SECURITIES AND EXCHANGE COMMISSION FILE
WASHINGTON DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
Date of report (Date of earliest event reported) March 31, 2000
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PerfectData Corporation
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(Exact Name of Registrant as Specified in Its Charter)
California
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(State or Other Jurisdiction of Incorporation or Organization)
0-12817 95-3087593
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(Commission File Number) (IRS Employer Identification No.)
110 West Easy Street, Simi Valley, CA 93065
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(Address of Principal Executive Offices) (Zip Code)
(805) 581-4000
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(Registrant's Telephone Number, Including Area Code)
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INFORMATION TO BE INCLUDED IN REPORT
Item 1. Change in Control of Registrant.
(a) Pursuant to a Stock Purchase Agreement dated January 20, 2000 (the
"Stock Purchase Agreement"), a copy of which is filed with this Report by
incorporation by reference and which is incorporated herein by this reference,
by and among PerfectData Corporation (the "Company") and Millennium Capital
Corporation ("Millennium"), JDK & Associates, Inc. ("JDK") and other persons or
entities who, between January 20, 2000 and March 31, 2000 (the "Closing Date"),
became Buyers (as such term is defined in the Stock Purchase Agreement), the
Company, on the Closing Date, sold an aggregate of 1,333,333 shares of its
Common Stock, no par value (the "Common Stock"), to Millennium, JDK and the
other Buyers at $2.25 per share or an aggregate purchase price of $2,999,999.25.
At a Special Meeting of Shareholders of the Company held on the Closing Date
prior to the sale described in this preceding sentence, the shareholders had
approved the Stock Purchase Agreement and the related series of transactions
contemplated thereunder. Proxies for such Special Meeting had been solicited by
the Company pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), using a proxy statement dated March 10, 2000 (the
"Proxy Statement").
The Company, Millennium and JDK also executed a letter agreement dated
January 20, 2000 (the "Consulting Agreement"), a copy of which is filed as an
exhibit to this Report and which is incorporated herein by this reference,
pursuant to which Millennium and JDK will act as financial advisors to the
Company in seeking and closing acquisitions and financings. The Consulting
Agreement, by its terms, became effective on the Closing Date as a result of the
sale of the shares of Common Stock described in the preceding paragraph. On the
Closing Date, for their services as financial advisors, Millennium and JDK were
to receive a Common Stock purchase warrant expiring January 20, 2005 (the
"Closing Warrant") to purchase 1,770,000 shares of the Common Stock at $2.75 per
share. The Consulting Agreement had provided for 1,800,000 shares; however;
Millennium and JDK had agreed with the Company that Consulting Warrants to
purchase an aggregate of 30,000 shares of the Common Stock could be issued to
employees of the Company (including its two executive officers). In addition,
Millennium and JDK directed the Company to issue Consulting Warrants each to
purchase 5,000 shares of the Common Stock to each of the five directors of the
Company (see the succeeding paragraph) and a member of the advisory board
appointed at a directors' meeting on the Closing Date and to reserve Consulting
Warrants to purchase an aggregate of 20,000 shares of the Common Stock for
issuance to future appointees to the advisory board. Millennium also assigned
Consulting Warrants to purchase an aggregate of 502,000 shares of the Common
Stock and JDK assigned Consulting Warrants to purchase an aggregate of 500,000
shares of the Common Stock. On the Closing Date, all holders of the Consulting
Warrants exercised the same, receiving an aggregate of 1,515,391 shares of the
Common Stock and surrendered an aggregate of 264,609 shares of the Common Stock
in payment of the exercise price (such surrendered shares being valued at $18.50
per share, i.e., the closing sales price on the Closing Date).
At a directors' meeting on the Closing Date, as contemplated by the Stock
Purchase Agreement, Joseph Mazin, the Chairman, the President and Chief
Executive Officer of the Company, and Ronald M. Chodorow resigned as directors
of the Company, the number of directors was increased from three to five and
Brian Maizlish, Timothy D. Morgan, Corey P. Schlossmann and Harris Shapiro were
elected as directors to fill the vacancies. The Proxy Statement had contemplated
that Eugene J. Wolter, Jr. would be nominated for election as a director;
however, Mr. Wolter had to decline nomination because of personal reasons and
Mr. Shapiro was elected instead. Tracie Savage continued as a director.
On March 21, 2000, Flamemaster Corporation ("Flamemaster"), the holder of
613,497 shares of Common Stock, sold to Millennium and JDK an option expiring on
June 1, 2000 (the "Flamemaster Option") to purchase 375,000 shares of the Common
Stock, the Flamemaster Option being exercisable as to 75,000 shares at an
exercise price of $3.00 per share and as to 300,000 shares (in five tranches of
60,000 shares each) at exercise prices ranging from $8.00 to $12.00 per share.
The expiration date will be extended from June 1, 2000 for an additional 90 days
as each 60,000 share tranche is exercised. On the Closing Date, Millennium
assigned its right under the Flamemaster Option to purchase 187,500 shares to a
Buyer and JDK assigned a right to purchase 100,000 and 12,500 shares pursuant to
the Flamemaster Option to Don Haidl and Corey P. Schlossmann, respectively, each
a Buyer and, in case of the latter, as indicated in the preceding paragraph, a
new director of the Company. The Millennium assignee, JDK and Messrs. Haidl and
Schlossmann paid Flamemaster $225,000 on April 3, 2000 for the Flamemaster
Option, Millennium's assignee exercised the Flamemaster Option as to 37,500
shares of the Common Stock and JDK and Messrs. Haidl and Schlossmann each
exercised as to 12,500 shares. An additional $127,500 of the purchase price for
the Flamemaster Warrant is due June 1, 2000. In addition, Flamemaster, depending
on the then market price of the Common Stock, may compel the holders to exercise
each tranche of 60,000 shares. A copy of the Flamemaster Option is filed as an
exhibit to this Report and is incorporated herein by this reference.
As a result of the sales pursuant to the Stock Purchase Agreement and the
exercise of the Consulting Warrants, an aggregate of 2,848,724 shares of the
Common Stock were issued, resulting in an aggregate of 6,094,530 shares of the
Common Stock being outstanding. As a result of such transactions, the partial
exercise of the Flamemaster Option and the Board of Director's grants on the
Closing Date of stock options expiring March 30, 2010 to purchase 25,000 shares
of the Common Stock at $18.50 per share to each of the five directors of the
Company, such options to be made subject to a new stock option plan, four new
beneficial owners of 5% or more of the Common Stock pursuant to Rule 13d-3(1)(i)
under the Exchange Act were created: (1) Millennium Capital Corporation (of
which Harris Shapiro, a new director of the Company and its new Chairman, is the
sole officer, director and shareholder) beneficially owns 309,500 shares or
5.1%; (2) JDK (of which Joseph D. Kowal is the sole officer, director and
shareholder) beneficially owns 556,869 shares or 9.1%; (3) Don Haidl
beneficially owns 567,003 shares or 9.3%; and (4) Corey P. Schlossmann, a new
director of the Company beneficially owns 521,259 shares or 8.5%. In addition,
Flamemaster `s beneficial ownership fell below 10% to 8.8%. Joseph Mazin, who
continues as the President and Chief Executive Officer of the Company, despite
his resignation as a director, beneficially owns 817,797 shares of the Common
Stock or 13.3%, so that he continues as the largest beneficial owner of the
Common Stock known to the Company; however, if the Flamemaster Option is
exercised in its entirety, his beneficial ownership will be reduced by 300,000
shares.
The four new directors elected on the Closing Date, when combined with
JDK and Mr. Haidl, may be deemed to be the beneficial owners of an aggregate of
2,013,143 shares or 32.5% of the outstanding as compared with the beneficial
ownership of the three directors of the Company prior to the Closing Date of
847,625 shares or 25.5% of the then outstanding. Although Millenium and JDK may
have constituted a "group" within the meaning of Section 13(d)(3) of the
Exchange Act for the purpose of acquiring control, except for their services
pursuant to the Consulting Agreement, they are no longer acting as a group.
In making the acquisitions of shares pursuant to the Stock Purchase
Agreement, Millennium, JDK and the Buyers used their own personal funds and
there was no loan from a bank.
(b) The Company is not aware of any arrangement, including any pledge by
any person of securities of the Company, the operation of which may at a
subsequent date result in a change in control of the Company.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired:
Not applicable.
(b) Pro forma financial information:
Not applicable.
(c) Exhibits
Number Exhibit
A Stock Purchase Agreement dated January 20, 2000 by
and among the Company, Millennium, JDK and other
Buyers is filed by incorporation by reference to
the Company's definitive Proxy Statement dated
March 10, 2000 filed on March 14, 2000
B Letter Agreement dated January 20, 2000 by and
among the Company, Millennium and JDK.
C Agreement dated as of March 24, 2000 by and
among Flamemaster, JDK and Millennium.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Perfect Data Corporation
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(Registrant)
Date April 14, 2000 By: /s/ Irene J. Marino
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Irene J. Marino
Vice President, Finance
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PerfectData Corporation
Exhibits Filed
With
Current Report on Form 10-K
Number Exhibit Page
B Letter Agreement dated January 20, 2000 by and
among the Company, Millennium Capital Corporation
and JDK Associates, Inc.................................... E-2
C Agreement dated as of the 21st day of March 2000 by
and among Flamemaster Corporation and JDK Associates, Inc.
and Millennium Capital Corporation......................... E-11
<PAGE>
Exhibit B
January 14, 2000
Millennium Capital Corporation
245 East 63rd Street
New York, New York 10021
JDK Associates, Inc.
19800 MacArthur Blvd., Suite 880
Irvine, California 92812
PerfectData Corporation
110 West Easy Street
Simi Valley, California 03065
Attention: Mr. Joseph Mazin, President
Dear Mr. Mazin:
This letter will confirm our understanding that PerfectData Corporation
(including its subsidiaries and affiliates, the "Company") has engaged
Millennium Capital Corporation and JDK Associates, Inc. (collectively the
"Consultant") to act as the Company's financial advisor in connection with
Transactions (as hereinafter defined) between the Company and third parties
introduced to the Company by the Consultant (any such person being a "Third
Party").
Section 1. Services to be Rendered. (a) In connection with this
engagement, the Consultant shall:
(i) familiarize itself, to the extent it deems appropriate and
feasible, with the business, operations, properties, financial condition and
prospects of the Company, it being understood that the Consultant shall, in the
course of such familiarization, rely entirely upon publicly available
information and such other information as may be supplied by the Company,
without independent investigation;
(ii) advise and assist the Company in developing and
implementing a general strategy for accomplishing Transactions of the type and
kind requested by the Company;
(iii) develop a list of potential Third Parties with which the
Company may consummate a Transaction;
(iv) hold preliminary discussions with potential Third Parties
concerning their possible interest in a Transaction;
(v) with the approval of the Company, provide potential Third
Parties with information provided to the Consultant by the Company concerning
the Company and its business to enable such potential Third Parties to evaluate
the proposed Transaction;
(vi) advise the Company with respect to its negotiations with
potential Third Parties and, if requested, participate directly in such
negotiations;
(vii) if requested, advise the Company with respect to the
structure, pricing and terms and conditions of the Transaction; and
(viii) perform such other financial advisory services as the
Consultant and the Company may from time to time mutually agree upon in writing.
(b) This Agreement does not constitute a commitment or an expression of
interest in providing or arranging any financing which may be required for the
consummation of a Transaction. If the Consultant is requested by the Company and
elects to provide or arrange for any such financing, the Consultant, the Company
and the other party or parties to such financing shall enter into a separate
agreement setting forth the terms and conditions of, and the fees payable in
connection with, such financing.
Section 2. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(a) The term "Common Stock" shall mean the Common Stock, no par value, of
the Company.
(b) The term "Transaction" shall mean, whether in one or a series of
transactions, (i) any merger, consolidation, reorganization, recapitalization,
leveraged buy-out, tender or exchange offer, restructuring or other
extraordinary corporate transaction involving the Company and a Third Party,
(ii) the acquisition by the Company, directly or indirectly, through public or
private purchases, sales or otherwise of all or any portion of the assets,
properties and/or businesses of any Third Party or any substantial portion of
the securities of any Third Party including, without limitation, a sale or
exchange of capital stock or assets, (ii) the acquisition by a Third Party,
directly or indirectly, through public or private purchases, sales or otherwise
of all or any portion of the assets, properties and/or businesses of the Company
or any substantial portion of the securities of the Company, including, without
limitation, a sale or exchange of capital stock or assets, (iv) the formation by
the Company and/or a Third Party, directly or indirectly, of a joint venture,
partnership or other vehicle for the purpose of combining all or any portion of
the securities, assets, properties and/or businesses of the Company and a Third
Party, (v) any sale or purchase by the Company to a Third Party or purchase by
the Company from a Third Party of debt or equity securities of the Company or
the Third Party or (vi) the making by the Company to a Third Party of a loan or
similar financing or the making by a Third Party to the Company of a loan or
similar financing.
(c) The term "Consideration" shall mean the total proceeds and other
consideration paid and to be paid or contributed and to be contributed or
financed, directly or indirectly, in connection with a Transaction (which
consideration shall be deemed to include amounts paid or to be paid into escrow)
to the Company and its shareholders or to the Third Party, as the case may be,
and in any event shall include, without limitation: (i) cash; (ii) notes,
securities and other property (including all options, warrants or other
instruments or arrangements convertible into or exercisable for any of the
foregoing) at the fair market value thereof; (iii) all liabilities (including
capitalized leases, pension liabilities, guarantees and indebtedness for
borrowed money) of the Company or Third Party repaid or retired by the Company
or the Third Party, as the case may be, in connection with, or in anticipation
of, a Transaction; (iv) the Target Entity's Percentage (as hereinafter defined)
of all liabilities (including capitalized leases, pension liabilities,
guarantees and indebtedness for borrowed money) existing on the acquired
entity's balance sheet at the time the Transaction is consummated (if such
Transaction takes the form of a merger, joint venture, purchase of stock or
other purchase of an equity interest) or assumed by the acquiring entity in
connection with a Transaction (if such Transaction takes any form other than a
merger, joint venture, purchase of stock or other purchase of any equity
interest, including, without limitation, a purchase of assets); (v) payments to
be made in installments; (vi) amounts paid or payable under management,
consulting, supply, service, distribution or licensing agreements, real property
or equipment lease agreements, agreements not to compete, employment agreements,
employee benefit plans and change of control, severance and other similar
arrangements; (vii) contingent payments (whether or not related to future
earnings or operations) and (vii) the total principal amount loaned, directly or
indirectly, in connection with a Transaction to or by the Company and in any
event shall include, without limitation, cash plus all liabilities of the
Company or Third Party paid or guaranteed by the lender in connection with, or
in anticipation of, a Transaction.
The fair market value of non-cash Consideration consisting of securities
shall be determined based upon (A) the closing sale price for such securities on
the national securities exchange, or The Nasdaq Stock Market, Inc. ("Nasdaq"),
providing the primary market therefor on the last trading day prior to the
consummation of the Transaction, (B) if such securities are not so traded, the
average of the closing bid and asked prices as reported by the OTC Bulletin
Board of the National Association of Securities Dealers Inc. (the "NASD") or
equivalent quotation system located outside of the United States on the last
trading day prior to the consummation of the Transaction, or (C) if such
securities are not so traded or reported, by mutual agreement between the
Company and the Consultant. The fair market value of any non-cash Consideration
other than securities shall be determined by agreement of the Company and the
Consultant.
If all or any portion of the Consideration is to be paid over time, then
that portion of the Transaction Fee attributable thereto shall be payable as and
when such Consideration is paid by the acquiring entity or financing party. If
all or any portion of the Consideration consists of contingent payments, then
the portion of the Transaction Fee attributable thereto shall be payable as and
when such payments are made by the acquiring entity or financed by the financing
party.
(d) "Target Entity's Percentage" means 100%, unless the Transaction takes
the form of a purchase of stock, a joint venture or other acquisition of an
equity interest, in which case it shall mean the percentage of the total issued
and outstanding equity of the acquired entity acquired by the acquiring entity.
(e) "Indemnified Person" shall have the meaning assigned thereto in
Section 6 hereof.
(f) "Closing Price" on any day when used with respect to the Common Stock
means the reported last sale price regular way on the composite tape, or, if the
shares of Common Stock are not quoted on the composite tape, the reported last
sale price on the New York or the American Stock Exchange or, if the shares of
Common Stock are not listed or admitted to trading on either such Exchange, as
reported on the Nasdaq System, or if the shares of Common Stock are not quoted
on such system, the average of the closing bid and asked prices as quoted on the
OTC Bulletin Board of NASD or if not so quoted as furnished by any member of the
NASD selected by the Company for that purpose.
Section 3. Term of Engagement. This Agreement shall become effective if
and only if there is a Closing (as defined) held pursuant to a Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") by and among
the Company, the Consultant and other buyers to be named. The term of this
Agreement shall commence with the Closing Date (as defined in the Stock Purchase
Agreement and terminate five years thereafter.
Section 4. Compensation. As compensation for the Consultant's services
hereunder, the Company shall pay to the Consultant a fee (the "Transaction Fee")
equal to five (5%) percent of the Consideration in the Transaction, payable upon
the closing of any Transaction if, during the term of this Agreement or at any
time within 24 months after the term of this Agreement (such 24-month period,
the "Trailer"), (1) a Transaction is consummated or (2) an agreement is entered
into which subsequently results in a consummated Transaction; provided that the
Consultant shall only be entitled to receive a Transaction Fee during the
Trailer if a Transaction is consummated with a Purchaser whom the Consultant has
contacted, or whom the Consultant has recommended to the Company, in either case
during the term of this engagement. The Transaction Fee shall be payable in
shares of the Common Stock valued at a price per share equal to the average
Closing Price of the Common Stock for the ten (10) trading days immediately
preceding the closing of the Transaction. No fee payable to any other financial
advisory by the Company or any other entity shall reduce or otherwise affect the
fees payable to the Consultant hereunder. In addition to the Transaction Fee,
the Company shall issue to the Consultant (allocated as designated by the
Consultant) a warrant to purchase 1,800,000 shares of the Common Stock
exercisable upon the execution hereof. The exercise period of the warrant shall
be five (5) years and the exercise price shall be $2.75 per share. The warrant
shall be in the form of Exhibit A attached hereto.
Section 5. Expenses. In addition to compensation payable pursuant to
Section 4 hereof and, regardless of whether any Transaction is announced,
commences or occurs, the Company shall reimburse the Consultant promptly upon
request for reasonable expenses incurred by the Consultant in connection with
this engagement, including, without limitation, fees and disbursements of legal
counsel and other professional advisors to the Consultant.
Section 6. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless the Consultant and its
affiliates, and their respective officers, directors, advisors, representatives,
agents, employees, and each other person controlling the Consultant or any of
its affiliates within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended (each such party, including the Consultant, being referred to herein as
an "Indemnified Person") from and against any and all losses, claims, damages
and liabilities, joint or several (collectively, "Damages"), related to, or
arising out of, any matter referred to in this Agreement, including an
Indemnified Person's services hereunder, except to the extent such Damages are
finally judicially determined to have resulted directly and primarily from the
gross negligence or willful misconduct of an Indemnified Person. The Company
will also reimburse an Indemnified Person immediately upon request for all
expenses as they are incurred (including, without limitation, reasonable fees
and disbursements of legal counsel, usual and customary expenses for an
Indemnified Person's involvement in discovery proceedings or testimony) incurred
in connection with investigating, preparing to defend or defending any commenced
or threatened action or legal, administrative or judicial proceeding or
investigation (collectively, "Proceedings"), related to, or arising out of, any
matter referred to in this Agreement, including an Indemnified Person's
services. The indemnification and reimbursement obligations contained herein
shall apply whether or not the Consultant or any other Indemnified Party is a
formal party to any lawsuit, claim or other proceeding and are expressly
intended to cover, among other things, reimbursement of legal and other expenses
incurred in a deposition or other discovery proceeding. In the event that any
reimbursed expenses are finally judicially determined to have resulted directly
and primarily from such Indemnified Person's gross negligence or willful
misconduct in performing the services which are the subject of this Agreement,
the Consultant shall promptly refund to the Company the portion of amounts
advanced under this Section 6 in respect of reimbursement of expenses which is
attributable to expenses incurred in relation to the act or omission of such
Indemnified Person who is the subject of such determination. The Company also
agrees that no Indemnified Person shall have any liability to the Company for,
or in connection with, this engagement, except for liability for Damages which
are finally judicially determined to have resulted directly and primarily from
the gross negligence or willful misconduct of the Indemnified Person. In no
event shall any Indemnified Person be responsible for any indirect, special, or
consequential damages, even if it is advised of the possibility thereof. The
Company will promptly notify an Indemnified Person of the assertion against it
or, to its knowledge, any other person of any claim or the commencement of any
Proceedings or investigation relating to, or arising out of, any matter referred
to in this Agreement, including an Indemnified Person's services hereunder.
(b) The Company and the Consultant agree that if, for any reason, any
indemnification sought pursuant to this Section 6 is unavailable or is
insufficient to hold any Indemnified Person harmless, then, whether or not the
Consultant is the person entitled to indemnification, the Company and the
Consultant shall each contribute to the amounts paid or payable by the
Indemnified Person in respect of the Damages and expenses (including all legal
and other fees and expenses incurred in defending any action or claim) for which
such indemnification is unavailable or insufficient in such proportion as is
appropriate to reflect (i) the relative benefits received (or anticipated to be
received) by the Company and its shareholders, on the one hand, and the
Consultant, on the other, in connection with the acts which resulted in such
Damages and expenses and (ii) their relative fault, in connection with the
matters as to which such Damages relate, as well as any relevant equitable
considerations; provided that in no event shall the amount to be contributed by
the Consultant exceed the amount of fees actually received by the Consultant
hereunder (excluding any amounts received by the Consultant as reimbursement of
expenses). It is hereby agreed that the relative benefits to the Company and its
shareholders on the one hand and the Consultant on the other hand with respect
to this engagement shall be deemed to be in the same proportion as (x) the total
value paid, transferred, exchanged or received or proposed to be paid,
transferred, exchanged or received by the Company or its shareholders, as the
case may be, in connection with any Transaction (whether or not consummated)
bears to (y) the fee paid or payable to the Consultant in connection with this
engagement. The Company and the Consultant agree that it would not be just and
equitable if contribution pursuant to this Section 6(b) were determined by pro
rata allocation or by any other method which does not take into account the
equitable considerations referred to herein.
(c) The Company and the Consultant agree to consult in advance with one
another with respect to the terms of any proposed waiver, release or settlement
of any Proceedings to which the Company or an Indemnified Person may be subject
as a result of the matters contemplated by this Agreement and further agree not
to enter into any such waiver, release or settlement without the prior written
consent of one another (which consent shall not be unreasonably withheld) unless
such waiver, release or settlement includes an unconditional release of the
Company or such Indemnified Person, as the case may be, from all liability
arising out of such Proceedings.
(d) The agreements of the Company under this Section 6 shall be in
addition to any liabilities the Company may otherwise have and shall apply
whether or not the Consultant or any other Indemnified Person is a formal party
to any Proceedings. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY PROCEEDINGS
ARISING OUT OF, OR RELATED TO, THE SERVICES OF THE CONSULTANT HEREUNDER IS
HEREBY WAIVED OR DEEMED WAIVED BY EACH INDEMNIFIED PERSON (AS DEFINED IN SECTION
6(a)) AND BY THE COMPANY.
Section 7. Cooperation, Confidentiality. Etc. (a) The Company shall
furnish the Consultant with all material information and data which the
Consultant shall reasonably deem appropriate in connection with its activities
on the Company's behalf (all of which information shall be accurate and complete
in all material respects) and will not withhold or omit any material
information, and shall provide the Consultant reasonable access to the Company's
officers, directors, employees and professional advisors. The Company shall
involve the Consultant in all or keep the Consultant apprised of all material
discussions between the Company and potential Third Parties to a Transaction and
shall make available to the Consultant all material information regarding
potential Purchasers which the Company receives from any source whatsoever.
(b)The Company recognizes and confirms that the Consultant in acting
pursuant to this engagement will be using information in public reports and
other information provided by others, including information provided by the
Company and potential Third Parties or their respective officers, employees,
auditors, attorneys or other agents, and that the Consultant does not assume
responsibility for, and may rely without independent verification upon, the
accuracy and completeness of any such information. The Company acknowledges its
understanding that the Consultant will not undertake to make an independent
appraisal of any of the assets of the Company. The Company alone shall be
responsible for making its own independent assessment of the risks, benefits and
suitability of a Transaction to the Company.
(c) The Company agrees that the Consultant's advice is for the use and
information of the Company's management and Board of Directors only and may not
be relied upon by others. The Company will not disclose such advice to others
(except the Company's professional advisors and except as required by applicable
law, regulation or judicial, arbitral or administrative process) or summarize or
refer to such advice without, in each case, the Consultant's prior written
consent. Notwithstanding anything to the contrary contained in the foregoing, in
the event the Company is required by law to make any filings with any
governmental authority (including, without limitation, the Securities and
Exchange Commission or other regulatory or administrative agency) or any
disclosure to any third party, including, without limitation, the shareholders
of the Company, which mention the Consultant, or any disclosure to the holders
of its securities concerning the Consultant or the advice rendered by the
Consultant hereunder, the Company shall afford the Consultant the opportunity to
review such disclosure in advance and to approve the form thereof, such approval
not to be unreasonably withheld or delayed.
(d) The Consultant agrees that it will not, without the prior written
consent of the Company, disclose to any person, other than the Consultant's and
its affiliates' respective officers, directors, employees, representatives,
auditors and professional advisors, any confidential information provided by the
Company to the Consultant in connection with this engagement, except to the
extent (a) such disclosure is required by applicable law, regulation or
judicial, arbitral or administrative process, (b) such information becomes
publicly known other than as a result of the breach by the Consultant of its
obligations set forth in this subsection, and (c) such disclosure is requested
or required by any regulatory authority having jurisdiction over the Consultant
or its affiliates.
(e) The Company recognizes that the Consultant has been retained by the
Company only, that the Consultant's services hereunder shall constitute services
of an independent contractor, and that the Company's engagement of the
Consultant is not deemed to be on behalf of, and is not intended to confer
rights upon. any shareholder, owner, partner, employee or creditor of the
Company or any person not a party hereto as against the Consultant or any other
Indemnified Person. Unless otherwise expressly agreed by the Consultant in
writing, no one other than the Company is authorized to rely upon this
engagement of the Consultant or any statements or conduct by the Consultant.
(f) Notwithstanding anything herein to the contrary, it is understood
that the Consultant is not undertaking to provide any legal, accounting, or tax
advice in connection with its engagement hereunder, and the Company shall rely
solely upon its own experts therefor; the Consultant may, however, assist the
Company in coordinating the obtaining of such advice.
Section 8. Consent to Jurisdiction.
(a) Each of the Company and the Consultant hereby irrevocably consents to
the exclusive jurisdiction of any California State or United States District
Court sitting in Los Angeles County over any Proceeding arising out of, or
relating to, this Agreement, and the Company and the Consultant hereby
irrevocably agrees that all claims in respect of such Proceeding may be heard in
such California State or United States District Court. Each of the Company and
the Consultant irrevocably consents to the service of any and all process in any
such Proceeding by the mailing of copies of such process to it at its address
set forth above. Each of the Company and the Consultant agrees that a final
judgment in any such Proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each of the Company and the Consultant further waives any objection to venue in
the State of California and any objection to any Proceeding in such State on the
basis of forum non conveniens. Each of the Company and the Consultant further
agrees that any Proceeding brought against the other party in connection with
this Agreement shall be brought only in the California State or United States
District Court sitting in Los Angeles County. Notwithstanding anything to the
contrary contained herein, nothing in this Section 8 is intended to prevent
either party hereto from instituting an action in a jurisdiction outside of
California for the sole and exclusive purpose of enforcing a judgment rendered
by a California State or United States District Court sitting in Los Angeles
County.
(b) In the event that the Corporation is hereafter reincorporated in a
State other then California, then, in addition to either party instituting a
Proceeding in the California State or United States District Court sitting in
Los Angeles County, a Proceeding may be instituted in the New York State or
United States District Court sitting in New York County. In such event, New York
State and New York County shall be added as an alternative to the State of
California and Los Angeles County whenever mention is made thereof in subsection
(a) of this Section 8.
Section 9. Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two (2) business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth in the introduction hereto or to such other address as to which the
party has given notice thereof pursuant to this Section 9. Any party may send
any notice, request, demand, claim or other communication hereunder to the
intended recipient at the aforementioned address using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
ordinary mail, or electronic mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient.
Section 10. Severability. Any term or provision of this Agreement that is
held invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
Section 11. Miscellaneous. The Company may not assign its rights or
obligations hereunder. The Consultant may assign all or part of its rights or
obligations to any affiliate thereof. Each of the parties hereto represents and
warrants, with respect to itself, that this Agreement has been duly executed and
delivered on its behalf and constitutes the legal, valid, binding and
enforceable obligation of such party, except to the extent that enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally or by
general equitable principles or public policy considerations. This Agreement (a)
sets forth the entire understanding of the parties relating to the subject
matter hereof and supersedes and cancels any prior communications,
understandings and agreements between the parties; (b) may not be amended or
modified except in a written instrument executed by each of the parties; (c) may
be signed in counterparts, each of which shall constitute an original and which
together shall constitute one and the same agreement; and (d) shall be governed
by, and construed in accordance with, the internal laws of the State of
California or, instead of California, such other state in which the Company may
hereafter be reincorporated, without regard to any principles of conflicts of
law.
If the foregoing terms meet with your approval. please indicate your
acceptance by signing and returning the attached copy of this letter to us.
Very truly yours,
Millennium Capital Corporation
By:__________________________
JDK Associates, Inc.
By:__________________________
ACCEPTED AND AGREED AS OF
THE DATE FIRST WRITTEN ABOVE:
PERFECTDATA CORPORATION
By:__________________________
<PAGE>
Exhibit C
AGREEMENT dated as of the 21st day of March 2000 by and among FLAMEMASTER
CORPORATION ("Flamemaster") and JDK Associates, Inc. and Millennium Capital
Corporation ( collectively the "Optionee").
NOW, THEREFORE, in consideration of Three Hundred and Fifty Two Thousand
Five Hundred ($352,500) Dollars (the "Option Price") and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
Flamemaster does hereby grant to JDK Associates, Inc. and Millennium Capital
Corporation, jointly, an option (the "Option") to purchase 375,000 shares of the
common stock (the "Shares"), no par value per share (the "Common Stock") of
Perfectdata Corp., a California corporation ("PERFECTDATA") upon the following
terms and conditions:
1. The Option Price shall be payable Two Hundred and Twenty Five Thousand
($225,000) Dollars on April 2, 2000 and One Hundred and Twenty Seven Thousand
Five Hundred ($127,500) Dollars on June 1, 2000. The Option shall be exercisable
by the Optionee in whole or in part at any time, and from time to time, during
the period commencing on the closing date of the transactions contemplated by
the Stock Purchase Agreement, dated January 20, 2000 (the "Commencement Date")
and terminating at 5:00 P.M., New York Time, on June 1, 2000 (the "Expiration
Date"). Notwithstanding the foregoing, the Expiration Date for each 60,000 Stock
Traunch set forth in sections 2(c)-(f) hereof shall be extended for an
additional 90 days in the event that the option set forth in Section 2(b) hereof
is exercised in full prior to the initial Expiration Date (the "First Extended
Expiration Date"). Notwithstanding the foregoing, the First Extended Expiration
Date for each 60,000 Stock Traunch set forth in sections 2(d)-(f) hereof shall
be extended for an additional 90 days in the event that the option set forth in
Section 2(c) hereof is exercised in full prior to the First Extended Expiration
Date (the "Second Extended Expiration Date"). Notwithstanding the foregoing, the
Second Extended Expiration Date for each 60,000 Stock Traunch set forth in
sections 2(e)-(f) hereof shall be extended for an additional 90 days in the
event that the option set forth in Section 2(d) hereof is exercised in full
prior to the Second Extended Expiration Date (the "Third Extended Expiration
Date"). Notwithstanding the foregoing, the Third Extended Expiration Date for
the 60,000 Stock Traunch set forth in section 2(f) hereof shall be extended for
an additional 90 days in the event that the option set forth in Section 2(e)
hereof is exercised in full prior to the Third Extended Expiration Date (the
"Fourth Extended Expiration Date").
2. The Option is exercisable at the following exercise prices per share
per share (the "Purchase Price") at any time on or after the Commencement Date
and on or before the Expiration Date by (a) payment of the Purchase Price for
the Shares being purchased by the Optionee in lawful money of the United States
and (b) delivery of an executed Election to Purchase in the form of Exhibit A
hereto to Flamemaster at 11120 Sherman Way, Sun Valley California 91352 or at
such other place as Flamemaster may hereafter designate by notice to the
Optionee:
a) three ($3.00) dollars per share as to seventy five thousand
shares of Common Stock;
b) eight ($8.00) dollars per share as to sixty thousand shares of
Common Stock;
c) nine ($9.00) dollars per share as to sixty thousand shares of
Common Stock;
d) ten ($10.00) dollars per share as to sixty thousand shares of
Common Stock;
e) eleven ($11.00) dollars per share as to sixty thousand shares
of Common Stock; and
f) twelve ($12.00) dollars per share as to sixty thousand shares
of common Stock (each such traunch of 60,000 shares of Common Stock set
forth in b-f hereof is hereinafter referred to as a "Stock Traunch");
Upon the execution hereof Flamemaster shall deliver the certificates for
the Shares into escrow with a mutually agreed to brokerage firm who shall
deliver the Shares to the Optionee as set forth below upon the exercise of the
option and shall deliver the Shares to Flamemaster upon the expiration of the
option, in accordance with an escrow agreement of even date hereof. The escrow
agent shall, within five business days after any such exercise, cause the shares
of Common Stock to be DTC delivered to the designee of the Optionee.
3. Commencing on June 1, 2000, in the event that at any time the Closing
Price of the Common Stock is one hundred fifty (150%) percent above the Purchase
Price of a Stock Traunch for ten consecutive trading days, Flamemaster shall
have the right, exercisable within ten days of the tenth trading days, upon the
giving of written notice to the Optionee, to cause the Optionee to exercise the
Option as to the Stock Traunch that has the lowest purchase price as to which
the Option has not been exercised. The Optionee shall have forty five days after
the giving of such notice to exercise the Option as to such Stock Traunch.
"Closing Price" on any day when used with respect to the Common Stock means the
reported last sale price regular way on composite tape, or, if the shares of
Common Stock are not quoted on the composite tape, the reported last sale price
on the New York or the American Stock Exchange or, if the shares of Common Stock
are not listed or admitted to trading on either such Exchange, as reported on
the National Association of Securities Dealers Automated Quotation System, or if
the shares of Common Stock are not quoted on such system, the average of the
closing bid and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected by Perfectdata for that
purpose. This section 3 shall not apply to the option to purchase 75,000 shares
of Common Stock set forth in section 2(a) hereof. A notice of the exercise of
the put rights under this section 3 may only be exercised once every 90 days.
4. Subject to the provisions of this Section 3, the Purchase Price and
the number of Shares shall be subject to adjustment from time to time as
hereinafter set forth:
(a) If at any time, or from time to time, PERFECTDATA shall, by
subdivision, consolidation, or reclassification of shares, or otherwise, change
as a whole the outstanding shares of the Common Stock into a different number or
class of shares, the number and class of shares so changed shall replace the
shares outstanding immediately prior to such change and the Purchase Price and
the number of shares of the Common Stock purchasable under the Option
immediately prior to the date on which such change shall become effective shall
be proportionately adjusted.
(b) If at any time while the Option is outstanding, PERFECTDATA shall
consolidate with, or merge into, another corporation, firm or entity, or
otherwise enter into a form of business combination, the holder of the Option
shall thereafter be entitled upon exercise thereof to purchase, with respect to
the shares of the Common Stock purchasable thereunder immediately prior to the
date on which such consolidation or merger or other form of business combination
shall become effective, the securities or property which Flamemaster received
upon such consolidation or merger or other form of business combination in
exchange for such shares of the Common Stock, without any change in, or payment
in addition to, the Purchase Price in effect immediately prior to such
consolidation or merger or other form of business combination.
(c) Upon the happening of any event requiring the adjustment of the
exercise price hereunder, Flamemaster shall forthwith give written notice
thereof to the Optionee stating the adjusted Purchase Price and the adjusted
number of securities purchasable upon the exercise thereof resulting from such
event and setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
5. Flamemaster represents that the Shares are registered under the
Securities Act of 1933, as amended and are freely tradable In the event of the
Optionee assigns all or a portion of the Option, Flamemaster agrees to execute
and deliver to the assignee an Option Certificate in the form of Exhibit B
hereto. Flamemaster shall also execute and deliver to the assignor Optionee an
Option Certificate for the balance, if any, of the shares still subject to the
Option. Upon exercise as provided in Section 2 hereof, the assignee or the
assignor Optionee shall surrender the Option Certificate together with the
Election to Purchase and the payment of the Purchase Price (unless the Optionee
elects to cause Flamemaster to sell the Shares). In the event there is only a
partial exercise of the Option evidenced by the Option Certificate, Flamemaster
shall issue to the person or entity exercising the Option a new Option
Certificate evidencing the number of shares of the Common Stock still available
for exercise.
6. Flamemaster covenants and agrees that, during the term of the Option,
it will not sell or otherwise dispose of its shares of the Common Stock so that
there are no less than 375,000 shares (or such lesser number of shares as are
then issuable pursuant to the Option) available at all times for the exercise of
the Option.
7. This Agreement shall be construed and enforced in accordance with the
laws of the State of California applicable to contracts made and to be performed
in that State, without giving effect to any principle of conflicts of law.
8. All notices, requests and demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered if delivered personally, or mailed if sent via nationally
recognized overnight courier service or mailed by registered mail, postage
prepaid, return receipt requested, as follows:
If to Flamemaster, to it at:
11120 Sherman Way
Sun Valley, CA 91352
If to the Optionee, to it at:
C/o Millenium Capital Corporation
245 East 63rd Street
New York, New York 10021
or to such other address as any such party shall have designated by like notice
to the other parties hereto (except that a notice of change of address shall
only be effective upon receipt).
9. This Agreement may be executed in any number of counterparts, each of
which so executed shall be an original but all of which together shall
constitute one instrument.
10. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements of the
parties, oral and written, with respect to the subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first mentioned.
FLAMEMASTER CORPORATION
By: /s/ Joseph Mazin
----------------------------
Name: Joseph Mazin
Title: President
JDK Associates, Inc.
By: /s/ Joseph D. Kowal
----------------------------
Name: Joseph D. Kowal
Title: President
Millennium Capital Corporation
By: /s/ Harris Shapiro
----------------------------
Name: Harris Shapiro
Title: President
<PAGE>
EXHIBIT A ELECTION TO PURCHASE
To: FLAMEMASTER CORPORATION
11120 Shennan Way
Sun Valley, CA 91352
[]The Undersigned hereby irrevocably elects to exercise the Option
granted pursuant to an Agreement dated as of March __, 2000 by and among
FLAMEMASTER CORPORATION and __________________________________ to purchase
__________ shares of the Common Stock of PERFECTDATA CORPORATION issuable upon
the exercise of the Option and requests that a certificate for such shares be
issued on the name of
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(Social Security or Tax Identification Number)
and be delivered to ________________________________________________________
(Name)
at ______________________________________________________________________
(Address)
[]The Undersigned hereby irrevocably elects to exercise the Option
granted pursuant to an Agreement dated as of March __, 2000 by and among
FLAMEMASTER CORPORATION and _______________________________ to purchase
__________ shares of the Common Stock of MCY.com Inc. issuable upon the exercise
of the Option and requests that FLAMEMASTER CORPORATION sell said shares and
deliver an amount equal to the sales price minus the Purchase Price to
- -------------------------------------------------------------------------------
(Name)
- -------------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------------
(Social Security or Tax Identification Number)
and be delivered to ________________________________________________________
(Name)
at ______________________________________________________________________
(Address)
Dated:
Name of holder of Option:
- --------------------------------------------------------------------------------
(Please Print)
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(Signature)
<PAGE>
EXHIBIT B
OPTION CERTIFICATE
To:
This Option Certificate will evidence your Option to purchase
______________ shares of the Common Stock of PERFECTDATA CORPORATION pursuant to
an Agreement dated as of March _, 2000 by and among Flamemaster Corporation and
________________ .
FLAMEMASTER CORPORATION
By: _________________________________
Name:
Title:
