As filed with the Securities and Exchange Commission on April 9, 1997
Registration No. 333-22165
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SANDATA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
11-2841799
(I.R.S. Employer Identification Number)
26 Harbor Park Drive
Port Washington, New York 11050
(516) 484-9060
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Bert E. Brodsky
President
Sandata, Inc.
26 Harbor Park Drive
Port Washington, New York 11050
(516) 484-9060
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies of all communications and notices to:
Steven J. Kuperschmid, Esq.
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
(516) 296-7000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
(Cover continued on following page)
<PAGE>
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule
415 of the Securities Act of 1933, check the following box.
[x]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box
and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Proposed Maximum Maximum
Amount to be Offering Price Aggregate Offering Amount of
Title of Each Class of Securities to be Registered Registered (1) Per Share (2) Price (2) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 1,988,140 $10.3 $20,636,893 $6,253.60(3)
Par Value, registered for the benefit
of Selling Stockholders
====================================================================================================================================
</TABLE>
(1) This Registration Statement also covers such additional number
of shares of Common Stock as may be issuable by reason of the
operation of the antidilution provisions of certain
outstanding warrants.
(2) Estimated solely for the purpose of calculating the amount of
the registration fee pursuant to Rule 457(c).
(3) $3,056.71 of the registration fee was paid with the original
filing.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Subject to Completion
Preliminary Prospectus Dated April 9, 1997
PROSPECTUS
1,988,140 SHARES OF COMMON STOCK, $.001 PAR VALUE
SANDATA, INC.
This Prospectus relates to 1,988,140 shares of Common Stock (the "Shares")
of Sandata, Inc. (the "Company"), or approximately 170% of the Company's
currently issued and outstanding shares of Common Stock. See Risk
Factors--Effect of Outstanding Exercisable Securities" and "Risk Factors--Shares
Eligible for Future are Resale May Adversely Affect the Market". This Prospectus
covers: (i) the resale by certain individuals and entities of up to an aggregate
of 300,000 Shares issued by the Company pursuant to Subscription Agreements
dated as of December 23, 1996, (ii) the resale by certain persons of up to an
aggregate of 100,000 Shares issued by the Company pursuant to Subscription
Agreements dated as of September 13, 1996, (iii) the resale by certain Directors
and executive officers of the Company of up to an aggregate of 1,238,140 Shares,
including, without limitation, shares underlying options and warrants, and (iv)
the resale by certain individuals and entities of up to an aggregate of 350,000
shares issuable upon the exercise of outstanding warrants.
The various persons and entities referred to herein are hereinafter
referred to individually as a "Selling Stockholder" and collectively as the
"Selling Stockholders". The Company will receive no proceeds upon the resale of
the Shares by such persons and entities. There are no commitments pursuant to
which the Company will receive any proceeds from the resale of the Shares by the
Selling Stockholders. See "Selling Stockholders."
In October, 1996, the Company commenced a private offering, on a "best
efforts--all or none" basis, to raise $1,500,000 by issuing an aggregate of
300,000 shares of Common Stock and five year warrants for the purchase of
150,000 shares of Common Stock at an exercise price of $7.00 per share. Neither
the shares of Common Stock, the warrants nor the shares of Common Stock
underlying the warrants were registered under the Securities Act of 1933, as
amended (the "Securities Act"). Contemporaneously with the execution and
delivery by the Company of the letter of intent with regard to such private
offering, certain assignees of the placement agent acquired 100,000 shares of
the Company's Common Stock at a purchase price of $3.00 per share.
In connection with the closing of such private offering, an affiliate of
the placement agent entered into a financial consulting agreement with the
Company pursuant to which, among other things, such affiliate will receive
aggregate annual payment of $36,000 and certain assignees of such affiliate
received warrants to purchase an aggregate of 200,000 shares of Common Stock
exercisable as follows: 100,000 shares at $5.00 per share and 100,000 shares at
$7.00 per share, such warrants to be exercisable for one year (with respect to
the warrants exercisable at $5.00 per share) and two years (with respect to the
warrants exercisable at $7.00 per share). The warrants issued in such private
offering, including those issued to investors as well as the assignees of the
placement agent's affiliate, are redeemable by the Company under certain
circumstances.
<PAGE>
Except for the Shares of Messrs. Bert E. Brodsky, Hugh Freund and Gary
Stoller, the Shares proposed to be sold hereby were acquired by Selling
Stockholders pursuant to the above mentioned private offering. Among other
things, in connection with such private offering, the Company agreed to
register, under certain circumstances, on one or more occasions, the Shares
acquired by such Selling Stockholders (including, without limitation, the
placement agent) in such private offering. The filing of the registration
statement of which this Prospectus forms a part represents the fulfillment of
certain obligations of the Company to such Selling Stockholders.
To the Company' s knowledge, the Selling Stockholders, directly through
agents designated by them from time to time or through broker-dealers or
underwriters also to be designated, may sell the Shares from time to time, in or
through privately negotiated transactions, or in one or more transactions,
including block transactions, on the NASDAQ SmallCap Market, or on any other
market or stock exchange on which the Shares may be listed in the future
pursuant to and in accordance with the applicable rules of such market or
exchange or otherwise. The selling price of the Shares may be at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. See "Selling Stockholders" and "Plan of
Distribution".
The Company has agreed to indemnify certain of the Selling Stockholders
against certain civil liabilities, including liabilities under the Securities
Act. See "Selling Stockholders" and "Plan of Distribution".
The Selling Stockholders and any agents, broker-dealers, or underwriters
that participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions received by them, and any profit on the resale of the
Shares purchased by them, may be deemed to be underwriting commissions or
discounts under the Securities Act. The Company is not aware of any underwriting
arrangements with respect to the resale of the Shares by the Selling
Stockholders. See "Selling Stockholders" and "Plan of Distribution".
A PURCHASE OF THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" (PAGE 5).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company's Common Stock is traded on the NASDAQ SmallCap Market under
the symbol "SAND". On April 8, 1997, the closing bid price for the Company's
Common Stock, as reported on the NASDAQ SmallCap Market, was $10.00.
, 1997
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of the Commission:
7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Furthermore, the Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding the
Company. The address of such Web site is http://www.sec.gov.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act") and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1996, as amended (the "Form 10-KSB").
(b) The Company's Quarterly Report on Form 10-QSB for the period ended
August 31, 1996, as amended.
(c) The Company's Quarterly Report on Form 10-QSB for the period ended
November 30, 1996, as amended (the "November 10-QSB").
(d) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8(a), as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering of the Shares offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
their respective dates of filing.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
incorporated into this Prospectus by reference (other than exhibits to such
documents). Requests for such copies should be directed to the Secretary,
Sandata, Inc., 26 Harbor Park Drive, Port Washington, New York 11050 (telephone
number: (516) 484-9060).
Any statement contained in a document incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY
The Company, through its wholly-owned subsidiaries, is engaged in the
business of providing computerized data processing services and custom software
and programming services, by utilizing Company- developed software, and software
acquired or licensed by the Company, principally to the health care industry,
but also to the general commercial market. In addition, the Company provides
hardware maintenance of personal computers ("PCS"), printers and networks and
training on PC software packages.
Applications of the Company's software include: a home health care system,
computerized preparation of management reports, payroll processing and
electronic time card with voice recognition systems.
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<PAGE>
Principal products and services provided by the Company include the Sandsport
Home Attendant Reporting Program, data entry services and specialized system
development, among others. In addition, the Company provides administration and
processing services for an affiliate engaged in the pharmacy prescription
reimbursement business See "Risk Factors--Unascertainable Risks Related to
Possible Acquisitions".
Generally, in providing data processing services, the Company first
receives data from its customers, then processes it and generates reports based
on such data. Services are provided to customers by processing on the Company's
equipment at its premises. The Company also has available software which permits
information retrieval from customers' facilities which communicate with the
Company's computers at its data center. This allows the Company's customers to
have access to processing hardware and software without a substantial investment
on their part. The Company also offers its services on a turnkey basis. Turnkey
computer systems offer the customer total in-house capabilities through the
licensing of the Company's software for use on a customer's computer. The
Company's software is written in a variety of software languages including
COBOL, C and FoxPro.
Over the past several years, the Company has developed its Santrax product,
a computerized time and attendance management system. The Santrax system
utilizes voice recognition and telecommunications technology to verify that a
person is at a particular telephone number at a particular time. Presently, the
system is being utilized by several of the Company's home health care clients,
with the Company receiving approximately an aggregate of 400,000 calls per week.
Although no assurances can be given, it is anticipated that the Santrax product
can be utilized by other industry applications.
The Company was incorporated in the State of New York in June 1978 and
reincorporated in the State of Delaware in December 1986, at which time it also
assumed its present name.
The Company maintains its executive offices at 26 Harbor Park Drive, Port
Washington, New York 11050; telephone number (516) 484-9060.
FORWARD-LOOKING STATEMENTS
The Company cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements which may be deemed to have been made in this
Prospectus or which are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in this Prospectus that are not statements of
historical fact may be deemed to be forward- looking statements. Without
limiting the generality of the foregoing, words such as "may", "will", "expect",
"believe", "anticipate", "intend", "could", "estimate", or "continue" or the
negative variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors which may effect the Company's results
include, but are not limited to, the risks and uncertainties associated with
data processing and system sales. The Company is also subject to other risks
detailed herein or detailed from time to time in the Company's Commission
filings. Factors that could cause or contribute to such difference include, but
are not limited to, those discussed in "Risk Factors" below, as well as those
discussed elsewhere in this Prospectus and in the Company's filings with the
Commission.
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<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk and should only be purchased by investors who can afford
to lose their entire investment. Prospective purchasers, prior to making an
investment, should carefully consider the following risks and speculative
factors, as well as other information set forth elsewhere in this Prospectus. As
discussed above, this Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. Factors that could cause
or contribute to such difference include, but are not limited to, those
discussed below, as well as those discussed elsewhere in this Prospectus.
1. Dependence on Governmental Program.
For its fiscal years ended May 31, 1996 and 1995, and the fiscal six
month periods ended November 30, 1996 and 1995, approximately 51%, 61%, 77%
and 62%, respectively, of the Company's revenues were derived from data
processing and other related services rendered to vendor agencies under
contract with the Human Resources Agency of the City of New York ("HRA").
Such vendor agencies receive a substantial portion of their operating funds
from the federal government through its Medicaid program; the balance of
their funding is provided by the State and City of New York. Management
believes that operations will, for the foreseeable future, continue to be
dependent upon revenues generated from such vendor agencies. Elimination of
the home attendant services program by HRA or a substantial cut-back in the
level of funding of this program by the federal, state or city governments
would have, through the impact of such cut-backs on the vendor agencies, a
material adverse effect on the Company. See "Item 1--Description of
Business--Principal Products and Services" in the Form 10-KSB.
2. Technological Obsolescence.
The data processing and computer software fields are characterized by
rapid technological developments and advances, often resulting in partial
or total obsolescence of systems. There is no assurance that the Company's
research and development activities will permit it to keep abreast of new
developments. See "Item 1--Description of Business--Research and
Development" in the Form 10-KSB.
3. Competition.
Some of the Company's competitors are larger and have greater
financial resources than the Company. Furthermore, the Company's customers
may find it desirable to perform for themselves the services being rendered
by the Company. The Company also competes with larger and better
established companies for the hiring of qualified technical and marketing
personnel. See "Item 1--Description of Business--Competition" in the Form
10-KSB.
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<PAGE>
4. Proprietary Rights.
The Company does not own, nor has it applied for, Federal Copyright
registration on its computer software systems now in existence or being
developed. However, the Company believes that its computer software systems
are proprietary trade secrets and that they, together with the
documentation, manuals, training aids, instructions and other materials
supplied by the Company to customers, are subject to the proprietary rights
of the Company and protected by applicable law. However, there can be no
assurance that the Company will be able to protect itself against
misappropriation of its proprietary rights and trade secrets. See "Item
1--Business--Proprietary Rights" in the Form 10-KSB.
5. Control by Current Stockholders.
The Company's Certificate of Incorporation does not provide for
cumulative voting. Therefore, stockholders owning in excess of 50% of the
outstanding shares of the Company's Common Stock are able to elect all the
members of the Board of Directors. As of the date of this Prospectus,
present management of the Company owns approximately 68.1% of the issued
and outstanding shares of Common Stock of the Company and will be able to
elect all of the Company's directors and to control the Company. However,
upon the completion of this offering, as to which no assurances can be
made, the present management of the Company will own 13.2% in the aggregate
of the issued and outstanding shares of the Company's Common Stock.
6. Effect of Outstanding Exercisable Securities.
As of the date of this Prospectus, the Company had currently
exercisable outstanding options and warrants to purchase shares of the
Company's Common Stock exercisable at various prices from $1.38 to $7.00,
subject to adjustment per share, pursuant to which an aggregate of
1,575,259 shares of Common Stock (subject to adjustment) may be issued.
This includes warrants granted to the Company's Chairman and options
granted to various directors, officers, employees and consultants.
During the respective terms of the Company's outstanding derivative
securities, the holders thereof may be able to purchase shares of Common
Stock at prices substantially below the then-current market price of the
Company's Common Stock with a resultant dilution in the interests of the
existing stockholders. In addition, the exercise of outstanding derivative
securities and the subsequent public sales of Common Stock by holders of
such securities pursuant to this offering, a registration statement
effected at their demand, under Rule 144 or otherwise, could have an
adverse effect upon the market for and price of the Company's securities.
7. Shares Eligible for Future Sale May Adversely Affect the Market.
870,420 of the Company's outstanding shares of Common Stock)
(exclusive of shares of Common Stock issuable upon the exercise of
outstanding options and warrants) are "restricted securities" and, in the
future, may be sold upon compliance with Rule 144 or pursuant to
registration (effected by demand or other rights granted to certain
stockholders) under the Act. Rule 144 currently provides, in essence, that
a person holding "restricted securities" for a period of two years (as of
April 29, 1997, one year) may sell an amount every three months up to the
greater of (a) 1% of the Company's issued and outstanding securities of
that class of securities or (b) the average
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<PAGE>
weekly volume of sales of such securities during the four calendar
weeks preceding the sale if there is adequate current public information
available concerning the Company. Additionally, non-affiliates (who have
not been affiliates of the Company for at least three months) may sell
their "restricted securities" in compliance with Rule 144 without volume
limitations after they have held such securities for a period of three
years (as of April 29, 1997, two years). An aggregate of 442,754 shares of
Common Stock have been owned by Messrs. Brodsky, Freund and Stoller for
more than two years. However, such shares are subject to an agreement with
Barber & Bronson Incorporated ("B&B") imposing certain restrictions on the
public sale thereof until December 22, 1997 without B&B's consent. B&B has
authorized Messrs. Brodsky, Freund and Stoller to sell an aggregate of
1,238.140 shares, which amount includes outstanding shares of Common Stock,
as well as shares of Common Stock underlying presently exercisable options
and warrants.
The Company is registering for resale 1,988,140 Shares held by certain
stockholders, including, without limitation, Shares underlying certain
options and warrants. Such Shares may be resold at any time following the
date of this Prospectus. Prospective investors should be aware that the
possibility of resales by the Selling Stockholders, as well as other
stockholders of the Company, may have a material depressive effect on the
market price of the Company's shares of Common Stock in any market which
may develop.
8. Ability to Renew Present Financing; Significant Outstanding
Indebtedness; Loan Covenants and Security Interests.
From time to time the Company and/or its subsidiaries have entered
into loan arrangements with Marine Midland Bank (the "Bank"), among others.
As of November 30, 1996, the Company owed the Bank $704,154. Although in
the past the Bank has renewed its loans to the Company when they matured,
there can be no assurance that it will continue to do so or that the
Company, if the Bank does not renew the loan, will be able to arrange
alternative financing on terms satisfactory to it.
In order to finance the Company's capital requirements, the Company 's
wholly owned subsidiary, Sandsport Data Services, Inc. ("Sandsport")
incurred substantial indebtedness in relation to the Company's consolidated
equity capital. Of the Company's total outstanding indebtedness of
$3,007,985 at November 30, 1996, $704,154 was outstanding under Sandsport's
Revolving Credit and Term Loan Agreement (the "Credit Agreement") with the
Bank. Pursuant to the Credit Agreement, Sandsport may borrow up to an
aggregate of $2.5 million. Amounts outstanding under the Credit Agreement
were due and payable on February 10, 1995; however, on April 20, 1995, the
Credit Agreement with the Bank was amended, extending the due date to April
20, 1997. Upon maturity, Sandsport may, at its option, convert the
then-outstanding principal balance of the advances under the Credit
Agreement into a five year term loan payable in sixty equal monthly
principal installments, plus interest at 3/4% above the Bank's prime rate.
However, the Company has accepted a commitment from the Bank to restructure
the Credit Facility as discussed below. Also, pursuant to the Credit
Agreement, on April 20, 1995, a two year loan (the "Term Loan") in the
amount of $500,000 was advanced by the Bank to Sandsport (which amount
constitutes part of the total credit facility available under the Credit
Agreement). The Term Loan is payable in 24 monthly principal installments
of $20,834, plus interest at 3/4% above the Bank's prime rate, through
April 1997. All of Sandsport's, the Company's and Company's subsidiaries'
(the "Group") assets are pledged to the Bank as collateral for the amounts
due under the Credit Agreement. The Group is prohibited from incurring
additional indebtedness except under certain circumstances.
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<PAGE>
In addition, pursuant to the Credit Agreement, the Group is required
to maintain certain levels of net worth and meet certain financial ratios
in addition to various other affirmative and negative covenants. The Group
has, in the past, failed to meet these net worth and financial ratios, and
the Bank has granted the Group waivers. No assurance can be given that the
Group will be able to meet these net worth and financial requirements in
the future, and/or that the Bank will continue to grant to the Group
waivers.
On February 13, 1997, Sandsport received a commitment from the Bank to
restructure the above mentioned credit facility. Such commitment has been
accepted by Sandsport as of March 4, 1997. Consummation of the
restructuring of such facility is subject to the negotiation, execution and
delivery of formal documentation acceptable to Sandsport and the Bank,
among other things. It is anticipated that the credit facility will be
restructured as described below. However, no assurances can be given in
that Sandsport has not fully negotiated the required documentation and it
is not known at this time whether or not such documentation will be
acceptable to Sandsport or the Bank. In addition, other factors such as
proposals from competing financial institutions may be considered. However,
management of Sandsport considers it likely that the credit facility will
be restructured with the Bank. The restructured facility (the "Restructured
Facility") allows Sandsport to borrow up to $3,000,000 and contemplates the
satisfaction of the existing facility. Under the Restructured Facility,
Sandsport may borrow and re-borrow amounts up to $3,000,000. Interest will
accrue on amounts outstanding under the Restructured Facility at a rate
equal to the London Interbank Offered Rate plus 2% and will be paid
quarterly in arrears or, at Sandsport's option, interest may accrue at the
Bank's prime rate. The Restructured Facility requires Sandsport to pay a
commitment fee in the amount of $30,000 and a fee equal to 1/4% percent per
annum payable on the unused average daily balance of the Restructured
Facility. In addition, there are other fees and charges imposed based upon
Sandsport's failure to maintain certain minimum balances. The Restructured
Facility will expire on March 1, 2000. The Restructured Facility is
guaranteed by the Company and Sandsport's sister subsidiaries. The
collateral for the Restructured Facility will be a first lien on all
equipment owned by Sandsport and the guarantors, as well as a collateral
assignment of $2,000,000 of life insurance payable on the life of Mr.
Brodsky. The Restructured Facility contemplates that the Group will be
required to meet certain covenants similar to those described above with
regard to the existing Credit Agreement. The Group's guaranty to the Bank,
relating to the bonds discussed below, is anticipated to be modified to
conform covenants described therein to comply with those in the
Restructured Credit Facility.
In addition, the Company is indebted to companies affiliated with the
Company's Chairman in the amount, as of November 30, 1996, of $1,847,000.
Of this amount, as of November 30, 1996, an aggregate of $462,000 of
indebtedness was evidenced by notes due in December 1997 and May 1998.
On June 1, 1994, BFS Sibling Realty Inc., formerly known as Brodsky
Sibling Realty, Inc. ("BFS") borrowed $3,350,000 in the form of Industrial
Development Revenue Bonds ("Bonds") to finance costs incurred in connection
with the acquisition, renovation and equipping of the Company's office
space located at 26 Harbor Park Drive, Port Washington, New York (the
"Facility" or the "Building") from the Nassau County Industrial Development
Agency (the "NCIDA"). These Bonds were subsequently purchased by the Bank.
The aggregate cost incurred by BFS in conjunction with such acquisition,
renovation and equipping was approximately $4,377,000. In addition, the
Company incurred approximately $500,000 of indebtedness to affiliates of
Mr. Brodsky in connection with additional capital improvements. The Bonds
bore interest at prime plus 3/4 of 1% until August 11, 1995, at which time
the interest rate became fixed at 9% for a five-year term through September
1, 2000. At that
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time, the interest rate will be adjusted to a rate of either prime
plus 3/4 of 1%, or the applicable fixed rate if offered by the Bank. As a
condition to the issuance of the Bonds, the NCIDA obtained title to the
Facility which it then leased to BFS. On June 21, 1994 (as of June 1,
1994), the Company and its Chairman guaranteed the full and prompt payment
of principal and interest of the Bonds and the Company granted the Bank a
security interest and lien on all the assets of the Company. In connection
with the issuance and sale of the Bonds, the Company entered into a lease
agreement (the "Sublease") with BFS, whereby the Company leased the
Facility for the conduct of its business and, in consideration therefor,
was obligated to make lease payments that at least equal amounts due to
satisfy the underlying Bond obligations.
On July 31, 1995, by an Assignment and Assumption and First Amendment
to Lease between the Company and BFS, the Company assumed the obligations
of BFS under the lease and became the direct tenant and the beneficial
owner of the Facility (collectively the "Assignment Transaction"). In
connection with the Assignment Transaction, the Sublease was terminated.
During the period commencing July 1, 1995 and ending October 31, 1996 the
Company paid rent for the Facility to the NCIDA in the amount of $48,600
per month, subject to adjustment based upon the then effective interest
rate of the Bonds, among other things. In connection with the Assignment
Transaction, the Company obtained the right to acquire the Facility upon
expiration of the lease with the NCIDA (the "Lease") and became directly
liable to the NCIDA for amounts due thereunder. In connection with the
Assignment Transaction, the Company assumed certain indebtedness owed to
affiliates of the Company's Chairman as follows: (i) the $364,570 remaining
balance of a 48-month term loan bearing interest at 8.7% per annum, and
(ii) the $428,570 remaining balance of a 42-month term loan bearing
interest at 8.91%. Each of the foregoing loans were incurred in connection
with the construction of improvements to the Building, are collateralized
by the assets of the primary obligor and are guaranteed by the Company's
Chairman.
On August 11, 1995, the Company entered into a $750,000 loan agreement
with the Long Island Development Corporation ("LIDC"), under a guarantee by
the U.S. Small Business Administration ("SBA") (the "SBA Loan"). The entire
$750,000 proceeds have been used to repay a portion of the Bonds. The
Company entered into the Assignment Transaction primarily to satisfy
certain requirements of the SBA. The SBA Loan is payable in 240 monthly
installments of $6,255, which includes principal and interest at a rate of
7.015%.
As of November 1, 1996, the Company entered into an Assignment and
Assumption of and Second Amendment to Lease Agreement among BFS Realty,
LLC, an affiliate of the Company's Directors (the "Assignee"), the Bank and
the Company (the "Second Amendment"). In connection with the Second
Amendment, (i) the Assignee assumed all of the Company's obligations under
the Lease with the NCIDA and entered into a sublease with the Company for
the Facility; and (ii) the Company conveyed to the Assignee the right to
become the owner of the Facility upon expiration of the Lease. In addition,
pursuant to the sublease, the Company has assumed certain obligations owed
by the Assignee to the NCIDA under the Lease. The Assignee has indemnified
the Company with respect to certain obligations relative to the Lease and
the Second Amendment.
The documentation with regard to each of the foregoing contain various
covenants requiring and/or restricting the Company from taking various
action. Among other things, the documentation relating to the SBA Loan
contains certain covenants which require certain principal stockholders of
the Company to maintain certain levels of equity in the Company. Such
restriction could impact the Company's ability to engage in equity
financings and a violation of such covenant could result in a default under
the SBA Loan. In the past, the Company has been
9
<PAGE>
able to obtain a waiver of such provision, however, no assurances can
be made that it will continue to be able to do so. Messrs. Brodsky, Freund
and Stoller have advised the Company that, if as a result of action taken
by any of them, a default occurs under the SBA Loan, such individuals shall
either cure such default, if possible, or satisfy the obligation.
10. Limited Marketing Capability.
The Company has limited marketing capabilities and resources. To date,
substantially all of the Company's commercial marketing activities have
been conducted by sales representatives directly employed by the Company
and independent sales agents. Such activities have consisted primarily of
personal contact with potential customers. Because of the nature of the
Company's business, management will continue to devote a substantial amount
of time developing and maintaining continuing personal relationships with
the Company's customers. See "Item 1--Description of Business--Marketing
and Distribution" in the Form 10-KSB.
11. Dependence on Key Personnel.
The Company is dependent upon the expertise and abilities of three key
executive personnel: Bert E. Brodsky, Chairman of the Board, President and
Treasurer, Hugh Freund, Executive Vice President and Secretary, and Gary
Stoller, Executive Vice President. Messrs. Stoller and Freund are not
parties to any employment agreements with the Company; Effective February
1, 1997 the Company and Mr. Brodsky entered into an employment agreement
for a 5 year term (the "Brodsky Employment Agreement"). Among other things,
the Brodsky Employment Agreement provides for compensation at the annual
rate of $500,000. See--"Subsequent Events". The Company's agreement with
the Bank requires that Mr. Brodsky at all times be active on a
substantially full-time basis in the affairs of the Company. The Company or
its subsidiaries is the beneficiary under certain key- man life insurance
policies on the life of each of Messrs. Brodsky and Freund in the amounts
of $4,500,000 and $1,400,000, respectively, the benefits of which are
payable to the Company. Of such insurance benefits, an aggregate of
$2,000,000 on the life of Mr. Brodsky has been pledged to the Bank.
However, if the Company were to lose the services of any of these key
personnel as a result of disability, death or otherwise the Company could
be in default under its agreement with the Bank and its business could be
adversely affected.
12. No Dividends.
To date, the Company has not paid any cash dividends on its Common
Stock and does not expect to declare or pay any cash or other dividends in
the foreseeable future. Dividends are restricted pursuant to the terms of
the Credit Agreement between the Company and the Bank. See "Item 5 - Market
for Common Equity and Related Stockholder Matters--Dividend Policy" in the
Form 10-KSB.
13. Unascertainable Risks Related to Possible Acquisitions.
The Company intends to explore opportunities to add, through
acquisition or licensing, technology or products to enhance or add to its
current product line, or to acquire a customer base or sales organization
to augment the Company's infrastructure. In exploring potential
acquisitions or licenses, the Company will consider, among other criteria:
the comparative cost to the Company in capital, resources and personnel to
create the identified technology or product, or to establish the targeted
customer base or sales organization; restrictions to the Company developing
similar technology or
10
<PAGE>
products arising from patent or other intellectual property
protection; and the synergy of the identified technology or products, or
customer base or sales organization, with the Company's products and
organization. Although the Company anticipates it will follow the foregoing
general criteria in determining whether or not to make any acquisitions,
management will have sole discretion over whether or not to engage in an
acquisition. There can be no assurance that the Company will identify any
acquisition or licensing candidates or, if it does, that it will be able to
reach any agreements to acquire or license technology or products, or
acquire assets, on terms acceptable to the Company. To the extent that the
Company effects an acquisition of technology or products in the early stage
of development or growth (including technology or products which have not
been fully tested or marketed), the Company will be subject to numerous
risks inherent in developmental technology and other high level of risk
associated with high technology industries based on innovative technologies
or processes. Furthermore, future acquisition transactions may require the
Company to obtain additional financing from banks or financial institutions
or to undertake debt or equity financing. No assurance can be given that
the Company would be able to obtain financing upon commercially reasonable
terms, or at all. Furthermore, equity financing will result in a dilution
of existing Stockholders of the Company, which may be significant. To the
extent that debt financing ultimately proves to be available, any
borrowings may subject the Company to various risks traditionally
associated with the incurring of indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal
and interest. Although the Company will endeavor to evaluate the risks
inherent in a particular acquisition, there can be no assurance that the
Company will properly ascertain or assess such significant risk factors.
The Company provides data processing services to a company of which
affiliates of Mr. Brodsky are principal stockholders, and which is engaged
in the administration of pharmacy prescription reimbursement programs for
unions and other benefit providers. The Company is considering entering
into the pharmacy prescription reimbursement administration business
directly or through one or more acquisitions of existing companies,
including, without limitation, the above mentioned affiliate; the Company
is considering several possible acquisition candidates in such industry,
including, without limitation, the above-mentioned affiliate; however, the
Company is in the preliminary stages of such consideration and has not had
formal negotiations with any such company. Accordingly, no assurances can
be made as to whether (i) the Company will enter into the business
directly, (ii) any of the acquisitions presently being considered will be
consummated, (iii) if consummated, the terms upon which any such
acquisitions may occur, and (iv) if consummated, whether such acquisitions
will be successful. Except as set forth above, as of the date of this
Prospectus , the Company has no other specific plans with respect to
material acquisitions. In addition to the foregoing, the Company may, from
time to time, enter into agreements with related parties. In such case, the
Company anticipates that the terms of such agreements will be commercially
reasonable and no less favorable to the Company than the Company could
obtain from unrelated third parties. Additionally, the Company intends that
such agreements will be approved by a majority of disinterested directors.
14. Securities Market Factors.
In recent years, the securities markets have experienced a high level
of volume volatility and market prices for many companies, particularly
small and emerging growth companies, have been subject to wide fluctuations
in response to quarterly variations in operating results. The securities of
many of theses companies which trade in the over-the-counter market, have
experienced wide price fluctuations, which in many cases were unrelated to
the operating performance of, or announcements concerning, the issuers of
the affected stock. Factors such as announcements by the Company or its
competitors concerning technological innovations, new products or
11
<PAGE>
procedures, government regulations and developments or disputes
relating to proprietary rights may have a significant impact on the market
for the Company's securities. General market price declines or market
volatility in the future could adversely affect the future price of the
Company's securities.
SUBSEQUENT EVENTS
Effective February 1, 1997, the Company and Mr. Brodsky entered into
the Brodsky Employment Agreement providing for, among other things,
compensation at the annual rate of $500,000 plus such bonuses or additional
compensation that the Board of Directors of the Company may, on the basis
of improvements in the Company's performance or other reasonable criteria,
deem appropriate. During the term of the Brodsky Employment Agreement, the
employee shall also be provided with a full-time use of a Company
automobile, six (6) weeks paid vacation annually and group medical
insurance and other benefits or programs which the Company establishes or
is made available to its employees.
See "Risk Factors" - "Ability to Renew Present Financing; Significant
Outstanding Indebtedness; Loan Covenants and Security Interests" for a
discussion of a contemplated restructuring of the Company's Bank financing.
In March 1997, Sandsport entered into a sale/lease-back transaction
with General Electric Capital Corporation ("GEC") whereby certain fixed
assets, including, without limitation, a certain program licensing
agreement (the "License") (the "Assets"), were sold to GEC for $981,000 and
concurrently leased back to Sandsport. The License was originally paid for
by Sandsport and inadvertently registered in the name of an affiliate of
Mr. Brodsky for which the Company provides services, but was assigned to
Sandsport in connection with the above-mentioned lease. The lease requires
monthly rental payments of $25,465.98 commencing on May 1, 1997 for a term
of 38 months, and provides Sandsport the option to purchase the Assets for
$200,000 upon expiration of the lease. Sandsport has assigned such purchase
option to P.W. Capital Corp., an affiliate of the Company, which has agreed
to purchase the Assets from GEC subject to the terms of the lease.
12
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth, as of April 8, 1997, to the Company's
knowledge, certain securities ownership information with respect to the
Selling Stockholders:
<TABLE>
<CAPTION>
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
---------------- --------- -------- --------------
Percent of
Number Outstanding
<S> <C> <C> <C> <C>
Bert E. Brodsky 955,809 (3) 820,213 (3) 135,596 7.1%
Hugh Freund 323,493 (4) 255,696 (4) 67,797 5.0%
Gary Stoller 257,786 (5) 162,231 (5) 95,555 7.2%
Steven N. Bronson 152,950 (6) 152,950 (6) -0- -0-
James S. Cassel 30,800 (7) 30,800 (7) -0- -0-
James S. Cassel and Mindy
Cassel, TBTE 58,300 (8) 58,300 (8) -0- -0-
James S. Cassel, as
Custodian for Chira Cassel 1,000 1,000 -0- -0-
James S. Cassel, as
Custodian for Seth Cassel
under the Uniform Gifts to
Minors Act ("UGMA") 1996 1,000 1,000 -0- -0-
James S. Cassel, as
Custodian for Philip Cassel
under the Uniform Gifts to
Minors Act 1996 1,000 1,000 -0- -0-
James S. Cassel, as
Custodian for Levi Cassel
under the Uniform Gifts to
Minors Act 1996 1,000 1,000 -0- -0-
Keil Stern 30,000 (9) 30,000 (9) -0- -0-
Eric R. Elliot 8,900 (10) 6,650 (10) -0- -0-
Eric R. Elliott (IRA) 7,500 (15) 7,500 (15) -0- -0-
Barry J. Booth 6,650 (11) 6,650 (11) -0- -0-
Bruce C. Barber 6,650 (12) 6,650 (12) -0- -0-
Barry Steiner & Lisa Steiner
(JT) 5,750 (13) 5,750 (13) -0- -0-
Scott Salpeter 2,000 (14) 2,000 (14) -0- -0-
Leonard Adler 3,750 (15) 3,750 (15) -0- -0-
13
<PAGE>
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
---------------- --------- -------- --------------
Percent of
Number Outstanding
Hans Koenig Revocable
Living Trust
(Hans & Hanni Koenig) - by
agreement 3/6/91 7,500 (15) 7,500 (15) -0- -0
Paul Pesce 7,500 (15) 7,500 (15) -0- -0-
Amral Raul Ragoonanan 3,750 (15) 3,750 (15) -0- -0-
Peter David Bronson &
Maguy F. Bronson (JT) 7,500 (15) 7,500 (15) -0- -0-
Martin & Dolores Elkin (JT) 7,500 (15) 7,500 (15) -0- -0-
Stephen Paul Kregstein 3,750 (15) 3,750 (15) -0- -0-
Juetten Family Trust
(Richard Juetten, Trustee) -
by agreement dated 4/4/91 3,750 (15) 3,750 (15) -0- -0-
Kenneth B. Elias 3,750 (15) 3,750 (15) -0- -0-
Ronald A. David & Dona C.
David (TE) 3,750 (15) 3,750 (15) -0- -0-
Haguy Shechter 7,500 (15) 7,500 (15) -0- -0-
Nial Maura Ingerto 3,750 (15) 3,750 (15) -0- -0-
Ronald Richard Fieldstone &
Linda Brady Fieldstone (TE) 7,500 (15) 7,500 (15) -0- -0-
Gordon Jay Dow (IRA) 7,500 (15) 7,500 (15) -0- -0-
James Allen Settlage &
Carol Lynn Settlage (JT) 3,750 (15) 3,750 (15) -0- -0-
Paul Maurice Bronson &
Laura Mae Bronson (JT) 7,500 (15) 7,500 (15) -0- -0-
Fern Susan Thaw 3,750 (15) 3,750 (15) -0- -0-
David Wayne Raisbeck &
Ellen Jane Raisbeck (JT) 3,750 (15) 3,750 (15) -0- -0-
14
<PAGE>
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
---------------- --------- -------- --------------
Percent of
Number Outstanding
The Petersen Family Trust
(Norman W. Petersen) - by
agreement 9/28/93 3,750 (15) 3,750 (15) -0- -0-
Margery Schwartz
(Cust for Evan Schwartz NJ-
UTMA) 3,750 (15) 3,750 (15) -0- -0-
Joseph Anthony Spinella 3,750 (15) 3,750 (15) -0- -0-
David William Rogers 3,750 (15) 3,750 (15) -0- -0-
Craig Loren Silverman 3,750 (15) 3,750 (15) -0- -0-
Anthony Peter Conza 7,500 (15) 7,500 (15) -0- -0-
Jeffrey L. Thomas & Sylvia
H. Thomas (JT) 3,750 (15) 3,750 (15) -0- -0-
Howard Clifford Beach 3,750 (15) 3,750 (15) -0- -0-
Delaware Charter Guarantee
& Trust Co.
Custodian F/B/O Law
Offices Bruce Thaw Keogh
Plan 3,750 (15) 3,750 (15) -0- -0-
Sylvia Levine 3,750 (15) 3,750 (15) -0- -0-
Hal Kaufman 3,750 (15) 3,750 (15) -0- -0-
Leonard Goodfriend &
Audrey Goodfriend (JT) 3,750 (15) 3,750 (15) -0- -0-
A.C. Brown 3,750 (15) 3,750 (15) -0- -0-
Frederick H. Fialkow 7,500 (15) 7,500 (15) -0- -0-
James A. Cook 3,750 (15) 3,750 (15) -0- -0-
Thomas A. Hanford Trust
(Thomas A. Hanford) - by
agreement 5/17/96 7,500 (15) 7,500 (15) -0- -0-
S. Daniel Ponce (IRA) 3,750 (15) 3,750 (15) -0- -0-
Yehuda Shechter 7,500 (15) 7,500 (15) -0- -0-
15
<PAGE>
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
---------------- --------- -------- --------------
Percent of
Number Outstanding
Effectenbank Stroeve N.V. 7,500 (15) 7,500 (15) -0- -0-
Jeffrey Scott Roschman 7,500 (15) 7,500 (15) -0- -0-
Steven I. Levin 3,750 (15) 3,750 (15) -0- -0-
Frank T. Vicino, Jr. 3,750 (15) 3,750 (15) -0- -0-
Mark S. Schecter 3,750 (15) 3,750 (15) -0- -0-
Michael J. Bonner &
Deborah M. Bonner (JT) 3,750 (15) 3,750 (15) -0- -0-
C.G. Chase Construction Co. 7,500 (15) 7,500 (15) -0- -0-
John Raymond Prufeta 3,750 (15) 3,750 (15) -0- -0-
Richard S. Serbin & Kathe
Serbin 7,500 (15) 7,500 (15) -0- -0-
Zvika Shechter 3,750 (15) 3,750 (15) -0- -0-
George Andrew Solack 3,750 (15) 3,750 (15) -0- -0-
Sheldon Drobny 7,500 (15) 7,500 (15) -0- -0-
Susan Lambeth Charitable
Remainder Unitrust
(Susan Lambeth and Edmuns
Schupp) - by agreement
3/5/47 7,500 (15) 7,500 (15) -0- -0-
Mark Hart 11,250 (15) 11,250 (15) -0- -0-
David Brian Cohen 7,500 (15) 7,500 (15) -0- -0-
Robert Stuart Pearlman &
Rita Jo Pearlman (JT) 3,750 (15) 3,750 (15) -0- -0-
Robbins, Tunkey, Ross,
Amsel, Raben and Waxman,
P.A.
401K Profit Sharing Trust
F/B/O William R. Tunkey 3,750 (15) 3,750 (15) -0- -0-
Doran Topaz 3,750 (15) 3,750 (15) -0- -0-
16
<PAGE>
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
---------------- --------- -------- --------------
Percent of
Number Outstanding
Harvey Morton Soldan &
Ingrid Else Soldan (JT) 7,500 (15) 7,500 (15) -0- -0-
The Beckham Family Trust
(David Beckham, Trustee) -
by agreement dated 10/26/95 3,750 (15) 3,750 (15) -0- -0-
Boris Zalkind 3,750 (15) 3,750 (15) -0- -0-
Eliahu Ben-Shmuel 7,500 (15) 7,500 (15) -0- -0-
Horst Siegfried Filtzer 3,750 (15) 3,750 (15) -0- -0-
Charles G. Leaness 3,750 (15) 3,750 (15) -0- -0-
Lior Ben-Shmuel 7,500 (15) 7,500 (15) -0- -0-
Sonya Ben-Shmuel Personal
Revocable Trust (Sonya
Ben-Shmuel, Trustee) - by
agreement dated 5/13/96 3,750 (15) 3,750 (15) -0- -0-
The Equity Group Profit-
Sharing Plan and Trust
(Robert D. Goldstein,
Trustee) - by agreement
dated 1/1/80 7,500 (15) 7,500 (15) -0- -0-
Jeffrey I. Binder & Rosalie
G. Binder (TE) 7,500 (15) 7,500 (15) -0- -0-
Jay Haft 3,750 (15) 3,750 (15) -0- -0-
Henry Tie Shue 3,750 (15) 3,750 (15) -0- -0-
Bruno Guazzoni
c/o Zanett Capital, Inc. 7,500 (15) 7,500 (15) -0- -0-
Barry J. Booth & Suellen G.
Booth (JT) 7,500 (15) 7,500 (15) -0- -0-
Lenore Katz 7,500 (15) 7,500 (15) -0- -0-
Private Opportunity Partners
II, Ltd.
FL Limited Partnership 71,250 71,250 -0- -0-
</TABLE>
17
<PAGE>
(1) Unless otherwise noted, the Company believes that all persons
named above have sole voting and investment power with respect
to all Common Stock beneficially owned by them, subject to
community property laws, where applicable. A person is deemed
to be the beneficial owner of securities that can be acquired
by such person within 60 days from the date hereof upon the
exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or
warrants that are held by such person (but not those held by
any other person) and which are exercisable within 60 days
from the date hereof have been exercised.
(2) Assumes that all of the shares registered for the account of
the Selling Stockholders are sold.
(3) Includes 50,000 shares of Common Stock owned by Mr. Brodsky's
wife. Includes presently exercisable options to purchase
74,000 shares of Common Stock at $1.79 per share under the
Company's Employee's Incentive Stock Option Plan (the
"Incentive Plan"); includes presently exercisable options to
purchase 44,000 shares of Common Stock at $1.51 per share
under the 1995 Stock Option Plan (the "1995 Plan"); includes
presently exercisable options to purchase 44,000 shares of
Common Stock at $2.34 per share under the 1995 Plan; includes
presently exercisable options to purchase 60,667 shares of
Common Stock at $1.38 per share under the Non-Qualified Stock
Option Plan (the "Non-Qualified Plan"); includes presently
exercisable options to purchase 110,000 shares of Common Stock
at $2.61 per share under the 1995 Plan; includes presently
exercisable warrants to purchase 400,000 shares of Common
Stock at $1.38 per share under a Warrant Agreement which
expires in August, 2001; includes 68,352 shares of the
Company's Common Stock owned by the trusts established for the
benefit of Mr. Brodsky's four children, of which Mr. Brodsky
is a trustee.
(4) Excludes 8,000 shares of Common Stock owned by Mr. Freund's
adult children. Excludes 4,000 shares of Common Stock and
presently exercisable options to purchase (i) 43,000 shares of
Common Stock at $1.79 per share under the Incentive Plan, (ii)
18,000 shares of Common Stock at $1.38 per share under the
1995 Plan and (iii)18,000 shares of Common Stock at $1.38 per
share under the Non-Qualified Plan owned by Mr. Freund's wife.
As set forth in Mr. Freund's Schedule 13G, filed with the SEC
on February 9, 1997, Mr. Freund disclaims any beneficial
interest in, or voting or dispositive control over, such
shares; includes presently exercisable options to purchase
43,000 shares of Common Stock at $1.79 per share under the
Incentive Plan; includes presently exercisable options to
purchase 18,000 shares of Common Stock at $1.51 per share
under the 1995 Plan; includes presently exercisable options to
purchase 36,000 shares of Common Stock at $2.34 per share
under the 1995 Plan; includes presently exercisable options to
purchase 18,000 shares of Common Stock at $1.38 per share
under the Non-Qualified Plan; includes presently exercisable
options to purchase 90,000 shares of Common Stock at $2.61 per
share under the 1995 Plan.
(5) Includes presently exercisable options to purchase 46,667
shares of Common Stock at $1.79 per share under the Incentive
Plan; includes presently exercisable options to purchase
20,000 shares of Common Stock at $1.51 per share under the
1995 Plan; includes presently exercisable options to purchase
20,000 shares of Common Stock at $2.34 per share under the
1995 Plan; includes presently exercisable options to purchase
20,000 shares of Common Stock at $1.38 per share under the
Non-Qualified Plan; includes presently exercisable options to
purchase 50,000 shares of Common Stock at $2.61 per share
under the 1995 Plan. Includes 13,000 shares of the Company's
Common Stock owned by trusts established for the benefit of
Mr. Stoller's children of which Mr. Stoller is a trustee.
(6) Includes 101,200 Shares issuable upon the exercise of
currently exercisable warrants.
(7) Includes 30,800 Shares issuable upon the exercise of currently
exercisable warrants.
(8) Includes 30,800 Shares issuable upon the exercise of currently
exercisable warrants.
(9) Includes 20,000 Shares issuable upon the exercise of currently
exercisable warrants.
(10) Includes 4,400 Shares issuable upon the exercise of currently
exercisable warrants.
18
<PAGE>
(11) Includes 4,400 Shares issuable upon the exercise of currently
exercisable warrants.
(12) Includes 4,400 Shares issuable upon the exercise of currently
exercisable warrants.
(13) Includes 2,000 Shares issuable upon the exercise of currently
exercisable warrants.
(14) Includes 2,000 Shares issuable upon the exercise of currently
exercisable warrants.
(15) Of such amount, two-thirds represents shares of Common Stock
and one-third represents shares of Common Stock issuable upon
exercise of currently exercisable warrants.
Certain of the securities set forth in the above table are included in this
Prospectus pursuant to registration commitments accorded to certain of the
Selling Stockholders. There are no commitments pursuant to which the Company
will receive any proceeds from the sale of the Shares by the Selling
Stockholders.
To the Company's knowledge, no Selling Stockholder has had any position,
office or other material relationship with the Company or any of its affiliates
during the past three years (other than as a holder of the Company's
securities), except that (i) Bert E. Brodsky has served as Chairman of the Board
and Treasurer of the Company since 1983 and President since 1989; (ii) Hugh
Freund has served as a director of the Company since 1978 and Executive Vice
President of the Company since 1986 (iii) Gary Stoller has served as a director
and Executive Vice President of the Company since 1983; and (iv) B&B has been a
market maker of the Company's Common Shares during such three year period. B&B
acted as the placement agent in a recent private offering by the Company. The
Company believes that Messrs. Steven R. Bronson, James S. Cassel, (and Mindy
Cassel), Keil Stern, Eric R. Elliot, Barry J. Booth, Bruce C. Barber, Barry E.
Steiner (and Ms. Lisa Steiner) and Scott Salpeter are affiliated with B&B.
PLAN OF DISTRIBUTION
The Shares set forth in the "Selling Stockholders" table may be sold by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest, either pursuant to the Registration Statement of which this Prospectus
forms a part or, if available, under Section 4(1) of the Securities Act or Rule
144 promulgated thereunder.
To the Company's knowledge, this offering is not being underwritten. The
Company believes that the Selling Stockholders, directly through agents
designated from time to time, or through broker-dealers or underwriters also to
be designated (who may purchase as principal and resell for their own account),
may sell the Shares from time to time, in or through privately negotiated
transactions, or in one or more transactions, including block transactions, on
the NASDAQ SmallCap Market or on any other market or stock exchange on which the
Shares may be listed in the future pursuant to and in accordance with the
applicable rules of such market or exchange or otherwise. The selling price of
the Shares may be at market prices prevailing at the time of sale, at prices
relating to such prevailing market prices or at negotiated prices. From time to
time the Selling Stockholders may engage in short sales against the box, puts
and calls and other transactions in securities of the Company or derivatives
thereof, and may sell and deliver the shares in connection therewith. Further,
except as set forth herein, the Selling Stockholders are not restricted as to
the number of shares which may be sold at any one time, and it is
19
<PAGE>
possible that a significant number of shares could be sold at the same
time, which may have a depressive effect on the market price of the Company's
shares of Common Stock.
The Selling Stockholders may also pledge shares as collateral for margin
accounts, and such shares could be resold pursuant to the terms of such
accounts. Resales or reoffers of the Shares by the Selling Stockholders must be
accompanied by a copy of this Prospectus.
The Selling Stockholders and any agents, broker-dealers or underwriters
that participate in the distribution of the Shares may be deemed to be
underwriters, and any profit on the sale of the Shares by them, and any
discounts, commissions or concessions received by them, may be deemed to be
underwriting commissions or discounts under the Securities Act.
LEGAL MATTERS
Matters relating to the legality of the securities being offered hereby are
being passed upon for the Company by Certilman Balin Adler & Hyman, LLP, 90
Merrick Avenue, East Meadow, New York 11554.
EXPERTS
The consolidated financial statements of the Company appearing in the Form
10-KSB, as amended, have been audited by Marcum & Kliegman, LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-3 (together with
all amendments thereto, the "Registration Statement") with the Commission under
the Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the securities offered hereby, reference is made to the Registration Statement
and to the exhibits filed therewith, copies of which may be obtained upon
payment of a fee prescribed by the Commission, or may be examined free of charge
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Each statement made in
this Prospectus referring to a document filed as an exhibit to the Registration
Statement is qualified by reference to the exhibit for a complete statement of
its terms and conditions.
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (estimated except for the
Registration Fee) in connection with the Offering described in the Registration
Statement:
Registration Fee.......................................................$6,253.60
Accountants' Fees and Expenses..........................................3,000.00
Legal Fees and Expenses................................................17,000.00
Printing .............................................................. 1,500.00
Miscellaneous.............................................................500.00
Total................................................................28,253.66
Item 15. Indemnification of Directors and Officers.
Pursuant to Section 145 of the Delaware General Corporation Law, Sandata,
Inc. (hereinafter, the "Registrant") has the power, under certain circumstances,
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding.
Article Tenth of the Registrant's Certificate of Incorporation provides
that the Registrant shall, to the fullest extent permitted by said Section 145,
indemnify all persons whom it may indemnify pursuant thereto.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("1933 Act") may be permitted to directors, officers or controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemni fication 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 1933 Act and will be governed by the final
adjudication of such issue.
II-1
<PAGE>
Item 16. Exhibits.
Exhibit Number Description of Exhibit
5 Opinion of Certilman Balin Adler & Hyman, LLP regarding the legality
of the securities being registered *
10.1 Form of agreement between Sandsport and vendor agency
10.2 Form of agreement between Sandsport and vendor agency
10.3 Form of Subscription Agreement dated December 23, 1996
10.4 Form of Subscription Agreement dated September 12, 1996
10.5 Form of Common Stock Purchase Warrant ($5.00 Exercise Price)
10.6 Form of Common Stock Purchase Warrant ($7.00 Exercise Price)
10.7 Form of Redeemable Common Stock Purchase Warrant
23.1 Consent of Marcum & Kliegman, LLP
23.2 Consent of Certilman Balin Adler & Hyman, LLP (included in its
opinion filed as Exhibit 5)
24 Powers of Attorney(included in signature page forming a part hereof)
* To be filed by amendment
II-2
<PAGE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(l) 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 facts or events 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; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; 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 (l)(i) and (l)(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 by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the 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 that 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 purposes of determining any liability under the Securities
Act of 1933, as amended, each filing of the Registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission
II-3
<PAGE>
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.
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 for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Port Washington, State of New York, on the 9th day of
April 1997.
SANDATA, INC.
By: /s/ Bert E. Brodsky
Bert E. Brodsky
President and
Chief Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Bert E. Brodsky as his true and lawful
attorney-in-fact and agent, with full power 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 attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite or 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 agent
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 below by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
President, Treasurer,
Chief Executive Officer
and Chairman of the
Board (Principal
Executive Officer and
Principal Financial and
/s/ Bert E. Brodsky Accounting Officer)
Bert E. Brodsky April 9, 1997
Executive Vice President
Secretary
/s/Hugh Freund and Director
Hugh Freund April 9, 1997
Executive Vice President
/s/ Gary Stoller and Director
Gary Stoller April 9, 1997
II-1
<PAGE>
TimeTrax Contract
Agreement, made this day of 1995 between Sandsport Data Services,
Inc., a domestic corporation having its principal place of office at 26
Harbor Park Drive, Port Washington, New York, hereinafter referred to as
"Processor" and __________________________________., a domestic
not-for-profit corporation having its principal office at
__________________________, herein referred to as "Vendor".
Whereas, Vendor is in the business of rendering home care services
within the jurisdiction of the Human Resources Administration of the City
of New York, hereinafter referred to as "HRA", and under contract by the
City of New York to render services to City's clients and Vendor desires
certain computer and telephone-related services as provided herein; and
whereas, processor desires, and is able, to furnish such services as
provided herein.
Now, therefore, in consideration of the mutual agreements set forth
herein the parties hereto agree as follows:
1. Vendor represents to Processor that it has contracted with the
City of New York, to deliver home attendant services to designated
clients.
2. Vendor will make available to Processor client schedules,
client's phone numbers, and client's name. Vendor will also make
available to Processor attendant's name and social security number.
3. Processor will assign to Vendor an 800 telephone number to
allow attendant to log in and log out from client's residence when
arriving and departing.
4. Client authorized twenty-four hour assignment (sleep-in
cases), will require attendant to log in once a day at an assigned
time.
5. Cluster client cases, will require attendant to log in at the
beginning of each assignment and log out at the end of the day from
last assignment.
6. The Vendor will be responsible for maintaining the client
database of information including client schedule and client phone
number, and the attendant database of information including
attendant's name and social security number. The On-Line Time Sheet
System (OTS) provides Vendor with the facility to update the client
(including the schedule) and the attendant data base.
7. Processor will record all calls received. TimeTrax will verify
the following:
- Call was received from correct client location.
- The attendant social security number is from an active
employee of the Vendor.
- Calls received were for scheduled assigned times.
<PAGE>
8. TimeTrax will generate reports on demand as follows:
- No show report - listing all clients scheduled to receive care
and no call was received from home care worker.
- Unscheduled report - listing of clients who are not scheduled
to receive care yet a log in call was received.
- Unidentified phone numbers - listing of phone calls received
that are not identified as belonging to any clients.
- Unidentified attendants - listing of unidentifiable employee
social security number that were received.
- Daily call summary - listing of all activity from the
preceding day.
- Weekly call summary - listing of all activity from preceding
week.
9. TimeTrax will consider an attendant on-time if they arrive
within __ minutes of their assigned time. The attendant will also be
given full credit if they leave within __ minutes of the scheduled
depart time. However, at the end of the week, the system will
accumulate all the late minutes and reduce total hours worked in
increments of __ minutes. The most the attendant will be credited
within one week for time not worked is __ minutes. The rounding of
hours will be performed within each client assigned that week.
10. The Vendor will require attendants to log in when they arrive
at the assigned client's home by picking up the phone and depressing
the tones on the phone to correspond to employee's social security
number, or the employee can enter his or her social security number by
speaking the digits into phone. The attendant will log out when
leaving the assigned client's home, following the same procedure as
the log in. The maximum calls per visit should not exceed two calls.
11. As an option, TimeTrax can verify the person calling is the
individual assigned. The feature is voice verification and requires
caller to use voice recognition. To use the feature, all employees
must go through an enrollment process.
12. The log in and log out times cannot be altered; they remain
as permanent records. The Vendor may adjust total hours worked when
situation warrants. Special passwords are available to limit access to
this feature.
13. The Processor will tally hours worked daily. The Vendor will
review the Daily Call Summary and make adjustments and corrections.
The hours recorded will be inputted into the payroll module and the
MMIS billing module.
14. Processor agrees that all information pertaining to the
recipient or the provider of services contained in its files and all
information pertaining to such recipients and/or providers or learned
from official HRA files or records or from other sources, shall be
held confidential by processor pursuant to the provisions of the New
York State Social Services Law, the Federal Social Security Act and
any other applicable laws and any regulation promulgated
<PAGE>
thereunder, and shall not be disclosed to unauthorized persons.
15. Processor agrees not to use, for any unauthorized purpose
whatsoever, any information pertaining to the recipient or provider of
services or learned from Vendor or official HRA files or records, or
from other sources. For the purpose of this clause, unauthorized
purpose means any use whatsoever not specifically authorized by
Vendor.
16. In the event that the contract between the Vendor and the
City of New York is terminated for any reason whatsoever, or the City
of New York dissolves the program involved herein, this contract shall
terminate immediately.
17. The terms of this Agreement shall run through ______________
and shall continue thereafter until terminated by either party on at
least __ days prior written notice to the other. Sandsport agrees that
it will not increase any of the fees through _______________.
Thereafter such fees may be increased by Sandsport upon at least __
days prior written notice to Vendor. Any such price increase shall
become effective unless Vendor gives Sandsport at least __ days prior
written notice of its intention to terminate this Agreement on the
effective date of such increase, in which case this Agreement shall,
not withstanding anything to the contrary, terminate on such date.
18. This contract embodies all the terms of the agreement between
parties. Any modifications hereto shall be in writing and signed by
both parties.
19. Any disputes arising between the parties as to billing
charges must be settled within ______ of receipt of billing by Vendor.
20. Processor agrees to allow audit firms hired by Human Resource
Administration of the City of New York, to audit its computer systems
and operating procedures in order to form an opinion of the security
and integrity of the system.
21. Vendor hereby acknowledges that it shall have access to and
come in contact with certain information and documentation which is
the property of Processor which is copyrighted and/or which Processor
considers a proprietary trade secret ("Confidential Information").
Vendor hereby agrees that:
- All such confidential information shall be retained at the
premises of Vendor unless Vendor obtains the expressed written
consent of the Processor that such confidential information
may be removed.
- Vendor will use reasonable means (not less than that used to
protect its own proprietary information) to safeguard
Processor's confidential information.
- Vendor shall not show or otherwise disclose any portion of the
materials or their contents to anyone other than its
employees.
- It will make no copies of the confidential information.
- It will return all confidential information promptly upon
request of the company.
<PAGE>
22. Processor agrees to comply with equal employment provision
relating to subcontractors, where applicable, that are set forth in
Part II, Section 6, of the Home Attendant Service Agreement between
Vendor and HRA and all amendments and modifications to such
provisions.
23. Processor will not violate or in any way infringe upon the
rights of third parties, including, but not limited to, property,
contractual, employment, trade secrets, proprietary information and
nondisclosure rights, or any trademark, copyright or patent rights.
24. Processor is the lawful user of all programs used in
providing the services hereunder; rights to use such programs have
been lawfully acquired by Processor and Processor has the absolute
right to permit Vendor access to or use such programs.
25. Processor will comply with and be responsible for ensuring
that its employees, agents and subcontractors comply with all
applicable federal, state, and local laws, rules, and regulations
relating to the performance of the services, and that it will have
obtained such permits licenses, and other forms of documentation and
authorization required to comply with such laws, rules and
regulations.
26. Processor hereby indemnifies and shall hold harmless Vendor
against all liability to third parties (other than liability which is
the fault of the Vendor), including, without limitation, any
liability incurred as a result of an improper
determination of benefit eligibility, arising from or in connection
with Processor's improper performance of the services or any breach of
the Processor's warranties provided for herein and accordingly shall
on demand reimburse any indemnified party for any and all loss.
Liability, fine, penalty, cost, or expense which may for any reason be
imposed upon any indemnified party by reason of any suit, claim,
action, proceeding or demand by and third party which results from
Processor's performance of the services.
27. This Agreement shall be governed by the laws of the State of
New York, without regard to principles of conflict of laws but
including any applicable provisions of the New York Uniform Commercial
Code, except to the extent that the provisions of this Agreement are
clearly inconsistent therewith, in which case the provisions hereof
shall be controlling.
28. Any notices or other communications required or permitted
hereunder shall be in writing and will be deemed sufficiently given
only if delivered in person or sent by telex, telecopier, first-class
mail or recognized courier service, postage and other charges pre-paid
addressed as follows:
If to Processor:
Sandata TimeTrax
Sandsport Data Services
<PAGE>
26 Harbor Park Drive
Port Washington, NY 11050
Attention: President
If to Vendor:
Address of Vendor
Attention: Director (or to such other address as the addressee
may have specified in a notice duly given to the sender as provided
herein.
29. Vendor agrees to pay Processor as follows:
Start up fee $
Weekly per client charge
(or)
Optional: Voice verification:
Enrollment fee per attendant
Weekly per client charge
30. This Agreement, together with any schedules, appendices and
other attachments hereto, all of which are hereby incorporated by
reference herein and made a part of this Agreement, constitutes the
entire Agreement between Processor and Vendor and supersedes all
proposals, oral and written and all other communications between the
parties in relation to the subject matter of this Agreement. Except as
otherwise provided herein, no amendment, modification or other
variation of this Agreement shall be effective until reduced to
writing and executed by the parties hereto.
In witness whereof, the parties have caused this Agreement to be
executed by their respective duly authorized officers.
SANDSPORT DATA SERVICES, INC. VENDOR
- ---------------------------------- --------------------------
Hugh Freund Name
President Title
- ------------------------------- --------------------------
Date Date
<PAGE>
AGREEMENT, made this day of , 199 between Sandsport Data Services,
Inc., a domestic corporation having a principal office at 26 Harbor Park
Drive, Port Washington, New York, hereinafter referred to as "Processor"
and [ ], a domestic not-for-profit corporation having a principal office at
[ ], herein referred to as "Vendor".
WHEREAS, Vendor is in the business of rendering Home Attendant
Care services within the jurisdiction of the Human Resources
Administration of the City of New York, hereinafter referred to as
"HRA" and under contract by the City of New York to render services to
the City's clients.
NOW THEREFORE, in consideration of One ($l.00) Dollar, and other
mutual and valuable considerations, by each to the other paid, the
parties have agreed as follows:
1. Vendor represents to Processor that it has contracted
with the City of New York to deliver Home Attendant Care Services
to designated clients of HRA.
2. Vendor will make available to Processor completed time
sheets and other related completed forms.
3. The Processor agrees to provide Vendor with an on-line
system which includes the following features:
Hardware:
Software:
Vendor agrees to pay a monthly computer access charge of ________.
<PAGE>
4. Time sheets, received from attendants who worked in the prior week,
should be batched with up to 50 time sheets. Totals of hours worked, number
of time sheets, etc. should be entered for control purposes. Time sheets
should be entered daily until twelve o'clock noon of day prior to payroll
delivery. (If payroll is on Thursday, time sheets should be entered and
completed prior to twelve noon on Wednesday.) In the event Vendor is unable
to update its files or enter time sheets, processor will pick up data at
Vendor's location and will enter data from Processor's forms or time sheets
for Vendor. Vendor must request such assistance prior to twelve noon for
such data to be entered and processed that day.
5a. Processor agrees to convey, on behalf of Vendor, a magnetic
tape equivalent to the sum of its weekly invoicing to MMIS in Albany,
State of New York, by Thursday of the week following time sheets
received, and in conformance with HRA and State of New York
specifications.
5b. Processor agrees, as an option, to provide Vendor Agency with
a separate magnetic tape of Vendor Agency's weekly MMIS invoicing for
an additional charge of $____ per magnetic tape generated.
5c. Processor agrees, as an option, to accept from Vendor Agency
a separate magnetic tape of MMIS remittance to be processed against
MMIS submissions generated on magnetic tape for an additional charge
of $_____ per magnetic tape processed.
5d. Processor agrees, as an option, to accept from Vendor Agency
paper MMIS remittance records to be keyed and verified and processed
against Sandsport MMIS submissions generated on magnetic tape for an
additional charge of ____ per line item.
<PAGE>
6. Processor agrees that in the event (i) the Processor fails to meet
the time specification established by MMIS for submission of magnetic tapes
and such late submission was not caused by Vendor, or (ii) Processor
submits a Magnetic Tape that MMIS does not process due to faulty tape,
inaccuracies and/or omissions not caused by Vendor, and MMIS payments are
delayed, Vendor shall be entitled to receive from Processor, as liquidated
damages, the sum of __% of the amount due Processor from Vendor for such
week's processing, for each week any such MMIS payment is delayed.
7. Processor agrees to convey to HRA or its designee on behalf of
Vendor, a magnetic tape, including insurance requirements, monthly, per HRA
specifications.
8. In consideration for services as herein outlined to be performed by
Processor for the benefit of the Vendor, Vendor agrees to pay a fee based
on the allowable client case load assigned to Vendor by HRA as follows:
Up to ____ primary client cases $_____ weekly, plus $___ per week
for each and every client. Vendor agrees to pay Processor such sum
within _____ (__) days of receipt of such billing. Should any amounts
due not be paid, and remain unpaid for a period of _____ (__) days
thereafter, Vendor agrees to pay a late charge of ____% on the unpaid
amount for each month subsequent to the due date that such amounts
remain unpaid. In the event the Vendor fails to make such payments,
the Processor, at its option, may terminate this Agreement by giving
notice in writing of its intention to terminate. The termination shall
be effective _______ (__) days from the date of receipt by the Vendor
of the intention to terminate and Processor shall have no further
<PAGE>
obligation under this contract, except that this clause shall not
serve to relieve the Vendor of its own breach of this contract.
9. Vendor, at its own cost and expense, shall pay for all payroll
forms and other forms which require Vendor's specific design (i.e., payroll
checks, personalized letterhead forms, time sheets etc.).
10. Processor agrees to provide Vendor at year end W-2 forms with
employee's pay history for an additional charge of $___ per W-2 form
printed.
11. Processor agrees to provide Vendor at year end a magnetic tape of
W-2 information for the Social Security Administration and N.Y. State for
an additional charge of $____ per tape.
12. Processor agrees to provide vendor, as an option, 24 hour payroll
turnaround (48 hour if legal holiday falls on day after pickup) for an
additional charge of $_____ per payroll upon written request of ______ (__)
days' advanced notice.
13. Processor agrees to provide Vendor Tier II payroll processing for
an additional charge of $________ per payroll.
14. Processor agrees to provide Vendor check signing of Vendor payroll
checks for an additional charge of $__ per check with a minimum charge of
$____ per payroll run. Cost of signature plates are $_____, and will be
billed to Vendor.
15. Processor agrees to provide Vendor, as an option, special payroll
run for an additional charge of $_____.
<PAGE>
16. Vendor agrees to pay Processor the sum of _______ Dollars ($___),
for each pickup and delivery of materials set forth in Processor's
specifications.
17. Processor agrees to provide, as an option, Microfiche of various
reports, at a charge of $____ per fiche.
18. Processor agrees that all information pertaining to the recipient
or the provider of services contained in its files and all information
pertaining to such recipients and/or providers or information learned from
official HRA files or records or from other sources, shall be held
confidential by Processor pursuant to the provisions of the New York State
Social Services Law, the Federal Social Security Act and any other
applicable laws and any regulation promulgated thereunder, and shall not be
disclosed to unauthorized persons. For the purpose of this clause
unauthorized persons are those persons not specifically designated by
Vendor.
19. The Processor agrees not to use, for any unauthorized purpose
whatsoever, any information pertaining to the recipient or provider of
services obtained or learned from Vendor or official HRA files or records,
or from other sources. For the purpose of this clause, unauthorized purpose
means any use whatsoever not specifically authorized by Vendor.
20. Processor agrees to receive a magnetic tape from HRA with Client
Prior Approval information (PARVND). Processor agrees to create a Client
Prior Approval file. HRA will provide weekly, on Friday, a Prior Approval
Transaction on Magnetic Tape, which will be used to update Vendor's client
Prior Approval file. If Magnetic tape is not available on Friday, update of
Vendor's Client Prior Approval file may be delayed until the following
Friday.
<PAGE>
21. Processor agrees to generate monthly a preliminary Surplus Fund
Billing listing for clients with Surplus Funds from the Client Prior
Approval file.
22. Processor agrees to generate monthly Surplus Fund Bills for all
clients with Surplus Funds on the Client Prior Approval file and a Surplus
Fund Billing Report at an additional charge of $____ per Surplus Fund Bill
generated.
23. Vendor will make available to Processor completed forms with
credit and debit transaction codes reflecting cash received, credit
adjustments, and debit adjustments for Surplus Fund processing.
24. Processor agrees to generate monthly, Accounts Receivable Report,
Transaction Report and Transaction Ledger.
25. Processor agrees to provide a clearance system at a monthly charge
of $____. All Vendor Agencies' history of Employed Home Attendants will be
maintained by Processor so that Vendor Agencies, who participate, can
determine if a prospective Home Attendant was employed by another Vendor
Agency. Only the following data relating to employee history will be made
available to Vendor Agency when inquiry is made: Social Security Number,
Name of Employee, Name of Vendor Agency(s) where Employee worked, and Date
of Commencement of Employment.
26. Processor agrees to provide Vendor, as an option available at an
additional charge of $_____, a "Quarterly Duplicate Hours Report" which
lists attendants who are working on the same day for your Vendor Agency as
well as another Vendor Agency.
27. Processor agrees to provide Vendor, as an option, 'Hour
Reconciliation
<PAGE>
Report' weekly.
28. Processor agrees to provide, as an option, Expenditure Control
Services, allowing Vendor to retrieve __ weeks of payroll history of
employees at a monthly charge of $____.
29. The Processor agrees to comply with Equal Employment Provision
relating to subcontractors, where applicable, as set forth in Part 11,
Section 6. of the Home Attendant Services Agreement between Vendor and HRA
and all amendments and modifications to such provisions.
30. The Processor certifies the implementation of the collective
bargaining monitoring system as specified in HRA Memorandum No. 82-19 and
represents that the necessary safeguards and controls exist in the payroll
and billing systems which include this system.
31. The Processor will provide the Differential Billing Report and the
Baseline Report as described in HRA Memorandum No. 82-19 when payroll is
generated.
32. Processor agrees to provide, as an option, weekly pickup and
delivery service of MMIS remittance checks, and/or remittance magnetic
tape, at a charge of $____ per pickup.
33. The system will retain all paid claims up to ___ weeks old, and
claims over ___ weeks old will be purged from the MMIS Invoice file and
will no longer be accessible.
34. In the event that the contract between the Vendor and the City of
New York is terminated for any reason whatsoever, or the City of New York
dissolves the program involved herein, this Agreement shall terminate
immediately.
35. The terms of this Agreement shall continue through ___________ and
shall
<PAGE>
continue thereafter until terminated by either party upon at least __
days' prior written notice to the other. Processor agrees that it will not
increase any of the fees through ________. Thereafter such fees may be
increased by Processor upon at least __ days' prior written notice to
Vendor. Any such price increase shall become effective unless Vendor gives
Processor at least __ days' prior written notice of its intention to
terminate this Agreement on the effective date of such increase, in which
case this Agreement shall, notwithstanding anything to the contrary,
terminate on such date.
36. Upon termination of this Agreement, Processor, at Vendor's
request, will provide Vendor, in a mutually agreeable standard format,
files and data still in possession, provided that Processor has been paid
for all services rendered to the date of termination, and provided further
that Processor is paid for such files and data at Processor's standard
rates.
37. This Agreement constitutes the entire Agreement between the
parties. Any modifications hereto shall be in writing and signed by both
parties.
38. Any disputes arising between the parties as to billing charge(s)
must be settled within one week of receipt of billing by Vendor.
39. Processor warrants that, in the event its system cannot be
operated to process payroll data, Processor has arranged with a large local
corporation for guaranteed portion of time on their computer system and
that Vendor's payroll data shall be processed utilizing such back-up system
at no additional cost to Vendor.
40. Processor agrees to allow audit firms hired by Human Resources
Administration, City of New York, to audit its computer systems and
operating procedures in order
<PAGE>
to form an opinion of the security and integrity of the system.
41. Vendor hereby acknowledges that it shall have access to and come
in contact with certain information and documentation which is the property
of Processor which is copyrighted and/or which Processor considers a
proprietary trade secret ("Confidential Information"). Vendor hereby agrees
that (1) all such Confidential Information shall be retained at the
premises of Vendor unless the Vendor obtains the express written consent of
the Processor that such Confidential Information may be removed; (2) Vendor
will use reasonable means (not less than that used to protect its own
proprietary information) to safeguard Processor's Confidential Information;
(3) Vendor shall not show or otherwise disclose any portion of the
materials or their contents to anyone other than its employees; (4) Vendor
will make no copies of the Confidential Information; (5) Vendor will return
all Confidential Information promptly upon the request of the Processor.
42. Processor agrees not to release any information in Vendor's files
without written authorization from Vendor.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
effective the day and year first above set forth.
SANDSPORT DATA SERVICES, INC.
By: By:
Hugh Freund, President
RESIDENTS OF THE STATE OF FLORIDA WHO PURCHASE THE SHARES HAVE THE RIGHT,
PURSUANT TO SECTION 517.061(11)(a)5 OF THE FLORIDA SECURITIES AND INVESTOR
PROTECTION ACT, TO WITHDRAW THEIR SUBSCRIPTIONS AND RECEIVE A FULL REFUND OF ALL
MONIES PAID WITHIN THREE DAYS AFTER RECEIPT OF THIS MEMORANDUM OR WITHIN THREE
DAYS AFTER THE FIRST PAYMENT OF MONEY OR OTHER CONSIDERATION TO THE COMPANY,
WHICHEVER OCCURS LATER.
SUBSCRIPTION AGREEMENT
Sandata, Inc.
c/o Barber & Bronson Incorporated
2101 West Commercial Boulevard
Suite 1500
Ft. Lauderdale, Florida 33309
Gentlemen:
1. Subscription. Subject to the terms and conditions of this Subscription
Agreement (the "Agreement"), the undersigned hereby subscribes for and agrees to
purchase from the Company the number of units (the "Units"), each Unit
consisting of 5,000 shares of Common Stock and Redeemable Common Stock Purchase
Warrants (the "Warrants") to purchase 2,500 shares of Common Stock of Sandata,
Inc., a Delaware corporation (the "Company"), as set forth on the signature page
hereof. Each Warrant forming part of the Units will allow the holder thereof to
purchase one share of Common Stock at an exercise price of $7.00 per share
commencing as of the date of issuance and extending for a period of five years
thereafter, subject to extension by the Company (the "Expiration Date"). The
Warrants are subject to redemption at the option of the Company, upon thirty
days notice, at $.01 per Warrant, if at any time the closing bid price of the
Common Stock as quoted on the Nasdaq Bulletin Board, Nasdaq SmallCap or Nasdaq
National Market or such other source for obtaining information about the
Company's shares of Common Stock, equals or exceeds $9.00 per share for a period
of twenty consecutive trading days ending within ten calendar days of the date
on which notice of redemption is given, provided such Warrants can then be
exercised pursuant to an effective Registration Statement covering the re-sale
of the underlying shares of Common Stock. This Agreement is accompanied by the
payment by certified check, wire transfer or other immediately available funds
of an amount equal to $25,000 multiplied by the number of Units subscribed for,
together with the other Subscription Documents, all in the forms submitted to
the undersigned.
Capitalized terms used but not defined herein shall have the meanings as
set forth in the Confidential Private Offering Memorandum dated October 29, 1996
(the "Memorandum").
<PAGE>
2. Acceptance of Subscription; Adoption and Appointment. It is understood
and agreed that this Agreement is made subject to the following terms and
conditions:
(a) The Company shall have the right to accept or reject subscriptions
in whole or in part, for any reason (or for no reason).
(b) Investments are not binding on the Company until accepted by the
Company. Any subscription may be rejected by giving written notice to the
subscriber by personal delivery or first-class mail. In its sole
discretion, the Company may establish a limit on the purchase of Units by a
particular purchaser.
(c) The undersigned hereby intends that the undersigned's signature
hereon shall constitute an irrevocable subscription to the Company for the
number of Units specified on the signature page of this Agreement, subject
to a three-day right of rescission for Florida residents pursuant to
Section 517.061 of the Florida Securities and Investor Protection Act. Each
Florida resident has a right to withdraw a subscription for Units, without
any liability whatsoever, and receive a full refund of all monies paid,
within three days after the execution of this Agreement or payment for the
Units has been made, whichever is later. To accomplish this withdrawal, a
subscriber need only send a letter or telegram to the Company at the
address set forth in this Agreement, indicating the intention to withdraw.
Such letter or telegram should be sent and postmarked prior to the end of
the aforementioned third day. It is prudent to send such letter by
certified mail, return receipt requested, to ensure that is received and
also to evidence the time when it was mailed. If the request is made orally
(in person or by telephone) to the Company, a written confirmation that the
request has been received should be requested.
(d) The undersigned understands that the Placement Agent will notify
the undersigned on or prior to the date in which the offering terminates
(the "Termination Date") as to whether this subscription has been accepted
or rejected. Subscriptions may be accepted in whole or in part, at the
discretion of the Company and Placement Agent. If rejected, the
Subscription Price paid by the subscriber will be returned to the
subscriber forthwith without interest or deduction. Upon satisfaction of
the all the conditions referred to herein, copies of this Agreement, duly
executed by the Company, will be delivered to the undersigned.
3. Representations and Warranties of the Undersigned. The undersigned
hereby represents and warrants to the Company that:
(a) The undersigned has sufficient available financial resources to
provide adequately for the undersigned's current needs, including possible
contingencies, and can bear the economic risk of a complete loss of the
investment hereunder without materially affecting the undersigned's
financial condition;
(b) The undersigned has received, and has read and reviewed with the
undersigned's Purchaser Representative, designated on the Purchaser
Representative Questionnaire (the "Purchaser Representative"), if any, and
represents that the undersigned is familiar with this Agreement, the other
Subscription Documents and the Memorandum accompanying these documents,
including the risk factors set forth therein. The undersigned confirms that
all documents, records and books pertaining to the investment in the
Company and requested by the
<PAGE>
undersigned or the undersigned's Purchaser Representative have been
made available or have been delivered to the undersigned and/or the
undersigned's Purchaser Representative, and the undersigned and/or the
undersigned's Purchaser Representative have been afforded the opportunity
to obtain any additional information with respect thereto;
(c) The undersigned is an "Accredited Investor", as defined in Rule
501(a) of Regulation D, promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
(d) The undersigned gives authority to the Company to verify
employment, bank accounts and other matters as the Company deems necessary.
(e) The Company, through the Placement Agent and its representatives,
has answered all inquiries that the undersigned and/or the undersigned's
Purchaser Representative has put to them concerning the Company and its
proposed activities, and the Offering and sale of the Units;
(f) The undersigned understands that the Units and the securities
included therein or issuable upon exercise thereof have not been registered
under the Act or applicable state securities laws, and that the issuance of
the Units and the securities included therein or issuable upon exercise
thereof is being effectuated pursuant to an exemption from the registration
requirements under the Act and such state securities laws, and that
reliance on such exemption is based, in part, upon the information being
supplied hereunder by the undersigned; the undersigned also understands
that the certificates representing the Shares and the Warrants will bear
substantially the following restrictive Legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THESE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT FOR DISTRIBUTION OR RESALE. THEY MAY NOT BE
SOLD, ASSIGNED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT.
(g) All the information set forth on the Confidential Purchaser
Questionnaire attached hereto (the "Confidential Purchaser Questionnaire")
which the undersigned has furnished the Company is correct and complete as
of the date of this Agreement and, if there should be any material change
in such information prior to the consummation of the undersigned's purchase
of Units, the undersigned will immediately furnish such revised or
corrected information to the Company in writing.
<PAGE>
(h) The undersigned is acquiring the Units, for which the undersigned
hereby subscribes, for the undersigned's own account, as principal, for
investment purposes only and not with a view to the further resale or
distribution of all or any part of such Units;
(i) The undersigned, if a corporation, partnership, trust or other
form of business entity, is authorized and otherwise duly qualified to
purchase and hold the Units and the securities included therein or issuable
upon exercise thereof and such entity has not been formed for the specific
purpose of acquiring the Units;
(j) The address set forth for the undersigned on the signature page
hereof is the undersigned's true and correct residence or principal place
of business, as applicable, and the undersigned has no present intention of
becoming a resident of, or relocating its principal place of business to,
any other state or jurisdiction;
(k) The undersigned acknowledges that if a "Purchaser Representative,"
as defined in Regulation D, has been utilized by the undersigned in
evaluating the investment as contemplated hereby, (i) the undersigned has
been advised by his Purchaser Representative as to the merits and risks of
the investment in general and the suitability of the investment for the
undersigned in particular; and (ii) the undersigned's Purchaser
Representative has completed and executed the Purchaser Representative
Questionnaire, and receipt of a copy of such completed and executed
Purchaser Representative Questionnaire has been acknowledged in writing by
the undersigned;
(l) The person, if any, executing the Purchaser Representative
Questionnaire, a copy of which has been received by the undersigned, is
acting and is hereby designated to act as the undersigned's Purchaser
Representative in connection with the offer and sale of the Units to the
undersigned. This designation of a Purchaser Representative was made with
the knowledge of the representations and disclosures made in such Purchaser
Representative Questionnaire;
(m) The undersigned acknowledges that if the assistance or advice of a
Purchaser Representative is not required, the undersigned believes that the
undersigned has sufficient knowledge and experience in financial and
business matters generally to be capable of evaluating the merits and risks
of this investment and, acknowledges further, that:
(i) The undersigned has considered that the undersigned may have
to hold the proposed investment for an indefinite period of time and
may have to bear a complete economic loss of such investment. The
undersigned represents that the information contained in the
Confidential Purchaser Questionnaire, which has been completed by the
undersigned and delivered to the Company, is true and correct;
(ii) The purchase of the Units by the undersigned will be solely
for the account of the undersigned and not for the account of any
other person and will not be made with a view to the further resale or
distribution thereof; and
(iii) The undersigned recognizes that the proposed investment is
being offered in a manner that is intended to comply with the
requirements of Section 4(2) and/or Rule 506 of Regulation D of the
Act and that the acceptance of the undersigned's Agreement has
<PAGE>
been induced by the reliance of the Company on the correctness of
the representations contained herein; and
(n) The undersigned acknowledges and is aware of the following:
(i) There are substantial restrictions on the
transferability of the Units and the securities included therein
or issuable upon exercise thereof and such securities will not be
registered under the Act, and investors in the Company have no
rights to require that the Units and the securities included
therein or issuable upon exercise thereof be registered under the
Act. The undersigned may be required to hold the Units and the
securities included therein or issuable upon exercise thereof for
an indefinite period of time and it may not be possible for the
undersigned to liquidate the investment in the Company;
(ii) No federal or state agency has made any finding or
determination as to the fairness of the offering of Units for
investment or any recommendation or endorsement of the Units; and
(iii) There can be no assurance that the prior performance
on the part of the Company or any Affiliate (as defined in Rule
405 promulgated under the Act), or of any other person, will in
any way indicate the predictable results of the ownership of the
Units or of the Company.
(iv) The Company shall incur certain costs and expenses and
undertake other actions in reliance upon the irrevocability of
the subscription (following the three-day rescission period
described in Paragraph 2(c) of this Agreement) for the Units made
hereunder.
(o) If the subscriber for Units is an entity (the "Entity"), the subscriber
covenants and undertakes to promptly notify the Company of any change of
circumstances with respect to the Entity which would change the accuracy of the
answers to any of the questions specified in Question 18 or Question 19 of the
Confidential Purchaser Questionnaire attached hereto, regardless of when such
change takes place.
(p) The undersigned has responded "no" to each of the questions specified
in Question 20 of the Confidential Purchaser Questionnaire attached hereto and
therefore represents that the subscriber is not a "Restricted Person."
(q) The subscriber will deliver to the Company, promptly upon demand by the
Company, any form, document, or other information in order to allow the
Placement Agent to make such determinations as it deems advisable with respect
to the availability for exemption from registration as an investment company, or
with respect to any other matter as the Placement Agent may reasonably
determine.
The foregoing representations and warranties are true and accurate as of
the date of delivery of the Subscription Price to the Company and shall survive
such delivery. If, in any respect, such representations and warranties shall not
be true and accurate prior to the delivery of the Subscription Price pursuant to
Paragraph 1 hereof, the undersigned shall give written notice
<PAGE>
of such fact to the Company and to the undersigned's Purchaser Representative,
if any, specifying which representations and warranties are not true and
accurate and the reasons therefor.
4. Registration Rights.
(a) The Company will, as soon as reasonably possible following the Closing
Date of the Private Offering, file a registration statement with the U.S.
Securities and Exchange Commission (the "Commission") registering the offer and
re-sale by the Holder of the shares of Common Stock included in the Units and
issuable upon exercise of the Warrants (collectively, the "Shares"). The Company
shall use its reasonable efforts to cause the registration statement to remain
effective for a period of at least one hundred twenty (120) days from the
effective date of the Registration Statement or such earlier date as all of the
Shares have been sold (the "Effective Period").
(b) In addition, if, at any time during the five (5) years commencing as of
the Closing Date, the holders of a majority of the Shares (the "Holders") shall
give notice to the Company requesting that the Company file with the Commission
a registration statement relating to the offer and re-sale of the Shares by the
Holder, the Company shall promptly give written notice of such proposed
registration statement to the Holders, and to any subsequent permissible
transferee of any of the Shares (at the address of such persons appearing on the
books of the Company or its transfer agent), which notice shall offer to include
the Shares in the requested registration statement. The Company shall, as
expeditiously as possible, file and use its reasonable efforts to cause to
become effective under the Securities Act, the registration statement covering
the sale of such of the Shares by such Holders as the Company has been requested
to register for disposition by the Holders thereof, to the extent required to
permit the public sale or other public disposition thereof by the Holders. The
Company shall cause the registration statement to remain effective during the
Effective Period. The Holders shall have the right to demand registration of the
Shares as described above on one occasion only. Notwithstanding anything
contained herein to the contrary, the Holders may not demand registration of the
Shares if the Shares may otherwise be sold without registration under the
Securities Act or applicable state securities laws and regulations and without
limitation as to volume pursuant to Rule 144 of the Securities Act.
Notwithstanding anything contained herein, the Company shall not be obligated to
file or use its reasonable efforts to cause to become effective a registration
statement under this section during any period commencing with the date the
Company files a registration statement relating to the sale or exchange by it of
its securities in either an underwritten offering or in an offering involving a
merger, acquisition, combination or reorganization and ending with the date such
registration statement becomes effective.
(c) In addition, if at any time during the five (5) years commencing as of
the Closing Date, the Company shall prepare and file one or more registration
statements under the Securities Act (other than a registration statement on Form
S-4 (or with regard to any transaction contemplated by Rule 145 promulgated
under the Securities Act) or Form S-8 or any successor form of limited purpose
and other than a post-effective amendment to any such registration statement),
to the extent permitted by law, including, without limitation, the rules and
regulations of the Commission, with respect to a public offering of equity or
debt securities of the Company, or of any such securities of the Company held by
its security holders, the Company will include in any such registration
statement such information as is required, and such number of Shares held
<PAGE>
by the Holders thereof or their respective designees or transferees as may be
requested by them, to permit a public offering of the Shares so requested;
provided, however, that if, in the written opinion of the Company's managing
underwriter, if any, for such offering, the inclusion of the Shares requested to
be registered, when added to the securities being registered by the Company or
the selling security holder(s), would exceed the maximum amount of the Company's
securities that can be marketed without otherwise materially and adversely
affecting the entire offering, then the Company may exclude from such offering
all or that portion of the Shares requested to be so registered, so that the
total number of securities to be registered is within the maximum number of
shares that, in the opinion of the managing underwriter, may be marketed without
otherwise materially and adversely affecting the entire offering, provided that
at least a pro rata amount of the securities that otherwise were proposed to be
registered for other stockholders is also excluded. In the event of such a
proposed registration (other than the registration contemplated by Section 4(a)
above), the Company shall furnish the then Holders with not less than twenty
(20) days' written notice prior to the proposed date of filing of such
registration statement. Further notice shall be given by the Company to the
Holders, with respect to subsequent registration statements or post-effective
amendments filed by the Company, until such time as all of the Shares have been
registered or may be sold without registration under the Securities Act or
applicable state securities laws and regulations pursuant to Rule 144 of the
Securities Act. The holders of Shares shall exercise the rights provided for in
this Section 4(c) by giving written notice to the Company, within ten (10) days
of receipt of the Company's notice of its intention to file a registration
statement. Notwithstanding anything contained herein to the contrary, prior to
the effectiveness of a registration statement pursuant to which the Holders have
requested registration of the Shares pursuant to this Section 4(c), the Company
may delay the effectiveness of such registration statement or withdraw such
registration statement.
(d) Notwithstanding anything contained herein to the contrary, the Holders
shall not be permitted to exercise the registration rights provided for herein
with respect to all or such portion of the Shares as may be sold without
registration under the Securities Act or applicable state securities laws and
regulations under Rule 144 of the Securities Act.
(e) The Company shall bear all expenses, incurred in the preparation and
filing of such registration statements or post-effective amendment (and related
state registrations, to the extent permitted by applicable law) and the
furnishing of copies of the preliminary and final prospectus thereof to the
Holder, other than expenses of the Holder's counsel, and other than sales
commissions or transfer taxes incurred by the then holders with respect to the
sale of such securities.
(f) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to Section 4(b) or Section 4(c), a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed or go effective and it is therefore essential to defer the
filing or effectiveness of such registration statement, then the Company shall
have the right to defer taking action with respect to such filing or
effectiveness for a period of not more than ninety (90) days after receipt of
the request of the Holders; provided, however, that the Company may not utilize
this right more than once in any twelve-month period.
<PAGE>
(g) Notwithstanding the provisions of Sections 4(b) and 4(c) above, if at
any time during which the Company is obligated to maintain the effectiveness of
a registration statement pursuant to such Section, counsel to the Company (which
counsel shall be experienced in securities matters) has determined in good faith
that the filing of such registration statement or the compliance by the Company
with its disclosure obligations thereunder would require the disclosure of
material information which the Company has a bona fide business purpose for
preserving as confidential, then the Company may delay the filing or the
effectiveness of such registration statement (if not then filed or effective, as
appropriate) and shall not be required to maintain the effectiveness thereof (if
previously declared effective) for a period expiring upon the earlier to occur
of (i) the date on which such information is disclosed to the public or ceases
to be material or the Company is so able to comply with its disclosure
obligations, or (ii) thirty (30) days after counsel to the Company makes such
good faith determination. There shall not be more than one such delay period
with respect to any registration statement after it has been declared effective
pursuant to Sections 4(b) and 4(c). Notice of any such delay period and of the
termination thereof will be promptly delivered by the Company to each Holder and
shall be maintained in confidence by each such Holder. The Holders shall not
sell any Shares during such period as any such registration statement is not
current, as advised by the Company. Each Holder shall furnish to the Company
such information regarding such Holder and a written description of the
contribution proposed by such Holder as the Company may reasonably request.
(h) Each Holder whose Shares are included in a registration statement
pursuant to an underwritten public offering shall, if requested by the managing
underwriter of the public offering, enter into an agreement with the underwriter
pursuant to which the Holder will agree not to sell, transfer or otherwise
dispose of the Shares for such period after consummation of the public offering
as may reasonably be requested by the underwriter; up to a maximum of ninety
(90) days, without the consent of the underwriter.
(i) With a view to making available to the Holder the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Holders to
sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934 (the "Exchange Act"); and
(iii) furnish to each Holder so long as such Holder owns the Shares,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested to
permit the Holders to sell such securities pursuant to Rule 144 without
registration.
<PAGE>
(j) The rights and the obligations of the Holders under this Agreement,
including the rights to cause the Company to register the Shares and the
restrictions on the transferability of the Shares, shall be deemed to be
automatically assigned with the transfer of the Shares.
5. Indemnification. The undersigned acknowledges that the undersigned
understands the meaning and legal consequences of the representations and
warranties contained herein, and the undersigned hereby indemnifies and holds
harmless the Company and the Placement Agent, and their respective agents,
employees and affiliates, from and against any and all losses, claims, damages
or liabilities due to or arising out of a breach of any representations or
warranties of the undersigned contained in this Agreement.
6. Transferability. The undersigned agrees not to transfer or assign this
Agreement, or any of the undersigned's interest herein. Further, the undersigned
acknowledges that an investor in the Units pursuant to this Agreement and
applicable law, will not be permitted to transfer or dispose of the Units or the
shares included therein or issuable upon exercise thereof unless they are
registered or unless such transaction is exempt from registration under the Act
and applicable state securities laws and, in the case of any such purportedly
exempt transfer or disposition, such investor provides (at the investor's own
expense) an opinion of counsel satisfactory to the Placement Agent and the
Company and their respective counsel that such exemption is, in fact, available.
7. Revocation. The undersigned acknowledges and agrees that the
subscription for the Units made by the execution and delivery of this Agreement
by the undersigned is irrevocable, subject to the three-day right of rescission
in Florida described in Section 2(c) herein, and that such subscription shall
survive the death or disability of the undersigned, except as provided pursuant
to the applicable law and regulations.
8. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid, to the undersigned at the
address set forth below and to the Company c/o Barber & Bronson
Incorporated, 2101 West Commercial Boulevard, Suite 1500, Ft. Lauderdale,
Florida 33309.
(b) Notwithstanding the place where this Agreement may be executed by
any of the parties hereto, the parties expressly agree that all the terms
and provisions hereof shall be construed in accordance with and shall be
governed in all respects by the laws of the State of Delaware, without
application of the principles of conflicts of laws.
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof, and may be amended only
by a writing executed by all parties.
(d) If the undersigned is more than one person, the obligations of the
undersigned shall be joint and several, and the representations and
warranties contained herein
<PAGE>
shall be deemed to be made by, and be binding upon, each such person
and his heirs, estates, legal representatives, successors and permitted
assigns. This Agreement, upon acceptance by the Company, shall be binding
upon the heirs, estates, legal representatives, successors and permitted
assigns of all parties hereto.
(e) Any terms not otherwise defined herein shall have the meaning
ascribed to it in the Memorandum.
(f) Words used in this Agreement, regardless of the number and gender
specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context indicates is appropriate.
(g) This Agreement may be executed in one or more counterparts, each
of which will be deemed an original and all of which together will
constitute one and the same instrument.
(h) The section and subsection headings in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
[SIGNATURES ON FOLLOWING PAGES]
<PAGE>
SUBSCRIPTION AGREEMENT SIGNATURE PAGE FOR INDIVIDUALS
Number of Units Subscribed for: ______ Units at $25,000 per Unit.
(Signature of Subscriber) (Signature of Spouse or Joint Tenant, If Any)
(Print Name of Subscriber) (Print Name of Spouse or Joint Tenant, If Any)
(Address) (Address)
(Telephone Number) (Telephone Number)
(Social Security Number) (Social Security Number)
Note: If two investors are signing, please check the manner in which the
ownership is to be legally held (the indicated manner shall be construed as if
written out in full accordance with applicable laws or regulations):
__JTTEN: As joint tenants with right of survivorship and not as tenants in
common.
__TEN COM: As tenants in common.
__TEN ENT: As tenants by the entireties.
<PAGE>
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
FOR CORPORATIONS, TRUSTS AND PARTNERSHIPS
Number of Units Subscribed for: ______ Units at $25,000 per Unit.
(Print Name of Subscriber)
By:
(Signature of Authorized Person)
(Print Name of Authorized Person)
(Title of Authorized Person)
(Address)
(Telephone Number) (Federal Employer Identification Number
or Other Tax Identification Number)
<PAGE>
APPROVED AND ACCEPTED in accordance with the terms of this Agreement on
this ____ day of ____________, 1996.
COMPANY:
SANDATA, INC., a Delaware corporation
By:
Name:
Title:
<PAGE>
RESIDENTS OF THE STATE OF FLORIDA WHO PURCHASE THE SHARES HAVE THE
RIGHT, PURSUANT TO SECTION 517.061(11)(a)5 OF THE FLORIDA SECURITIES
AND INVESTOR PROTECTION ACT, TO WITHDRAW THEIR SUBSCRIPTIONS AND
RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN THREE DAYS AFTER
RECEIPT OF THIS MEMORANDUM OR WITHIN THREE DAYS AFTER THE FIRST PAYMENT
OF MONEY OR OTHER CONSIDERATION TO THE COMPANY, WHICHEVER OCCURS LATER.
SUBSCRIPTION AGREEMENT
As of September 12, 1996
Sandata, Inc.
26 Harbor Park Drive
Port Washington, NY 11050
Ladies and Gentlemen:
1. Offer to Purchase. Subject to the terms and conditions set forth in this
Subscription Agreement (the "Agreement"), ____________________ (the "Purchaser")
hereby subscribes for the purchase of _________ shares (the "Shares") of common
stock, $.001 par value per share ("Common Stock"), of Sandata, Inc., a Delaware
corporation (the "Company"), at a price of $3.00 per share, which in the
aggregate totals $_________. The purchase price is payable by unendorsed
certified check made payable to the order of or wire transfer to Sandata, Inc.,
contemporaneously herewith.
2. Representations, Warranties and Agreements of Purchaser. In connection
with its subscription, the Purchaser hereby makes the following representations,
warranties and agreements and confirms the following understandings to the
Company:
(a) Investment Purpose. The Purchaser is acquiring the Shares for
his own account and for investment purposes only, within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, with no intention of assigning any
participation or interest therein and with no view to the distribution
or resale thereof.
CORP\02437\0068\LCF04.03B
970409
<PAGE>
(b) Review and Evaluation of Information Regarding the Company.
Purchaser is familiar with the Company's operations and financial
condition. He acknowledges that he has had the opportunity to ask
representatives of the Company questions about the Company's business
and financial condition and that he has obtained and reviewed such
information as he has requested to the extent he has deemed necessary
to permit him to fully evaluate the merits and risks of his investment
in the Company.
(c) Purchaser's Financial Experience. The Purchaser is
sufficiently experienced in financial and business matters to be
capable of evaluating the merits and risks of an investment in the
Company.
(d) Suitability of Investment. The Purchaser has evaluated the
merits and risks of the Purchaser's proposed investment in the
Company, including those risks particular to the Purchaser's
situation, and has determined that this investment is suitable for
him. The Purchaser has adequate financial resources for an investment
of this character, and at this time the Purchaser can bear a complete
loss of his investment.
(e) Limitations on Disposition. Purchaser will not sell, assign,
transfer, encumber or otherwise dispose of any of the Shares unless
(i) a registration statement under the Securities Act with respect
thereto is in effect and the prospectus included therein meets the
requirements of Section 10 of the Securities Act, or (ii) the Company
has received a written opinion of its counsel that, after an
investigation of the relevant facts, such counsel is of the opinion
that such proposed sale, assignment, transfer, encumbrance or
disposition does not require registration under the Securities Act.
The Purchaser understands that the Shares are not being registered
under the Securities Act and must be held indefinitely unless they are
subsequently registered thereunder or an exemption from such
registration is available. The Purchaser understands that there are
substantial restrictions on the transferability of the Shares. The
Purchaser may not be able to avail himself of certain of the
provisions of Rule 144 adopted by the Securities and Exchange
Commission ("Commission") under the Securities Act with respect to the
public resale of the Shares; and accordingly, the Purchaser may have
to hold the Shares for an indefinite period of time and the Purchaser
may not be able to liquidate his investment in the Company. The
Purchaser represents that he can afford to hold the Shares for an
indefinite period of time.
(f) Accredited Investor. The Purchaser has reviewed the Company's
Annual Report on Form 10-KSB for the fiscal year ended May 31, 1996
(the "Form 10-KSB"). The Purchaser (i) is either an "accredited
investor," as such term is defined in Rule 501(a) promulgated by the
Commission under the Securities Act, or has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of the acquisition of the Shares
contemplated hereby; (ii) the Purchaser is able to bear the economic
risks of investment in the Shares, including, without limitation, the
risk of the loss of part or all of his investment and the inability to
sell or transfer the Shares for an indefinite period of time; (iii)
the Purchaser has adequate means of providing for current needs and
contingencies and has no need for liquidity in his investment in the
Shares; and (iv) the Purchaser does not have an overall
CORP\02437\0068\LCF04.03B
970409
<PAGE>
commitment to investments which are not readily marketable that
is excessive in proportion to his net worth and an investment in the
Shares will not cause such overall commitment to become excessive. The
Purchaser will execute and deliver to the Company such documents as
the Company may reasonably request in order to confirm the accuracy of
the foregoing.
(g) Reliance on Representations. The Purchaser understands that
the Shares are not being registered under the Securities Act in part
on the ground that the issuance thereof is exempt under Section 4(2)
of the Securities Act, as a transaction by an issuer not involving any
public offering and that the Company's reliance on such exemption is
predicated in part on the foregoing representations and warranties of
the Purchaser.
(h) Restrictive Legend. The Shares to be issued to Purchaser may
not be sold, assigned, transferred, encumbered or disposed of unless
they are registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is
available. Accordingly, the following restrictive legend will be
placed on any instrument, certificate or other document evidencing the
Shares.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THESE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT FOR DISTRIBUTION OR RESALE. THEY MAY NOT BE
SOLD, ASSIGNED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT.
(i) Certain Risk Factors. Purchaser acknowledges that there are
significant risks relating to the acquisition of the Shares including,
without limitation, the risks referred to in the Company's Form
10-KSB.
(j) Absence of Official Evaluation. The Purchaser understands
that neither the Commission nor any other federal or state agency has
made any finding or determination as to the fairness of the terms of
an investment in the Company, nor any recommendation or endorsement of
the Shares offered hereby.
CORP\02437\0068\LCF04.03B
970409
<PAGE>
(k) Obligation. This Agreement constitutes a valid and legally
binding obligation of the Purchaser and neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will constitute a violation of or default under,
or conflict with, any judgment, decree, statute or regulation of any
governmental authority applicable to the Purchaser or violate, alone
or with notice or the passage of time or both, result in a material
breach or termination or otherwise give any contracting party the
right to terminate or declare a default under any contract,
commitment, agreement or restriction of any kind to which the
Purchaser is a party or by which he or his assets are bound. The
execution and delivery of this Agreement does not, and the
consummation of the transactions described herein will not, violate
applicable law, or any mortgage, lien, agreement, indenture, lease or
understanding (whether oral or written) of any kind outstanding
relative to the Purchaser.
(l) Approvals Required. No approval, authorization, consent,
order or other action of, or filing with, any person, firm or
corporation or any court, administrative agency or other governmental
authority is required in connection with the execution and delivery of
this Agreement by the Purchaser or the consummation of the
transactions described herein, and, except to the extent that the
Purchaser or the Company is required to file reports in accordance
with relevant regulations under Federal securities laws all of which
reports have been or will be timely made by the Purchaser.
3. Representations, Warranties and Agreements of the Company. In connection
with this subscription, the Company makes the following representations,
warranties and agreements and confirms the following understanding:
(a) No Pending Proceedings. Except as disclosed in the Form 10-KSB,
there is not now pending or, to the Company's knowledge, threatened
against the Company, any of its subsidiaries or affiliates nor any of
their respective directors or officers (in their capacity as directors
or officers) any action or proceeding of which it has been advised,
either in any court of competent jurisdiction or before the
Commission, or regulatory authority.
(b) No Material Adverse Changes. Since the date of the Form
10-KSB, no facts have come to our attention which would cause us to
believe that the Form 10-KSB includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading.
(c) Company's Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in all jurisdictions
in which it is required to be qualified to do business, and has all
necessary powers to carry on its business as now operated by it.
CORP\02437\0068\LCF04.03B
970409
<PAGE>
(d) Capitalization. The Company has 763,955 shares of Common
Stock outstanding, and options and warrants to purchase 1,225,259
shares of Common Stock outstanding. No shares of the Common Stock are
held by it as treasury shares; all of the outstanding shares of the
Common Stock are validly issued, fully paid and non-assessable; none
of the shares of the Common Stock have been issued in violation of the
preemptive rights of any person. Except as described in the Form
10-KSB, there is not outstanding any security, option, warrant, right,
instrument convertible into or exchangeable for, employee benefit plan
or arrangement, agreement, understanding or commitment of any kind
entitling any person, corporation or entity to purchase, subscribe for
or otherwise acquire, or relating to the voting of, any shares of
capital stock or other equity interests of the Company.
(e) Legal and Other Proceedings. Neither the Company, nor any of
its subsidiaries or affiliates or each of their respective directors
or officers (in their capacity as directors or officers), is a party
to any pending or, to the best knowledge of the Company, threatened,
claim, action, suit, investigation, arbitration or proceeding, or is
subject to any order, judgment or decree that is reasonably expected
to have, either individually or in the aggregate, a material adverse
effect on the condition (financial or otherwise), earnings or results
of operations of the Company. The Company is not, as of the date
hereof, a party to or subject to any enforcement action instituted by,
or any agreement or memorandum of understanding with, any federal or
state regulatory authority restricting its operations or requiring
that actions be taken, and no such regulatory authority has threatened
any such action, memorandum or order against the Company and the
Company has not received any report of examination from any federal or
state regulatory agency which requires that the Company address any
problem or take any action which has not already been addressed or
taken in a manner satisfactory to the regulatory agency.
(f) Compliance with Laws. The Company represents and warrants
that, to the best of its knowledge, the Company:
(1) is in compliance in all material respects with
all laws, regulations, reporting and licensing requirements
and orders applicable to its business or any of its employees
(because of any such employee's activities on the Company's
behalf);
(2) is in compliance in all material respects with
all federal, state and local employment laws and regulations
(including employment discrimination laws and regulations)
applicable to its business or any of its employees; and
(3) has received no notification from any agency or
department of federal, state or local government or any
regulatory authority or the staff thereof asserting that it is
not in material compliance with or has violated any of the
statutes, regulations or ordinances which such governmental
authority or regulatory authority enforces, or threatening to
revoke any license, franchise, permit or governmental
authorization, and is subject to no material agreement or
consent
CORP\02437\0068\LCF04.03B
970409
<PAGE>
decree with any regulatory authorities arising out of
previously asserted violations with respect to its assets or
business.
(g) Financial Statements. The financial statements included in
the Form 10-KSB (the "Financial Statements"), as of the dates thereof
and for the periods covered thereby, are in accordance with the books
and records of the Company, which books and records are complete and
correct in all material respects required by generally accepted
accounting principles ("GAAP") and present fairly, in all material
respects, the financial position and results of the Company in
accordance with GAAP applied on a basis consistent with prior periods.
(h) Tax Matters. All federal, state, local and foreign tax
returns (including, without limitation, estimated tax returns, and,
with respect to employees, FICA and FUTA returns) required to be filed
by or on behalf of the Company have been timely filed, or requests for
extensions have been timely filed, granted and have not expired, and
all returns filed are complete and accurate in all material respects.
All taxes shown on filed returns have been paid. As of the date
hereof, there is no deficiency or refund litigation, matter in
controversy, or audit examination with respect to any taxes that might
result in a determination adverse to the Company, except as reserved
in the Financial Statements. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or
concluded litigation have been paid. The Company has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect. To the extent
any federal, state, local or foreign taxes are due from or, for any
periods through and including December 31, 1996, adequate provision
has been made for the payment of such taxes by establishing
appropriate liability accounts on the Financial Statements.
(i) Obligation. This Agreement constitutes a valid and legally
binding obligation of the Company and neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will constitute a violation of or default under,
or conflict with, any judgment, decree, statute or regulation of any
governmental authority applicable to the Company or violate, alone or
with notice or the passage of time or both, results in a material
breach or termination or otherwise give any contracting party the
right to terminate or declare a default under any contract,
commitment, agreement or restriction of any kind to which the Company
is a party or by which its assets are bound. The execution and
delivery of this Agreement does not, and the consummation of the
transactions described herein will not, violate applicable law, or any
mortgage, lien, agreement, indenture, lease or understanding (whether
oral or written) of any kind outstanding relative to the Company.
(j) Approvals Required. No approval, authorization, consent,
order or other action of, or filing with, any person, firm or
corporation or any court, administrative agency or other governmental
authority is required in connection with the execution and delivery of
this Agreement by the Company or the consummation of the transactions
described herein, and, except to the extent that the Purchaser or the
Company is required to file reports in accordance with
CORP\02437\0068\LCF04.03B
970409
<PAGE>
relevant regulations under Federal securities laws all of which
reports have been or will be timely made by the Company.
4. Registration Rights. If at any time during the three (3) years
after the date hereof, the Company shall prepare and file one or more
registration statements under the Securities Act (other than a registration
statement on Form S-4 (or with regard to any transaction contemplated by Rule
145, promulgated under the Securities Act) or Form S-8 or any successor form of
limited purpose and other than a post-effective amendment to any registration
statement), to the extent permitted by law, including, without limitation, the
rules and regulations of the Commission, with respect to a public offering of
equity or debt securities of the Company, or of any such securities of the
Company held by its security holders, the Company will, to the extent permitted
by law, including without limitation, the rules and regulations of the
Commission, include in any such registration statement such information as is
required, and such number of Shares held by the Purchaser or his respective
designees or transferees (the "Purchasers") as may be requested by them, to
permit a public offering of the Shares so requested; provided, however, that if,
in the written opinion of the Company's managing underwriter, if any, for such
offering, the inclusion of the Shares requested to be registered, when added to
the securities being registered by the Company or the selling security
holder(s), would exceed the maximum amount of the Company's securities that can
be marketed without otherwise materially and adversely affecting the entire
offering, then the Company may exclude from such offering all or that portion of
the Shares requested to be so registered, so that the total number of securities
to be registered is within the maximum number of shares that, in the opinion of
the managing underwriter, may be marketed without otherwise materially and
adversely affecting the entire offering, provided that at least a pro rata
amount of the securities that otherwise were proposed to be registered for other
stockholders is also excluded. In the event of such a proposed registration, the
Company shall furnish the then Purchasers with not less than twenty (20) days'
written notice prior to the proposed date of filing of such registration
statement. Further notice shall be given by the Company to Purchasers, with
respect to subsequent registration statements or post-effective amendments filed
by the Company, until such time as all of the Shares have been registered or may
be sold without registration under the Securities Act or applicable state
securities laws and regulations pursuant to Rule 144 of the Securities Act. The
Purchaser shall exercise the rights provided for in this Section by giving
written notice to the Company, within ten (10) days of receipt of the Company's
notice of its intention to file a registration statement. Notwithstanding
anything contained herein to the contrary, the Purchaser shall not be permitted
to exercise the registration rights provided for herein with respect to all or
such portion of the Shares as may be sold without registration under the
Securities Act or applicable state securities laws and regulations under Rule
144 of the Securities Act.
The Company shall bear all expenses, incurred in the preparation and
filing of such registration statements or post-effective amendment (and related
state registrations, to the extent permitted by applicable law) and the
furnishing of copies of the preliminary and final prospectus thereof to the
Purchaser, other than expenses of the Purchaser's counsel, and other than sales
CORP\02437\0068\LCF04.03B
970409
<PAGE>
commissions or transfer taxes incurred by the Purchasers with respect to the
sale of such securities.
The Purchaser whose Shares are included in a registration statement
pursuant to an underwritten public offering shall, if requested by the managing
underwriter of the public offering, enter into an agreement with the underwriter
pursuant to which the Purchaser will agree not to sell, transfer or otherwise
dispose of the Shares for such period after consummation of the public offering
as may reasonably be requested by the underwriter; up to a maximum of ninety
(90) days, without the consent of the underwriter.
Notwithstanding anything contained herein to the contrary, prior to the
effectiveness of a registration statement pursuant to which the Purchaser has
requested registration of his Shares pursuant to this Agreement, the Company may
delay the effectiveness of such registration statement or withdraw the
registration statement.
Notwithstanding anything contained herein to the contrary, if at any
time during which the Company is obligated to maintain the effectiveness of a
registration statement, counsel to the Company (which counsel shall be
experienced in securities matters) has determined in good faith that the filing
of such registration statement or the compliance by the Company with its
disclosure obligations thereunder would require the disclosure of material
information which the Company has a bona fide business purpose for preserving as
confidential, then the Company may delay the filing or the effectiveness of such
registration statement (if not then filed or effective, as appropriate) and
shall not be required to maintain the effectiveness thereof (if previously
declared effective) for a period expiring upon the earlier to occur of (i) the
date on which such information is disclosed to the public or ceases to be
material or the Company is so able to comply with its disclosure obligations, or
(ii) thirty (30) days after counsel to the Company makes such good faith
determination. There shall not be more than one such delay period with respect
to any registration statement after it has been declared effective pursuant to
this Section. Notice of any such delay period and of the termination thereof
will be promptly delivered by the Company to each Purchaser and shall be
maintained in confidence by each such Purchaser. The Purchaser shall not sell
any Shares during such period as any such registration statement is not current,
as advised by the Company. Each Purchaser shall furnish to the Company such
information regarding such Purchaser and a written description of the
distribution proposed by such Purchaser as the Company may reasonably request.
5. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof. This Agreement supersedes all prior negotiations,
letters and understandings relating to the subject matter hereof.
CORP\02437\0068\LCF04.03B
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<PAGE>
(b) Amendment. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed
by the party or parties against whom enforcement of any such
amendment, supplement or modification is sought.
(c) Choice of Law. This Agreement will be interpreted, construed
and enforced in accordance with the laws of the State of Florida,
without giving effect to the application of the principles pertaining
to conflicts of laws.
(d) Effect of Waiver. The failure of any party at any time or
times to require performance of any provision of this Agreement will
in no manner affect the right to enforce the same. The waiver by any
party of any breach of any provision of this Agreement will not be
construed to be a waiver by any such party of any succeeding breach of
that provision or a waiver by such party of any breach of any other
provision.
(e) Construction. The parties hereto and their respective legal
counsel participated in the preparation of this Agreement; therefore,
this Agreement shall be construed neither against nor in favor of any
of the parties hereto, but rather in accordance with the fair meaning
thereof.
(f) Severability. The invalidity, illegality or unenforceability
of any provision or provisions of this Agreement will not affect any
other provision of this Agreement, which will remain in full force and
effect, nor will the invalidity, illegality or unenforceability of a
portion of any provision of this Agreement affect the balance of such
provision. In the event that any one or more of the provisions
contained in this Agreement or any portion thereof shall for any
reason be held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be reformed, construed and enforced as if such
invalid, illegal or unenforceable provision had never been contained
herein.
(g) Enforcement. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this
Agreement, the successful party will be awarded reasonable attorneys'
fees at all trial and appellate levels, expenses and costs.
(h) Binding Nature. This Agreement will be binding upon and will
inure to the benefit of any successor or successors of the parties
hereto.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of
which together will constitute one and the same instrument.
CORP\02437\0068\LCF04.03B
970409
<PAGE>
IN WITNESS WHEREOF, the Purchaser has caused this Agreement to be
executed as of the date first above written.
----------------------------------
----------------------------------
AGREED AND ACCEPTED this
____ day of September, 1996
SANDATA, INC., a Delaware corporation
By:
Name:
Title:
CORP\02437\0068\LCF04.03B
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<PAGE>
VOID AFTER 5:00 P.M., MIAMI, FLORIDA TIME, ON DECEMBER 22, 1997.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
OTHERWISE DISPOSED OF, IN WHOLE OR IN PART (COLLECTIVELY, A "TRANSFER"), UNLESS
ANY SUCH TRANSFER IS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SAID
ACT IS AVAILABLE, AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH
EFFECT, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY. THIS LEGEND
SHALL BE ENDORSED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT.
SANDATA, INC.
COMMON STOCK PURCHASE WARRANT
Warrant Certificate No. 1~
1. Number and Price of Shares of Common Stock Subject to Common Stock
Purchase Warrant. Subject to the terms and conditions hereinafter set forth, 2~
(the "Holder"), is entitled to purchase from Sandata, Inc., a Delaware
corporation (the "Company"), at any time and from time to time during the period
from December 23, 1996 (the "Commencement Date") until 5:00 p.m., Miami, Florida
Time, on December 22, 1997 (the "Expiration Date"), at which time this Common
Stock Purchase Warrant (the "Warrant") shall expire and become void, an
aggregate of 3~ shares (the "Warrant Shares") of the Company's common stock,
$.001 par value per share (the "Common Stock"), which number of Warrant Shares
is subject to adjustment from time to time, as described below, upon payment
therefor of the exercise price of $5.00 per Warrant Share, in lawful funds of
the United States of America, such amounts (the "Basic Exercise Price") being
subject to adjustment in the circumstances set forth hereinbelow. This
applicable Basic Exercise Price, until such adjustment is made and thereafter as
adjusted from time to time, is called the "Exercise Price." This Warrant is one
of a series of Common Stock Purchase Warrants dated December 23, 1996 to
purchase an aggregate of 200,000 Warrant Shares, of which 100,000 Warrant Shares
may be purchased for a Basic Exercise Price of $5.00 and 100,000 Warrant Shares
may be purchased for a Basic Exercise Price of $7.00. The terms and conditions
of the Common Stock Purchase Warrants shall be identical in all material
respects except that the number of Warrant Shares to which the holder is
entitled to purchase may differ.
CORP\02437\0068\LCFAS12.19C
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<PAGE>
2. Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time from and after the Commencement Date and on or before the
Expiration Date, provided however, if such Expiration Date is a day on which
Federal or State chartered banking institutions located in the State of Florida
are authorized by law to close, then the Expiration Date shall be deemed to be
the next succeeding day which shall not be such a day, by presentation and
surrender to the Company at its principal office, or at the office of any
transfer agent for the Warrants ("Transfer Agent"), designated by the Company,
of this Warrant accompanied by the form of election to purchase on the last page
hereof signed by the Holder and upon payment of the Exercise Price for the
Warrant Shares purchased thereby, by cashier's check or by wire transfer of
immediately available funds. If this Warrant is exercised in part only, the
Company or Transfer Agent shall, promptly after presentation of this Warrant
upon such exercise, execute and deliver a new Warrant, dated the date hereof,
evidencing the rights of the Holder to purchase the balance of the Warrant
Shares purchasable hereunder upon the same terms and conditions herein set
forth. This Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the Warrant Shares or other securities
issuable upon such exercise shall be treated for all purposes as the holder of
such shares of record as of the close of business on such date. As promptly as
practicable, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full Warrant Shares issuable upon such exercise, together with cash in lieu of
any fraction of a share as provided below.
3. Call Option.
At any time prior to the expiration of this Warrant, except as
provided below, the Company shall have the right and option, upon notice mailed
to the Holder, to call, redeem and acquire all of the Warrants remaining
outstanding and unexercised at the date fixed for such redemption in such
notice, which redemption date shall be at least 30 days after the date of such
notice, for an amount equal to $.01 per underlying share (the "Redemption
Price"); provided, that the Company may exercise such right and option only if,
for 20 consecutive trading days ending within 10 calendar days prior to the
redemption notice date, the closing price per share of the Common Stock equals
or exceeds $7.00, such amount being subject to adjustment under the same
circumstances and in the same proportion as the Exercise Price. The Holder shall
have the right, during the 20-day period immediately following the date of such
notice, to exercise the Warrants. If any Warrants are exercised during such
20-day period, this call option shall be deemed not to have been exercised by
the Company as to the Warrant Shares so exercised by the Holder. Said notice of
redemption shall require the Holder to surrender to the Company, on or before
the redemption date, at the offices of the Company, or its warrant agent, if
any, the certificate or certificates representing the Warrants to be redeemed.
Notwithstanding the fact that any Warrants called for redemption have not been
surrendered for redemption and cancellation on the redemption date, after the
redemption date, such Warrants shall be deemed to be expired and all rights of
the Holder with respect to such unsurrendered Warrants shall cease and
terminate, other than the right to receive the Redemption Price. The rights of
the Company pursuant to this Section 3 are conditioned upon the registration by
the Company of the resale of the Warrant Shares under the Securities Act of
1933, as amended (the "Securities
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Act"), pursuant to a registration statement which is kept current by the Company
for at least 120 days after the notice of redemption.
4. Registration Rights.
4.1 If, at any time prior to the Expiration Date, the Holders of
a majority of the Warrants Shares shall give notice to the Company
requesting that the Company file with the Securities and Exchange
Commission (the "Commission") a registration statement (the
"Registration Statement") relating to the sale of the Warrant Shares
by the Holder, the Company shall promptly give written notice of such
proposed Registration Statement to the Holders of such Warrants or
Warrant Shares, and to any subsequent permissible transferee of any of
the Warrants or Warrant Shares (at the address of such persons
appearing on the books of the Company or its transfer agent) which
notice shall offer to include the Warrant Shares in the requested
Registration Statement. The Company shall, as expeditiously as
possible, file and use its reasonable efforts to cause to become
effective under the Securities Act, the Registration Statement
covering the sale of such of the Warrant Shares by such Holders as the
Company has been requested to register for disposition by the Holders
thereof, to the extent required to permit the public sale or other
public disposition thereof by the Holders. The Company shall cause the
Registration Statement to remain effective for a period of at least
120 days from the effective date of the Registration Statement or such
earlier date as all of the Warrant Shares have been sold or the
Warrants expire (the "Effective Period"). The Holders shall have the
right to demand registration of the Warrant Shares as described above
on one occasion only. Notwithstanding anything contained herein to the
contrary, the Holders may not demand registration of the Warrant
Shares if the Warrant Shares may otherwise be sold without
registration under the Securities Act or applicable state securities
laws and regulations and without limitation as to volume pursuant to
Rule 144 of the Securities Act. Notwithstanding anything contained
herein, the Company shall not be obligated to file or use its
reasonable efforts to cause to become effective a registration
statement under this section during any period commencing with the
date the Company files a registration statement relating to the sale
or exchange by it of its securities in either an underwritten offering
or in an offering involving a merger, acquisition, combination or
reorganization and ending with the date such registration statement
becomes effective.
4.2 In addition, if at any time during the four years after the
Commencement Date, the Company shall prepare and file one or more
registration statements under the Securities Act (other than a
registration statement on Form S-4 (or with regard to any transaction
contemplated by Rule 145 promulgated under the Securities Act) or Form
S-8 or any successor form of limited purpose and other than a
post-effective amendment to any such registration statement), with
respect to a public offering of equity or debt securities of the
Company, or of any such securities of the Company held by its security
holders, the Company will include in any such registration statement
such information as is required, and such number of Warrant Shares
held by the Holders thereof or their respective designees or
transferees as may be requested by them, to permit a public offering
of the Warrant Shares so requested; provided, however, that if, in the
written opinion of the Company's managing underwriter, if any, for
such offering, the inclusion of the Warrant Shares requested to be
registered, when added to the securities being registered by the
Company or the selling security holder(s), would exceed the
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maximum amount of the Company's securities that can be marketed
without otherwise materially and adversely affecting the entire
offering, then the Company may exclude from such offering all or that
portion of the Warrant Shares requested to be so registered, so that
the total number of securities to be registered is within the maximum
number of shares that, in the opinion of the managing underwriter, may
be marketed without otherwise materially and adversely affecting the
entire offering, provided that at least a pro rata amount of the
securities that otherwise were proposed to be registered for other
stockholders is also excluded. In the event of such a proposed
registration, the Company shall furnish the then Holders of Warrant
Shares with not less than 20 days' written notice prior to the
proposed date of filing of such registration statement. Further notice
shall be given by the Company to Holders of Warrant Shares, with
respect to subsequent registration statements or post-effective
amendments filed by the Company, until such time as all of the Warrant
Shares have been registered or may be sold without registration under
the Securities Act or applicable state securities laws and regulations
pursuant to Rule 144 of the Securities Act. The holders of Warrant
Shares shall exercise the rights provided for in this Section 4.2 by
giving written notice to the Company, within ten days of receipt of
the Company's notice of its intention to file a registration
statement. Notwithstanding anything contained herein to the contrary,
the Company may delay the effectiveness of such registration statement
or withdraw such registration statement; provided, however, the
Company must provide the Holders of Warrant Shares with notice of such
delay or withdrawal.
4.3 Notwithstanding anything contained herein to the contrary,
the Holders shall not be permitted to exercise the registration rights
provided for herein with respect to all or such portion of the Warrant
Shares as may be sold without registration under the Securities Act or
applicable state securities laws and regulations under Rule 144 of the
Securities Act.
4.4 The Company shall bear all expenses, incurred in the
preparation and filing of such registration statements or
post-effective amendment (and related state registrations, to the
extent permitted by applicable law) and the furnishing of copies of
the preliminary and final prospectus thereof to the Holder, other than
expenses of the Holder's counsel, and other than sales commissions or
transfer taxes incurred by the then holders with respect to the sale
of such securities.
4.5 Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to Section 4.1
or Section 4.2, a certificate signed by the Chief Executive Officer of
the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be
filed or go effective and it is therefore essential to defer the
filing or effectiveness of such registration statement, then the
Company shall have the right to defer taking action with respect to
such filing or effectiveness for a period of not more than 90 days
after receipt of the request of the Holders; provided, however, that
the Company may not utilize this right more than once in any
twelve-month period.
4.6 Notwithstanding the provisions of Sections 4.1 and 4.2, if at
any time during which the Company is obligated to maintain the
effectiveness of a registration statement pursuant to such Section,
counsel to the Company (which counsel shall be experienced in
securities matters) has determined in good faith that the filing of
such registration statement or
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the compliance by the Company with its disclosure obligations
thereunder would require the disclosure of material information which
the Company has a bona fide business purpose for preserving as
confidential, then the Company may delay the filing or the
effectiveness of such registration statement (if not then filed or
effective, as appropriate) and shall not be required to maintain the
effectiveness thereof (if previously declared effective) for a period
expiring upon the earlier to occur of (i) the date on which such
information is disclosed to the public or ceases to be material or the
Company is so able to comply with its disclosure obligations, or (ii)
30 days after counsel to the Company makes such good faith
determination. There shall not be more than one such delay period with
respect to any registration statement after it has been declared
effective pursuant to Sections 4.1 and 4.2. Notice of any such delay
period and of the termination thereof will be promptly delivered by
the Company to each Holder and shall be maintained in confidence by
each such Holder. The Holders shall not sell any Warrant Shares during
such period as any such registration statement is not current, as
advised by the Company. Each Holder shall furnish to the Company such
information regarding such Holder and a written description of the
contribution proposed by such Holder as the Company may reasonably
request.
4.7 Each Holder whose Warrant Shares are included in a
registration statement pursuant to an underwritten public offering
shall, if requested by the managing underwriter of the public
offering, enter into an agreement with the underwriter pursuant to
which the Holder will agree not to sell, Transfer or otherwise dispose
of the Warrant Shares for such period after consummation of the public
offering as may reasonably be requested by the underwriter; up to a
maximum of 90 days, without the consent of the underwriter.
5. Reservation of Common Stock. The Company covenants that, during the
period this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares of Common Stock to
provide for the issuance of the Warrant Shares upon the exercise of this
Warrant. This Company agrees that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for Warrant Shares
upon the exercise of this Warrant.
6. No Stockholder Rights. This Warrant, as such, shall not entitle the
Holder to any rights of a stockholder of the Company, until the Holder has
exercised this Warrant in accordance with Section 2 hereof.
7. Adjustment of Exercise Price and Number of Warrant Shares.
7.1 The number and kind of securities issuable upon the exercise
of this Warrant shall be subject to adjustment from time to time, and
the Company agrees to provide notice upon the happening of certain
events, as follows:
a. If the Company is recapitalized through the subdivision
or combination of its outstanding shares of Common Stock into a
larger or smaller number of shares of Common Stock, the number of
shares of Common Stock for which this Warrant may be exercised
shall be increased or reduced, as of the record date for such
recapitalization, in the
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same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall
be adjusted so that the aggregate amount payable for the purchase
of all of the Warrant Shares issuable hereunder immediately after
the record date for such recapitalization shall equal the
aggregate amount so payable immediately before such record date.
b. If the Company declares a dividend on its Common Stock
payable in shares of its Common Stock or securities convertible
into shares of its Common Stock, the number of shares of Common
Stock for which this Warrant may be exercised shall be increased
as of the record date for determining which holders of Common
Stock shall be entitled to receive such dividend, in proportion
to the increase in the number of outstanding shares of Common
Stock (and shares of Common Stock issuable upon conversion of all
such securities convertible into shares of Common Stock) as a
result of such dividend, and the Exercise Price shall be adjusted
so that the aggregate amount payable for the purchase of all the
Warrant Shares issuable hereunder immediately after the record
date for such dividend shall equal the aggregate amount so
payable immediately before such record date.
c. If the Company effects a general distribution to holders
of its Common Stock, other than as part of the Company's
dissolution or liquidation or the winding up of its affairs, of
any shares of its capital stock, any evidence of indebtedness or
any of its assets (other than cash, shares of Common Stock or
securities convertible into shares of Common Stock), the Company
shall give written notice to the Holder of any such general
distribution at least 15 days prior to the proposed record date
in order to permit the Holder to exercise this Warrant on or
before the record date. There shall be no adjustment in the
number of shares of Common Stock for which this Warrant may be
exercised, or in the Exercise Price, by virtue of any such
general distribution, except as otherwise provided herein.
d. If the Company offers rights or warrants (other than the
Warrant) to all holders of its Common Stock which entitle them to
subscribe to or purchase additional shares of Common Stock or
securities convertible into shares of Common Stock, the Company
shall give written notice of any such proposed offering to the
Holder at least 15 days prior to the proposed record date in
order to permit the Holder to exercise this Warrant on or before
such record date.
e. In the event an adjustment in the Exercise Price or the
number of Warrant Shares issuable hereunder is made under
subsection a. or b. above, and such an event does not occur, then
any adjustments in the Exercise Price or number of Warrant Shares
issuable upon exercise of this Warrant that were made in
accordance with such subsection a. or b. shall be re-adjusted to
the Exercise Price and number of Warrant Shares as were in effect
immediately prior to the record date for such an event.
f. If and whenever the Company issues or sells, or in
accordance with Section 7.1 is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less
than the Exercise Price in effect immediately prior to the time
of such issuance or sale (except for the issuance or deemed
issuance of securities in a transaction described in paragraph g.
of this Section 7.1), then immediately upon such issuance or sale
the Exercise Price will be reduced to an Exercise Price
determined by multiplying the Exercise Price
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in effect immediately prior to the issuance or sale by a
fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding prior to the
issuance or sale plus (ii) the number of Warrant Shares issuable
hereunder that the maximum aggregate amount of consideration
receivable by the Company upon such issuance or sale would
purchase at the Exercise Price in effect immediately prior to the
issuance or sale, and the denominator of which shall be the
number of shares of Common Stock deemed outstanding, as
hereinafter determined, immediately after such issuance or sale.
g. Notwithstanding anything contained herein to the
contrary, the following securities or transactions shall be
excluded from the operation of paragraph f. of this Section 7.1:
(i) The existence and any exercise, conversion and/or
exchange of any option, convertible promissory note and/or
other convertible or exchangeable security, warrant, or
other right to purchase Common Stock, that is outstanding on
the date hereof (whether or not currently exercisable,
convertible or exchangeable); and
(ii) Any grant or exercise of options for Common Stock
granted under the Company's stock option plans, in existence
as of the date hereof, provided said grant or exercise is
not effectuated as a result of any amendment to such plans
subsequent to the date hereof, with an exercise price equal
to at least the fair market value of the shares of Common
Stock on the date of grant. Notwithstanding anything
contained herein to the contrary, if the Company amends such
plans with the consent of Barber & Bronson Incorporated
(which consent shall not be unreasonably withheld or
delayed), the securities issued pursuant to such plan, as
amended, shall be excluded from the operation of paragraph
f. of this Section 7.1. As used herein, the term "fair
market value" shall mean the closing bid price, or, if not
available, the highest bid price, of the shares of Common
Stock as quoted on a national securities exchange, or in the
over-the-counter market as reported by Nasdaq or, if not
available, by the National Quotation Bureau, Incorporated,
as the case may be (or, if there is no bid price on a
particular day, then the closing bid price or, if not
available, the highest bid price on the nearest trading date
before that day and for which such prices are available),
and if the shares of Common Stock are not listed on such an
exchange or traded in such a market on such particular day,
then the fair market value per share shall be determined by
mutual agreement of the Board of Directors and the Holders
by taking into consideration all relevant factors,
including, but not limited to, the Company's net worth,
prospective earning power and dividend paying capacity.
h. If the Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (such
rights or options being herein called "Rights" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Rights or upon conversion or
exchange of such Convertible Securities is less than the Exercise
Price in effect immediately prior to the time of the granting of such
Rights, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Rights or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Rights will be deemed to be
outstanding and to have been issued and
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sold by the Company for such price per share. For purposes of
this Section, the "price per share for which Common Stock is issuable
upon exercise of such Rights or upon conversion or exchange of such
Convertible Securities" will be determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration
for the granting of such Rights, plus the minimum aggregate amount of
additional consideration payable to the Company upon exercise of all
such Rights, plus, in the case of Rights that relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock then issuable upon
the exercise of such Rights or upon the conversion or exchange of all
Convertible Securities issuable upon the exercise of such Rights.
Except as otherwise provided in Subsections j. and k. below, no
adjustment of the Exercise Price will be made when Convertible
Securities are actually issued upon the exercise of such Rights or
when Common Stock is actually issued upon the exercise of such Rights
or the conversion or exchange of such Convertible Securities.
i. If the Company in any manner issues or sells any
Convertible Securities, and the price per share for which Common
Stock is issuable upon such conversion or exchange is less than
the Exercise Price in effect immediately prior to the time of
such issuance or sale, then the maximum number of shares of
Common Stock then issuable upon conversion or exchange of all
such Convertible Securities will be deemed to be outstanding and
to have been issued and sold by the Company for such price per
share, as determined below. For the purposes of this Section, the
"price per share for which Common Stock is issuable upon such
conversion or exchange" will be determined by dividing (i) the
total amount received or receivable by the Company as
consideration for the issuance or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares
of Common Stock then issuable upon the conversion or exchange of
all such Convertible Securities. Except as otherwise provided in
Subsections j. and k. below, no adjustment of the Exercise Price
will be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any
such issuance or sale of such Convertible Securities is made upon
exercise of any Convertible Securities for which adjustments of
the Exercise Price had been or are to be made pursuant to other
provisions of this Section 6, no further adjustment of the
Exercise Price will be made by reason of such issuance or sale.
j. If the purchase price provided for in any Rights, the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time (other than under or by reason of provisions
that are designed to protect against dilution of the type set forth in
this Section 7 and are no more favorable to the holders of such Rights
or Convertible Securities than this Section 7 would have been if this
Section 7 were included in such Rights or Convertible Securities),
then the Exercise Price in effect at the time of such change will be
re-adjusted to the Exercise Price that would have been in effect at
such time had such Rights or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration, or
changed conversion rate, as the case may be, at the time initially
granted, issued, or sold; and such adjustment of the Exercise Price
will be made whether the result thereof is to increase or reduce the
Exercise Price then in effect
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under this Warrant, provided that no such adjustment shall
increase the Exercise Price above the initial Exercise Price hereof
and that such adjustments shall be made by the Board of Directors of
the Company, who shall promptly provide notice of the new Exercise
Price to the Holder.
k. Upon the expiration of any Right, or the termination of any
right to convert or exchange any Convertible Security, without the
exercise of such Right, or the conversion of such Convertible
Security, the Exercise Price then in effect hereunder will be adjusted
to the Exercise Price that would have been in effect at the time of
such expiration or termination had such Right or Convertible Security
never been issued, but such subsequent adjustment shall not affect the
number of shares of Common Stock issued upon any exercise of this
Warrant prior to the date such adjustment is made.
l. If any shares of Common Stock, Rights, or Convertible
Securities are issued or sold or deemed to have been issued or sold
for consideration that includes cash, then the amount of cash
consideration actually received by the Company will be deemed to be
the cash portion thereof. If any shares of Common Stock, Rights, or
Convertible Securities are issued or sold or deemed to have been
issued or sold for a consideration part or all of which is other than
cash, then the amount of the consideration other than cash received by
the Company will be the fair value of such consideration as determined
by the Board of Directors of the Company, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the market value thereof
as of the date of receipt. If any shares of Common Stock, Rights, or
Convertible Securities are issued in connection with any merger or
consolidation in which the Company is the surviving corporation, then
the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock,
Rights, or Convertible Securities, as the case may be.
m. If any Right is issued in connection with the issuance or sale
of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such
Right by the parties thereto, the Right will be deemed to have been
issued without consideration.
n. The number of shares of Common Stock deemed outstanding at any
given time shall include the number of shares of Common Stock
outstanding, as adjusted as provided herein, but shall not include
shares owned or held by or for the account of the Company, and the
disposition of any shares so owned or held will be considered an
issuance or sale of Common Stock hereunder.
o. No adjustment of the Exercise Price shall be made if the
amount of such adjustment would be less than one cent per Warrant
Share, but in such case any adjustment that otherwise would be
required to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment that, together
with any adjustment or adjustments so carried forward, shall amount to
not less than one cent per Warrant Share.
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7.2 In the event of any reorganization or reclassification of the
outstanding shares of Common Stock (other than a change in par value, or
from no par value to par value, or from par value to no par value, or as a
result of a subdivision or combination) or in the event of any
consolidation or merger of the Company with another entity at any time
prior to the expiration of this Warrant, the Holder shall have the right to
exercise this Warrant. Upon such exercise, the Holder shall have the right
to receive the same kind and number of shares of capital stock and other
securities, cash or other property as would have been distributed to the
Holder upon such reorganization, reclassification, consolidation or merger.
The Holder shall pay upon such exercise the Exercise Price that otherwise
would have been payable pursuant to the terms of this Warrant. If any such
reorganization, reclassification, consolidation or merger results in a cash
distribution in excess of the then applicable Exercise Price, the Holder
may, at the Holder's option, exercise this Warrant without making payment
of the Exercise Price, and in such case the Company shall, upon
distribution to the Holder, consider the Exercise Price to have been paid
in full, and in making settlement to the Holder, shall deduct an amount
equal to the Exercise Price from the amount payable to the Holder. In the
event of any such reorganization, merger or consolidation, the corporation
formed by such consolidation or merger or the corporation which shall have
acquired the assets of the Company shall execute and deliver a supplement
hereto to the foregoing effect, which supplement shall also provide for
adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided in the Warrant.
7.3 If the Company shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have
the right to exercise this Warrant. Upon such exercise the Holder shall
have the right to receive, in lieu of the shares of Common Stock of the
Company that the Holder otherwise would have been entitled to receive, the
same kind and amount of assets as would have been issued, distributed or
paid to the Holder upon any such dissolution, liquidation or winding up
with respect to such stock receivable upon exercise of this Warrant on the
date for determining those entitled to receive any such distribution. If
any such dissolution, liquidation or winding up results in any cash
distribution in excess of the Exercise Price provided by this Warrant, the
Holder may, at the Holder's option, exercise this Warrant without making
payment of the Exercise Price and, in such case, the Company shall, upon
distribution to the Holder, consider the Exercise Price to have been paid
in full and, in making settlement to the Holder, shall deduct an amount
equal to the Exercise Price from the amount payable to the Holder.
7.4 Upon each adjustment of the Exercise Price pursuant to Section 7
hereof, the Holder shall thereafter (until another such adjustment) be
entitled to purchase, at the adjusted Exercise Price in effect on the date
this Warrant is exercised, the number of Warrant Shares, calculated to the
nearest number of Warrant Shares, determined by (a) multiplying the number
of Warrant Shares purchasable hereunder immediately prior to the adjustment
of the Exercise Price by the Exercise Price in effect immediately prior to
such adjustment, and (b) dividing the product so obtained by the adjusted
Exercise Price in effect on the date of such exercise. The provisions of
Section 11 shall apply, however, so that no fractional share of Common
Stock or fractional Warrant shall be issued upon exercise of this Warrant.
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7.5 The Company may retain a firm of independent public accountants of
recognized standing (who may be any such firm regularly employed by the
Company) to make any computation required under this Section 7, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 7.
8. Voting Agreement. Upon exercise of the Warrants, the Holder shall agree
to vote the Warrant Shares in favor of management's nominees to the Board of
Directors for a period of four years or so long as Holder owns the Warrant
Shares, whichever is lesser. The delivery of the Warrant Shares to the Holder
shall be contingent upon the execution and delivery to the Company of a document
providing for the foregoing in a form reasonably satisfactory to the Company.
9. Notice to Holder. So long as this Warrant shall be outstanding (a) if
the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of capital stock or securities convertible into capital stock or any
similar rights or (c) if there shall be any capital reorganization of the
Company in which the Company is not the surviving entity, recapitalization of
the capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or other transfer of all or substantially
all of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company, then in such event, the
Company shall cause to be mailed by registered or certified mail to the Holder,
at least 30 days prior to the relevant date described below (or such shorter
period as is reasonably possible if 30 days is not reasonably possible), a
notice containing a description of the proposed action and stating the date or
expected date on which a record of the Company's stockholders is to be taken for
the purpose of any such dividend, distribution of rights, or such
reorganization, recapitalization, consolidation, merger, sale, lease or
transfer, dissolution, liquidation or winding up is to take place and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event.
10. Certificate of Adjustment. Whenever the Exercise Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the Holder of this Warrant a
certificate of an officer of the Company setting forth the nature of such
adjustment and a brief statement of the facts requiring such adjustment.
11. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
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12. Restrictions on Exercise.
12.1 Unless, prior to the exercise of this Warrant, the Warrant Shares
have been registered with the Commission pursuant to the Securities Act,
the notice of exercise shall be accompanied by a representation of the
Holder to the Company that such shares are being acquired for investment
and not with a view to the distribution thereof, and such other
representations and documentation as may reasonably be required by the
Company, unless in the opinion of counsel to the Company such
representations or other documentation is not necessary to comply with such
the Securities Act.
12.2 The Company shall not be obligated to deliver any Warrant Shares
unless and until the Company has compiled with any requirements of the
securities exchange or other self-regulatory body on which the Company's
shares of Common Stock may be listed or until there has been qualification
under or compliance with such federal or state laws, rules or regulations.
The Company agrees and undertakes to comply with such laws, rules or
regulations promptly upon receipt by the Company of the Election to
Purchase, and in any event by such date as compliance is required.
Notwithstanding anything contained herein to the contrary, where the
actions described herein may be taken after the issuance of the Warrant
Shares, the Company will promptly issue the Warrant Shares and thereafter
take such appropriate action.
13. Restrictions on Transfer.
13.1 Neither this Warrant nor any Warrant Shares may be transferred
except as follows: (a) to a person who, in the opinion of counsel
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the Securities Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Section 13 with respect to any Transfer
of such securities; or (b) to any person upon delivery of a prospectus then
meeting the requirements of the Securities Act relating to such securities
and the offering thereof for such Transfer.
13.2 Unless, prior to the exercise of this Warrant, the Warrant Shares
have been registered with the Commission pursuant to the Securities Act,
upon exercise of this Warrant and the issuance of the Warrant Shares, all
certificates representing such Warrant Shares shall bear on the face or
reverse thereof substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY
IS OBTAINED STATING THAT SUCH SALE, OFFER FOR SALE, PLEDGE,
TRANSFER, ASSIGNMENT OR OTHER DISPOSITION IS IN
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COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION.
14. Lost, Stolen or Destroyed Warrants. In the event that the Holder
notifies the Company that this Warrant has been lost, stolen or destroyed and
either (a) provides a letter, in form satisfactory to the Company, to the effect
that it will indemnify the Company from any loss incurred by it in connection
therewith, and/or (b) provides an indemnity bond in such amount as is reasonably
required by the Company, the Company shall accept such letter and/or indemnity
bond in lieu of the surrender of this Warrant as required by Section 2 hereof.
15. Exchange or Assignment of Warrant. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company, for other Warrants of different denominations, entitling
the Holder to purchase in the aggregate the same number of shares purchasable
hereunder. Subject to the provisions of this Warrant and receipt by the Company
of any required representations and agreements, upon surrender of this Warrant
to the Company with the Assignment annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without additional
charge, execute and deliver a new Warrant in the name of the assignee named in
such instrument of assignment and this Warrant shall promptly be canceled.
16. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or five days after
mailing by registered or certified mail, postage prepaid, to the Holder at 201
South Biscayne Boulevard, Suite 2950, Miami, Florida 33131. Notices or other
communications to the Company shall be deemed to have been sufficiently given if
delivered by hand or five days after mailing if mailed by registered or
certified mail postage prepaid, to the Company at 26 Harbor Park Drive, Port
Washington, New 11050. A party may change the address to which notice shall be
given by notice pursuant to this Section 16.
17. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Warrant, the successful
party will be awarded reasonable attorneys' fees at all trial and appellate
levels, expenses and costs.
18. Entire Agreement and Modification. The Company and the Holder of this
Warrant hereby represent and warrant that this Warrant is intended to and does
contain and embody all of the understandings and agreements, both written and
oral, of the parties hereto with respect to the subject matter of this Warrant,
and that there exists no oral agreement or understanding, express or implied,
whereby the absolute, final and unconditional character and nature of this
Warrant shall be in any way invalidated, impaired or affected. A modification or
waiver of any of the terms, conditions or provisions of this Warrant shall be
effective only if made in writing and executed with the same formality of this
Warrant.
19. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without application of the
principles of conflicts of laws.
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IN WITNESS WHEREOF, the Company has executed this Warrant as of the 23rd
day of December, 1996.
SANDATA, INC., a Delaware corporation
By:
Bert E. Brodsky, President
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ELECTION TO PURCHASE
TO: Sandata, Inc.
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Common Stock Purchase Warrant to purchase ____________________ shares of
Common Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
(Please insert social security or other identifying number)
(Please print name and address)
Dated: ____________________, 19__
NOTICE: The signature on this Election to Purchase must correspond with the
name as written upon the face of the within Warrant, in every particular,
without alteration, enlargement, or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, having an office or
correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm
having membership on a registered national securities exchange and an office in
New York, New York, or Boca Raton or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
Name of Bank or Firm:
Dated:
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ASSIGNMENT
FOR VALUE RECEIVED, __________________________________________, the
undersigned Holder hereby sells, assigns, and transfers all of the rights of the
undersigned under the within Warrant with respect to the number of Shares
covered thereby set forth below, unto the Assignee identified below, and does
hereby irrevocably constitute and appoint
________________________________________ to effect such transfer of rights on
the books of the Company, with full power of substitution:
Name of Assignee Address of Assignee No. of Shares Exercise Price
Dated:
(Signature of Holder)
(Print or type name)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant, in every particular, without
alteration, enlargement, or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, having an office or correspondent in New York,
New York, Boca Raton or Miami, Florida, or by a firm having membership on a
registered national securities exchange and an office in New York, New York, or
Boca Raton or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
Name of Bank or Firm:
Dated:
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VOID AFTER 5:00 P.M., MIAMI, FLORIDA TIME, ON DECEMBER 22, 1997.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
OTHERWISE DISPOSED OF, IN WHOLE OR IN PART (COLLECTIVELY, A "TRANSFER"), UNLESS
ANY SUCH TRANSFER IS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SAID
ACT IS AVAILABLE, AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH
EFFECT, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY. THIS LEGEND
SHALL BE ENDORSED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT.
SANDATA, INC.
COMMON STOCK PURCHASE WARRANT
Warrant Certificate No. 1~
1. Number and Price of Shares of Common Stock Subject to Common Stock
Purchase Warrant. Subject to the terms and conditions hereinafter set forth, 2~
(the "Holder"), is entitled to purchase from Sandata, Inc., a Delaware
corporation (the "Company"), at any time and from time to time during the period
from December 23, 1996 (the "Commencement Date") until 5:00 p.m., Miami, Florida
Time, on December 22, 1997 (the "Expiration Date"), at which time this Common
Stock Purchase Warrant (the "Warrant") shall expire and become void, an
aggregate of 3~ shares (the "Warrant Shares") of the Company's common stock,
$.001 par value per share (the "Common Stock"), which number of Warrant Shares
is subject to adjustment from time to time, as described below, upon payment
therefor of the exercise price of $5.00 per Warrant Share, in lawful funds of
the United States of America, such amounts (the "Basic Exercise Price") being
subject to adjustment in the circumstances set forth hereinbelow. This
applicable Basic Exercise Price, until such adjustment is made and thereafter as
adjusted from time to time, is called the "Exercise Price." This Warrant is one
of a series of Common Stock Purchase Warrants dated December 23, 1996 to
purchase an aggregate of 200,000 Warrant Shares, of which 100,000 Warrant Shares
may be purchased for a Basic Exercise Price of $5.00 and 100,000 Warrant Shares
may be purchased for a Basic Exercise Price of $7.00. The terms and conditions
of the Common Stock Purchase Warrants shall be identical in all material
respects except that the number of Warrant Shares to which the holder is
entitled to purchase may differ.
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2. Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time from and after the Commencement Date and on or before the
Expiration Date, provided however, if such Expiration Date is a day on which
Federal or State chartered banking institutions located in the State of Florida
are authorized by law to close, then the Expiration Date shall be deemed to be
the next succeeding day which shall not be such a day, by presentation and
surrender to the Company at its principal office, or at the office of any
transfer agent for the Warrants ("Transfer Agent"), designated by the Company,
of this Warrant accompanied by the form of election to purchase on the last page
hereof signed by the Holder and upon payment of the Exercise Price for the
Warrant Shares purchased thereby, by cashier's check or by wire transfer of
immediately available funds. If this Warrant is exercised in part only, the
Company or Transfer Agent shall, promptly after presentation of this Warrant
upon such exercise, execute and deliver a new Warrant, dated the date hereof,
evidencing the rights of the Holder to purchase the balance of the Warrant
Shares purchasable hereunder upon the same terms and conditions herein set
forth. This Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the Warrant Shares or other securities
issuable upon such exercise shall be treated for all purposes as the holder of
such shares of record as of the close of business on such date. As promptly as
practicable, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full Warrant Shares issuable upon such exercise, together with cash in lieu of
any fraction of a share as provided below.
3. Call Option.
At any time prior to the expiration of this Warrant, except as
provided below, the Company shall have the right and option, upon notice mailed
to the Holder, to call, redeem and acquire all of the Warrants remaining
outstanding and unexercised at the date fixed for such redemption in such
notice, which redemption date shall be at least 30 days after the date of such
notice, for an amount equal to $.01 per underlying share (the "Redemption
Price"); provided, that the Company may exercise such right and option only if,
for 20 consecutive trading days ending within 10 calendar days prior to the
redemption notice date, the closing price per share of the Common Stock equals
or exceeds $7.00, such amount being subject to adjustment under the same
circumstances and in the same proportion as the Exercise Price. The Holder shall
have the right, during the 20-day period immediately following the date of such
notice, to exercise the Warrants. If any Warrants are exercised during such
20-day period, this call option shall be deemed not to have been exercised by
the Company as to the Warrant Shares so exercised by the Holder. Said notice of
redemption shall require the Holder to surrender to the Company, on or before
the redemption date, at the offices of the Company, or its warrant agent, if
any, the certificate or certificates representing the Warrants to be redeemed.
Notwithstanding the fact that any Warrants called for redemption have not been
surrendered for redemption and cancellation on the redemption date, after the
redemption date, such Warrants shall be deemed to be expired and all rights of
the Holder with respect to such unsurrendered Warrants shall cease and
terminate, other than the right to receive the Redemption Price. The rights of
the Company pursuant to this Section 3 are conditioned upon the registration by
the Company of the resale of the Warrant Shares under the Securities Act of
1933, as amended (the "Securities
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Act"), pursuant to a registration statement which is kept current by the Company
for at least 120 days after the notice of redemption.
4. Registration Rights.
4.1 If, at any time prior to the Expiration Date, the Holders of
a majority of the Warrants Shares shall give notice to the Company
requesting that the Company file with the Securities and Exchange
Commission (the "Commission") a registration statement (the
"Registration Statement") relating to the sale of the Warrant Shares
by the Holder, the Company shall promptly give written notice of such
proposed Registration Statement to the Holders of such Warrants or
Warrant Shares, and to any subsequent permissible transferee of any of
the Warrants or Warrant Shares (at the address of such persons
appearing on the books of the Company or its transfer agent) which
notice shall offer to include the Warrant Shares in the requested
Registration Statement. The Company shall, as expeditiously as
possible, file and use its reasonable efforts to cause to become
effective under the Securities Act, the Registration Statement
covering the sale of such of the Warrant Shares by such Holders as the
Company has been requested to register for disposition by the Holders
thereof, to the extent required to permit the public sale or other
public disposition thereof by the Holders. The Company shall cause the
Registration Statement to remain effective for a period of at least
120 days from the effective date of the Registration Statement or such
earlier date as all of the Warrant Shares have been sold or the
Warrants expire (the "Effective Period"). The Holders shall have the
right to demand registration of the Warrant Shares as described above
on one occasion only. Notwithstanding anything contained herein to the
contrary, the Holders may not demand registration of the Warrant
Shares if the Warrant Shares may otherwise be sold without
registration under the Securities Act or applicable state securities
laws and regulations and without limitation as to volume pursuant to
Rule 144 of the Securities Act. Notwithstanding anything contained
herein, the Company shall not be obligated to file or use its
reasonable efforts to cause to become effective a registration
statement under this section during any period commencing with the
date the Company files a registration statement relating to the sale
or exchange by it of its securities in either an underwritten offering
or in an offering involving a merger, acquisition, combination or
reorganization and ending with the date such registration statement
becomes effective.
4.2 In addition, if at any time during the four years after the
Commencement Date, the Company shall prepare and file one or more
registration statements under the Securities Act (other than a
registration statement on Form S-4 (or with regard to any transaction
contemplated by Rule 145 promulgated under the Securities Act) or Form
S-8 or any successor form of limited purpose and other than a
post-effective amendment to any such registration statement), with
respect to a public offering of equity or debt securities of the
Company, or of any such securities of the Company held by its security
holders, the Company will include in any such registration statement
such information as is required, and such number of Warrant Shares
held by the Holders thereof or their respective designees or
transferees as may be requested by them, to permit a public offering
of the Warrant Shares so requested; provided, however, that if, in the
written opinion of the Company's managing underwriter, if any, for
such offering, the inclusion of the Warrant Shares requested to be
registered, when added to the securities being registered by the
Company or the selling security holder(s), would exceed the
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maximum amount of the Company's securities that can be marketed
without otherwise materially and adversely affecting the entire
offering, then the Company may exclude from such offering all or that
portion of the Warrant Shares requested to be so registered, so that
the total number of securities to be registered is within the maximum
number of shares that, in the opinion of the managing underwriter, may
be marketed without otherwise materially and adversely affecting the
entire offering, provided that at least a pro rata amount of the
securities that otherwise were proposed to be registered for other
stockholders is also excluded. In the event of such a proposed
registration, the Company shall furnish the then Holders of Warrant
Shares with not less than 20 days' written notice prior to the
proposed date of filing of such registration statement. Further notice
shall be given by the Company to Holders of Warrant Shares, with
respect to subsequent registration statements or post-effective
amendments filed by the Company, until such time as all of the Warrant
Shares have been registered or may be sold without registration under
the Securities Act or applicable state securities laws and regulations
pursuant to Rule 144 of the Securities Act. The holders of Warrant
Shares shall exercise the rights provided for in this Section 4.2 by
giving written notice to the Company, within ten days of receipt of
the Company's notice of its intention to file a registration
statement. Notwithstanding anything contained herein to the contrary,
the Company may delay the effectiveness of such registration statement
or withdraw such registration statement; provided, however, the
Company must provide the Holders of Warrant Shares with notice of such
delay or withdrawal.
4.3 Notwithstanding anything contained herein to the contrary,
the Holders shall not be permitted to exercise the registration rights
provided for herein with respect to all or such portion of the Warrant
Shares as may be sold without registration under the Securities Act or
applicable state securities laws and regulations under Rule 144 of the
Securities Act.
4.4 The Company shall bear all expenses, incurred in the
preparation and filing of such registration statements or
post-effective amendment (and related state registrations, to the
extent permitted by applicable law) and the furnishing of copies of
the preliminary and final prospectus thereof to the Holder, other than
expenses of the Holder's counsel, and other than sales commissions or
transfer taxes incurred by the then holders with respect to the sale
of such securities.
4.5 Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to Section 4.1
or Section 4.2, a certificate signed by the Chief Executive Officer of
the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be
filed or go effective and it is therefore essential to defer the
filing or effectiveness of such registration statement, then the
Company shall have the right to defer taking action with respect to
such filing or effectiveness for a period of not more than 90 days
after receipt of the request of the Holders; provided, however, that
the Company may not utilize this right more than once in any
twelve-month period.
4.6 Notwithstanding the provisions of Sections 4.1 and 4.2, if at
any time during which the Company is obligated to maintain the
effectiveness of a registration statement pursuant to such Section,
counsel to the Company (which counsel shall be experienced in
securities matters) has determined in good faith that the filing of
such registration statement or
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the compliance by the Company with its disclosure obligations
thereunder would require the disclosure of material information which
the Company has a bona fide business purpose for preserving as
confidential, then the Company may delay the filing or the
effectiveness of such registration statement (if not then filed or
effective, as appropriate) and shall not be required to maintain the
effectiveness thereof (if previously declared effective) for a period
expiring upon the earlier to occur of (i) the date on which such
information is disclosed to the public or ceases to be material or the
Company is so able to comply with its disclosure obligations, or (ii)
30 days after counsel to the Company makes such good faith
determination. There shall not be more than one such delay period with
respect to any registration statement after it has been declared
effective pursuant to Sections 4.1 and 4.2. Notice of any such delay
period and of the termination thereof will be promptly delivered by
the Company to each Holder and shall be maintained in confidence by
each such Holder. The Holders shall not sell any Warrant Shares during
such period as any such registration statement is not current, as
advised by the Company. Each Holder shall furnish to the Company such
information regarding such Holder and a written description of the
contribution proposed by such Holder as the Company may reasonably
request.
4.7 Each Holder whose Warrant Shares are included in a
registration statement pursuant to an underwritten public offering
shall, if requested by the managing underwriter of the public
offering, enter into an agreement with the underwriter pursuant to
which the Holder will agree not to sell, Transfer or otherwise dispose
of the Warrant Shares for such period after consummation of the public
offering as may reasonably be requested by the underwriter; up to a
maximum of 90 days, without the consent of the underwriter.
5. Reservation of Common Stock. The Company covenants that, during the
period this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares of Common Stock to
provide for the issuance of the Warrant Shares upon the exercise of this
Warrant. This Company agrees that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for Warrant Shares
upon the exercise of this Warrant.
6. No Stockholder Rights. This Warrant, as such, shall not entitle the
Holder to any rights of a stockholder of the Company, until the Holder has
exercised this Warrant in accordance with Section 2 hereof.
7. Adjustment of Exercise Price and Number of Warrant Shares.
7.1 The number and kind of securities issuable upon the exercise
of this Warrant shall be subject to adjustment from time to time, and
the Company agrees to provide notice upon the happening of certain
events, as follows:
a. If the Company is recapitalized through the subdivision
or combination of its outstanding shares of Common Stock into a
larger or smaller number of shares of Common Stock, the number of
shares of Common Stock for which this Warrant may be exercised
shall be increased or reduced, as of the record date for such
recapitalization, in the
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same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall
be adjusted so that the aggregate amount payable for the purchase
of all of the Warrant Shares issuable hereunder immediately after
the record date for such recapitalization shall equal the
aggregate amount so payable immediately before such record date.
b. If the Company declares a dividend on its Common Stock
payable in shares of its Common Stock or securities convertible
into shares of its Common Stock, the number of shares of Common
Stock for which this Warrant may be exercised shall be increased
as of the record date for determining which holders of Common
Stock shall be entitled to receive such dividend, in proportion
to the increase in the number of outstanding shares of Common
Stock (and shares of Common Stock issuable upon conversion of all
such securities convertible into shares of Common Stock) as a
result of such dividend, and the Exercise Price shall be adjusted
so that the aggregate amount payable for the purchase of all the
Warrant Shares issuable hereunder immediately after the record
date for such dividend shall equal the aggregate amount so
payable immediately before such record date.
c. If the Company effects a general distribution to holders
of its Common Stock, other than as part of the Company's
dissolution or liquidation or the winding up of its affairs, of
any shares of its capital stock, any evidence of indebtedness or
any of its assets (other than cash, shares of Common Stock or
securities convertible into shares of Common Stock), the Company
shall give written notice to the Holder of any such general
distribution at least 15 days prior to the proposed record date
in order to permit the Holder to exercise this Warrant on or
before the record date. There shall be no adjustment in the
number of shares of Common Stock for which this Warrant may be
exercised, or in the Exercise Price, by virtue of any such
general distribution, except as otherwise provided herein.
d. If the Company offers rights or warrants (other than the
Warrant) to all holders of its Common Stock which entitle them to
subscribe to or purchase additional shares of Common Stock or
securities convertible into shares of Common Stock, the Company
shall give written notice of any such proposed offering to the
Holder at least 15 days prior to the proposed record date in
order to permit the Holder to exercise this Warrant on or before
such record date.
e. In the event an adjustment in the Exercise Price or the
number of Warrant Shares issuable hereunder is made under
subsection a. or b. above, and such an event does not occur, then
any adjustments in the Exercise Price or number of Warrant Shares
issuable upon exercise of this Warrant that were made in
accordance with such subsection a. or b. shall be re-adjusted to
the Exercise Price and number of Warrant Shares as were in effect
immediately prior to the record date for such an event.
f. If and whenever the Company issues or sells, or in
accordance with Section 7.1 is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less
than the Exercise Price in effect immediately prior to the time
of such issuance or sale (except for the issuance or deemed
issuance of securities in a transaction described in paragraph g.
of this Section 7.1), then immediately upon such issuance or sale
the Exercise Price will be reduced to an Exercise Price
determined by multiplying the Exercise Price
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in effect immediately prior to the issuance or sale by a
fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding prior to the
issuance or sale plus (ii) the number of Warrant Shares issuable
hereunder that the maximum aggregate amount of consideration
receivable by the Company upon such issuance or sale would
purchase at the Exercise Price in effect immediately prior to the
issuance or sale, and the denominator of which shall be the
number of shares of Common Stock deemed outstanding, as
hereinafter determined, immediately after such issuance or sale.
g. Notwithstanding anything contained herein to the
contrary, the following securities or transactions shall be
excluded from the operation of paragraph f. of this Section 7.1:
(i) The existence and any exercise, conversion and/or
exchange of any option, convertible promissory note and/or
other convertible or exchangeable security, warrant, or
other right to purchase Common Stock, that is outstanding on
the date hereof (whether or not currently exercisable,
convertible or exchangeable); and
(ii) Any grant or exercise of options for Common Stock
granted under the Company's stock option plans, in existence
as of the date hereof, provided said grant or exercise is
not effectuated as a result of any amendment to such plans
subsequent to the date hereof, with an exercise price equal
to at least the fair market value of the shares of Common
Stock on the date of grant. Notwithstanding anything
contained herein to the contrary, if the Company amends such
plans with the consent of Barber & Bronson Incorporated
(which consent shall not be unreasonably withheld or
delayed), the securities issued pursuant to such plan, as
amended, shall be excluded from the operation of paragraph
f. of this Section 7.1. As used herein, the term "fair
market value" shall mean the closing bid price, or, if not
available, the highest bid price, of the shares of Common
Stock as quoted on a national securities exchange, or in the
over-the-counter market as reported by Nasdaq or, if not
available, by the National Quotation Bureau, Incorporated,
as the case may be (or, if there is no bid price on a
particular day, then the closing bid price or, if not
available, the highest bid price on the nearest trading date
before that day and for which such prices are available),
and if the shares of Common Stock are not listed on such an
exchange or traded in such a market on such particular day,
then the fair market value per share shall be determined by
mutual agreement of the Board of Directors and the Holders
by taking into consideration all relevant factors,
including, but not limited to, the Company's net worth,
prospective earning power and dividend paying capacity.
h. If the Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (such
rights or options being herein called "Rights" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities"), and the price per share for which Common Stock is
issuable upon the exercise of such Rights or upon conversion or
exchange of such Convertible Securities is less than the Exercise
Price in effect immediately prior to the time of the granting of such
Rights, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Rights or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Rights will be deemed to be
outstanding and to have been issued and
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sold by the Company for such price per share. For purposes of
this Section, the "price per share for which Common Stock is issuable
upon exercise of such Rights or upon conversion or exchange of such
Convertible Securities" will be determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration
for the granting of such Rights, plus the minimum aggregate amount of
additional consideration payable to the Company upon exercise of all
such Rights, plus, in the case of Rights that relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock then issuable upon
the exercise of such Rights or upon the conversion or exchange of all
Convertible Securities issuable upon the exercise of such Rights.
Except as otherwise provided in Subsections j. and k. below, no
adjustment of the Exercise Price will be made when Convertible
Securities are actually issued upon the exercise of such Rights or
when Common Stock is actually issued upon the exercise of such Rights
or the conversion or exchange of such Convertible Securities.
i. If the Company in any manner issues or sells any
Convertible Securities, and the price per share for which Common
Stock is issuable upon such conversion or exchange is less than
the Exercise Price in effect immediately prior to the time of
such issuance or sale, then the maximum number of shares of
Common Stock then issuable upon conversion or exchange of all
such Convertible Securities will be deemed to be outstanding and
to have been issued and sold by the Company for such price per
share, as determined below. For the purposes of this Section, the
"price per share for which Common Stock is issuable upon such
conversion or exchange" will be determined by dividing (i) the
total amount received or receivable by the Company as
consideration for the issuance or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares
of Common Stock then issuable upon the conversion or exchange of
all such Convertible Securities. Except as otherwise provided in
Subsections j. and k. below, no adjustment of the Exercise Price
will be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any
such issuance or sale of such Convertible Securities is made upon
exercise of any Convertible Securities for which adjustments of
the Exercise Price had been or are to be made pursuant to other
provisions of this Section 6, no further adjustment of the
Exercise Price will be made by reason of such issuance or sale.
j. If the purchase price provided for in any Rights, the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time (other than under or by reason of provisions
that are designed to protect against dilution of the type set forth in
this Section 7 and are no more favorable to the holders of such Rights
or Convertible Securities than this Section 7 would have been if this
Section 7 were included in such Rights or Convertible Securities),
then the Exercise Price in effect at the time of such change will be
re-adjusted to the Exercise Price that would have been in effect at
such time had such Rights or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration, or
changed conversion rate, as the case may be, at the time initially
granted, issued, or sold; and such adjustment of the Exercise Price
will be made whether the result thereof is to increase or reduce the
Exercise Price then in effect
CORP\02437\0068\LCFAS12.19C
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under this Warrant, provided that no such adjustment shall
increase the Exercise Price above the initial Exercise Price hereof
and that such adjustments shall be made by the Board of Directors of
the Company, who shall promptly provide notice of the new Exercise
Price to the Holder.
k. Upon the expiration of any Right, or the termination of any
right to convert or exchange any Convertible Security, without the
exercise of such Right, or the conversion of such Convertible
Security, the Exercise Price then in effect hereunder will be adjusted
to the Exercise Price that would have been in effect at the time of
such expiration or termination had such Right or Convertible Security
never been issued, but such subsequent adjustment shall not affect the
number of shares of Common Stock issued upon any exercise of this
Warrant prior to the date such adjustment is made.
l. If any shares of Common Stock, Rights, or Convertible
Securities are issued or sold or deemed to have been issued or sold
for consideration that includes cash, then the amount of cash
consideration actually received by the Company will be deemed to be
the cash portion thereof. If any shares of Common Stock, Rights, or
Convertible Securities are issued or sold or deemed to have been
issued or sold for a consideration part or all of which is other than
cash, then the amount of the consideration other than cash received by
the Company will be the fair value of such consideration as determined
by the Board of Directors of the Company, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the market value thereof
as of the date of receipt. If any shares of Common Stock, Rights, or
Convertible Securities are issued in connection with any merger or
consolidation in which the Company is the surviving corporation, then
the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock,
Rights, or Convertible Securities, as the case may be.
m. If any Right is issued in connection with the issuance or sale
of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such
Right by the parties thereto, the Right will be deemed to have been
issued without consideration.
n. The number of shares of Common Stock deemed outstanding at any
given time shall include the number of shares of Common Stock
outstanding, as adjusted as provided herein, but shall not include
shares owned or held by or for the account of the Company, and the
disposition of any shares so owned or held will be considered an
issuance or sale of Common Stock hereunder.
o. No adjustment of the Exercise Price shall be made if the
amount of such adjustment would be less than one cent per Warrant
Share, but in such case any adjustment that otherwise would be
required to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment that, together
with any adjustment or adjustments so carried forward, shall amount to
not less than one cent per Warrant Share.
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7.2 In the event of any reorganization or reclassification of the
outstanding shares of Common Stock (other than a change in par value, or
from no par value to par value, or from par value to no par value, or as a
result of a subdivision or combination) or in the event of any
consolidation or merger of the Company with another entity at any time
prior to the expiration of this Warrant, the Holder shall have the right to
exercise this Warrant. Upon such exercise, the Holder shall have the right
to receive the same kind and number of shares of capital stock and other
securities, cash or other property as would have been distributed to the
Holder upon such reorganization, reclassification, consolidation or merger.
The Holder shall pay upon such exercise the Exercise Price that otherwise
would have been payable pursuant to the terms of this Warrant. If any such
reorganization, reclassification, consolidation or merger results in a cash
distribution in excess of the then applicable Exercise Price, the Holder
may, at the Holder's option, exercise this Warrant without making payment
of the Exercise Price, and in such case the Company shall, upon
distribution to the Holder, consider the Exercise Price to have been paid
in full, and in making settlement to the Holder, shall deduct an amount
equal to the Exercise Price from the amount payable to the Holder. In the
event of any such reorganization, merger or consolidation, the corporation
formed by such consolidation or merger or the corporation which shall have
acquired the assets of the Company shall execute and deliver a supplement
hereto to the foregoing effect, which supplement shall also provide for
adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided in the Warrant.
7.3 If the Company shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have
the right to exercise this Warrant. Upon such exercise the Holder shall
have the right to receive, in lieu of the shares of Common Stock of the
Company that the Holder otherwise would have been entitled to receive, the
same kind and amount of assets as would have been issued, distributed or
paid to the Holder upon any such dissolution, liquidation or winding up
with respect to such stock receivable upon exercise of this Warrant on the
date for determining those entitled to receive any such distribution. If
any such dissolution, liquidation or winding up results in any cash
distribution in excess of the Exercise Price provided by this Warrant, the
Holder may, at the Holder's option, exercise this Warrant without making
payment of the Exercise Price and, in such case, the Company shall, upon
distribution to the Holder, consider the Exercise Price to have been paid
in full and, in making settlement to the Holder, shall deduct an amount
equal to the Exercise Price from the amount payable to the Holder.
7.4 Upon each adjustment of the Exercise Price pursuant to Section 7
hereof, the Holder shall thereafter (until another such adjustment) be
entitled to purchase, at the adjusted Exercise Price in effect on the date
this Warrant is exercised, the number of Warrant Shares, calculated to the
nearest number of Warrant Shares, determined by (a) multiplying the number
of Warrant Shares purchasable hereunder immediately prior to the adjustment
of the Exercise Price by the Exercise Price in effect immediately prior to
such adjustment, and (b) dividing the product so obtained by the adjusted
Exercise Price in effect on the date of such exercise. The provisions of
Section 11 shall apply, however, so that no fractional share of Common
Stock or fractional Warrant shall be issued upon exercise of this Warrant.
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<PAGE>
7.5 The Company may retain a firm of independent public accountants of
recognized standing (who may be any such firm regularly employed by the
Company) to make any computation required under this Section 7, and a
certificate signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 7.
8. Voting Agreement. Upon exercise of the Warrants, the Holder shall agree
to vote the Warrant Shares in favor of management's nominees to the Board of
Directors for a period of four years or so long as Holder owns the Warrant
Shares, whichever is lesser. The delivery of the Warrant Shares to the Holder
shall be contingent upon the execution and delivery to the Company of a document
providing for the foregoing in a form reasonably satisfactory to the Company.
9. Notice to Holder. So long as this Warrant shall be outstanding (a) if
the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of capital stock or securities convertible into capital stock or any
similar rights or (c) if there shall be any capital reorganization of the
Company in which the Company is not the surviving entity, recapitalization of
the capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or other transfer of all or substantially
all of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company, then in such event, the
Company shall cause to be mailed by registered or certified mail to the Holder,
at least 30 days prior to the relevant date described below (or such shorter
period as is reasonably possible if 30 days is not reasonably possible), a
notice containing a description of the proposed action and stating the date or
expected date on which a record of the Company's stockholders is to be taken for
the purpose of any such dividend, distribution of rights, or such
reorganization, recapitalization, consolidation, merger, sale, lease or
transfer, dissolution, liquidation or winding up is to take place and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event.
10. Certificate of Adjustment. Whenever the Exercise Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the Holder of this Warrant a
certificate of an officer of the Company setting forth the nature of such
adjustment and a brief statement of the facts requiring such adjustment.
11. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
CORP\02437\0068\LCFAS12.19C
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12. Restrictions on Exercise.
12.1 Unless, prior to the exercise of this Warrant, the Warrant Shares
have been registered with the Commission pursuant to the Securities Act,
the notice of exercise shall be accompanied by a representation of the
Holder to the Company that such shares are being acquired for investment
and not with a view to the distribution thereof, and such other
representations and documentation as may reasonably be required by the
Company, unless in the opinion of counsel to the Company such
representations or other documentation is not necessary to comply with such
the Securities Act.
12.2 The Company shall not be obligated to deliver any Warrant Shares
unless and until the Company has compiled with any requirements of the
securities exchange or other self-regulatory body on which the Company's
shares of Common Stock may be listed or until there has been qualification
under or compliance with such federal or state laws, rules or regulations.
The Company agrees and undertakes to comply with such laws, rules or
regulations promptly upon receipt by the Company of the Election to
Purchase, and in any event by such date as compliance is required.
Notwithstanding anything contained herein to the contrary, where the
actions described herein may be taken after the issuance of the Warrant
Shares, the Company will promptly issue the Warrant Shares and thereafter
take such appropriate action.
13. Restrictions on Transfer.
13.1 Neither this Warrant nor any Warrant Shares may be transferred
except as follows: (a) to a person who, in the opinion of counsel
satisfactory to the Company, is a person to whom this Warrant or the
Warrant Shares may legally be transferred without registration and without
the delivery of a current prospectus under the Securities Act with respect
thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Section 13 with respect to any Transfer
of such securities; or (b) to any person upon delivery of a prospectus then
meeting the requirements of the Securities Act relating to such securities
and the offering thereof for such Transfer.
13.2 Unless, prior to the exercise of this Warrant, the Warrant Shares
have been registered with the Commission pursuant to the Securities Act,
upon exercise of this Warrant and the issuance of the Warrant Shares, all
certificates representing such Warrant Shares shall bear on the face or
reverse thereof substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY
IS OBTAINED STATING THAT SUCH SALE, OFFER FOR SALE, PLEDGE,
TRANSFER, ASSIGNMENT OR OTHER DISPOSITION IS IN
CORP\02437\0068\LCFAS12.19C
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COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION.
14. Lost, Stolen or Destroyed Warrants. In the event that the Holder
notifies the Company that this Warrant has been lost, stolen or destroyed and
either (a) provides a letter, in form satisfactory to the Company, to the effect
that it will indemnify the Company from any loss incurred by it in connection
therewith, and/or (b) provides an indemnity bond in such amount as is reasonably
required by the Company, the Company shall accept such letter and/or indemnity
bond in lieu of the surrender of this Warrant as required by Section 2 hereof.
15. Exchange or Assignment of Warrant. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company, for other Warrants of different denominations, entitling
the Holder to purchase in the aggregate the same number of shares purchasable
hereunder. Subject to the provisions of this Warrant and receipt by the Company
of any required representations and agreements, upon surrender of this Warrant
to the Company with the Assignment annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without additional
charge, execute and deliver a new Warrant in the name of the assignee named in
such instrument of assignment and this Warrant shall promptly be canceled.
16. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or five days after
mailing by registered or certified mail, postage prepaid, to the Holder at 201
South Biscayne Boulevard, Suite 2950, Miami, Florida 33131. Notices or other
communications to the Company shall be deemed to have been sufficiently given if
delivered by hand or five days after mailing if mailed by registered or
certified mail postage prepaid, to the Company at 26 Harbor Park Drive, Port
Washington, New 11050. A party may change the address to which notice shall be
given by notice pursuant to this Section 16.
17. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Warrant, the successful
party will be awarded reasonable attorneys' fees at all trial and appellate
levels, expenses and costs.
18. Entire Agreement and Modification. The Company and the Holder of this
Warrant hereby represent and warrant that this Warrant is intended to and does
contain and embody all of the understandings and agreements, both written and
oral, of the parties hereto with respect to the subject matter of this Warrant,
and that there exists no oral agreement or understanding, express or implied,
whereby the absolute, final and unconditional character and nature of this
Warrant shall be in any way invalidated, impaired or affected. A modification or
waiver of any of the terms, conditions or provisions of this Warrant shall be
effective only if made in writing and executed with the same formality of this
Warrant.
19. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without application of the
principles of conflicts of laws.
CORP\02437\0068\LCFAS12.19C
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<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as of the 23rd
day of December, 1996.
SANDATA, INC., a Delaware corporation
By:
Bert E. Brodsky, President
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<PAGE>
ELECTION TO PURCHASE
TO: Sandata, Inc.
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Common Stock Purchase Warrant to purchase ____________________ shares of
Common Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
(Please insert social security or other identifying number)
(Please print name and address)
Dated: ____________________, 19__
NOTICE: The signature on this Election to Purchase must correspond with the
name as written upon the face of the within Warrant, in every particular,
without alteration, enlargement, or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, having an office or
correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm
having membership on a registered national securities exchange and an office in
New York, New York, or Boca Raton or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
Name of Bank or Firm:
Dated:
CORP\02437\0068\LCFAS12.19C
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, __________________________________________, the
undersigned Holder hereby sells, assigns, and transfers all of the rights of the
undersigned under the within Warrant with respect to the number of Shares
covered thereby set forth below, unto the Assignee identified below, and does
hereby irrevocably constitute and appoint
________________________________________ to effect such transfer of rights on
the books of the Company, with full power of substitution:
Name of Assignee Address of Assignee No. of Shares Exercise Price
Dated:
(Signature of Holder)
(Print or type name)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant, in every particular, without
alteration, enlargement, or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, having an office or correspondent in New York,
New York, Boca Raton or Miami, Florida, or by a firm having membership on a
registered national securities exchange and an office in New York, New York, or
Boca Raton or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
Name of Bank or Firm:
Dated:
CORP\02437\0068\LCFAS12.19C
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<PAGE>
VOID AFTER 5:00 P.M., MIAMI, FLORIDA TIME, ON DECEMBER 22, 2001.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
OTHERWISE DISPOSED OF, IN WHOLE OR IN PART (COLLECTIVELY, A "TRANSFER"), UNLESS
ANY SUCH TRANSFER IS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SAID
ACT IS AVAILABLE, AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH
EFFECT, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY. THIS LEGEND
SHALL BE ENDORSED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT.
SANDATA, INC.
REDEEMABLE COMMON STOCK PURCHASE WARRANT
Warrant Certificate No. 1~
1. Number and Price of Shares of Common Stock Subject to Common Stock
Purchase Warrant. Subject to the terms and conditions hereinafter set forth, 2~
(the "Holder"), is entitled to purchase from Sandata, Inc., a Delaware
corporation (the "Company"), at any time and from time to time during the period
from December 23, 1996 (the "Commencement Date") until 5:00 p.m., Miami, Florida
Time, on December 22, 2001 (the "Expiration Date"), at which time this
Redeemable Common Stock Purchase Warrant (the "Warrant") shall expire and become
void, an aggregate of 3~ shares (the "Warrant Shares") of the Company's common
stock, $.001 par value per share (the "Common Stock"), which number of Warrant
Shares is subject to adjustment from time to time, as described below, upon
payment therefor of the exercise price of $7.00 per Warrant Share, in lawful
funds of the United States of America, such amounts (the "Basic Exercise Price")
being subject to adjustment in the circumstances set forth hereinbelow. This
applicable Basic Exercise Price, until such adjustment is made and thereafter as
adjusted from time to time, is called the "Exercise Price."
2. Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time from and after the Commencement Date and on or before the
Expiration Date, provided however, if such Expiration Date is a day on which
Federal or State chartered banking institutions located in the State of Florida
are authorized by law to close, then the Expiration Date shall be deemed to be
the next succeeding day which shall not be such a day, by presentation and
surrender to the Company at its principal office, or at the office of any
transfer agent for the Warrants ("Transfer Agent"), designated by the Company,
of this Warrant
CORP\02437\0068\LCFJLS12.21A
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<PAGE>
accompanied by the form of election to purchase on the last page hereof signed
by the Holder and upon payment of the Exercise Price for the Warrant Shares
purchased thereby, by cashier's check or by wire transfer of immediately
available funds. If this Warrant is exercised in part only, the Company or
Transfer Agent shall, promptly after presentation of this Warrant upon such
exercise, execute and deliver a new Warrant, dated the date hereof, evidencing
the rights of the Holder to purchase the balance of the Warrant Shares
purchasable hereunder upon the same terms and conditions herein set forth. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Warrant Shares or other securities issuable upon
such exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable, the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full Warrant Shares
issuable upon such exercise, together with cash in lieu of any fraction of a
share as provided below.
3. Call Option.
At any time prior to the expiration of this Warrant, except as
provided below, the Company shall have the right and option, upon notice mailed
to the Holder, to call, redeem and acquire all of the Warrants remaining
outstanding and unexercised at the date fixed for such redemption in such
notice, which redemption date shall be at least 30 days after the date of such
notice, for an amount equal to $.01 per underlying share (the "Redemption
Price"); provided, that the Company may exercise such right and option only if,
for 20 consecutive trading days ending within 10 calendar days prior to the
redemption notice date, the closing price per share of the Common Stock equals
or exceeds $9.00, such amount being subject to adjustment under the same
circumstances and in the same proportion as the Exercise Price. The Holder shall
have the right, during the 20-day period immediately following the date of such
notice, to exercise the Warrants. If any Warrants are exercised during such
20-day period, this call option shall be deemed not to have been exercised by
the Company as to the Warrant Shares so exercised by the Holder. Said notice of
redemption shall require the Holder to surrender to the Company, on or before
the redemption date, at the offices of the Company, or its warrant agent, if
any, the certificate or certificates representing the Warrants to be redeemed.
Notwithstanding the fact that any Warrants called for redemption have not been
surrendered for redemption and cancellation on the redemption date, after the
redemption date, such Warrants shall be deemed to be expired and all rights of
the Holder with respect to such unsurrendered Warrants shall cease and
terminate, other than the right to receive the Redemption Price. The rights of
the Company pursuant to this Section 3 are conditioned upon the registration by
the Company of the resale of the Warrant Shares under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a registration statement
which is kept current by the Company for at least 120 days after the notice of
redemption.
CORP\02437\0068\LCFJLS12.21A
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4. Registration Rights.
4.1 The Company will, as soon as reasonably possible following
issuance of these Warrants, file a registration statement with the Securities
and Exchange Commission (the "Commission") for the purpose of registering the
re-sale by the Holders thereof of the Common Stock issuable upon exercise of the
Warrant.
4.2 In addition, if, at any time prior to the Expiration Date,
the Holders of a majority of the Warrants Shares shall give notice to the
Company requesting that the Company file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") relating to the offer and re-sale of the Warrant Shares by the
Holder, the Company shall promptly give written notice of such proposed
Registration Statement to the Holders of such Warrants or Warrant Shares, and to
any subsequent permissible transferee of any of the Warrants or Warrant Shares
(at the address of such persons appearing on the books of the Company or its
transfer agent) which notice shall offer to include the Warrant Shares in the
requested Registration Statement. The Company shall, as expeditiously as
possible, file and use its reasonable efforts to cause to become effective under
the Securities Act, the Registration Statement covering the sale of such of the
Warrant Shares by such Holders as the Company has been requested to register for
disposition by the Holders thereof, to the extent required to permit the public
sale or other public disposition thereof by the Holders. The Company shall cause
the Registration Statement to remain effective for a period of at least 120 days
from the effective date of the Registration Statement or such earlier date as
all of the Warrant Shares have been sold or the Warrants expire (the "Effective
Period"). The Holders shall have the right to demand registration of the Warrant
Shares as described above on one occasion only. Notwithstanding anything
contained herein to the contrary, the Holders may not demand registration of the
Warrant Shares if the Warrant Shares may otherwise be sold without registration
under the Securities Act or applicable state securities laws and regulations and
without limitation as to volume pursuant to Rule 144 of the Securities Act.
Notwithstanding anything contained herein, the Company shall not be obligated to
file or use its reasonable efforts to cause to become effective a registration
statement under this section during any period commencing with the date the
Company files a registration statement relating to the sale or exchange by it of
its securities in either an underwritten offering or in an offering involving a
merger, acquisition, combination or reorganization and ending with the date such
registration statement becomes effective.
4.3 In addition, if at any time prior to the Expiration Date,
the Company shall prepare and file one or more registration statements under the
Securities Act (other than a registration statement on Form S-4 (or with regard
to any transaction contemplated by Rule 145 promulgated under the Securities
Act) or Form S-8 or any successor form of limited purpose and other than a
post-effective amendment to any such registration statement), to the extent
permitted by law, including, without limitation, the rules and regulations of
the Commission, with respect to a public offering of equity or debt securities
of the Company, or of any such securities of the Company held by its security
holders, the Company will include in any such registration statement such
information as is required, and such number of Warrant Shares held by the
CORP\02437\0068\LCFJLS12.21A
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<PAGE>
Holders thereof or their respective designees or transferees as may be requested
by them, to permit a public offering of the Warrant Shares so requested;
provided, however, that if, in the written opinion of the Company's managing
underwriter, if any, for such offering, the inclusion of the Warrant Shares
requested to be registered, when added to the securities being registered by the
Company or the selling security holder(s), would exceed the maximum amount of
the Company's securities that can be marketed without otherwise materially and
adversely affecting the entire offering, then the Company may exclude from such
offering all or that portion of the Warrant Shares requested to be so
registered, so that the total number of securities to be registered is within
the maximum number of shares that, in the opinion of the managing underwriter,
may be marketed without otherwise materially and adversely affecting the entire
offering, provided that at least a pro rata amount of the securities that
otherwise were proposed to be registered for other stockholders is also
excluded. In the event of such a proposed registration (other than the
registration statement contemplated by Section 4.1 above), the Company shall
furnish the then Holders of Warrant Shares with not less than 20 days' written
notice prior to the proposed date of filing of such registration statement.
Further notice shall be given by the Company to Holders of Warrant Shares, with
respect to subsequent registration statements or post-effective amendments filed
by the Company, until such time as all of the Warrant Shares have been
registered or may be sold without registration under the Securities Act or
applicable state securities laws and regulations pursuant to Rule 144 of the
Securities Act. The holders of Warrant Shares shall exercise the rights provided
for in this Section 4.3 by giving written notice to the Company, within ten days
of receipt of the Company's notice of its intention to file a registration
statement. Notwithstanding anything contained herein to the contrary, the
Company may delay the effectiveness of such registration statement or withdraw
such registration statement; provided, however, the Company must provide the
Holders of Warrant Shares with notice of such delay or withdrawal.
4.4 Notwithstanding anything contained herein to the contrary,
the Holders shall not be permitted to exercise the registration rights provided
for herein with respect to all or such portion of the Warrant Shares as may be
sold without registration under the Securities Act or applicable state
securities laws and regulations under Rule 144 of the Securities Act.
4.5 The Company shall bear all expenses, incurred in the
preparation and filing of such registration statements or post-effective
amendment (and related state registrations, to the extent permitted by
applicable law) and the furnishing of copies of the preliminary and final
prospectus thereof to the Holder, other than expenses of the Holder's counsel,
and other than sales commissions or transfer taxes incurred by the then holders
with respect to the sale of such securities.
4.6 Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to Section 4.2
or Section 4.3, a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed or go effective and it is therefore
essential to defer the filing or effectiveness of such registration statement,
then the Company shall have
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the right to defer taking action with respect to such filing or effectiveness
for a period of not more than 90 days after receipt of the request of the
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve-month period.
4.7 Notwithstanding the provisions of Sections 4.2 and 4.3, if
at any time during which the Company is obligated to maintain the effectiveness
of a registration statement pursuant to such Section, counsel to the Company
(which counsel shall be experienced in securities matters) has determined in
good faith that the filing of such registration statement or the compliance by
the Company with its disclosure obligations thereunder would require the
disclosure of material information which the Company has a bona fide business
purpose for preserving as confidential, then the Company may delay the filing or
the effectiveness of such registration statement (if not then filed or
effective, as appropriate) and shall not be required to maintain the
effectiveness thereof (if previously declared effective) for a period expiring
upon the earlier to occur of (i) the date on which such information is disclosed
to the public or ceases to be material or the Company is so able to comply with
its disclosure obligations, or (ii) 30 days after counsel to the Company makes
such good faith determination. There shall not be more than one such delay
period with respect to any registration statement after it has been declared
effective pursuant to Sections 4.2 and 4.3. Notice of any such delay period and
of the termination thereof will be promptly delivered by the Company to each
Holder and shall be maintained in confidence by each such Holder. The Holders
shall not sell any Warrant Shares during such period as any such registration
statement is not current, as advised by the Company. Each Holder shall furnish
to the Company such information regarding such Holder and a written description
of the contribution proposed by such Holder as the Company may reasonably
request.
4.8 Each Holder whose Warrant Shares are included in a
registration statement pursuant to an underwritten public offering shall, if
requested by the managing underwriter of the public offering, enter into an
agreement with the underwriter pursuant to which the Holder will agree not to
sell, Transfer or otherwise dispose of the Warrant Shares for such period after
consummation of the public offering as may reasonably be requested by the
underwriter, up to a maximum of 90 days, without the consent of the underwriter.
5. Reservation of Common Stock. The Company covenants that, during the
period this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares of Common Stock to
provide for the issuance of the Warrant Shares upon the exercise of this
Warrant. This Company agrees that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for Warrant Shares
upon the exercise of this Warrant.
6. No Stockholder Rights. This Warrant, as such, shall not entitle the
Holder to any rights of a stockholder of the Company, until the Holder has
exercised this Warrant in accordance with Section 2 hereof.
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7. Adjustment of Exercise Price and Number of Warrant Shares.
7.1 The number and kind of securities issuable upon the
exercise of this Warrant shall be subject to adjustment from time to time, and
the Company agrees to provide notice upon the happening of certain events, as
follows:
a. If the Company is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or smaller
number of shares of Common Stock, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the record
date for such recapitalization, in the same proportion as the increase or
decrease in the outstanding shares of Common Stock, and the Exercise Price shall
be adjusted so that the aggregate amount payable for the purchase of all of the
Warrant Shares issuable hereunder immediately after the record date for such
recapitalization shall equal the aggregate amount so payable immediately before
such record date.
b. If the Company declares a dividend on its Common Stock payable
in shares of its Common Stock or securities convertible into shares of its
Common Stock, the number of shares of Common Stock for which this Warrant may be
exercised shall be increased as of the record date for determining which holders
of Common Stock shall be entitled to receive such dividend, in proportion to the
increase in the number of outstanding shares of Common Stock (and shares of
Common Stock issuable upon conversion of all such securities convertible into
shares of Common Stock) as a result of such dividend, and the Exercise Price
shall be adjusted so that the aggregate amount payable for the purchase of all
the Warrant Shares issuable hereunder immediately after the record date for such
dividend shall equal the aggregate amount so payable immediately before such
record date.
c. If the Company effects a general distribution to holders of its
Common Stock, other than as part of the Company's dissolution or liquidation or
the winding up of its affairs, of any shares of its capital stock, any evidence
of indebtedness or any of its assets (other than cash, shares of Common Stock or
securities convertible into shares of Common Stock), the Company shall give
written notice to the Holder of any such general distribution at least 15 days
prior to the proposed record date in order to permit the Holder to exercise this
Warrant on or before the record date. There shall be no adjustment in the number
of shares of Common Stock for which this Warrant may be exercised, or in the
Exercise Price, by virtue of any such general distribution, except as otherwise
provided herein.
d. If the Company offers rights or warrants (other than the Warrant)
to all holders of its Common Stock which entitle them to subscribe to or
purchase additional shares of Common Stock or securities convertible into shares
of Common Stock, the Company shall give written notice of any such proposed
offering to the Holder at least 15 days prior to the proposed record date in
order to permit the Holder to exercise this Warrant on or before such record
date.
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e. In the event an adjustment in the Exercise Price or the number of
Warrant Shares issuable hereunder is made under subsection a. or b. above, and
such an event does not occur, then any adjustments in the Exercise Price or
number of Warrant Shares issuable upon exercise of this Warrant that were made
in accordance with such subsection a. or b. shall be re-adjusted to the Exercise
Price and number of Warrant Shares as were in effect immediately prior to the
record date for such an event.
f. If and whenever the Company issues or sells, or in accordance with
Section 7.1 is deemed to have issued or sold, any shares of its Common Stock for
a consideration per share less than the Exercise Price in effect immediately
prior to the time of such issuance or sale (except for the issuance of the
Common Stock Purchase Warrants to B C Capital Corp. or its designees
simultaneously herewith or the issuance or deemed issuance of securities in a
transaction described in paragraph g. of this Section 7.1), then immediately
upon such issuance or sale the Exercise Price will be reduced to an Exercise
Price determined by multiplying the Exercise Price in effect immediately prior
to the issuance or sale by a fraction, the numerator of which shall be the sum
of (i) the number of shares of Common Stock outstanding prior to the issuance or
sale plus (ii) the number of Warrant Shares issuable hereunder that the maximum
aggregate amount of consideration receivable by the Company upon such issuance
or sale would purchase at the Exercise Price in effect immediately prior to the
issuance or sale, and the denominator of which shall be the number of shares of
Common Stock deemed outstanding, as hereinafter determined, immediately after
such issuance or sale.
g. Notwithstanding anything contained herein to the contrary, the
following securities or transactions shall be excluded from the operation of
paragraph f. of this Section 7.1:
(i) The existence and any exercise, conversion and/or exchange
of any option, convertible promissory note and/or other convertible or
exchangeable security, warrant, or other right to purchase Common Stock, that is
outstanding on the date hereof (whether or not currently exercisable,
convertible or exchangeable); and
(ii) Any grant or exercise of options for Common Stock granted
under the Company's stock option plans, in existence as of the date hereof,
provided said grant or exercise is not effectuated as a result of any amendment
to such plans subsequent to the date hereof, with an exercise price equal to at
least the fair market value of the shares of Common Stock on the date of grant.
Notwithstanding anything contained herein to the contrary, if the Company amends
such plans with the consent of Barber & Bronson Incorporated (which consent
shall not be unreasonably withheld or delayed), the securities issued pursuant
to such plan, as amended, shall be excluded from the operation of paragraph f.
of this Section 7.1. As used herein, the term "fair market value" shall mean the
closing bid price, or, if not available, the highest bid price, of the shares of
Common Stock as quoted on a national securities exchange, or in the
over-the-counter market as reported by Nasdaq or, if not available, by the
National Quotation Bureau, Incorporated, as the case may be (or, if there is no
bid price on a particular day, then the closing bid price or, if not available,
the highest bid price on the nearest trading
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date before that day and for which such prices are available), and if the shares
of Common Stock are not listed on such an exchange or traded in such a market on
such particular day, then the fair market value per share shall be determined by
mutual agreement of the Board of Directors and the Holders by taking into
consideration all relevant factors, including, but not limited to, the Company's
net worth, prospective earning power and dividend paying capacity.
h. If the Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or options being
herein called "Rights" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities"), and the price per share for which
Common Stock is issuable upon the exercise of such Rights or upon conversion or
exchange of such Convertible Securities is less than the Exercise Price in
effect immediately prior to the time of the granting of such Rights, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Rights or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Rights will be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of this Section, the "price per share for which Common
Stock is issuable upon exercise of such Rights or upon conversion or exchange of
such Convertible Securities" will be determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such Rights, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Rights, plus, in
the case of Rights that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance or sale of such Convertible Securities and the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock then
issuable upon the exercise of such Rights or upon the conversion or exchange of
all Convertible Securities issuable upon the exercise of such Rights. Except as
otherwise provided in Subsections j. and k. below, no adjustment of the Exercise
Price will be made when Convertible Securities are actually issued upon the
exercise of such Rights or when Common Stock is actually issued upon the
exercise of such Rights or the conversion or exchange of such Convertible
Securities.
i. If the Company in any manner issues or sells any Convertible
Securities, and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Exercise Price in effect immediately
prior to the time of such issuance or sale, then the maximum number of shares of
Common Stock then issuable upon conversion or exchange of all such Convertible
Securities will be deemed to be outstanding and to have been issued and sold by
the Company for such price per share, as determined below. For the purposes of
this Section, the "price per share for which Common Stock is issuable upon such
conversion or exchange" will be determined by dividing (i) the total amount
received or receivable by the Company as consideration for the issuance or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock then
issuable upon the conversion or exchange of all such Convertible Securities.
Except as otherwise provided in Subsections j. and k. below, no adjustment of
the
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Exercise Price will be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issuance
or sale of such Convertible Securities is made upon exercise of any Convertible
Securities for which adjustments of the Exercise Price had been or are to be
made pursuant to other provisions of this Section 7, no further adjustment of
the Exercise Price will be made by reason of such issuance or sale.
j. If the purchase price provided for in any Rights, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock changes at any time (other
than under or by reason of provisions that are designed to protect against
dilution of the type set forth in this Section 7 and are no more favorable to
the holders of such Rights or Convertible Securities than this Section 7 would
have been if this Section 7 were included in such Rights or Convertible
Securities), then the Exercise Price in effect at the time of such change will
be re-adjusted to the Exercise Price that would have been in effect at such time
had such Rights or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration, or changed conversion rate, as
the case may be, at the time initially granted, issued, or sold; and such
adjustment of the Exercise Price will be made whether the result thereof is to
increase or reduce the Exercise Price then in effect under this Warrant,
provided that no such adjustment shall increase the Exercise Price above the
initial Exercise Price hereof and that such adjustments shall be made by the
Board of Directors of the Company, who shall promptly provide notice of the new
Exercise Price to the Holder.
k. Upon the expiration of any Right, or the termination of any right
to convert or exchange any Convertible Security, without the exercise of such
Right, or the conversion of such Convertible Security, the Exercise Price then
in effect hereunder will be adjusted to the Exercise Price that would have been
in effect at the time of such expiration or termination had such Right or
Convertible Security never been issued, but such subsequent adjustment shall not
affect the number of shares of Common Stock issued upon any exercise of this
Warrant prior to the date such adjustment is made.
l. If any shares of Common Stock, Rights, or Convertible Securities
are issued or sold or deemed to have been issued or sold for consideration that
includes cash, then the amount of cash consideration actually received by the
Company will be deemed to be the cash portion thereof. If any shares of Common
Stock, Rights, or Convertible Securities are issued or sold or deemed to have
been issued or sold for a consideration part or all of which is other than cash,
then the amount of the consideration other than cash received by the Company
will be the fair value of such consideration as determined by the Board of
Directors of the Company, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the market value thereof as of the date of receipt. If any shares of
Common Stock, Rights, or Convertible Securities are issued in connection with
any merger or consolidation in which the Company is the surviving corporation,
then the amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Rights, or Convertible Securities, as the
case may be.
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m. If any Right is issued in connection with the issuance or sale of
other securities of the Company, together comprising one integrated transaction
in which no specific consideration is allocated to such Right by the parties
thereto, the Right will be deemed to have been issued without consideration.
n. The number of shares of Common Stock deemed outstanding at any
given time shall include the number of shares of Common Stock outstanding, as
adjusted as provided herein, but shall not include shares owned or held by or
for the account of the Company, and the disposition of any shares so owned or
held will be considered an issuance or sale of Common Stock hereunder.
o. No adjustment of the Exercise Price shall be made if the amount
of such adjustment would be less than one cent per Warrant Share, but in such
case any adjustment that otherwise would be required to be made shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment that, together with any adjustment or adjustments so carried forward,
shall amount to not less than one cent per Warrant Share.
7.2 In the event of any reorganization or reclassification of
the outstanding shares of Common Stock (other than a change in par value, or
from no par value to par value, or from par value to no par value, or as a
result of a subdivision or combination) or in the event of any consolidation or
merger of the Company with another entity at any time prior to the expiration of
this Warrant, the Holder shall have the right to exercise this Warrant. Upon
such exercise, the Holder shall have the right to receive the same kind and
number of shares of capital stock and other securities, cash or other property
as would have been distributed to the Holder upon such reorganization,
reclassification, consolidation or merger. The Holder shall pay upon such
exercise the Exercise Price that otherwise would have been payable pursuant to
the terms of this Warrant. If any such reorganization, reclassification,
consolidation or merger results in a cash distribution in excess of the then
applicable Exercise Price, the Holder may, at the Holder's option, exercise this
Warrant without making payment of the Exercise Price, and in such case the
Company shall, upon distribution to the Holder, consider the Exercise Price to
have been paid in full, and in making settlement to the Holder, shall deduct an
amount equal to the Exercise Price from the amount payable to the Holder. In the
event of any such reorganization, merger or consolidation, the corporation
formed by such consolidation or merger or the corporation which shall have
acquired the assets of the Company shall execute and deliver a supplement hereto
to the foregoing effect, which supplement shall also provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided in the Warrant.
7.3 If the Company shall, at any time before the expiration of
this Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have
the right to exercise this Warrant. Upon such exercise the Holder shall have the
right to receive, in lieu of the shares of Common Stock of the Company that the
Holder otherwise would have been entitled to receive, the same kind and amount
of assets as would have been issued, distributed or paid to the Holder upon any
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such dissolution, liquidation or winding up with respect to such stock
receivable upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such dissolution, liquidation
or winding up results in any cash distribution in excess of the Exercise Price
provided by this Warrant, the Holder may, at the Holder's option, exercise this
Warrant without making payment of the Exercise Price and, in such case, the
Company shall, upon distribution to the Holder, consider the Exercise Price to
have been paid in full and, in making settlement to the Holder, shall deduct an
amount equal to the Exercise Price from the amount payable to the Holder.
7.4 Upon each adjustment of the Exercise Price pursuant to
Section 7 hereof, the Holder shall thereafter (until another such adjustment) be
entitled to purchase, at the adjusted Exercise Price in effect on the date this
Warrant is exercised, the number of Warrant Shares, calculated to the nearest
number of Warrant Shares, determined by (a) multiplying the number of Warrant
Shares purchasable hereunder immediately prior to the adjustment of the Exercise
Price by the Exercise Price in effect immediately prior to such adjustment, and
(b) dividing the product so obtained by the adjusted Exercise Price in effect on
the date of such exercise. The provisions of Section 11 shall apply, however, so
that no fractional share of Common Stock or fractional Warrant shall be issued
upon exercise of this Warrant.
7.5 The Company may retain a firm of independent public
accountants of recognized standing (who may be any such firm regularly employed
by the Company) to make any computation required under this Section 7, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 7.
8. Voting Agreement. Upon exercise of the Warrants, the Holder shall
agree to vote the Warrant Shares in favor of management's nominees to the Board
of Directors for a period of five years or so long as Holder owns the Warrant
Shares, whichever is lesser. The delivery of the Warrant Shares to the Holder
shall be contingent upon the execution and delivery to the Company of a document
providing for the foregoing in a form reasonably satisfactory to the Company.
9. Notice to Holder. So long as this Warrant shall be outstanding (a)
if the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of capital stock or securities convertible into capital stock or any
similar rights or (c) if there shall be any capital reorganization of the
Company in which the Company is not the surviving entity, recapitalization of
the capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or other transfer of all or substantially
all of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company, then in such event, the
Company shall cause to be mailed by registered or certified mail to the Holder,
at least 30 days prior to the relevant date described below (or such shorter
period as is reasonably possible if 30 days is not reasonably possible), a
notice containing a description of the proposed action and stating the date or
expected date on which a record of the Company's stockholders
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is to be taken for the purpose of any such dividend, distribution of rights, or
such reorganization, recapitalization, consolidation, merger, sale, lease or
transfer, dissolution, liquidation or winding up is to take place and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event.
10. Certificate of Adjustment. Whenever the Exercise Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the Holder of this Warrant a
certificate of an officer of the Company setting forth the nature of such
adjustment and a brief statement of the facts requiring such adjustment.
11. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
12. Restrictions on Exercise.
12.1 Unless, prior to the exercise of this Warrant, the
Warrant Shares have been registered with the Commission pursuant to the
Securities Act, the notice of exercise shall be accompanied by a representation
of the Holder to the Company that such shares are being acquired for investment
and not with a view to the distribution thereof, and such other representations
and documentation as may reasonably be required by the Company, unless in the
opinion of counsel to the Company such representations or other documentation is
not necessary to comply with such the Securities Act.
12.2 The Company shall not be obligated to deliver any Warrant
Shares unless and until the Company has compiled with any requirements of the
securities exchange or other self-regulatory body on which the Company's shares
of Common Stock may be listed or until there has been qualification under or
compliance with such federal or state laws, rules or regulations. The Company
agrees and undertakes to comply with such laws, rules or regulations promptly
upon receipt by the Company of the Election to Purchase, and in any event by
such date as compliance is required. Notwithstanding anything contained herein
to the contrary, where the actions described herein may be taken after the
issuance of the Warrant Shares, the Company will promptly issue the Warrant
Shares and thereafter take such appropriate action.
13. Restrictions on Transfer.
13.1 Neither this Warrant nor any Warrant Shares may be
transferred except as follows: (a) to a person who, in the opinion of counsel
satisfactory to the Company, is a person to whom this Warrant or the Warrant
Shares may legally be transferred without registration and without the delivery
of a current prospectus under the Securities Act with respect
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thereto and then only against receipt of an agreement of such person to comply
with the provisions of this Section 13 with respect to any Transfer of such
securities; or (b) to any person upon delivery of a prospectus then meeting the
requirements of the Securities Act relating to such securities and the offering
thereof for such Transfer.
13.2 Unless, prior to the exercise of this Warrant, the
Warrant Shares have been registered with the Commission pursuant to the
Securities Act, upon exercise of this Warrant and the issuance of the Warrant
Shares, all certificates representing such Warrant Shares shall bear on the face
or reverse thereof substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY
IS OBTAINED STATING THAT SUCH SALE, OFFER FOR SALE, PLEDGE,
TRANSFER, ASSIGNMENT OR OTHER DISPOSITION IS IN COMPLIANCE
WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
14. Lost, Stolen or Destroyed Warrants. In the event that the Holder
notifies the Company that this Warrant has been lost, stolen or destroyed and
either (a) provides a letter, in form satisfactory to the Company, to the effect
that it will indemnify the Company from any loss incurred by it in connection
therewith, and/or (b) provides an indemnity bond in such amount as is reasonably
required by the Company, the Company shall accept such letter and/or indemnity
bond in lieu of the surrender of this Warrant as required by Section 2 hereof.
15. Exchange or Assignment of Warrant. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company, for other Warrants of different denominations, entitling
the Holder to purchase in the aggregate the same number of shares purchasable
hereunder. Subject to the provisions of this Warrant and receipt by the Company
of any required representations and agreements, upon surrender of this Warrant
to the Company with the Assignment annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without additional
charge, execute and deliver a new Warrant in the name of the assignee named in
such instrument of assignment and this Warrant shall promptly be canceled.
16. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or five days after
mailing by registered or certified mail, postage prepaid, to the Holder at 4~.
Notices or other communications to the Company shall be deemed to have been
sufficiently given if delivered by hand or five days after
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mailing if mailed by registered or certified mail postage prepaid, to the
Company at 26 Harbor Park Drive, Port Washington, New York 11050. A party may
change the address to which notice shall be given by notice pursuant to this
Section 16.
17. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Warrant, the successful
party will be awarded reasonable attorneys' fees at all trial and appellate
levels, expenses and costs.
18. Entire Agreement and Modification. The Company and the Holder of
this Warrant hereby represent and warrant that this Warrant is intended to and
does contain and embody all of the understandings and agreements, both written
and oral, of the parties hereto with respect to the subject matter of this
Warrant, and that there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of
this Warrant shall be in any way invalidated, impaired or affected. A
modification or waiver of any of the terms, conditions or provisions of this
Warrant shall be effective only if made in writing and executed with the same
formality of this Warrant.
19. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without application of the
principles of conflicts of laws.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
23rd day of December, 1996.
SANDATA, INC., a Delaware corporation
By:
Bert E. Brodsky, President
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ELECTION TO PURCHASE
TO: Sandata, Inc.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Common Stock Purchase Warrant to purchase
____________________ shares of Common Stock issuable upon the exercise of such
Warrants and requests that certificates for such shares be issued in the name
of:
(Please insert social security or other identifying number)
(Please print name and address)
Dated: ____________________, 19__
NOTICE: The signature on this Election to Purchase must correspond with
the name as written upon the face of the within Warrant, in every particular,
without alteration, enlargement, or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, having an office or
correspondent in New York, New York, Boca Raton or Miami, Florida, or by a firm
having membership on a registered national securities exchange and an office in
New York, New York, or Boca Raton or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
Name of Bank or Firm:
Dated:
CORP\02437\0068\LCFJLS12.21A
970408
-15-
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ASSIGNMENT
FOR VALUE RECEIVED, __________________________________________, the
undersigned Holder hereby sells, assigns, and transfers all of the rights of the
undersigned under the within Warrant with respect to the number of Shares
covered thereby set forth below, unto the Assignee identified below, and does
hereby irrevocably constitute and appoint
________________________________________ to effect such transfer of rights on
the books of the Company, with full power of substitution:
Name of Assignee Address of Assignee No. of Shares Exercise Price
Dated:
(Signature of Holder)
(Print or type name)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant, in every particular, without
alteration, enlargement, or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, having an office or correspondent in New York,
New York, Boca Raton or Miami, Florida, or by a firm having membership on a
registered national securities exchange and an office in New York, New York, or
Boca Raton or Miami, Florida.
SIGNATURE GUARANTEE
Authorized Signature:
Name of Bank or Firm:
Dated:
CORP\02437\0068\LCFJLS12.21A
970408
-16-
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Sandata, Inc.
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Sandata, Inc. and to
the incorporation by reference therein of our report dated August 16, 1996 with
respect to the consolidated financial statements included in its Annual Report
on Form 10-KSB for the year ended May 31, 1996, as amended, filed with the
Securities and Exchange Commission.
Marcum & Kliegman LLP
/s/ Marcum & Kliegman LLP
Woodbury, New York
April 9, 1997
<PAGE>
