notice of a
special meeting shall state, in addition, the purpose or purposes for which the
meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his or her address
as it appears on the records of the corporation.
Section 5. Quorum; Adjournments of Meetings. The holders of one third
of the issued and outstanding shares of the capital stock of the corporation
entitled to vote at a meeting, present in person or represented by proxy, shall
constitute a quorum for the transaction of business at such meeting; but, if
there be less than a quorum, the holders of a majority of the stock so present
or represented may adjourn the meeting or, if no stockholder is present, any
officer entitled to preside at or to act as Secretary of such meeting may
adjourn the meeting to another time or place, from time to time, until a quorum
shall be present, whereupon the meeting may be held, as adjourned, without
further notice, except as required by law, and any business may be transacted
thereat which might have been transacted at the meeting as originally called.
Section 6. Voting; Proxies. At any meeting of the stockholders every
registered owner of shares entitled to vote may vote in person or by proxy and,
except as otherwise provided by statute, in the Certificate of Incorporation or
these By-Laws, shall have one vote for each such share standing in his name on
the books of the corporation. Except as otherwise required by statute, the
Certificate of Incorporation or these By-Laws, all elections of directors shall
be decided by a plurality of votes cast, and all other matters shall be decided
by a majority of the votes cast.
Section 7. Inspectors of Election. The Board of Directors, or, if the
Board shall not have made the appointment, the chairman presiding at any meeting
of stockholders, shall have power to appoint one or more
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persons to act as inspectors of election at the meeting or any adjournment
thereof, but no candidate for the office of director shall be appointed as an
inspector at any meeting for the election of directors.
Section 8. Chairman of Meetings. The Chairman of the Board or, in his
absence, the President shall preside as chairman of a meeting of the
stockholders. In the absence of both the Chairman of the Board and the
President, a majority of the members of the Board of Directors present in person
at such meeting may appoint any other person to act as chairman of the meeting.
Section 9. Secretary of Meetings. The Secretary of the corporation
shall act as secretary of all meetings of the stockholders. In the absence of
the Secretary, the chairman of the meeting shall appoint any other person to act
as secretary of the meeting.
Section 10. Stockholders' Action Without Meetings. Any action required
or permitted to be taken at any annual or special meeting of the stockholders of
the corporation may be taken without a meeting, without prior notice and without
vote, if a consent in writing, setting forth the action so taken, is signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote on such action were present and voted. Prompt
notice of the taking of corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE II
Board of Directors
Section 1. Number of Directors. The Board of Directors shall consist of
one or more members, the number thereof to be determined from time to time by
resolution of the Board of Directors. Directors need not be shareholders.
Section 2. Vacancies. Whenever any vacancy shall occur in the Board of
Directors by reason of death, resignation, removal, increase in the number of
directors or otherwise, it may be filled for the balance of the term by a
majority of the directors then in office (even if they constitute less than a
quorum) or by a sole remaining director; or, if the Board has not filled such
vacancy, it may be filled by the stockholders.
Section 3. First Meeting. The first meeting of each newly elected Board
of Directors, of which no notice shall be necessary, shall be held immediately
following the annual meeting of stockholders or any adjournment thereof at the
place the annual meeting of stockholders was held at which such directors were
elected, or at such other place as a majority of the members of the newly
elected Board of Directors who are then present shall determine, for the
election or appointment of a Chairman of the Board of Directors and officers for
the ensuing year and the transaction of such other business as may be brought
before such meeting.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors, other than the first meeting, may be held without notice at such
times and places as the Board of Directors may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by order of the Chairman of the Board or the President. Notice of
the time and place of each special meeting shall be given by or at the direction
of the person or persons calling the meeting by mailing the same at least three
days before the meeting or by telephoning, telegraphing or delivering personally
the same at least twenty-four hours before the meeting to each director. Except
as otherwise specified in the notice thereof, or as required by statute, the
Certificate of Incorporation or these By-Laws, any and all business may be
transacted at any special meeting.
Section 6. Place of Conference Call Meeting. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
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Section 7. Organization. Every meeting of the Board of Directors shall
be presided over by the Chairman of the Board, or, in his absence, the
President. In the absence of the Chairman of the Board and the President, a
presiding officer shall be chosen by a majority of the directors present. The
Secretary of the corporation shall act as secretary of the meeting, but, in his
absence, the presiding officer may appoint any person to act as secretary of the
meeting.
Section 8. Quorum; Vote. A majority of the directors then in office
(but in no event less than one-third of the total number of directors) shall
constitute a quorum for the transaction of business, but less than a quorum may
adjourn any meeting to another time or place from time to time until a quorum
shall be present, whereupon the meeting may be held, as adjourned, without
further notice. Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, all matters coming before any meeting of the
Board of Directors shall be decided by the vote of a majority of the directors
present at the meeting, a quorum being present.
Section 9. Removal of Directors. Any one or more of the directors shall
be subject to removal with or without cause at any time by the stockholders.
Section 10. Committees. Except as otherwise required by statute, the
Certificate of Incorporation or these By-Laws, the Board of Directors may, by
resolution passed by a majority of the Board of Directors, designate one or more
committees, each committee to consist of two or more directors. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meetings
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise the powers and authority of the Board of Directors,
in the management of the business and affairs of the corporation with the
exception of any authority the delegation of which is prohibited by Section 141
of the General Corporation Law, the Certificate of Incorporation or these
By-Laws, and may authorize the seal of the corporation to be affixed to all
papers which may require it.
Section 11. Directors' Action Without Meetings. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written consent thereto
is signed by all members of the Board of Directors or such committee as the case
may be, and such written consent is filed with the minutes of proceedings of the
Board of Directors or committee.
Section 12. Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE III
Officers
Section 1. General. The Board of Directors shall elect the officers of
the corporation, which shall include a President, a Secretary and a Treasurer
and such other or additional officers (including, without limitation, a Chairman
of the Board, one or more Executive Vice Presidents, Vice Presidents, Assistant
Vice Presidents, Assistant Secretaries and Assistant Treasurers) as the Board of
Directors may designate.
Section 2. Term of Office; Removal and Vacancy. Each officer shall hold
his office until his successor is elected and qualified or until his earlier
resignation or removal. Any officer shall be subject to removal with or without
cause at any time by the Board of Directors. Vacancies in any office, whether
occurring by death, resignation, removal or otherwise, may be filled by the
Board of Directors.
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Section 3. Powers and Duties. Each of the officers of the corporation
shall, unless otherwise ordered by the Board of Directors, have such powers and
duties as generally pertain to his office as well as such powers and duties as
from time to time may be conferred upon him by the Board of Directors.
Section 4. Power to Vote Stock. Unless otherwise ordered by the Board
of Directors, the Chairman of the Board and the President each shall have full
power and authority on behalf of the corporation to attend and to vote at any
meeting of stockholders of any corporation in which this corporation may hold
stock, and may exercise on behalf of this corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting and shall
have power and authority to execute and deliver proxies, waivers and consents on
behalf of the corporation in connection with the exercise by the corporation of
the rights and powers incident to the ownership of such stock. The Board of
Directors, from time to time, may confer like powers upon any other person or
persons.
Section 5. Salaries. Officers of the corporation shall be entitled to
such salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board of Directors.
ARTICLE IV
Capital Stock
Section 1. Issuance of Stock. Unless otherwise voted by the
stockholders and subject to the provisions of the Certificate of Incorporation,
the whole or any part of any unissued balance of the authorized capital stock of
the corporation or the whole or any part of any unissued balance of the
authorized capital stock of the corporation held in its treasury may be issued,
sold, transferred or otherwise disposed of by vote of the Board of Directors in
such manner, for such consideration and on such terms as the Board of Directors
may determine.
Section 2. Certificates of Stock. Certificates for stock of the
corporation shall be in such form as the Board of Directors may from time to
time prescribe and shall be signed by the Chairman of the Board or a Vice
Chairman of the Board or the President or any Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
Section 3. Transfer of Stock. Shares of capital stock of the
corporation shall be transferable on the books of the corporation only by the
holder of record thereof, in person or by duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares, with an
assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, and with such proof of the authenticity of the signature and of
authority to transfer, and of payment of transfer taxes, as the corporation or
its agents may require.
Section 4. Ownership of Stock. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the owner thereof
in fact and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
law.
ARTICLE V
Miscellaneous
Section 1. Corporate Seal. The seal of the corporation shall be
circular in form and shall contain the name of the corporation and the year and
state of incorporation.
Section 2. Fiscal Year. Except as from time to time otherwise
determined by the Directors, the fiscal year of the corporation shall be the
twelve months ending December thirty-first.
Section 3. Waiver of Notice. Whenever any notice whatsoever is required
to be given by law, by the Certificate of Incorporation or by these By-Laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
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Section 4. Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
Section 5. Transactions with Interested Parties. No contract or
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.]
Section 6. Severability. Any determination that any provision of these
By-Laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-Laws.
Section 7. Pronouns. All pronouns used in these By-Laws shall be deemed
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
ARTICLE VI
Amendment
The Board of Directors shall have the power to make, alter or repeal
the By-Laws of the corporation subject to the power of the stockholders to alter
or repeal the By-Laws made or altered by the Board of Directors.
ARTICLE VII
Indemnification
Except to the extent expressly prohibited by the Delaware General
Corporation Law, the corporation shall indemnify each person made or threatened
to be made a party to any action or proceeding, whether civil or criminal, and
whether by or in the right of the corporation or otherwise, by reason of the
fact that such person or such person's testator or intestate is or was a
director or officer of the corporation, or serves or served at the request of
the corporation any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity while he or she was
such a director or officer (hereinafter referred to as "Indemnified Person"),
against judgments, fines, penalties, amounts paid in settlement and reasonable
expenses, including attorneys' fees, incurred in connection with such action or
proceeding, or any appeal therein, provided that no such indemnification shall
be made if a judgment or other final adjudication adverse to such Indemnified
Person establishes that either (a) his or her acts were committed in bad faith,
or were the result of active and deliberate dishonesty, and were material to the
cause of action so adjudicated, or (b) that he or she personally gained in fact
a financial profit or other advantage to which he or she was not legally
entitled.
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The corporation shall advance or promptly reimburse upon request any
Indemnified Person for all expenses, including attorneys' fees, reasonably
incurred in defending any action or proceeding in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such
Indemnified Person to repay such amount if such Indemnified Person is ultimately
found not to be entitled to indemnification or, where indemnification is
granted, to the extent the expenses so advanced or reimbursed exceed the amount
to which such Indemnified Person is entitled.
Nothing herein shall limit or affect any right of any Indemnified
Person otherwise than hereunder to indemnification or expenses, including
attorneys' fees, under any statute, rule, regulation, Certificate of
Incorporation, By-Law, insurance policy, contract or otherwise.
Anything in these By-Laws to the contrary notwithstanding, no
elimination of this By-Law, and no amendment of this By-Law adversely affecting
the right of any Indemnified Person to indemnification or advancement of
expenses hereunder shall be effective until the 60th day following notice to
such Indemnified Person of such action, and no elimination of or amendment to
this By-Law shall thereafter deprive any Indemnified Person of his or her rights
hereunder arising out of alleged or actual occurrences, acts or failures to act
prior to such 60th day.
The corporation shall not, except by elimination or amendment of this
By-Law in a manner consistent with the preceding paragraph, take any corporate
action or enter into any agreement which prohibits, or otherwise limits the
rights of any Indemnified Person to, indemnification in accordance with the
provisions of this By-Law. The indemnification of any Indemnified Person
provided by this By-Law shall be deemed to be a contract between the corporation
and each Indemnified Person and shall continue after such Indemnified Person has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of such Indemnified Person's heirs, executors, administrators and legal
representatives. If the corporation fails to timely make any payment pursuant to
the indemnification and advancement or reimbursement of expenses provisions of
this Article VII and an Indemnified Person commences an action or proceeding to
recover such payment, the corporation in addition shall advance or reimburse
such Indemnified Person for the legal fees and other expenses of such action or
proceeding.
The corporation is authorized to enter into agreements with any of its
directors or officers extending rights to indemnification and advancement of
expenses to such Indemnified Person to the fullest extent permitted by
applicable law, but the failure to enter into any such agreement shall not
affect or limit the rights of such Indemnified Person pursuant to this By-Law,
it being expressly recognized hereby that all directors or officers of the
corporation, by serving as such after the adoption hereof, are acting in
reliance hereon and that the corporation is estopped to contend otherwise.
Persons who are not directors or officers of the corporation shall be similarly
indemnified and entitled to advancement or reimbursement of expenses to the
extent authorized at any time by the Board of Directors.
In case any provision in this By-Law shall be determined at any time to
be unenforceable in any respect, the other provisions shall not in any way be
affected or impaired thereby, and the affected provision shall be given the
fullest possible enforcement in the circumstances, it being the intention of the
corporation to afford indemnification and advancement of expenses to its
directors or officers, acting in such capacities or in the other capacities
mentioned herein, to the fullest extent permitted by law whether arising from
alleged or actual occurrences, acts or failures to act occurring before or after
the adoption of this Article VII.
For purposes of this By-Law, the corporation shall be deemed to have
requested an Indemnified Person to serve an employee benefit plan where the
performance by such Indemnified Person of his or her duties to the corporation
also imposes duties on, or otherwise involves services by, such Indemnified
Person to the plan or participants or beneficiaries of the plan, and excise
taxes assessed on an Indemnified Person with respect to an employee benefit plan
pursuant to applicable law shall be considered indemnifiable fines. For purposes
of this By-Law, the term "corporation" shall include any legal successor to the
corporation, including any corporation which acquires all or substantially all
of the assets of the corporation in one or more transactions.
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Appendix D--2000 Stock Option Plan
THE [EIEIHOME.COM INC.]
2000 STOCK OPTION PLAN
1. Purpose.
The purpose of the 2000 Stock Option Plan (the "Plan") of eieiHome.com Inc., a
Delaware corporation (the "Company"), is to attract and retain employees
(including officers), directors, consultants and independent contractors of the
Company, or any Subsidiary or Affiliate which now exists or hereafter is
organized or acquired, and to furnish additional incentives to such persons to
enhance the value of the Company over the long term encouraging them to acquire
a proprietary interest in the Company.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any entity if, at the time of granting
of an Option, (i) the Company, directly, owns at least 50% of the combined
voting power of all classes of stock of such entity or at least 50% of the
ownership interest in such entity or (ii) such entity, directly or indirectly,
owns at least 50% of the combined voting power of all classes of stock of the
Company.
(b) "Beneficiary" means the person, persons, trust or trusts
which have been designated by an Optionee in his or her most recent written
beneficiary designation filed with the Company to receive the Optionee's rights
under the Plan upon the Optionee's death, or, if there is no such designation or
no such designated person survives the Optionee, then the person, persons, trust
or trusts entitled by will or applicable law to receive such rights or, if no
such person has such right then the Optionee's executor or administrator.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means a change in control of the
Company which will be deemed to have occurred if:
(i) any "person" as such term is used in Section 13(d) and 14(d) of the
Exchange Act (other than an Exempt Person) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding voting securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or (iv) of this
Section 2(d) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity) 50% or more of the combined voting power of the
voting securities of the Company or such surviving or parent entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinbefore defined), other than an Exempt Person,
acquired 50% or more of the combined voting power of the Company's then
outstanding securities; or
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(iv) the stockholders of the Company approve of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets (or any transaction
having a similar effect).
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the committee, consisting exclusively of
two or more Non-Employee Directors (as defined in Rule 16b-3), if and as the
same may be established by the Board to administer the Plan; provided, however,
that to the extent required for the Plan to comply with the applicable
provisions of Section 162(m) of the Code, "Committee" means either such
committee or a subcommittee of that committee, as the case may be, which shall
be constituted to comply with the applicable requirements of Section 162(m) of
the Code and the regulations promulgated thereunder.
(g) "Company" means eieiHome.com Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(i) "Exempt Person" means (1) the Company, (2) any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, (3) any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of
Stock, or (4) any person or group of persons who, immediately prior to the
adoption of this Plan, owned more than 50% of the combined voting power of the
Company's then outstanding voting securities.
(j) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other property determined by
such methods or procedures as shall be established from time to time by the
Committee. Notwithstanding the foregoing, the per share Fair Market Value of
Stock as of a particular date shall mean (i) if the shares of Stock are then
listed on a national securities exchange, the closing sales price per share of
Stock on the national securities exchange on which the Stock is principally
traded, for the last preceding date on which there was a sale of such Stock on
such exchange, or (ii) if the shares of Stock are then traded on the National
Market System of the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the reported per share closing price of the Stock
on the day prior to such date or, if there was no such price reported for such
date, on the next preceding date for which such a price was reported, or (iii)
if the shares of Stock are then traded in an over-the-counter market other than
on the NASDAQ National Market System, the average of the closing bid and asked
prices for the shares of Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Stock in such market, or (iv)
if the shares of Stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Committee, in its sole
discretion, shall determine in good faith.
(k) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(l) "NQSO" means any Option not designated as an ISO.
(m) "Option" means a right, granted to an Optionee under
Section 6(b) of the Plan, to purchase shares of Stock, subject to the terms and
conditions of this Plan. An Option may be either an ISO or an NQSO, provided
that ISOs may be granted only to employees of the Company or a Subsidiary.
(n) "Optionee" means a person who, as an employee, director,
officer, consultant or independent contractor of the Company, a Subsidiary or an
Affiliate, has been granted an Option.
(o) "Plan" means this eieiHome.com Inc. 1999 Stock Option
Plan, as amended from time to time.
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(p) "Rule 16b-3" means Rule 16b-3, as from time to time in
effect, promulgated by the Securities and Exchange Commission under Section 16
of the Exchange Act, including any successor to such Rule.
(q) "Stock" means the common stock, par value $[0.001] per
share, of the Company.
(r) "Stock Option Agreement" means any written agreement,
contract, or other instrument or document evidencing an Option.
(s) "Subsidiary" means any corporation in which the Company,
directly or indirectly, owns stock possessing 50% or more of the total combined
voting power of all classes of stock of such corporation.
(t) "Ten Percent Shareholder" means a person or persons who
own, directly or indirectly, more than 10% of the total combined voting power of
all classes of stock of the Company or any of its Subsidiaries.
3. Administration.
The Plan shall be administered by the Committee. The Committee shall
have the authority, in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Options; to determine the persons to whom and
the time or times at which Options shall be granted; to determine the type and
number of Options to be granted, the number of shares of Stock to which Options
may relate and the terms, conditions, restrictions and performance criteria
relating to any Options; to determine whether, to what extent, and under what
circumstances Options may be settled, canceled, forfeited, exchanged or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives included in, Options in recognition of
unusual or non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any Subsidiary or
Affiliate, or in response to changes in applicable laws, regulations or
accounting principles; to designate Affiliates; to construe and interpret the
Plan and any Options; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Stock Option
Agreement (which need not be identical for each Optionee); and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary, Affiliate or Optionee (or any person
claiming any rights under the Plan from or through any Optionee) and any
stockholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Option
granted hereunder.
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4. Eligibility.
Options may be granted in the discretion of the Committee to employees
(including officers), directors, consultants and independent contractors of the
Company and its present or future Subsidiaries and Affiliates. In determining
the persons to whom Options shall be granted and the type of Options granted
(including the number of shares to be covered by such Options), the Committee
shall take into account such factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant of Options
under the Plan shall be 3,000,000 shares of Stock, subject to adjustment as
provided herein. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company in private transactions or otherwise. The number of shares of Stock
available for issuance under the Plan shall be reduced by the number of shares
of Stock subject to outstanding Options. If any shares subject to an Option are
forfeited, canceled, exchanged or surrendered or if an Option otherwise
terminates or expires without a distribution of shares to the Optionee, the
shares of Stock with respect to such Option shall, to the extent of any such
forfeiture, cancellation, exchange, surrender, termination or expiration, again
be available for Options under the Plan. In no event shall any Optionee acquire,
pursuant to any awards of Options under this Plan, more than 25% of the
aggregate number of shares of Stock reserved for awards under the Plan.
In the event that the Committee shall determine, in it sole discretion,
that any dividend or other distribution (whether in the form of cash, Stock, or
other property), recapitalization, stock split, reverse split, any
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, license arrangement, strategic alliance or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of any Optionees under
the Plan, then the Committee shall make such equitable changes or adjustments as
it deems necessary or appropriate to any or all of (i) the number and kind of
shares of Stock which may thereafter be issued in connection with Options, (ii)
the number and kind of shares of Stock issued or issuable in respect of
outstanding Options, and (iii) the exercise price, grant price, or purchase
price relating to any Option; provided that, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code.
6. Specific Terms of Options.
(a) General. Options may be granted at the discretion of the
Committee. The term of each Option shall be for such period as may be determined
by the Committee. The Committee may make rules relating to Options, and may
impose on any Option or the exercise thereof, at the date or thereafter, such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine.
(b) Options. The Committee is authorized to grand Options to
Optionees on the following terms and conditions:
i) Type of Option. The Stock Option Agreement evidencing the grant
of an Option under the Plan shall designate the Option as an ISO (in the event
its terms, and the individual to whom it is granted, satisfy the requirements
for ISOs under the Code), or an NQSO.
ii) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee; provided that,
in the case of an ISO, (i) such exercise price shall be not less than the Fair
Market Value of a share of Stock on the date of grant of such Option or such
other exercise price as may be required by the Code, (ii) if the Optionee is a
Ten Percent Shareholder, such exercise price shall not be less than 110% of the
Fair Market Value of a share of Stock on the date of grant of such Option and in
no event shall the exercise price for the purchase of shares of Stock be less
than par value. The exercise price for Stock subject to an Option may be paid in
cash or by an exchange of Stock owned by the Optionee for at least six months
prior to the date of the exchange ("Mature Stock"), or a combination of both, in
an amount having a combined value equal to such exercise price. Any shares of
Mature Stock exchanged upon the exercise of any Option shall be valued at the
Fair Market Value on the date on which such shares
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are exchanged. An Optionee may also elect to pay all or a portion of the
aggregate exercise price by having shares of Stock with a Fair Market Value on
the date of exercise equal to the aggregate exercise price withheld by the
Company or sold by a broker-dealer in accordance with applicable law.
iii) Term and Exercisability of Options. The date on which the
Committee adopts a resolution expressly granting an Option shall be considered
the day on which such Option is granted. Options shall be exercisable over the
exercise period (which shall not exceed ten years from the date of grant), at
such times and upon such conditions as the Committee may determine, as reflected
in the Stock Option Agreement. An Option may be exercised to the extent of any
or all full shares of Stock as to which the Option has become exercisable, by
giving written notice of such exercise to the Company's Secretary and paying the
exercise price as described in Section 6(b)(ii).
iv) Termination of Employment, etc. An Option may not be exercised
unless the Optionee is then in the employ or a director of, or then maintains an
independent contractor relationship with, the Company or any Subsidiary or
Affiliate (or a company or a parent or subsidiary company of such company
issuing or assuming the Option in a transaction to which Section 424(a) of the
Code applies), and unless the Optionee has continuously maintained any of such
relationships since the date of grant of the Option; provided that, the Stock
Option Agreement may contain provisions extending the exercisability of Options,
in the event or specified terminations, to a date not later than the expiration
date of such Option. The Committee may establish a period during which the
Beneficiaries of an Optionee who died while an employee, director or independent
contractor of the Company or any Subsidiary or Affiliate or during any extended
period referred to in the immediately preceding proviso may exercise those
Options which were exercisable on the date of the Optionee's death; provided
that no Option shall be exercisable after its expiration date.
v) Nontransferability. Options shall not be transferable by an Optionee
except by will or the laws of descent and distribution and shall be exercisable
during the lifetime of an Optionee only by such Optionee.
vi) Other Provisions. Options may be subject to such other conditions
as the Committee may prescribe in it discretion.
7. Change in Control Provisions.
In the event of a Change in Control, any and all Options then
outstanding shall become fully exercisable and vested, whether or not
theretofore vested and exercisable.
8. General Provisions.
(a) Compliance with Legal and Exchange Requirements. The Plan,
the granting and exercising of Options thereunder, and the other obligations of
the Company under the Plan and any Stock Option Agreement, shall be subject to
all applicable federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Stock under
any Option until completion of such stock exchange listing or registration or
qualification of such Stock or other required action under any state, federal or
foreign law, rule or regulation as the Company may consider appropriate, and may
require any Optionee to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
Stock in compliance with applicable laws, rules and regulations.
(b) No Right to Continued Employment, etc. Nothing in the Plan
or in any Option granted or Stock Option Agreement entered into pursuant to the
Plan shall confer upon any Optionee the right to continue in the employ of, or
to continue as a director of or an independent contractor to, the Company, any
Subsidiary or any Affiliate, as the case may be, or to be entitled to any
remuneration or benefits not set forth in the Plan or such Stock Option
Agreement or to interfere with or limit in any way the right of the Company or
any such Subsidiary or Affiliate to terminate such Optionee's employment,
directorship or independent contractor relationship.
(c) Taxes. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Option granted, any payment relating to an
Option under the Plan (including from a distribution of Stock), or any other
payment to an Optionee, amounts of withholding and other taxes due in connection
with any transaction involving an
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Option, and to take such other action as the Committee may deem advisable to
enable the Company and an Optionee to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Option. This
authority shall include authority to withhold or receive Stock or other property
and to make cash payments in respect thereof in satisfaction of an Optionee's
tax obligations.
(d) Amendment and Termination of the Plan. The Board may at
any time and from time to time alter, amend, suspend, or terminate the Plan in
whole or in part; provided that, no amendment which requires stockholder
approval in order for the Plan to continue to comply with Rule 16b-3 or Sections
422 and 424 of the Code and the regulations promulgated thereunder shall be
effective unless the same shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Optionee, without such Optionee's consent, under any Option theretofore granted
under the Plan.
(e) No Rights to Options; No Stockholder Rights. No person
shall have any claim to be granted any Option under the Plan, and there is no
obligation for uniformity of treatment of Optionees. Except as provided
specifically herein, an Optionee or transferor of an Option shall have no rights
as a stockholder with respect to any shares covered by the Option until the date
of the issuance of a stock certificate to such Optionee for such shares.
(f) Unfunded Status of Options. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. Nothing
contained in the Plan or any Option shall give any such Optionee any rights that
are greater than those of a general creditor of the Company.
(g) No Fractional Shares. No fractional shares of Stock shall
be issued or delivered pursuant to the Plan or any Option. The Committee shall
determine whether cash, other Options, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(h) Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles thereof.
(i) Effective Date; Plan Termination.
(i) The Plan shall take effect upon its adoption by the Board (the
"Effective Date"), but the Plan (and any grants of Options made prior to the
stock holder approval mentioned herein), shall be subject to the approval of the
holder(s) of a majority of the issued and outstanding shares of voting
securities of the Company entitled to vote, which approval must occur within
twelve months of the date the Plan is adopted by the Board. In the absence of
such approval, such Options shall be null and void.
(ii) The Board may terminate the Plan at any tine with respect to any
shares of Stock that are not subject to Options. Unless terminated earlier by
the Board, the Plan shall terminate ten years after the Effective Date and no
Options shall be granted under the Plan after such date. Termination of the Plan
under this Section 8(i) will not affect the rights and obligations of any
Optionee with respect to Options granted prior to termination.
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Appendix E--Provisions of the General Laws of Massachusetts Relating to the
Rights of Dissenting Stockholders
(SECTIONS 86 TO 98 OF CHAPTER 156B OF THE GENERAL LAWS OF MASSACHUSETTS)
86. RIGHT OF APPRAISAL. If a corporation proposes to take a corporate
action as to which any section of this chapter provides that a stockholder who
objects to such action shall have the right to demand payment for his shares and
an appraisal thereof, sections eighty-seven to ninety-eight, inclusive, shall
apply except as otherwise specifically provided in any section of this chapter.
Except as provided in sections eighty-two and eighty-three, no stockholder shall
have such right unless (1) he files with the corporation before the taking of
the vote of the shareholders on such corporate action, written objection to the
proposed action stating that he intends to demand payment for his shares if the
action is taken and (2) his shares are not voted in favor of the proposed
action.
87. NOTICE OF STOCKHOLDERS MEETING TO CONTAIN STATEMENT AS TO APPRAISAL
RIGHTS. The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not voted
in favor of such action has or may have the right to demand in writing from the
corporation (or, in the case of a consolidation or merger, the name of the
resulting or surviving corporation shall be inserted), within twenty days after
the date of mailing to him of notice in writing that the corporate action has
become effective, payment for his shares and an appraisal of the value thereof.
Such corporation and any such stockholder shall in such cases have the rights
and duties and shall follow the procedure set forth in sections 88 to 98,
inclusive, of chapter 156B of the General Laws of Massachusetts."
88. NOTICE TO OBJECTING STOCKHOLDER THAT CORPORATE ACTION HAS BECOME
EFFECTIVE. The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
89. DEMAND FOR PAYMENT BY OBJECTING STOCKHOLDER. If within twenty days
after the date of mailing of a notice under subsection (e) of section
eighty-two, subsection (f) of section eighty-three, or section eighty-eight any
stockholder to whom the corporation was required to give such notice shall
demand in writing from the corporation taking such action, or in the case of a
consolidation or merger from the resulting or surviving corporation, payment for
his stock, the corporation upon which such demand is made shall pay to him the
fair value of his stock within thirty days after the expiration of the period
during which such demand may be made.
90. DETERMINATION OF VALUE OF STOCK BY SUPERIOR COURT. If during the
period of thirty days provided for in section eighty-nine the corporation upon
which such demand is made and any such objecting stockholder fail to agree as to
the value of such stock, such corporation or any such stockholder may within
four months after the expiration of such thirty-day period demand a
determination of the value of the stock of all such objecting stockholders by a
bill in equity filed in the superior court in the county where the corporation
in which such objecting stockholder held stock had or has its principal office
in the commonwealth.
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91. BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING
STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF ETC; PARTIES TO BILL ETC;
SERVICE OF BILL ON CORPORATION; NOTICE TO STOCKHOLDER PARTIES ETC. If the bill
is filed by the corporation, it shall name as parties respondent all
stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof. If the bill is
filed by a stockholder, he shall bring the bill in his own behalf and in behalf
of all other stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
92. BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING
STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC; ENTRY OF DECREE
DETERMINING VALUE OF STOCK; DATE ON WHICH VALUE IS TO BE DETERMINED. After
hearing the court shall enter a decree determining the fair value of the stock
of those stockholders who have become entitled to the valuation of and payment
for their shares, and shall order the corporation to make payment of such value,
together with interest, if any, as hereinafter provided, to the stockholders
entitled thereto upon the transfer by them to the corporation of the
certificates representing such stock if certificated or if uncertificated, upon
receipt of an instruction transferring such stock to the corporation. For this
purpose, the value of the shares shall be determined as of the day preceding the
date of the vote approving the proposed corporate action and shall be exclusive
of any element of value arising from the expectation or accomplishment of the
proposed corporate action.
93. BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING
STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; COURT MAY REFER BILL,
ETC., TO SPECIAL MASTER TO HEAR PARTIES, ETC. The court in its discretion may
refer the bill or any question arising thereunder to a special master to hear
the parties, make findings and report the same to the court, all in accordance
with the usual practice in suits in equity in the superior court.
94. BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING
STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; STOCKHOLDER PARTIES MAY
BE REQUIRED TO SUBMIT THEIR STOCK CERTIFICATES FOR NOTATION THEREON OF PENDENCY
OF BILL, ETC. On motion the court may order stockholder parties to the bill to
submit their certificates of stock to the corporation for notation thereon of
the pendency of the bill, and may order the corporation to note such pendency in
its records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
95. BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING
STOCKHOLDERS ON FAILURE TO AGREE ON VALUE THEREOF, ETC.; TAXATION OF COSTS,
ETC.; INTEREST ON AWARD, ETC. The costs of the bill, including the reasonable
compensation and expenses of any master appointed by the court, but exclusive of
fees of counsel or of experts retained by any party, shall be determined by the
court and taxed upon the parties to the bill, or any of them, in such manner as
appears to be equitable, except that all costs of giving notice to stockholders
as provided in this chapter shall be paid by the corporation. Interest shall be
paid upon any award from the date of the vote approving the proposed corporate
action, and the court may on application of any interested party determine the
amount of interest to be paid in the case of any stockholder.
96. STOCKHOLDER DEMANDING PAYMENT FOR STOCK NOT ENTITLED TO NOTICE OF
STOCKHOLDERS' MEETINGS OR TO VOTE STOCK OR TO RECEIVE DIVIDENDS, ETC.;
EXCEPTIONS. Any stockholder who has demanded payment for his stock as provided
in this chapter shall not thereafter be entitled
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to notice of any meeting of stockholders or to vote such stock for any purpose
and shall not be entitled to the payment of dividends or other distribution on
the stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the date of the vote approving the proposed
corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections to
and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
97. CERTAIN SHARES PAID FOR BY CORPORATION TO HAVE STATUS OF TREASURY
STOCK, ETC. The shares of the corporation paid for by the corporation pursuant
to the provisions of this chapter shall have the status of treasury stock or in
the case of a consolidation or merger the shares or the securities of the
resulting or surviving corporation into which the shares of such objecting
stockholder would have been converted had he not objected to such consolidation
or merger shall have the status of treasury stock or securities.
98. ENFORCEMENT BY STOCKHOLDER OF RIGHT TO RECEIVE PAYMENT FOR HIS
SHARES TO BE EXCLUSIVE REMEDY; EXCEPTION. The enforcement by a stockholder of
his right to receive payment for his shares in the manner provided in this
chapter shall be an exclusive remedy except that this chapter shall not exclude
the right of such stockholder to bring or maintain an appropriate proceeding to
obtain relief on the ground that such corporate action will be or is illegal or
fraudulent as to him.
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