As Filed with the Securities and Exchange Commission on April 8, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ABC DISPENSING TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 59-2001203
------- ----------
(state or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
451 Kennedy Road
Akron, Ohio 44305
(330) 733-2841
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
CHARLES M. STIMAC, JR.
PRESIDENT
451 Kennedy Road
Akron, Ohio 44305
(330) 733-2841
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
WITH A COPY TO:
Lee A. Albanese, Esq.
St. John & Wayne, L.L.C.
70 East 55th Street
New York, New York 10022
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO
TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Proposed Maximum Maximum Amount of
Amount to be Offering Price Aggregate Registration
Title of each Class of Securities to be Registered Registered Per Share Offering Price Fee
------------ ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share, 257,500(1)(5) $2.00(2) $ 515,000.00 $ 156.06
Underlying Common Stock Purchase Warrants and Options 10,000(1)(5) $3.00(2) $ 30,000.00 $ 9.09
20,000(1)(5) $3.375(2) $ 67,500.00 $ 20.45
700,000(1)(5) $3.50(2) $ 2,450,000.00 $ 742.42
30,000(1)(5) $2.25(2) $ 67,500.00 $ 20.45
300,000(1)(5) $1.375(2) $ 412,500.00 $ 124.99
40,000(1)(5) $1.25(2) $ 50,000.00 $ 15.15
10,000(1)(5) $3.50(2) $ 35,000.00 $ 10.61
90,000(1)(5) $1.25(2) $ 112,500.00 $ 34.09
100,000(1)(5) $1.25(2) $ 125,000.00 $ 37.88
381,000(1)(5) $1.125(2) $ 428,625.00 $ 129.89
80,000(1)(5) $ .844 $ 67,500.00 $ 20.45
134,000(1)(5) $1.25(2) $ 167,500.00 $ 50.76
3,837,500(1)(5) $1.25(2) $ 4,796,875.00 $1,453.60
Common Stock, par value $.01 per share, issuable in 690,750(3)(5) $1.453(6) $ 1,003,659.75(6) $ 304.12
payment of dividends on Preferred Stock
Common Stock, par value $.01 per share, issuable upon 3,837,500(4)(5) $1.00(2) $ 3,837,500.00 $1,162.88
conversion of Preferred Stock
TOTAL 10,518,250 ----- $14,166,659.75 $4,292.89
</TABLE>
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(1) Issuable upon exercise of the Warrants (as defined in the Prospectus).
(2) The offering price per share is calculated pursuant to Rule 457(g).
(3) Issuable in lieu of cash dividends payable on the Preferred Stock (as
defined in the Prospectus).
(4) Issuable upon conversion of the Preferred Stock (as defined in the
Prospectus).
(5) Pursuant to Rule 416, there are also registered hereby such additional
indeterminate number of shares of Common Stock as may be issuable by
reason of the anti-dilution provisions of such Warrants and Preferred
Stock.
(6) Estimated pursuant to Rule 457(c) solely for purposes of calculating
the amount of the registration fee, based upon the average of the high
and low prices reported on March 25, 1998 as reported on the NASDAQ
Small Cap Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR THAT PERSON TO MAKE AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
UNDER THIS PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT
THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS.
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
Item of Form S-1 Prospectus Location
---------------- -------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Facing Page; Cross Reference Sheet; Outside Front Cover Page
Outside Front Cover Page of Prospectus of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page of Prospectus
of Prospectus
3. Summary Information, Risk Factors, Ratio of Risk Factors; Inapplicable as to Summary and Ratio of Earnings
Earnings to Fixed Charges to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Inapplicable
6. Dilution Inapplicable
7. Selling Security Holders Inapplicable
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of Capital Stock; Stock Price and Dividend Policy
10. Interests of Named Experts and Counsel Legal Matters, Experts
11. Information with Respect to the Registrant
(a) Description of Business Business
(b) Description of Property Business
(c) Legal Proceedings Business
(d) Dividends and Related Dividend Policy
Stockholder Matters
(e) Financial Statements Financial Statements and Financial Statement Schedules
(f) Selected Financial Data Selected Financial Data
(g) Supplementary Financial Inapplicable
Information
(h) Management's Discussions Management's Discussions and Analysis of Financial Condition
and Analysis of Financial and Results of Operations
Condition and Results of
Operations
(i) Changes in Accountants Changes in Accountants
(j) Directors and Executive Management
Officers
(k) Executive Compensation Management
(l) Security Ownership Security Ownership of Certain Beneficial Owners and
Management
</TABLE>
<PAGE>
PROSPECTUS
ABC DISPENSING TECHNOLOGIES, INC.
10,518,250 Shares of Common Stock
The securities of ABC Dispensing Technologies, Inc. (the "Company"), to which
this Prospectus relates (the "Securities"), include the following: 5,990,000
shares of the Company's common stock, $.01 par value per share ("Common Stock")
issuable by the Company (the "Warrant Shares") upon exercise of certain common
stock purchase warrants and options (collectively, the "Warrants"), 3,837,500
shares of Common Stock (the "Conversion Shares") issuable upon conversion of
shares of the Company's issued and outstanding 9% Convertible Cumulative
Redeemable Preferred Stock, Series A ("Preferred Stock") and 690,750 shares of
Common Stock issuable in payment of dividends on the Preferred Stock (the
"Dividend Shares").
The Securities being offered hereby by the Company are being offered to permit
the issuance of registered stock upon the exercise of the Warrants, conversion
of the Preferred Stock into Common Stock, and in payment of dividends on the
Preferred Stock. See "Plan of Distribution."
Additionally, this Prospectus has been prepared for use, with the prior consent
of the Company, by certain holders of the Warrants, who will acquire Warrant
Shares upon exercise of Warrants and who may wish to sell such shares in
transactions in which they may (because of their relationship to the Company) be
deemed to be underwriters within the meaning of the Act.
The Company's Common Stock is presently listed on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") Small Cap Market System under
the symbol "ABCC." The average of the closing bid and asked price for the Common
Stock as reported by NASDAQ on March 25, 1998 was $1.485.
Other than the proceeds equal to the exercise price of the Warrants exercised,
the Company will receive no cash proceeds from the distribution of the
Securities offered hereby.
This Prospectus also relates to such additional shares of Common Stock which may
be issuable pursuant to the anti-dilution provisions of the Warrants and
Preferred Stock, which shares are being registered pursuant to Rule 416
promulgated under the Act.
SEE "RISK FACTORS" FOR CERTAIN MATTERS TO BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THE PROSPECTUS IS APRIL 7, 1998
1
<PAGE>
TABLE OF CONTENTS
Available Information.......................................................2
Risk Factors................................................................3
The Company.................................................................4
Use of Proceeds.............................................................4
Plan of Distribution........................................................5
Stock Price and Dividend Policy.............................................6
Selected Financial Data.....................................................7
Management's Discussion and Analysis of
Financial Condition and Results of Operations......................9
Business...................................................................16
Change In Accountants......................................................20
Management.................................................................21
Security Ownership of Certain Beneficial
Owners and Management.............................................24
Certain Transactions.......................................................25
Description of Capital Stock...............................................26
Legal Matters..............................................................29
Experts....................................................................29
Index to Financial Statements.............................................F-1
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, the Company files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements and other information can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549; and
at the regional offices of the Commission at Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such materials can be obtained
from the Public Reference Section of the Commission, in 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such reports and other
information may be electronically accessed at the Commission's site on the World
Wide Web located at http://www.sec.gov.
The Company has filed a Registration Statement on Form S-1 (together with all
amendments thereto referred to herein as the "Registration Statement") under the
Act with the Commission, covering the shares of Common Stock being offered by
this Prospectus. This Prospectus does not contain all the information set forth
or incorporated by reference in the Registration Statement and the exhibits and
schedules relating thereto, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits and
schedules thereto which are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the offices of the Commission. Statements contained
in this Prospectus as to the contents of any contract or other documents
referred to are not necessarily complete, and are qualified in all respects by
such reference.
2
<PAGE>
RISK FACTORS
The Securities offered hereby involve a high degree of risk. Prospective
investors should carefully consider, along with the other information contained
herein, the following risk factors before purchasing any Securities offered
hereby:
1. HISTORY OF LOSSES; ADDITIONAL CAPITAL REQUIREMENTS. The Company has
reported a net loss for each year of operation since its inception except for
the fiscal year ended April 30, 1989, in which it reported net income of
$154,000. For the nine months ended January 24, 1998, the Company reported a net
loss of $1,033,000 on revenues of $4,511,000 as compared to a net loss of
$1,650,000 on revenues of $2,565,000 for the comparable period in the previous
fiscal year. The Company reported a net loss of $2,968,000 on revenues of
$3,073,000 for the fiscal year ended April 26, 1997, as compared to a net loss
of $1,324,000 on revenues of $5,312,000 for the fiscal year ended April 27, 1996
and a net loss of $2,681,000 on revenues of $3,359,000 for the fiscal year ended
April 29, 1995. As a result, the Company requires capital resources to fund
operating losses as well as research and development expenditures. It is
anticipated that the expenditures associated with continued research and
development will cause the Company to incur operating losses and cash flow
deficiencies until such time, if any, as the Company generates sufficient
additional revenues from operations. Accordingly, the Company will be required
to seek alternative sources of working capital with funds from additional equity
or debt financings or joint venture or other collaborative arrangements. No
assurance can be given that any such additional funds will be available to the
Company on acceptable terms, if at all. If adequate funds are not available from
operations or additional sources of financing, the Company's business will be
materially adversely affected.
2. UNCERTAINTY AS TO CONTINUATION AS A GOING CONCERN. The Company's
history of operating losses and limited capital resources have caused the
Company's independent auditors to include in their reports for the fiscal years
ended April 26, 1997 and April 27, 1996 a paragraph expressing substantial doubt
regarding the Company's ability to continue as a going concern.
3. UNCERTAINTY OF MARKET ACCEPTANCE. The success of the Company's
dispensing systems will depend heavily on the Company's ability to gain
acceptance, both domestically and internationally, of leading companies in
industrial, food service and other markets. Acceptance of the Company's
technology by industry leaders will be determined in large part by the Company's
ability to access such entities and to demonstrate the performance features and
cost benefits of its dispensing products. The Company has had limited success to
date in the paint industry and the beverage industry. No assurance can be given
that the Company's dispensing technology will meet with general market
acceptance.
4. DEPENDENCE ON MAJOR CUSTOMER. During the first nine months of Fiscal
1998, one customer, The Home Depot, Inc., accounted for 90% of the Company's
total revenues. During the fiscal years ended April 26, 1997 and April 27, 1996,
one customer, Sherwin-Williams, accounted for 54% and 72%, respectively, of the
Company's revenues. The Company currently has no orders from Sherwin-Williams
and does not expect significant revenues from sales to Sherwin-Williams in the
near future. While the effect of the loss of revenues from Sherwin-Williams has
been somewhat mitigated by the revenues generated from Home Depot, a loss of
revenues from Home Depot would have a material adverse effect on the Company's
revenues and there can be no assurance that the Company would be able to replace
the revenues from such loss.
5. COMPETITION. The controlled measurement and dispensing equipment
industry is highly competitive and dominated by several large companies with
substantially greater financial resources and name recognition than the Company.
Many of these companies have extensive experience, possess substantially greater
financial, technological and personnel resources than the Company and,
particularly in the food service industry, have received the approval and
support of industry leaders commanding large market shares. No assurance can be
given that the Company will be able to compete successfully in the controlled
measurement and dispensing equipment industry.
6. DIVIDEND POLICY. The Company has not paid dividends on its Common
Stock since its inception and, by reason of its present financial condition and
its projected financial needs, it does not contemplate paying dividends in the
foreseeable future on the Company's Common Stock.
7. SHARES ELIGIBLE FOR FUTURE SALE. Sales of the Company's Common Stock
in the public market by current shareholders of the Company could adversely
affect the market price of the Common Stock. Assuming the exercise of the
Warrants, conversion of the Preferred Stock and payment of Preferred Stock
dividends with Common Shares, 10,518,250 shares of Common Stock may be offered
for sale in the public market. The Company has registered with the Commission an
aggregate of approximately 600,000 shares of Common Stock in several
registration statements filed by the Company for continuous or delayed sales. In
addition, the Company has approximately an aggregate of 291,000 shares issued
and outstanding which are "restricted" in accordance with Rule 144 of the
Regulations promulgated under the Securities Act of 1933. The Company cannot
predict the extent to which the market sales of the Common Stock or the
availability of such Common Stock will have an adverse effect on the market
price for such stock.
8. NASDAQ LISTING. The Company is currently out of compliance with the
NASDAQ'S capital and surplus requirement, as set forth in NASD Marketplace Rule
4310(c)(02) which became effective February 23, 1998. To meet the new minimum
listing requirement, the Company must maintain net tangible assets of at least
$2,000,000. As of February 28, 1998, the Company had $1,062,180 of net tangible
assets. The Company has provided the NASDAQ with a written appeal, requesting
additional time within which to comply with the minimum net tangible asset rule.
The appeal is based on, among other things, the pending success of the Company's
capital raising activites. The delisting has been stayed pending the appeal.
There can be no assurance that the Company's appeal will be successful, or that
if such appeal is granted, that the Company will in fact attain the requisite
amount of net tangible assets. If the NASDAQ delists the Company's Common Stock,
the market price thereof and the efficiency of the trading market therefor may
be materially adversely affected.
3
<PAGE>
THE COMPANY
The Company designs proprietary dispensing systems which dispense and
blend liquids, powders and other ingredients to a uniform and high degree of
accuracy. The Company also custom designs and manufactures its own proprietary
dispensing equipment to meet the needs of its customers, using standard
micro-processors. The Company's technology is protected by 33 useful patents and
5 patents pending. The Company's long-term objective is to be a worldwide source
of dispensing technology possessing substantial marketing capabilities
consisting of industry-specific marketing divisions.
The Company offers a complete range of dispensing technology
commercialization services. In addition to custom design and manufacturing, the
Company also provides training, installation and product service. Dispensing is
an integral part of a large number of manufacturing processes. In many
industries, dispensing is a mechanical function and one of the few operations
that remains largely untouched by advanced technology.
To date, the Company has developed unique dispensing systems for the
beverage, paint, chemical coatings, concrete and animal-husbandry industries.
Virtually all of the Company's revenues to date have been derived from the sale
of its computerized paint-tint dispensing system and its beverage dispensing
systems.
The Company has recently completed a thorough internal review of
operations, marketing and strategic planning. As a result, the Company has
refocused its resources and efforts on its paint dispensing and juice dispensing
product lines. On April 18, 1997 the Company terminated its exclusive agreement
(the "Sherwin-Williams Agreement") with The Sherwin-Williams Company
("Sherwin-Williams") pursuant to which agreement the Company sold its
paint-dispensing systems exclusively to Sherwin-Williams. The termination of the
Sherwin-Williams Agreement allowed the Company to pursue other customers in the
paint industry. On February 12, 1997, the Company received a multi-million
dollar order for 300 of its new, self-calibrating universal paint-tint
dispensing systems from The Home Depot, Inc. ("Home Depot"). Delivery of the
Company's systems to Home Depot commenced in May 1997 and is expected to be
completed during the current fiscal year. The Company anticipates, though there
can be no assurances, that Home Depot's order constitutes the initial phase of a
system-wide roll-out to Home Depot's entire 500-plus store network, with one to
three units of the Company's tinting system expected to be installed in each
store.
On June 25, 1997 the Company announced the formation of "Virtual
Squeeze"(TM), a joint venture with Damon Industries Inc., a Nevada based juice
manufacturer and distributor. Virtual Squeeze has targeted the $3 billion
institutional juice market with a self-contained, refrigerated dispenser
designed to use shelf stable, bag in the box concentrates. Current plans provide
for the free installation and service of the dispensing equipment provided that
only Virtual Squeeze(TM) products are used. The joint venture will generate
revenues from on-going juice sales. The Company and Damon Industries will share
in the resulting profits or losses equally. The Company believes the Virtual
Squeeze(TM) equipment is the only known juice dispenser specifically designed to
use shelf stable products.
During fiscal 1997, the Company discontinued marketing efforts with
respect to its Classic(TM) line of soft drink dispensers, due to narrow margins
and resistance from major soft drink suppliers to support the equipment. The
Company is exploring opportunities to capitalize on its Classic(TM) product
line, including potential strategic partnerships, technology licenses and/or
sale of the Classic(TM) product line.
The Company is a corporation organized under the laws of Florida in
1980. In May 1996, the Company changed its name from American Business Computers
Corporation to ABC Dispensing Technologies, Inc. The Company's principal
executive offices are located at 451 Kennedy Road, Akron, Ohio 44305, and its
telephone number is (330) 733-2841.
USE OF PROCEEDS
The Company will only receive proceeds from the exercise of the
Warrants and the issuance of the Warrant Shares. The 5,990,000 Warrant Shares
are being registered to provide the holders of the Warrants with freely
tradeable Common Stock upon exercise. If all the Warrants are exercised, the
Company will receive aggregate gross proceeds of approximately $9,327,000. No
assurance can be given, however, that all or any portion of the Warrants will be
exercised. If any of the Warrants are exercised, the Company intends to use the
proceeds for general corporate purposes.
4
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale of 5,990,000 shares of
Common Stock by the Company upon the exercise of the Warrants, 690,750 shares of
Common Stock issuable in payment of dividends on the Company's Preferred Stock
and 3,837,500 shares of Common Stock by the Company upon conversion of shares of
the Preferred Stock.
The shares of Common Stock issuable upon exercise of the Warrants, in
payment of dividends and upon conversion of the Preferred Stock will be issued
and distributed by the Company pursuant to the terms and conditions of the
Warrants and Preferred Stock. Such Common Stock is being registered pursuant to
the Act and offered by the Company hereby to permit the issuance by the Company
of registered stock upon the exercise of the Warrants in payment of dividends
and upon conversion of the Preferred Stock in accordance with their respective
terms. Additional shares of Common Stock may be issuable pursuant to the
anti-dilution provisions of the Warrants and Preferred Stock, which shares are
also being registered hereby pursuant to Rule 416 promulgated under the Act. If
all of the Warrants registered hereby are exercised, the Company will receive
aggregate cash proceeds of approximately $9,327,000. See "Use of Proceeds."
From time to time, the Company may amend this Prospectus by Prospectus
Supplements or post-effective amendments to the Registration Statement of which
this Prospectus is a part, to offer Warrant Shares and Conversion Shares
obtained by persons pursuant to the exercise of the Warrants or Conversion of
Shares of Preferred Stock, which persons may, by virtue of their relationship to
the Company, be deemed underwriters under the Act.
The Warrants consist of fourteen different classes of securities
described as follows:
(1) common stock purchase warrants issued in a private placement
during the summer of 1995 covering an aggregate of 257,500
shares of Common Stock with an exercise price of $2.00 per
share and an expiration date of June 1, 1998;
(2) common stock purchase options issued to officers of the
Company in August 1995 covering an aggregate of 10,000 shares
of Common Stock with an exercise price of $3.00 per share and
an expiration date of April, 2000;
(3) common stock purchase options issued as compensation to
certain officers of the Company in May 1995 covering an
aggregate of 20,000 shares of Common Stock with an exercise
price of $3.375 per share and an expiration date of May, 2000.
(4) common stock purchase warrants issued as part of the
settlement of a litigation in September and November 1995
covering an aggregate of 700,000 shares of Common Stock with
an exercise price of $3.50 per share and an expiration date of
November, 2000;
(5) common stock purchase options issued as compensation to a
commissioned agent in December 1995 covering 30,000 shares of
Common Stock with an exercise price of $2.25 per share and an
expiration date of December, 2000;
(6) common stock purchase warrants issued as compensation to an
officer of the Company in July 1996 covering 300,000 shares of
Common Stock with an exercise price of $1.375 per share and an
expiration date of July 2006;
(7) common stock purchase warrants issued as compensation to
an officer of the Company in October 1996 covering 15,000
shares of Common Stock with an exercise price of $1.25 per
share and an expiration date of October, 2001;
(8) common stock purchase warrants issued in September, 1996 as
compensation for consulting services provided covering 10,000
shares of Common Stock with an exercise price of $3.50 per
share and an expiration date of September, 2001 and 25,000
shares of Common Stock with an exercise price of $1.25 per
share and an expiration date of September, 2001;
(9) common stock purchase warrants issued as compensation to
directors of the Company in January and February 1997 covering
90,000 shares of Common Stock with an exercise price of $1.25
per share and an expiration date of February, 2002;
(10) common stock purchase warrants issued as compensation to an
officer of the Company in March, 1997 covering 100,000 shares
of Common Stock with an exercise price of $1.25 per share and
an expiration date of March, 2007;
(11) common stock purchase warrants issued as incentive to 42
employees in May, 1997 covering 381,000 shares of Common Stock
with an exercise price of $1.125 per share and an expiration
date of May, 2002.
(12) common stock purchase warrants issued as compensation to
directors of the Company in October, 1997 covering 80,000
shares of Common Stock with an exercise price of $.844 per
share and an expiration date of October, 2007.
5
<PAGE>
(13) common stock purchase warrants associated with Notes Payable
issued by the Company covering 134,000 shares of Common Stock
with an exercise price of $1.25 per share and an expiration
date five years from their date of issuance.
(14) common stock purchase warrants which are eligible for issuance
upon conversion of the Company's Preferred Stock at a price of
$1.25 per share and an expiration date five years from their
date of issuance.
The Preferred Stock issued in connection with a private placement in
December 1996 and January and February 1997 consists of 307 shares of 9%
Convertible Cumulative Redeemable Preferred Stock, Series A, each convertible
into shares of Common Stock at a price of $1.00 per share and Common Stock
Purchase Warrants to purchase an equal number of shares of Common Stock as
received upon conversion, exercisable at a price of $1.25 per share. Each share
of Preferred Stock is entitled to receive dividends semi-annually and may be
redeemed by the Company at any time upon thirty (30) days' written notice.
In order to comply with certain states' securities laws, if applicable,
the Common Stock issuable upon exercise of the Warrants will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In certain
states, the Common Stock issuable upon exercise of the Warrants may not be sold
unless such Common Stock has been registered or qualified for sale in such
state, or unless an exemption from registration or qualification is available
and is obtained.
TRANSFER AGENT
The Transfer Agent for the Common Stock is American Stock Transfer &
Trust Company, 40 Wall Street, New York, New York 10005.
STOCK PRICE AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq Small Cap Market
under the symbol "ABCC". The following table sets forth the high and low closing
sale prices of the Company's Common Stock as reported on the Nasdaq Small Cap
Market for the periods indicated.
FISCAL 1996 HIGH LOW
---- ---
First Quarter.................................. 3 7/16 2 1/4
Second Quarter................................. 3 7/16 2 5/16
Third Quarter.................................. 3 3/16 1 7/8
Fourth Quarter................................. 2 1/8 1 9/16
FISCAL 1997
First Quarter.................................. 2 1/8 1 3/16
Second Quarter................................. 1 7/16 13/16
Third Quarter.................................. 2 1/16 11/16
Fourth Quarter................................. 2 1/4 1 1/6
6
<PAGE>
FISCAL 1998 HIGH LOW
---- ---
First Quarter.................................. 1 3/16 27/32
Second Quarter................................ 1 5/16 25/32
Third Quarter.................................. 1 1/4 17/32
Fourth Quarter (Through March 25, 1998)........ 1 5/8 7/8
On March 25, 1998, the last sale price of the Common Stock reported on
the Nasdaq Small Cap Market was $1.500 per share. At March 25, 1998, the
approximate number of holders of record of the Common Stock was 1,080.
The Company has never paid cash dividends on its capital stock and does
not intend to pay cash dividends for the foreseeable future. The Company expects
that earnings will be retained for the continued growth and development of the
Company's business. Future dividends, if any, will depend upon the Company's
earnings, financial condition, working capital requirements, compliance with
covenants in agreements to which the Company is or may be subject, future
prospects and other factors deemed relevant by the Company's Board of Directors.
SELECTED FINANCIAL DATA
The selected financial data for each of the years ended April 30, 1994
and 1993 are derived from financial statements of the Company not included
herein. The selected financial data for the two years in the period ended April
27, 1996 are derived from the financial statements of the Company, included
elsewhere herein, which have been audited by Ernst & Young LLP, independent
auditors, as stated in their report appearing elsewhere herein. The selected
financial data for the year ended April 26, 1997 are derived from the financial
statements of the Company, included elsewhere herein, which have been audited by
Grant Thornton LLP, independent auditors, as stated in their report appearing
elsewhere herein. The selected financial data for the nine months ended January
24, 1998 and January 25, 1997 are derived from the financial statements of the
Company, included elsewhere herein, and are unaudited. The financial data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements, including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE FISCAL YEARS ENDED
- ------------------------------------------------------------------------------------------------------------------------------------
JAN. 24, JAN. 25, APRIL 26, APRIL 27, APRIL 29, APRIL 30, APRIL 30,
1998 1997 1997 1996 1995 1994 1993
------- ------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES(a) $4,511,000 $2,565,000 $3,073,000 $5,312,000 $3,359,000 $5,010,000 $2,329,000
NET LOSS $(1,033,000) $(1,650,000) ($2,968,000) ($1,324,000) ($2,681,000) ($1,378,000) ($3,359,000)
WEIGHTED AVERAGE 17,178,863 17,067,493 17,074,000 16,414,000 15,669,000 14,155,000 13,820,000
NUMBER OF SHARES
OUTSTANDING
NET LOSS PER SHARE - ($0.07) $(0.10) ($0.17) ($0.08) ($0.17) ($0.10) ($0.24)
BASIC AND DILUTED
TOTAL $3,562,000 $3,683,000 $3,350,000 $4,020,000 $3,719,000 $4,190,000 $4,102,000
ASSETS
LONG-TERM $ 265,000 $ 279,000 $283,000 $294,000 $278,000 $-0- $-0-
OBLIGATIONS
STOCKHOLDERS' $1,167,000 $2,433,000 $1,635,000 $1,085,000 $515,000 $2,194,000 $2,011,000
EQUITY
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE FISCAL YEARS ENDED
- -----------------------------------------------------------------------------------------------------------------------------------
JAN. 24, JAN. 25, APRIL 26, APRIL 27, APRIL 29, APRIL 30, APRIL 30,
1998 1997 1997 1996 1995 1994 1993
------- ------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
DIVIDENDS $-0- $-0- $-0- $-0- $-0- $-0- $-0-
DECLARED
PER SHARE OF
COMMON
STOCK
RESEARCH & $924,000 $344,000 $629,000 $714,000 $606,000 $386,000 $391,000
DEVELOPMENT (a)
</TABLE>
(a) Research & Development costs include costs subject to reimbursement under
various agreements. The amounts earned under these agreements are included in
revenues for the respective years.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT ORDER
On February 12, 1997, the Company announced that it received an initial
multi-million dollar order for its new, self-calibrating, universal paint-tint
dispensing system. The order was received from The Home Depot, Inc., North
America's largest home improvement retailer. The order is for 300 units of ABC's
new automatic tinting system, tradenamed "Royal Match." Commercial delivery
commenced in May, 1997, and will be completed during fiscal year 1998. This is
the initial phase of an anticipated roll out to The Home Depot's entire 500-plus
store network in 34 states and three Canadian provinces, with one to three units
of the tinting system expected to be installed per store. The unit has been
designed to interface with The Home Depot's networked point-of-sale system.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 24, 1998 COMPARED TO NINE MONTHS ENDED
JANUARY 25, 1997
The Company's net loss the first three quarters of fiscal 1998 decreased
$617,000, or 37.4%, to $1,033,000, from the $1,650,000 net loss for the
corresponding period of the prior year. The net loss for the third quarter of
fiscal 1998 decreased $22,000, or 8.3%, to $244,000, from the $266,000 net loss
for the third quarter of the prior year.
While revenues have increased significantly (see below), losses have not
decreased proportionately. This is due to $321,000 of costs being deferred into
future periods in the third quarter of fiscal 1997. The deferred costs relate to
the adaption of the ROYAL MATCH(TM) tint system to meet the specific needs of
The Home Depot. Had the costs not been deferred, the net loss for the first
three quarters of fiscal 1998 and fiscal 1997 would have been $863,000 and
$1,971,000, respectively. The decrease in net loss for the first three quarters
of fiscal 1998 would have been $1,108,000, or 56.2%, from the same period in the
prior year. The net loss for the third quarter of fiscal 1997 would have been
$587,000. The decrease in net loss for the third quarter of fiscal 1998 would
have been $343,000, or 58.4%, from the net loss for the third quarter of fiscal
1997. The costs were amortized over a period of 11 months and were fully
amortized as of October 25, 1997.
REVENUES
<TABLE>
<CAPTION>
Nine Months Ended Third Quarter Ended
January 24, January 25, January 24, January 25,
1998 1997 1998 1997
----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
(in thousands)
Equipment sales $ 4,088 $ 2,028 $ 1,857 $ 216
Service revenues 423 537 138 211
------ ------ ------ ----
TOTAL $ 4,511 $ 2,565 $ 1,995 $ 427
====== ====== ====== ====
</TABLE>
Equipment sales for the first three quarters of fiscal 1998 increased
$2,060,000, or 101.6%, over the first three quarters of fiscal 1997. The
increase is due to $2,388,000 in increased sales of paint colorant dispensers
which were partially offset by decreases of $241,000 in beverage equipment sales
and $87,000 in industrial equipment sales and project development revenues.
Equipment sales for the third quarter of fiscal 1998 increased $1,641,000, or
759.7%, over the third quarter of fiscal 1997. This increase is due to
$1,792,000 in increased sales of paint colorant dispensers which were partially
offset by decreases of $124,000 in beverage equipment sales and $27,000 in
industrial equipment sales and project development revenues.
9
<PAGE>
The increase in sales of paint colorant dispensers is due to the Company not
having any orders for paint colorant dispensers from the middle of the second
quarter to the end of the third quarter of fiscal 1997. The decrease in sales of
beverage equipment is due to the company discontinuing its' Omnitron(tm) soft
drink line of beverage dispensers in the second quarter of fiscal 1997. The
decrease in sales of industrial equipment and project development revenues is a
result of the company focusing on the paint and institutional juice markets. The
Company's current strategy is to develop only products for which there is a
known market need and customers who are committed to the product.
Service revenues for the first three quarters of fiscal 1998 were down $114,000,
or 21.2% from the first three quarters of fiscal 1997. The decrease was due to a
$191,000 decrease in sales of replacement parts which was partially offset by a
$72,000 increase in service labor revenues. Service revenues for the third
quarter of fiscal 1998 decreased $73,000, or 34.6% from the third quarter of
fiscal 1997. The decrease was due to a $114,000 decrease in sales of replacement
parts which was partially offset by a $41,000 increase in service labor
revenues. Sales of replacement parts are down due to discontinuation of the
TINT-A-COLOR(tm) paint colorant dispensers and the Omnitron(tm) soft drink
dispensers. Service labor revenues have increased due to installation charges on
sales of ROYAL MATCH(tm) paint colorant dispensers.
GROSS MARGINS
<TABLE>
<CAPTION>
Nine Months Ended Third Quarter Ended
January 24, January 25, January 24, January 25,
1998 1997 1998 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Equipment 34.3% 31.0% 31.4% 18.4%
======= ======= ===== =======
Service (5.2)% (25.9)% 0.7% (37.8%)
======= ======= ===== =======
Total 30.6% 19.1% 30.0% (0.9%)
======= ======= ===== =======
</TABLE>
For the first three quarters of fiscal 1998, gross margin as a percentage of
sales on equipment increased 3.3 points over the first three quarters of fiscal
1997. For the third quarter of fiscal 1998, gross margin as a percentage of
sales on equipment increased 13 points over the third quarter of fiscal 1997.
The increases resulted from changes in product mix caused by the cessation of
shipments to Sherwin-Williams in the second quarter of FY 1997 and the Company's
withdrawal from the soft drink market.
For the first three quarters of fiscal 1998, gross margin as a percentage of
service revenues increased 20.7 points over the first three quarters of fiscal
1997. For the third quarter of fiscal 1998, gross margin as a percentage of
service revenues increased 38.5 points over the third quarter of fiscal 1997.
These increases are primarily due to increased equipment installation revenues
and a decline in low (or negative) margin service on soft drink equipment
resulting from the discontinuation of the Omnitron (tm) soft drink dispensers.
Additionally, in fiscal 1997, the Company had negotiated with Sherwin-Williams
to retrofit existing paint colorant dispensers at a price equal to the Company's
cost.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $217,000, or 16.9%, to $1,064,000
in the first three quarters of fiscal 1998, down from $1,281,000 for the same
period of the prior year. Severance expense of $221,000 which was incurred in
the first three quarters of fiscal 1997 and a decreases in payroll expense and
travel expense of $201,000 and $26,000, respectively, during the first three
quarters of fiscal 1998 are primarily responsible for the decrease. These
decreases were partially offset by an increase in amortization of deferred
charges of $152,000 and increased legal and professional fees of $79,000 in the
first three quarters of fiscal 1998. The increase in legal and professional fees
relates to raising capital, corporate governance and shareholder communications.
For the third quarter of fiscal 1998, general and administrative expenses
increased $63,000, or 23.5%, to $331,000, up from $268,000 for the third quarter
of fiscal 1997. The increase is attributable to $77,000 of increased
amortization expense related to deferred charges. This increase was partially
offset by individually immaterial decreases in various expenses aggregating
$14,000.
10
<PAGE>
SELLING AND MARKETING EXPENSES
For the first three quarters of fiscal 1998, selling and marketing expenses
decreased $133,000, or 28.3%, to $337,000, down from $470,000 for the first
three quarters of fiscal 1997. The decrease was primarily due to sales and
marketing personnel performing more research and development, and administrative
activities in the first three quarters of fiscal 1998 than in same period of the
prior year. The allocation of sales and merchandising payroll expense to
research and development and general and administrative expense was responsible
for $103,000 of the decrease. The decreased selling and marketing activity also
resulted in a decrease of $30,000 in travel expense during the first three
quarters of fiscal 1998, as compared to the same period of the prior year.
Selling and marketing expense decreased $50,000, or 30.3%, to $115,000 in the
third quarter of fiscal 1998, down from $165,000 for the same period of the
prior year. A decrease in marketing activity led to decreased payroll expense of
$20,000 and decreased travel expense of $30,000 in the third quarter of fiscal
1998, as compared to the same period of the prior year.
RESEARCH AND DEVELOPMENT EXPENSES
For the first three quarters of fiscal 1998 research and development expenses
increased $580,000, or 168.8%, to $924,000, up from $344,000 for the first three
quarters of fiscal 1997. For the third quarter of fiscal 1998, research and
development expenses increased $365,000, or 776.6%, to $318,000, up from a
negative $47,000 in fiscal 1997. The increase in research and development
expenses is due to continued development of, and enhancements to, the ROYAL
MATCH(TM) paint colorant dispenser, the CHECK MATE(TM) software which controls
the ROYAL MATCH(TM), and the VIRTUAL SQUEEZE(TM) juice dispenser.
OTHER INCOME AND EXPENSE
For the first three quarters of fiscal 1998, interest expense increased $25,000,
or 33.8%, to $99,000, up from $74,000 for the first three quarters of fiscal
1997. For the third quarter of fiscal 1998, interest expense increased $31,000,
or 258.3%, up from $12,000 for the third quarter of fiscal 1997. The increases
are due to higher debt balances in fiscal 1998.
Other income increased $19,000, or 118.8%, to $35,000 in the first three
quarters of fiscal 1998, up from $16,000 for the first three quarters of fiscal
1997. The increase is attributable to reversing an estimated liability and
related expense of $58,000. The underlying matter was ultimately settled without
cost to the Company. This increase credited to other income was partially offset
by the write-off of patents-pending of $39,000. For the third quarter of fiscal
1998, other expense was $30,000, a decrease of $43,000, or (330.8)% from the
$13,000 other income for fiscal 1997. The decrease was primarily due to the
write-off of patents-pending of $39,000.
11
<PAGE>
FISCAL 1997 COMPARED TO FISCAL 1996
The net loss for FY 1997 was $2,968,000, an increase of $1,644,000, or 124% over
the net loss of $1,324,000 for FY 1996. The Company's consolidated results of
operations for the two years are summarized below:
Revenues FY 1997 FY 1996
- -------- ------- -------
Equipment sales $ 2,427,000 $ 4,258,000
Service revenues 646,000 799,000
Royalties - 255,000
---------- ----------
TOTAL $ 3,073,000 $ 5,312,000
========== ==========
Equipment sales for FY 1997 were $2,427,000, a decrease of $1,831,000, or 43%,
from FY 1996 equipment sales of $4,258,000. The decrease was primarily due to a
$1,504,000 decline in sales of paint colorant dispensers to The Sherwin-
Williams Company. The production and shipment of equipment to fill the
Sherwin-Williams order was completed during the second quarter of FY 1997 and no
additional orders for equipment were received from Sherwin-Williams. Sales of
beverage equipment decreased $227,000 due to the Company's withdrawal from the
soft drink market in FY 1997. Additionally, project development revenues
decreased in FY 1997 are responsible for the remaining $100,000 decrease. The
Company's new strategy to develop only products for which there is a known
market need led to the decrease in project development revenues.
Service revenues for FY 1997 were $646,000, a decrease of $153,000, or 19.1%,
from FY 1996 service revenues of $799,000. The decrease was due to decreased
installation revenue from Sherwin-Williams as their order was completed in the
second quarter of FY 1997, and decreased service revenue on soft drink equipment
as the Company withdrew from the soft drink market in FY 1997.
Royalty revenues for FY 1997 decreased $255,000, or 100%, from FY 1996. The
absence of royalty revenues in FY 1997 was due to the termination of the
Company's relationship with Sherwin-Williams.
Gross Margins FY 1997 FY 1996
- ------------- ------- -------
Equipment 29.9% 30.8%
==== ====
Service (41.1)% (20.7)%
==== ====
Total 15.0% 23.0%
==== ====
In FY 1997, gross margin as a percentage of sales on equipment decreased 0.9
points to 29.9%, down from 30.8% in FY 1996. The decrease was due to a change in
product mix caused by the cessation of shipments to Sherwin-Williams in the
second quarter of FY 1997 and the Company's withdrawal from the soft drink
market.
Gross margin as a percentage of service revenue in FY 1997 decreased 20.4 points
to a negative 41.1%, down from a negative 20.7% in FY 1996. The decrease was
primarily due to the Company terminating its relationship with Sherwin-Williams
and the Company's withdrawal from the soft drink market. Service expenses did
not decrease with the decline in revenues. Additionally, the Company had
negotiated with Sherwin-Williams to retrofit existing paint colorant dispensers
at a price equal to the Company's cost.
12
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased $891,000, or 80.6%, to $1,997,000
in FY 1997, up from $1,106,000 in FY 1996. The increase was attributable to
$509,000 in management reorganization and related payroll costs; a $191,000
increase in amortization of deferred charges during fiscal 1997; a $93,000
increase in bad debt expense; a $61,000 increase in payroll expense; and $37,000
of individually immaterial increases in various expenses. The management
reorganization was completed in fiscal 1997.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses increased $160,000 or 29.6%, to $700,000 in FY
1997, up from $540,000 in FY 1996. Selling & marketing expenses increased due to
a larger sales force in the current year, and increased expenses related to
product presentations at trade shows and to industry councils.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased $85,000 or 11.9%, to $629,000 in FY
1997, down from $714,000 in FY 1996. The decrease was due to fewer product
development projects in FY 1997 than in the prior year. Management's strategy is
to only pursue development projects when there is a known market need for the
product and there is a customer who has committed to purchase the product.
Management believes that this strategy will increase the commercial viability of
the project.
OTHER INCOME (EXPENSE)
Other income (net) decreased $210,000, or 62.9%, in FY 1997 to $124,000, from
$334,000 in Fiscal 1996. The decrease was primarily attributable to the reversal
of $95,000 of securities and contract litigation fees in FY 1997, versus a
$366,000 reversal in FY 1996 (see note 13 to the financial statements).
Additionally, investment income decreased $74,000 from the prior year as most of
the Company's investments were liquidated. These decreases were offset by
individually immaterial increases in other revenues. The funds received from
liquidating investments were used for continuing operations.
The Company's operating results may fluctuate in the future as a result of a
number of factors, including changes in pricing policies by the Company's
suppliers, the market acceptance of new and enhanced versions of the Company's
products, and general economic conditions.
FISCAL 1996 COMPARED TO FISCAL 1995
The net loss for FY 1996 was $1,324,000, down $1,357,000, or 50.6%, from the
$2,681,000 net loss for FY 1995. The Company's consolidated results of
operations for the two years are summarized below:
Revenues FY 1996 FY 1995
- -------- ------- -------
Equipment sales $4,258,000 $2,525,000
Service revenues 799,000 683,000
Royalties 255,000 151,000
---------- ----------
$5,312,000 $3,359,000
========== ==========
Equipment sales increased $1,733,000, or 68.6%, to $4,258,000 in FY 1996, up
from $2,525,000 in FY 1995. The increase was due to $1,710,000 in increased
sales of paint-tint dispensers to The Sherwin-Williams Company and an increase
of $23,000 in project development revenues during FY 1996.
Service revenues for FY 1996 were $799,000, an increase of $116,000, or 17.0%,
from FY 1995 service revenues of $683,000. The increase was due to service and
installation for new equipment sales to Sherwin-Williams.
In FY 1996, royalty revenue increased $104,000, or 68.8%, to $255,000, up from
$151,000 in FY 1995. Increased sales of paint-tint dispensers to The
Sherwin-Williams Company caused the increase.
Gross Margins FY 1996 FY 1995
- ------------- ------- -------
Equipment 30.8% 27.2%
==== ====
Service (20.7)% (10.4)%
==== ====
Total 23.0% 19.6%
==== ====
13
<PAGE>
In FY 1996, gross margin as a percentage of sales on equipment increased 3.6
points to 30.8%, up from 27.2% in FY 1995. The variance was caused by a $150,000
write-off of obsolete inventory in FY 1995 that exceeded the FY 1996 write-off
by $92,000. The additional write-off in FY 1995 lowered the gross margin from
30.8% to 27.2%.
Gross margin as a percentage of service revenue in FY 1996 decreased 10.3 points
to a negative 20.7%, down from a negative 10.4% in FY 1995. The decrease was due
to increased travel and administrative expenses associated with installation and
service of new equipment.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased $57,000, or 5.4%, to $1,106,000 in
FY 1996, up from $1,049,000 in FY 1995. The increase was due to increased
payroll expense and supplemental legal counsel for public company matters.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses increased $134,000, or 33%, to $540,000 in FY
1996, up from $406,000 in FY 1995. The increase was caused by additional
international marketing efforts for both paint and beverage products.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased $108,000, or 17.8%, to 714,000 in FY
1996, up from $606,000 in FY 1995. The change resulted from increased new
product development activity. Numerous dispensing applications were under
development during FY 1996, including: the institutional juice dispenser, a
chemical coatings dispenser, and a cement additives dispenser.
SECURITIES AND CONTRACT LITIGATION
The distribution of the Class Action settlement fund (see Note 13 to the
Consolidated Financial Statements) and the final valuation of the Company's
contributed common stock to the fund allowed the Company to lower the accrual
for settlement costs and legal expenses by $366,000. The Company had originally
accrued $1,000,000 in FY 1995 to record estimated remaining settlement costs and
legal fees. The remaining accrual at April 27, 1996, was $95,000.
INTEREST EXPENSE
Interest expense was $134,000 in FY 1996, up $106,000, or 378.6%, from the FY
1995 interest expense of $28,000. The increase is due to a full year of interest
on the building mortgage, an increased average balance on the line-of credit,
and an increase of $500,000 in long-term debt during FY 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance decreased to $287,000 as of January 24, 1998 from
$445,000 as of April 26, 1997.
Operations during the first three quarters ended January 24, 1998 required cash
of $1,183,000 which resulted from a net loss of $1,033,000, and net increases in
operating assets and operating liabilities of $435,000, and $6,000,
respectively, offset by depreciation and amortization of $291,000.
Consistent with prior years, the Company's primary source of liquidity has been
private placements of equity and equity derivative instruments. From August 1,
1996, to October 30, 1996, the Company issued 132 shares of Series A Preferred
Stock in exchange for the surrender of the Company's outstanding $25,000, 9%
Convertible Subordinated Redeemable Notes Payable in the aggregate principal
amount of $1,650,000. From August 1, 1996, through February 7, 1998, the Company
14
<PAGE>
issued 176 shares of Series A Preferred Stock in exchange for $12,500 cash per
share, generating $2,063,000 cash (see footnote 8). Near term cash requirements
will be obtained using this same Preferred Stock vehicle.
In August, 1997, to raise additional working capital, the Company began issuing
short term promissory notes. The notes are sold in multiples of $12,500, or
fractions thereof, and pay interest at the rate of 10%, with principal and
interest paid at maturity. The initial maturity date is June 30, 1998, however,
the Company may, at its sole option, extend the maturity date to December 31,
1998. At January 24, 1998, the Company has generated $335,000 in cash by issuing
the notes.
In addition to private placements of equity and notes payable, management
uses an accounts receivable-based credit line to meet short-term cash
requirements (see note 5 to the financial statements). The credit line bears an
interest rate of prime plus four points. As of March 12, 1998, the credit limit
was set at $500,000 with an outstanding balance of $500,000.
If the above sources of cash do not become available or are not sufficient, the
Company may be forced to curtail marketing and research & development activities
which would adversely affect future operating results. Furthermore, if
management is successful in raising additional funds, there is no guarantee that
the Company will achieve profitable operations, or positive cash flow.
The current liquidity position of the Company and the inability of operations to
generate positive cash flow raises doubt about the Company's ability to continue
as a going concern (see Note 3 to the financial statements). Management
recognizes these weaknesses and is taking aggressive steps to increase revenues
through increased sales and marketing efforts.
1997 AUDIT
Grant Thornton LLP has audited the consolidated balance sheet of the
Company as of April 26, 1997, and the related consolidated statement of
operations, cash flows and stockholders' equity for the year ended April 26,
1997. In its report of July 11, 1997, to the Board of Directors and to the
Company it is stated that the financial statements have been prepared assuming
that the Company will continue as a going concern. However, their report states
that the "history of operating losses and limited capital resources raise
substantial doubt" about the Company's ability to continue as a going concern
(see Note 3 to the Consolidated Financial Statements). Management recognizes the
need to increase sales and raise additional capital and has plans and programs
intended to accomplish these goals.
IMPACT OF YEAR 2000
The year 2000 issue pertains to computer programs that were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize the year "00" as
the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations.
During fiscal 1998, the Company has obtained software updates for its critical
operational software to make the software "2000 compliant." The Company believes
that with the updates to existing software, the Year 2000 Issue will not pose
significant operational problems for its computer systems.
15
<PAGE>
BUSINESS
ORGANIZATION
The Company is a corporation organized under the laws of Florida in 1980.
In May, 1996, the Company changed its name from American Business Computers
Corporation to ABC Dispensing Technologies, Inc.
CORE COMPETENCE
ABC Dispensing Technology's (the "Company" or "ABC") core competence is its
ability to creatively use existing technology to develop state-of-the-art
dispensing systems. The Company's dispensing systems are designed to increase
accuracy, efficiency, speed, flexibility and functionality. The Company's
technology is transferable into many industries. The Company concentrates on
developing solutions for specific, known applications. The Company has a unique
approach to creating new, innovative solutions by combining first the principles
of physics with state-of-the-art electronics. The Company designs its own
computer controlled systems--both hardware and software.
The core of the Company is talented people and 33 useful patents and 5
patents pending. The Company is a technology and marketing firm. However, two
operational advantages the Company believes it has over other technically
oriented firms are: (1) the ability to produce the systems the Company designs,
and (2) the ability to offer field technical support (training, installation,
and service).
NEW DIRECTIONS
ABC, as a technology firm, has depended on industry partners to make
the Company's equipment commercially successful. The risk in this approach is
centered around possible different goals and objectives between ABC and its
partners. As of July 15, 1996 the Company began thoroughly examining the markets
in which it competes. This examination included inviting leaders in those
markets to define their exact needs and problems. A complete understanding of
its customers' needs will allow the Company to design more universally accepted
machines from the Company's innovative concepts.
Marketing, market demand, and the customer will drive ABC's research &
development, design, and commercialization. Exclusivity has restricted the
Company in the past. The Company's new mission focuses on driving an innovative
dispensing solution through the broad market in a universally and commercially
viable fashion.
ABC will strive to take advantage of strategic alliances with other
companies with whom it may have had long standing relationships. The Company
believes joint ventures and co-production will grow the business and reduce
expenses through economies of scale.
In addition to broadening the marketing of ABC's equipment, the Company
will concentrate on maximizing its patent portfolio. This portfolio is a library
of useful technology. The Company will strive to sell and re-sell the various
configurations of that technology as useful parts and components to the wide
range of industries we serve now--and in the future.
The Company's new mission embraces the concept of "milestone development."
In other words, ABC will discontinue research & development on new products at
its own expense, based on speculation of the possibility of a future order.
Rather, it will work closely with those companies willing to pay ABC in stages
as the Company works from proof of concept through field prototype to the
ultimate, commercial version of the product. Generating revenues in stages as
the Company proves its ability helps ensure the commercial order or alerts the
Company early to the feasibility of the project. This method of research &
development should help control expenses.
16
<PAGE>
As the Company rolls out new products, it will assist its customers and
partners in making their organizations comfortable and confident in their use of
ABC's equipment and products. ABC will strive to assist them in making these
products commercially successful and will support their effort with regard to
applications, maintenance, training, marketing, and sales.
The Company is dedicated to selling dispensing technology at a profit--to a
wide range of industries.
PRODUCTS
INDUSTRIAL
During the past year, the Company has successfully developed a universal
line of tint dispensers designed in a modular fashion that provides the
flexibility to control from 9 to 18 different colorants. As a result, the
Company believes it can now address the current needs of most of the world's
major paint retailers. The Company recently obtained a purchase order from The
Home Depot, North America's largest home improvement retailer. The multi-million
dollar order is for 300 self-calibrating units, (Royal Match(TM)) that will be
installed in new stores and used to upgrade dispensing capabilities in existing
stores. Commercial shipments of this equipment began in May, 1997. System
advantages include:
1. Elimination of daily purging;
2. Self-calibration to adjust for changes in tint rheology including
temperature, density and viscosity;
3. Limited moving parts to minimize maintenance requirements; and
4. Self-cleaning dispensing of clear flush after each dispense cycle.
For the nine months ended January 24, 1998, 90% of the Company's revenues
were from sales of paint products to The Home Depot, Inc. During the fiscal year
ended April 26, 1997 ("FY 1997"), all paint product sales were sales to The
Sherwin-Williams Company, accounting for 54% of total Company revenues. Paint
product sales to The Sherwin-Williams Company were 72% and 59% of total Company
revenues in FY 1996 and FY 1995, respectively. The Company currently has no
orders from The Sherwin-Williams Company, and does not expect significant
revenues from sales to The Sherwin-Williams Company in the near future.
Other Industrial dispensers that have been partially developed through
field test, including Concrete Additives, Chemical Coatings and an Antibacterial
dairy sprayer. These products are not being further developed until a customer
order can be obtained. The Company will continue to obtain customer feedback on
features, market size, and economics of these projects. However, the Company's
new focus on product commercialization prevents any major development efforts on
these products.
BEVERAGE
The Company currently markets two types of beverage dispensers:
juice and liquor.
On June 25, 1997 the Company announced the creation of "Virtual
Squeeze,"(TM) a 50-50 joint venture agreement with Damon Industries Inc., a
Nevada based juice manufacturer and distributor. Virtual Squeeze has targeted
the $3 billion institutional juice market with a self-contained, refrigerated
dispenser designed to use shelf stable, bag in the box concentrates. Current
plans provide for the free installation and service of the dispensing equipment
provided that only "Virtual Squeeze" products are used. Revenues will be
generated from on-going juice sales. The Company believes the equipment is the
only known juice dispenser specifically designed to use shelf stable products.
System advantages include:
1. High volume dispensing of chilled juices;
2. No refrigerated storage required;
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3. Preprogrammed, automated, mandatory sanitization routines;
4. Pre-set portion dispensing; and
5. Automated flavor blending.
The current marketing strategy has a three pronged approach: Direct sales
efforts targeted at nursing home chains and buying groups, distributor
recruitment of existing businesses currently servicing the health care industry,
and marketing directly to food service distributors.
During Fiscal 1997, ABC discontinued the ongoing marketing efforts of the
Classic(TM) line of soft drink dispensers. This decision was made because of
narrow margins and resistance from the major soft drink suppliers to support the
equipment. The Company is continuing to look for opportunities to capitalize on
its soft drink technology. Options currently being considered include, strategic
partnerships, technology licenses, and outright sale.
Sales of Classic(TM) products accounted for 0.3%, 12.2%, 10.8% and 11% of
total Company revenues for the 9 months ended January 24, 1998, and in FY 1997,
FY 1996 and FY 1995, respectively.
The Company's UltraBar(TM) liquor dispensing system pours complex mixed
drinks quickly with a touch of the customized touch-sensitive drink menu.
Advantages are speed, accuracy, simplicity, full cash and inventory
accountability, and reduction of theft, spillage, overpours, errors, and
giveaways.
Sales of UltraBar(TM) products accounted for 5.3%, 10.1%, 7.5% and 13% of
total Company revenues for the 9 months ended January 24, 1998, and in FY 1997,
FY 1996 and FY 1995, respectively.
NEW PRODUCT DEVELOPMENT
ABC offers the ability to contract with new business partners to assist in
the development of new dispensing systems. As mentioned previously in the "New
Directions" section, ABC plans to develop new dispensers for emerging products
which require our technology; however, ABC will perform this development work in
phases with each phase intended to generate revenues.
SERVICES
SERVICE/TECHNICAL SUPPORT
The Company is able to perform on-site service for the Company's installed
base of equipment in the U.S. using its own service technicians who are located
throughout the country. The Company has committed to increase the number of
field service technicians to improve its response time and reduce the variable
costs of providing service. Variable costs will be reduced by eliminating
excessive travel and overtime expenses. The Company also contracts with
third-party service organizations to assist in providing technical support to
customers.
ABC also utilizes its technical service organization to perform third party
installation and service for other electronic equipment manufacturers. Service
sales accounted for 9.4%, 21%, 15.1% and 22% of total Company revenues for the 9
months ended January 24, 1998, and in FY 1997, FY 1996 and FY 1995,
respectively.
SALES BACKLOG
As of March 1, 1998, the sales order backlog (unshipped product orders) was
$312,000. As of April 26, 1997, the sales order backlog was $4.4 million. As of
April 27, 1996, the sales order backlog was $1.6 million.
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<PAGE>
INTERNATIONAL SALES
Revenues from international sales for the 9 months ended January 24, 1998,
and for fiscal years 1997, 1996, and 1995 amounted to 1%, 1%, 1% and 3% of total
revenues, respectively. Primary international sales efforts center on liquor
equipment to Canada and Industrial Sales to South America and Europe.
COMPETITION
The Company is one of four manufacturers that sell automatic paint tint
dispensers in the U.S. Of the other three manufacturers, one has an established
presence in the U.S. market, and the other two are new to the U.S. market. The
Company recently gained access to the entire U.S. market after being released
from an exclusivity agreement with The Sherwin-Williams Company. ABC believes
that the design and features of its' dispensing equipment, coupled with the
ability to provide nationwide on-site technical support give the Company a
competitive advantage in the market place.
The institutional juice market in which the Company competes through the
creation of the Virtual Squeeze joint venture is highly competitive. Currently,
80-90% of the juice sold in this market is sold as frozen concentrate. The
joint venture will compete by selling shelf-stable juice concentrates and
providing the customer with a dispenser that will mix, chill and provide portion
control dispensing of the juice. The dispenser also allows for mixing of juice
flavors and requires automated sanitizing routines.
HUMAN RESOURCES
As of March 1, 1998, the Company had 41 full-time employees, seven fewer
than the same time last year. The Company has cash and stock option incentive
plan programs for substantially all full-time employees. In fiscal year 1997,
the Company has increased the employee option program to provide greater degrees
of employee ownership and to help ensure a stable workforce. The employees are
not represented by a union. Temporary workers are utilized in the production
process. A highly qualified labor pool exists in the immediate geographic area
should the Company need to expand its workforce.
PATENTS
The Company has consistently sought patent protection for its proprietary
technology and products. To date, 33 patents are held and an additional 5 are
pending. Patent coverage of the Company's dispensing technology is broad.
Research and development expenditures for the nine months ended January 24,
1998, and fiscal years 1997, 1996, and 1995 were $924,000, $629,000, $714,000
and $606,000, respectively.
ENTITIES AND FISCAL YEAR
"ABC" is comprised of three legal entities: the parent (public entity)--ABC
Dispensing Technologies, Inc., (a Florida corporation) (NASDAQ:ABCC), the
operating subsidiary--ABC Dispensing Technologies, Inc. (an Ohio corporation),
and a second subsidiary that holds the patents--ABC Tech Corp. (an Ohio
corporation).
"Fiscal Year 1998" ends April 25, 1998. The Company has adopted a fiscal
year ending on the Saturday closest to April 30. Each quarter consists of 13
weeks.
"Fiscal Year 1997" ended April 26, 1997.
PROPERTIES
The Company owns a single floor building of approximately 18,400 square
feet of office, laboratory, and production space located in Akron, Ohio. The
property is encumbered by a mortgage in favor of an institutional lender. The
principal balance of the mortgage was $259,000 as of January 24, 1998.
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The Company leases additional warehouse space from independent third
parties on an as needed basis.
LEGAL PROCEEDINGS
The Company presently is not involved as a defendant in any material litigation.
CHANGE IN ACCOUNTANTS
On March 20, 1997, the Company notified Ernst & Young LLP ("E&Y") that they
were dismissed as the Company's independent auditor.
The Company and E&Y had not, in connection with the audit of the Company's
financial statements for each of the prior two years ended April 27, 1996 and
April 29, 1995, had any disagreement on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to E&Y's satisfaction, would have caused E&Y to
make reference to the subject matter of the disagreement in connection with its
reports.
The reports of E&Y on the Company's financial statements for the years
ended April 27, 1996 and April 29, 1995 did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles, except that the report of E&Y on the
Company's financial statements for the year ended April 27, 1996 included an
explanatory paragraph relating to an uncertainty about the Company's ability to
continue as a going concern.
The decision to change accountants was approved by the Company's Board of
Directors.
On March 20, 1997, the Company appointed Grant Thornton LLP its independent
accountants and Grant Thornton LLP accepted such appointment.
The Company had no prior relationship with Grant Thornton LLP.
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MANAGEMENT
The executive officers and Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Charles M. Stimac, Jr. 46 President, Chief Executive Officer, Chief Financial
Officer and Director
Herbert L. Luxenburg 62 Director
C. Rand Michaels 60 Director
Frank E. Vaughn 68 Director
Norbert J. Lewandowski 60 Director
William L. Shanklin 57 Director
</TABLE>
CHARLES M. STIMAC, JR. has been President, Chief Executive Officer and a
Director of the Company since July 15, 1996. Mr. Stimac has more than twenty
years experience in the investment banking industry. Prior to joining the
Company, Mr. Stimac served as Vice President of Roney and Company, a member firm
of the New York Stock Exchange through June 1996.
HERBERT L. LUXENBURG has been a Director of the Company since September 1988.
Mr. Luxenburg has been a proprietor in the hospitality industry since 1965 and
has served as President and Chief Executive Officer of the University Inn and
Days Inn of Kent, Ohio from 1989 through the present.
C. RAND MICHAELS has been a Director of the Company since September 1986. Mr.
Michaels is Vice Chairman of Lomak Petroleum, Inc., a public corporation engaged
in exploration for, and in the development and production of, crude oil and
natural gas. Mr. Michaels has held executive positions with Lomak since 1976.
Mr. Michaels also has served as a Director of Lynx Exploration, Inc., an oil and
gas exploration company from 1994 through the present and as a Director of North
Coast Energy, Inc. from 1996 through the present.
FRANK E. VAUGHN was appointed Director of the Company on October 13, 1997 to
fill a vacant seat on the board and serve until the next election by the
shareholders at the 1998 annual meeting. Mr. Vaughn was formerly President of
the Hoover Companies and Executive Vice President of the Maytag Corporation. Mr.
Vaughn is currently an Adjunct Professor and visiting lecturer at Kent State
University.
NORBERT J. LEWANDOWSKI was appointed Director of the Company on December 15,
1997 to fill a vacant seat on the board and serve until the next election by the
shareholders at the 1998 Annual Meeting. Mr. Lewandowski currently serves on the
Board of Trustees at Kent State University. Mr. Lewandowski is a CPA and until
1992 he headed a large regional accounting firm that he founded. Mr. Lewandowski
currently serves as a consultant to many local companies.
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WILLIAM L. SHANKLIN was appointed Director of the Company on December 15, 1997
to fill a vacant seat on the board and serve until the next election by the
shareholders at the 1998 Annual Meeting. Mr. Shanklin has been a Professor
of Marketing and Entrepreneurship at Kent State University from 1977 to the
present. Mr. Shanklin has served as consultant and advisor to the President/CEO
of the Company for the past 16 months. Mr. Shanklin is an author and has been a
consultant to numerous companies, ranging from Fortune 500 firms to small
businesses.
BOARD MEETINGS
For the nine months ended January 24, 1998, the Board of Directors held
three Meetings. The Company's Board of Directors held three meetings during the
fiscal year ended April 26, 1997. All Directors attended all the Board meetings.
DIRECTORS' COMPENSATION
On September 22, 1996, Herbert L. Luxenburg and C. Rand Michaels were each
granted 20,000 options to purchase shares of the Company's common stock at $1.25
per share. On January 2, 1997, Mr. Luxenburg and Mr. Michaels were each granted
20,000 warrants to purchase shares of the Company's common stock at $1.25 per
share. On October 10, 1997, Mr. Luxenburg and Mr. Michaels were each granted
20,000 warrants to purchase shares of the Company's common stock at $0.844 per
share and Mr. Vaughn was granted 20,000 warrants to purchase shares of the
Company's common stock at $0.844 per share. These options and warrants were
granted to the Directors to compensate them for their services as Directors. On
October 10, 1997 Mr. Vaughn was granted 20,000 warrants to purchase shares of
the Company's common stock at $0.844 per share for accepting a position on the
Board of Directors. On January 29, 1998, Mr. Lewandowski and Mr. Shanklin were
each granted 20,000 warrants for accepting positions on the Board of Directors
and 20,000 warrants as compensation for their services as Directors for fiscal
1998. Each warrant allows the Director to purchase one share of the Company's
common stock at a price $1.125 per share. On October 10, 1997 Mr. Vaughn was
granted 20,000 warrants to purchase shares of the Company's common stock at
$0.844 per share for accepting a position on the Board of Directors. On January
29, 1998, Mr. Lewandowski and Mr. Shanklin were each granted 20,000 warrants for
accepting positions on the Board of Directors and 20,000 warrants as
compensation for their services as Directors for fiscal 1998. Each warrant
allows the Director to purchase one share of the Company's common stock at a
price $1.125 per share.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the fiscal years ended April
26, 1997, April 27, 1996 and April 29, 1995 of the compensation of the Company's
Chief Executive Officer.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- --------------
Name and Principal Fiscal Other Annual Options All Other
Position Year Salary Bonus Compensation (# of Compensation
($) (1) shares) ($)
------------------ ------ ------ ----- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Stimac, Jr. 1997 $108,333 -0- -0- -0- $670(2)
President and Chief
Executive Officer
Robert A. Cutting, 1996 $122,000 -0- -0- -0- $490
Former President and 1995 $115,000 -0- -0- -0- $490(3)
Chief Executive Officer
</TABLE>
(1) Perquisites of the fiscal year ended April 26, 1997 did not exceed 10%
of Mr. Stimac's and Mr. Cutting's respective salaries combined.
(2) These amounts represent the Company's matching contributions for Mr.
Stimac's account in the Company's 401-(K) retirement plan.
(3) Mr. Cutting's employment with the Company terminated effective July 14,
1996.
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<PAGE>
OPTION GRANTS DURING THE YEAR ENDED APRIL 26, 1997
The Company did not grant any options to purchase shares of Common Stock to
the named executive officers during the fiscal year ended April 26, 1997.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 1, 1998, there were no persons known by the Company to
beneficially own more than five percent (5%) of any class of the Company's
securities. The following table sets forth certain information as of March 1,
1998, except as noted, regarding the Common Stock held by Directors and the
Chief Executive Officer of the Company, including each nominee for election as a
Director and all directors and executive officers as a group:
<TABLE>
<CAPTION>
Number of Shares of Common Percent of
Name and Beneficial Owner Stock Beneficially Owned Class
- ------------------------- -------------------------- ----------
<S> <C> <C>
Charles M. Stimac, Jr., President, 378,881(1) 2.18%
Chief Executive Officer and Director
Herbert L. Luxenburg, Director 275,826(2) 1.58%
C. Rand Michaels, Director 263,300(3) 1.51%
Frank E. Vaughn 140,000(4) *
William L. Shanklin 301,170(5) 1.73%
Norbert J. Lewandowski 40,000(6) *
Directors (including nominees) and 1,399,177 8.06%
Officers as a Group (4 Persons)
</TABLE>
- -------------
* The percentage of shares beneficially owned by this director does not
exceed one percent of the class so owned.
(1) Includes 153,881 shares of Common Stock and warrants to purchase
225,000 shares of Common Stock, which warrants are exercisable
within 60 days.
(2) Herbert L. Luxenburg owns stock options rights to purchase 75,000
shares of Common Stock under the Company's 1990 Non-Qualified
Stock Option Plan. Under the Company's 1995 Stock Option Plan, Mr.
Luxenburg holds options to purchase 25,826 shares of Common Stock
and warrants to purchase 100,000 shares of Common Stock. All of
such options and warrants are exercisable within 60 days. Mr.
Luxenburg also owns 75,000 shares of Common Stock.
(3) C. Rand Michaels owns stock options rights to purchase 75,000
shares of Common Stock under the Company's 1990 Non-Qualified
Stock Option Plan. Under the Company's 1995 Stock Option Plan,
Mr. Luxenburg holds options to purchase 25,826 shares of Common
Stock and warrants to purchase 60,000 shares of Common Stock. Mr.
Michaels is the owner of 2 shares of the Company's 9% Cumulative
Convertible Preferred Stock and the beneficial owner of an
additional two shares. The Preferred shares are convertible into
12,500 shares of the Company's Common Stock at any time after
March 1, 1997. Upon conversion of the Preferred shares, Mr.
Michaels will receive warrants to purchase Common Stock equal to
the number of common shares obtained upon conversion. All of such
options and warrants are exercisable within 60 days. Mr. Luxenburg
also owns 1,319 shares of Common Stock and is the beneficial owner
of 859 shares.
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<PAGE>
(4) Frank E. Vaughn holds warrants to purchase 40,000 shares of Common
Stock and owns 4 shares of the Company's 9% Cumulative Convertible
Preferred Stock. The Preferred shares are convertible into 12,500
shares of the Company's Common Stock at any time after March 1,
1997. Upon conversion of the Preferred shares, Mr. Vaughn will
receive warrants to purchase Common Stock equal to the number of
common shares obtained upon conversion. All of such options and
warrants are exercisable within 60 days.
(5) William L. Shanklin holds warrants to purchase 75,000 shares of
Common Stock and owns 4 shares of the Company's 9% Cumulative
Convertible Preferred Stock (Preferred Stock). Mr. Shanklin will
also acquire 5 shares of the Company's Preferred Stock on 1/15/98
pursuant to the terms of a consulting agreement dated 10/1/97.
The Preferred shares are convertible into 12,500 shares of the
Company's Common Stock at any time after March 1, 1997. Upon
conversion of the Preferred Shares, Mr. Shanklin will receive
warrants to purchase Common Stock equal to the number of common
shares obtained upon conversion. All of such Preferred Shares and
warrants are convertible or exercisable within 60 days. Mr.
Shanklin also owns 1,170 shares of Common Stock.
(6) Norbert J. Lewandowski holds warrants to purchase 40,000 shares of
Common Stock. The warrants are exercisable within 60 days.
CERTAIN TRANSACTIONS
On January 17, 1996, the Company obtained a $500,000 working capital
asset-secured loan from the Mezzanine Financial Fund, L.P. ("Mezzanine").
Interest on the loan was due monthly at the rate of 18% per annum. The terms of
the loan agreement provided for a $100,000 repayment of principal on each of the
first and second anniversaries of the closing of the loan. The balance of
$300,000 was due on the third anniversary. Mezzanine, at its option, could have
converted the loan into 166,666 shares of common stock (including standard
anti-dilution provisions). In consideration for providing the loan, Mezzanine
received a five (5) year warrant (the "Warrant Fee") to acquire shares of common
stock (at a price equal to the lower of seventy percent (70%) of the 30-day
average trading price prior to closing of the loan, or $2.50 (the "Price")). The
warrant exercise price was therefore determined to be $2.04 per share. The
maximum number of shares subject to the warrant was determined to be 58,910
under a formula in the loan agreement. At Mezzanine's election, all or any part
of the Warrant Fee could have been put to the Company upon repayment of the loan
for payment in cash in the amount equal to 70% of such Warrant Fee, paid in
equal monthly payments over the same number of months that the loan was
outstanding. Additionally, Mezzanine received a closing fee equal to 2% of the
amount of the loan and reimbursement for expenses associated with the making of
the loan.
On July 24, 1996, the Company distributed 125,000 shares of common stock to
Mezzanine in satisfaction of $38,000 of interest charges from May through
September 1996 due Mezzanine under the credit facility.
On September 23, 1996, the Company fully repaid Mezzanine the $500,000.
Prior to this date, the Company delivered 125,000 common shares to Mezzanine of
which 30,000 shares were sold to pay past due interest. In addition, another
60,000 shares were sold by Mezzanine in September and October 1996, the
proceeds, net of commission, used to pay off the remaining interest of
approximately $10,000 and agreed to an enhancement fee of approximately $23,000.
On December 31, 1996, Mezzanine returned 35,000 shares of Common Stock to the
Company.
Herbert M. Pearlman, Chairman of the Board of Directors of the Company
through February 5, 1997, is a director, officer and principal stockholder of
the general partner of Mezzanine. Mr. Pearlman is also Chairman, chief executive
officer and a principal stockholder of Helm Resources, Inc., a publicly traded
company which holds an approximately 14% equity stake in Mezzanine.
Pursuant to an arrangement with InterSystems, Inc., a company in which Mr.
Pearlman is Chairman and in which Mr. Pearlman has a significant equity
interest, the Company received certain shareholder relations services. The
Company reimbursed InterSystems, Inc. by paying one-third of the salary and
other expenses of the InterSystems, Inc. employee providing the services to the
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<PAGE>
Company. The Company did not make any payments to InterSystems, Inc. during
fiscal 1997. The arrangement was terminated in February, 1997.
Pursuant to an arrangement with Helm Resources, Inc., that was terminated
in February 1997, the Company paid for 25% of the allocated overhead expenses
associated with the office space maintained for Mr. Pearlman by Helm Resources,
Inc. The Company did not make any payments to Helm Resources, Inc. during fiscal
1997.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue up to 50,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock. As of the date of this Prospectus,
17,362,862 shares of Common Stock and 316 shares of Preferred Stock are issued
and outstanding. An additional 3,109,719 shares of Common Stock are issuable
upon exercise of outstanding stock options and warrants to purchase Common
Stock.
The following description provides a summary of the material rights and
limitations relating to ownership of the Company's capital stock. For a complete
legal description of the Company's capital stock, reference should be made to
the Company's Restated Certificate of Incorporation, as amended, and Bylaws,
copies of which are included as exhibits to the Registration Statement of which
this Prospectus is a part.
PREFERRED STOCK
The Company's 9% Convertible Cumulative Redeemable Preferred Stock, Series
A (each a "Preferred Share") is convertible into the Company's Common Stock at a
price of $1.00 per share. Attached to each Preferred Share are redeemable Common
Stock purchase warrants to purchase a number of shares of Common Stock, at a
price of $1.25 per share, equal to the number of shares of Common Stock issued
upon conversion of the Preferred Shares. The warrants are exercisable for a
period of five years commencing on the date of the conversion of the Preferred
Shares. The Preferred Shares may be redeemed by the Company, at its option, upon
no more than sixty, nor fewer than thirty, written days notice to the holder.
Each Preferred Share pays dividends semi-annually each February 1 and August 1,
commencing on February 1, 1997. The Company may elect to make dividend payments
in shares of Common Stock of the Company issued at 90% of the then market price
of the Common Stock.
COMMON STOCK
All outstanding shares of Common Stock are, and the shares to be issued in
this Offering will be, fully paid and non-assessable. There are no preemptive,
conversion, subscription, redemption or repurchase rights associated with the
shares of Common Stock. Each holder of Common Stock is entitled to one vote for
each share owned of record on matters submitted to a vote of the stockholders.
Holders of Common Stock are not entitled to cumulative voting rights in the
election of Directors. Upon liquidation of the Company, the holders of Common
Stock are entitled to participate ratably in the assets available for
distribution after satisfaction of all claims of the Company's creditors and
preferred shareholders. The holders of Common Stock are entitled to receive
ratably such dividends as the Board of Directors, in its discretion, may declare
out of funds legally available therefor.
CERTAIN BYLAW PROVISIONS
The Company's Bylaws provide that stockholders may act by written consent,
without prior notice and without a vote, if a consent is signed by stockholders
having not less than the minimum number of votes that would be necessary to
authorize such action at a meeting of stockholders. The Bylaws may be amended by
a majority vote of the stockholders or Board of Directors. The foregoing summary
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<PAGE>
of material provisions is qualified in its entirety by reference to the
Company's Bylaws, which are filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
ANTI-TAKEOVER MATTERS
A Florida corporation may not engage in a business transaction with any
person acquiring 10% or more of the voting stock of such Florida corporation (an
"interested shareholder") for a period of three years following the date of such
acquisition, unless: (i) the corporation approved the business transaction; (ii)
the corporation has not had more than 300 shareholders of record at any time
during the proceeding three years; (iii) the interested stockholder has been a
beneficial owner of 80% or more of the corporation's voting stock for at least
five years prior to the transaction; (iv) the interested shareholder is the
beneficial owner of at least 90% of the outstanding voting shares of the
corporation, exclusive of shares acquired directly from the corporation in a
transaction not approved by a majority of the disinterested directors; (v) the
corporation is an investment company registered under the Investment Company Act
of 1940; (vi) in the business transaction, consideration shall be paid to the
holders of each class or series of voting shares and all of the following
conditions shall be met: (1) the aggregate amount of the cash and the fair
market value as of the valuation date of consideration other than cash to be
received per share by holders of each class or series of voting shares in such
transaction are at least equal to the highest of the following: (a) if
applicable, the highest per share price, including any brokerage commissions,
transfer taxes, and soliciting dealers' fees, paid by the interested shareholder
for any shares of such class or series acquired by it within the 2-year period
immediately preceding the transaction date or in the transaction in which it
became an interested shareholder, whichever is higher; (b) the fair market value
per share of such class or series on the transaction date; (c) if applicable,
the price per share equal to the fair market value per share of such class or
series determined pursuant to subparagraph b., multiplied by the ratio of the
highest per share price, including any brokerage commissions, transfer taxes,
and soliciting dealers' fees, paid by the interested shareholder for any shares
of such class or series acquired by it within the 2-year period immediately
preceding the transaction date, to the fair market value per share of such class
or series on the first day in such 2-year period on which the interested
shareholder acquired any shares of such class or series; and (d) if applicable,
the highest preferential amount, if any, per share to which the holders of such
class or series are entitled in the event of any voluntary or involuntary
dissolution of the corporation, (2) the consideration to be received by holders
of outstanding shares shall be in cash or in the same form as the interested
shareholder has previously paid for shares of the same class or series, and if
the interested shareholder has paid for shares with varying forms of
consideration, the form of the consideration shall be either cash or the form
used to acquire the largest number of shares of such class or series previously
acquired by the interested shareholder, (3) During such portion of the 3-year
period preceding the transaction date that such interested shareholder has been
an interested shareholder, except as approved by a majority of the disinterested
directors: (a) there shall have been no failure to declare and pay at the
regular date therefor any full periodic dividends, whether or not cumulative, on
any outstanding shares of the corporation; (b) there shall have been: (I) no
reduction in the annual rate of dividends paid on any class or series of voting
shares, except as necessary to reflect any subdivision of the class or series;
and (II) an increase in such annual rate of dividends as necessary to reflect
any reclassification, including any reverse stock split, recapitalization,
reorganization, or similar transaction which has the effect of reducing the
number of outstanding shares of the class or series; and (c) such interested
shareholder shall not have become the beneficial owner of any additional voting
shares except as part of the transaction which results in such interested
shareholder becoming an interested shareholder, (4) during such portion of the
3-year period preceding the transaction date that such interested shareholder
has been an interested shareholder, except as approved by a majority of the
disinterested directors, such interested shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder), of
any loans, advances, guaranties, pledges, or other financial assistance or any
tax credits or other tax advantages provided by the corporation, whether in
anticipation of or in connection with such affiliated transaction or otherwise,
(5) except as otherwise approved by a majority of the disinterested directors, a
proxy or information statement describing the affiliated transaction and
complying with the requirements of the Exchange Act and the rules and
regulations thereunder has been mailed to holders of voting shares of the
corporation at least 25 days before the consummation of such affiliated
transaction, whether or not such proxy or information statement is required to
be mailed pursuant to the Exchange Act or such rules or regulations.
The corporation may opt out of the effect of this statute by: (i) including
a provision to such effect in the corporation's original certificate of
incorporation, (ii) amendment to the corporation's bylaws made by the board of
directors prior to January 1, 1989, or (iii) amendment of the corporation's
27
<PAGE>
certificate of incorporation or bylaws approved by holders of a majority of the
shares entitled to vote, excluding the voting shares of the interested
shareholder; provided that such amendment shall not take effect until 18 months
after its adoption and shall not effect any business combinations with
interested stockholders which are effected during such 18 months.
LIMITATION OF DIRECTOR AND OFFICER LIABILITY
The Company's Directors are each party to an Indemnification Agreement
pursuant to which such Directors of the Company shall not be personally liable
to the Company or its stockholders for damages for breach of any duty owed to
the Company or its stockholders; provided, that such Director shall act in good
faith and in a manner he reasonably believes to be in, or not opposed to, the
best interests of the Company, and, with respect to any criminal action or
proceeding, such Director has no reasonable cause to believe his conduct is
unlawful.
TRANSFER AGENT
American Stock Transfer & Trust Co. is the transfer agent and registrar for
the Common Stock.
28
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the legality of the Securities offered
hereby have been passed upon for the Company by St. John & Wayne, L.L.C., 70
East 55th Street, New York, New York 10022.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company included herein, have been audited by Grant Thornton LLP,
independent auditors, as set forth in their report thereon for the fiscal year
ended April 26, 1997 (which contains an explanatory paragraph with respect to a
going concern uncertainty mentioned in Note 3 of the consolidated financial
statements for the fiscal year ended April 26, 1997) included herein. Such
consolidated financial statements and financial statement schedule are included
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements and financial statement schedule of
the Company as of April 27, 1996 and for the two years then ended included
herein, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon (which contains an explanatory paragraph with
respect to a going concern uncertainty mentioned in Note 3 to the consolidated
financial statements) appearing elsewhere herein. Such consolidated financial
statements and financial statement schedule are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
29
<PAGE>
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
--------------------------------------------------------
<S> <C>
REPORTS OF INDEPENDENT AUDITORS..................................................................................................F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of January 24, 1998 (unaudited), April 26, 1997 and April 27, 1996................................F-4
Consolidated Statement of Operations for the Nine Months Ended January 24, 1998
and January 25, 1997, (unaudited) and the Years ended April 26, 1997, April 27, 1996 and April 29, 1995........................F-5
Consolidated Statement of Cash Flows for the nine months ended January 24, 1998 and
January 25, 1997 (unaudited) and for Years ended April 26, 1997, April 27, 1996, and April 29, 1995............................F-6
Consolidated Statement of Stockholders' Equity for the nine months ended January 24, 1998
(unaudited) and for Years ended April 26, 1997, and April 27, 1996, and April 29, 1995.........................................F-7
Notes to Consolidated Financial Statements.......................................................................................F-9
Supplementary Data:
Schedule II - Valuation & Qualifying Accounts...................................................................................F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
ABC DISPENSING TECHNOLOGIES, INC.
We have audited the accompanying consolidated balance sheet of ABC Dispensing
Technologies, Inc. (name changed from American Business Computers Corporation)
as of April 26, 1997, and the related consolidated statement of operations, cash
flows and stockholders' equity for the year then ended. Our audit also included
the financial statement schedule listed in the index at Item 11.2. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ABC
Dispensing Technologies, Inc. at April 26, 1997, and the consolidated results of
its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully described in
Note 3, the Company's history of operating losses and limited capital resources
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3. The
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that might result from the outcome
of this uncertainty.
GRANT THORNTON LLP
Cleveland, Ohio
July 11, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
ABC Dispensing Technologies, Inc.
We have audited the accompanying consolidated balance sheet of ABC Dispensing
Technologies, Inc. (name changed from American Business Computers Corporation)
as of April 27, 1996, and the related consolidated statements of operations,
cash flows and stockholders' equity for the two fiscal years in the period ended
April 27, 1996. Our audits also included the financial statement schedule listed
in the index at Item 11.2 for the two fiscal years in the period ended April
27, 1996. These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ABC
Dispensing Technologies, Inc. at April 27, 1996, and the related consolidated
statements of operations, cash flows and stockholders' equity for the two fiscal
years in the period ended April 27, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule for the two fiscal years in the period ended April 27, 1996, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
The accompanying consolidated financial statements as of April 27, 1996, and for
the two fiscal years in the period then ended, have been prepared assuming that
the Company will continue as a going concern. As more fully described in Note 3,
the Company's history of operating losses and limited capital resources raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that might result from the outcome of this
uncertainty.
ERNST & YOUNG LLP
Akron, Ohio
August 8, 1996
F-3
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 24, 1998
Assets Unaudited April 26,1997 April 27, 1996
- ------ ---------------- ------------- --------------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 287,000 $ 445,000 $ 488,000
Accounts receivable, less allowance for doubtful
accounts of $76,000, $191,000 and $136,000 at January 24,
1998, April 26, 1997 and April 27, 1996, respectively 1,155,000 327,000 764,000
Inventories (Note 4) 1,084,000 1,431,000 1,703,000
-------------- -------------- --------------
Total current assets 2,526,000 2,203,000 2,955,000
Property, plant, and equipment (Notes 5 and 12) 663,000 704,000 703,000
Other assets:
Advances to Joint Venture (Note 15) 123,000 -- --
Discount on Notes Payable (Note 5) 59,000 -- --
Intangible assets, less accumulated amortization of
$614,000, $552,000 and $480,000 as of January 24, 1998,
April 26, 1997 and April 27, 1996, respectively 70,000 102,000 169,000
Patents pending and deferred charges 121,000 341,000 193,000
-------------- -------------- --------------
373,000 443,000 362,000
-------------- -------------- --------------
Total Assets $ 3,562,000 $ 3,350,000 $ 4,020,000
============== ============== ============
Liabilities And Stockholders' Equity
- ------------------------------------
Current Liabilities
Accounts payable $ 938,000 $ 877,000 $ 875,000
Line of credit (Note 5) 373,000 2,000 292,000
Note payable to related party (Note 5) - - 500,000
Current portion of long-term debt 369,000 36,000 25,000
Accrued liabilities:
Legal fees and settlement costs (Note 14) - - 148,000
Employee compensation and benefits 82,000 224,000 218,000
Warranty reserve 170,000 88,000 197,000
Other 198,000 205,000 386,000
-------------- -------------- --------------
Total current liabilities 2,130,000 1,432,000 2,641,000
Long-term debt (Note 5) 265,000 283,000 294,000
Stockholders' equity:
Preferred Stock, 9% cumulative; authorized 320 shares,
308 and 271 shares issued and outstanding at January 24,
1998 and April 26, 1997, respectively (Note 8) 3,850,000 3,388,000 -
Common Stock, $.01 par value; authorized 50,000,000
shares; 17,355,347; 17,114,279 and 16,984,160 shares as
of January 24, 1998, April 26, 1997 and April 27, 1996,
respectively 174,000 171,000 170,000
Additional paid-in capital ($36,785 restricted for cost of
treasury shares held at April 26, 1997) 19,291,000 19,014,000 18,942,000
Retained earnings (deficit) (22,102,000) (20,850,000) (17,882,000)
-------------- -------------- --------------
1,213,000 1,723,000 1,230,000
Less notes receivable - stockholders (46,000) (51,000) (146,000)
Less cost of treasury stock, 35,000 shares - (37,000) -
-------------- -------------- --------------
Total Stockholders' Equity 1,167,000 1,635,000 1,085,000
-------------- -------------- --------------
Total Liabilities and Stockholders' Equity $ 3,562,000 $ 3,350,000 $ 4,020,000
============== ============== ============
See accompanying notes.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended Years Ended
---------------------------- ---------------------------------------
Jan. 24, 1998 Jan. 25, 1997 April 26, April 27, April 29,
(Unaudited) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Products and services $ 4,511,000 $ 2,565,000 $ 3,073,000 $ 5,057,000 $ 3,208,000
Royalties -- -- -- 255,000 151,000
----------- ----------- ----------- ----------- -----------
4,511,000 2,565,000 3,073,000 5,312,000 3,359,000
Cost and expenses:
Products and services 3,165,000 2,076,000 2,839,000 4,610,000 3,053,000
General and administrative 1,064,000 1,281,000 1,997,000 1,106,000 1,049,000
Selling and marketing 337,000 470,000 700,000 540,000 406,000
Research and development 924,000 344,000 629,000 714,000 606,000
----------- ----------- ----------- ----------- -----------
5,490,000 4,171,000 6,165,000 6,970,000 5,114,000
----------- ----------- ----------- ----------- -----------
Loss from operations (979,000) (1,606,000) (3,092,000) (1,658,000) (1,755,000)
Other income (expense)
Securities and contract litigation
fees and settlement (Note 14) -- -- 95,000 366,000 (1,000,000)
Investment income 10,000 14,000 4,000 78,000 77,000
Interest expense (99,000) (74,000) (138,000) (134,000) (28,000)
Other, net 35,000 16,000 163,000 24,000 25,000
----------- ----------- ----------- ----------- -----------
(54,000) (44,000) 124,000 334,000 (926,000)
----------- ----------- ----------- ----------- -----------
Net loss $(1,033,000) $(1,650,000) $(2,968,000) $(1,324,000) $(2,681,000)
========== ============ ============ ============ ============
Net loss per share - Basic and Diluted $ (0.07) $ (0.10) $ (0.18) $ (0.08) $ (0.17)
========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended Years Ended
---------------------------------- -----------------------------------------
Jan. 24, 1998 Jan. 25, 1997 April 26, April 27, April 29,
(Unaudited) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net loss $ (1,033,000) $ (1,650,000) $ (2,968,000) $ (1,324,000) $ (2,681,000)
Adjustments to reconcile net loss
to net cash used in operating activities:
Deprecation and amortization 291,000 124,000 313,000 110,000 99,000
Loss on disposal of assets -- -- -- -- 6,000
Value of common stock issued to settle
litigation -- -- -- -- 450,000
Treasury stock issued as compensation for legal
services 37,000 -- -- -- --
Changes in operating assets and liabilities:
Receivables (828,000) 437,000 437,000 (398,000) 220,000
Inventories 347,000 648,000 272,000 (484,000) 129,000
Other assets 46,000 (291,000) (307,000) (283,000) (13,000)
Accounts payable 61,000 (475,000) 2,000 421,000 149,000
Accrued liabilities (82,000) (289,000) (428,000) (869,000) 163,000
Deferred income 15,000 (29,000) (5,000) 13,000 (32,000)
------------- ------------- ------------- ------------- -------------
Total adjustments (113,000) 125,000 284,000 (1,490,000) 1,171,000
------------- ------------- ------------- ------------- -------------
Net cash used in operating activities (1,146,000) (1,525,000) (2,684,000) (2,814,000) (1,510,000)
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (46,000) (34,000) (69,000) (16,000) (671,000)
Additions to patent (30,000) (5,000) (4,000) -- (11,000)
Advances to Joint Venture (123,000) -- -- -- --
Investment in Joint Venture -- -- (14,000) -- --
------------- ------------- ------------- ------------- --------------
Net cash used in investing activities (107,000) (29,000) (87,000) (16,000) (682,000)
FINANCING ACTIVITIES:
Proceeds from (Payments on)
Line of Credit - Net 371,000 (292,000) -- -- --
Increase in deferred charges (59,000) -- -- -- --
Proceeds from private placements from
Preferred Stock 462,000 2,836,000 3,388,000 926,000 979,000
Proceeds from private placement of
notes payable 335,000 -- 29,000 1,267,000 490,000
Private placement costs -- -- (73,000) -- --
Proceeds from issuance of common stock -- 69,000 140,000 -- --
Repayment of notes payable and loan costs (29,000) (592,000) (820,000) (684,000) (12,000)
Proceeds from collection of stockholders
receivable 5,000 94,000 95,000 -- --
Proceeds from stock issued for exercise of
stock options and warrants -- -- 6,000 500,000 23,000
Purchase of treasury shares -- -- (37,000) -- --
Other 10,000 (9,000) -- -- --
------------- ------------- ------------- ------------- -------------
Net cash provided by financing activities 1,095,000 2, 106,000 2,728,000 2,009,000 1,480,000
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents (158,000) 552,000 (43,000) (821,000) (712,000)
Cash and cash equivalents at beginning of year 445,000 488,000 488,000 1,309,000 2,021,000
------------- ------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR 287,000 $ 1,040,000 $ 445,000 $ 488,000 $ 1,309,000
============= ============= ============= ============= =============
</TABLE>
See accompanying notes.
F-6
<PAGE>
<TABLE>
<CAPTION>
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended April 26, 1997, April 27,
1996, and April 29, 1995
and Nine Months Ended January 24, 1998 (unaudited)
Number
Number of of
Shares of Shares of Additional Retained Notes
Common Common Preferred Preferred Paid-in Earnings Receivable Treasury
Stock Stock Stock Stock Capital (Deficiency) Stockholders Stock
--------- ------ --------- --------- ----------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 1, 1994 14,981,039 $150,000 - - $15,921,000 $(13,877,000) -
Private placements 1,000,000 10,000 1,126,000 $(164,000)
Exercise of stock
options 15,077 23,000
Collection on notes
receivable-stockholders 7,000
Net Loss (2,681,000)
---------- -------- --------- --------- ----------- ------------- ----------- --------
Balance at April 29, 1995 15,996,116 $160,000 - - $17,070,000 $(16,558,000) $(157,000) -
Private placements 569,667 6,000 909,000
Stock issued to settle
litigation 150,000 1,000 466,000
Exercise of warrants 214,000 2,000 426,000
Exercise of stock
options 54,377 1,000 71,000
Collection on notes
receivable-stockholders 11,000
Net Loss (1,324,000)
---------- -------- --------- --------- ----------- ------------- ----------- --------
Balance at April 27, 1996 16,984,160 $170,000 - - $18,942,000 $(17,882,000) ($146,000) -
Preferred Stock private
placement (Note 9) 271 $3,388,000
Private placement costs (73,000)
Issuance of Stock to
Mezzanine Financial
Fund, L.P. (Note 5) 125,000 1,000 139,000
Exercise of Stock
Options 5,000 6,000
Collection on notes
receivable-stockholders 95,000
Net Loss (2,968,000)
Purchase of Treasury Stock
35,000 shares $(37,000)
---------- -------- --------- --------- ----------- ------------- ----------- --------
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
ABC DISPENSING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended April 26, 1997, April 27,
1996, and April 29, 1995 and
Nine Months Ended January 24,
1998 (unaudited)
(continued)
Number
Number of of
Shares of Shares of Additional Retained Notes
Common Common Preferred Preferred Paid-in Earnings Receivable Treasury
Stock Stock Stock Stock Capital (Deficiency) Stockholders Stock
--------- ------ --------- --------- ----------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 26, 1997 17,114,279 $171,000 271 $3,388,000 $19,014,000 $(20,850,000) $(51,000) $(37,000)
Preferred Stock Private
Placement (Note 9) 37 462,000
Preferred Stock Dividend
(Note 9) 241,068 3,000 216,000 (219,000)
Warrants Outstanding -
Original Issue Discount 61,000
Collection on notes
receivable-stockholders 5,000
Net Loss (1,033,000)
Issuance of Treasury Stock
(35,000 Shares) issued for
legal services received
37,000
---------- -------- --- ---------- ----------- ------------- --------- ---------
Balance at January 24, 17,355,347 $174,000 308 $3,850,000 $19,291,000 $(22,102,000) $(46,000) $ 0
1998 ========== ======== === ========== =========== ============= ========= =========
</TABLE>
See accompanying notes.
F-8
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 26, 1997
(information as of January 24, 1998 and for
the nine months ended January 24, 1998,
and January 25, 1997, is unaudited)
1. BUSINESS DESCRIPTION
ABC Dispensing Technologies, Inc. (name changed from American Business Computers
Corporation) designs proprietary dispensing systems to dispense and blend
liquids, powders and other ingredients to a uniform and high degree of accuracy.
The Company provides training, installation and product service and also custom
designs and manufactures its own proprietary dispensing equipment to meet the
needs of its customers which are located primarily in the United States. To
date, the Company has focused its development and marketing efforts on the
Beverage and Paint Industries.
2. SIGNIFICANT ACCOUNTING POLICIES
YEAR END -The Company's fiscal year-end is the Saturday closest to April 30,
which results in a fifty-two or fifty-three week year. Fiscal 1998, fiscal 1997,
fiscal 1996 and fiscal 1995 consist of fifty-two weeks ending on April 24, 1998,
April 26, April 27, and April 29, respectively. References to the years 1998,
1997, 1996 and 1995 refer to fiscal years ended April 24, 1998, April 26, 1997,
April 27, 1996, and April 29, 1995, respectively.
CONSOLIDATION - The consolidated financial statements include the accounts of
the Company and its subsidiaries, ABC Dispensing Technologies, Inc. and ABC Tech
Corp. Significant intercompany transactions and balances have been eliminated in
consolidation.
LOSS PER SHARE - In 1997, the Fnancial Accounting Standards Board issued
Statement (SFAS) No. 128, Earnings per Share. SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. All loss per share amounts for all periods have
been presented, and where appropriate, restated to conform to the SFAS No. 128
requirements.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS - The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents. On
December 22, 1997 the Company issued 35,000 shares of treasury stock as
compensation for legal services received. The treasury stock was valued at
$37,000.
FINANCIAL INSTRUMENTS - The carrying value of the Company's cash, accounts
receivable, accounts payable and notes payable are a reasonable estimate of
their fair value due to the short-term nature of these instruments. The
Company's long-term debt has variable interest rates and carrying value
approximates fair market value at January 24, 1998.
CONCENTRATION OF CREDIT - In the normal course of business, the Company enters
into transactions to meet the financing needs of customers. The Company performs
ongoing credit evaluations of customers' financial condition and generally
requires collateral from customers who finance purchases beyond thirty days. The
Company's exposure to credit risk associated with nonperformance on these
transactions is limited to amounts reflected in the Company's consolidated
financial statements, less the value, if any, of the secured equipment.
INVENTORIES - Inventories are valued at the lower of cost or market, using the
first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at
cost. Depreciation is provided primarily by use of the straight-line method over
the estimated useful lives of the assets, which are five years for machinery and
equipment and thirty years for buildings.
INTANGIBLE ASSETS - Intangible assets consist of patents and purchased selling
rights which are recorded at cost. Amortization is provided using the
straight-line method over a period of five years or less.
REVENUE RECOGNITION - Revenue on equipment sales is recognized when the product
is shipped and title transfers. Revenue for development services and for service
and support is recognized when the service is performed unless there is a
service contract. Revenue from service contracts is recognized ratably over the
contract term, generally one year. Royalty income is recognized in accordance
with the terms of the royalty agreement, which generally provides that royalties
are based on units shipped.
MAJOR CUSTOMER - Revenues from The Home Depot, Inc. were 90 percent of total
revenues for the nine months ended January 24, 1998. Revenues from The
Sherwin-Williams Company were 1%, 65%, 54%, 72% and 59% of the Company's total
revenues for the nine months ended January 24, 1998 and January 25, 1997 and the
years ended April 26, 1997, April 27, 1996 and April 29, 1995. respectively. The
Company currently has no orders from Sherwin-Williams and does not expect
significant revenues from sales to Sherwin-Williams in the near future.
PROVISION FOR WARRANTY CLAIMS - Estimated warranty costs are provided at the
time of sale of the warranted products.
STOCK-BASED COMPENSATION - The Company grants stock options for a fixed number
of shares to employees generally with an exercise price equal to the fair value
of the shares at the date of grant. The Company accounts for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and, accordingly, recognizes no
compensation expense for the stock option grants. Additional disclosures
relating to stock option activity which are required by Statement of Financial
Accounting Standards No. 123 - "Accounting for Stock Based Compensation" are
included in note 7.
BASIS OF PRESENTATION OF INTERIM FINANCIAL INFORMATION - The interim unaudited
consolidated financial statements included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended January 24, 1998 are not
necessarily indicative of the results that may be expected for the year ending
April 25, 1997.
F-9
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 26, 1997
(information as of January 24, 1998 and for
the nine months ended January 24, 1998,
and January 25, 1997, is unaudited)
3. GOING CONCERN UNCERTAINTY
The Company has reported a net loss for each year of operation since its
inception except for 1989, and as of January 24, 1998 has an accumulated
retained earnings deficiency of $22,102,000. The Company's cash flow from
operating activities was a negative $1,146,000, negative $2,684,000 and negative
$2,814,000 for the nine months ended January 24, 1998, and the years ended April
26, 1997, and April 27, 1996, respectively. Cash and cash equivalents declined
from $2,021,000 at the beginning of fiscal 1995 to $287,000 at January 24, 1998.
Management expects that the Company will continue to incur losses and use cash
in operations in the near future.
Management recognizes the Company must generate additional funds to assure
continuation of operations. The Company has been successful in raising capital
from private investors and raised $5,220,000 over the past three years through
private placements of both preferred and common stock. The Company is continuing
in it efforts to raise capital through private placements of 9% Convertible
Cumulative Preferred Stock. The Preferred Stock is convertible into common stock
at $1 per share. Proceeds from private placements will be used to reduce
accounts payable and provide additional working capital. No assurances can be
given that the Company will be successful in raising additional capital.
Further, there can be no assurance, assuming the Company successfully raises
additional funds, that the Company will achieve profitable operations or
positive cash flow. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. No adjustments to the amounts or
classification of assets and liabilities which could result from the outcome of
this uncertainty are reflected in the consolidated financial statements.
4. INVENTORIES
At January 24, 1998, April 26, 1997 and April 27, 1996, inventories consisted of
the following:
January 24, 1998 1997 1996
---------------- ----------- -----------
Raw Materials $ 865,000 $ 927,000 $ 729,000
Work-in-process 85,000 118,000 488,000
Finished goods 134,000 386,000 486,000
---------- ------------ -----------
$1,084,000 $1,431,000 $1,703,000
========== ============ ===========
The above amounts are net of obsolescence reserves of $838,000 at January 24,
1998 and April 26, 1997, and $985,000 at April 27, 1996.
5. FINANCING ARRANGEMENTS
NOTES PAYABLE
In June 1994, the Company purchased its headquarters facility in Akron, Ohio for
$490,000. A note payable was entered into during fiscal 1995 to partially
finance this purchase which was previously leased from the former chairman. The
note payable has an adjustable interest rate (9.03% at January 24, 1998 and
9.25% at April 26, 1997, and April 27, 1996) which may not increase or decrease
by more than 2% once every three years. The maximum increase or decrease is 6%
over the life of the loan. Principal and interest payments of $2,995 are payable
monthly with the balance of $143,000 due October 1, 2005. The note payable is
secured by the headquarters facility. At January 24, 1998, the facility and
improvements thereto have a net book value of $535,000.
At January 24, 1998, April 26, 1997 and April 27, 1996, long-term debt consisted
of the following:
<TABLE>
<CAPTION>
January 24, 1998 1997 1996
---------------- --------- ---------
<S> <C> <C> <C>
Note payable to bank $259,000 $268,000 $278,000
Notes Payable 335,000 - -
Other 40,000 51,000 41,000
-------- -------- -------
Less amounts due within one year 634,000 319,000 319,000
(369,000) (36,000) (25,000)
-------- -------- --------
Total long-term debt $265,000 $283,000 $294,000
======== ======== ========
</TABLE>
F-10
<PAGE>
As of April 26, 1997 maturities of long term debt for the next five years were
as follows: 1998--$35,000; 1999--$32,000; 2000--$20,000; 2001--$16,000 and
2002--$17,000.
In August, 1997 the Company began issuing notes payable at a discount. The notes
are sold in multiples of $12,500, or fractions thereof, and pay interest at the
rate of 10%, with principal and interest paid at maturity. The initial maturity
date is June 30, 1998, however, the Company may, at its sole option, extend the
maturity date to December 31, 1998. Attached to notes are reedemable common
stock purchase warrants to purchase 5,000 shares of the Company's common stock
at a price of $1.25 per share. The warrants are exercisable for a period of five
years commencing on the date of issuance. The warrants have been valued at
$63,000 using the Black-Sholes option pricing model and a discount on notes
payable has been recorded for that amount. As of February 24, 1998, the Company
has issued notes in the aggregate of $335,000.
For the nine months ended January 24, 1998 and the years ended April 26, 1997
and April 27, 1996, interest expenses approximated interest paid by the Company.
MEZZANINE NOTE
On January 17, 1996, the Company obtained a $500,000 working capital
asset-secured loan from the Mezzanine Financial Fund, L.P. ("Mezzanine").
Interest is due monthly at the rate of 18% per annum. In consideration for
providing the loan, Mezzanine received a five (5) year warrant to acquire shares
of common stock at a price equal to the lower of seventy percent (70%) of the
30-day average trading price prior to closing of the loan, or $2.50 (the
"Price"). The warrant exercise price was therefore determined to be $2.04 per
share. The number of shares subject to the warrant will be determined by
dividing the Price into an amount equal to 10% of the average annual loan
balance multiplied by the number of years the loan is outstanding (the "Warrant
Fee"). The resulting maximum number of warrants that could be issued are 58,910.
At Mezzanine's election, all or any part of the Warrant Fee may be put to the
Company upon repayment of the loan for payment in cash in the amount equal to
70% of such Warrant Fee, paid in equal monthly payments over the same number of
months that the loan was outstanding. Additionally, Mezzanine received a closing
fee equal to 2% of the amount of the loan and reimbursement for expenses
associated with the making of the loan. On July 24, 1996, the Company
distributed 125,000 shares of common stock to Mezzanine. Mezzanine subsequently
sold 90,000 of the shares to satisfy interest charges from April through
September, 1996, prepayment penalties and other fees. On September 24, 1996, the
Company repaid the $500,000 principal balance of the loan in full. On December
31, 1996, the loan agreement was terminated and Mezzanine returned 35,000 shares
of Common Stock to the Company.
Herbert M. Pearlman, who resigned as Chairman of the Board of Directors of the
Company on February 5, 1997, is a director, officer and principal stockholder of
the general partner of Mezzanine. Mr. Pearlman is also Chairman, chief executive
officer and a principal stockholder of Helm Resources, Inc., a publicly traded
company which holds an approximately 14% equity stake in Mezzanine.
BRIDGE NOTES
On June 13, 1995, the Company initiated a private offering to sell 20 units of
$25,000 10% Senior Subordinate Notes due June 1, 1998, and three year redeemable
warrants to purchase 12,500 shares of the Company's common stock at $2 per
share. The transaction was exempt from registration under the Securities Act of
1933. Nineteen units were issued under the offering, providing the Company with
$475,000 in proceeds. The notes included a repayment provision requiring the
Company to apply 40% of the net proceeds received by it from the sale of any of
its common stock other than common stock issued upon the exercise of employee,
director, or consultant stock options, to the pro-rata repayment of the Notes
within sixty (60) days of the receipt of such proceeds. As a result of this
repayment provision, the notes were paid in full on February 16, 1996.
LINE OF CREDIT On December 18, 1995, the Company established a $750,000 line of
credit secured by accounts receivable and other assets of the Company. In
February, 1996, the line of credit was reduced from $750,000 to $450,000. In
December, 1998, the credit line was increased to $500,000. At January 24, 1998,
$390,000 was outstanding and $110,000 of the line of credit was available. At
April 26, 1997, $2,000 was outstanding and $108,000 of the line of credit was
available. The line of credit bears an interest rate of prime plus four points
(12.50% at January 24, 1998, April 26, 1997 and April 27, 1996), which equals
the weighted-average interest rate for the period.
F-11
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 26, 1997
(information as of January 24, 1998 and for the
nine months ended January 24, 1998, and
January 25, 1997, is unaudited)
6. INCOME TAXES
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of Company assets and liabilities.
The components of the Company's deferred income taxes at April 26, 1997 and
April 27, 1996 are as follows:
1997 1996
---------------- ------------
Net operating loss carry forwards $ 6,650,000 $ 5,450,000
Inventories 413,000 495,000
Other 170,000 255,000
----------- -----------
Total deferred tax asset 7,233,000 6,200,000
Valuation allowance for deferred taxes (7,233,000) (6,200,000)
----------- -----------
Net deferred taxes $-0- $-0-
=========== ===========
At April 26, 1997 and April 27, 1996, the Company had Federal net operating loss
carryforwards for tax reporting purposes of approximately $17,500,000 and
$14,800,000, respectively. The net operating loss carryforwards expire in the
years 1998 to 2012. It is uncertain if benefits relating to these deferred tax
assets are realizable and accordingly, a valuation allowance equal to the amount
of such deferred tax assets has been recorded.
7. COMMON STOCK
STOCK OPTION PLANS
The Company has non-qualified stock option plans under which directors, officers
and key employees may be granted incentive stock options for the purchase of the
Company's common stock An aggregate of 500,000 shares of the Company's common
stock were reserved for issuance under the Company's 1990 Stock Option Plan and
1,750,000 shares were reserved for issuance under the Company's 1995 Stock
Option Plan and amendments thereto. All granted options are exercisable after
six months from the grant date provided the employee has at least one year of
service. Grant options expire five years after grant date or 90 days after the
Employee's or Director's relationship with the Company is terminated. The
Company also may grant incentive stock warrants to directors, officers and key
employees. The stock warrants can be redeemed to purchase the common stock of
the Company.
A summary of the Company's stock option plans and employee stock warrants, and
related information for the years ended April 26, 1997, April 27, 1996, and
April 29, 1995, is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- ------------------------ ------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise price Shares Exercise price Shares Exercise price
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year 510,966 $ 2.46 411,941 $ 1.81 179,018 $ 2.24
Granted 1,029,851 $ 1.29 273,902 $ 2.89 264,500 $ 1.69
Exercised (5,119) $ 1.10 (54,377) $ 1.32 - -
Canceled (17,375) $ 1.50 (120,500) $ 1.75 (31,577) $ 3.15
--------- -------- -------
Outstanding - end of year 1,518,323 $ 1.68 510,966 $ 2.46 411,941 $ 1.81
========= ======== =======
Exercisable at end of year 1,039,652 $ 1.92 468,814 $ 2.48 409,941 $ 1.81
========= ======== =======
Available for grant 341,677 894,034 113,059
========= ======== =======
Weighted average fair value of options
granted during the year $ 0.96 $ 1.95 $ 1.14
</TABLE>
F-12
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. COMMON STOCK (CONTINUED)
The following table summarizes information about stock options and employee
stock warrants outstanding and exercisable by price range as of April 26, 1997:
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------------------- ---------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of exercise prices Shares Life Exercise Price Shares Exercise Price
- ------------------------ -------- ------------------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C>
$1.00 - $1.63 1,155,421 4.06 $ 1.27 676,750 $ 1.34
$2.00 - $2.50 41,652 3.82 $ 2.17 41,652 $ 2.17
$2.50 - $3.44 321,250 2.93 $ 3.09 321,250 $ 3.09
--------- ---------
1,518,323 1,039,652
========= =========
</TABLE>
ACCOUNTING FOR STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) and related interpretations in
accounting for its employee stock based compensation. The exercise price of each
stock options and employee stock warrant equals the market price of the
Company's stock on the date of grant. Accordingly, no compensation cost has been
recognized for the plans.
During 1995, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION
(SFAS 123). SFAS 123 defines a fair valued based method of accounting for an
employee stock option and similar equity instrument and encourages all entities
to adopt that method of accounting for all of their employee stock compensation
plans. However, SFAS 123 allows an entity to continue to measure compensation
cost for those plans using the method of accounting prescribed in APB 25.
Entities that elect to continue using APB 25 must make pro forma disclosures of
net income and earnings per share as if the fair value based method of
accounting defined in SFAS 123 had been adopted.
The Company has computed, for pro forma disclosure purposes, the value of all
options granted during the fiscal years ending April 26, 1997, and April 26,
1996, using the Black-Scholes option pricing model as prescribed by SFAS 123
using the following weighted average assumptions:
1997 1996
-------- -------
Risk-free interest rate 6.54% 6.18%
Dividend yield 0 % 0 %
Volatility 79% 92%
Average life 5 years 5 Years
F-13
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. COMMON STOCK (CONTINUED)
Using the Black-Scholes methodology, the total value of options granted during
fiscal 1997 and 1996 was $781,000 and $495,000, respectively. If the Company had
accounted for its stock-based compensation plans in accordance with SFAS 123,
the Company's net loss and net loss per share would approximate the pro forma
disclosures below:
<TABLE>
<CAPTION>
April 26, 1997 April 27, 1996
-------------- --------------
<S> <C> <C> <C>
Net Loss As reported $ (2,968,000) $ (1,324,000)
Pro forma $ (3,749,000) $ (1,819,000)
Primary earnings per share As reported $ (0.17) $ (0.08)
Pro forma $ (0.22) $ (0.11)
</TABLE>
WARRANTS
On May 2, 1995, the Company granted David B. Hudson, V.P. - Domestic Beverage
Sales, and Keith P. Jordan, National Account Manager, warrants to purchase
20,000 and 10,000 restricted shares of common stock, respectively, at $3.38 per
share; the warrants expire May 2, 2000.
On June 13, 1995, the Company initiated a private offering to sell 20 units of
$25,000 10% Senior Subordinate Notes due June 1, 1998 and three year redeemable
warrants to purchase 12,500 shares of the Company's common stock at $2 per share
(See Note 5).
On August 1, 1995, the Company granted warrants to Herbert M. Pearlman, Chairman
(200,000 at $3.00 per share), Robert A. Cutting, former President (100,000 at
$3.00 per share), and others (30,000 ranging from $2.00 to $3.00).
On September 14, 1995, the Company issued 200,000 warrants at $3.50 per share to
Hussmann Corporation pursuant to the securities litigation settlement (see
footnote 12 to the Consolidated Financial Statements).
On November 1, 1995, the Company issued 500,000 warrants at $3.50 per share to
Pepsi-Cola Company pursuant to the securities litigation settlement (see
footnote 12).
On December 11, 1995, the Company issued 30,000 warrants at $2.25 per share
pursuant to a sale of common stock.
On January 17, 1996, the Company issued 58,910 warrants at $2.04 per share to
Mezzanine Financial Fund L.P. pursuant to the debt financing received by
Mezzanine (see footnote 5)
On July 15, 1996, the Company granted 300,000 warrants at $1.375 per share to
Charles M. Stimac, Jr. pursuant to the terms of his employment agreement as
President of the Company. The warrants are subject to a 10 year vesting
schedule.
On September 7, 1996, the Company granted warrants to William Lerner, Secretary
(10,000) and William T. Shanklin, consultant to the Company (25,000) at $1.25
per share.
On October 27, 1996, the Company granted 15,000 warrants at $1.25 per share to
Charles M. Stimac, Jr., President.
On January 2, 1997, the Company granted warrants to Herbert L. Luxenburg,
Director (20,000), and C. Rand Michaels, Director (20,000), at $1.25 per share.
On February 5, 1997, the Company issued 50,000 warrants at $1.25 per share to
Herbert M. Pearlman, former Director.
F-14
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. NET LOSS PER SHARE
The following table sets forth the computation of net loss per share - basic and
diluted:
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
- ------------------------------------------------------------------------------------------------------------------------------
January 24, January 25, April 26, April 27, April 29,
1998 1997 1997 1996 1995
------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Numerator:
Net Loss $( 1,033,000) $( 1,650,000) $( 2,968,000) $ 1,324,000 $(2,681,000)
Preferred Stock Dividends 243,000) (67,000) (143,000) - -
-------------- ------------- -------------- ------------- ------------
Numerator for net loss per
share - income available to
common shareholders $( 1,276,000) $ (1,717,000) $( 3,111,000) $( 1,324,000) $(2,681,000)
-------------- ------------- ------------- ------------- ------------
Denominator:
Denominator for basic and diluted earnings
per share - weighted-average
shares 17,178,863 17,067,493 17,074,000 16,414,000 15,669,000
-------------- ------------- ------------- ------------- -------------
Net loss per share -- basic and
diluted $( 0.07) $( 0.10) $( 0.18) $( 0.08) $( 0.17)
============== ============= ============== ============= =============
</TABLE>
Diluted earnings per share calculations have been omitted as the effect of
potentially dilutive securities would have been anti-dilutive for the periods
reported.
Options and warrants to purchase 3,109,719, 3,325,411, 2,853,234, 2,775,679 and
1,669,277 shares of Common Stock were outstanding and exercisable as of January
24, 1998, January 25, 1997, April 26, 1997, April 27, 1996, and April 29, 1995,
respectively. Each option allows the holder to purchase one share of the
Company's Common Stock. The exercise price of the options varies from $0.844 to
$3.50 per share. The options and warrants were not used to compute diluted
earnings per share because the Company has net losses for the periods reported,
and therefore, the effect would be antidilutive.
9. PREFERRED STOCK
The shareholders of the Company have approved an amendment to the Company's
Certificate of Incorporation to authorize 5,000,000 shares of Preferred stock.
The Company offered shares of 9% Convertible Cumulative Redeemable Preferred
Stock, Series A ("Series A Preferred Stock") in exchange for the surrender of
the Company's outstanding $25,000, 9% Convertible Subordinated Redeemable Notes
due August 1, 1999 ("Notes").
As of January 24, 1998, through private placements, the Company issued 308
shares of Series A Preferred Stock in exchange for notes or $12,500 cash per
share, generating gross proceeds of $3,850,000 to the Company.
The Series A Preferred Stock is convertible at the option of the holder, in
whole or in part, at any time after March 1, 1997 (the "Initial Conversion
Date") into Common Stock of the Company at a price per share of Common Stock
equal to (i) $1.00 per share, or (ii) such adjusted price as may from time to
time be adjusted (the "Conversion Price"). If converted into Common Stock, each
Preferred Share will entitle the holder to receive warrants to purchase a number
of shares of Common Stock at a price of $1.25 per share, equal to the number of
shares of Common Stock into which the Preferred Shares were converted. The
warrants will be valid for a period of five years commencing from the date of
issuance.
The Preferred Shares pay dividends semi-annually each February 1, and August 1,
commencing on February 1, 1997. The Company may elect to pay dividends in the
form of Common Stock of the Company issued at 90% of the then current market
price of the Common Stock. A cash adjustment shall be paid for any fractional
shares that are due under the dividend calculation. For the purposes of this
calculation the "current market price" shall mean the average of the daily
closing prices for each of the thirty consecutive business days prior to such
dividend date.
On October 7, 1997, the Company paid its February 1, and August 1, 1997,
Preferred Stock dividend requirements by issuing common stock. The total number
of common shares issued for the February 1, 1997 dividend was 61,240. The shares
were valued at $1.09359 per share. The total number of common shares issued for
the August 1, 1997 dividend was 179,828. The shares were valued at $0.84375 per
share.
F-15
<PAGE>
As of February 1, 1998 there is a dividend payable on Preferred Stock in the
amount of $167,463. At the discretion of the Company, the dividend will be paid
in common stock of the Company. A total of 228,636 shares will be issued to
satisfy the dividend requirement.
10. RELATED PARTY TRANSACTIONS
From February, 1995, to August, 1996, the Company leased office space for
Herbert M. Pearlman from Helm Resources, Inc. for approximately $21,000 per
year. Mr. Pearlman is Chairman, Chief Executive Officer and a principal
stockholder in Helm Resources, Inc. (see footnote 5). Mr. Pearlman resigned as
Chairman of the Board of Directors of the Company on February 5, 1997.
11. OPERATING LEASES
Aggregate rental expense for the nine months ended January 24, 1998, and fiscal
years 1997, 1996 and 1995 was $33,000, $48,000, $60,000 and $13,000,
respectively.
12. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at January 24, 1998,
April 26, 1997 and April 27, 1996:
<TABLE>
<CAPTION>
January 24, 1998 1997 1996
---------------- --------- ---------
<S> <C> <C> <C>
Land $59,000 $57,000 $57,000
Building and building improvements 572,000 572,000 572,000
Machinery and equipment 890,000 934,000 865,000
--------- --------- ---------
1,519,000 1,563,000 1,494,000
Less accumulated depreciation (856,000) (859,000) (791,000)
--------- -------- ---------
$663,000 $704,000 $703,000
========= ========= =========
</TABLE>
F-16
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RETIREMENT BENEFITS
The Company sponsors a 401(k) plan which covers substantially all full-time
employees. Eligible employees may contribute up to 14% of their compensation to
this plan. The Company has agreed to match participants' contributions at the
rate of 25 cents on the dollar up to a maximum of 4% of the participants'
compensation. The cost of the Company's matching contribution was approximately
$11,000 for the nine months ended January 24, 1998, $13,000 in 1997, and $9,000
in each year during 1996 and 1995. The Company has the discretion to make a
profit-sharing contribution, but no such contribution has been made by the
Company.
14. LITIGATION SETTLEMENT/CONTINGENCIES
On March 13, 1995, the Company and other defendants (officers and directors and
former directors of the Company) entered into a Stipulation of Settlement (the
"Settlement") with the Plaintiffs in a class action lawsuit (the "Securities
Litigation") that provided for the Settlement of the Securities Litigation. The
Settlement provided for a Gross Settlement Fund of $1,850,000, plus 1,550,000
shares of the Company's common stock. The Company's contribution to the
Settlement Fund was $443,000 and 150,000 shares. The Stipulation defined the
Plaintiff class as "all persons who purchased ABCC common stock on the open
market from January 24, 1990 through August 1, 1991, inclusive." On June 19,
1995, the U.S. Federal District Court for the Southern District of New York
entered a Final Judgment approving the Settlement as "fair, reasonable and
adequate to members of the class." Pursuant to the terms of the Final Judgment,
on July 6, 1995, Plaintiffs' counsel were paid attorneys' fees of $550,000 (plus
$1,078 of accrued interest after taxes) on the cash portion of the Settlement
Fund and were reimbursed $244,394 for expenses out of the Gross Settlement Fund.
Plaintiffs' counsel also received an aggregate of 465,000 shares of common stock
of the Company awarded to Plaintiffs' counsel from the Gross Settlement Fund as
a portion of attorneys' fees. These shares of common stock were distributed to
Plaintiffs' counsel in early February 1996.
On January 16, 1996, the U.S. Federal District Court ordered the distribution of
the Net Settlement Fund consisting of approximately $1,082,000 cash and
1,085,000 shares of common stock of the Company to 1,469 authorized claimants.
The distribution to authorized claimants was made pursuant to the Order of the
Court on about February 23, 1996. There is no further action to be taken in
connection with the Securities Litigation since the Settlement has been
effectuated in accordance with the Order of the Court.
The estimated legal fees and settlement costs were accrued for the above
action. At April 29, 1995, the accrual amounted to $1,498,000. During 1996,
$1,037,000 of this amount was settled in cash and securities, $366,000 was
reversed and credited to income and $95,000 remained in the accrual at April 26,
1996 to cover certain remaining legal fees. In 1997, the remaining $95,000
accrual was reversed and credited to income.
The Company from time to time is subject to routine litigation incidental to its
business. The Company believes that any liability that may finally be determined
would not have a material adverse effect on its financial statements.
15. JOINT VENTURE AGREEMENT
On June 25, 1997, the Company entered into a joint venture agreement with Damon
Industries, a privately-owned national juice manufacturer with headquarters in
Sparks, Nevada, to form "Virtual Squeeze", a 50-50 business enterprise. The
purpose of the joint venture is to provide shelf-stable juice products and
state-of-the-art dispensing technology to health care facilities with high
volume juice consumption. Under the agreement, the Company will manufacture
dispensing equipment and provide technical support to the joint venture, and
Damon will manufacture fruit juice and provide marketing and administrative
support for the joint venture. The joint venture will finance the dispensing
equipment through sale/leaseback arrangements. The dispensing equipment will be
placed in a customer's facility at no charge providing the customer commits to
purchasing all of its juice from the Virtual Squeeze. The revenue from the juice
sales will cover the cost of equipment, juice, and operating expenses of the
joint venture. Resulting profits from the juice sales will be split equally by
the Company and Damon.
Through January 24, 1998, the Company has provided $123,000 of juice dispensing
equipment to Virtual Squeeze, a joint venture between the Company and Damon
Industries of Sparks, Nevada. The Company will be reimbursed for the cost of the
equipment through revenues from juice sales made by Virtual Squeeze.
F-17
<PAGE>
<TABLE>
<CAPTION>
ABC DISPENSING TECHNOLOGIES, INC. (CONSOLIDATED)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
NINE MONTHS ENDED JANUARY 25, 1998 (UNAUDITED)
Allowance for doubtful accounts $ 191,000 $ - $ 115,000 (a) $ 76,000
======== ========= ========= =======
Allowance for inventory obsolescence $ 838,000 $ - $ - $ 838,000
======== ========= ========= =======
YEAR ENDED APRIL 26, 1997
Allowance for doubtful accounts $ 136,000 $ 141,000 $ 86,000 (a) $ 191,000
======== ========= ======== =======
Allowance for inventory obsolescence $ 985,000 - $ 147,000(b) $ 838,000
======== ======== ======== =======
YEAR ENDED APRIL 27, 1996
Allowance for doubtful accounts $ 78,000 $ 40,000 $ 18,000 (a) $ 136,000
======== ========= ======== ========
Allowance for inventory obsolescence $ 943,000 $ 80,000 $ 38,000(b) $ 985,000
======== ========= ======= =======
YEAR ENDED APRIL 29, 1995
Allowance for doubtful accounts $ 128,000 $ 1,000 $ 51,000(a) $ 78,000
======== ========= ======== =======
Allowance for inventory obsolescence $ 816,000 $ 150,000 $ 23,000(b) $ 943,000
======== ========= ======== =======
(a) Uncollectible accounts written off, net of recoveries.
(b) Inventory written off and/or disposed of.
</TABLE>
F-18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 5. FAILURE TO MEET NASDAQ MINIMUM LISTING REQUIREMENTS
The Company is currently out of compliance with NASDAQ'S capital and
surplus requirement, as set forth in NASD Marketplace Rule 4310( c)(02). To meet
the minimum requirement, the Company must maintain capital and surplus in excess
of $2,000,000. The NASDAQ Listing Requirements Department has scheduled the
Company's Common Stock to be delisted from the NASDAQ Stock Market effective
with the close of business on March 16, 1998. The Company is requesting a
hearing with the NASDAQ Listing Qualifications Department to appeal the
delisting decision. The request for the hearing will stay the delisting of the
Company's Common Stock pending the outcome of the hearing.
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses of ABC Dispensing
Technologies, Inc. in connection with the distribution of the securities being
registered:
Registration Fee................................................. $ 4,292.89
Legal Fees and Expenses.......................................... $25,000.00
Accounting Fees and Expenses..................................... $15,000.00
Miscellaneous Expenses........................................... $ 500.00
TOTAL............................................................ $37,240.91
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Florida corporation. The following summary is
qualified in its entirety by reference to the complete text of the Florida
Business Corporation Act (the "FBCA"), the Company's Articles of Incorporation,
and the Company's Bylaws.
Section 607.0850(1) of the FBCA, provides, in general, that a
corporation may indemnify any of its directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding (including any appeal thereof) (i) if such person acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, and (ii) with respect to any
criminal action or proceeding, he or she had no reasonable cause to believe his
or her conduct was unlawful.
Section 607.0850(2), however, provides that in actions brought by or in
the right of the corporation, no indemnification shall be made in respect of any
claim, issue or matter as to which the director or officer shall have been
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
ITEM 16. EXHIBITS
3.1 Certificate of Incorporation of the Registrant, as amended
3.2 Bylaws of the Registrant
5.1 Opinion of St. John & Wayne, L.L.C. as to the legality of the
securities to be registered
10.1 Employment Agreement dated March 1, 1997 by and between the
Registrant and Charles M. Stimac, Jr.
10.2 1990 Stock Option Plan
10.3 Amended 1995 Stock Option Plan
11.1 Statement re: Computation of Per Share Earnings included as
footnote 8 in Item 11 of this Registration Statement on
Form S-1
11.2 The financial statement schedule listed on the index set forth
in Item 11 of this registration statement on Form S-1 is
filed as part of this Registration Statement.
II-1
<PAGE>
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Grant Thornton LLP, Independent Auditors
23.3 Consent of St. John & Wayne, L.L.C. (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page hereof)
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any fact or events
arising after the effective date of the registration
statement (or arising after the effective date of the
registration statement or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs 1(i) and 1(ii) do not apply
if the registration statement is on Form S-3, or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the effective registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's Annual Report pursuant
to Section 13(a) or 15(d) of the Securities Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(5) To supplement the prospectus, after the expiration of the
subscription period, to set forth the results of the subscription offer, and the
terms of any subsequent re-offering thereof. If any public offering is to be
made on terms differing from those set forth on the cover page of the
Prospectus, a post-effective amendment will be filed to set forth the terms of
such offering.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant, or otherwise, the Securities and Exchange Commission
has informed the registrant that such indemnification is against public policy
as expressed in the Act and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Akron, State of Ohio, on April 8, 1998.
ABC DISPENSING TECHNOLOGIES, INC.
By: /s/ Charles M. Stimac, Jr.
---------------------------
Charles M. Stimac, Jr., President and Director
(principal executive officer and principal financial
and accounting officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Charles M. Stimac, Jr. and John L. Hornbeck true and lawful attorneys-in-fact
and agents each acting alone, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full powers and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on April 8, 1998.
Signature Title
- --------- ------
/s/ Charles M. Stimac, Jr. President, Director
- -----------------------------
Charles M. Stimac, Jr.
/s/ Herbert L. Luxenburg Director
- -----------------------------
Herbert L. Luxenburg
/s/ C. Rand Michaels Director
- -----------------------------
C. Rand Michaels
/s/ Frank E. Vaughn Director
- -----------------------------
Frank E. Vaughn
/s/ Norbert J. Lewandowski Director
- -----------------------------
Norbert J. Lewandowski
/s/ William L. Shanklin Director
- -----------------------------
William L. Shanklin
II-3
<PAGE>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
3.1 Certificate of Incorporation of the Registrant, as amended
3.2 Bylaws of the Registrant
5.1 Opinion of St. John & Wayne, L.L.C. as to the legality of the
securities to be registered.
10.1 Employment Agreement dated March 1, 1997 by and between
the Registrant and Charles M. Stimac, Jr.
10.2 1990 Stock Option Plan
10.3 Amended 1995 Stock Option Plan
11.1 Statement re: Computation of Per Share Earnings included as footnote 8
in Item 11 of this Registration Statement on Form S-1.
11.2 The financial statement schedule listed on the index set forth in
Item 11 of this Registration Statement on Form S-1 is filed as part of
this Registration Statement.
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Grant Thornton LLP, Independent Auditors
23.3 Consent of St. John & Wayne, L.L.C. (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page hereof)
II-4
AMENDED AND RESTATED ARTICLES OF INCORPORATION
of
SEBRN CORPORATION
--------------------------------------
To the Department of State
State of Florida
Pursuant to the provisions of the Florida General Corporation Act, the
corporation hereinafter named does hereby and amend and restate its Articles of
Incorporation.
1. The name of the corporation is AMERICAN BUSINESS COMPUTERS CORPORATION. The
name under which the corporation was originally incorporated was Sebrn
Corporation. The date of the filing of the original Articles of Incorporation of
the corporation with the Department of State of the State of Florida was June
25, 1980.
2. The Amended and Restated Articles of Incorporation of the corporation, which
are hereinafter set forth in Article 6 hereof, were duly adopted by the Board of
Directors of the corporation.
3. Articles I and IX of the corporation's Articles of Incorporation existing
prior to the adoption of the amendments set forth herein, relating respectively
to the name of the corporation and the registered office of the corporation in
the State of Florida, are hereby amended so as to read as hereinafter set forth
in the Amended and Restated Articles of Incorporation and are numbered in such
Amended and Restated Articles of Incorporation as Articles I and V,
respectively. Articles IV, VI, VII and VIII of the corporation's Articles of
Incorporation existing prior to the adoption of the amendments set forth herein
are hereby deleted in their entirety from the Amended and Restated Articles of
Incorporation set forth below.
4. The aforesaid amendments were adopted by vote of the shareholders entitled to
vote thereon at a meeting held on September 25, 1986.
5. The aforesaid amendments have been adopted pursuant to subsection (4) of
Section 607.194 of the Florida General Corporation Act, and there is no
discrepancy between the Articles of Incorporation of the corporation as
heretofore amended and the provisions of the Amended and Restated Articles of
Incorporation as hereinafter set forth, except for the effects of the aforesaid
amendments and the omission of matters of historical interest.
6. The following Amended and Restated Articles of Incorporation shall be the
Articles of Incorporation of the corporation until amended and changed in
accordance with the provisions of the Florida General Corporations Act:
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN BUSINESS COMPUTERS CORPORATION
ARTICLE I
The name of the Corporation is AMERICAN BUSINESS COMPUTERS CORPORATION.
ARTICLE II
The Corporation may engage in any activity or business permitted under
the laws of the United States and under the laws of the State of Florida.
ARTICLE III
The maximum number of shares of capital stock that the Corporation is
authorized to issue is 20,000,000 shares at $.0l par value per share.
ARTICLE IV
The Corporation shall have perpetual existence unless sooner dissolved
according to law.
ARTICLE V
The address of the Corporation's registered office in the State of
Florida is c/o The Prentice-Hall Corporation System, Inc., Suite 420, First
Florida Bank Building, City of Tallahassee 32301, County of Leon; and the name
of the Corporation's registered agent at such address is The Prentice-Hall
Corporation System, Inc.
IN WITNESS WHEREOF, these Amended and Restated Articles of
Incorporation have been executed this 25th day of September, 1986.
AMERICAN BUSINESS COMPUTERS
CORPORATION
By:_________________________________
Joseph W. Shannon,
Chairman of the Board of Directors
-------------------------------------
James J. Powers, Secretary
<PAGE>
STATE OF OHIO )
) SS.:
COUNTY OF SUMMIT )
On this _____ day of September, 1986, before me, a Notary Public in and
for the State and County aforesaid, personally appeared Joseph W. Shannon and
James J. Powers, who acknowledged to me that they are the Chairman of the Board
of Directors and Secretary, respectively, of American Business Computers
Corporation and that each executed as such officer the foregoing instrument of
such corporation as his act and deed and as the act and deed of such
corporation.
WITNESS my hand and seal of office on the date and year first
aforesaid.
- ------------------------------
Notary Public
Commission Expires:
(Notarial Seal)
ACCEPTANCE OF APPOINTMENT BY REGISTERED AGENT
Pursuant to the provisions of the Florida General Corporation Act, the
undersigned does hereby accept its appointment as registered agent on which
process may be served within the State of Florida for the proposed domestic
corporation named in the foregoing Articles of Incorporation, and does hereby
accept the obligations of Section 607:325, Florida General Corporation Act.
The Prentice-Hall Corporation System, Inc.
By:__________________________________
Its Vice President
Stephen S. Craig
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
AMERICAN BUSINESS COMPUTERS CORPORATION
- --------------------------------------------------------------------------------
(present name)
Pursuant to the provisions of section 607.l006, Florida Statutes, this Florida
profit corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: (indicate article number(s) being amended, added
or deleted)
Article I shall be deleted in its entirety and replaced with the following:
ARTICLE I
The name of the corporation is ABC Dispensing
Technologies, Inc.
SECOND: If an amendment provides for in exchanger reclassification or
cancellation of issued shares, provisions for implementing the
amendment if not contained in the amendment if not contained
in the amendment itself, are as follows:
THIRD: The date of each amendment's adoption: March 1, 1996.
FOURTH: Adoption of Amendment(s) (CHECK ONE)
The amendment(s) was/were approved by the shareholders. The
number of votes cast for the amendment(s) was/were sufficient
for approval.
The amendment(s) was/were approved by the shareholders through
voting groups. The following statements must be separately
provided for each voting group entitled to vote separately on
the amendment(s): "The number of votes cast for the
amendment(s) was/were sufficient for approval
by__________________________________. "
voting group
<PAGE>
The amendment(s) was/were approved by the board of directors
without shareholder action and shareholder action was not
required.
The amendment(s) was/were approved by the incorporators
without shareholder action and shareholder action was not
required.
Singed this _______ day of ________________, 19__
Signature__________________________________________________________________
(By the Chairman or Vice Chairman of the Board of Directors, President
or other officer if adopted by the shareholders)
OR
(By a director if adopted by the directors)
OR
(By an incorporator if adopted by the incorporators)
________________________________________________________________________________
Typed or printed name
________________________________________________________________________________
Title
<PAGE>
AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
ABC DISPENSING TECHNOLOGIES, INC.
To the Department of State
State of Florida
Pursuant to the provisions of Section 607.1006 of the Florida
Business Corporation Act, the corporation hereinafter named (the "Corporation")
does hereby adopt the following Articles of Amendment:
1. The name of the Corporation is ABC Dispensing Technologies, Inc.
2. Article III of the Articles of Incorporation of the Corporation is
hereby amended and restated so as henceforth to read as follows:
The total number of shares of stock that the Company
shall have authority to issue is fifty-five million
(55,000,000), consisting of fifty million (50,000,000) shares
of common stock (the "Common Stock") of the par value of one
cent ($.01) each and five million (5,000,000) shares of
preferred stock (the "Preferred Stock") of the par value of
one cent ($.01) each.
The Preferred Stock may be divided into one or more
classes. The designation, relative rights, preferences and
limitations of the shares of each class of Preferred Stock are
as follows:
The shares of Preferred Stock may be issued from time to
time in one or more series of any number of shares; provided
that the aggregate number of shares issued and not canceled of
any and all such series shall not exceed the total number of
shares of Preferred Stock hereinafter authorized, and with
distinctive serial designations, all as shall hereafter be
stated and expressed in the resolution or resolutions provided
for the issue of such shares of Preferred Stock from time to
time adopted by the Board of Directors pursuant to the
authority so to do which is hereby vested in the Board of
Directors. Each series of shares of Preferred
<PAGE>
Stock (a) may have such voting powers, full or limited,
or may be without voting powers; (b) may be subject to
redemption at such time or times and at such prices; (c) may
be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions and
at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or
classes or series of stock; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the
Company; (e) may be made convertible into or exchangeable for,
shares of any other class or classes of any other series of
the same or any other class or classes of shares the Company
at such price or prices or at such rates or exchange and with
such adjustments; (f) may be entitled to the benefit of a
sinking fund to be applied to the purchase or redemption of
shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon
the creation of indebtedness of the Company or any subsidiary,
upon the issue of any additional shares (including additional
shares of such series or of any other series) and upon the
payment of dividends or the making of other distributions on,
and the purchase, redemption or other acquisition by the
Company or any subsidiary of, any outstanding shares of the
Company; and (h) may have such other relative, participating,
optional or other special rights, qualifications, limitations
or restrictions thereof; all as shall be stated in said
resolution or resolutions providing for the issue of such
shares of Preferred Stock. Shares of Preferred Stock of any
series that have been redeemed (whether through the operation
of a sinking fund or otherwise) or that if convertible or
exchangeable, have been converted into or exchanged for shares
of any other class or classes shall have the status of
authorized and unissued shares of Preferred Stock of the same
series and may be reissued as a part of the series of which
they were originally a part or may be reclassified and
reissued as part of a new series of shares of Preferred Stock
to be created by resolution or resolutions of the Board of
Directors or as part of any other series of shares of
Preferred Stock, all subject to the conditions or restrictions
on issuance set forth in the resolution or resolutions adopted
by the Board of Directors providing for the issue of any
series of shares of Preferred Stock.
3. The date of adoption of the aforesaid amendment was December 2,
1996.
<PAGE>
4. The number of votes cast for the said amendment by the shareholders
was sufficient for the approval thereof.
5. The effective time and date of these Articles of Amendment shall be
at 5:00 p.m. on December 2, 1996.
ABC DISPENSING TECHNOLOGIES, INC.
--------------------------------
Charles M. Stimac, Jr.
President and Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ABC DISPENSING TECHNOLOGIES, INC.
TO: THE SECRETARY OF STATE
STATE OF FLORIDA
Pursuant to the provision of Section 607.047 of the Florida General
Corporation Act, the undersigned corporation executes the following
Certificate of Amendment to its Certificate of Incorporation.
1. The name of the corporation is ABC Dispensing Technologies, Inc.
(the "Corporation").
2. The following resolution, establishing and designating a series of
shares and fixing and determining the relative rights and preferences thereof
was duly adopted by the Board of Directors of the Corporation on or about the
30th day of January, 1997, pursuant to authority vested in it by the Certificate
of Incorporation:
RESOLVED, pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the
Board of Directors does hereby classify 480 shares of preferred stock
of the Corporation as a class designated 9% Convertible Cumulative
Redeemable Preferred Stock, Series A; and it is further
RESOLVED, that a description of such 9% Convertible Cumulative
Redeemable Preferred Stock, Series A, including the preferences and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions for redemption, all as set by
the Board of Directors of the Corporation, is set forth in the attached
Certificate of Designation Establishing the 9% Convertible Cumulative
Redeemable Preferred Stock, Series A and Fixing the Powers,
Designations, Preferences and Relative, Participating, Optional and
Other Special Rights, and the Qualifications, Limitations and
Restrictions of the 9% Convertible Cumulative Redeemable Preferred
Stock, Series A.
<PAGE>
3. The resolution was adopted by the Board of Directors by Unanimous
Consent on or about January 30, 1997.
4. The Certificate of Incorporation of the corporation is amended so
that the designation and number of shares of each class and series acted upon in
the resolution, and the relative rights, preferences and limitations of each
such class and series are as stated in the resolution.
ABC DISPENSING TECHNOLOGIES, INC.
By:____________________________________
Charles M. Stimac, Jr., President
<PAGE>
ABC DISPENSING TECHNOLOGIES, INC.
Certificate of Designation Establishing the 9% Convertible Cumulative
Redeemable Preferred Stock, Series A and Fixing the Powers,
Designations, Preferences and Relative, Participating, Optional and
Other Special Rights, and the Qualifications, Limitations and
Restrictions of the 9% Convertible Cumulative Redeemable Preferred
Stock, Series A
There is hereby established a new series of the preferred stock
("Preferred Stock") of ABC Dispensing Technologies, Inc., a Florida corporation
("Corporation"), to which the following powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions, of the shares of such new series of
preferred stock shall apply:
1. Designation and Rank.
The series (this "Series") of shares of Preferred Stock shall be
designated as "9% Convertible Cumulative Redeemable Preferred Stock, Series A"
(the "Series A Preferred Stock"), and each share of Series A Preferred Stock
shall have a liquidation value of $12,500 per share. Shares of Series A
Preferred Stock shall have a liquidation preference of $12,500 per share, plus
an amount per share equal to any dividends declared but unpaid, without
interest.
The Series A Preferred Stock shall rank prior to common stock of all
classes (collectively, "Common Stock") of the Corporation and to all other
classes and series of equity securities of the Corporation now or hereafter
authorized, issued or outstanding (the Common Stock and such other classes and
series of equity securities of the Corporation are collectively referred to
herein as the "Junior Stock"), other than any class or series of equity
securities of the Corporation expressly designated as ranking on a parity with
(the "Parity Stock") or senior to (the "Senior Stock") the Series A Preferred
Stock as to dividend rights and rights upon liquidation, winding up or
dissolution of the Corporation. The Series A Preferred Stock shall be junior to
the creditors of the Corporation. The Series A Preferred Stock shall be subject
to the creation of Senior Stock, Parity Stock and Junior Stock to the extent not
expressly prohibited by the charter of the Corporation.
The number of shares of Series A Preferred Stock may be increased or
decreased from time to time by a vote of not less than a majority of the members
of the Board then in office, provided that no decrease shall reduce the number
of shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of any outstanding options, rights or warrants, if any, to purchase
shares of Series A Preferred Stock, or upon the conversion of any outstanding
securities issued by the Corporation convertible into shares of Series A
Preferred Stock.
<PAGE>
2. Dividends.
(a) Payment of Dividends. Holders of shares of Series A Preferred Stock
shall be entitled to receive, if, when and as declared by the Board of
Directors, out of funds legally available therefor, cumulative cash (except as
provided below) dividends at an annual rate of 9% of the $12,500 liquidation
preference per share ($562.50 per share bi-annually), and no more. Such
cumulative dividends shall be payable, if declared, bi-annually on August 1 and
February 1, in each year, or if such day is not a business day, on the next
business day (each such date, a "Dividend Payment Date"). If the Corporation
elects, the Corporation may make dividend payments in shares of Common Stock of
the Corporation valued at 90% of the then current market price of the Common
Stock ("Dividend Stock"); provided, however, no fractional shares or scrip
representing any fractional shares shall be issued. Instead of any fractional
shares of Dividend Stock which would otherwise be issuable, upon election of the
Corporation to make dividend payments in the form of Common Stock, the
Corporation shall pay a cash adjustment in respect of such fractional share of
Common Stock in an amount equal to the same fraction of 90% of the then current
market price of a share of Common Stock. For these purposes, the "current market
price" shall mean the average of the daily closing prices for thirty (30)
consecutive business days prior to such dividend payment date. The closing price
for each day shall be the last sale price regular way, or, in case no such
report of sale takes place on such day, the average of the last reported bid and
asked prices regular way in either case on a principal national securities
exchange on which the Common Stock is admitted to trading or listed, or if not
listed or admitted to listing on such exchange, the average of the highest
reported bid and lowest reported ask price as reported by NASDAQ, or similar
organization if NASDAQ is no longer reporting such information, or if not so
available, the fair market price as determined by the Board of Directors. The
first Dividend Payment Date shall be February 1, 1997. Each declared dividend
shall be payable to holders of record of the Series A Preferred Stock as they
appear on the stock books of the Corporation at the close of business on such
record dates, not more than forty-five (45) calendar days nor fewer than ten
(10) calendar days preceding the Dividend Payment Date therefor, as determined
by the Board of Directors (each such date, a "Record Date"). Semi-annual
dividend periods (each a "Dividend Period") shall commence on a Dividend Payment
Date and shall end on and include the day immediately preceding the next
Dividend Payment Date; provided, however, that the first Dividend Period (the
"Initial Dividend Period") shall commence, with respect to each holder of Series
A Preferred Stock, on the date the Corporation accepted such holder's
subscription for the Series A Preferred Stock and shall end on and include
January 31, 1997.
The amount of dividends payable on each share of the Series A Preferred
Stock for each full Dividend Period during which such share is outstanding shall
be $562.50. The amount of dividends payable for the Initial Dividend Period and
for any Dividend Period which, as to a share of Series A Preferred Stock
(determined by reference to the issuance date and the redemption or retirement
date thereof), is other than one full Dividend Period shall be computed on the
basis of a 360-day year composed of twelve (12) thirty (30) day months
<PAGE>
and the actual number of days elapsed in the Initial Dividend Period or such
Dividend Period.
Holders of the Series A Preferred Stock shall not be entitled to any
interest, or any sum of money in lieu of interest, in respect of any dividend
payment or payments on the Series A Preferred Stock (whether or not declared by
the Board of Directors) which may be unpaid. Any dividend payment made on any
share of Series A Preferred Stock shall first be credited against the earliest
unpaid accrued dividend with respect to such share of Series A Preferred Stock.
(b) Dividends Cumulative. The right of holders of Series A Preferred
Stock to receive dividends shall commence to accrue and shall be cumulative from
and including the date of its original issuance (or in the case of shares of
Series A Preferred Stock subscribed for prior to the date hereof, the date the
Corporation accepted such subscription) and shall be cumulative whether or not
they have been paid or declared.
(c) Priority as to Dividends. No full dividends shall be declared or
paid or set apart for payment on any Parity Stock or Junior Stock for any
Dividend Period unless full dividends have been or contemporaneously are
declared and paid (or declared and a sum (or amount of Dividend Stock)
sufficient for the payment thereof set apart for such payment) on the Series A
Preferred Stock for such Dividend Period. When dividends are not paid in full
(or declared and a sum (or amount of Dividend Stock) sufficient for such full
payment is not so set apart) for any Dividend Period on the Series A Preferred
Stock and any Parity Stock, dividends declared on the Series A Preferred Stock
and Parity Stock shall only be declared pro rata based upon the respective
amounts that would have been paid on the Series A Preferred Stock and such
Parity Stock had dividends been declared in full.
In addition to the foregoing restriction, the Corporation shall not
declare, pay or set apart funds for any dividends or other distributions (other
than in Common Stock or other Junior Stock) with respect to any Common Stock or
other Junior Stock of the Corporation or repurchase, redeem or otherwise
acquire, or set apart funds for repurchase, redemption or other acquisition of,
any Common Stock or other Junior Stock through a sinking fund or otherwise,
unless and until (i) the Corporation shall have paid in full all accrued
cumulative dividends on the Series A Preferred Stock through the most recent
preceding Dividend Period or funds (or the requisite amount of Dividend Stock)
have been paid over to the dividend disbursing agent of the Corporation for
payment of such dividends, and (ii) the Corporation has declared a dividend on
the Series A Preferred Stock for the current Dividend Period, and sufficient
funds or Dividend Stock have been paid over or delivered to the dividend
disbursing agent for the Corporation for the payment of such dividend for such
current Dividend Period.
No dividend shall be paid or set aside for holders of Series A
Preferred Stock for any Dividend Period unless full dividends have been paid or
set aside for the holders of each class or series of equity securities of the
Corporation, if any, ranking prior to the Series A Preferred Stock as to
dividends for such Dividend Period.
<PAGE>
(d) Any reference to "dividends" or "distributions" in this Section 2
shall not be deemed to include any distribution made in connection with any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation.
2A. Negative Pledge.
The Corporation will not grant or permit the existence of any liens on
any of the assets of the Corporation except:
(i) Purchase money security interests incurred from time to time
in connection with the acquisition of additional assets
(included capitalized lease obligations);
(ii) Liens granted from time to time by the Corporation to
financial institutions and/or insurance companies to secure
working capital loans to the Corporation;
(iii) Liens for taxes not yet due which are contested in good
faith by appropriate proceedings;
(iv) Carrier's, warehousemen's, mechanic's, materialmen's,
repairmen's, landlord's liens or other like lines arising in
the ordinary course of business; and
(v) Easements, rights of way, restrictions and other similar
encumbrances incurred in the ordinary course of business.
3. Redemption
(a) General. The shares of Series A Preferred Stock may be redeemed by
the Corporation or its successor or any acquiring or resulting entity with
respect to the Corporation (including by any parent or subsidiary of the
Corporation, any such successor, or any such acquiring or resulting entity), as
applicable, at its option, in whole or in part, at any time or from time to
time, upon notice as provided in subsection (b) of this Section 3, by resolution
of the Board of Directors of the Corporation or its successor or any acquiring
or resulting entity with respect to the Corporation (including by any parent or
subsidiary of the Corporation, any such successor, or any such acquiring or
resulting entity), as applicable, at price equal to $12,750 per share if the
redemption takes place on or before December 31, 1998 or $12,625 per share if
the redemption takes place at any time thereafter, plus, in each case, an amount
in cash equal to all accrued and unpaid dividends to the date fixed for
redemption, without interest.
The aggregate redemption price payable to each holder of record of
Series A Preferred Stock to be redeemed shall be rounded to the nearest cent
($0.01).
<PAGE>
If less than all of the outstanding shares of Series A Preferred Stock
are to be redeemed, the Corporation will select those shares to be redeemed pro
rata, by lot or such other methods as the Board of Directors in its sole
discretion determines to be equitable. If redemption is being affected by the
Corporation, on and after the redemption date, dividends shall cease to accrue
on the shares of Series A Preferred Stock called for redemption, and they shall
be deemed to cease to be outstanding, provided that the redemption price
(including any accrued but unpaid dividends to the date fixed for redemption)
has been duly paid or provided for. If redemption is being effected by an entity
other than the Corporation, on and as of the redemption date, such entity shall
be deemed to own the shares being redeemed for all purposes hereof provided that
the redemption price (including the amount of any declared but unpaid dividends
to the date fixed for redemption) has been duly paid or provided for.
If redemption is being effected by the Corporation, on and as of the
redemption date, dividends shall cease to accrue on the shares of Series A
Preferred Stock called for redemption, and they shall be deemed to cease to be
outstanding, provided that the redemption price (including any declared but
unpaid dividends to the date fixed for redemption) has been duly paid. If
redemption is being effected by an entity other than the Corporation, on and as
of the redemption date such entity shall be deemed to own the shares being
redeemed for all purposes of hereunder, provided that the redemption price
(including the amount of any declared but unpaid dividends to the date fixed for
redemption) has been duly paid or provided for.
(b) Notice of Redemption. Notice of any redemption, setting forth (i)
the date and place fixed for said redemption, (ii) the redemption price and
(iii) a statement that dividends on the shares of Series A Preferred Stock (A)
to be redeemed by the Corporation will cease to accrue on such redemption date,
or (B) to be redeemed by an entity other than the Corporation will thereafter
accrue solely for the benefit of such entity, shall be mailed, postage prepaid,
at least thirty (30) days, but not more than sixty (60) days, prior to said
redemption date to each holder of record of Series A Preferred Stock to be
redeemed at his or her address as the same shall appear on the stock books of
the Corporation. If less than all of the shares of Series A Preferred Stock
owned by such holder are then to be redeemed, such notice shall specify the
number of shares thereof that are to be redeemed and the numbers of the
certificates representing such shares. Notice of any redemption shall be given
by first class mail, postage prepaid. Neither failure to mail such notice, nor
any defect therein or in the mailing thereof, to any particular holder shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice which was mailed in the
manner herein provided shall be conclusively presumed to have been duly given
whether or not the holder receives such notice.
If such notice of redemption shall have been so mailed, and if, on or
before the redemption date specified in such notice, all funds necessary for
such redemption shall have been set aside by the Corporation (or other entity as
provided in subsection (a) of this Section 3) separate and apart from its other
funds in trust for the account of the holders of shares of Series A Preferred
Stock to be redeemed (so as to be and continue to be available therefor), then,
on and after said redemption date, notwithstanding that any certificate for
shares of Series A Preferred Stock so called for redemption shall not have been
surrendered for cancellation or transfer, the shares of Series A Preferred Stock
(A) so called for redemption by the Corporation shall be deemed to be no longer
outstanding and all rights with respect to such shares of
<PAGE>
Series A Preferred Stock so called for redemption shall forthwith cease and
terminate, or (B) so called for redemption by an entity other than the
Corporation shall be deemed owned for all purposes hereof by such entity, except
in each case for the right of the holders thereof to receive, out of the funds
so set aside in trust, the amount payable on redemption thereof, but without
interest, upon surrender (and endorsement or assignment for transfer, if
required by the Corporation or such other entity) of their certificates.
In the event that holders of shares of Series A Preferred Stock that
shall have been redeemed shall not within two (2) years (or any longer period if
required by law) after the redemption date claim any amount deposited in trust
with a Corporation or trust company for the redemption of such shares, such
Corporation or trust company shall, upon demand and if permitted by applicable
law, pay over to the Corporation (or other entity that redeemed the shares) any
such unclaimed amount so deposited with it, and shall thereupon be relieved of
all responsibility in respect thereof, and thereafter the holders of such shares
shall, subject to applicable escheat laws, look only to the Corporation (or
other entity that redeemed the shares) for payment of the redemption price
thereof, but without interest from the date of redemption.
(c) Status of Shares Redeemed. Shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired for value by the Corporation shall,
after such acquisition, have the status of authorized and unissued shares of
Preferred Stock and may be reissued by the Corporation at any time as shares of
any series of Preferred Stock other than as shares of Series A Preferred Stock.
4. Liquidation Preference.
(a) Liquidating Distributions. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of shares of Series A Preferred Stock shall be entitled to receive
for each share thereof, out of the assets of the Corporation legally available
for distribution to shareholders under applicable law, or the proceeds thereof,
before any payment or distribution of the assets shall be made to holders of
shares of Common Stock or any other Junior Stock (subject to the rights of the
holders of any class or series of equity securities having preference with
respect to distributions upon liquidation and the Corporation's general
creditors, including its depositors), liquidating distributions in the amount of
$12,500 per share, plus an amount per share equal to any dividends accrued but
unpaid, without interest.
If the amounts available for distribution in respect of shares of
Series A Preferred Stock and any outstanding Parity Stock are not sufficient to
satisfy the full liquidation rights of all of the outstanding shares of Series A
Preferred Stock and such Parity Stock, then the holders of such outstanding
shares shall share ratably in any such distribution of assets in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the
<PAGE>
holders of shares of Series A Preferred Stock will not be entitled to any
further participation in any liquidating distribution of assets by the
Corporation. All distributions made in respect of Series A Preferred Stock in
connection with such a liquidation, dissolution or winding up of the Corporation
shall be made pro rata to the holders entitled thereto.
(b) Consolidation, Merger or Certain Other Actions. Neither the
consolidation, merger or other business combination of the Corporation with or
into any other person, nor the sale of all or substantially all of the assets of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 4.
5. Voting Rights.
Holders of shares of Series A Preferred Stock shall have no voting
rights.
6. Conversion Rights.
The holders of shares of Series A Preferred Stock shall have rights to
convert such shares into shares of Common Stock. The shares of Series A
Preferred Stock are convertible at the option of the holder, in whole or in
part, at any time after March 1, 1997 (the "Initial Conversion Date") and prior
to maturity into Common Stock at the price per share of Common Stock which
equals (i) $1.00 per share as such price may from time to time be adjusted
pursuant to the terms set forth herein (the "Conversion Price"). No fractional
shares or scrip representing any fractional shares shall be issued; instead of
any fractional shares of such Common Stock which would otherwise be issuable
upon such conversion, the Corporation shall pay a cash adjustment in respect of
such fractional share of Common Stock in an amount equal to the same fraction of
the then current market price of a share of Common Stock. Accrued dividends
through the date of conversion will be paid to the holder in cash or, at the
election of the Corporation, in Common Stock valued at 90% of the then current
market price of a share of Common Stock. For these purposes, "current market
price" shall have the meaning ascribed thereto in Section 2(a) hereof. In the
event that the Corporation shall, at any time prior to the exercise of
conversion rights hereunder: (i) declare or pay to the holders of the Common
Stock a dividend payable in any kind of shares of stock of the Corporation; or
(ii) change or divide or otherwise reclassify its Common Stock into the same or
a different number of shares with or without par value, or in shares of any
class or classes; or (iii) transfer its property as an entirety or substantially
as an entirety to any other company; or (iv) make any distribution of its assets
to holders of its Common Stock as a liquidation or partial liquidation dividend
or by way of return of capital; then, upon the subsequent exercise of conversion
rights, the holder thereof shall receive, in addition to or in substitution for
the shares of Common Stock to which it would otherwise be entitled upon such
exercise, such additional shares of stock or scrip of the Corporation, or such
reclassified shares of stock of the Corporation, or such shares of the
securities or property of the Corporation resulting from such transfer, or such
assets of the Corporation, which it would have been entitled to receive had it
exercised such conversion rights prior to the happening of any of the foregoing
events. Additionally, in the event of any of the foregoing events or
transactions, the Conversion Price shall be appropriately adjusted, if
necessary.
<PAGE>
Each share of Series A Preferred Stock, if converted into Common Stock
as prescribed above, will also entitle the holder to Warrants to purchase a
number of shares of Common Stock, at a price of $1.25 per share, during a five
(5) year period, commencing on the date of issuance, equal to the number of
shares of Common Stock received by the holder upon such conversion. The Warrants
shall be redeemable by the Corporation, at its sole option, at a redemption
price of $.05 per share underlying the Warrants to be redeemed, at any time
commencing from the date of issuance, upon not less than thirty (30) days prior
written notice, if the current market price of the Common Stock equals or
exceeds $3.00 per share for any sixty (60) consecutive trading day period during
which the shares of Common Stock underlying the Warrants to be redeemed are the
subject of an effective and current registration statement under the Securities
Act of 1993, as amended. "Current market price" for purposes of this Section 6
shall have the meaning ascribed thereto in Section 2(a) hereof; except that any
reference therein to an average price over a period of thirty (30) business days
shall instead refer to an actual price for each of sixty (60) consecutive
trading days. The exercise price of the Warrants shall be adjusted under the
same circumstances and in the same manner as the adjustments described in the
preceding paragraph regarding the Conversion Price.
7. No Sinking Fund.
No sinking fund shall be established for the retirement or redemption
of shares of Series A Preferred Stock.
8. Preemptive or Subscription Rights.
No holder of shares of Series A Preferred Stock shall have any
preemptive or subscription rights in respect of any shares of the Corporation
that may be issued.
9. No Other Rights.
The shares of Series A Preferred Stock shall not have any designations,
preferences or relative, participating, optional or other special rights except
as set forth herein, or as otherwise required by law.
10. Compliance with Applicable Law.
Declaration by the Board of Directors and payment by the Corporation of
dividends to holders of the Series A Preferred Stock and the repurchase,
redemption or other acquisition by the Corporation (or another entity as
provided in subsections (a) and (b) of Section 3 hereof) of shares of Series A
Preferred Stock shall be subject in all respects to any and all restrictions and
limitations placed on dividends, redemptions or other distributions by the
Corporation (or any such other entity) under (i) laws, regulations and
regulatory conditions or limitations applicable to or regarding the Corporation
(or any such other entity) from time to time and (ii) agreements between the
Corporation and its creditors from time to time in effect.
<PAGE>
Signatures
Signed by:
_________________________________________ Date: January , 1997
Charles M. Stimac, Jr.
Title: President and Chief Executive Officer
CORPORATE BY-LAWS
OF
ABCC CORP.
ARTICLE I
OFFICES
The principal office shall be in Miami, Dade County, Florida. The
corporation may also have offices at such other places both within and without
the State of Florida as the board of directors may from time to time determine
or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of
this corporation shall be held not more than four (4) months after the end of
each fiscal year. The time and place of the meeting shall be designated by the
president. If an annual meeting has not been held within four (4) months after
the end of any fiscal year, any stockholder may call said meeting. The
stockholder shall elect a board of directors and transact any other necessary
business at the annual meeting.
Section 2. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by the
Certificate of Incorporation, may be called by the president or by a majority of
the board of directors, and shall be called by the president or the secretary at
the request in writing of a majority of the board of directors then in office,
or at the request of stockholders owning a majority in the amount of the entire
capital stock of the corporation issued and outstanding and entitled to vote
thereat. Such request shall state the purpose or purposes of the proposed
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice thereof.
Section 3. Place of Meeting. The board of directors may designate any
place either within or without the State of Florida, unless otherwise prescribed
by law or by the Certificate of Incorporation, as the place of meeting for any
annual meeting or for any special meeting of the stockholders. A waiver of
notice signed by all stockholders entitled to vote at a meeting may designate
any place, either within or without the state of Florida, unless otherwise
prescribed by law or by the Certificate of Incorporation, as the place for the
holding of such meeting. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal office of the
corporation in the State of Florida.
<PAGE>
Section 4. Notice of Meeting. Written or printed notice stating the
place, day and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the president or the
secretary, or the officer or the persons calling the meeting, to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
Section 5. Waiver of Notice of Meeting. When stockholders who hold 4/5
of the voting stock having the right and entitled to vote at any meeting shall
be present at such meeting, however called or notified, and shall sign a written
consent thereto on the record of the meeting, the acts of such meeting shall be
as valid as if legally called and notified.
Section 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make at least five (5)
days before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held by each,
which list, for a period of three (3) days prior to such meeting, shall be kept
on file at the principal office of the corporation and shall be subject to
inspection by any stockholder at any time during the usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any stockholder during the whole time
of the meeting. The original stock transfer book shall be prima facie evidence
as to who are the stockholders entitled to examine such list or transfer books
or to vote at any meeting of the stockholders.
Section 7. Quorum. Except as otherwise provided in these By-Laws, or as
required by the Certificate of Incorporation or By-Law, a majority of the
outstanding shares of the corporation entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of stockholders. If less than a
majority of the outstanding shares are represented at a meeting, a majority of
the shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 8. Voting of Shares. Each stockholder entitled to vote shall at
every meeting of the stockholders be entitled to one vote in person or by proxy,
signed by him, for each share of voting stock held by him. Such right to vote
shall be subject to the right of the board of directors to close the transfer
books or to fix a record date for voting stockholders as hereinafter provided,
and if such directors shall not have exercised such right, no share of stock
shall be voted at any election for directors which shall have been transferred
on the books of the corporation within five (5) days next preceding such
election. The vote of a majority of the outstanding shares shall constitute the
act of the stockholders.
<PAGE>
Section 9. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy, executed in writing by the stockholder or by his duly authorized
attorney-in-fact; but no proxy shall be voted after three (3) years from such
date, unless the proxy provides for a longer period. Such proxies shall be filed
with the secretary of the corporation before or at the time of the meeting.
Section 10. Informal Action By Stockholders. Unless otherwise provided
by law or by the Certificate of Incorporation, any action required to be taken
at a meeting of the stockholders, or any other action which may be taken at a
meeting of the stockholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting at which all shares entitled to
vote thereon were present and voted.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by its board of directors.
Section 2. Number, Tenure, and Qualifications. The board of directors
of the corporation shall consist of between one and nine directors. The number
of directors may be altered from time to time, by the stockholders at any annual
or special meeting; provided that the number of directors shall not be less nor
more than the number fixed by the Certificate of Incorporation. Each director
shall hold office until the next annual meeting of stockholders and until his
successor has been qualified, unless sooner removed by the stockholders at any
general or special meeting. All directors shall be of full age and at least one
of them shall be a citizen of the United States.
Section 3. Annual Meeting. After each annual meeting of stockholders,
the board of directors shall hold its annual meeting at the same place as and
immediately following such annual meeting of stockholders for the purpose of the
election of officers and the transaction of such other business as may come
before the meeting; and, if a majority of the directors be present at such place
and time, no prior notice of such meeting shall be required to be given to the
directors. The place and time of such meeting may also be fixed by written
consent of the directors.
Section 4. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall be determined
from time to time by the board of directors.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by the chairman of the board, if there be one, or the president or
any two (2) directors. The person or persons authorized to call special meetings
of the board of directors may fix the place for holding any special meetings of
the board of directors called by them.
<PAGE>
Section 6. Notice. Notice of any special meeting shall be given at
least three (3) days prior thereto, by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting, either before,
at or after such meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 7.Quorum. A majority of the directors shall constitute quorum,
but a smaller number may adjourn from time to time, without further notice,
until a quorum is secured.
Section 8. Manner of Action. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Vacancies. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the board of directors, unless otherwise provided
by the Certificate of Incorporation or by law. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
Section 10. Compensation. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors, or a stated salary as directors. No payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
Section 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as the secretary of
the meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail, return receipt requested, to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 12. Informal Action by Board. Any action required or permitted
to be taken by any provision of law, of the Certificate of Incorporation or of
these By-Laws at any meeting of the board of directors or of any committee
thereof may be taken without a meeting if, prior to such action, a written
consent thereto is signed by all members of the board or of such committee, as
the case may be.
<PAGE>
Section 13. Removal. Any director may be removed by the stockholders at
any general or special meeting of the stockholders of the corporation whenever
in their judgment the best interest of the corporation shall be served thereby,
but such removal shall be without prejudice to the contract rights, if any, of
the person removed. This by-law shall not be subject to change by the board of
directors.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be elected by the
board of directors. The board of directors may also elect a chairman of the
board, one or more vice presidents, one or more assistant secretaries and
assistant treasurers and such other officers as the board of directors shall
deem appropriate. The same person may hold more than one office and may hold all
offices of the corporation
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting after
each annual meeting of stockholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as is
convenient.
Each officer shall hold office until his successor shall have been duly
elected and qualified, or until death, resignation, or removal.
Section 3. Removal. Any officer elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy due to death, resignation, removal,
disqualification, or otherwise, may be filled by the board for the unexpired of
the term.
Section 5. Duties of Officers. The president shall be the chief
executive officer, shall have general and active management of the affairs of
the corporation subject to the direction of the board, shall preside at all
meetings of the stockholders, and shall preside at all meetings of directors
unless directors shall elect a chairman. The secretary shall have custody of,
and maintain all corporate records except financial records, shall record the
minutes of all meetings of stockholders and directors, and send out notice of
meetings. The treasurer shall have custody of all corporate funds and financial
records, keep full and accurate accounts of receipts and disbursements, and
render accounts thereof, as directed by the president. The secretary, treasurer,
and all other officers shall perform such other duties as may be prescribed by
the board of directors or president. Subject to the foregoing, all officers
shall have such powers and duties as usually pertain to their respective offices
under law.
<PAGE>
Section 6. Salaries. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
Section 7. Delegation of Duties. In the absence of or disability of any
officer of the corporation, or for any other reason deemed sufficient by the
board of directors, the board may delegate his powers or duties to any other
officer or to any other director for the time being.
ARTICLE V
EXECUTIVE AND OTHER COMMITTEES
Section 1. Creation of Committees. The board of directors may, by
resolution passed by a majority of the whole board, designate an executive
committee and one or more other committees, each to consist of two (2) or more
of the directors of the corporation.
Section 2. Executive Committee. The executive committee, if there shall
be one, shall consult with and advise the officers of the corporation in the
management of its business and shall have and may exercise to the extent
provided in the resolution of the board of directors creating such executive
committee such powers of the board of directors as can be lawfully delegated by
the board.
Section 3. Other Committees. Such other committees shall have such
functions and may exercise the powers of the board of directors as can be
lawfully delegated and to the extent provided in the resolution or resolutions
creating such committee or committees.
Section 4. Meetings of Committees. Regular meetings of the executive
committee and such other committees may be held without notice at such time and
at such place as shall from time to time be determined by the executive
committee or such other committees and special meetings of the executive
committee or such other committees may be called by any member thereof upon two
(2) days notice to each of the other members of such committee, or on such
shorter notice as may be agreed to in writing by each of the other members of
such committee, given either personally or in the manner provided in Section 6
of Article III of these By-Laws (pertaining to notice for directors' meetings).
Section 5. Vacancies on Committees. Vacancies on the executive
committee or on such other committees shall be filled by the board of directors
then in office at any regular or special meeting.
Section 6. Quorum of Committees. At all meetings of the executive
committee or such other committees, a majority of the committee's members then
in office shall constitute a quorum for the transaction of business.
Section 7. Manner of Action of Committee. The acts of a majority of the
members of the executive committee or such other committees, present at any
meeting at which there
<PAGE>
is a quorum, shall be the act of such committee.
Section 8. Minutes of Committees. The executive committee, if there
shall be one, and such other committees shall keep regular minutes of their
proceedings and report the same to the board of directors when requested.
Section 9. Compensation. Members of the executive committee and such
other committees may be paid compensation in accordance with the provisions of
Article III, Section 10 of these By-Laws (pertaining to compensation of
directors).
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, and does hereby, indemnify any person made a
party to an action, suit or proceeding, whether civil or criminal, brought to
impose a liability or penalty on such person in his capacity of director or
officer of this corporation, or of any other corporation which he served as such
at the request of this corporation, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees, actually and
necessarily incurred as a result of such action, suit or proceeding, or any
appeal therein, if such director or officer acted in good faith in the
reasonable belief that such action was in the best interests of the corporation
and, in criminal actions or proceedings, without reasonable ground for belief
that such action was unlawful. The termination of any such civil or criminal
action, suit or proceeding by judgment, settlement, conviction or upon a plea of
nolo contendere shall not in itself create a presumption that any director or
officer did not act in good faith in the reasonable belief that such action was
in the best interests of this corporation or that he had reasonable ground for
belief that such action was unlawful. The foregoing rights of indemnification
shall apply to the heirs, executors, and administrators of any such director or
officer and shall not be exclusive of other rights to which any such director or
officer may be entitled pursuant to any provision of the Certificate of
Incorporation, these By-Laws, any vote of the stockholder or otherwise.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Certificates for Shares. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation, by the chairman of the board, the president or a vice
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, exhibiting the holder's name and
certifying the number of shares owned by him in the corporation. The
certificates shall be numbered and entered in the books of the corporation as
they are issued.
<PAGE>
Section 2. Transfer of Shares. Transfers of shares of the corporation
shall be made upon its books by the holder of the shares in person or by his
lawfully constituted representative, upon surrender of the certificate of stock
for cancellation. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes and the corporation shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person whether
or not it shall have express or other notice thereof, save as expressly provided
by the laws of the State of Florida.
Section 3. Facsimile Signature. Where a certificate is signed (1) by a
transfer agent or an assistant transfer agent or (2) by a transfer clerk acting
on behalf of the corporation and a registrar, the signature of any such chairman
of the board, president, vice president, treasurer, assistant treasurer,
secretary or assistant secretary may be a facsimile. In case any officer or
officers who have signed, or whose facsimile signature or signatures have been
used on, any such certificate or certificates shall cease to be such officer or
officers of the corporation, such certificate or certificates may nevertheless
be adopted by the corporation and be issued and delivered as though the person
or persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such officer
or officers of the corporation.
Section 4. Lost Certificates. The board of directors may direct a new
certificate or certificates to he issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such Sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
ARTICLE VIII
CLOSING OF TRANSFER BOOKS
OR FIXING OF RECORD DATE
The board of directors may close the stock transfer books of the
corporation for a period not exceeding forty (40) days preceding the date of any
meeting of stockholders, or the date for payment of any dividend, or the date
for the allotment or rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or for a period not exceeding
forty (40) days in connection with the obtaining of the consent of stockholders
for any purpose. In lieu of closing the stock transfer books, as aforesaid, the
board of directors may fix in advance a date, not exceeding forty (40) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date of the allotment of rights, or the date when any
change, conversion or exchange of capital stock shall go into effect, or a date
in connection with obtaining such consent, as a record date for the
<PAGE>
determination of the stockholders entitled to notice of, and to vote, at any
such meeting and any adjournment thereof, any such allotment of rights, or to
exercise the rights in respect of any such change conversion or exchange of
capital stock, or to give such consent, and in such case such stockholders and
only such stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, or to give such consent, as the
case may be notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid.
ARTICLE IX
DIVIDENDS
The board of directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares of capital stock in the
manner and upon the terms and conditions provided by the Certificate of
Incorporation and By-Laws. Dividends may be paid in cash, in property, or in
shares of stock, subject to the law.
ARTICLE X
FISCAL YEAR
The fiscal year of the corporation shall be the 12-month period
selected by the board of directors as the taxable year of the corporation for
federal income tax purposes.
ARTICLE XI
SEAL
The corporate seal shall be as follows:
ARTICLE XII
AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by the board of directors, provided that any By-Law or amendment
thereto as adopted by the board of directors may be altered, amended or repealed
by vote of the stockholders entitled to vote thereon, or a new By-Law in lieu
thereof may be adopted by the stockholders. No By-Law which has been altered,
amended or adopted by such a vote of the stockholders may be altered, amended or
repealed by a vote of the directors until two (2) years shall have expired since
such vote of the stockholders.
April 2, 1998
ABC Dispensing Technologies, Inc.
451 Kennedy Road
Akron, Ohio 44305
Re: ABC Dispensing Technologies, Inc.
Form S-1 Registration Statement Covering
10,518,250 Shares of Common Stock
Gentlemen:
We have acted as counsel for ABC Dispensing Technologies, Inc., a
Florida corporation (the "Company"), in connection with the preparation and
filing by the Company of a Registration Statement on Form S-1 filed under the
Securities Act of 1933, as amended (the "Act")(the "Registration Statement"),
relating to:
(A) the issuance by the Company of up to 5,990,000 shares of the
Company's common stock, $.01 par value (the "Common Stock") upon the
exercise of common stock purchase warrants and options (the "Warrant
Shares");
(B) the issuance by the Company of up to 3,837,500 shares of Common
Stock (the "Conversion Shares") upon conversion of the shares of the
Company's issued and outstanding 9% Cumulative Redeemable Preferred
Stock, Series A (the "Preferred Stock"); and
(C) 690,750 shares of Common Stock issuable in payment of dividends on
the Preferred Stock (the "Dividend Shares").
In that connection, we have examined the Articles of Incorporation and
By-laws of the Company, the minutes of the various meetings and consents of the
Board of Directors of the Company, and such other documents, certificates,
records, authorizations, proceedings, statutes and judicial decisions as we have
deemed necessary to form the basis of the opinion expressed below. In such
examination, we have assumed the genuineness of all signatures, the authenticity
all documents submitted to us as originals and the conformity to originals of
all documents
<PAGE>
ABC Dispensing Technologies, Inc.
April 2, 1998
Page 2
submitted to us as copies thereof. As to various questions of fact material to
such opinion, we have relied upon statements and certificates of officers and
representatives of the Company and others.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly organized and is validly existing as a
corporation under the laws of the State of Florida.
2. The Warrant Shares have been duly authorized and reserved for
issuance and when issued in accordance with the terms of the Warrants and upon
the Company's receipt of the exercise price therefor, will be validly issued,
fully paid and non-assessable.
3. The Conversion Shares have been duly authorized and reserved for
issuance and when issued in accordance with the terms of the Preferred Stock,
will be validly issued, fully paid and non-assessable.
4. The Dividend Shares have been duly authorized and reserved for
issuance and when issued as dividends in accordance with the terms of the
Preferred Stock, will be validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"Legal Matters" in the Prospectus comprising a part of the Registration
Statement.
By giving the foregoing consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the Act or
are otherwise within the category of persons described in Section II (a)(4) of
the Act.
Very truly yours,
ST. JOHN & WAYNE, L.L.C.
EMPLOYMENT AGREEMENT
This agreement is made as of March 1, 1997, and has been entered into
between ABC Dispensing Technologies, Inc., a Florida corporation with its
principal offices at 405 Kennedy Road (the "Employer" or "Company"), and Charles
M. Stimac, Jr. (the "Employee").
WHEREAS, the Company desires to employ the Employee on the terms and
conditions set forth herein; and
WHEREAS, the Employee desires to be employed by the Company on the terms
and conditions set forth herein;
NOW THEREFORE, the Company and the Employee agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee, and the Employee
hereby accepts continued employment, upon the terms and conditions hereinafter
set forth.
2. TERM. Subject to the provisions of termination as herein provided, the
Term of this Agreement shall begin on March 1, 1997, and shall terminate on
February 28, 2000 (being three (3) years after the commencement date); provided,
however, that commencing on the date which is one year prior to the date of
termination, and on each anniversary of such date (such date and the date of
each anniversary thereof being a "Renewal Date"), the term shall be
automatically extended so to terminate two (2) years from such Renewal Date,
unless at least sixty (60) days prior to such Renewal Date either party hereto
gives notice to the other that the term shall not be so extended.
3. POSITION AND DUTIES. During the term of this Agreement, the Employee
shall serve as President and Chief Executive Officer of the Company with at
least such statutory duties and responsibilities as exist as of the date hereof
and as may be provided in the By-Laws of the Company. The place of employment
shall be at the principal executive offices of the Company in Akron, Ohio. The
Employee agrees to devote all of business time, skill, attention and best
efforts during normal business hours to the business of the Company to the
extent necessary to discharge the responsibilities assigned during the term of
employment hereunder, except for service on other corporation, civic or
charitable boards or committees not significantly interfering with the
Employee's duties hereunder and usual, ordinary and customary periods of
vacation.
4. COMPENSATION.
(a) Base Salary. For all services rendered by Employee under this
Agreement, the Company shall pay a salary of $150,000 per year ("Base Salary"),
which Base Salary will be increased annually to reflect the percentage increase
in the consumer Price Index for Ohio (the "CPI") for the most recently completed
year. Upon issuance of the CPI for the Ohio region, Employee's Basse Salary will
be increase retroactively to January of the year following the year for which
the CPI is issued. The Base Salary will be paid in installments in conformity
with the regular payroll practices of the Company. The Base Salary shall also be
reviewed annually by the Compensation Committee of the Board of Directors of the
Company and may be increased on the basis of individual and corporate
performance, by criteria and standards determined by the Compensation Committee.
Any increase in Base Salary or other compensation shall in no way limit or
reduce any other obligation of the Company, hereunder, and once established at
an increased specified rate, Employee's Base Salary hereunder shall not
thereafter be reduced.
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(b) Incentive Compensation; Bonuses. In addition to the Base Salary, the
Employee shall be entitled to an annual bonus equal to four (4%) percent of
annual pretax income as calculated by the company's auditors, and shall be
entitled (i) participate in such incentive plans (including the right to defer
such bonus) made available by the Company to its executives and key employees
and (ii) to receive such additional bonus or discretionary compensation payments
as the Board of Directors of the Company or the Compensation Committee may
determine from time to time, which incentive plan participation and additional
bonus or discretionary compensation payments shall be reviewed annually by the
Compensation Committee of the Board of Directors and shall be awarded, on the
basis of corporate performance, by criteria and standards established by the
Board of Directors or the Compensation Committee of the Board in their sole
discretion.
(c) Expenses. During the term of employment hereunder, the Employee
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred in accordance with the policies and procedures of the Company, as may
be in force from time to time.
(d) Benefits. During the term of employment hereunder, the Employee
shall be entitle to receive a package of benefits that includes all of the
programs, plans and perquisites currently provided to you by the Company, as
long as such programs, plans and perquisites are continued by the company.
(e) Special Award. A special award of Stock Options or Warrants to
acquire 100,00 shares of common stock of the Company at an exercise price of
$1.25 per share shall be granted to the Employee as of the effective date of the
Agreement. The term of the Stock Option or Warrant shall be 10 years, and the
shares shall be fully vested as of January 31, 1998.
5. TERMINATION.
(a) Termination for Disability. In the event that Employee shall have
been prevented form substantially rendering the services required under this
Agreement by reason of his disability (as confirmed by medical authority
satisfactory to the Company and Social Security guidelines) for a period of six
(6) consecutive months (or 180 days), the Company shall have the Right to
terminate this Agreement upon thirty (30) days written notice, provided such
disability continues during said notice period.
(b) Termination for Employee's Breach. The Company shall have the
right to terminate this Agreement and the employment hereunder if Employee
violates his responsibilities under paragraph 3 of this Agreement and such
violation continues after the Employee's having received notice of such
violation and thirty (30) days to cure such violation(s) to the satisfaction of
the Company's Board of Directors. The Company may immediately terminate this
Agreement upon (i) determination by the Company's Board of Directors that
Employee has willfully defaulted on a material obligation of the Agreement, (ii)
determination by the Company's Board of Directors that there has been a
defalcation of the Company's funds by Employee, (iii) conviction of Employee on
a felony charge or conviction of a misdemeanor which impairs the Employee's
ability to substantially perform his duties with the Company, or (iv)
determination by the Company's Board of Directors that the Employee has had
unauthorized discussions of the Company's business activities, or improperly
disclosed trade secrets or confidential information concerning the Company's
business activities or proposed business activities. At such time as the
Company's Board of Directors addresses such charges, the Employee may submit a
written statement regarding such claims and present a defense against such
claims.
2
<PAGE>
(c) Termination for Employer's Breach. Employee shall have the right to
terminate this Agreement if the Company materially breaches any of the
provisions hereof and such breach is not cured within thirty (30) days after the
Company has received written notice from the Employee. In such event, or in the
event of a wrongful termination of the Employee, all moneys due to the Employee
through the term of the Agreement shall be paid by the Company in a lump sum
amount within thirty(30) days of Employee's termination with bonuses to be paid
when earned through the remainder of the term of this Agreement. Employee shall
have no obligation to mitigate any losses or damages incurred as a result of
such termination.
(d) Termination by Death. If employment terminates by reason of the
Employee's death, the Company will pay the Employee's estate a lump sum payment
equivalent to six (6) months salary; other benefits will be determined in
accordance with the Company's survivor's benefits, insurance and other
applicable programs and plans, then in effect.
(e) Change of Control. In the event of a change of control, all
Options and Grants of Common Stock shall be fully vested. A change of control is
defined as (i) a tender offer, merger or other transactions as a result of which
any person or group becomes the owner of more than 50% of the Common Stock of
the Company or the combined voting power of the Company's then outstanding
securities, (ii) a liquidation or sale of substantially all of the Company's
assets, (iii) the individuals constituting the Board of Directors or individuals
nominated by them cease to constitute a majority of the Board of Directors, or
(iv) the Company's merger or consolidation with any other corporation (other
than a wholly-owned subsidiary), if the Company is not the surviving corporation
(or survives only as a subsidiary of another corporation).
6. CONFIDENTIAL AND PROPRIETARY INFORMATION. Employee agrees to keep secret
all confidential information, trade secrets or proprietary information acquired
by the Employee during his employment concerning the business and affairs of the
Company (the "Information") and further agrees for a period of one (1) year
after the termination of his employment, for any reason, not to disclose any
such Information to any person, firm or corporation other than as directed by
the Employer, unless and until such Information becomes known outside of the
Company (other that through a violation by the Employee of his obligations
hereunder). Employee also agrees, upon the company's request, to execute a
confidential nondisclosure agreement if requested.
7. MISCELLANEOUS PROVISIONS.
(a) Successors. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the company would be required to perform it if no such succession
had taken place. Failure of the company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of the
Agreement and shall entitle the Employee to compensation from the Company in
the same amount and on the same terms as the Employee is entitled to hereunder
if the Employee terminated his employment for good cause.
(b) Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the employee should die while any amount would still be payable to
the Employee hereunder if the Employee had continued to live, all such amounts,
unless otherwise provide herein, shall be paid in accordance with
3
<PAGE>
the terms of this Agreement, to the Employee's devisee, legatee or other
designee or, if there is not such designee, to the Employee's estate.
(c) Notices and Communications. All notices and communications hereunder
shall be in writing and shall be hand delivered or sent postage prepaid by
registered or certified mail, return receipt requested, to the addresses first
written or to such other address of which notice shall have been given in the
manner herein provided.
(d) Entire Agreement, Non-Assignment. This Agreement may not be
modified, amended, changed or discharged, except by a writing signed by the
parties hereto and then only to the extend herein set forth. This Agreement
shall be binding upon and inure to the benefit of the parties hereto, and any
administrator, executor and successor the Company. This Agreement may not be
assigned by either of the parties hereto without prior written consent of the
other party.
(e) Validity; Governing Law. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Ohio.
(f) Legal Expenses. All legal fees and expenses incurred by the
Employee in attempts to receive the benefits granted hereunder or to enforce
this Agreement or any of its terms will be paid by the Company providing that
Employee's claims are not dismissed in a summary proceeding.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year first written above.
ABC DISPENSING TECHNOLOGIES, INC.
/s/ William Lerner, Secretary
-----------------------------
(Authorized Officer)
EMPLOYEE:
/s/ Charles M. Stimac, Jr.
--------------------------
CHARLES M. STIMAC, JR
4
STOCK OPTION PLAN
1. Purpose. The 1990 Nonqualified Stock Option Plan (the "Plan") is
intended to advance the interests of AMERICAN BUSINESS COMPUTERS CORPORATION
(the "Company"), its shareholders, and its subsidiaries by encouraging and
enabling selected directors, officers and other key employees upon whose
judgment, initiative and effort the Company is largely dependent for the
successful conduct of its business, to acquire and retain a proprietary interest
in the Company by ownership of its stock. Options granted under the plan are
intended to be options which do not meet the requirements of Section 422A of the
Internal Revenue Code of 1986 (the "Code").
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the body administering the Plan.
(c) "Common Stock" means the Company's $0.01 par value Common Stock.
(d) "Date of Grant" means the date on which an option is granted under
the Plan.
(e) "Disinterested Person" shall mean a person who:
(i) during one year prior to the time of exercising discretion in
administering the Plan, has not been eligible for selection as a person
to whom equity securities may be allocated or granted to the Plan (or
any other plan of the Company or any of its affiliates) entitling the
participants therein to acquire equity securities; and
(ii) is not so eligible for one year after such exercise.
(f) "Option" means an option granted under the Plan.
(g) "Optionee" means a person to whom an option, which has not expired,
has been granted under the Plan.
(h) "Subsidiary" or "Subsidiaries" means a subsidiary corporation or
corporations of the Company as defined in Section 425 of the Code.
(i) "Successor" means the legal representative of the estate of a
deceased optionee or the person or persons who acquire the right to
exercise an option by bequest or inheritance or by reason of the death of
any optionee.
<PAGE>
3. Administration of Plan. The Board of Directors of the Company shall
appoint a Committee of two or more directors, all of whom are disinterested
persons (as defined in the Plan), to administer the Plan. The members of the
Committee shall be appointed for terms of one (1) year each. No discretion
concerning decisions regarding the Plan shall be afforded to a person who is not
a disinterested person. Notwithstanding the foregoing, the Committee shall have
the authority to retain consultants or other advisors for the purpose of
designing performance plans and objectives or other criteria for the grant of
options pursuant to the Plan. The Committee shall have full and final authority
in its discretion, subject to the provisions of the Plan, to determine the
individuals to whom and the time or times at which options shall be granted and
the number of shares and purchase price of Common Stock covered by each option;
to construe and interpret the Plan; to determine the terms and provisions of
the respective option agreements, which need not be identical, including, but
without limitation, terms covering the payment of the option price; and to make
all other determinations and take all other actions deemed necessary or
advisable for the proper administration of the Plan. All such actions and
determinations shall be conclusively binding for all purposes and upon all
persons.
4. Common Stock Subject to Options. The aggregate number of shares of the
Company's Common Stock which may be issued upon the exercise of options granted
under the Plan shall not exceed 500,000 shares, subject to adjustment under the
provisions of paragraph 7. The shares of Common Stock to be issued upon the
exercise of options may be authorized but unissued shares, shares issued and
reacquired by the Company or shares bought on the market for the purposes of the
Plan. In the event any option shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, the shares subject to such
option but not purchased thereunder shall again be available for options to be
granted under the Plan.
5. Eligibility. Options may be granted only to key employees, including
officers, and Directors, of (a) the Company, (b) subsidiary corporations
(hereinafter called "subsidiaries"), of the Company from time to time and (c)
any business entity (hereinafter called an "affiliate") in which the Company
shall have a substantial interest. A Director who is a member of the Committee
charged with administration of the Plan will not be eligible to receive an
option. In determining those to whom options shall be granted and the number of
shares to be covered by each option, the Committee may take into account the
nature of the services rendered by the Optionee, their present and potential
contributions to the Company's success and such other factors as the Committee
in its discretion shall deem relevant. Options may be granted to Optionees who
hold or have held options under the previous plans. An Optionee who has been
granted an option under the Plan may be granted an additional option or options
under the Plan if the Committee shall so determine.
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<PAGE>
6. Terms and Conditions of Options. Any option granted under the Plan shall
be evidenced by an agreement executed by the Company and the applicable officer,
director or employee and shall contain such terms and be in such form as the
Committee may from time to time approve, subject to the following limitations
and conditions:
(a) Option Price. The option price per share with respect to each option
shall be the fair market value of a share of the Common Stock on the Date
of Grant. For the purposes hereof, fair market value shall be determined as
follows: (i) in case the Common Stock shall not then be listed and traded
upon a recognized securities exchange, the fair market value shall be the
last bid quotation for such stock option on the Date of Grant (as reported
by a recognized stock quotation service) or, in the event that there shall
be no bid quotations on the Date of Grant, then the last bid quotation on
the date nearest preceding the Date of Grant or (ii) in case the Common
Stock shall be listed and traded upon a recognized securities exchange, the
fair market value shall be the last selling price at which shares of the
Common Stock were traded on such recognized securities exchange on the Date
of Grant or, if the Common Stock was not traded on said Date, the last
selling price on the date nearest preceding the Date of Grant.
(b) Period of Option. The expiration date of each option shall be fixed
by the Committee, but, notwithstanding any provision of the Plan to the
contrary, such expiration date shall not be more than five years from the
Date of Grant.
(c) Vesting of Shareholder Rights. Neither an optionee nor his successor
shall have any of the rights of a shareholder of the Company until the
certificates evidencing the shares purchased are properly delivered to such
optionee or his successor.
(d) Exercise of Option. Each option shall be exercisable from time to
time over a period commencing on the Date of Grant and ending upon the
expiration or termination of the option; provided, however, the Committee
may, by the provisions of any option agreement, limit the number of shares
purchasable thereunder in any period or periods of time during which the
option is exercisable; and provided, further, that no option shall be
exercisable within six months after its Date of Grant, except in those
cases provided in subparagraph (f) hereof. An option shall not be
exercisable in whole or in part prior to the date of shareholder approval
of the Plan.
(e) Nontransferability of Option. No option shall be transferable or
assignable by an optionee, otherwise than by will or the laws of descent
and distribution and each option shall be exercisable, during the
optionee's lifetime, only by
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<PAGE>
him or his duly appointed guardian or legal representative. No option
shall be pledged or hypothecated in any way and no option shall be subject
to execution, attachment, or similar process except with the express
consent of the Committee.
(f) Holding Period. No option granted hereunder shall be exercisable by
the Optionee thereof for at least six months after the Date of Grant,
except in the case of the death or disability of the Optionee. For purposes
hereof, the Optionee shall be deemed disabled upon the appointment of a
guardian or other legal representative for his person and estate.
(g) Termination of Employment. Upon termination of an optionee's
employment with the Company or with any of its subsidiaries, or, in the
case of a director who is not an employee, upon the termination of his term
as a director without his re-election thereto, his option privileges shall
be limited to the shares which were immediately purchasable by him at the
date of such termination and such option privileges shall expire unless
exercised by him within 90 days after the date of such termination. The
granting of an option to an eligible person does not alter in any way the
Company's or the relevant subsidiary's existing rights to terminate such
person's employment or his term as a director at any time for any reason,
nor does it confer upon such person any rights or privileges except as
specifically provided for in the Plan.
(h) Death of Optionee. If an optionee dies while in the employ of the
Company or any subsidiary, or while a director of either, his option
privileges shall be limited to the shares which were immediately
purchasable by him at the date of death and such option privileges shall
expire unless exercised by his successor within one year after the date of
death.
(i) Securities Law Restrictions. The agreement to be entered into
between the Company and the Optionee at the time of granting an option
hereunder shall provide that the shares subject thereto will be acquired
for investment only and not with a view to distribution thereof unless
there shall be an effective registration statement under the Securities Act
of 1933, as amended, with respect thereto.
7. Adjustments.
(a) In the event that the outstanding shares of Common Stock of the
Company are hereafter increased or decreased or changed into or exchanged
for a different number or kind of shares or other securities of the Company
or of another corporation, by reason of a recapitalization,
reclassification, stock-split up, combination of shares, or dividend or
other distribution payable in capital stock, appropriate adjustment may be
made by the Committee in the number and kind of
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<PAGE>
shares for the purchase of which options may be granted under the Plan.
In addition, the Committee may make appropriate adjustment in the number
and kind of shares as to which outstanding options, or portions thereof
then unexercised, shall be exercisable, to the end that the proportionate
interest of the holder of the option shall, to the extent practicable, be
maintained as before the occurrence of such event. Such adjustment in
outstanding options shall be made without change in the total price
applicable to the unexercised portion of the option but with a
corresponding adjustment in the option price per share.
(b) In the event of the dissolution or liquidation of the Company, any
option granted under the Plan shall terminate as of a date to be fixed by
the Committee, provided that not less than 30 days written notice of the
date so fixed shall be given to each optionee and each such optionee shall
have the right during such period to exercise his option as to all or any
part of the shares covered thereby including shares as to which such option
would not otherwise be exercisable by reason of an insufficient lapse of
time.
(c) In the event of a Reorganization (as hereinafter defined) in which
the Company is not the surviving or acquiring company, or in which the
Company is or becomes a wholly owned subsidiary of another company after
the effective date of the Reorganization, then
(1) If there is no plan or agreement respecting the Reorganization
(Reorganization Agreement) or if the Reorganization Agreement does not
specifically provide for the change, conversion, or exchange of the
shares under outstanding and unexercised stock options for securities of
another corporation, then the Committee shall take such action, and the
options shall terminate, as provided in subparagraph (b) of this
paragraph 7; or
(2) If there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion, or exchange
of the shares under outstanding and unexercised stock options for
securities of another corporation, then the Committee shall adjust the
shares under such outstanding and unexercised stock options (and shall
adjust the shares remaining under the Plan which are then available to
be optioned under the Plan, if the Reorganization Agreement makes
specific provision therefor) in a manner not inconsistent with the
provisions of the Reorganization Agreement for the adjustment, change,
conversion, or exchange of such stock and such options.
The term Reorganization as used in this subparagraph (C) of this paragraph
7 shall mean any statutory merger, statutory consolidation, sale of all or
substantially all of the assets
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of the Company, or sale, pursuant to an agreement with the Company, of
securities of the Company pursuant to which the Company is or becomes a
wholly owned subsidiary of another company after the effective date of the
Reorganization.
(d) Adjustments and determinations under this paragraph 7 shall be made
by the Committee, whose decisions as to what adjustments or determinations
shall be made, and the extent thereof, shall be final, binding, and
conclusive.
8. Restrictions on Issuing Shares. The exercise of each option shall be
subject to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
9. Use of Proceeds. The Proceeds received by the Company from the sale
of Common Stock pursuant to the exercise of options granted under the Plan shall
be added to the Company's general funds and used for general corporate purposes.
10. Amendment, Suspension, and Termination of Plan. The Board may at any
time suspend or terminate the Plan or may amend it from time to time in such
respects as the Board may deem advisable in order that the options granted
thereunder may conform to any changes in the law or in any other respect which
the Board may deem to be in the best interests of the Company; provided,
however, that without approval by the shareholders of the Company representing a
majority of the voting power, no such amendment shall (a) except as specified in
paragraph 7, increase the maximum number of shares for which options may be
granted under the Plan, (b) change the provisions of subparagraph (a) of
paragraph 6 relating to the establishment of the option price, (c) change the
provisions of subparagraph (b) of paragraph 6 relating to the expiration date of
each option or (d) change the provisions of the second sentence of this
paragraph 10 relating to the term of this Plan. Unless the Plan shall
theretofore have been terminated by the Board or as provided in paragraph 11,
the Plan shall terminate ten years after the effective date of the Plan. No
option may be granted during any suspension or after the termination of the
Plan. Except as provided in paragraph 11, no amendment, suspension, or
termination of the Plan shall, without an optionees consent, alter or impair any
of the rights or obligations under any option theretofore granted to such
optionee under the Plan.
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11. Effective Date of Plan and Shareholder Approval. The effective date
of the Plan is February 16, 1990, the date of its approval by the Board;
provided, however, if the Plan is not approved by the shareholders of the
Company representing a majority of the voting power at the next shareholders
meeting or if the Plan is not approved by such shareholders before December 31,
1990, the Plan shall terminate and any options granted thereunder shall be void
and have no force or effect.
ABC DISPENSING TECHNOLOGIES, INC.
AMENDED 1995 STOCK OPTION PLAN
1. PURPOSES. The purposes of this Amended 1995 Stock Option Plan (the "Plan")
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to the Directors and
Employees of the Company or its subsidiaries (as defined in Section 2 below) to
whom Option's may be granted under this Plan, and to promote the success of the
Company's business.
Options granted hereunder may be either "incentive stock options", as
defined in Section 422 of the Internal Revenue Code of 1986, as amended
("ISO's"), or "Non-ISO's", at the discretion of the Board and as reflected in
the terms of the written option agreement.
The Plan is not intended as an agreement or promise of employment.
Neither the Plan, nor any Option granted pursuant to the Plan, shall confer on
any person any right to continue in the employ of the Company. The right of the
Company to terminate an Employee is not limited by the Plan, nor by any Option
granted pursuant to the Plan, unless such right is specifically described by the
terms of any such Option.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee appointed under Section 4(a)
hereof, or, in the absence of such appointment, the Board of Directors of the
Company.
(d) "Common Stock" shall mean the Company's common stock, $.01 par
value per share.
(e) "Company" shall mean ABC Dispensing Technologies, Inc., a Florida
corporation.
(f) "Continuous Service or Continuous Status as an Employee" shall mean
the absence of any interruption or termination of service as an Employee or
Director. Continuous Status as an
<PAGE>
Employee or Director shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Board.
(g) "Director" shall mean any person serving on the Company's Board of
Directors.
(h) "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" shall mean the closing bid price of the
Company's Common Stock as reported on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System (or if the Common Stock is not
traded on the NASDAQ system, on the Exchange, Quotation System or Electronic
Bulletin Board which reports or quotes the closing prices for a share of the
Company's Common Stock) for any date (or, if no shares of Common Stock are
traded on such date, for the immediately preceding date on which shares of
Common Stock were traded) as reported in the Wall Street Journal (or if the Wall
Street Journal no longer reports such price, any newspaper, trade journal or
quotation service selected by the Committee); or, if no such price quotation is
available, the price which the Committee acting in good faith determines through
any reasonable valuation method that a share of Common Stock might change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or sell and both having reasonable knowledge of the relevant facts.
(k) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(l) "Non-Employee Director" shall have the meaning ascribed to such
term under Rule 16b-3(b)(3)(i) promulgated under the Exchange Act.
(m) "Non-ISO" shall mean an Option granted under the Plan to purchase
stock which is not intended by the Committee to satisfy the requirements of
Section 422 of the Code.
(n) "Option" shall mean a stock option granted pursuant to the Plan.
(o) "Option Price" shall mean the price per Option Share at which an
Option may be exercised.
(p) "Optioned Stock" shall mean the Common Stock subject to an Option.
(q) "Optionee" shall mean an Employee, Consultant or Director who
receives an Option.
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(r) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(s) "Plan" shall mean this ABC Dispensing Technologies, Inc. Amended
1995 Stock Option Plan, as amended from time to time.
(t) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations promulgated under the Exchange Act.
(u) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(v) "Subsidiary" shall mean a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(x) "Ten Percent Shareholder" shall mean a person who owns (after
taking into account the attribution rules of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or a Subsidiary.
3. STOCK AUTHORIZED.
Subject to the provisions of Section 11 of the Plan, the maximum
aggregate number of shares which may be Optioned and sold under the Plan is ONE
MILLION SEVEN HUNDRED FIFTY THOUSAND (1,750,000) shares of authorized, but
unissued, or reacquired no par value Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
further grant under the Plan.
4. ADMINISTRATION.
Procedure. The Plan shall be administered by a Committee of not less
than two members of the Board of Directors (the "Committee") to be designated by
the Board of Directors of the Company. No member of the Committee shall be
eligible at any time during his or her tenure to receive Options under the Plan.
In addition, no member of the Committee shall have received any Options under
the Plan during the one (1) year period prior to his or her tenure on the
Committee. A majority vote of the members of the Committee shall be required for
all of its actions. The provisions of the immediately preceding two sentences
shall not be applicable to the extent Rule 16b-3 is amended such that similar
requirements are no longer applicable for the exemption offered thereunder.
A majority of the entire Committee shall constitute a quorum, and the
action of the majority of the Committee members present at any meeting at which
a quorum is present shall be the action of the Committee. All decisions,
determinations, and interpretations of the Committee shall be final and
conclusive on all persons affected thereby and shall, as to Incentive Stock
Options, be consistent with Section 422 of the Code. The Committee shall have
all of the powers and duties set forth
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<PAGE>
herein, as well as such additional powers and duties as the Board of Directors
may delegate to it; provided, however, that the Board of Directors expressly
retains the right in its sole discretion (i) to elect and to replace the members
of the Committee, and (ii) to terminate or amend this Plan in any manner
consistent with applicable law. The Board of Directors may from time to time
elect members of the Committee in substitution for and in addition to members
previously elected, may fill vacancies in the Committee, however caused, and may
discharge the Committee. Duly authorized actions of the Committee shall
constitute actions of the Board of Directors for the purpose of this Plan and
the administration thereof. Notwithstanding anything to the contrary contained
herein unless the last sentence of the first paragraph of Section 4(a) is
applicable, no member of the Committee shall serve as such under this Plan
unless such person is a "disinterested person" within the meaning of Rule
16b-3(c)(2)(i) of the Exchange Act.
(b) Powers of the Committee. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to grant Incentive
Stock Options, in accordance with Section 422 of the Code, or to grant
"Non-ISO's"; (ii) to determine the Fair Market Value of the Common Stock; (iii)
to determine the exercise price per share of Options to be granted which
exercise price shall be determined in accordance with Section 8(a) of the Plan;
(iv) to determine the Employees and Directors to whom, and the time or times at
which, Options shall be granted and the number of Shares to be represented by
each Option; (v) to interpret the Plan; (vi) to prescribe, amend and rescind
rules and regulations relating to the Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical) and, with the
consent of the holder thereof, modify or amend each Option; (viii) to accelerate
or defer (with the consent of the Optionee) the exercise date of any Option;
(ix) to authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Option previously granted by the Board;
and (x) to make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) Notwithstanding anything herein to the contrary, no Employee,
officer or Director of the Company or its Parent or Subsidiary shall, as a
member of the Committee or otherwise, have any vote with regard to any option
granted to himself, including, but not limited to:
(i) the time at which any such Option shall be granted;
(ii) the number of Shares covered by any such Option;
(iii) the time or times at which, or the period during which, any such
Option may be exercised or whether it may be exercised in whole or in
installments;
(iv) the provisions of the agreement relating to any such Option; and
(v) the Option Price of Shares subject to an Option granted to him or
her.
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<PAGE>
(d) Effect of the Committee's Decision. All decisions, determinations
and interpretations of the Committee shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.
5. ELIGIBILITY. Options may be granted only to Employees and to Directors who
are not serving on the Committee, except to the extent provided in the last
sentence of the first paragraph of Section 4(a) . Any Employee or Director who
has been granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options.
Each grant of an Option shall be evidenced by an Option Agreement, and
each Option Agreement shall (1) specify whether the Option is an Incentive Stock
Option or a Non-ISO and (2) incorporate such other terms and conditions as the
Committee acting in its absolute discretion deems consistent with the terms of
this Plan, including, without limitation, a restriction on the number of shares
of stock subject to the Option which first become exercisable during any
calendar year.
To the extent that the aggregate Fair Market Value of the stock of the
Company subject to Incentive Stock Options granted to any Optionee which first
become exercisable in any calendar year exceeds $100,000, such Options shall be
treated as Non-ISO's. This $100,000 limitation shall be administered in
accordance with the rules under Section 422(d) of the Code.
6. EFFECTIVE DATE AND TERM OF PLAN. The effective date of this Plan ("Effective
Date") shall be the date it is adopted by the Board, provided the shareholders
of the Company (acting at a duly called meeting of such shareholders) approve
this Plan within twelve (12) months after such Effective Date. The effectiveness
of Options granted under this Plan prior to the date such shareholder approval
is obtained shall be contingent on such shareholder approval.
Subject to the provisions of Section 13 hereof, no Option shall be
granted under this Plan on or after the earlier of
(1) the tenth anniversary of the Effective Date of this Plan in which
event the Plan otherwise thereafter shall continue in effect until all
outstanding Options shall have been surrendered or exercised in full or no
longer are exercisable, or
(2) the date on which all of the Common Stock reserved for issuance
under Section 3 of this Plan has (as a result of the exercise or expiration of
Options granted under this Plan) has been issued or no longer is available for
use under this Plan, in which event the Plan also shall terminate on such date.
7. TERM OF OPTION. An Option shall expire on the date specified in such Option,
which date shall not be later than the tenth anniversary of the date on which
the Option was granted, except that if any Employee or Director, at any time an
Incentive Stock Option is granted to him, owns stock representing more than ten
5
<PAGE>
percent of the total combined voting power of all classes of Common Stock (or,
under Section 424(d) of the Code is deemed to own stock representing more than
ten percent of the total combined voting power of all such classes of Common
Stock, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal descendant
of such Employee or Director, or by or for any corporation, partnership, state
or trust of which such Employee or Director is a shareholder, partner or
beneficiary), the Incentive Stock Option granted him shall not be exercisable
after the expiration of five years from the date of grant or such earlier
expiration as provided in the particular Option agreement.
8. EXERCISE PRICE AND CONSIDERATION.
(a) The Option Price for the Shares to be issued pursuant to exercise
of an Option shall be such price as is determined by the Committee, but shall be
subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, immediately before the grant of such
Incentive Stock Option, owns stock (considering attribution under Section 424(d)
of the Code) representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the Option Price
shall be no less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to an Employee, the per share exercise price shall be no
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of an Option granted on or after the effective date of
registration of any class of equity security of the Company pursuant to Section
12 of the Exchange Act and prior to six months after the termination of such
registration, the per Share exercise price shall be no less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board and may consist entirely of cash, check, promissory note, other Shares
of Common Stock having a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said option shall be
exercised, by conversion of Shares (in the manner provided in the succeeding
sentence), or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Florida Law. If the Optionee desires to pay for the Optioned
Shares, in whole or in part, by conversion of Shares, Optionee shall be entitled
to receive that number of Shares equal to the quotient obtained by dividing
[(A-B)(x)] by (A) where:
(A) = the Fair Market Value of one Share of Common Stock on the date of
conversion.
(B) = the Option Price for one Share of Common Stock subject to an
Option.
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(X) = the Number of Shares of Common Stock issuable upon exercise of
the Option if exercised for cash;
provided, that if the above calculation results in a negative number, then no
Shares shall be issued or issuable upon conversion of the Option. Any payment
made in Shares of the Company's Common Stock shall be treated as equal to the
Fair Market Value of such Common Stock on the date the properly endorsed
certificate for such Common Stock is delivered to the Committee (or its
delegate).
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance, which in no event will be delayed more than thirty (30) days
from the date of the exercise of the Option (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Service as an Employee or Director. If the
Continuous Service of any Employee or Director terminates, he may, but only
within thirty (30) days (or such other period of time not exceeding three (3)
months as is determined by the Committee) after the date he ceases to be an
Employee or Director of the Company, exercise his Option to the extent that he
was entitled to exercise it as of the date of such termination. To the extent
that he was not entitled to exercise the Option at the date of such termination,
or if he does not exercise such Option (which he was entitled to exercise)
within the time specified herein, the Option shall terminate.
7
<PAGE>
(c) Notwithstanding the provisions of Section 9(b) above, in the event
an Employee or Director is unable to continue his Continued Service with the
Company as a result of his total and permanent disability (as defined in Section
105(d)(4) of the Code, as amended), he may, but only within three (3) months (or
such other period of time not exceeding twelve (12) months as is determined by
the Committee) from the date of disability, exercise his Option to the extent he
was entitled to exercise it at the date of such disability. To the extent that
he was not entitled to exercise the Option at the date of disability, or if he
does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Optionee who is at the time of his death an
Employee or Director of the Company and who shall have been in Continuous Status
as an Employee or Director since the date of grant of the Option, the Option may
be exercised, at any time within twelve (12) months following the date of death,
by the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living one (1) month
after the date of death; or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Committee) after the
termination of Continuous Status as an Employee or Director, the Option may be
exercised, at any time within three (3) months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
10. NON-TRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend with
respect to the Common Stock or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason
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<PAGE>
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
or in the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another corporation, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.
12. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may amend or terminate the Plan from time to time in such
respects as the Board may deem advisable; provided that, the following revisions
or amendments shall require approval of the holders of a majority of the
outstanding shares of the Company entitled to vote:
(i) any material increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the Plan; or
(ii) if shareholder approval of such amendment is required for
continued compliance with Rule 16b-3 or Section 422 of the Code.
(b) Shareholder Approval. Any amendment requiring shareholder approval
under Section 13(a) of the Plan shall be solicited as described in Section 17(a)
of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
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As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written Option agreements in
such form as the Committee shall approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to approval
by the shareholders of the Company within twelve months before or after the date
the Plan is adopted. If such shareholder approval is obtained at a duly held
shareholders' meeting, it may be obtained by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present or represented
and entitled to vote thereon. The approval of such shareholders of the Company
shall be (1) solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder, or (2)
solicited after the Company has furnished in writing to the holders entitled to
vote substantially the same information concerning the Plan as that which would
be required by the rules and regulations in effect under Section 14(a) of the
Exchange Act at the time such information is furnished.
If such shareholder approval is obtained by written consent in the
absence of a Shareholders' Meeting, it must be obtained by the written consent
of all shareholders of the Company who would have been entitled to cast the
minimum number of votes which would be necessary to authorize such action at a
meeting at which all Shareholders entitled to vote thereon were present and
voting.
18. MISCELLANEOUS PROVISIONS. An Optionee shall have no rights as a shareholder
with respect to any Shares covered by his Option until the date of the issuance
of a stock certificate to him for such shares.
19. OTHER PROVISIONS. The stock option agreement authorized under the Plan shall
contain such other provisions, including, without limitation, restrictions upon
the exercise of the Option, as the Committee shall deem advisable. Any such
stock option agreement shall contain such limitations and restrictions upon the
exercise of the Option as shall be necessary in order that such option will be
an Incentive Stock Option as defined in Section 422 of the Code.
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20. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such Board
member is liable for negligence or misconduct in the performance of his duties;
provided that within 60 days after institution of any such action, suit or
proceeding a Board member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.
21. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of
Common Stock pursuant to Options will be used for general corporate purposes.
22. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall impose no
obligation upon the Optionee to exercise such Option.
23. OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect any
other stock option or incentive or other compensation plans in effect for the
Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
24. SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
25. HEADINGS, ETC., NO PART OF PLAN. Headings of Articles and Sections hereof
are inserted for convenience and reference; they constitute no part of the Plan.
26. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware, except to the extent preempted by
Federal law. The Plan is intended to comply with Rule 16b-3. Any provisions
inconsistent with Rule 16b-3 shall be inoperative and shall not affect the
validity of the Plan, unless the Board of Directors shall expressly resolve that
the Plan is no longer intended to comply with Rule 16b-3.
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IN WITNESS WHEREOF, ABC Dispensing Technologies, Inc. has caused its
duly authorized representative to execute this Plan this __ day of August, 1997
to evidence its adoption of the Plan.
ABC DISPENSING TECHNOLOGIES, INC.
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Subsidiaries of the Registrant:
(1) ABC Dispensing Technologies, Inc. is the operating subsidiary (an Ohio
corporation).
(2) ABC TechCorp holds certain patents (an Ohio corporation).
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Selected Financial
Data", and "Experts" and to the use of our report dated August 8, 1996, which
contains an explanatory paragraph with respect to a going concern uncertainty,
with respect to the consolidated financial statements and schedule of ABC
Dispensing Technologies, Inc. included in the Registration Statement (Form S-1
No. 333-00000) and related Prospectus of ABC Dispensing Technologies, Inc. for
the registration of 10,518,250 shares of its common stock.
ERNST & YOUNG LLP
Akron, Ohio
April 6, 1998
Consent of Grant Thornton LLP
We have issued our report dated July 11, 1997, which contains an explanatory
paragraph with respect to a going concern uncertainty, accompanying the
consolidated financial statements and schedule of ABC Dispensing Technologies,
Inc. for the fiscal year ended April 26, 1997, which financial statements are
included in the Registration Statement filed on Form S-1 and related Prospectus
for the registration of 10,518,250 shares of common stock. We consent to the use
of the aforementioned report and to the use of our name as it appears under the
caption "Experts."
GRANT THORNTON LLP
Cleveland, Ohio
April 7, 1998
