As filed with the Securities and Exchange Commission on April 25, 1997
Registration No. 333-22165
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
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.
<PAGE>
(Cover continued on following 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 $10.38 $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) Paid with the previous filings.
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 25, 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 Sale 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 (and may be
acquired upon exercise of the above mentioned warrants) 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 21, 1997, the closing bid price for the Company's
Common Stock, as reported on the NASDAQ SmallCap Market, was $9.00.
, 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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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.
(d) The Company's Quarterly Report on Form 10-QSB for the period ended
February 28, 1997 (the "February 10-QSB").
(e) 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.
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<PAGE>
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. 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. On April 10, 1997, the Company
received notice that MCI Telecommunications Corporation ("MCI") had commenced an
action against it in the United States District Court for the Eastern District
of New York alleging that the Company's Santrax time and attendance system
infringes on certain patent rights allegedly owned by plaintiff. The complaint
seeks compensatory and treble damages with interest and injunctive relief. The
Company believes that its product does not infringe on such patent rights and
intends to vigorously defend this action. However, in that the litigation has
only recently been commenced, no assurances as to the outcome can be given. See
"Risk Factors--Proprietary Rights; Pending Litigation".
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",
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<PAGE>
"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.
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 nine
month periods ended February 28, 1997 and 1996, approximately 51%, 61%, 76%
and 67%, 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.
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<PAGE>
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.
4. Proprietary Rights; Pending Litigation.
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. On April 10, 1997, the
Company received notice that MCI had commenced an action against it in the
United States District Court for the Eastern District of New York alleging
that the Company's Santrax time and attendance system infringes on certain
patent rights allegedly owned by plaintiff. The complaint seeks
compensatory and treble damages with interest and injunctive relief. The
Company believes that its product does not infringe on such patent rights
and intends to vigorously defend this action. However, in that the
litigation has only recently been commenced, no assurances as to the
outcome can be given.
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
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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 Securities 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 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 February 28, 1997, the Company owed the Bank $237,486.
On April 18, 1997, the Company's wholly owned subsidiary, Sandsport
Data Services, Inc. ("Sandsport") entered into a Revolving Credit Agreement
(the "Credit Agreement") with the Bank which allows Sandsport to borrow and
re-borrow amounts up to $3,000,000. Interest accrues on amounts outstanding
under the Credit Agreement 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 Credit Agreement
required Sandsport to pay a commitment fee in the amount of $30,000 and a
fee equal to 1/4% per annum payable on the unused average daily
balance of amounts under the Credit Agreement. In addition, there are other
fees and charges imposed
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based upon Sandsport's failure to maintain certain minimum balances.
The Credit Agreement will expire on March 1, 2000. The indebtedness under
the Credit Agreement is guaranteed by the Company and Sandsport's sister
subsidiaries (the "Group"). The collateral for the facility is 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 Group's guaranty to the Bank, relating to the bonds
discussed below, was modified to conform covenants described therein to
comply with those in the Credit Agreement.
All of 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.
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, under prior agreements with the the Bank, 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. 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 addition, the Company is indebted to companies affiliated with the
Company's Chairman in the amount, as of February 28, 1997, of $1,297,000.
Of this amount, as of February 28, 1997, 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 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
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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 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
9
<PAGE>
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
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
10
<PAGE>
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
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.
15. Prior Public Announcements.
In a January 20, 1997 Newsday article, Mr. Brodsky was referred to as
saying that the Company could have revenues "in excess of 12 million" for
the fiscal year ended May 31, 1997. As of the date of this Prospectus, the
Company anticipates that revenue for the fiscal year ended May 31, 1997
will likely be between $11 million and $12 million, and though not likely,
could exceed $12 million if the fourth quarter is particularly strong, as
to which no assurances can be made. The foregoing constitutes a
forward-looking statement as to which no
11
<PAGE>
assurances can be given with respect to the outcome thereof. Factors
making it problematic to determine the outcome of the foregoing statements
include, among other things, general market and economic factors affecting
the Company's sales in the fourth quarter of the fiscal year ended May 31,
1997.
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.
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's Chairman ("PW"), which has agreed to purchase the
Assets from GEC subject to the terms of the lease. PW acquired the right to
purchase such equipment on consideration of its posting a letter of credit in
connection with such lease.
SELLING STOCKHOLDERS
The following table sets forth, as of April 24, 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)
- --------------- --------- -------- --------------
Number Percent of 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%
12
<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
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-
Hans Koenig Revocable
Living Trust
(Hans & Hanni Koenig) - by
agreement 3/6/91 7,500 (15) 7,500 (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
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-
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-
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
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-
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-
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
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-
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-
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
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>
(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.
17
<PAGE>
(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.
(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.
18
<PAGE>
(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 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.
19
<PAGE>
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 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 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)
* Filed previously
**Supersedes prior filing
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
Securities 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 Securities
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 25th day
of April 1997.
SANDATA, INC.
By: /s/ Bert E. Brodsky
Bert E. Brodsky
President and
Chief Executive Officer
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.
II-4
<PAGE>
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) April 25, 1997
- ---------------------
Bert E. Brodsky
Executive Vice President
Secretary
/s/Hugh Freund and Director April 25, 1997
- ----------------------
Hugh Freund
Executive Vice President
/s/ Gary Stoller and Director April 25, 1997
- ---------------------
Gary Stoller
II-5
<PAGE>
April 25, 1997
Sandata, Inc.
26 Harbor Park Drive
Port Washington, New York 11050
Re: Sandata, Inc./Amendment No. 2 to Registration Statement on Form S-3
Gentlemen:
In our capacity as counsel to Sandata, Inc., a Delaware corporation (the
"Company"), we have been asked to render this opinion in connection with the
Company's Registration Statement on Form S-3 (the "Registration Statement")
being filed contemporaneously by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, covering 1,988,140
shares of Common Stock, $.001 par value, of the Company which are either (i)
issuable by the Company to certain persons and entities upon the exercise of
certain options and warrants (the "Issuable Shares") and are being registered
for resale by such persons and entities; or (ii) shares of issued and
outstanding Common Stock, $.001 par value, of the Company (the "Selling
Stockholder Shares") which are owned by certain persons and entities and are
being registered for resale by such persons and entities. The Issuable Shares
and the Selling Stockholder Shares are collectively referred to herein as the
"Shares".
In connection with our opinion, we have examined the Certificate of
Incorporation and By-Laws of the Company, each as amended, the Registration
Statement, and certain agreements entered into, and instruments and warrants
issued, by the Company in connection with the issuance of the Shares. We are
also familiar with proceedings of the Board of Directors of the Company, or
otherwise have relied upon representations made by officers of the Company,
relating to the authorization of the issuance of the Shares. We have also
examined such other instruments and documents as we deemed relevant under the
circumstances.
For purposes of the opinions expressed below, we have assumed (i) the
authenticity of all documents submitted to us as originals, (ii) the conformity
to the originals of all documents submitted as certified, photostatic or
facsimile copies and the authenticity of the originals, (iii) the legal capacity
of natural persons, (iv) the due authorization, execution and delivery of all
documents by all parties and the validity and binding effect thereof and (v) the
conformity to the proceedings of the Board of Directors of all minutes of such
proceedings and all representations, oral and
<PAGE>
Sandata, Inc.
April 25, 1997
Page 2
written, made by officers of the Company with respect thereto. We have also
assumed that the corporate records furnished to us by the Company include all
corporate proceedings taken by the Company to date.
Based upon and subject to the foregoing including the assumptions made, we
are of the opinion that (i) the Selling Stockholder Shares were duly and validly
authorized and issued and are fully paid and nonassessable shares of Common
Stock, $.001 par value, of the Company, and (ii) the Issuable Shares will be,
upon issuance in accordance with the terms of the respective options and
warrants, duly and validly authorized and issued, fully paid and nonassessable
shares of Common Stock, .$001 par value, of the Company.
We hereby consent to the use of our opinion as herein set forth as an
exhibit to the Registration Statement and to the use of our name under the
caption "Legal Matters" in the Prospectus forming a part of the Registration
Statement.
This opinion is as of the date hereof, and we do not undertake, and hereby
disclaim, any obligation to advise you of any changes in any of the matters set
forth herein.
We are rendering this opinion only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters.
This opinion is for your exclusive use only and is to be utilized and
relied upon only in connection with the matters expressly set forth herein.
Very truly yours,
/s/ CERTILMAN BALIN ADLER & HYMAN, LLP
CERTILMAN BALIN ADLER & HYMAN, LLP
<PAGE>
SanTrax 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. SanTrax 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.
8. SanTrax will generate reports on demand as follows:
<PAGE>
- 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 numbers 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. SanTrax 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, SanTrax 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
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
<PAGE>
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.
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.
<PAGE>
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, (a) any liability incurred (but only as
the result of a final, binding and non-appealable judgment of a court of
competent jurisdiction) directly based upon Processor's actual infringement of
U.S. Patent Number 5,255,183 and (b) 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 SanTrax
Sandsport Data Services
26 Harbor Park Drive
Port Washington, NY 11050
Attention: President
If to Vendor:
<PAGE>
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>
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
970408
-1-
<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.
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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
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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:
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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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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.
/s/ Marcum & Klieman LLP
Marcum & Kliegman LLP
Woodbury, New York
April 24, 1997
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