U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14392
COLOROCS INFORMATION TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Georgia 58-1482573
(State of incorporation) (I.R.S. Employer
Identification Number)
5600 Oakbrook Parkway, Suite 240, Norcross, Georgia 30093-1843
(Address of principal executive offices, including zip code)
(770) 447-3570
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock,
no par value
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will
be contained, to be best of the issuer's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. __.
The issuer's revenues for the fiscal year ended December 31, 1996 were
$2,863,448. Based on the closing bid price of the Common Stock on
April 8, 1997, the aggregate market value of the outstanding Common
Stock held by non-affiliates of the issuer on April 8, 1997 was
$10,381,494. There were 2,102,794 shares of Common Stock outstanding
as of April 8, 1997.
Check whether the issuer has filed all documents and reports required
to be filed by Section 12,13 or 15(d) of the Securities Exchange Act
of 1934 after the distribution of securities under a plan confirmed by
a court. Yes X No .
Transitional Small Business Disclosure Format Yes No X .
Portions of the issuer's Proxy Statement for the 1997 Annual Meeting
of Shareholders to be held on June 23, 1997 are incorporated by
reference in Part III hereof.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Colorocs Information Technologies, Inc. ("Company") was incorporated
under the name Colorocs Corporation on July 14, 1982 under the laws of
Georgia. On December 13, 1995, the Company's name was changed from
Colorocs Corporation to Colorocs Information Technologies, Inc. to
reflect changes in the Company's business focus. The Company was
originally founded to capitalize on the trend toward the use of color
in business communications, and the Company's principal operations
historically were primarily the design, manufacture and sale of full
color copiers and color printers. Beginning in 1994, the Company's
principal business focus shifted to product support of color copiers
and printers previously manufactured and sold by the Company and to
the licensing of the Company's patented color printing and copier
technology. In 1995 and 1996 the Company used the revenues generated
from patent licensing to develop two new technology based lines of
business; the delivery of the Internet through the television through
the Company's majority-owned subsidiary ViewCall America, Inc.
("VCA"), and the provision of network printing and file sharing
software products through the Company's wholly owned subsidiary COPS,
Inc. ("COPS").
The Company currently generates revenue from the licensing of its
patented printer and copier technology, the sale of supplies and spare
parts, maintenance of its installed base of copiers and printers, the
sale of the Company's remaining inventory of color copiers and
printers, the sale of network printing and file sharing software
products, and technology license fees for the Company's Internet-TV
access service ("On-TV[TM]") (see also - "Recent Developments").
Unless the context indicates otherwise, the "Company" refers to
Colorocs Information Technologies, Inc. and its subsidiaries VCA and
COPS.
In addition to historical information this report includes forward
looking statements and information based on management's beliefs,
plans, expectations and assumptions and on currently available
information. The words "may", "should", "expect", "anticipate",
"intend", "plan", "continue", "believe", "seek", "estimate" and
similar expressions used in this report are intended to identify
forward looking statements, although this report also contains other
forward looking statements. The forward looking statements in this
report are not guarantees of future performance and involve certain
risks, uncertainties and assumptions, many of which are beyond the
Company's control. Such factors include particularly, but are not
limited to, those set forth under "-Internet-TV On-Line Service -
Business Risks". As a result of these various risks, uncertainties
and assumptions underlying the forward looking statements in this
report, the Company's future actions, financial condition, results of
operations and shareholder values could differ materially from any
forward looking statement made by the Company.
RECENT DEVELOPMENTS
On March 7, 1997 VCA agreed in principle with NetChannel, Inc.
("NetChannel"), a privately held company based in South San Francisco,
California for the sale to NetChannel of all VCA Common Stock
outstanding on the date of closing in exchange for 4,252,273 shares of
NetChannel Preferred stock and the conversion of all options and
warrants to purchase VCA Common Stock outstanding on the date of
closing into options and warrants to purchase NetChannel Common Stock.
The NetChannel Preferred Stock is convertible by the holder into
shares of NetChannel Common Stock on a share-for-share basis. In
connection with the sale of VCA to NetChannel, virtually all of the
outstanding liabilities of VCA will be satisfied, including accounts
payable of approximately $2,500,000 and secured debt of $1,500,000.
Additionally Colorocs has agreed to convert the entire amount of its
advances to VCA into VCA Common Stock immediately prior to closing.
Management believes that the market for Internet-TV services is one
that is consolidating rapidly, and the joining of two of the leading
companies in this market will increase the likelihood of success of
the combined entity. However, consummation of the transaction is
subject to several conditions and no assurance can be given as to
whether or when the transaction will be completed. See also Note 2 of
Notes to Consolidated Financial Statements.
In January 1997 VCA announced that it had entered into a Letter of
Intent with Hitachi Home Electronics (America), Inc. to include
On-TV[TM] exclusively with all of its Internet appliances for a period
of two years. Also in January 1997 the Company announced that Sega of
America, Inc. had launched VCA's On-TV[TM] service as a premium
channel with its Sega Saturn Netlink games machine.
On January 31, 1997 the Company's Chief Financial Officer, Mr Michael
J. Casey, left the Company.
The report of the Company's independent auditors, Arthur Andersen LLP,
with respect to the Company's audited financial statements for the
fiscal year ended December 31, 1996, includes an explanatory paragraph
which states that substantial doubt exists regarding the Company's
ability to continue as a going concern due to the Company's losses
from operations and net capital deficiency. See the Report of
Independent Public Accountants and Note 1 to the Consolidated
Financial Statements of the Company set forth in "Item 7. Financial
Statements".
BUSINESS STRATEGY
General
During 1996 the Company moved aggressively toward new technology based
businesses which provide growth opportunities and away from the
Company's historical color copier and printer business. As a result
the Company today operates three significantly different businesses,
each of which is at a different stage of its product life cycle and
each of which offers different opportunities. Accordingly, the
Company's business strategy for each business differs. The Company's
strategy for each of these businesses is described in more detail
below.
Internet TV On-Line Service (VCA)
The Company's business strategy for VCA is to develop an on-line
service for forthcoming Internet-televisions and Internet set top
boxes. These devices, either built into the television or designed as
an add-on to the television, enable a consumer to connect to the
Internet through a standard telephone line and then surf the Internet
from the comfort of their armchair. VCA has developed an on-line
service, On-TV[TM], that enhances the Internet by providing original
televisual content that is highly personalized, localized and
customized for the television viewer. VCA's strategy is to develop
and enhance On-TV[TM] and provide it to consumers bundled with
Internet access devices from major consumer electronics companies.
Once the consumer has purchased an Internet access device bundled with
On-TV, VCA expects to generate recurring revenues from monthly
subscriptions, advertising and transaction fees. To date, VCA has
entered into agreements, which are typically exclusive, with
Mitsubishi Consumer Electronics America, Inc., Hitachi Home
Electronics (America), Inc., Boca Research Inc. and Sega of America,
Inc. which provide for the Company's On-TV[TM] service to be bundled
with, respectively, an integrated Internet-TV ("DiamondWeb[TM]"), an
unannounced product, a low cost set top box and a games machine ("Sega
Saturn").
VCA also generates revenues from licensing its enabling technology to
other companies as well as from licensing On-TV[TM] for use in
international markets.
VCA intends to maintain its position as technology neutral with regard
to which hardware platform and which browser connect to the Company's
On-TV[TM] service. This open approach enables consumer electronics
manufacturers to select the technology of their choice and maximizes
the potential number of subscribers that can connect to VCA's
On-TV[TM] service.
Color Copiers and Printers
Colorocs current business strategy is to market its patented double
transfer, single pass to paper, color imaging system on a
non-exclusive basis to manufacturers and developers of color copiers
and printers that desire to use Colorocs' patents in new or existing
electrophotography and printing devices. Licensees for the Colorocs
patents are typically large, multinational companies for whom the
sales cycle can be several years. Patent license fees for 1995 totaled
$5,287,000; however, Colorocs did not enter into any patent licenses
during 1996, although a number of new potential patent licensees were
identified. Colorocs has deferred $875,000 of income in connection
with patent license agreements in 1995 (See "Item 4. Financial
Statements"). Colorocs believes that there may be additional
potential licensees of its proprietary technology and is aggressively
pursuing these opportunities.
As of December 31, 1996, Colorocs had sold substantially all of its
existing color copier and printer inventory, and the Company does not
plan to develop or manufacture new color copiers and printers.
Revenues from supplying and supporting Colorocs' installed base of
copiers and printers has declined from $1,077,792 in 1995 to $806,842
in 1996. Colorocs' strategy during 1996 was to maximize the sales of
consumables and parts to the existing installed base of its color
copiers and printers by focusing on direct sales to dealers and
wholesalers. Colorocs was successful in gaining new distributors in
Europe and Asia who had formerly been purchasing from alternative
sources. The Company recognizes that Colorocs installed base of
copiers and printers will decline over time as these copiers and
printers are replaced by more technologically advanced and/or
inexpensive color copiers and printers manufactured by others. As a
result, sales of the Company's parts supplies, and consumables to this
installed base are expected to decline accordingly.
Network Printing and File Sharing Software (COPS)
The Company's principal business strategy for COPS is to maintain and
update the existing installed base of COPStalk, a network printing and
file sharing software product. As market opportunities allow, the
Company intends to develop and market new network printing related
software products and to expand into new software product lines. The
Company intends to distribute these new products both through COPS's
existing distribution channels and to COPS's existing customer base as
well as by developing new distribution channels and expanding its
customer base.
INTERNET-TV ON-LINE SERVICE (VCA)
Background
In late 1995, seeking new forms of expansion and growth, the Company
identified a new opportunity for the delivery of the Internet to the
64% of U.S. households who do not have a personal computer yet do have
a television and a telephone. Tapping into the growing popularity of
the Internet, the Company originally licensed from ViewCall Europe PLC
("VCE"), a publicly traded company based in the United Kingdom, and
Walzer Corporation ("Walzer"), a British Virgin Islands corporation
related by common ownership to VCE, an early stage, development
version set top box and browser that could connect to the Internet and
display the pages on a television screen. During 1996 the Company
undertook market testing of the product concept and was instrumental
in defining the market for Internet access through the television.
Following the incorporation of VCA as a separate subsidiary in June
1996 and partially as a result of market investigation the Company
identified a number of companies, many of which were better financed
and had greater resources than the Company, that intended to develop
and market Internet access devices that were competitive with the
Company's products. As a result, VCA identified the need for a
service to which to connect these devices and subsequently developed
On-TV[TM], the personal Internet channel. On-TV[TM] provides original
personalized content, including news, sports and television listings,
together with full access to the Internet which is delivered to the
Internet access device over a telephone line and displayed on a
television screen.
While developing the On-TV[TM] service VCA continued development of
the software browser that was originally licensed and has undertaken
original development of a low cost set top box ("STB"), both of which
are used to connect to VCA's On-TV[TM] service. These products have
been licensed to Boca Research on a non-exclusive basis and additional
parties may be licensed in the future. As part of the development of
the market, VCA has chosen to focus on development of the On-TV[TM]
service, electing to partner with leading technology companies to make
their hardware/software combinations work with the On-TV[TM] service.
As a result further development of the STB and browser ceased in the
first quarter of 1997.
Products
On-TV[TM] Service
VCA has developed and continues to enhance an on-line service,
On-TV[TM], which provides consumers access to timely, personalized and
localized information together with electronic mail (e-mail) delivered
to their television set through the Internet. VCA's on-line service
is delivered to consumers bundled with a number of different hardware
devices, typically a set top box that can be added to the television
and connected to a telephone, or a television that includes the
software and circuitry necessary to connect the television to the
Internet. On-TV[TM] has two major advantages over competing services:
(i) it is designed to operate independently of the different hardware
and software configurations that make up an STB, which makes it
connectable to more Internet access devices and thereby increases the
potential market and (ii) it provides the consumer with
personalization features that enable consumers to receive what they
want, when they want it rather than having to sift through the
complexity of the Internet to find the resources they want, thereby
increasing consumer satisfaction and reducing the rate of "churn" or
disconnection from the service.
Product Research and Development
VCA's products have either been developed internally through
sub-contractors who are engaged on a "work for hire" basis or have
been licensed from third parties. VCA's core product, the On-TV[TM]
service, has been developed substantially in-house. VCA had no
expenditure on research and development in 1995 and spent $3,050,802
on research and development in 1996, directly as a result of
developing the On-TV[TM] service, together with the STB and browser.
Sales and Marketing
VCA is currently a development stage company. It sells On-TV[TM] for
inclusion with Internet access devices typically on an exclusive
basis. As of December 31, 1996, VCA had entered into exclusive
agreements with Mitsubishi Consumer Electronics America, Inc. for the
inclusion of On-TV[TM] with all of Mitsubishi's Internet-ready
televisions which will be marketed under the brand name
DiamondWeb[TM], and with Boca Research which is developing an STB
based on VCA's enabling technologies. VCA also has a non-exclusive
agreement with Sega of America, Inc. for inclusion of the On-TV[TM] as
a premium channel on the Sega Netlink cartridge add-on to the popular
Sega Saturn games machine. VCA's sales strategy is to enter into
long-term, mutually beneficial relationships with consumer electronics
companies for the exclusive inclusion of On-TV[TM] with their Internet
access devices. In support of this strategy VCA has developed
technology partnerships with a number of leading technology providers,
including; Motorola, VLSI, Acorn, Spyglass and others. VCA identifies
prospective customers with which to partner its On-TV[TM] service
through a combination of direct sales, market research and attendance
at industry trade shows.
Once a consumer purchases an Internet access device such as those
described above, the consumer is automatically connected to the
On-TV[TM] service. Depending on the nature of the agreement made with
the consumer electronics manufacturer, the consumer may either have a
30-day free trial or start paying for the service immediately.
VCA is pursuing international expansion through the formation of joint
ventures for the deployment and localization of the "On-TV[TM]"
service in other countries. ViewCall Canada ("VCC") was formed in
December 1996 as a joint venture with MTS Advanced, Inc., a subsidiary
of Manitoba Telecom Services Inc., to deploy the On-TV[TM] service in
Canada.
Customer Support and Services
VCA offers customer support to its consumer electronics partners for
technical integration and marketing launch. It also provides
technical support to its joint venture partners, such as VCC, through
electronic media and telephone support. VCA anticipates providing
direct end user support through first and second level telephone call
center(s) depending on the nature of the agreement with the consumer
electronics manufacturer.
Competition
The technology industry in general is highly competitive. VCA faces
direct competition from two other companies, Web-TV Networks, Inc. a
California based company that has announced agreements with Philips
and Sony, and NetChannel, also a California based company that has
announced an agreement with RCA Thompson. VCA also faces indirect
competition from PC on-line services including America On-Line,
Compuserve, Prodigy and Microsoft's MS-NBC; Internet service providers
("ISP's") including UUNET, PSINet, MindSpring and Netcomm and
telephone companies that are establishing Internet service offerings
including AT&T, MCI and Sprint. Many of these companies have larger
technical staffs, more established and larger marketing and sales
organizations and greater financial resources that the Company. To
the extent that any of these companies enter the Internet-TV market,
increased competition may result in reduced numbers of subscribers or
price competition resulting in reduced revenues and earnings.
The Company believes that leading technology, quality of the on-line
service, price and consumer service are the primary competitive
factors in the industry. The Company believes that VCA competes
primarily on the basis of technology leadership and the quality of the
on-line service.
Product Protection
The Company regards the software and implementation of its On-TV[TM]
service together with its enabling technologies as proprietary. VCA
enters into written non-disclosure agreements with its industry
contacts and enters into written contracts and licenses with its trade
customers which protect its proprietary property. The On-TV[TM]
service contains a written license agreement which the consumer sees
on-screen and must affirmatively acknowledge in order to commence the
service. The software is usually furnished in object code only,
although source code licenses are granted in certain situations.
Employees and technical consultants of the Company are required to
execute agreements providing for the non-disclosure of information and
the assignment to the Company of proprietary property developed on
behalf of the Company.
There can be no assurances that the steps taken by the Company to
protect its proprietary property will be adequate to prevent
misappropriation or unlawful copying of its technology or software
programs. Additionally, copyright and trade secret laws do not limit
the right of others to independently develop similar technology and
software programs. Although the Company believes that its VCA
technology does not infringe on any proprietary rights of others,
there can be no assurances that third parties will not assert
infringement claims in the future.
Business Risk
The development of VCA's business model contains substantial risk.
The market for non-PC access to the Internet is not yet proven; the
revenue model that VCA has developed, while having parallels in the PC
world, is not tested in the non-PC market, and the technology
necessary to develop and deploy an on-line service for the television
is still in development. There is no guarantee that the technology
can be developed on a timely basis or for the budgeted amount. If
developed, there is no guarantee that sufficient consumers will pay
for the On-TV[TM] service to enable the Company to realize an
operating profit from its operation. While the only announced
competitors to VCA are Web-TV and NetChannel (see "Competition") the
barriers to entry into the market are few and other companies may
enter which have greater resources than VCA. The Company continues to
monitor closely the development of the market and if any disruption
occurs to VCA's business plan will attempt to take appropriate
measures to address them. However, there can be no assurance that the
Company could overcome such disruptions without materially disrupting
its business plan.
COLOR COPIER, PRINTER AND PATENT LICENSING BUSINESS (COLOROCS)
Technology
Colorocs' copiers and printers incorporate electrophotography, a
process that has been in commercial use for over 30 years. In this
process, an image is formed by light on an electrically charged
photoconductive insulating surface (a drum or a belt), and the image
is developed with toners that adhere only to the electrically charged
areas. The image is then transferred and permanently bonded to a
sheet of plain paper. Most existing office copiers and laser printers
use some variation of the electrophotographic process. Colorocs'
copier and printer designs incorporate several innovative applications
and refinements of the electrophotographic process.
Colorocs' products produce full color copies and color prints by the
controlled blending and mixing of three standard process color toners.
The upper section of each machine is either an optical scanner
subassembly (in the copier) or an electronic imaging subassembly (in
the printer). The lower section of both machines, the "print engine",
consists of the image development and assembly unit and paper handling
subassemblies. While many of Colorocs' patents cover different
elements of the Copier and Printer technology, the most valuable
patents cover the core of the print engine and thus are applicable in
different implementations of color printing.
Products and Services
Colorocs provides spare parts, supplies, and consumables such as
toner, developer, and belts for use in the color copiers and printers
formerly manufactured by Colorocs. Currently, Colorocs maintains an
inventory of over 1,400 of these items. Colorocs markets and
distributes its parts, supplies, and consumables primarily through its
network of approximately 20 established dealers which have existing
relationships with target customers. Colorocs maintains a location in
Atlanta to provide maintenance and service for its copiers located in
that city. Dealers and third party service organizations provide
these services in other locations.
Through the Cost per Copy ("CPC") program, Colorocs provides copiers
and related maintenance services primarily to quick-copy shops in
exchange for a fee for each copy made by the copiers. Revenues from
the maintenance and CPC programs have declined from approximately 12%
of net sales in 1995 to approximately 4% of net sales in 1996, and
these revenues are expected to continue to decline as the installed
base of the Company's copiers and printers is replaced by more
technologically advanced and/or inexpensive copiers and printers
manufactured by others. See "- Competition."
Sources and Availability of Materials
Colorocs obtains most of its the parts, supplies, and consumables
necessary to support its copiers (and a majority of its printer parts,
supplies and consumables) from Sharp Corporation ("Sharp"). On
October 1, 1994, Colorocs entered into a Parts and Consumables Supply
Agreement with Sharp ("Sharp Agreement") whereby Sharp will provide
these parts, supplies, and consumables to Colorocs until September 30,
1999. This agreement provides Colorocs with exclusive distribution of
all parts, supplies, and consumables for its color copiers and
printers in Canada, the United States and Mexico. Colorocs has
experienced no difficulty in obtaining parts, supplies and consumables
pursuant to the Sharp Agreement. The remainder of Colorocs's parts,
supplies and consumables are available from numerous sources located
primarily in the United States. Colorocs has not experienced any
shortages or significant increases in prices of any parts, supplies or
consumables.
Distribution
Colorocs distributes its parts, supplies and consumables to its
installed base of color copiers and printers directly and through
dealers. In the past, Colorocs has depended on one large customer,
Savin Corporation ("Savin"), for a significant portion of its revenue.
Savin previously distributed private label models of Colorocs' color
copiers, parts, supplies and consumables, but Colorocs currently
distributes its parts, supplies and consumables to the Savin installed
base of color copiers. The Company recorded net sales to this
installed base of approximately $329,000 or 18% of total net sales for
the year ended December 31, 1995 as compared to net sales of
approximately $55,000 or 2% of total net sales for the year ended
December 31, 1996. In recent years, Savin has reduced its emphasis on
the color copier business as a result of a change in its business
strategy. As a result, the Company believes that this portion of the
Company's revenue will continue to decline in 1997.
Competition
Colorocs faces little competition in the sale of spare parts, supplies
and consumables to Colorocs' installed base of color copiers and
printers. See "- Sources and Availability of Materials" and "-
Distribution". On the other hand, the installed base is declining
rapidly as newer, more technologically advanced and lower cost
machines replace Colorocs' machines. Revenues from Colorocs' sale of
spare parts, supplies, and consumables and revenues from maintenance
are dependent upon the size of the installed base of Colorocs' color
copiers and printers, and any reduction in the size of this installed
base likely would adversely impact Colorocs' revenues from these
sources.
Patents, Trade Secrets, Trademarks, and Copyrights
Although Colorocs' color copier and printer products are based on
technology currently used in black and white copiers and laser
printers, Colorocs' copier and printer incorporate many applications
and refinements of that technology that Colorocs believes to be
innovative. Colorocs holds United States patents with respect to
certain of those refinements in order to maximize its rights in such
technology. The United States Patent Office has granted Colorocs 22
patents.
Colorocs has entered into several non-exclusive, permanent, worldwide
technology licensing agreements with certain manufacturers that
develop or manufacture color print engines. Colorocs believes that
there may be other companies interested in licensing this technology
from Colorocs and continues to aggressively pursue these
opportunities.
NETWORK PRINTING SOFTWARE BUSINESS (COPS)
Products
COPS' software products provide cross-platform and networking
utilities and applications designed primarily for file and print
sharing. These software products, which have end user list prices
ranging from $179 to $500 per copy, are described in greater detail
below.
COPSTalk
COPSTalk is a Windows based software utility which allows IBM
compatible personal computers to print to Postscript printers and to
share files with Apple Macintosh computers.
COPS LocalTalk[TM]
The Company believes that COPS is the world's only manufacturer of
LocalTalk[TM] network interface cards for personal computers. The
COPS LocalTalk[TM] family of products includes 8-bit industry standard
architecture ("ISA") and micro-channel cards that allow Microsoft NT
servers, Novell Netware servers or stand alone workstations to access
Apple Macintosh LocalTalk[TM] networks for printing and file sharing.
Product Research and Development
COPS' products have been substantially developed internally. COPS
development staff is responsible for modifying and enhancing the COPS
products and for the development of new products.
Sales and Marketing
COPS sells its products to a wide range of industries through three
principal marketing channels: distributors, OEMs and direct sales.
As of December 31, 1996, COPS sold its products through 28
international independent distributors, 3 major catalog distributions,
6 OEMs, and two employees engaged in sales and marketing. COPS
identifies prospective customers for its products through a
combination of direct mail, telemarketing, media, catalog and Internet
advertising and tradeshow participation.
Customer Support and Services
COPS offers software maintenance and support and custom development
services to its customers. Generally, the COPS software products
include a 60-day warranty. Maintenance and support services include
telephone installation assistance, telephone support and maintenance
updates. These support services are provided free of charge. COPS
also provides custom development service to customers for the purpose
of developing features or capabilities not then available in its
products.
Competition
The computer software industry in general is highly competitive. COPS
faces direct competition from two other companies which market third
party network printing related software products. These competitors,
as well as a number of potential competitors, have larger technical
staffs, more established and larger marketing and sales organizations,
and greater financial resources than the Company. COPS also faces
competition from developers of networking software applications which
incorporate some of the functionality provided by COPS' software
products. To the extent that the developers of networking software
applications improve their network software applications which provide
print spooler and cross network printing functionality, demand for
COPS' software products may decline.
The Company believes that price, functionality, performance, ease of
use, environments supported and customer support are the primary
competitive factors in the industry. The Company believes that its
COPS products compete primarily on the basis of performance and
environments supported.
Product Protection
The Company regards its COPS software and hardware products as
proprietary. COPS enters into written "shrink-wrap" license
agreements with its customers which limit the use and copying of its
software. COPS relies principally on copyright law and trade secret
protection to protect its proprietary property, and all of its
products are copyrighted. The software is usually furnished in object
code only, although source code licenses are granted in certain
situations. COPS has not applied for any patents for its software and
does not believe that patent laws will be a source of protection of
its software products. Employees and technical consultants are
required to execute agreements providing for the non-disclosure of
information and the assignment of proprietary property developed on
behalf of COPS.
There can be no assurances that the steps taken by COPS to protect its
proprietary property will be adequate to prevent misappropriation or
unlawful copying of its technology or software programs.
Additionally, copyright and trade secret laws do not limit the right
of others to independently develop similar technology and software
programs. In addition, the laws of some foreign countries do not
protect software to the same extent as do the laws of the United
States. Furthermore, the software licenses may not be enforceable in
all jurisdictions. Although COPS believes that its software products
do not infringe on any proprietary rights of others, there can be no
assurances that third parties will not assert infringement claims in
the future.
EMPLOYEES
As of March 31, 1997, the Company employed 64 persons on a full time
basis. These employees consisted of 9 in executive and senior
management positions, 13 in sales and marketing, 7 in technical
support, 25 in product development and 10 in general and
administrative positions. None of the Company's employees is
represented by a union. The Company has experienced no work stoppage
attributable to labor disputes, and the Company considers its employee
relations to be good.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases approximately 19,000 square feet of office and
warehouse space in Norcross, Georgia for its corporate offices. The
lease for 9,500 square feet of this space expires on December 31,
1997. The lease for the remaining space expires on May 31, 1999, with
an option to terminate in May 1998 which the Company does not
currently intend to exercise. The Company believes that these
facilities are suitable and adequate for their respective uses and are
adequately covered by insurance. The Company engages in no real
estate investment activities.
ITEM 3. LEGAL PROCEEDINGS
On December 16, 1996, Melton Harrell, a director of the Company, filed
a lawsuit against VCA in the Superior Court of Gwinnett County,
Georgia. Mr Harrell seeks a declaratory judgment that VCA wrongly
terminated a warrant agreement pursuant to which Mr Harrell was
entitled to purchase 750,000 shares of Common Stock of VCA at a price
of $0.70 per share. Mr Harrell also claims that he is relieved of his
obligations under a related guaranty agreement, entered into at the
same time as the warrant agreement, under which Mr Harrell agreed to
guarantee and supply sufficient collateral to secure financing for VCA
of up to $1,500,000. On January 16, 1997, VCA filed its answer and a
counterclaim against Mr Harrell claiming breach of contract and fraud,
claiming damages in an unspecified amount and seeking a declaration
that VCA was entitled to rescind the warrant agreement due to Mr
Harrell's material breach of the guaranty agreement. VCA intends to
vigorously defend the lawsuit filed against it and to vigorously
pursue its counterclaim against Mr. Harrell.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by the Company to a vote of its shareholders
during the quarter ended December 31, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Stock Price and Dividend Information
The Company's Common Stock is traded on the OTC Bulletin Board system
under the symbol "CLRC". The following table sets forth the range of
high and low bid information during each quarter of 1996 and 1995.
The quotations reflect inter-dealer prices without retail mark-up,
mark-down or commissions and may not represent actual transactions.
1996 High Low 1995 High Low
First Quarter $4.15 $2.75 First Quarter $3.00 $1.25
Second Quarter 14.50 7.25 Second Quarter 2.50 1.25
Third Quarter 17.50 5.00 Third Quarter 2.50 1.00
Fourth Quarter 9.00 3.75 Fourth Quarter 4.15 2.25
At December 31, 1996, there were approximately 674 record holders of
the Company's Common Stock. This number does not include beneficial
owners of the Common Stock whose shares are held in the names of
various dealers, clearing agencies, banks, brokers and other
fiduciaries.
The Company has never paid cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In 1996, the Company's operations were focused on three separate lines
of business:
VCA
Following initial development in December 1995, VCA spent 1996
defining the business model and market for an installed base of
customers subscribing to On-TV[TM]. This strategy includes providing
technical expertise to consumer electronics companies and developing a
value-added service hosted on the Internet for delivery to the
television consumer. The Company invested heavily in 1996 in
establishing VCA as a leading company in the rapidly developing
Internet-TV market, incurring debt on behalf of VCA in order to
maintain development.
The development and marketing of Internet-TV appliances occurred
slower than expected, with the result that as at December 31, 1996,
only the Company's competitor Web-TV had entered the market with an
Internet-TV device. The lack of any appliances from the VCA's
consumer electronics partners in retail distribution dramatically
affected VCA's ability to generate subscriber revenues, while VCA
continued to incur significant development expenses relating to the
enhancement and maintenance of the On-TV[TM] service. Conversely, VCA
has been able to generate technology license revenues ahead of
expectation from business partners MTS Advanced, Inc. and Boca
Research.
COPS
During 1996 COPS focused on updating its product line to take
advantage of the new Microsoft Windows95 operating system, thus
increasing the market for its software. COPS also reduced the cost of
sale of its products by enhancing its presence on the Internet at its
web-site (http://www.copstalk.com), which now accounts for over 15% of
product sales.
Colorocs
During 1996 Colorocs exhausted its historic inventory of color copiers
and printers and focused on selling consumables, maintenance and
service to its existing installed base. Colorocs closed or sold off
all its service and maintenance operations in all locations outside of
the Atlanta area because the continued decline in the installed base
had rendered them unprofitable. Colorocs expects that revenues from
this line of business will continue to decline in coming years and is
investigating ways in which maximum return can be made from the
reduced revenues.
While in 1994 and 1995 the majority of Colorocs' cash flow came from
the licensing of Colorocs' color copier and printer patent portfolio,
the Company did not enter into any new license agreements in 1996.
Because these licenses typically contain a large payment due on
signing for either a fully paid up license or as a down payment on
future royalty payments, the failure to enter into any new license
agreements materially affected Colorocs' results for 1996.
While Colorocs continues to aggressively pursue license agreements
with major copier and print engine manufacturers and believes that its
patented double transfer, single pass to paper technology enjoys
several technology advantages, there can be no assurances that any
further licenses can be obtained.
As a result of reduced contribution from the patent licensing
business, coupled with the increased expense relating to the
establishment and development of VCA, the Company recorded a
substantial loss for 1996 and expects to continue to post losses until
VCA progresses from the development phase to the operational phase.
Results of Operations
The following table presents the percentage relationships of certain
statement of operations items to total revenues for the years ended
December 31, 1995 and 1996:
1996
1995 1996 over
1995
Total revenue 100.0% 100.0% 53.4%
Cost of copier and
consumables product 48.0 28.6 (8.6)
Cost of Internet service -- 60.6 --
Gross margin 52.0 10.8 (68.0)
Selling, general and
administrative expenses 104.6 174.1 155.3
Research and development -- 112.0 --
Loss from operations (52.6) (275.3) (702.2)
Other income (expense), net 239.9 (3.4) (102.2)
Income (loss) before
provision for income taxes
and minority interest 187.2 (278.8) (328.4)
Minority interest -- 28.7 --
Income (loss) before
provision for income taxes 182.2 250.1 (304.9)
Provision for income taxes 71.3 -- --
Net (loss) income 115.9% (250.1)% (431.0)%
Total revenues for the year ended December 31, 1995 were $1,866,901
compared to total revenues of $2,863,448 for the year ended December
31, 1996, an increase of approximately 53%. This increase was
principally due to revenues from VCA totaling $830,403 and a full year
of operations for COPS, which was acquired in December 1995 and
contributed software revenue of $914,535 in 1996. For the year ended
December 31, 1995, the Company recorded revenues of consumables and
parts of $937,957 as compared to $853,572 for the year ended December
31, 1996. This decrease was less than had been expected due to the
Company's success in increasing the installed base of its copiers in
1995. The Company recorded maintenance and CPC revenues of $219,650
for the year ended December 31, 1995 as compared to $109,842 for the
year ended December 31, 1996. This decrease in maintenance and CPC
revenues was due to the elimination of the Company's maintenance
operations outside of Atlanta in June 1996 and a decrease in the
number of installed CPC machines.
Cost of copier and consumables product was $894,594 for the year ended
December 31, 1995, as compared to $817,717 for the year ended December
31, 1996. The 8.6% decrease is due to efforts to increase the gross
margin on these items to partially off-set the continued decline in
the Company's installed base of copiers and printers. Cost of
Internet service totaled $2,385 for the year ended December 31, 1995
as compared to $1,735,456 for the year ended December 31, 1996. This
increase was due entirely to the operations of VCA.
Selling, general and administrative expenses were $1,952,742 for the
year ended December 31, 1995 compared to, $4,986,318 for the year
ended December 31, 1996, an increase of approximately 155%. This
increase is primarily due to increased payroll, consulting and
professional fees and sales and marketing costs related to VCA's
operations in 1996.
The Company had no research and development expenses in the year ended
December 31, 1995 and incurred $3,208,183 of these expenses in the
year ended December 31, 1996. The expenses relate almost entirely to
the development of VCA's On-TV[TM] service during 1996.
Other income (expense), net for the year ended December 31, 1995 was
$4,477,981 compared to ($98,764) for the year ended December 31, 1996.
The decrease in other income, net was due to $4,273,906, net of
direct expenses, received from certain patent technology licensing
agreements recorded in the year ended December 31, 1995. No income
related to patent technology licensing agreements was received during
1996.
Liquidity and Capital Resources
The Company's primary source of liquidity is current cash balances and
cash equivalents and cash generated from operations, supplemented from
time to time by borrowings under the Company's bank line of credit and
from directors of the Company. Cash and cash equivalents of
$1,578,994 and short term investments of $1,970,812 as of December 31,
1995 had declined to cash and cash equivalents of $282,596 and short
term investments of $94,685 at December 31, 1996 due to the investment
in establishing and developing VCA. Management believes that these
sources of funds, together with anticipated cash from operations, will
be sufficient and that no further lines of credit or debt will be
necessary to fund the Company's color copier and printer and network
printing software lines of business in 1997. However if the sale of
VCA is delayed past April 1997, or if the Company is unable to sell
VCA, the Company would be unable to finance the operations of VCA at
its current level of operations without obtaining additional debt or
equity financing. There can be no assurance that any such financing
would be available on satisfactory terms. If satisfactory financing
is unavailable, the Company likely would significantly curtail or
terminate the operations of VCA.
The report of the Company's independent auditors contains an
explanatory paragraph as to the Company's ability to continue as a
going concern. As stated in the report, the Company has experienced
losses, a capital deficit and cash flow deficiencies that raise
substantial doubt about the Company's ability to continue as a going
concern. Certain of the Company's assets might be worth substantially
less than the amounts shown on the Company's balance sheet if the
Company is unable to continue as a going concern and the financial
statements have not been adjusted to reflect the outcome of this
uncertainty. There can be no assurance that future revenues will
exceed operating expenses to enable the Company to continue as a going
concern.
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and the
related report of independent public accountants are included on pages
14 through 35:
Report of Independent Public Accountants.
Consolidated Balance Sheet as of December 31 1996.
Consolidated Statements of Operations for the years ended December 31,
1995 and 1996.
Consolidated Statements of Shareholders' Equity (Deficit) for the
years ended December 31, 1995 and 1996.
Consolidated Statements of Cash Flows for the years ended December 31,
1995 and 1996.
Notes to Consolidated Financial Statements as of December 31, 1995 and
1996.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Colorocs Information Technologies, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of
COLOROCS INFORMATION TECHNOLOGIES, INC. (a Georgia corporation) AND
SUBSIDIARIES as of December 31, 1996 and the related consolidated
statements of operations, shareholders' equity (deficit), and cash
flows for the two years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Colorocs
Information Technologies, Inc. and subsidiaries as of December 31,
1996 and the results of their operations and their cash flows for the
two years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the financial statements, the Company has suffered losses from
operations and has a net capital deficiency that raises substantial
doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The
accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
April 4, 1997
<TABLE>
COLOROCS INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS December 31, 1996
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 282,596
Short-term investments 94,685
Receivables, net of allowance for doubtful accounts
of $141,033 (Note 1) 475,060
Inventories 128,876
Prepaid expenses 192,560
----------
TOTAL CURRENT ASSETS 1,173,777
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $154,596 1,165,525
INVESTMENT IN VIEWCALL EUROPE (Note 9 ) 250,000
INVESTMENT IN VIEWCALL CANADA (Note 1 ) 1,529
GOODWILL AND INTANGIBLE ASSETS (Note 1 ) 1,092,177
OTHER ASSETS 161,030
DEPOSITS 6,516
----------
$3,850,554
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term borrowings from bank (Note 2 ) $ 712,500
Note payable to director/shareholder (Notes 2 and 12 ) 500,000
Accounts payable and accrued liabilities (Note 1 ) 2,589,224
Deferred income 257,084
----------
TOTAL CURRENT LIABILITIES 4,058,808
DEFERRED LICENSING INCOME (Note 4 ) 875,000
MINORITY INTEREST 117,500
COMMITMENTS AND CONTINGENCIES (Note 8 ) --
SHAREHOLDERS' DEFICIT (Note 10 ):
Common stock; no par value; 10,000,000 shares authorized; 2,071,544 shares
issued and outstanding at December 31, 1996 1,802,738
1,323,337
Retained deficit (4,326,829)
----------
Total shareholders' deficit (1,200,754)
----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $3,850,554
==========
</TABLE>
The accompanying notes are an integral part of this consolidated
balance sheet.
<TABLE>
COLOROCS INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
December 31, 1995 December 31, 1996
<S> <C> <C>
REVENUES:
Copier and consumables $1,848,268 $1,080,403
License of technology -- 691,176
Software 18,633 914,535
Other -- 177,334
---------- ----------
TOTAL REVENUES 1,866,901 2,863,448
OPERATING EXPENSES:
Cost of copier and consumables product 894,594 817,717
Cost of Internet service 2,385 1,735,456
Selling, general and administrative 1,952,742 4,986,318
Research and development -- 3,208,183
---------- ----------
TOTAL OPERATING EXPENSES 2,849,721 10,747,674
LOSS FROM OPERATIONS (982,820) (7,884,226)
OTHER INCOME/(EXPENSE), net (Note 4 ) 4,477,981 (98,764)
---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST 3,495,161 (7,982,990)
MINORITY INTEREST -- 822,500
---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 3,495,161 (7,160,490)
PROVISION FOR INCOME TAXES (Notes 1 and 7 ) 1,332,000 --
---------- ----------
NET INCOME (LOSS) $2,163,161 $(7,160,490)
========== ==========
NET INCOME (LOSS) PER COMMON AND EQUIVALENT SHARES:
PRIMARY $ 1.08 $ (3.51)
FULLY DILUTED $ 1.07 $ (3.51)
WEIGHTED AVERAGE SHARES OUTSTANDING:
PRIMARY 2,004,095 2,042,839
FULLY DILUTED 2,024,709 2,042,839
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<TABLE>
COLOROCS INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
December 31, 1995 December 31, 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $2,163,161 $(7,160,490)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for income taxes 1,332,000 --
Depreciation and amortization 60,502 135,361
Minority interest -- 117,500
Deferred income (Note 4 ) 875,000 250,000
Changes in assets and liabilities, net of acquisition:
Receivables (2,376,602) 2,222,524
Inventories 274,372 211,216
Prepaid expenses (160,774) (5,846)
Deposits (14,551) 14,451
Other assets -- (161,030)
Accounts payable and accrued expenses 328,907 2,172,945
Deferred income 12,145 (5,063)
---------- ----------
Cash provided by (used in) operating activities 2,494,160 (2,208,432)
INVESTING ACTIVITIES:
Purchase of property and equipment -- (1,265,401)
Purchase of business, net of cash acquired (47,872) --
(Purchase) Sale of marketable securities (985,129) 1,876,127
Investment in ViewCall Europe (250,000) --
Investment in ViewCall Canada -- (1,529)
Sale of investment in Savin Corporation, net of gain 144,000 --
Purchase of technology -- (950,000)
---------- ----------
Cash used in investing activities (1,139,001) (340,803)
FINANCING ACTIVITIES:
(Repayment) borrowing of line of credit (8,000) 712,500
Proceeds from demand note -- 500,000
Stock options exercised -- 47,860
Repurchase of fractional shares -- (13,273)
Deferred compensation (Note 10 ) -- 5,750
---------- ----------
Net cash (used in) provided by financing activities (8,000) 1,252,837
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,347,159 (1,296,398)
CASH AND CASH EQUIVALENTS, beginning of year 231,835 1,578,994
---------- -----------
CASH AND CASH EQUIVALENTS, end of year $1,578,994 $ 282,596
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<TABLE>
COLOROCS INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
Unrealized
Gain on
Additional Retained Marketable Total
Common Stock Paid-In Earnings Equity Shareholders'
Shares Amount Capital (Deficit) Securities Equity (Deficit)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, at December 31, 1994 2,012,163 $1,659,830 $ -- $ 670,500 $ 60,000 $2,390,330
Unrealized gain on Savin
Corporation stock -- -- -- -- (60,000) (60,000)
Issuance of stock for
acquisition of
CoOperative Printing
Solutions, Inc. (Note 6) 19,231 142,908 -- -- -- 142,908
Benefit from pre-December
10, 1993 net operating
loss carryforwards (Note 1) -- -- 1,283,000 -- -- 1,283,000
Net income -- -- -- 2,163,161 -- 2,163,161
--------- ---------- ---------- ----------- -------- ----------
BALANCE, at December 31, 1995 2,031,394 1,802,738 1,283,000 2,833,661 -- 5,919,399
Stock options exercised 40,150 -- 47,860 -- -- 47,860
Repurchase of fractional shares -- -- (13,273) -- -- (13,273)
Deferred compensation (Note 10) -- -- 5,750 -- -- 5,750
Net loss -- -- -- (7,160,490) -- (7,160,490)
--------- ---------- ---------- ----------- -------- ----------
BALANCE, at December 31, 1996 2,071,544 $1,802,738 $1,323,337 $(4,326,829) $ -- $(1,200,754)
========= =========== =========== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
statements
Colorocs INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Colorocs Information Technologies, Inc. (the "Company" ) is
incorporated in the state of Georgia. On December 13, 1995, the
Company's name was changed from Colorocs Corporation to Colorocs
Information Technologies, Inc. The Company operates using the name of
Colorocs Information Technologies ("Colorocs") for its copier
business, CoOperative Printing Solutions, Inc. ("COPS") for the sale
of its network printing and file sharing software, and ViewCall
America, Inc. ("VCA") for its development and sale of on-line services
and access to the Internet through the television. The Company and
its subsidiaries operate primarily in the United States. Some of the
Company's subsidiaries and affiliates have certain distribution rights
for the ViewCall technology in Asia, Europe, South America and Canada;
however, there were no significant operations in these locations.
The Company's principal operations through Colorocs are product
support of color copiers and printers previously manufactured and sold
by the Company, and the licensing of its patented color printing and
copier technology. Colorocs generates income through the licensing of
its technology, the sale of spare parts, supplies and other
consumables, maintenance of its installed base of color copiers and
printers, the cost per copy ("CPC") program, and the sales of
remaining inventory of color copiers and printers. COPS generates
revenue through the sale of network printing and file sharing software
products. The Company generates revenue from VCA related to the sale
of license agreements for its ViewCall technology.
Going Concern
At December 31, 1996, the Company's ability to continue as a going
concern is subject to several business and market risks, as stated
below:
[BULLET] The Company has not generated significant revenue or cash
flow from its current operations, and the expectation of
future revenues or cash flow cannot be assumed.
[BULLET] The Company must obtain significant additional financing in
order to fund the research, development, and marketing of
its ViewCall technology.
[BULLET] The Company has no significant established operating history
related to its ViewCall technology.
[BULLET] The Company's ability to remain in existence is subject to
several technical, business and market risks, including its
ability to attract and retain consumer electronics companies
who will develop and market acceptable devices that connect
to the Company's on-line service ("On-TV[TM]") for access to
the Internet and to generate sufficient revenues and cash
flows to support operations. Additionally, none of the
Company's consumer electronics partners have shipped a
product that connects to the Company's on-line services, nor
is there any guarantee that, once shipped, this market
position will be positive.
[BULLET] Competition includes other companies with significantly
greater resources for product development and marketing.
Management's plans regarding the above risks are as follows:
[BULLET] The Company has reached an agreement to sell VCA as
discussed below. There can be no assurances, however, that
such an agreement will be completed on the terms discussed
below.
[BULLET] The Company continues to focus on cost control efforts
related to its existing copier and consumables business and
COPS.
The Company incurred a net loss of approximately $7,160,000 for the
year ended December 31, 1996 and has an accumulated deficit of
approximately $4,300,000 at December 31, 1996. The Company currently
has no source of additional cash, which has a material adverse effect
on the Company's ability to service its debts. The Company's working
capital at December 31, 1996, plus limited revenue from product sales
from its color copier and consumables business, will not be sufficient
to meet its obligations or to continue to fund the development of
On-TV[TM]. Management recognizes that the Company must obtain
additional funding or significantly reduce operating costs to enable
it to continue operations with available resources. Management's
plans, as noted above, include controlling costs as well as the sale
of VCA, as discussed below. No assurances can be given that the
Company will be successful in controlling costs or in completing the
sale of VCA as outlined below. Further, there can be no assurance,
assuming the Company successfully controls costs or timely completes
the sale of VCA, that the Company will achieve profitability or
positive cash flow. If the Company is unable to obtain adequate
additional funding or timely complete the sale of VCA, management may
be required to curtail the Company's operations.
The above factors raise substantial doubt about the ability of the
Company to continue as a going concern. The accompanying financial
statements have been prepared under the assumption that the Company
will continue as a going concern and do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amount and classification of liabilities that might be
necessary should the Company be unable to continue in existence.
Incorporation of ViewCall America, Inc. and Related Entities
In 1995, the Company purchased 250,000 shares of common stock
(approximately 3%) of ViewCall Europe PLC ("VCE"), a publicly traded
company based in the United Kingdom, for $1 per share (see Note 9).
The Company accounts for this investment under the cost method and has
recorded an investment of $250,000 in the accompanying consolidated
balance sheet. VCE developed a low-cost television set top box
("STB") that provides users with direct access to the Internet through
a television and ordinary telephone line. In connection with the
investment in VCE, the Company obtained a six-month exclusive license
and an option to acquire a permanent license from VCE and Walzer
Corporation ("Walzer"), a British Virgin Islands corporation related
by common ownership to VCE, to distribute the STBs in North America.
In June 1996, the Company incorporated VCA as a wholly owned
subsidiary to exercise the option to acquire the permanent exclusive
license noted above. In connection with the organization of VCA and
the exercise of the permanent exclusive license, the Company
contributed $5,000,000 to VCA, inclusive of the investment to date in
the STB. VCA then issued to Walzer 1,000,000 shares of its common
stock, valued at $700,000 and representing 16.9% of the outstanding
common stock to exercise the option for the permanent exclusive
license and acquired rights to the STB. The value associated with the
VCA technology acquired of $700,000 is included in goodwill and
intangible assets in the accompanying consolidated balance sheet.
VCA's principal operations include developing and providing services
and products that are designed for delivering on-line services and
access to the Internet for display on the television in the United
States. The Company consolidates the operations of VCA, as the
Company currently owns 83.1% of VCA common stock. No minority
interest is accounted for as VCA had significant losses during 1996.
Also in June 1996, VCA and Walzer organized ViewCall South America,
Inc., a Georgia corporation ("VCSA"), of which 51% of the common stock
is owned by VCA and the remaining stock is owned by Walzer. VCSA's
principal operations include developing and providing services and
products that are designed for delivering on-line services and access
to the Internet for display on television using the VCA technology in
South America. VCSA is consolidated with VCA for presentation
purposes and has recognized a minority interest for the amount of the
original investment owned by the minority holders. The minority
holders portion of the net loss in VCSA for the year ended December
31, 1996 was approximately $122,500. VCSA paid $250,000 to Walzer for
these exclusive rights and has recorded this amount in goodwill and
intangible assets in the accompanying consolidated balance sheet.
In December 1996, VCA, along with MTS Advanced, Inc. ("MTS"),, an
unrelated entity entered into an agreement to form ViewCall Canada,
Inc. ("VCC"), a Canadian corporation. VCC was formed to operate the
On-TV[TM] service in Canada. VCA contributed $1,529 for a 20%
ownership in VCC. VCA accounts for this investment under the equity
method and has recorded $1,529 in the accompanying consolidated
balance sheet, as the results of operations for VCC were not material
for 1996. In connection with this agreement, VCA agreed to subscribe
for additional shares of stock of VCC for $200,000 Canadian by
February 15, 1997 and $600,000 Canadian by February 14, 1998.
Additionally, VCA agreed to advance to VCC $400,000 Canadian by
February 15, 1997. MTS subscribed for shares of stock for $800,000
Canadian in December 1996. MTS has agreed to subscribe for additional
shares of stock for $2,400,000 Canadian by February 14, 1998.
Additionally, MTS agreed to advance to VCC $1,600,000 Canadian at
varying dates up to February 15, 1997. None of the above additional
commitments had been fulfilled by VCA or MTS as of December 31, 1996.
As of December 31, 1996, the revenue from the operations of VCA, VCSA,
and VCC were not material. The majority of the operations entailed
research and development expenses of the technology associated with
television Internet access.
Sale of VCA
On March 7, 1997 VCA agreed in principle with NetChannel, Inc.
("NetChannel"), a privately held company based in South San Francisco,
California for the sale to NetChannel of all VCA Common Stock
outstanding on the date of closing in exchange for 4,252,273 shares of
NetChannel Preferred stock and the conversion of all options and
warrants to purchase VCA Common Stock outstanding on the date of
closing into options and warrants to purchase NetChannel Common Stock.
The NetChannel Preferred Stock is convertible by the holder into
shares of NetChannel Common Stock on a share-for-share basis. In
connection with the sale of VCA to NetChannel, virtually all of the
outstanding liabilities of VCA will be satisfied, including accounts
payable of approximately $2,500,000 and secured debt of $1,500,000.
Additionally Colorocs has agreed to convert the entire amount of its
advances to VCA into VCA Common Stock immediately prior to closing.
Upon consummation of the sale, Colorocs' carrying value of its
investment in VCA will be approximately $6,800,000. The investment in
VCA will be accounted for on the cost basis. VCA received bridge
financing from NetChannel, Inc. in connection with the sale (See Note
2).
At December 31, 1996 the total assets, revenues and net loss of VCA
were as follows:
Total assets $3,032,912
Revenues 868,508
Net loss (7,124,473)
Reorganization and Fresh-Start Reporting
Effective December 10, 1993, the Company was reorganized and
recapitalized under Chapter 11 of the Bankruptcy Code. New common
stock was issued to new investors and to certain classes of the
predecessor Company's creditors as settlement of their claims pursuant
to the plan of reorganization (the "Plan"). Under the Plan, the
predecessor Company's former common stockholders and preferred
stockholders also received new common stock of the reorganized
Company.
As a result of the reorganization and recapitalization of the Company
pursuant to the Plan, the Company was required to adopt "fresh-start"
reporting and reflect the effects of such adoption in the financial
statements as of December 10, 1993 in accordance with AICPA Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code". The ongoing impact of the adoption of
fresh-start reporting is reflected in the financial statements for
periods subsequent to December 10, 1993.
In adopting fresh-start reporting, the Company was required to
determine its reorganization value, which represents the fair value of
the entity before considering liabilities and approximates the amount
a willing buyer would pay for the assets of the Company immediately
after its emergence from Chapter 11 status. The reorganization value
of the Company was determined by consideration of several factors,
including the discounted residual value of the Company; market share;
competitive position and competitors of the Company; projected sales,
profitability growth and working capital requirements; and general
economic conditions. Various valuation methods were relied upon,
including discounted cash flow, price/earnings ratios, comparable
merger and acquisition activities and other applicable ratios and
industry indices.
The adjustments to reflect the consummation of the Plan and the
adjustment to record assets and liabilities at their fair values
(including the establishment of reorganization value in excess of
amounts allocable to identifiable assets) have been reflected in the
accompanying consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiary and two majority-owned
subsidiaries. All significant intercompany accounts and transactions
have been eliminated, and the resulting minority interest is presented
in the accompanying consolidated balance sheet and statements of
operations.
Accounting for Investments and Minority Interest
The Company consolidates the operations of VCA and VCSA. The minority
interest included in the accompanying consolidated balance sheet at
December 31, 1996 represents the minority interest in the intangible
assets at VCSA. The minority interest on accompanying consolidated
statement of operations of $822,500 represents the minority holders'
share of the net loss of VCA up to the original investment of the
minority holder. Any additional losses of the minority holder above
the original investment have been included in the net loss of the
consolidated company.
Revenue Recognition
Revenue from Colorocs' product sales is recognized at the time the
product is shipped. Revenue from servicing Colorocs' copiers is
recognized as the services are performed. Revenue realized by
Colorocs from license agreements is recognized when the agreement is
consummated and is included in other income in the accompanying
consolidated statements of operations. COPS records the revenue from
the sales of software in accordance with the AICPA Statement of
Position 91-1 on software revenue recognition. Revenue from software
licenses is recognized upon delivery if no significant vendor
obligations exist. VCSA and VCC had no significant revenue for the
year ended December 31, 1996. VCA did license its technology during
1996. Revenue from these license agreements was recognized upon
payment of the license fees and is included in license revenue in the
accompanying consolidated statements of operations.
Cash and Cash Equivalents
The Company considers cash on deposit and investments with an original
maturity of three months or less to be cash equivalents.
Short-Term Investments
Short term investments consist primarily of U.S. Treasury obligations
and certificates of deposit with original maturities at the date of
purchase beyond 3 months and less than 12 months. Such short-term
investments are carried at cost, which approximates fair value.
Receivables
Receivables at December 31, 1996 consist of the following:
1996
Trade accounts receivables $188,052
Notes receivable 157,325
Employee receivables 19,500
License and other receivables 251,216
--------
616,093
Less allowance for doubtful accounts (141,033)
--------
$475,060
========
The Company periodically evaluates the requirement for providing for
credit losses on its accounts receivable. Criteria used by management
to evaluate the adequacy of the allowance for doubtful accounts
include, among others, the creditworthiness of the customer, prior
payment performance, and the age of the receivable.
Inventories
Inventories consist of consumable supplies and repair parts and are
carried at the lower of cost or market. Inventories are valued using
the first-in, first-out method. The majority of the inventory at
December 31, 1996 consisted of finished goods for resale or use in the
consumables service business of Colorocs.
Property and Equipment
The Company's property and equipment are mainly comprised of office
equipment, furniture, and leasehold improvements. The useful lives
of this property and equipment are between one and seven years.
Goodwill and Intangible Assets
Goodwill and intangible assets at December 31, 1996 include the value
assigned to the exclusive rights to the STB from VCSA of $250,000
(Note 1), the value assigned to the exclusive rights for the STB from
Walzer, a related party, of $700,000 (Note 1) and goodwill of
approximately $142,000 from the purchase of COPS (Note 4). The
goodwill and intangible assets are being amortized using the straight
line method over their useful lives of 5 years.
Other Assets
Other assets consist primarily of a prepaid license fee of
approximately $161,000 paid by VCA to Acorn Computers Limited
("Acorn"), an unrelated entity, for the use of Acorn's operating
system in the VCA STB. This license fee was payable in three equal
installments due at the execution of the agreement, 30 days after the
execution of the agreement and 60 days after the execution of the
agreement. The agreement is for one year and is renewable for an
additional one year term upon the payment of 150,000 British pounds.
VCA or its sub-licensers are also required to pay royalties on every
STB sold. The above payment can be used to offset the royalties
required under the agreement within the first 24 months of the
agreement. Royalties are payable on a quarterly basis and is based on
the number of STB's sold. No sales of the STB occurred in 1996 and no
royalties were paid. At December 31, 1996, the Company had an
additional commitment of $85,000.
Income Taxes
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes" ("SFAS 109"). Under the asset and
liability method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and net operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which these temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes that enactment date. A valuation
allowance is recorded when it appears it is more likely than not that
some or all of deferred tax assets will not be realized.
Accrued Liabilities
Accounts payable and accrued liabilities at December 31, 1996 consist
of the following:
1996
Trade accounts payable $2,339,128
Accrued liabilities 39,987
Accrued bonus 111,109
Accrued taxes, legal and professional 99,000
----------
$2,589,224
==========
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification
Certain prior year amounts have been reclassified to conform to the
current year presentation.
Earnings Per Share
The computation of earnings per share is based on the weighted average
number of shares of common stock outstanding during the period plus
the effect, if any, of shares of common stock issuable under stock
options. Common stock equivalents were antidilutive for 1996.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of," to be effective for
fiscal years beginning after December 15, 1995. The adoption of this
statement as of January 1, 1996 did not have any impact on the
Company's financial position or results of operations.
The American Institute of Certified Public Accountants has issued an
exposure draft to amend the provisions of Statement of Position 91-1,
"Software Revenue Recognition." The adoption of the standards in the
current version of the exposure draft would not be expected to have a
significant impact on the Company's consolidated financial statements.
Accounting Standards Yet to Be Adopted
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities,"
which the Company is required to adopt in 1997. SFAS No. 125 requires
the Company to recognize the financial and servicing assets it
controls and the liabilities it has incurred, derecognize financial
assets when control has been surrendered, and derecognize liabilities
when extinguished. The Company's management does not believe that the
adoption of this pronouncement will have a material impact on the
Company's financial position or results of operations. Other issued
but not yet required FASB standards are not currently applicable to
the Company's operations.
2. SHORT-TERM BORROWINGS
As of December 31, 1996, VCA had a $1,500,000 line of credit from a
bank which bears interest at the prime rate (8.25% at December 31,
1996). As of December 31, 1996, VCA had an outstanding balance of
$712,500 under this line of credit. The line was guaranteed and 100%
collateralized in cash by the chairman of the board of directors of
the Colorocs who is also the chairman of the board of VCA for up to
$1,500,000. The line of credit is also collateralized by certificates
of deposit of the Company of $94,685 included in short-term
investments in the accompanying consolidated balance sheet. The line
of credit expires May 23, 1997. Subsequent to year end, VCA borrowed
an additional $787,500 under the line of credit for a total balance of
$1,500,000.
On November 11, 1996, the Company borrowed $500,000 from the chairman
of the board of directors. The note is due May 12, 1997 and bears
interest of prime plus 2% (10.25% as of December 31, 1996) and is
collateralized by all of the assets of the Company. The Company paid
approximately $4,000 in interest to the director in connection with
this loan.
In connection with the sale of VCA discussed in Note 1, VCA has
received bridge financing in the amount of $450,000 contemplated from
NetChannel, Inc. The bridge financing is due August 31, 1997, carries
an interest rate of 8%, and is not collateralized. VCA also received
$250,000 from an additional third party manufacturer as a bridge loan.
This bridge loan is due May 27, 1997, carries an interest rate of 8%,
and is collateralized by all of the accounts receivable of VCA.
3. DEBT GUARANTEES
The debt guarantees of the Company and related entities and parties
are as follows:
[BULLET] The $1,500,000 line of credit discussed in Note 2 has been
guaranteed and 100% collateralized by cash for up to
$1,500,000 by the chairman of the board of directors of
Colorocs who is also chairman of the board of VCA. The
guarantee is secured by all of the assets of VCA and
Colorocs. The chairman was issued warrants in connection
with this debt guarantee (See Note 10).
[BULLET] The chairman of the board of Colorocs, who is also chairman
of the board of VCA, has loaned VCA $500,000 as discussed
in Note 2. The guarantee is secured by all of the assets of
VCA and Colorocs.
[BULLET] One June 7, 1996, an additional member of the board of
directors of Colorocs agreed to guarantee up to $1,500,000
of VCA debt for a period of up to five years. The guarantee
is secured by all of the assets of VCA. Warrants were also
issued to this board member in connection with the guarantee
(see Note 10). This board member did not fulfill the debt
guarantee prior to year end and the related warrants were
canceled.
[BULLET] Colorocs agreed to guarantee up to $1,000,000 of VCA debt
for a period of five years. Colorocs has the first
requirement to guarantee debt of VCA prior to the guarantees
noted above. Colorocs was issued warrants in connection
with the guarantee (see Note 10).
4. LICENSING AGREEMENTS
In December 1996, VCA entered into a technology licensing agreement
with VCC, a related entity, which allowed VCC to use VCA's On-TV[TM]
which allows Internet access to consumers using a television set by
means of the ViewCall On-TV[TM] Service. This agreement has an
original term of three years and is renewable upon agreement by both
parties. The Company recorded approximately $433,000 from VCC in
license revenue in the accompanying consolidated statement of
operations.
In November 1996, VCA entered into an agreement with Boca Research,
Inc. ("Boca"), an unrelated entity, to license the STB reference
design to Boca. Boca agreed to pay $500,000 for this license. As of
December 31, 1996 Boca had paid $250,000 of this amount and the
Company recognized this amount as license revenue in the accompanying
consolidated statement of operations. The Company deferred the
remaining $250,000 and has included this amount as current deferred
income in the accompanying consolidated balance sheet. Boca is
required to pay the remaining amount by August 1997.
In 1995, the Company entered into certain licensing agreements to use
the Colorocs' patented double transfer, single pass to paper color
imaging system. The Company recorded other income for the year ended
December 31, 1995 for technology licensing of $4,273,906, net of
direct expenses. The Company has deferred approximately $875,000 of
income under these agreements as of December 31, 1996 and 1995.
Income from these licensing agreements is shown net in other income in
the accompanying consolidated statement of operations for the year
ended December 31, 1995. The Company had a $2,250,000 receivable from
one customer as of December 31, 1995, which was paid in 1996.
5. JOINT VENTURE
In June 1996, VCA and VCE formed a 50/50 joint venture, ViewCall
Technology, Inc. ("VCT"), to develop the browser technology that VCA
will use in its STB reference design. VCA, VCE, and Walzer
transferred all their rights to the browser technology to VCT. VCA
invested $1,000,000 during 1996 for the development and implementation
of the technology. VCT granted a royalty-free perpetual exclusive
license for North America to VCA and granted a royalty-free perpetual
exclusive license for Europe to VCE and also granted a license to the
rest of the world to Walzer upon payment of certain royalties, as
defined. The investment of $1,000,000 is included in the 1996
research and development expense in the accompanying consolidated
statement of operations. VCT had no operations for the year ended
December 31, 1996.
6. ACQUISITION
In December 1995, the Company acquired substantially all of the assets
of CoOperative Printing Solutions, Inc. for $47,872 in cash and 19,231
shares of the Company's common stock valued at approximately $100,000.
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the acquired assets and liabilities have
been recorded at their estimated fair values at the date of
acquisition. Allocation of the purchase price of the acquisition
resulted in goodwill of $168,303, which is being amortized over five
years. The acquisition was not significant to the Company.
7. INCOME TAXES
The provision for income taxes included in net income consists of a
provision of $1,332,000 for the year ended December 31, 1995. There
was no provision for or benefit from income taxes for the year ended
December 31, 1996 as a result of the establishment of a valuation
allowance. The principal differences between the federal statutory
tax rate and the provision for income taxes for the year ended
December 31, 1995 are as follows:
1995 1996
Federal statutory tax rate 34.0% 34.0%
State taxes, net of federal tax benefit 4.0 4.0
Increase in valuation allowance 0.0 (38.0)
Other 0.1 0.0
---- ----
38.1% 0.0%
==== ====
At December 31, 1995 and 1996, the Company had net operating loss
carryforwards and research and development tax credit carryforwards
for federal income tax purposes of approximately $13,088,000 and
$20,126,000 and $349,000 and $403,000, respectively, which are
available to offset future taxable income, if any, through 2009.
Additionally, in 1995, the Company had a capital loss carryforward of
approximately $3,812,000 which expired in 1996. The Company has
approximately $47,000 in foreign tax credit carryforwards which expire
in 1999. If there is a change in ownership of greater than 50% of
the outstanding shares of the Company's capital stock, as defined,
the Company's ability to utilize its net operating losses will be
subject to the limitations imposed by Internal Revenue Code Section
382. These limitations could significantly affect the Company's
utilization of those losses.
The tax effect of temporary differences that give rise to deferred tax
assets and liabilities as of December 31, 1996 is as follows:
1996
Deferred tax assets:
Inventory reserves $ 97,000
Research and development credit carryforward 403,000
Net operating loss carryforwards 7,648,000
Foreign tax credit carryforwards 47,000
Other asset basis differences:
Deferred licensing income 333,000
Patents 67,000
Other, net 103,000
------------
Gross deferred tax assets 8,698,000
Deferred tax liabilities:
Depreciation (21,000)
Total deferred tax assets 8,677,000
Valuation allowance (8,677,000)
------------
Net deferred tax assets $ --
=============
The change in the valuation allowance for deferred tax assets for the
years ended December 31, 1995 and 1996 was as follows:
1995 1996
Balance, beginning of year $6,178,000 $7,350,000
Decrease in valuation allowance 1,172,000 1,327,000
---------- ----------
Balance, end of year $7,350,000 $8,677,000
========== ==========
Future realization of any net operating loss carryforward generated
prior to December 10, 1993, the date of bankruptcy, should first
reduce to zero the reorganization value in excess of amounts allocable
to identifiable assets and other intangible assets until exhausted and
thereafter be reported as an increase in additional paid-in capital.
As a result, in 1995, the tax provision first reduced patent
intangible assets by $49,000, the only remaining amount of
reorganization value in excess of amounts allocable to identifiable
assets and other intangible assets. The remaining 1995 tax provision
was a realization of a pre December 10, 1993 net operating loss
carryforwards and was recorded as an increase to additional paid-in
capital.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future
taxable income by the Company during the periods in which those
temporary differences become deductible. Management considers the
projected future taxable income and tax planning strategies in
determining the valuation allowance.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company is obligated under a noncancelable lease agreement for its
corporate office space. In addition, the Company leases various
office equipment at its corporate office under noncancelable lease
agreements expiring in May 1999. Following is a schedule of future
minimum payments under the agreements:
Year Amount
1997 $178,000
1998 59,000
1999 23,000
--------
$260,000
========
Rent expense for the year ended December 31, 1996 and 1995 was $85,708
and $55,935, respectively.
In March 1997, VCA was given a notice of default in relation to an
operating lease agreement entered into in 1996 for the lease of
certain space. The lease agreement requires lease payments of
approximately $12,000 per months for a term of 3 years with a total
commitment of approximately $430,000. The Company has not entered the
space and has not paid any amounts under the lease for 1997. The
lessor is seeking full performance under the lease agreement. The
Company has accrued for $90,000 at December 31, 1996 which represents
management's estimate of the amount of exposure under the lease
agreement that will not be covered by subleasing income.
Litigation
On December 16, 1996, a director of Colorocs filed suit in Superior
Court of Gwinnett County against VCA in connection with the debt
guarantee discussed in Note 3. The director agreed to guarantee debt
of VCA for up to $1,500,000. In connection with this guarantee, the
director was issued a warrant to purchase 750,000 shares of VCA common
stock for $0.70 per share. On November 6, 1996, VCA issued a letter
to the director to provide $750,000, representing one-half of the
guaranteed indebtedness to be funded by November 11, 1996. No funds
were received by VCA before November 11, 1996. On November 11, 1996,
VCA notified the director of the default and provided 3 days to cure
the default. After the 3 day period elapsed, VCA canceled the
warrants for 750,000 share of commons stock of VCA claiming the
director was in default of the guarantee. The director claims that at
no time was there a refusal to perform under the debt guarantee and
claims that VCA failed to provide a reasonable time period to perform
the obligation. The director claims that the warrants can not be
canceled, and upon canceling by VCA, VCA was in default of the debt
guarantee agreement and relieved the director of the obligation. The
director is seeking judgment that the warrant was fully vested and
earned and could not be canceled. The Company plans to vigorously
defend this action and prosecute a counterclaim for the guarantee
amount.
The Company is subject to legal proceedings and claims which have
arisen in the normal course of business. In the opinion of
management, the amount of potential liability with respect to these
actions will not materially affect the financial position or results
of operations of the Company.
Employment Agreements
The Company has certain employment agreements with members of
management at December 31, 1996. The significant employment agreement
terms are as follows:
Colorocs:
[BULLET] The president and chief operating officer of Colorocs has an
employment agreement for a term of 12 months beginning April
17, 1996 for a base salary of $160,000 and 101,500 options
that vested 2/3 at the date of the signing of the agreement
and 1/3 at the one year anniversary. The employment
agreement also includes a 3 year nonsolicitation and
nondisclosure covenant.
VCA:
[BULLET] The executive vice president and chief operating officer of
VCA has an employment agreement for a term of 12 months
beginning December 2, 1996. The agreement provides for a
base salary of $160,000 and an eligible bonus of up to
$100,000. The agreement provides for the grant of 170,000
options to purchase common stock of VCA at $0.70 per share.
Subsequent to year end, the employee was issued an
additional 240,000 options to purchase common stock of VCA
at $0.70 per share. Additionally, upon a merger,
consolidation or change in ownership of VCA by more than
50%, the employee receives two times the yearly salary and
bonus noted above. The agreements contain nondisclosure and
nonsolicitation covenants as well.
[BULLET] VCA also has various other employment agreements with other
vice presidents granting salary of up to $125,000 and
performance bonuses of up to $100,000 based on management
and the board of directors' discretion. These agreements
contain nondisclosure and nonsolicitation covenants as well.
9. LONG-TERM INVESTMENTS
During 1995, the Company purchased 250,000 shares of common stock at
$1 per share or approximately 3% of VCE. VCE develops and markets a
low-cost television set top box that provides users with direct access
to the Internet through a television and an ordinary telephone line.
In connection with its investment in VCE, the Company obtained a
six-month exclusive license and an option to acquire a permanent
exclusive license, to distribute the STB in North America and Mexico.
This investment is included in the accompanying consolidated balance
sheets as of December 31, 1996 and 1995.
During 1995, the Company sold its investment in Savin Corporation for
$144,000 in cash. The related investment account and unrealized gain
on marketable equity securities were eliminated.
10. SHAREHOLDERS' EQUITY
During April 1995, the Company's board of directors authorized a
1-for-20 reverse stock split. During December 1995, the Company's
board of directors authorized a 25-for-1 split-up effective in the
form a dividend. All share and per share amounts in the accompanying
financial statements have been restated to reflect the 1-for-20
reverse stock split and the 25-for-1 split-up effective in the form of
a dividend. In 1996, the Company paid $13,273 to repurchase certain
fractional shares as a result of the stock split.
In 1996, an executive of the Company sold Colorocs common stock prior
to holding the stock for six months. The profit of $5,750 on that
sale was paid to the Company by the executive.
Warrants
During 1996 and subsequent to year end, VCA issued the following
warrants:
[BULLET] On June 7, 1996, VCA issued warrants to purchase 100,000
shares of common stock of VCA at an exercise price of $0.70
per share to a director related to the contribution of
browser technology and the Walzer VCE license. The warrants
expire June 7, 2001 and are fully vested at December 31,
1996.
[BULLET] On June 7, 1996, VCA issued warrants to purchase 500,000
shares of common stock of VCA at an exercise price of $0.70
per share to Colorocs for the debt guarantee discussed in
Note 3. These warrants expire June 6, 2001 and were fully
vested at December 31, 1996. On January 16, 1997, these
warrants were canceled and new warrants to purchase 937,500
shares of common stock of VCA at an exercise price of $0.70
per share were issued to Colorocs. These warrants expire
January 16, 2002. All of these warrants were canceled on
April 2, 1997. On April 2, 1997, VCA issued warrants to
purchase 875,000 shares of common stock of VCA at an
exercise price of $0.70 per share to Colorocs. These
warrants expire April 4, 2002. These changes were made in
relation to the changes in the structure of the debt
guarantee. See Note 8, "Litigation".
[BULLET] On June 7, 1996, VCA issued warrants to purchase 750,000
shares of common stock of VCA at an exercise price of $0.70
per share to the chairman of the board of Colorocs who is
also a member of the board of directors of VCA for the debt
guarantee discussed in Note 3. These warrants expire June 6,
2001 and were fully vested at December 31, 1996. On January
16, 1997, these warrants were canceled and new warrants to
purchase 1,062,500 shares of common stock of VCA at an
exercise price of $0.70 per share were issued to the
chairman. Additional warrants were issued due to the amount
of the debt guarantee. Subsequent to year-end, VCA issued
warrants to purchase 62,500 shares of VCA common stock to
the chairman as the debt owed by VCA was not paid by March
1, 1997. These warrants expire January 16, 2002.
[BULLET] On June 7, 1996, VCA issued warrants to purchase 750,000
shares of common stock of VCA at an exercise price of $0.70
per share to a director of Colorocs for the debt guarantee
discussed in Note 3. These warrants expire June 6, 2001. In
November 1996, VCA canceled the warrants for non performance
under the debt guarantee as discussed in Note 8 under the
heading "Litigation."
[BULLET] On September 16, 1996, VCA issued warrants to purchase
500,000 shares of common stock of VCA at an exercise price
of $5.00 per share to a consumer electronics partner of VCA.
These warrants expire September 16, 2002 and vest over time
as defined in the agreement. At December 31, 1996, 125,000
of the warrants were vested.
[BULLET] On October 5, 1996, VCA issued warrants to purchase 37,500
shares of common stock of VCA at an exercise price of $2.00
per share to an unrelated consultant of VCA. These warrants
expire September 30, 2001 and were fully vested at December
31, 1996.
[BULLET] Subsequent to year end, VCA issued warrants to purchase
50,000 shares of VCA common stock at an exercise price of
$0.70, 137,500 shares of VCA common stock at an exercise
price of $1.00, 130,334 shares of VCA common stock at an
exercise price of $2.00, and 66,000 shares of VCA common
stock at an exercise price of $3.00. These warrants expire
on dates ranging from February 6, 2002 to February 26, 2007
and were issued to employees and consultants.
The value assigned to the above warrants was not material to the
operations of the Company for the year ended December 31, 1996.
11. STOCK OPTIONS
During 1994, the Company adopted the 1994 Director Stock Option Plan,
("Colorocs Director Plan") which provides for the issuance of up to
156,250 shares of the Company's common stock, and the 1994 Employee
Stock Option Plan, ("Colorocs Employee Plan") which, as amended in
1995, provides for the issuance of up to 62,500 shares of Colorocs'
common stock. In addition to options granted in connection with the
1994 Director Stock Option Plan and the 1994 Employee Stock Option
Plan, as amended, the board of directors granted 101,500 stock options
in connection with an employment agreement in 1995. The vesting of
the stock options has varied as determined by the board of directors.
During 1996, VCA adopted the ViewCall America, Inc. 1996 Long-Term
Incentive Plan (the "1996 VCA Plan"), which provides for the issuance
of options for up to 2,500,000 stock options for common stock of VCA,
stock appreciation rights, restricted stock awards, performance share
awards, dividend equivalent awards, or other stock-based award issued
under this plan. A summary of the stock option activity under all
plans is as follows:
Colorocs Director and Employee Plans:
<TABLE>
Shares Price Range Weighted Average Exercise Price
<S> <C> <C> <C>
Outstanding-December 31, 1994 234,850 $0.95 $0.95
Granted in 1995 113,025 $1.50 - 3.32 $1.81
Canceled in 1995 (78,600) $1.50 $1.50
-------
Outstanding-December 31, 1995 269,275 $0.95 - 3.32 $1.31
Granted in 1996 58,846 $5.20 - 7.75 $6.50
Exercised in 1996 (40,150) $0.95 - 3.32 $1.19
Canceled in 1996 (25,025) $3.32 - 7.75 $7.57
-------
Outstanding-December 31, 1996 262,946 $0.95 - 7.75 $1.89
=======
Vested and exercisable options
at December 31, 1996 227,789 $0.95 - 7.75 $1.92
=======
Vested and exercisable options
at December 31, 1995 192,750 $0.95 - 3.32 $0.98
=======
Options available for future
grants at December 31, 1996 82,329
=======
</TABLE>
1996 VCA Plan:
<TABLE>
Shares Price Range Weighted Average Exercise Price
<S> <C> <C> <C>
Outstanding-December 31, 1994 0 -- --
Granted in 1995 0 -- --
Canceled in 1995 0 -- --
------- ------------ -----
Outstanding-December 31, 1995 0 -- --
Granted in 1996 2,210,225 $0.70 - 4.00 $0.77
Exercised in 1996 0 -- --
---------
Outstanding-December 31, 1996 2,210,225 $0.70 - 4.00 $0.77
=========
Vested and exercisable options
at December 31, 1995 and 1996 0 -- --
=========
Options available for future
grants at December 31, 1996 289,775
=========
</TABLE>
All Colorocs options granted in 1995 and 1996 were granted at fair
market value on the date of grant. All VCA options granted during
1996 had a fair market value of $0.70 per share.
Subsequent to year end, the Company granted an additional 402,000
options to purchase VCA common stock for $0.70 to $2.00 per share.
The Company also accelerated the vesting of 142,942 options to
purchase VCA common stock related to termination agreements with
certain employees. Employees forfeited options to purchase 161,783
shares of VCA common stock as a result of the termination agreements
subsequent to year end. All forfeited options under the 1996 VCA Plan
are then available for grant.
During 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" which defines a fair value-based method of accounting
for an employee stock option plan or similar equity instrument.
However, it also allows an entity to continue to measure compensation
cost of those plans using the method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees." Entities electing to remain with the
accounting in APB No. 25 must make pro forma disclosures of net income
(loss) and, if presented, earnings (loss) per share, as if the fair-
value based method of accounting defined in the statement had been
applied.
The Company has elected to account for the Colorocs Director Plan, the
Colorocs Employee Plan and the 1996 VCA Plan under APB No. 25;
however, the Company has computed for pro forma disclosure purposes
the value of all options granted during 1995 and 1996 using the
Black-Scholes option pricing model as prescribed by SFAS No. 123 using
the following weighted average assumptions used for grants in 1995 and
1996:
Risk-free interest rate.......................... 5.37 to 7.00%
Expected dividend yield.......................... 0
Expected lives................................... 6 years
Expected volatility.............................. 64%
The total value of the options granted during the years ended December
31, 1995 and 1996 were computed as approximately $82,000 and $277,000,
respectively, which would be amortized over the vesting period of the
options. If the Company had accounted for these plans in accordance
with SFAS No. 123, the Company's reported pro forma net income (loss)
and pro forma net income (loss) per share for the years ended
December 31, 1995 and 1996 would have changed to the following pro
forma amounts (in thousands):
<TABLE>
1995 1996
<S> <C> <C>
Net income (loss):
As reported in the financial statements $2,163 $(7,160)
Pro forma in accordance with SFAS No. 123 $2,081 $(7,437)
Net income (loss) per common and
common equivalent share:
Primary - as reported in the financial statements 1.08 (3.51)
Primary -pro forma in accordance with SFAS No. 123 1.04 (3.64)
Fully diluted - as reported in the financial statements 1.07 (3.51)
Fully diluted -pro forma in accordance with SFAS No. 123 1.03 (3.64)
</TABLE>
As noted above, the 1996 VCA Plan provides for the issuance of stock
appreciation rights, performance share awards, dividend equivalent
awards, or other stock based awards. No such awards were issued in
1996.
12. RELATED-PARTY TRANSACTIONS
Colorocs has a consulting agreement with the chief executive officer
and chairman of the board of Colorocs who is also chairman of the
board of VCA. Colorocs paid approximately $200,000 in consulting fees
to the director for the year ended December 31, 1996.
As noted in Note 3, Colorocs and certain shareholders of the Company
entered into agreements to guarantee VCA debt, subject to certain
conditions. In connection therewith, VCA granted warrants to purchase
shares of VCA common stock as discussed in Note 10.
As discussed in Note 2, the Company borrowed $500,000 from the chief
executive officer and chairman of the board of directors, a related
party. The note is collateralized by all of the assets of the Company
and its subsidiaries. During 1996, the Company paid approximately
$4,000 in interest to the chairman of the board of directors in
connection with this note payable.
Reference is herein made to Notes 1, 4, 5 and 9 for transactions
related to the Company, VCA, VCSA, VCC, VCT, VCE and the related
ownership and accounting for each.
13. CONCENTRATION OF CREDIT RISK AND SUPPLY OF INVENTORY
On October 1, 1994, the Company entered into an agreement with Sharp
Corporation ("Sharp") for the continuing supply of spare parts and
consumables for the Company's line of copiers and printers. This
agreement provided the Company with an assured supply of essential
parts and consumables for a five- year period with exclusive
distribution rights in the United States, Canada, and Mexico. Total
purchases from Sharp by the Company were approximately $159,000 and
$529,000 for the years ended December 31, 1996 and 1995, respectively.
In connection with the agreement with Sharp, the Company is
repurchasing 54,082 shares of Colorocs common stock issued to Sharp as
a result of the Company's bankruptcy proceedings for a sum of
approximately $200,000 unless the agreement is previously terminated
by either party. According to the agreement, the full sum of money
must be paid before the shares are returned. The Company has paid
approximately $125,000 to Sharp for these shares as of December 31,
1996. This amount is included in prepaid expenses in the
accompanying consolidated balance sheet.
A single customer accounted for approximately $329,000 or 18% of the
Company's revenues, for the year ended December 31, 1995. Accounts
receivable from this one customer accounted for approximately $19,000
of accounts receivable as of December 31, 1995. VCA sold two
technology license agreements to VCC and Boca in 1996 for
approximately $933,000 and recognized approximately $683,000 as
license revenue in the accompanying statements of operations. At
December 31, 1996, the Company had receivables of $250,000 related to
these license agreements included in the accompanying consolidated
balance sheet. No other customer accounted for more that 10% of
income in 1996.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes amounted to $0 and $35,473 for the years
ended December 31, 1996 and 1995, respectively. Cash paid for
interest was $8,679 and $0 for the years ended December 31, 1996 and
1995, respectively.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
On December 8, 1995, the engagement of BDO Seidman, LLP, the
independent accountants which audited the Company's financial
statements for the fiscal year ended December 31, 1994, was officially
terminated by the Company and the Board of Directors of the Company
approved the engagement of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ended December 31, 1995.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by Item 401 of Regulation S-B regarding the
directors of the Company is set forth under the caption "Proposal 1 -
Election of Directors - Nominees" in the Company's Proxy Statement
for the 1997 Annual Meeting of Shareholders to be held on June 23,
1997. Such information is incorporated herein by reference.
Information required by Item 401 of Regulation S-B regarding the
executive officers of the Company is set forth below. Information
required by Item 405 of Regulation S-B regarding compliance with the
reporting requirements of Section 16(a) of the Securities Exchange Act
of 1934 by the Company's directors and executive officers and
beneficial owners of more than ten percent of the Company's Common
Stock is set forth under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement
referred to above. Such information is incorporated herein by
reference.
Executive Officers
Rudolph P. Russo, age 67, Chairman of the Board and Chief Executive
Officer. Mr. Russo has served as a director of the Company since
December 10, 1993. He served as Co-Chairman of the Board from
December 10, 1993 until May 13, 1994 and has served as Chairman of the
Board since May 13, 1994. Mr. Russo is an attorney-at-law in
Poughkeepsie, New York where he has been in private practice since
1957.
Alan McKeon, age 34, President and Chief Operating Officer. Mr. McKeon
has served as President since joining the Company in April 1995.
Following the incorporation of VCA in June 1996 he has additionally
served as President and Chief Executive Officer of VCA. From 1991
until 1995, Mr. McKeon served as Vice President, Sales of Iterated
Systems, Inc., a leader in technology for digital compression. From
1989 until 1991, Mr. McKeon served as OEM business development manager
for Microsoft Ltd., and from 1986 until 1989, he served as European
Sales Manager for a subsidiary of Dun and Bradstreet Software.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
The information required by this item regarding executive compensation
is set forth under the captions "Proposal 1 - Election of Directors -
- -Director Compensation" and "Executive Compensation" in the Proxy
Statement referred to in Item 9 above. Such information is
incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item regarding ownership of the
Company's Common Stock as of December 31, 1996 by certain persons is
set forth under the captions "Voting - Principal Shareholders" and
"Proposal 1 - Election of Directors - Nominees" in the Proxy Statement
referred to in Item 9 above. Such information is incorporated herein
by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item regarding certain relationships
and transactions between the Company and certain of its affiliates is
set forth under the caption "Certain Transactions" in the Proxy
Statement referred to in Item 9 above. Such information is
incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed with or incorporated by
reference in this report. Where such filing is made by
incorporation by reference to a previously filed registration
statement or report, such registration statement or report is
identified in parentheses. The Company will furnish any exhibit
upon request to Investor Relations, Colorocs Information
Technologies, Inc., 5600 Oakbrook Parkway, Suite 240, Norcross,
GA 30093-1843, (770) 447-3570. There is a charge of $0.50 per
page to cover expenses of copying and mailing. See the Index of
Exhibits included with the exhibits filed as part of this report.
2.1 Plan of Reorganization, as amended and restated on March 17,
1993, and as modified by Modification filed on June 2, 1993
(Exhibit 2.1 to the Company's Current Report on Form 8-K
dated September 30, 1991)
3(i) Articles of Incorporation of the Company, as amended through
December 21, 1995 (Exhibit 3.1 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995)
(a) Articles of Amendment to the Articles of Incorporation
effective as of May 9, 1995
(b) Articles of Amendment to the Articles of Incorporation
effective as of December 13, 1995
3(ii)Bylaws of the Company, as amended through June 7, 1990
(Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1990)
10.1 Lease Agreement by and between AP Southeast Portfolio
Partners, L.P. and the Company dated February 14, 1994.
(Exhibit 10.6 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1993)
10.2 Lease Agreement by and between The Northwestern Mutual Life
Insurance Company and VCA dated October 21, 1996 - filed
herewith
10.3 Spare Parts and Consumables (Partscon) Agreement dated
October 1, 1994 between the Company and Sharp Corporation
(Exhibit 10.5 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994)
10.4 Asset Purchase Agreement among the Company, Guy Mariande and
CoOperative Printing Solutions, Inc. dated December 5, 1995
(Exhibit 10.5 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995)
10.5 Management Compensation Agreements:
(a) 1994 Employee Stock Option Plan (Exhibit 10.6(a) to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995)
(b) 1994 Director Stock Option Plan (Exhibit 10.6(b) to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995)
(c) Employment Agreement, as amended, between the Company
and Alan McKeon dated April 4, 1995 (Exhibit 10.6(c) to
the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995)
10.6 Debt guarantee agreements:
(a) Agreement dated June 7, 1996 between VCA and Rudolph P.
Russo - filed herewith
(b) Agreement dated June 7, 1996 between VCA and Colorocs
Information Technologies, Inc. - filed herewith
10.7 Warrant agreements:
(a) Agreement dated June 7, 1996 between VCA and Rudolph P.
Russo - filed herewith
(b) Agreement dated June 7, 1996 between VCA and Colorocs
Information Technologies, Inc. - filed herewith
10.8 Warrants:
(a) Warrant dated January 16, 1997 for the purchase of VCA
Common stock by Rudolph P. Russo - filed herewith
(b) Warrant dated April 2, 1997 for the purchase of VCA
Common stock by Rudolph P. Russo - filed herewith
(c) Warrant dated April 2, 1997 for the purchase of VCA
Common stock by Colorocs Information Technologies, Inc.
- filed herewith
21 Subsidiaries of the Issuer - filed herewith
23 Consent of Independent Accountants - filed herewith
27 Financial Data Schedule - filed herewith
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by the Company during
the quarter ended December 31, 1996.
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the issuer has caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized,
on April 10, 1997.
Colorocs Information Technologies, Inc.
(Issuer)
By: /s/ Alan McKeon
Alan McKeon
President and Chief Operating
Officer
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Issuer and in the capacities indicated on April 10,
1997.
Signatures
/s/ Rudolph P. Russo /s/ Alan McKeon
Rudolph P. Russo, Chairman of Alan McKeon, President, Chief
the Board and Chief Executive Operating Officer and Chief
Officer Financial and Accounting Officer
/s/ Melton Harrell /s/ Joseph Wallace
Melton Harrell, Director Joseph Wallace, Director
/s/ Nicholas M Russo
Nicholas M Russo, Director
COLOROCS INFORMATION TECHNOLOGIES, INC.
INDEX OF EXHIBITS
Exhibit No. Description Page No.
2.1 Plan of Reorganization, as amended and
restated on March 17, 1993, and as modified
by Modification filed on June 2, 1993
(Exhibit 2.1 to the Company's Current Report
on Form 8-K dated September 30, 1991)
3(i) Articles of Incorporation of the Company,
as amended through December 21, 1995
(Exhibit 3.1 to the Company's Annual Report
on Form 10-KSB for the year ended December
31, 1995)
(a) Articles of Amendment to the Articles of
Incorporation effective as of May 9, 1995
(b) Articles of Amendment to the Articles of
Incorporation effective as of December 13, 1995
3(ii) Bylaws of the Company, as amended through June
7, 1990 (Exhibit 3.1 to the Company's Quarterly
Report on From 10-Q for the quarter ended
September 30, 1990)
10.1 Lease Agreement by and between AP Southeast
Portfolio Partners, L.P. and the Company dated
February 14, 1994. (Exhibit 10.6 to the
Company's Annual Report on Form 10-KSB for
the year ended December 31, 1993)
10.2 Lease Agreement by and between The Northwestern
Mutual Life Insurance Company and VCA dated
October 21, 1996
10.3 Spare Parts and Consumables (Partscon) Agreement
dated October 1, 1994 between the Company and
Sharp Corporation (Exhibit 10.5 to the Company's
Annual Report on Form 10-KSB for the year ended
December 31, 1994)
10.4 Asset Purchase Agreement among the Company, Guy
Mariande and CoOperative Printing Solutions,
Inc. dated December 5, 1995 (Exhibit 10.5 to
the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995)
10.5 Management Compensation Agreements:
(a) 1994 Employee Stock Option Plan (Exhibit
10.6(a) to the Company's Annual Report on
Form 10-KSB for the year ended December 31,
1995)
(b) 1994 Director Stock Option Plan (Exhibit
10.6(b) to the Company's Annual Report on
Form 10-KSB for the year ended December 31,
1995)
(c) Employment Agreement, as amended, between
the Company and Alan McKeon dated April 4,
1995 (Exhibit 10.6(c) to the Company's
Annual Report on Form 10-KSB for the year
ended December 31, 1995)
10.6 Debt guarantee agreements:
(a) Agreement dated June 7, 1996 between VCA
and Rudolph P. Russo
(b) Agreement dated June 7, 1996 between VCA
and Colorocs Information Technologies, Inc.
10.7 Warrant agreements:
(a) Agreement dated June 7, 1996 between VCA
and Rudolph P. Russo
(b) Agreement dated June 7, 1996 between VCA
and Colorocs Information Technologies, Inc.
10.8 Warrants:
(a) Warrant dated January 16, 1997 for the
purchase of VCA Common stock by Rudolph
P. Russo
(b) Warrant dated April 2, 1997 for the
purchase of VCA Common stock by Rudolph
P. Russo
(c) Warrant dated April 2, 1997 for the
purchase of VCA Common stock by Colorocs
Information Technologies, Inc.
21 Subsidiaries of the Issuer
23 Consent of Independent Auditors
27 Financial Data Schedule
OAKBROOK PLACE
LEASE AGREEMENT
LESSOR: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
c/o Peterson Management Company, Inc.
Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
LESSEE: VIEWCALL AMERICA, INC.
Oakbrook Drive
Suite 165
Norcross, Georgia 30093
TABLE OF CONTENTS
Article Description Page
1 Leased Premises 1
2 Term 1
3 Base Rent & Security Deposit 1
4 Signs 2
5 Usage, Laws & Insurance 2
6 Janitorial Service 3
7 Services 3
8 Rental Escalation 4
9 Repairs & Maintenance 4
10 Compliance With Rules & Regulations 4
11 Lessor Improvements 4
12 Alterations & Improvements 5
13 Condemnation 5
14 Fire & Casualty 5
15 Hold Harmless 6
16 Quiet Enjoyment 6
17 Lessor's Right of Entry 6
18 Assignment or Sublease 6
19 Surrender & Holding Over 7
20 Defaults by Lessee 7
21 Remedies for Lessee's Default 7
22 Late Charges 9
23 Interest on Past Due Obligations 9
24 Acts of God 9
25 Attorney's Fees & Homestead 9
26 Lessee Estoppel Certificate 10
27 Rights of Mortgagees 10
28 Definitions 10
29 Successors 10
30 Extrinsic Evidence 10
31 Notice 11
32 Real Estate Commission 11
33 Conditional Mutual Waiver of Subrogation 11
34 Amendments 11
35 Enforceability 12
36 Cumulative 12
37 Applicable Law 12
38 Limitation of Lessor's Liability 12
39 Exceptions to Demise 12
40 Statement of Acceptance 12
41 Hazardous Substances 12
42 Commencement Date Agreement 13
Signatures 13
Rules & Regulations 14
Special Stipulations (Exhibit "A") 15
Commencement Date Agreement (Exhibit "B") 18
Floor Plan (Exhibit "C") 19
Site Plan (Exhibit "D") 20
Sign Criteria (Exhibit "E") 21
Schedule A (Exhibit "F") 22
OAKBROOK PLACE
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into between THE NORTHWESTERN
MUTUAL LIFE INSURANCE COMPANY hereafter referred to as "Lessor" and
VIEWCALL AMERICA, INC. hereafter referred to as "Lessee".
WITNESSETH:
1. LEASED PREMISES. In consideration of the rents, terms provisions
and covenants of this Lease Agreement, Lessor hereby leases, lets and
demises to Lessee and Lessee hereby takes, the following describes
premises (hereafter referred to as the "Leased premises" or "demised
premises or the premises") containing approximately 21,375 square
feet situated in Suite 165 at 1555 Oakbrook Drive, Norcross, GA
30093 which, together with driveways, sidewalks, loading areas and
grounds appurtenant thereto, is hereinafter referred to as "the
building"). A floor plan of the premises is attached hereto as
Exhibit "C". the premises are more particularly described as follows:
Approximately 21,375 square feet in a 92,678 square foot
multi-tenant business/service building located in Suite 165 at
1555 Oakbrook Drive, Norcross, Georgia, 30093. Approximately
19,200 square feet exists as finished office area.
2. TERM. Subject to and upon the conditions set forth below, the
term of this Lease shall commence at the earliest of either (1) the
date upon which the Lessee takes possession of the demised premises,
or (2) 12:01 a.m. on the 1st day of January, 19 97, (hereinafter
called "Commencement Date"), and shall end at midnight on the 31st
day of December, 1999, unless sooner terminated as hereinafter
provided (hereinafter called the "Lease Term"). The "Commencement
Date" shall constitute the commencement of this Lease Agreement for
all purposes, whether or not Lessee has actually taken possession.
3. BASE RENT AND SECURITY DEPOSIT. (a) Lessee agrees to pay to
Lessor as annual rental for the Leased Premises, the sum of See
Attached Special Stipulation #43 DOLLARS ($__________) payable
monthly in equal installments of See Attached Special Stipulation
#43 DOLLARS ($________), without deduction or setoff, in advance on
the first day of each month. Lessee agrees annually, throughout the
term of this Lease, to increase the base rental due under this Lease,
in the following manner: Beginning with the January 1, 1998, rental
payment, Lessee's monthly base rental shall be increased by an amount
equal to Three percent ( 3%) ) of the previous year's monthly base
rental payment; on each subsequent January 1 , Lessee shall
increase the monthly base rental payments over the previous year's
monthly base rental payment by a like percentage.
The aforesaid payments of rent are to be made to Lessor at Peterson
Management Company, Inc., PO Box 10228, Atlanta, Georgia, 30339, or at
any other place which Lessor, from time to time might designate.
A prorated monthly installment, based on a thirty (30) day month,
shall be paid in advance if the lease term begins on any date other
than the first day, or terminates on any date other than the last day
of any month.
(b) On the date of execution of this Lease by Lessee, there
shall be due and payable by Lessee the first month's rental and a
security deposit in an amount equal to one monthly rental installment
to be held for the performance by Lessee of Lessee's covenants and
obligations under this Lease, it being expressly understood that the
deposit shall not be considered an advance payment of rental or a
measure of Lessor' damage in case of default by Lessee. Upon the
occurrence of any event of default by Lessee or breach by Lessee of
Lessee's covenants under this Lease, Lessor may, from time to time,
without prejudice to any other remedy, use the security deposit to the
extent necessary to make good any arrears of rent and/or damage,
injury, expense or liability caused to Lessor by the event of default
or breach of covenant and thereafter Lessee hereunder shall promptly
restore the resulting deficiency in said deposit.
(c) The base rental set forth in the preceding subparagraph (a)
shall be subject to escalation as provided elsewhere in this Lease.
4. SIGNS. (a) Lessee shall have the right to install
non-illuminated letters, numerals, sign cuts, logos, etc., which will
be provided and erected by Lessor at Lessee's expense, to be mounted
at or immediately adjacent to the leased premises. Exact location of
the signage will be uniform and determined by Lessor. Sign will be of
standard uniform design determined by Lessor.
(b) If the leased premises have a rear steel service door
(intended for deliveries or shipping), Lessee shall have the right to
install a standard sign of uniform design determined by Lessor.
(c) Lessee agrees that no other signs of description shall be
erected or painted in the or about the premises. If Lessee installs
any sign which does not conform to the foregoing, Lessor shall have
the right to remove the same and Lessee shall be liable for any and
all expenses incurred by Lessor in said removal.
5. USAGE, LAWS AND INSURANCE. (a) Lessee's business consists of
sales, development and service of consumer electronics. The demised
premises shall be used only for general office the purpose of
receiving, storing, shipping and selling (other than retail) products,
materials and merchandise made and/or distributed by Lessee and for
such other lawful purpose as may be incidental thereto. Lessee shall
at its own cost and expense obtain any and all licenses and permits
necessary for any such use. Lessee shall comply with all laws,
ordinances, rules and regulations of all state, federal, municipal or
other agencies having jurisdiction relating to the use, condit8ion and
occupancy of the premises, and shall promptly comply with all
governmental orders and directives for the correction, prevention and
abatement of nuisances in, upon, or connected with the premises, all
at the Lessee's sole expense. Without Lessor's prior written consent,
Lessee shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly inflammable.
Lessee will not permit the premises to be used for any purpose which
would render the insurance thereon void or the insurance risk more
hazardous; nor shall the demised premises by used for any illegal
purposes; nor in violation of any regulation of any governmental body;
nor in any manner to create any nuisance or trespass. If the
insurance premiums on the building in which the leased premises are
located are increased due to Lessee's use of the premises, then,
Lessee shall immediately upon demand of Lessor, pay such increased in
premiums as additional rent.
(b) Liability. Lessee, at Lessee's sole cost and expense, shall
maintain and keep in effect throughout this lease insurance against
liability for bodily injury (including death) or property damage in or
about the Premises, and the Building, under a policy of comprehensive
general public liability insurance, with such limits as to each as may
be reasonably required by Lessor from time to time by not less than
$1,000,000 for each occurrence for bodily injury (including death) and
$1,000,000 for property damage. The policies of comprehensive general
public liability insurance shall name Lessor and Lessee as the insured
parties. Each policy required by this paragraph (b) shall provide
that it shall not be cancelable without at least thirty (30) days
prior written notice to Lessor and to any mortgagee named in an
endorsement thereto and shall be issued by an insurer and in a form
satisfactory to Lessor. At least five (5) days prior to the
commencement date, a certificate of insurance shall be delivered to
Lessor, and Lessor shall be named a additional insured. Each such
policy shall have attached thereto an endorsement to the effect that
no act or omission of Lessee shall affect the obligation of the
insurer to pay Lessor the full amount of any loss sustained by Lessor.
(c) Insurance. Commencing in the year 1997 and continuing
thereafter during each year of the term of this Lease, in the event
Lessor's per square foot cost of insurance on the building increase
above the 1997 base year cost per square foot, then Lessee shall pay
to Lessor as additional rent the amount of such increase computed by
multiplying the number of square feet in the Premises by the amount of
such increase. The term "increase" shall include all fire and
extended casualty insurance on the building and all liability coverage
on the grounds, sidewalks, driveways, parking areas and any other
exterior or interior areas, together with such other insurance
protection as if from time to time reasonably necessary by Lessor.
Lessor shall notify Lessee in writing, on or reasonably after Lessor's
annual receipt of insurance billing, of the amount of any such
increase over the preceding calendar year in insurance, and Lessee
shall pay the amount of such increase to Lessor as additional rent
within ten (10) calendar days after delivery of such notice to
Premises or receipt thereof by Lessee.
In the event Lessee's occupancy causes any increase of premium for any
insurance policy on the premises or the building or any part thereof
above the rate of the least hazardous type of occupancy legally
permitted in the premises, Lessee shall pay the additional premium of
such insurance policies by reason thereof.
6. JANITORIAL SERVICE. Lessee shall pay directly all charges for
dumpster, trash removal and janitorial services performed at the
demised premises during the term of this Lease. Lessee reserves the
right to locate trash containers and dumpsters which shall be placed
by Lessee in the service area of the demised premises. Lessee agrees
at all times to keep the sidewalks and loading areas directly adjacent
to its demised premises in a sightly condition and free and clear of
rubbish, trash and other debris.
7. SERVICES. (a) Lessee, at its sole cost and expense, shall pay
all charges for gas and electricity used by Lessee during the term of
this Lease. Lessee shall contract directly with the utility companies
and pay all charges directly to said utility companies, exclusive of
water to the premises and common area utilities. Lessee acknowledges
that Lessor shall not be responsible for any failure in the
electrical, gas or water supply.
(b) Lessee shall be responsible for obtaining, maintaining and
paying the cost of any and all telephone service to the premises.
(c) Lessor will contract for common area maintenance, electric
current and electric lighting service to the public portions and
special service areas of the building in the manner and to the extend
deemed by Lessor to be standard. Failure by Lessor to any extent to
furnish these defined services, or any cessation thereof, resulting
from cause beyond the control of Lessor shall neither render Lessor
liable in any respect for damages to either person or property, be
construed as an eviction of Lessee, work an abatement of rent or
relieve Lessee from fulfillment of any covenant of this Lease.
Should any of the equipment or machinery for which Lessor is
responsible breakdown, or for any cause cease to function properly,
Lessor shall use reasonable diligence to repair the same promptly, but
Lessee shall have no claim for rebate of rent or damages on account of
any interruptions in service occasioned from repairs. Lessor will not
undertake the responsibility to repair any equipment that is not owned
by Lessor.
(d) Lessee agrees to pay to Lessor monthly during the term
hereof, as additional rent, without notice or demand and without any
deduction whatsoever, a Water and Common Area Maintenance Charge equal
to one-twelfth (1/12th) of Lessee's proportionate share (as defined in
paragraph 8 (b), below) of the Water and Common Areas Operating costs
(as hereinafter defined) of the Building. Lessee shall pay an initial
minimum annual charge of $9,252.00 per year, in equal monthly
installments of $771.00 each. Within one hundred twenty (120) days
following the end of each calendar year during the term hereof, Lessor
shall furnish to Lessee a statement in reasonable detail of the actual
Water and Common Area Operating Costs for the preceding calendar year.
Thereupon, Lessee shall immediately reimburse Lessor for any shortfall
in the current year to date, or Lessee shall be credited by Lessor any
overage in the amount of said annual payments, said credit to be
applied to the Water and Common Area Maintenance Charges for the
current twelve (12) month period. The actual Water and Common Area
Operating Costs are reported in said statement shall be used as the
basis for calculating Lessee's annual Water and Common Area
Maintenance Charge for the present twelve (12) month period. The
obligation to the annual adjustment in the Water and Common Area
Maintenance Charge in accordance with this paragraph shall survive the
expiration or other termination of this lease. In no event shall the
Water and Common Area Maintenance Charge for any year be less than the
minimum annual charge stated above.
In the event that the Commencement Date or the termination date
of this lease should fall on a date other than January 1st or December
31st, then, in such event the Water and Common Area maintenance Charge
shall be pro-rated for that calendar year based upon the number of
days during the year that Lessee's lease was in effect.
The term "Water and Common Area Operating Costs" means the total
cost and expense incurred by Lessor in supplying water and sewer to
the building and in operating and maintaining the Common facilities
(as hereinafter defined), and specifically including, without
limitation, the costs of gardening and landscaping, repairs,
utilities, lighting, cleaning and sprinkler systems. The term "Common
Facilities" means all areas provided by Lessor, from time to time, for
the common or joint use and benefit of the occupants of the building
and their employees, agents, servants, customers and other invitee,
including, without limitation, lawns, parking areas, access roads,
driveways, retaining walls, landscaped areas, sidewalks, and exterior
walkways.
(e) Lessee shall have an annual maintenance check-up performed on
the heating, ventilation and air conditioning systems in the demised
premises. Lessee shall provide Lessor with a copy of the maintenance
report and shall pay for any repairs resulting from said check-up.
Lessee shall be solely responsible for the maintenance and upkeep of
the hearing, ventilation and air conditioning systems in the demised
premises.
8. RENTAL ESCALATION. (a) Lessee agrees to pay to Lessor monthly
during the term hereof, as additional rent, without notice or demand
therefore and without any deduction whatsoever, Lessee's proportionate
share of the amount by which real estate valorem taxes, governmental
and public charges and special assessments imposed against the
property containing the leased premises, including all costs and fees
incurred by Lessor in contesting same, exceed the sum of the 1997 base
year cost per square foot, which shall be Lessor's share of said
taxes, charges and assessments. Lessee's payments under this
subparagraph 8(a) shall be based on Lessor's reasonable estimates of
tax bills or any future tax levied in lieu of or in additional to real
property taxes for the applicable period, and Lessor shall set forth
in written notice to Lessee the total estimated amount of said taxes,
charges and assessments and Lessee's proportionate share of same. If,
based upon applicable tax bills, payment of estimated amounts by
Lessee resulted in an overpayment to Lessor for a particular calendar
year, Lessee shall be entitled to a credit against its payments for
taxes, charges and assessments in the current calendar year.
(b) For the purposes of this and all other escalation clauses,
"Lessee's proportionate share" shall mean 21,375 / 92,678 = 23.06%
(c) If any governmental authority having jurisdiction now or
hereafter imposes upon Lessor, pursuant to statute, ordinance,
regulation, order or otherwise, a tax, levy or other imposition based
upon the rentals received by Lessor under this Lease, the above
paragraph 8(a) notwithstanding, Lessee shall without prior demand, pay
to Lessor the amount thereof at the time or times the same may fall
due with respect to the term of this Lease. The tax, levy or
imposition to which reference is made shall include sales, excise or
similar tax, but shall not include capital stock, estate or
inheritance taxes imposed upon Lessor. These sums shall be paid as
additional rent beyond any other rent reserved herein.
9. REPAIRS AND MAINTENANCE. (a) Lessor agrees that it shall at all
times, at its sole cost and expense, except as noted herein, keep the
roof, and exterior walls (excluding windows, window glass, plate glass
and all doors), in good repair and condition, reasonable wear and tear
excepted, and will with reasonable promptness during regular business
hours, make all repairs thereto which may be necessary during the term
of this Lease. Lessee shall be responsible for all other maintenance
and repair required in connection with the leased premises. Lessor
shall not be liable to Lessee, except as expressly provided in this
Lease, for any damage or inconvenience, and Lessee shall not be
entitled to any abatement or reduction of rent, by reason of any
repairs, alterations or additions made by Lessor under this Lease.
(b) Lessee shall promptly at its own cost and expense repair or
replace any damage or injury to all or any part of the leased premises
caused by Lessee or Lessee's agents, employees, invitee, licensees,
visitors or any other person, thing or event not caused by Lessor's
gross negligence, provided, however, if Lessee fails to make the
repairs or replacements promptly, Lessor may, at his option, make the
repairs and replacements and Lessee shall reimburse the cost to Lessor
on demand.
(c) Lessee shall not commit or allow any waste or damage to be
committed on any portion of the leased premises and at the termination
of this Lease, by lapse or time or otherwise, Lessee shall deliver the
leased premises to Lessor in as good condition as the date of first
possession of Lessee, ordinary wear and tear excepted. The cost and
expense of any repairs necessary to restore the condition of the
leased premises shall be paid by Lessee.
10. COMPLIANCE WITH RULES AND REGULATIONS. Lessee will comply with
the Building Rules and Regulations, which are set forth below (Page
14) Lessor shall have the right at all times to change the rules and
regulations of the building or to amend them in any reasonable manner
as may be deemed advisable for the safety, care and cleanliness, and
for the preservation of good order, of the property. All changes and
amendments in the rules and regulations of the building will be sent
by Lessor to Lessee in writing and shall thereafter be carried out and
observed by Lessee.
11. LESSOR IMPROVEMENTS. Lessee acknowledges that unless there is a
Special Stipulation requiring Lessor to construct any improvements in
the demised premises prior to Lessee's occupancy, Lessor shall have no
such obligation prior to subsequent to the commencement of the term of
this lease and Lessee shall accept possession of the demised premises
"as is". Taking possession of the demised premised by Lessee shall be
conclusive evidence, as against Lessor, that Lessee accepts the same
"as is" and that the demised premises and the building were in good
and satisfactory condition at the time such possession was so taken.
12. ALTERATIONS AND IMPROVEMENTS. (A) Lessee shall not make or
allow to be made any alteration or physical additions in or to the
leased premises without first obtaining the written consent of Lessor
which consent shall not be unreasonably withheld. Any alterations,
physical additions or improvements to the leased premises made by
Lessee shall at once become the property of Lessor and shall be
surrendered to Lessor upon the termination of this Lease; provided,
however, this clause shall not apply to movable equipment or furniture
owned by Lessee which may be removed by Lessee at the end of the term
of this Lease if Lessee is not then in default and if such equipment
and furniture is not the subject to any other rights, liens and
interests of Lessor. At the termination of this lease, and upon
written notice from Lessor to Lessee, Lessee shall be required to
remove all alterations, and improvements, and additions at Lessee's
sole expense.
(b) Lessee shall have no authority, express or implied, to create
or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Lessor in the favor of
any person dealing with Lessee, including those who may furnish
materials or perform labor for any construction or repairs, and each
such claims shall affect and each such lien shall attach to, if at
all, only the leasehold interest granted to Lessee by this instrument.
Lessee covenants and agrees that it will pay or cause to be paid all
sums legally due and payable by it on account of any labor performed
or materials furnished in connection with any work performed on the
premises and that it will save and hold Lessor harmless from any and
all loss, cost or expense (including, but not limited to, reasonable
attorney's fees) based on or arising out of asserted claims or liens
against, the leasehold estate or against the rights, titles and
interest of the Lessor in the premises or under the terms of this
Lease. Without limiting the generality of the foregoing, Lessee shall
unconditionally remove or discharge, by bonding or otherwise, any
mechanic's or materialman's lien without twenty (20) days after
receiving notice thereof.
13. CONDEMNATION. (a) If, during the term of this Lease, or any
extension or renewal thereof, an amount of space in excess of
twenty-five percent (25%) of the leased premises is taken for any
public or quasi-public use under any governmental law, ordinance or
regulation, or by eminent domain or by private purchase in lieu
thereof, this Lease shall terminate effective on the date physical
possession is taken by the by condemning authority, and no further
rent shall be due by Lessee.
(b) In the event a portion of the demised premises shall be taken
for any public or any quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain or by private
sale in lieu thereof, and this Lease is not terminated as provided in
subparagraph (a) above, Lessor may, at Lessor's sole risk and expense,
restore and reconstruct the building and other improvements situated
on the demised premises to the extent necessary to make it reasonable
tenantable. The rent payable under this Lease during the unexpired
portion of the term shall be equitably adjusted (on the basis of the
number of square feet before and after such event) as of the date on
which the condemning authority takes possession and the lease shall
otherwise continue in full force and effect.
(c) Any award for any taking of all or any part the Demised
Premises under the power of eminent domain shall be the property of
the Lessor, whether such award shall be made as compensation for
diminution in value of the leasehold or for taking of the fee.
Nothing contained herein, however, shall be deemed to preclude Lessee
from obtaining, or to give Lessor any interest in, any award to Lessee
for damages for cessation or interruption of Lessee's business. See
Special Stipulation #49
14. FIRE AND CASUALTY. (a) If the leased premises should be totally
destroyed by fire, tornado or other casualty, or if the premises
should be so damaged that the rebuilding or repairs cannot reasonably
be completed within one hundred eighty (180) working twenty (120) days
after the date of the casualty, this Lease shall terminate and the
rent shall be abated for the unexpired portion of the Lease, effective
as of the date of the casualty.
(b) If the leased premises should be partially damaged by fire,
tornado or other casualty, and rebuilding or repairs can reasonable be
completed within one hundred eighty (180) working twenty (120) days
from the date of the casualty, this Lease shall not terminate, but
Lessor may at its sole risk and expense proceed with reasonable
diligence to rebuild or repair the building or other improvements to
substantially the condition in which they existed prior to the damage.
If the demised premises are to be rebuilt or repaired and are
untenantable in whole or in part following the damage, and the damage
or destruction was not caused or contributed by intentional act or
negligence of the Lessee, its agents, employees, invitee or others for
whom the Lessee is responsible, the rent payable under this Lease
during the period for which premises are inhabitable shall be adjusted
to such an extent as may be fair and reasonable under the
circumstances. In the event that Lessor fails to complete the
necessary repairs or rebuilding within one hundred eighty (180) twenty
(120) days from the date of the casualty, Lessee may at its option
terminate this Lease by delivering written notice of termination to
Lessor, whereupon all rights and obligations under the Lease shall
cease to exist; provided, however, that said 180 120 day period may be
extended by a period of up to 180 60 days for which Lessor is delayed
from completing said repairs and rebuilding due to fire, theft, labor,
dispute, governmental regulation, act of God or other cause beyond
Lessor's control. Lessee may exercise its right to cancel the Lease
pursuant to the preceding sentence only by delivering said notice to
Lessor within (10) twenty (20) business days after the date by which
Lessor is required to complete said repairs or rebuilding.
(c) Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed of trust
covering the premises requires that the insurance proceeds be applied
to such indebtedness, the Lessor shall have the right to terminate
this Lease by delivering written notice of termination to Lessee,
whereupon all rights and obligations hereunder shall cease and
terminate, subject to any rights of Lessor for amounts due hereunder
and unpaid.
15. HOLD HARMLESS. Lessor shall not be liable to Lessee's employees,
agents, invitees, licensees or visitors, or to any other person, for
any injury to person or damage to property on or about the leased
premises caused by the negligence or misconduct of Lessee, its agents,
servants or employees, or of any other person entering upon the leased
premises under express or implied invitation by Lessee, or caused by
the building and improvements located on the leased premises becoming
out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the leased premises or due to any other
cause. Lessee agrees to indemnify and hold harmless Lessor from any
loss, attorney's fees, expenses or claims arising out of any such
damage or injury. Any liability insurance which may be carried by
Lessor with respect to the Leased Premises shall be for the sole
benefit of Lessor and under its sole control. See Special
Stipulation #50
16. QUIET ENJOYMENT. Subject to the terms of this Lease, Lessor
hereby covenants and agrees that Lessee, upon payment of the required
rents and performing the terms, conditions, covenants and agreements
contained in this Lease, shall peaceably and quietly have, hold and
enjoy the leased premises during the full term of this Lease as well
as any extension or renewal without let or hindrance by Lessor or its
agent; provided, however, that Lessee accepts this Lease subject and
subordinate to any recorded mortgage, deed of trust or other lien
hereafter placed on the leased premises, and Lessee agrees upon demand
to execute additional instruments subordinating this Lease as Lessor
may require.
17. LESSOR'S RIGHT OF ENTRY. With prior notice except in the case of
emergency Lessor shall have the right, at all reasonable hours, to
enter the leased premises for the following; inspection; cleaning or
making repairs; alterations or additions as Lessor may deem necessary
or desirable within the last six months of the Lease for purposes of
showing the leased premises to prospective Lessees (notwithstanding
anything in the Rules and Regulations to the contrary); determining
Lessee's use of the leased premises; or determining if any act of
default under this Lease has occurred; showing the Leased Premises to
prospective lessees or purchasers provided that Lessor shall not
interfere with the operation of Lessee's business.
18. ASSIGNMENT OR SUBLEASE. Lessor shall have the right to transfer
and assign, in whole or in part, its rights and obligation sin the
building and property that are the subject of this Lease and its
rights and obligations under this Lease. Upon such an assignment,
Lessor shall be fully and automatically released from all obligations
and liabilities under this lease. Lessee shall not assign this Lease
or sublet all or any part of the leased premises without the prior
written consent of Lessor which consent shall not be unreasonably
withheld. Lessor shall have the option, upon receipt from Lessee of
written request for Lessor's consent to subletting or assignment, to
cancel this Lease or modify the lease for a portion of the Premises in
a sublease as of the date the requested subletting or assignment is to
be effective. The option shall be exercised, if at all, within
fifteen (15) days following Lessor's receipt of said written request
from Lessee by delivery to Lessee of written notice of Lessor's
intention to exercise the option. In the event Lessor terminates this
Lease pursuant to the preceding sentence, Lessor shall have the right
to lease the premises to any entity whatsoever, including without
limitation Lessee's proposed assignee or sublessee.
In the event of any assignment or subletting, Lessee shall
nevertheless at all times, remain fully responsible and liable for the
payment of the rent and for compliance with all of its other
obligations under the terms, provisions and covenants of this Lease.
In the event that Lessor consents to any assignment or sublease of any
portion of the Demised Premises, Lessee shall pay Lessor, within five
(5) days of receipt, seventy-five percent (75%) fifty percent (50%)
of the amount of rent payable by such sublessee or assignee in excess
of the amount of rent payable by Lessee (net of costs associated with
such sublease or assignment including but not limited to tenant
improvements, commissions, free rent, and other concessions)
hereunder with respect to the portion of the Demised Premises sublet
or assigned. Lessee covenants and agrees to provide Lessor with a
quarterly statement, prepared and verified by a certified public
accountants, stating the amount of rent paid in cash or other non-cash
considerations by its sublessee(s) or assignee(s) during such
quarterly period. If such statement shows Lessee failed to make the
full payments required by this Paragraph, a late charge equal to tent
percent (10%) of the amount due shall be paid by Lessee as additional
rent hereunder. Upon the occurrence of any "event of default" as
defined below, if all or any part of the leased premised are then
assigned or sublet, Lessor, in addition to any other remedies provided
by this Lease or provided by law, may at its option, collect directly
from the assignee or sublessee all rents becoming due to Lessee by
reason of the assignment or sublease and Lessor shall have a security
interest in all properties on the leased premise to secure payment of
such sums. Any collection directly by Lessor from the assignee or
sublessee shall not be construed to constitute a novation or a release
of Lessee from the further performance of its obligations under this
Lease. Consent to one assignment or sublease shall not destroy or
waive this provision, and all later assignments and sublease shall
likewise be made only upon the prior written consent of Lessor.
Sublessees or assignees shall become liable to Lessor for all
obligations of the Lessee hereunder without relieving Lessee's
liability hereunder. For purposes of this Paragraph 18, if Lessee is
a corporation, a transfer of at least 50% of the voting shares of
Lessee shall be deemed as assignment of this lease. If Lessee is a
joint venture, general partnership or limited partnership, a transfer
of 50% or more of the interests held by the general partner(s) of
Lessee shall be deemed as assignment of this lease. See Special
Stipulation #51.
19. SURRENDER AND HOLDING OVER. Lessee shall deliver up and
surrender to Lessor possession of the demised premises upon the
expiration of the Lease, or its termination in any way, in as good
condition and repair as the same shall be at the commencement of said
term (damage by fire and other perils and normal wear and tear
excepted), and shall deliver the keys at the office of Lessor or
Lessor's agent. Should Lessee or any party claiming under Lessee
remain in possession of the demised premises, or any part thereof,
after any termination of this Lease, no tenancy or interest in the
demised premises shall result therefrom and no holding over by Lessee,
whether with or without consent of Lessor shall operate to extend this
Lease except as otherwise provided, but such holding over shall be an
unlawful detainer and all such parties shall be subject to immediate
eviction and removal, and Lessee shall, upon demand, pay to Lessor as
liquidated damages, a sum equal to twice one and one half times the
rent which would have been payable by Lessee had the holdover period
been a part of the original term of this lease.
20. DEFAULTS BY LESSEE. The following events shall be deemed to be
events of default by Lessee under this Lease:
(a) Lessee shall fail to pay any installation of the rent hereby
reserved when due, and such failure shall continue for a period of
five (5) ten (10) days from the date such installment was due. Lessor
to provide written notice thereof to Lessee provided that no such
notice shall be required if Lessee has received a similar notice
within 365 days prior to such violation or failure.
(b) Lessee shall be come insolvent, or shall make a transfer in
fraud of creditors or shall make an assignment for the benefit of
creditors.
(c) Lessee shall file a petition under any section or chapter of
any federal bankruptcy act, as amended, or under any similar law or
statute of the United States or any State thereof; or Lessee shall be
adjudged bankrupt or insolvent in proceedings filed against Lessee
thereunder.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of Lessee.
(e) The filing of an involuntary petition against Lessee as the
subject debtor under the Bankruptcy Code or other insolvency laws,
which is either not dismissed within thirty (30) days of filing, or
results in the issuance of an order for release against the debtor,
whichever is later.
(f) Lessee shall desert or abandon all or any substantial portion
of the premises
(g) Lessee shall assign this Lease or sublet all or any part of
the leased premises in violation of Paragraph 18.
(h) Lessee shall fail to comply with any terms, provisions or
covenant of this Lease (other than the foregoing in this paragraph
20), and shall not cure such failure within twenty (20) thirty (30)
days after written notice thereof to Lessee provided that no such
notice shall be required if Lessee has received a similar notice
within 365 days prior to such violation or failure.
(i) the institution of a foreclosure action upon all or a
substantial portion of Lessee's real or personal property.
(j) Lessee shall commit any act on the premises which is
inconsistent with the Declaration of Subdivision Regulations of
Oakbrook Center, Gwinnett County, Georgia, dated January 26, 1979, as
amended from time to time.
21. REMEDIES FOR LESSEE'S DEFAULT. (a) Upon the occurrence of any
of such events of default described in paragraph 20 hereof, Lessor
shall have the option to pursue any one or more of the following
remedies without notice or demand whatsoever.
(i) Terminate this Lease by giving written notice of such
termination to Lessee, in which event Lessee shall immediately
surrender the premises to Lessor, and if Lessee fails to do so, Lessor
may, without prejudice to any other remedy which it may have for
possession or arrearage in rent, enter upon and take possession of the
premises and expel or remove Lessee and any other person who may be
occupying such premises or any part thereof, or may recover possession
under and by virtue of the laws of the State of Georgia, without being
liable for prosecution or any claim of damages therefor and Lessee
agrees to pay to Lessor on demand the amount of all loss and damage
which Lessor may suffer by reason of such termination, whether through
inability to relet the premises on satisfactory terms or otherwise.
(ii) Should this Lease be terminated before the expiration of the
term of this Lease by reason of Lessee's default as hereinabove
provided, or if Lessee shall abandon or vacate the Demised Premises
before the expiration or termination of the term of this Lease without
having paid the full rental for the remainder of such term, Lessor
shall have the option to relet the Demised Premises for such rent and
upon such terms as are reasonable under the circumstances and , if the
full rental reserved under this Lease (and any of the costs, expenses
or damages indicated below) shall not be realized by Lessor, Lessee
shall be liable for all damages sustained by Lessor, including,
without limitation, deficiency in rent, reasonable attorney's fees,
brokerage fees and expenses of placing the Demised premises in first
class rentable condition. Lessor, in putting the Demised Premises in
good order or preparing the same for re-rental may, at Lessor's
option, make such alterations, repairs, or replacements in the Demised
Premises as Lessor, in its sole judgment, considers advisable and
necessary for the purpose of reletting the Demised Premises, and the
making of such alterations, repairs, or replacements shall in no event
be liable in any way whatsoever for failure to relet the Demised
Premises, or in the event that the Demised Premises are relet, for
failure to collect the rent under such reletting, and in no event
shall Lessee be entitled to receive the excess, if any, of such net
rent collected over the sums payable to Lessee to Lessors hereunder.
(iii) Enter upon the premises and do whatever Lessee is obligated
to do under the terms of this Lease and Lessee agrees to reimburse
Lessor on demand for any expenses which Lessor may incur in thus
effecting compliance with Lessee's obligations under this Lease, and
Lessee further agrees that Lessor shall not be liable for any damages
resulting to the Lessee from such action, whether caused by the
negligence of Lessor or otherwise.
(b) Nothing contained herein shall prevent the enforcement of any
claim Lessor may have against Lessee for anticipatory breach of the
unexpired term of this Lease. In the event of a breach or
anticipatory breach by Lessee of any of the covenants or provision
hereof, Lessor shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity as if reentry, summary
proceedings and other remedies were not provided for herein. Mention
in this Lease of any particular remedy shall not preclude Lessor from
any other remedy, in law or in equity. Lessee hereby expressly waives
any and all rights of redemption granted by or under any present or
future laws in the event of Lessee being evicted or dispossessed for
any cause, or in the event of Lessor obtaining possession of the
Demised Premises, by reason of the violation by Lessee of any of the
covenants and conditions of this Lease, or otherwise.
(c) Lessor shall have a lien upon the personal property of Lessee
moved in to the Demised Premises, as and for security for the rent and
other obligations of Lessee herein provided. In order to perfect and
enforce said lien, Lessor may, at any time after default by Lessee in
the payment of rent or default of other obligations to be performed or
complied with by Lessee under this Lease, seize and take possession of
any and all personal property belonging to Lessee which is found in
and upon the Demised Premises. If Lessee fails to redeem the personal
property so seized, by payment of whatever sum may be due Lessor under
and by virtue of the provisions of this Lease, then and in that event,
Lessor shall have the right, after twenty (20) days written notice to
Lessee of its intention to do so, to sell such personal property so
seized at public or private sale and upon such terms and conditions as
to Lessor may appear advantageous, and after the payment of all proper
charges incident to such sale, apply the proceeds thereof to the
payment of any balance due to Lessor on account of rent or other
obligations of Lessee pursuant to this Lease. In the event there
shall then remain in the hands of Lessor any balance realized from
the sale of said personal property as aforesaid, the same shall be
paid over to Lessee. The exercise of the foregoing remedy by Lessor
shall not relieve or discharge Lessee from any deficiency owed to
Lessor which Lessor has the right to enforce pursuant to any other
provision of this Lease.
(d) Assumption or Assignment by Trustee. (i) In the event Lessee
becomes the subject debtor in a case pending under the Bankruptcy
Code, Lessor's right to terminate this Lease pursuant to Paragraph
21(a)(i), shall be subject to the rights of the Trustee in bankruptcy
to assume or assign this Lease. The Trustee shall not have the right
to assume or assign this Lease unless the Trustee (a) promptly cures
all defaults under this Lease, (b) promptly compensates Lessor for
monetary damages incurred as a result of such default, and (c)
provides "adequate assurance of future performance" (as hereinafter
defined).
(ii) Adequate Assurance of Future Performance. Lessor and Lessee
hereby agree in advance that the phrase "adequate assurance of future
performance." As used in this Subparagraph 21(d)(ii), shall mean that
all of the following minimum criteria must be met: (a) the Trustee
must pay to Lessor, at the time the next payment of rent is then due
under this Lease, in addition to such payment of rent, an amount equal
to the next three (3) months rent due under this Lease, said amount to
be held by Lessor in escrow until either the Trustee or Lessee
defaults in its payments of rent or other obligations under this Lease
(whereupon Lessor shall have the right to draw upon such escrowee
funds) or until the expiration of this Lease (whereupon the funds
shall be returned to Trustee or Lessee); (b) the Lessee or Trustee
must agree to pay to Lessor, at any time the Lessor is authorized to
and does draw upon the funds escrowee pursuant to this Subparagraph
21(d)(ii), the amount necessary to restore such escrow account to the
original level required by said provision; [copyright] Lessee must pay
the cost of all services, if any, provided by Lessor for which Lessee is
charged (whether directly or through agents or contractors, and
whether or not the cost of such services is to be passed through to
Lessee) in advance of the performance or provision of such services;
(d) the Trustee must agree that liquidation sales, auctions, or other
non-first class business operations shall not be conducted on the
Demised Premises without Lessor's prior written approval; (e) the
Trustee must agree that the use of the Demised Premises as stated in
this Lease will remain unchanged; and (f) the Trustee must agree that
the assumption or assignment of this Lease will not violate or affect
the rights of other Lessees in the Building.
(iii) Failure to Provide Adequate Assurance. In the event of a
default under Paragraph 20, above, where Lessee is unable (a) to cure
its defaults, (b) to reimburse Lessor for its monetary damages, [copyright]
to pay when due the rent due under this Lease, or any other payments
required of Lessee under this Lease, or (d) to meet the criteria and
obligations imposed by Paragraph 21(d)(ii) above, then Lessee agrees
in advance that it has not met its burden to provide adequate
assurance of future performance, and this Lease may be terminated by
Lessor in accordance with Paragraph 21(a)(i) above.
22. LATE CHARGE. Anything contained in this lease to the contrary
not withstanding, in order to cover the extra expenses involved in
handling delinquent payments, Lessee shall pay a "late charge" of
$100.00 or ten percent (10%) five percent (5%) of base rent, whichever
is greater, when any installment of rent (base or otherwise, as may be
considered additional rental under this lease), is paid more than five
(5) ten (10) days after the due date thereof. It is hereby understood
that the late charge is for extra expenses incurred by the Lessor in
processing the delinquency.
23. INTEREST ON PAST DUE OBLIGATIONS. Any installment of rent (base
or otherwise, as may be considered additional rental under this lease)
or other charges or money obligations to be paid by Lessee hereunder
which is not paid within 30 days from the date due shall bear interest
at a rate of eighteen percent (18%) twelve percent (12%) per annum
(but in no event higher than the highest interest rate permitted by
law) from the due date until paid.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or constitute a forfeiture
or waiver of any rent due to Lessor hereunder or of any damages
accruing to Lessor by reason of the violation of any of the terms,
provisions and covenants herein contained. Now waiver by Lessor of
any violation or breach of any of the terms, provision and covenants
herein contained shall be deemed or construed to constitute a waiver
of any other violation or breach of any of the terms, provisions and
covenants herein contained. Lessor's acceptance of the payment of
rental or other payments hereunder after the occurrence of any event
of default shall not be construed as a waiver of such default, unless
Lessor so notifies Lessee in writing. Forbearance by Lessor to
enforce one or more of the remedies herein provided upon an event of
default shall not be deemed or construed to constitute waiver of such
default. If, on account of any breach or default by Lessee in
Lessee's obligations under the terms and conditions of this Lease, it
shall be come necessary to appropriate for Lessor to employ or consult
with an attorney concerning or to enforce or defend any of Lessor's
rights or remedies hereunder, Lessee agrees to pay all reasonable
attorney's fees. No act or thing done by the Lessor or its agents
during the term hereby granted shall be deemed an acceptance of the
surrender of the premises, and no agreement to accept a surrender of
said premises shall be valid unless in writing signed by Lessor. The
receipt by Lessor of rent with knowledge of the breach of any covenant
or other provisions contained in this Lease shall not be deemed or
construed to constitute a waiver of any other violation or breach of
any of the terms, provisions and covenants contained herein.
24. ACTS OF GOD. Lessor shall not be required to perform any
covenant or obligation in this Lease, or be liable in damages to
Lessee, so long as the performance or nonperformance of the covenant
or obligation is delayed, caused by or prevented by act of God or
force majeure.
25. ATTORNEY'S FEES AND HOMESTEAD. If any amount owing or payable
under this Lease are collected by or through an attorney at law,
Lessee the non-prevailing party agrees to promptly reimburse Lessor
the prevailing party for all reasonable attorney's fees. Lessee
waives all homestead rights and exemptions which Lessee may have under
any law as against any obligation owing this Lease and assigns so much
thereof to Lessor as may be necessary to secure payment and
performance of Lessee's obligations under this Lease.
26. LESSEE ESTOPPEL CERTIFICATE. At any time and from time to time,
Lessee agrees upon request in writing from Lessor, to execute,
acknowledge and deliver to Lessor, or to Lessor's mortgagee or
financial institution, a statement in writing certifying to all or any
part of the following information as Lessor shall request: (I) that
this Lease constitutes the entire agreement between Lessor and Lessee
and is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified
and stating the modification); (ii) the dates to which the base
rental, additional rental and other charges hereunder have been paid,
and the amount of any security deposits held by Lessor; (iii) that the
demised premises have been completed on or before the date of such
letter and that all conditions precedent to the Lease taking effect
have been carried out; (iv) that Lessee has accepted possession, that
the lease term has commenced, that Lessee is occupying the said
premises and that Lessee knows of no default under the Lease by Lessor
and there are no defaults or offsets which Lessee has against
enforcement of the Lease by Lessor; (v) the actual commencement date
of the Lease and the expiration date of the Lease; and (vi) that
Lessee's facility is open for business, provided such facts are true
and ascertainable. In the event Lessee fails to provide such letter
as above described within ten (10) twenty (20) days after Lessor'
written request therefore, Lessee does hereby make, constitute and
irrevocably appoint Lessor as its attorney-in-fact and in this name,
place and stead so to do.
27. RIGHTS OF MORTGAGEES. If the interests of Lessor under this
Lease shall be sold and/or assigned by reason of foreclosure of other
proceedings for enforcement of any first mortgage on the leased
premises, Lessee shall be bound to the transferee (whether mortgagee
or third party purchaser, either or whom is referred to herein as
"Purchaser") under the terms, covenants and conditions of this Lease
for the balance of the term remaining, and any extensions or renewals
that have been exercised by Lessee, with the same force and effect as
if the Purchaser were the Lessor under this Lease and Lessee agrees to
attorn to Purchaser provided Purchaser assumes in writing the
obligations of lessor hereunder. The attornment is to be effective
and self-operative without the execution of any further instruments
upon Purchaser succeeding to the interest of Lessor under this Lease.
The respective rights and obligations of Lessee and Purchaser upon the
attornment, to the extent of the then remaining balance of the term of
this Lease, and any exercised extensions and renewals shall be and are
the same as those set forth in the Lease.
28. DEFINITIONS. The following definitions apply to the terms
defined as those terms are used throughout this Lease.
(a) "Abandon" means the vacating of all or a substantial portion
of the leased premises by Lessee, whether or not Lessee is in default
of the rental payments due under this Lease.
(b) An "act of God" or "force majeure" is defined for purpose of
this Lease agreement as strikes, lockouts, sit-downs, material or
labor restrictions by a governmental authority, riots, floods,
washout, explosions, earthquakes, fire, storms, acts of the public
enemy, wars, insurrections and any other cause not reasonably within
the control of Lessor and which by the exercise of due diligence
Lessor is unable, wholly or in part, to prevent or overcome.
(c) Notwithstanding the provisions of Paragraph 2 hereinabove,
and without creating a conflict therewith, the taking of possession by
Lessee shall be conclusively deemed to establish that the improvements
have been completed and that the leased premises are in good and
satisfactory condition as of the date possession was so taken by
Lessee.
(d) "Real property tax" means all city, state, and county taxes
and assessments including special taxing, district taxes or
assessments, or any future taxes levied in lieu of or in addition to
real property taxes.
29. SUCCESSORS. This Lease and all the covenants, provisions and
conditions herein contained shall be binding upon and inure to the
benefit of Lessor and Lessee and their respective heirs, personal
representatives, successors and permitted assigns; provided, however,
that no assignment by, from, through or under Lessee in violation of
the provisions hereof shall vest in the assigns any right, title or
interest whatsoever. It is hereby covenanted and agreed that should
Lessor'' interest in the Leased premises cease to exist for any reason
during the term of the Lease, then notwithstanding the happening of
such event this Lease nevertheless shall remain unimpaired and in full
force and effect and Lessee hereunder agrees to attorn to the then
owner of the leased premises.
30. EXTRINSIC EVIDENCE. It is expressly agreed by Lessee, as a
material consideration for the execution of this Lease Agreement, that
this Lease, with the specific references to written extrinsic
documents, is the entire agreement of the parties; that there are, and
were, no verbal representations, understandings, stipulations,
agreements or promises pertaining to this Lease Agreement or the
expressly mentioned written extrinsic documents not incorporated in
writing in the Lease Agreement. It is likewise agreed that this Lease
may not be altered, waived, amended or extended except by an
instrument in writing, signed by both Lessor and Lessee.
31. NOTICE. (a) All rent and other payments required to made by
lessee shall be payable to Lessor at the address set forth below, or
any other address Lessor may specify from time to time by written
notice delivered to Lessee.
(b) All payments required to be make by Lessor to Lessee shall be
payable to Lessee at the address set forth below, or at any other
address within the United States as Lessee may specify from time to
time by written notice.
(c) Any notice or document required to be delivered by this Lease
shall be deemed to be delivered (whether or not actually received)
when deposited in the United States Mail, postage prepaid, certified
mail, return receipt requested, addressed to the parties at the
respective address set out below.
LESSOR: LESSEE:
The Northwestern Mutual Life Insurance ViewCall America, Inc.
Company
c/o Peterson Management Company, Inc. 1555 Oakbrook Drive
2849 Paces Ferry Road Suite 165
Suite 700 Norcross, GA 30093
Atlanta, GA 30339-3769 Attn: Mike Casey
Attn: Lease Administrator
With Copies to:
The Northwestern Mutual Life Insurance
Company
720 W. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Richard A. Schnell
and
The Northwestern Mutual Life Insurance
Company
Atlanta Regional Office
#5 Concourse Parkway
Suite 2410
Atlanta, GA 30328
Attn: Paul Gregory
32. REAL ESTATE COMMISSION. Lessee warrants that he has had no
dealings with any real estate Broker(s) or Agent(s) in connection with
the negotiation of this lease, excepting only Peterson Management
Company, Inc. for Lessor and William Leonard & Co. for Lessee and that
he knows of no other real estate Broker(s) or Agents(s) who is or
might be entitled to a commission in connection with this lease.
Lessor shall pay all brokerage commissions due and payable to the
Broker(s) or Agent(s) named above and such brokerage commission shall
be paid in accordance with a separate agreement between Lessor and
Broker(s) or Agent(s). Lessee shall indemnify Lessor from any other
commission claims by Brokers or Agents not named under this paragraph.
33. CONDITIONAL MUTUAL WAIVER OF SUBROGATION. Each party hereby
waives its right to recover against the other, for any losses or
claimed losses that are caused by or result from risks normally
covered by a standard policy of Fire and Extended Coverage Insurance
except where waiver has or would have the effect of invalidating or
denying either party's coverage under any Fire and Extended Coverage
Insurance policy held at the time of loss, in which case this Mutual
Waiver of Rights of Recovery shall be of no force or effect. Lessee
agrees to obtain an endorsement from Lessee's Fire and Extended
Coverage Insurer(s) that such insurer(s): (a) has waived its rights
for subrogation as against any party for who Lessee has waived its
right of recovery pursuant to the terms of this Lease, or (b) has
agreed that Lessee's coverage shall not be invalidated should the
Lessee-insured waive in writing prior to loss its right of recovery
for any loss covered by such policy, and to provide evidence of such
endorsement upon Lessor's request. Lessor agrees, to the extent is
does not act as a self-insurer, to obtain a similar endorsement from
Fire and Extended Coverage Insurer; however failure to obtain
endorsement shall not constitute a default under the terms of the
lease.
34. AMENDMENTS. No amendment to this Agreement shall be binding on
any of the parties to the Agreement unless it is in writing and
executed by all parties with the same formality as this Agreement is
executed.
35. ENFORCEABILITY. If any term, covenant or condition of this
agreement or the application thereof to any person or circumstances
shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement or the application of such terms, covenants and
conditions to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall be affected thereby and each
term, covenant or condition of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
36. CUMULATIVE. All right, powers and privileges conferred hereunder
upon the parties shall, unless otherwise provided, be cumulative and
not restricted to those given by Law.
37. APPLICABLE LAW. This Agreement shall be construed and
interpreted under the law of the State of Georgia.
38. LIMITATION OF LESSOR'S LIABILITY. If Lessor shall fail to
perform any covenant, term or condition of this Lease upon Lessor's
part to be performed, Lessee hereby releases Lessor from any personal
liability for such default. Should Lessee, as a consequence of such
default, recover a money judgment against Lessor, such judgment shall
be satisfied only out of (I) the proceeds of sale produced upon
execution of such judgment and levy thereon against Lessor's interest
in the entire demised premises and improvements thereon, (ii) the
rents or other income from such property receivable by Lessor and
(iii) the consideration received by Lessor from the sale of all or any
part of Lessor's interest in the entire demised premises, and Lessor
shall not be liable for any deficiency. The provisions of this
article are not designed to relive Lessor from the performance of any
of its obligations hereunder, nor do they constitute a liquidated
damages clause, but rather to limit Lessor's liability in the case of
recovery of a judgment against it, as aforesaid, nor shall nay of the
provisions of this Paragraph 38 be deemed to limit or otherwise affect
Lessee's right to obtain injunctive relief or specific performance or
avail itself of any other right or remedy which may be accorded Lessee
by law or this Lease. In the event of sale or other transfer of
Lessor's right title and interest in the building of which the demised
premises are a part and an assumption of this lease by the purchaser
or transferee, Lessor shall thereafter be released from all liability
and obligations hereunder. This paragraph shall inure to the benefit
of any such purchaser or transferee.
39. EXCEPTION TO DEMISE. Notwithstanding anything to the contrary
herein contained, this Lease is subject to all easements and other
restrictions and agreements affecting the Building or Demised
Premises, both recorded and unrecorded.
40. STATEMENT OF ACCEPTANCE. After completion of the Premises in
accordance with the terms of this Lease, Lessee, prior to occupancy,
will furnish Lessor with a written statement confirming Lessee's
acceptance of the Premises and confirming the Commencement Date of the
term of this Lease.
41. HAZARDOUS SUBSTANCES. (a) the term "hazardous substance(s)" as
used in the Lease, is defined as follows:
Any element, compound, mixture, solution, particle or substance,
which presents danger or potential danger for damage or injury to
health, welfare or the environment including, but not limited to: (i)
those substances which are inherently or potentially radioactive,
explosive, ignitable, corrosive, reactive, carcinogenic, or toxic and
(ii) those dangerous to health, welfare or to the environment by any
federal, municipal, state, county or other government or
quasi-governmental authority and/or any department or agency thereof.
Lessee represents and warrants to Lessor that at all times during
the terms of this Lease and any extensions or renewals thereof, Lessee
shall:
(a) obtain Lessor's prior written consent, which consent, shall
be granted or withheld in Lessor's sole discretion, to the
manufacturing, processing, distributing, using, producing, treating,
storing (above or below ground level), disposing or allowing to be
present (the "Presence") of hazardous substances in or about the
Premises. In connection with each such consent request by Lessee,
Lessee shall submit to Lessor a description, including the
composition, quality and all other information requested by Lessor
concerning the proposed presence of any hazardous substance. Lessor's
consent to the presence of any hazardous substance may be deemed given
only by inclusion of a description of the composition and quantity of
the proposed hazardous substance on Schedule A to the Addendum to
Lease. Any hazardous substance, which Lessor has agreed to the
presence thereof, shall be deemed to be an allowed substance for
purposes of this article. Lessor's consent to the presence of any
hazardous substance at any time during the lease term or renewal
thereof shall not waive the requirement of obtaining Lessor's consent
to the subsequent presence of any other, or increased quantities of,
hazardous substance, such consent shall be deemed given only by
amendment of Schedule A to this Addendum to lease.
(b) refrain from (and prohibit others from) allowing the presence
of any hazardous substance in or about the Premises which is not an
allowed substance;
(c) promptly comply at Lessee's own cost and expense, with all
laws, orders, rules, regulations, certificates of occupancy, or other
requirements, as the same now exist or may hereafter be enacted,
amended or promulgated, or any federal, municipal, state, county or
other governmental or quasi-governmental authorities and/or any
department or agency thereof relating to the manufacturing, processing
distributing, using, producing, treating, storing (above or below
ground level), disposing or allowing to be present (the "Presence") of
hazardous substances in or about the Premises, whether or not such
substances are allowed substances.
(d) indemnify and hold Lessor, its agents, and employees,
harmless from any and all demands, claims causes of action, penalties,
liabilities, judgments, damages (including consequential damages) and
expenses including, without limitation, court costs and reasonable
attorney's fees incurred by Lessor as a result from (a) Lessee's
failure to delay in properly complying with such law, order, rule,
regulation, certificate of occupancy or other requirement referred to
in section (b) (iii), above or (b) any adverse effect which results
from the Presence of any hazardous substance in our about the
Premises, whether Lessee or Lessee's agents, employees, contractors or
any other person claiming under Lessee, with our without Lessee's
consent, has caused, either intentionally or unintentionally, the
Presence of such hazardous substance. IF any action or proceeding is
brought against Lessor, Lessee, upon notice from Lessor, will defend
such claim at Lessee's expense with counsel reasonably satisfactory to
Lessor. This indemnification by Lessee of Lessor shall survive the
termination of the Lease.
(e) promptly disclose the Lessor by delivering , in the manner
prescribed for delivery of notice in the Lease, a copy of any forms,
submissions, notices, reports, or other written documentation
(Communications) relating to the Presence of any hazardous substance
in or about the Premises, whether such Communications are delivered to
Lessee or are requested of Lessee by any federal, municipal, state,
county or other governmental or quasi-governmental authority and/or
any department or agency thereof.
(f) notwithstanding any other provisions of the Lease, allow
Lessor, and any authorized representative of Lessor, access and the
right to enter and inspect the Premises for the Presence of any
hazardous substance, at any time deemed reasonable by Lessor, without
prior notice to Lessee.
Compliance by Lessee with any provision of this special
stipulation shall not be deemed a waiver of any other provision
thereof. Without limiting the foregoing, Lessor's consent to the
Presence of any hazardous substance shall not relieve Lessee of its
indemnity obligations under the terms of this Section 41.
42. COMMENCEMENT DATE AGREEMENT. Lessor shall, not later than thirty
(30) days after Lessee takes possession of the premises, prepare and
deliver to Lessee an agreement (hereinafter the "Commencement Date
Agreement") which shall fix the date upon which the term commenced,
the date upon which the obligation to pay Base Rent and Additional
Rent commenced and the date upon which the Term shall expire.
Provided Lessee agrees with the information contained in the
Commencement Date Agreement, it shall properly execute and return said
agreement to Lessor. When fully executed and delivered the
Commencement Date Agreement shall supersede any inconsistent terms
contained in this Lease and shall be attached to this Lease as Exhibit
B.
IN WITNESS WHEREOF, the parties herein have hereunto set their
hands and seals this __________ day of October, 19____.
Signed, sealed and LESSOR: The Northwestern Mutual Life
delivered in the presence Insurance Company
of:
________________________ By: __________________________________
Witness Peterson Management Company, Inc.
Agent for Lessor
Signed, sealed and LESSEE: ViewCall America, Inc.
delivered in the presence
of:
_________________________ By: __________________________________
Witness
BUILDING RULES AND REGULATIONS
1. No additional locks shall be places on doors of the demised
premises by Lessee, nor shall any existing locks be changed
unless lessor is immediately furnished with two keys thereto.
Lessor will without charge furnish Lessee with two keys for each
lock existing upon the entrance doors when Lessee assumes
possession with the understanding that the termination of the
Lease these keys shall be returned.
2. Lessee will refer all contractors, contractor's representatives
and installation technicians, rendering any service on the
premises for Lessee, to Lessor for Lessor's approval and
supervision before performance of any contractual service. This
provision shall apply to all work performed in the building
including installation of telephone, telegraph equipment,
electrical devices and attachments and installations of any
nature affecting floors, walls, woodwork, trim, windows,
ceilings, equipment or any other physical portion of the
building. Nothing herein shall be construed to require Lessor to
exercise any care in the approval of supervision of any such
person or firm and is solely an agreement for benefit of Lessor.
3. No Lessee shall at any time occupy any part of the building as
sleeping or lodging quarters.
4. Less shall not place, install or operate on the demised premises
or in any part of the building, any engine, stove or machinery,
or conduct mechanical operations or cook thereon or therein, or
p;ace or use in or about the premises any explosives, gasoline,
kerosene, oil, acids, caustics, or any other flammable,
explosive, or hazardous material without written consent of
Lessor.
5. Lessor will not be responsible for loss of stolen personal
property, equipment, money or jewelry from Lessee's area or
public rooms regardless of whether such loss occurs when area is
locked against entry or not.
6. Lessee shall not at any time display a "For Rent" sign upon the
demised premise for rent.
7. Safes and other unusually heavy objects which might damage the
slab or floor structure shall be placed by Lessee only in such
places as may be approved by Lessor.
8. Windows facing on corridors and walkways shall at all times by
wholly clear and uncovered (except for curtains and such signs as
Lessor may approve) so that a full unobstructed view of the
interior of the demised premises may be had from the corridors
and walkways.
9. Lessor will not permit entrance to Lessee's offices by use of
pass key controlled by Lessor, to any person at any time without
written permission by Lessee, except employees, contractors, or
service personnel directly supervised by Lessor.
10. None of the entries, passages, doors, or hallways shall be
blocked or obstructed, or any rubbish, litter, trash, or material
of any nature placed, emptied or thrown into these areas,
including any alleyways to the rear of the leased premises, or
such areas be used at any time except for access or egress by
Lessee, Lessee's agents, employees or invitee.
11. The water closets and other fixtures shall not be used for any
purpose other than those for which they were constructed, and any
damages resulting to them from misuse, or the defacing or injury
of any part of the building shall be home by the person who shall
occasion it. No person shall waste water by interfering with the
faucets or otherwise.
12. No vehicles or animals shall be brought into the building without
Lessor's written approval.
13. No sign, tag, label, picture, advertisement, or notice shall be
displayed, distributed, inscribed, painted or affixed by the
Lessee on any part of the outside of the building or on any part
of the inside of the Premises such that it will be visible from
the outside of the building without the prior written consent of
the Lessor.
14. In the event Lessor should advance upon the request, or for the
account of the Lessee, any amount of labor, material, packing,
shipping, postage, freight, or express upon articles delivered to
the demised premises for the safety, care and cleanliness for the
demised premises, the amount so paid shall be regarded as
additional rent and shall be due and payable forthwith to the
Lessor.
15. Lessee shall not do or permit to be done within the demised
premises anything which would unreasonably annoy or interfere
with the rights of other Lessees of the building.
16. During the sixty days prior to the expiration of this Lease,
Lessor may show the demised premises to prospective Lessees and
place upon the windows or doors thereon one or more "For Rent"
signs of reasonable dimensions.
17. Lessee shall at no time during the term of this Lease maintain or
place any materials outside of the demised premises. No vehicles
shall be permanently parked or stored in the designated parking
or loading areas of the building without consent of Lessor.
18. Lessee shall keep and maintain all exterior area immediately
adjacent to the demised premises and loading facilities in a
clean and orderly manner.
19. Lessee shall abide at all time by the rules, regulations and
covenants of Oakbrook Center as they currently exist and are
amended from time to time.
Exhibit "A"
SPECIAL STIPULATIONS
Insofar as the following Special Stipulations conflict with any of the
foregoing provisions, the following shall control:
43. BASE RENT:
In further reference to Paragraph 3, "Base Rent and Security
deposit", Lessee agrees to pay Lessor as Base Rental for the
Leased Premises according to the following schedule:
Period Per SF Month Base Rent Per Annum
1/1/97 to 12/31/97 6.50 $11,578.13 $138,937.56
1/1/98 to 12/31/98 6.70 $11,934.38 $143,212.56
1/1/99 to 12/31/99 6.90 $12,290.63 $147,487.56
44. DISCLOSURE:
In further reference to paragraph 32, all parties hereto
acknowledge and agree that Peterson Management Company, Inc. is
acting as agent for Lessor in connection with the transactions
described herein and shall be paid a commission by Lessor William
Leonard & Co. is acting as agent for the Lessee in this
transaction and shall be paid a commission by Lessor.
45. HVAC EQUIPMENT:
Lessee shall at all times conduct maintenance on the HVAC
equipment in the Premises in accordance with all Federal, state
or local laws. In the event that a leak occurs in any portion of
the HVAC equipment in the Premises, Lessee shall promptly repair
such leak in accordance with such Federal, sate or local laws and
shall, in any event, repair such leaks within the deadline
imposed by such Federal, state or local laws subject to any
applicable warranties. Lessee hereby agrees to indemnify, defend
and hold Lessor harmless against any and all damages,
liabilities, losses, costs and expenses, including reasonable
attorneys' fees, incurred by Lessor as a result to Lessee's
failure to conduct maintenance on the HVAC equipment in the
Premises in accordance with all Federal, state or local laws or
as a result of Lessee's failure to repair any leak in any portion
of the HVAC equipment in the Premises in accordance with Federal,
state or local laws.
Lessee shall have an annual maintenance check up performed on the
heating, ventilation and air condition systems in the demised
Premises. Lessee shall provide Lessor with a copy of the
maintenance report and shall pay for any repairs from said
check-up. Lessee shall be solely responsible for the maintenance
and up keep of the heating, ventilation and air conditioning
systems in the demised premises. Lessor shall warrant the
heating, ventilation and air conditioning systems until February
28, 1997.
46. ACCESS:
Lessor agrees to provide to Lessee access to the Premises for
renovation by November 1, 1996. No base rent or CAM shall be due
for the access.
47. RIGHT OF FIRST OFFER:
(a) Lessor and Lessee acknowledge that there is currently
approximately 10,738 square feet of space in Suite 175 in the
Building (hereinafter the "First Offer Space"), as outline on
Exhibit "D" of this Lease. Lessor acknowledges that Lessee may
wish to expand the Premises and lease the First Offer Space.
Lessee, however, acknowledges that Lessor must be in a position
to lease the First Offer Space to other tenants. In order to
accommodate Lessee's desire regarding the First Offer Space and
Lessor's requirements for a future lease of the First Offer
Space, Lessor shall grant to Lessee the Right of First Offer to
lease the First Offer Space in accordance with the terms and
conditions contained herein. In the event Lessor obtains a
written offer from a prospective tenant to lease the First Offer
Space and Lessor desires to accept such offer, then Lessor shall
submit to Lessee in writing all of the material terms and
conditions of such proposed offer to lease (hereinafter referred
to as the "Offer") and Lessee shall have the right and option to
lease the First Offer Space covered by the Offer upon the
following terms and conditions:
1) In no event shall the lease term for the First Offer Space
be less than thirty-six (36) months.
2) In the event the lease term for the First Offer Space
extends beyond the expiration date of the Lease, the Lease shall
be extended so that the lease terms for both spaces are
coterminous.
3) The Base Rental for the First Offer Space shall be at least
the rate which Lessee is paying for Suite 165. In the event the
Offer includes tenant improvements to the First Offer Space, Base
Rental shall be adjusted so that the rent to be paid by Lessee
for the First Offer Space is based on "As-Is" condition of the
space.
If Lessee shall elect to exercise its right to lease the First
Offer Space covered by the Offer, written notice of such election
shall be give to Lessor within five (5) business days from the
time that Lessee first received a copy of the Offer from Lessor
(hereinafter referred to as the "Offer Period"), which notice by
Lessee shall specify a date that Lessee shall lease the space
covered by the Offer, which date shall be not less than thirty
(30) nor more than ninety (90) days after the giving of notice
thereof.
b) Upon exercise of its right to lease the First Offer Space covered
by the Offer, Lessor and Lessee shall enter into a written
agreement modifying and supplementing this Lease and specifying
that the First Offer Space is a part of the Premises under this
Lease and containing other appropriate terms and provisions
relating to the addition of such area to this Lease, including,
without limitation, increasing, adjusting or augmenting Rent as a
result of the addition of such space.
c) If a right to Lease pursuant to this Section shall not be
exercised within the Offer Period or shall be waived (no notice
is deemed to be a waiver of such right), then Lessor shall have
the right to offer such space to the prospective tenant, and if
such transaction is consummated, Lessee's rights under this
Section shall automatically terminate and be of no further force
or effect. If a right to lese pursuant to this Section shall not
be exercised within the Offer Period or shall be waived (no
notice is deemed to be a waiver of such right), and Lessor fails
to lease the space covered by the Offer within six (6) months
after Lessor's submission of a copy of the Offer to Lessee, then
this section shall be applicable to any subsequent offer to lease
the First Offer Space.
d) Notwithstanding the foregoing Right Of First Offer and any other
provision of this Lease to the contrary, such Right of First
Offer is conditioned upon this Lease being in full force and
effect and there being no default under this Lease. If Lessee
fails to exercise the foregoing Right of First Offer as provided
in and in strict accordance with the terms of this Section, or if
the condition above is not entirely satisfied, the foregoing
Right of First Offer shall automatically terminate and be of no
further force or effect, or if exercised, shall be null and void.
e) Lessee shall not have the right to assign its Right of First
Offer to any sublessee of the Premises or any portion thereof or
to any assignee of this Lease, nor may any such sublessee or
assignee exercise or enjoy the benefit of such Right of First
Offer.
f) Notwithstanding any other term or provision of this Section or
elsewhere in the Lease, expressed or implied, it is understood
and agreed by the Lessee that , (i) Lessor shall not be liable
for the failure or inability of Lessee to exercise or benefit
from any or all rights granted in this Section with respect to
said First Offer Space or any portion thereof by reason of such
superior rights and options of the existing lessees, and (ii)
Lessee shall not be entitled to any compensation, consolation,
consideration, replacement of such space, or any other remedy
from or against Lessor by reason of such failure or inability.
48. RENEWAL OPTION:
As long as Lessee is not then in default and has fulfilled each
and every provision of this Lease, Lessee shall have the option,
with written notice to Lessor by October 1, 1999, to extend this
Lease for three additional years at the then market rent for
comparable space in Gwinnett County, Georgia. This option is not
assignable to another entity and is based on "as is" condition of
the Premises.
49. CONDEMNATION:
Notwithstanding the provisions of Article 13 of the Lease, Lessee
shall be entitled to retain any condemnation proceeds which are
separately awarded to Lessee or which are otherwise available
under applicable law, including but not limited to Lessee's
moving costs and other costs of relocation or the interruption of
or damage to Lessee's business.
50. INDEMNIFICATION:
Notwithstanding the provisions of Article 15 of this Lease,
Lessee shall not be required to defend, indemnify and hold
harmless Lessor from any liability for injury, loss, accident,
claims or damage to any person or property resulting from the
gross negligence of Lessor, its agents, contractors, servants,
employees, or licensees in connection with Lessor's activities on
the Premises. Lessor agrees to defend, indemnify, and hold
harmless Lessee from and against any and all claims arising from
the gross negligence of Lessor, its agents, contractors,
servants, employees and licensees. Such exclusion from Lessee's
indemnity obligation and such agreement by Lessor to indemnify
Lessee are not intended to and shall not relieve any insurance
carrier of its obligations under policies required to be carried
by Lessee pursuant to the Lease to the extent such policies cover
the gross negligence of Lessor or its agents, contractors,
servants, employees, or licensees; provided, however, that this
sentence shall in no way be construed to imply the availability
of any double or duplicate coverage following the primary
liability of such carrier. Lessee waives no claim for damages or
other relief against Lessor arising as a result of Lessor's gross
negligence.
51. ASSIGNMENT OR SUBLETTING:
Notwithstanding the provision of Article 18 of this Lease, Lessee
shall have the right, without prior consent of the Lessor, to
assign this Lease or sublet the whole or any part of the premises
to a corporation of entity which: 1) is Lessee's parent
corporation; or 2) is a wholly owned subsidiary of Lessee or
Lessee's parent corporation; or 3) is a corporation of which
Lessee or Lessee's parent corporation owns in excess of fifty
percent (50%) of the outstanding capital stock; or 4) as a result
of consolidation or merger with Lessee and/or Lessee's parent
corporation; or 5) a corporation to which substantially all of
Lessee's assets may be transferred. Any transfer pursuant to
1,2,3,4 or 5 above, shall be subject to the following conditions:
a) Lessee shall remain fully liable during the unexpired term of
this Lease; and b) any such assignment, sublease or transfer
shall be subject to all of the terms, covenants and conditions of
this Lease, and such assignee, sublessee or transferee shall
expressly assume the obligations of Lessee under the Lease by a
document reasonably satisfactory to Lessor.
52. IMPROVEMENTS
Lessor shall close openings in the demising wall to demise the
Premises and separate it from Suite 175 at its sole cost and
expense. Except for these improvements, Lessee shall accept the
Premises in "as-is" condition.
EXHIBIT "B"
COMMENCEMENT DATE AGREEMENT
Mr. Mike Casey
ViewCall America, Inc.
1555 Oakbrook Drive
Suite 165
Norcross, GA 30093
RE: Commencement Date Agreement - to the Lease dated October _____,
1996, between ViewCall America, Inc. and the Northwestern Mutual
Life Insurance Company.
Dear Mike:
The Commencement Date for the Lease noted for the Premises located at
Oakbrook Place, more particularly known as Suite 165 at 1555 Oakbrook
Drive, Norcross, Georgia, 30093, is hereby set as January 1, 1997.
The base rental shall be paid as follows:
Base Rental Schedule
Period Per SF Month Base Rent Per Annum
1/1/97 to 12/31/97 6.50 $11,578.13 $138,937.56
1/1/98 to 12/31/98 6.70 $11,934.38 $143,212.56
1/1/99 to 12/31/99 6.90 $12,290.63 $147,487.56
Please acknowledge your acceptance of the above by signing below and
returning this letter to me. We are pleased to have you at Oakbrook
Place. If we can be of assistance, please do not hesitate to call.
Sincerely,
Stephen K. Weltlich
Vice President
Agreed to this _______ day of _______________, 19____.
____________________________
(Signature)
EXHIBIT "C"
FLOOR PLAN
1555 Oakbrook Drive
Suite 165
21,375 SF
EXHIBIT "D"
SITE PLAN
1555 Oakbrook Drive
Suite 165
21,375 SF
EXHIBIT "E"
SIGN CRITERIA
All Lessees at Oakbrook Place will be allowed to install a Lessee
identification sign for their Premises as follows:
1. Front elevation sign shall consist of individual non-illuminated
brushed aluminum letters with a maximum height of 12". Company
logo will be permitted in same constructions with maximum size of
12" x 12".
2. Rear and front door lettering to consist of vinyl die cut letters
reading Lessee name and Suite number with maximum height of 3".
Only a flat white color is acceptable unless approved by Lessor.
3. Lessee shall be responsible for all costs incurred for
fabrication and installation of Lessee's signs.
4. Before installation of signage, Lessee must submit to Lessor a
detailed sketch and layout of proposed signage for Lessor's
written approval.
EXHIBIT "F"
Schedule "A"
FIRST AMENDMENT TO LEASE
STATE OF GEORGIA
COUNTY OF GWINNETT
THIS, First Amendment to Lease, made and entered into this ______ day
of October, 1996 by and between the NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY hereafter referred to as "Lessor" and VIEWCALL AMERICA, INC.,
hereafter referred to as "Lessee"/
WITNESSETH:
WHEREAS, Lessor and Lessee entered into a Lease Agreement dated
October 21, 1996 for the Premises located at Suite 165 at 1555
Oakbrook Drive, Norcross, Georgia 30093 initially containing 21,375
square feet (hereinafter referred to as "Lease");
WHEREAS, Lessor and Lessee desire to further amend the Lease in
certain respects and to ratify and confirm all provisions of the Lease
Agreement;
NOW THEREFORE, in consideration of the Premises, the sum of ten and
no/100 dollars ($10.00) in hand paid by Lessee to Lessor, and for
other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. EXPANSION
2. The Premises shall be expanded to include Suite 175 containing
10,738 square feet. The new size of the Premises shall be
32,113 square feet.
3. FIRST RIGHT OF OFFER
4. Since the Premises will now include Suite 175, Paragraph 47,
First Right Offer, page 16 of the lease, is hereby deleted and is
of no further force and effect.
5. REVISED BASE RENT
In further reference to Paragraphs 1 and 43 of the Lease,
Paragraph 43 is hereby deleted and the revised schedule for Base
Rent in the Premises shall be the following:
Period Per SF Month Base Rent Per Annum
1/1/97 to 1/31/97 $4.33 $11,578.13 $138,937.56
2/1/97 to 12/31/97 $6.50 $17,394.54 $208,734.48
1/1/98 to 12/31/98 $6.70 $17,929.76 $215,157.12
1/1/99 to 12/31/99 $6.90 $18,464.98 $221,579.76
4. REVISED COMMENCEMENT DATE LETTER:
A revised Commencement Date Letter reflecting the above terms is
now included as Exhibit A, attached.
5. IMPROVMENTS:
Paragraph 52, Improvements, is hereby deleted and is of no
further force and effect.
Signed, sealed and LESSOR: The Northwestern Mutual Life
delivered in the presence Insurance Company
of:
_________________________ By: __________________________________
Witness Peterson Management Company, Inc.
Agent for Lessor
Signed, sealed and LESSEE: ViewCall America, Inc.
delivered in the presence
of:
__________________________ By: __________________________________
Witness
EXHIBIT "A"
COMMENCEMENT DATE AGREEMENT
Mr. Mike Casey
ViewCall America, Inc.
1555 Oakbrook Drive
Suite 165
Norcross, GA 30093
RE: Commencement Date Agreement - to the Lease dated October _____,
1996, between ViewCall America, Inc. and the Northwestern Mutual
Life Insurance Company.
Dear Mike:
The Commencement Date for the Lease noted for the Premises located at
Oakbrook Place, more particularly known as Suite 165 at 1555 Oakbrook
Drive, Norcross, Georgia, 30093, is hereby set as January 1, 1997.
The base rental shall be paid as follows:
Base Rental Schedule
Period Per SF Month Base Rent Per Annum
1/1/97 to 1/31/97 $4.33 $11,578.13 $138,937.56
2/1/97 to 12/31/97 $6.50 $17,394.54 $208,734.48
1/1/98 to 12/31/98 $6.70 $17,929.76 $215,157.12
1/1/99 to 12/31/99 $6.90 $18,464.98 $221,579.76
Please acknowledge your acceptance of the above by signing below and
returning this letter to me. We are pleased to have you at Oakbrook
Place. If we can be of assistance, please do not hesitate to call.
Sincerely,
Stephen K. Weltlich
Vice President
Agreed to this _______ day of _______________, 19____.
____________________________
(Signature)
AGREEMENT
This Agreement dated as of June 7, 1996 between ViewCall
America, Inc., a Georgia corporation ("ViewCall") and Rudolph P.
Russo, an individual resident of the State of New York (the
"Guarantor").
WHEREAS, contemporaneously with the execution of this
Agreement, ViewCall will issue to the Guarantor a common stock
purchase warrant for the purchase of shares of common stock of
ViewCall;
WHEREAS, in consideration of the issuance of such warrant to
the Guarantor, the Guarantor has agreed to guaranty certain
indebtedness of ViewCall which may be incurred, renewed or
otherwise extended to ViewCall after the date hereof; and
WHEREAS, the parties desire to enter into this Agreement to
evidence the guaranty obligations of the Guarantor.
NOW, THEREFORE, in consideration of the foregoing premises
and intending to be legally bound hereby, the parties hereto
agree as follows:
1. For a period of five (5) years from the date hereof,
the Guarantor hereby agrees to guarantee any borrowings,
fundings, loans, debts or other forms of credit extension, which
have been duly authorized and validly approved by the Board of
Directors of ViewCall and the Board of Directors of Colorocs
Information Technologies, Inc., to ViewCall from any lender (any
such lender, the "Lender") in an aggregate principal amount up
to, but not to exceed $1,500,000. Further, the Guarantor agrees,
upon the request of ViewCall, to execute and deliver to the
Lender a guaranty in substantially the form attached hereto as
Exhibit A or such other form as the Guarantor and the Lender may
mutually agree.
2. The Guarantor further agrees to be available to
participate in information meetings with the Lender at such times
and places as the Lender may reasonably request.
3. This Agreement shall be binding upon the Guarantor and
his respective successors and assigns. The Guarantor may not
assign his obligations under this Agreement without the prior
written consent of ViewCall.
4. This Agreement sets forth the entire agreement of the
parties hereto with regard to the subject matter hereof and
supersedes and replaces all prior agreements, understandings and
representations, oral or written, with regard to such matters.
5. This Agreement shall be governed by and under the laws
of the State of Georgia
6. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable under any present or future
laws effective during the terms hereof, such provision shall be
fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions
hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by
its severance herefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provisions, there shall be added
automatically, as part of this Agreement, a provision as similar
in its terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first written above.
___________________________________
Rudolph P. Russo
VIEWCALL AMERICA, INC.
By: _______________________________
Name:
Title:
EXHIBIT A
FORM OF GUARANTY
THIS GUARANTY dated as of ______________, 199_ executed and
delivered by ______________________________ (the "Guarantor") in
favor of __________________________ (the "Lender").
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor,
the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby, irrevocably and
unconditionally, guarantees the due and punctual payment when
due, whether at stated maturity, by acceleration or otherwise, of
the following (the following collectively referred to as the
"Guaranteed Obligations"): (a) all indebtedness and obligations
now or hereafter owing by the ViewCall America, Inc. (the
"Borrower") to the Lender, whenever and however incurred or
evidenced, whether direct or indirect, absolute or contingent, or
due or to become due ; and (b) any and all extensions, renewals,
modifications, amendments or substitutions of the foregoing.
Section 2. Guaranty of Payment and Not of Collection. This
Guaranty is a guaranty of payment, and not of collection, and a
debt of the Guarantor for its own account.
Section 3. Guaranty Absolute. The Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the documents evidencing the same,
regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute and unconditional
in accordance with its terms and shall remain in full force and
effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance
or occurrence whatsoever.
Section 4. Inability to Accelerate Loan. If the Lender or
the holder of any of the Guaranteed Obligations is prevented
under applicable law or otherwise from demanding or accelerating
payment thereof by reason of any automatic stay or otherwise, the
Lender or such holder shall be entitled to receive from the
Guarantor, upon demand therefor, the sums which otherwise would
have been due had such demand or acceleration occurred.
Section 5. Set-off. The Guarantor authorizes the Lender at
any time and from time to time, without notice to the Guarantor,
which notice the Guarantor hereby expressly waives, to set off
and apply any and all deposits (whether general or special, time
or demand, provisional or final, including any negotiable or
non-negotiable certificate of deposit now or hereafter issued by
the Lender to the Guarantor) or other indebtedness owing by the
Lender to the Guarantor, to the then outstanding Guaranteed
Obligations then due and payable.
Section 6. Information. The Guarantor assumes all
responsibility for being and keeping itself informed of the
Borrower's financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and the nature, scope and extent of the
risks that the Guarantor assumes and incurs hereunder, and agrees
that the Lender will not have any duty to advise the Guarantor of
information known to it or any of them regarding such
circumstances or risks.
Section 7. Governing Law. THIS GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORIGA.
Section 8. Waiver of Remedies. No delay or failure on the
part of the Lender in the exercise of any right or remedy it may
have against the Guarantor hereunder or otherwise shall operate
as a waiver thereof, and no single or partial exercise by the
Lender of any such right or remedy shall preclude other or
further exercise thereof or the exercise of any other such right
or remedy.
Section 9. Amendments. This Guaranty may not be amended
except in writing signed by the Lender and the Guarantor.
Section 10. Payments/Expenses. All payments made by the
Guarantor pursuant to this Guaranty shall be made in the lawful
currency of the United States of America, in immediately
available funds on the date demand therefor is made. The
Guarantor shall pay, on demand, all costs and expenses incurred
by the Lender in the collection and enforcement of this Guaranty
including the reasonable fees and disbursements of counsel to the
Lender if collection is sought by or through an attorney.
Section 11. Notices. All notices, demands or other
communications to the Guarantor hereunder shall be in writing and
shall be mailed or hand delivered or sent via facsimile
transmission to the address for the Guarantor set forth below its
signature hereto. All such notices, demands and communications
shall be deemed received by the Guarantor (a) if personally
delivered or by messenger or overnight courier or delivered via
facsimile transmission, on the date of delivery thereof or (b) if
through the United States mail, on the earlier of (i) the date
three days after the posting thereof and (ii) the date of actual
receipt by the Guarantor.
Section 12. Severability. In case any provision of this
Guaranty shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
Section 13. Headings. Section headings used in this
Guaranty are for convenience only and shall not affect the
construction of this Guaranty.
IN WITNESS WHEREOF, the Guarantor has duly executed and
delivered this Guaranty as of the date and year first written
above.
[GUARANTOR]
By:____________________________
Title:______________________
Address for Notices:
_______________________________
_______________________________
_______________________________
Telephone Number:______________
Telecopy Number:_______________
AGREEMENT
This Agreement dated as of June 7, 1996 between ViewCall
America, Inc., a Georgia corporation ("ViewCall") and Colorocs
Information Technologies, Inc., a Georgia corporation (the
"Guarantor").
WHEREAS, contemporaneously with the execution of this
Agreement, ViewCall will issue to the Guarantor a common stock
purchase warrant for the purchase of shares of common stock of
ViewCall;
WHEREAS, in consideration of the issuance of such warrant to
the Guarantor, the Guarantor has agreed to guaranty certain
indebtedness of ViewCall which may be incurred, renewed or
otherwise extended to ViewCall after the date hereof; and
WHEREAS, the parties desire to enter into this Agreement to
evidence the guaranty obligations of the Guarantor.
NOW, THEREFORE, in consideration of the foregoing premises
and intending to be legally bound hereby, the parties hereto
agree as follows:
1. For a period of five (5) years from the date hereof,
the Guarantor hereby agrees to guarantee any borrowings,
fundings, loans, debts or other forms of credit extension, which
have been duly authorized and validly approved by the Board of
Directors of ViewCall and the Board of Directors of Colorocs
Information Technologies, Inc., to ViewCall from any lender (any
such lender, the "Lender") in an aggregate principal amount up
to, but not to exceed $1,000,000. Any such borrowings, findings,
loans, debt or other forms of credit extension are to be obtained
on commercially reasonable terms and conditions. Further, the
Guarantor agrees, upon the request of ViewCall, to execute and
deliver to the Lender a guaranty in substantially the form
attached hereto as Exhibit A or such other form as the Guarantor
and the Lender may mutually agree.
2. The agreement of Guarantor to Guarantee such
indebtedness is part of a series of three integrated agreements
by Guarantor, Melton Harrell ("Harrell") and Rudolph P. Russo
("Russo") for a total of $4,000,000 and Guarantor shall be liable
under any guarantee for the first One Million Dollars
($1,000,000) of such indebtedness with Harrell and Russo being
liable as between themselves for one half (1/2) of the indebtedness
guaranteed in excess of the $1,000,000 for which Guarnator shall
have primary liability;
3. The Guarantor further agrees to cause appropriate
officers and/or representatives of the Guarantor available to
participate in information meetings with the Lender at such times
and places as the Lender may reasonably request.
4. This Agreement shall be binding upon the Guarantor and
his respective successors and assigns. The Guarantor may not
assign his obligations under this Agreement without the prior
written consent of ViewCall.
5. This Agreement sets forth the entire agreement of the
parties hereto with regard to the subject matter hereof and
supersedes and replaces all prior agreements, understandings and
representations, oral or written, with regard to such matters.
6. This Agreement shall be governed by and under the laws
of the State of Georgia.
7. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable under any present or future
laws effective during the terms hereof, such provision shall be
fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions
hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by
its severance herefrom. Furthermore, in lieu of such illegal,
invalid or unenforceable provisions, there shall be added
automatically, as part of this Agreement, a provision as similar
in its terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first written above.
COLOROCS INFORMATION TECHNOLOGIES, INC.
By: __________________________________
Name: Alan McKeon
Title: President
VIEWCALL AMERICA, INC.
By: _______________________________
Name: Alan McKeon
Title: President
EXHIBIT A
FORM OF GUARANTY
THIS GUARANTY dated as of ______________, 199_ executed and
delivered by ______________________________ (the "Guarantor") in
favor of __________________________ (the "Lender").
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor,
the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby, irrevocably and
unconditionally, guarantees the due and punctual payment when
due, whether at stated maturity, by acceleration or otherwise, of
the following (the following collectively referred to as the
"Guaranteed Obligations"): (a) all indebtedness and obligations
now or hereafter owing by the ViewCall America, Inc. (the
"Borrower") to the Lender, whenever and however incurred or
evidenced, whether direct or indirect, absolute or contingent, or
due or to become due ; and (b) any and all extensions, renewals,
modifications, amendments or substitutions of the foregoing.
Section 2. Guaranty of Payment and Not of Collection. This
Guaranty is a guaranty of payment, and not of collection, and a
debt of the Guarantor for its own account.
Section 3. Guaranty Absolute. The Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the documents evidencing the same,
regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The liability of the
Guarantor under this Guaranty shall be absolute and unconditional
in accordance with its terms and shall remain in full force and
effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance
or occurrence whatsoever.
Section 4. Inability to Accelerate Loan. If the Lender or
the holder of any of the Guaranteed Obligations is prevented
under applicable law or otherwise from demanding or accelerating
payment thereof by reason of any automatic stay or otherwise, the
Lender or such holder shall be entitled to receive from the
Guarantor, upon demand therefor, the sums which otherwise would
have been due had such demand or acceleration occurred.
Section 5. Set-off. The Guarantor authorizes the Lender at
any time and from time to time, without notice to the Guarantor,
which notice the Guarantor hereby expressly waives, to set off
and apply any and all deposits (whether general or special, time
or demand, provisional or final, including any negotiable or
non-negotiable certificate of deposit now or hereafter issued by
the Lender to the Guarantor) or other indebtedness owing by the
Lender to the Guarantor, to the then outstanding Guaranteed
Obligations then due and payable.
Section 6. Information. The Guarantor assumes all
responsibility for being and keeping itself informed of the
Borrower's financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and the nature, scope and extent of the
risks that the Guarantor assumes and incurs hereunder, and agrees
that the Lender will not have any duty to advise the Guarantor of
information known to it or any of them regarding such
circumstances or risks.
Section 7. Governing Law. THIS GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORIGA.
Section 8. Waiver of Remedies. No delay or failure on the
part of the Lender in the exercise of any right or remedy it may
have against the Guarantor hereunder or otherwise shall operate
as a waiver thereof, and no single or partial exercise by the
Lender of any such right or remedy shall preclude other or
further exercise thereof or the exercise of any other such right
or remedy.
Section 9. Amendments. This Guaranty may not be amended
except in writing signed by the Lender and the Guarantor.
Section 10. Payments/Expenses. All payments made by the
Guarantor pursuant to this Guaranty shall be made in the lawful
currency of the United States of America, in immediately
available funds on the date demand therefor is made. The
Guarantor shall pay, on demand, all costs and expenses incurred
by the Lender in the collection and enforcement of this Guaranty
including the reasonable fees and disbursements of counsel to the
Lender if collection is sought by or through an attorney.
Section 11. Notices. All notices, demands or other
communications to the Guarantor hereunder shall be in writing and
shall be mailed or hand delivered or sent via facsimile
transmission to the address for the Guarantor set forth below its
signature hereto. All such notices, demands and communications
shall be deemed received by the Guarantor (a) if personally
delivered or by messenger or overnight courier or delivered via
facsimile transmission, on the date of delivery thereof or (b) if
through the United States mail, on the earlier of (i) the date
three days after the posting thereof and (ii) the date of actual
receipt by the Guarantor.
Section 12. Severability. In case any provision of this
Guaranty shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
Section 13. Headings. Section headings used in this
Guaranty are for convenience only and shall not affect the
construction of this Guaranty.
IN WITNESS WHEREOF, the Guarantor has duly executed and
delivered this Guaranty as of the date and year first written
above.
[GUARANTOR]
By:_________________________
Title:___________________
Address for Notices:
__________________________
__________________________
__________________________
Telephone Number:_________
Telecopy Number:__________
WARRANT AGREEMENT
Warrant Agreement, dated as of June 7, 1996, between
ViewCall America, Inc., a Georgia corporation ("ViewCall" or the
"Company") and Rudolph P. Russo, an individual resident of the
State of New York (the "Holder").
R E C I T A L S:
WHEREAS, the Company and the Holder have entered into that
certain agreement of even date hereof (the "Guarantee
Agreement"), whereby the Holder has agreed to provide to the
Lender certain guarantees and obligations as set forth in the
Guarantee Agreement, on the terms and conditions provided
therein.
WHEREAS, as consideration for the Holder to enter into the
Guarantee Agreement, ViewCall has agreed to grant to the Holder a
warrant to purchase common stock of ViewCall on the terms and
conditions provided in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and intending to be legally bound hereby, the parties hereto
agree as follows:
1. ISSUANCE OF WARRANT; FORM OF WARRANT. Concurrently
with the execution of this Agreement, the Company will issue and
deliver a currently exercisable warrant to purchase 750,000
shares of ViewCall common stock, par value $.01 per share (the
"Common Stock"), at a price of $0.70 per share (the "Warrant").
The Warrant and the related form of Election to Purchase shall be
substantially in the form set forth as Exhibit A hereto. The
Warrant shall be executed on behalf of the Company by its
President under its corporate seal and attested by the Secretary
of the Company.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
2.1 The Company hereby represents, warrants and covenants
as follows: (i) this Agreement has been duly authorized,
executed and delivered by the Company and is enforceable against
it in accordance with its terms; (ii) when issued and delivered
in accordance with this Agreement, the Warrant will be duly
authorized, executed and delivered by the Company and enforceable
against it in accordance with its terms and (iii) when issued and
delivered in accordance with this Agreement and upon payment in
full of the purchase price thereof in accordance with the terms
of the Warrant, the shares issuable upon exercise of the Warrant
will be duly authorized, validly issued, fully paid and
non-assessable. The Company has reserved and will continue to
reserve such number of its duly authorized and issued shares of
Common Stock to provide for the exercise of the rights of
purchase represented by the Warrant.
2.2 (a) The Holder represents he is acquiring the Warrant
for the purpose of investment and not with a view to the resale
or distribution thereof, and that the Holder has no present
intention of selling, negotiating or otherwise disposing of the
Warrant or the shares of Common Stock represented thereby. The
Holder acknowledges that neither the Warrant nor the shares of
Common Stock represented thereby have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any
state securities law and that such Warrant or shares must be held
indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is
available.
(b) The Holder represents that he is an "accredited
investor" as defined in Rule 501(a) of the Securities Act, as
promulgated by the Securities and Exchange Commission.
3. MISCELLANEOUS.
3.1 Governing Law. This Agreement and all rights and
obligations of the parties hereunder shall be governed by and be
construed and enforced in accordance with the laws of the State
of Georgia.
3.2 Assignment. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and
assigns.
3.3 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability
of the remainder of this Agreement or the enforceability of such
provision in any other jurisdiction.
3.4 Notices. All notices, requests, demands, directions,
declarations and other communications provided for in this
Agreement shall, except as otherwise expressly provided, be
mailed by registered or certified mail, return receipt requested,
or by facsimile (receipt confirmed) or delivered in hand to the
applicable party at its address indicated next to its signature
on the signature page hereto. Except as otherwise expressly
provided herein, each notice, request, demand, direction,
declaration and other communication shall be effective when
deposited in the mails, postage prepaid, addressed as aforesaid
and shall whenever sent by facsimile or delivered by hand, be
effective when received. Any party may change its address by a
communication in accordance herewith.
3.5 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the Holder and ViewCall have executed
this Agreement as of the day and year first above written.
VIEWCALL AMERICA, INC.
By:_____________________________
Alan McKeon
President
Address:
5600 Oakbrook Parkway
Suite 240
Norcross, Georgia 30093
_______________________________
Name: Rudolph P. Russo
Address:
___________________________
___________________________
EXHIBIT A
THIS COMMON STOCK PURCHASE WARRANT (THE "WARRANT") AND ANY SHARES
ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE ON CERTAIN EXEMPTIONS PROVIDED THEREUNDER, OR UNDER THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON
CERTAIN EXEMPTIONS PROVIDED THEREUNDER, INCLUDING SECTION
10-5-9(13) OF THAT ACT. THE WARRANT AND ANY SHARES ACQUIRED UPON
THE EXERCISE OF THIS WARRANT HAVE ALSO NOT BEEN REGISTERED UNDER
ANY OTHER FEDERAL OR STATE SECURITIES LAW. THIS WARRANT AND ANY
SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT ARE BEING ACQUIRED
FOR INVESTMENT, AND NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE SECURITIES
ACT OF 1933, THE GEORGIA SECURITIES ACT OF 1973 AND ANY OTHER
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION
IS AVAILABLE UNDER SAID ACTS. NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT, AND NO TRANSFER OF THIS WARRANT OR ANY
OF SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
VOID AFTER 5:00 P.M., E.D.T. , ON JUNE ___, 2001.
VIEWCALL AMERICA, INC.
____ Shares of Common Stock
PURCHASE WARRANT
No. _______
ViewCall America, Inc., a Georgia corporation (the
"Company"), hereby agrees that, for value received,
________________, an individual residing at _________________
(the "Holder"), is entitled, subject to the terms and conditions
set forth below, to purchase from the Company up to ___________
fully paid and nonassessable shares (the "Shares") of the common
stock, par value $.01 per share (the "Common Stock"), of the
Company, at a purchase price per Share of $0.70 (the "Purchase
Price"), subject to certain adjustments contained in Section 3
herein, and prior to the Expiration Date (as defined below).
This Warrant shall expire and be of no further force or effect at
the earlier of the time when it has been exercised with respect
to all Shares which the Holder is or may become entitled to
purchase hereunder or on June ___, 2001 (the "Expiration Date").
The number and character of the Shares and the Purchase Price are
subject to adjustment as herein provided.
1. EXECUTION; REGISTRATION. This Warrant is executed on
behalf of the Company by its President and attested by its
Secretary under its corporate seal. The Company shall keep or
cause to be kept a register of the Holder of this Warrant (the
"Warrant Register"). Prior to due presentment of this Warrant
for transfer in accordance with Section 7 hereof, the Company
shall treat the Holder in whose name or names this Warrant is
registered as the absolute owner or owners hereof for all
purposes.
2. EXERCISE. This Warrant may be exercised, in whole or
in part, from time to time by the Holder by delivering this
Warrant, together with an Election to Purchase in the form
attached hereto properly completed and duly executed by or on
behalf of the Holder, to the Company or such person as the
Company may have appointed as warrant agent, at its principal
office (or at the office of such agent), accompanied by payment
in cash or by certified or bank check, payable to the order of
the Company, in an aggregate amount equal to the Purchase Price
as then adjusted multiplied by the number of Shares as to which
this Warrant is then exercised. The Company shall cancel this
Warrant on any such exercise and, if such exercise is partial,
shall issue and deliver to the Holder a new Warrant, of like
tender, with respect to the Shares as to which this Warrant has
not then been exercised.
The Company will, or will direct its transfer agent to,
issue, as soon as practicable after any exercise of this Warrant,
and in any event within 15 days thereafter, at the Company's
expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the
Holder may direct (on payment by the Holder of any applicable
transfer taxes and compliance with Section 7 hereof), a
certificate or certificates for the number of fully paid and
nonassessable Shares as to which this Warrant is so exercised,
plus, in lieu of any fractional shares to which the Holder would
otherwise be entitled, cash equal to such fraction multiplied by
the greater of (i) the then fair market value of such shares or
(ii) the Purchase Price as then adjusted.
Any Shares as to which this Warrant is exercised shall be
deemed issued on and as of the date of such exercise and the
Holder or the person or persons designated by the Holder as
therein provided shall thereupon be deemed to be the owner or
owners of record thereof.
Shares of Common Stock purchased pursuant to this Warrant
shall bear a restrictive securities legend similar in substance
to the one at the head of this Warrant.
3. ADJUSTMENTS
3.1 Stock Dividends, Splits, Etc. The number of Shares
purchasable on exercise of this Warrant and the Purchase Price
shall be subject to adjustment from time to time in the event
that the Company shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock (or securities
convertible into, exchangeable for or otherwise entitling a
holder thereof to receive Common Stock), (b) subdivide its
outstanding shares of Common Stock into a greater number of
shares or (c) combine its outstanding shares of Common Stock into
a smaller number of shares. In any such case, the total number
of Shares and the number of shares or other units of such other
securities purchasable upon exercise of this Warrant immediately
prior thereto shall be adjusted so that the Holder shall be
entitled to receive at the same aggregate purchase price the
number of shares of Common Stock and the number of shares or
other units of such other securities which the Holder would have
owned or would have been entitled to receive immediately
following the occurrence of any of the events described above had
this Warrant been exercised in full immediately prior to the
occurrence (or applicable record date) of such event. An
adjustment made pursuant to this Section 3.1 shall, in the case
of a stock dividend or distribution, be made as of the record
date therefor and, in the case of a subdivision or combination,
be made as of the effective date thereof.
3.2 Reorganization, Recapitalization, Consolidation, Merger
or Sale of Assets. In the event of any reorganization or
recapitalization of the Company or in the event the Company
consolidates with or merges with or into another corporation or
transfers all or substantially all its assets to another entity,
then and in each such event, the Holder, upon exercise of this
Warrant at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or
transfer, shall be entitled to receive the stock or other
securities or property to which the Holder would have been
entitled if the Holder had exercised this Warrant immediately
prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization,
recapitalization, consolidation, merger or transfer and shall be
applicable to such shares of stock or other securities or
property receivable on the exercise of this Warrant after such
consummation.
3.3 Notice of Adjustment. Upon the occurrence of any event
requiring an adjustment of the Purchase Price or the Shares, then
and in each such case, the Company shall promptly deliver to the
holder of this Warrant an Officer's Certificate stating the
Purchase Price or Shares resulting from such adjustment and
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based; provided,
however, that no notice to holders of this Warrant or of any part
hereof shall be required before the earlier of the public
announcement or notice to shareholders of the same.
4. FURTHER ASSURANCES. The Company will not, by amendment
of its articles of incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the performance of any
terms of this Warrant, but will at all times in good faith take
all necessary action to carry out all such terms. Without
limiting the generality of the foregoing, the Company (a) will
not increase the par value of any shares of stock receivable on
exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary
or appropriate so that the Company may validly and legally issue
fully paid and nonassessable Shares (or other securities or
property deliverable hereunder), free of all liens, encumbrances,
security interests and claims whatsoever, upon the exercise of
this Warrant, and (c) will not transfer all or substantially all
its assets to any other entity or consolidate or merge with or
into any other entity or permit any such entity to consolidate or
merge with or into the Company (if the Company is not the
surviving entity), unless such other entity shall be bound by all
the terms of this Warrant. This Warrant shall bind the
successors and assigns of the Company.
5. NOTICES OF RECORD DATES, ETC.
(a) If the Company shall fix a record date of the holders
of its Common Stock (or other securities at the time deliverable
upon the exercise of this Warrant) for the purpose of entitling
or enabling them to receive any dividend (including a stock
dividend) or other distribution, or to receive any right to
subscribe for or to purchase any shares of any class of any
securities, or to receive any other right, or
(b) in the event of any reorganization or recapitalization
of the Company, any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into
another corporation or any transfer of all or substantially all
the assets of the Company to another entity, or
(c) in the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in any such event, the Company shall mail or cause to be
mailed to the Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or right and stating
the amount and character of such dividend, distribution or right
or (ii) the date on which a record is to be taken for the purpose
of voting on or approving such reorganization, recapitalization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up and the date on which such event is to
take place and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or any other securities at the
time deliverable upon exercise of this Warrant) shall be entitled
to exchange their shares of Common Stock (or such other
securities) for securities or other property deliverable upon
such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding up. Such notice shall be mailed promptly after
definitive information (such as, for example, approval of the
Board of Directors or the signing of a letter of intent) with
respect to such proposed action becomes known to the Company, but
in any event at least 10 days prior to the record date therein
specified; provided, however, that no notice to holders of this
Warrant or any part hereof shall be required before the earlier
of the public announcement or notice to shareholders of the same.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon delivery of any indemnity
bond (or, in the case of any institutional holder, an indemnity
agreement) reasonably satisfactory in form and amount to the
Company or, in the case of any mutilation, upon surrender and
cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like
tenor.
7. TRANSFERS.
7.1 The Holder shall not transfer or assign this
Warrant except by will, by court order or pursuant to the laws of
descent and distribution; provided, however, that any such
transfer shall be subject to compliance with applicable
securities laws. Any attempted or purported assignment or
transfer of this Warrant without compliance with the preceding
sentence shall be void. In the event of any transfer permitted
by this Section 7, the Company shall register or shall cause its
agent to register the transfer or assignment on its Warrant
Register upon surrender of this Warrant, duly endorsed, or
accompanied by a written instrument of transfer duly executed by
the Holder or by the duly appointed legal representative or
attorney thereof. On any such registration of transfer, the
Company shall issue a new Warrant or Warrants, of like tenor, in
lieu of the transferred or assigned Warrant. In no event will
the Company be required to effect any registration of transfer,
assignment or exchange that would result in the issuance of a
fraction of a Share. Any action by the Company required under
this Section 7 shall be taken at its own expense.
7.2 No holder of this Warrant may sell, transfer,
assign, pledge, hypothecate or otherwise dispose of this
Warrant, or any part hereof, unless (i) a registration statement
under the Securities Act of 1933, as amended (the "Securities
Act"), and all applicable state securities laws then in effect
with respect to this Warrant and the Shares, (ii) the holder
delivers to the Company a written opinion of counsel,
satisfactory to counsel for the Company, to the effect that an
exemption from registration under the Securities Act and any
applicable state securities laws is available with respect to
such disposition of this Warrant and that no such registration is
required or (iii) the Company is satisfied that registration
under such acts is not required.
7.3 Issue Tax. The issuance of this Warrant and
certificates for Shares upon the exercise of this Warrant shall
be made without charge to the Holder of such Shares for any
issuance tax in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any Warrant
or certificate in a name other than that of the Holder.
8. RESERVATION OF SHARES. The Company shall reserve, for
the purpose of issuance upon exercise of this Warrant, such
number of its duly authorized and unissued shares of Common Stock
or such class or classes of capital stock or other securities as
shall from time to time be sufficient to comply with this
Warrant. If at any time the authorized and unissued shares of
Common Stock or such other class or classes of capital stock or
other securities are not sufficient for the exercise of this
Warrant, the Company shall immediately take such corporate action
as may be necessary to increase its authorized and unissued
shares of Common Stock or such other class or classes of capital
stock or other securities to such number as shall be sufficient
for that purpose.
9. PIGGYBACK REGISTRATION RIGHTS.
9.1 Certain Definitions. As used in this Section
9, the following terms shall have the following respective
meanings.
(a) "Commission" shall mean the United States
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
(b) "Form S-4" and "Form S-8" shall mean Form S-4
or Form S-8, respectively, promulgated by the Commission or any
substantially similar form then in effect.
(c) The terms "Register," "Registered" and
"Registration" refer to a registration effected by preparing and
filing a registration statement ("Registration Statement") in
compliance with Securities Act and the declaration or ordering of
the effectiveness of such Registration Statement.
(d) "Registrable Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant or
any other warrant originally issued by the Company as of the date
of this Warrant.
(e) "Registration Expenses" shall mean all
expenses incurred by the Company in complying with this Section
9, including, without limitation, all federal and state
registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky fees
and expenses, the expense of any special audits incident to or
required by any such Registration and the reasonable fees and
disbursements of one counsel for the Selling Shareholders, as
defined below.
(f) "Restriction Termination Date" shall mean,
with respect to any Registrable Securities, the earliest of (i)
the date that such Registrable Securities shall have been
Registered and sold or otherwise disposed of in accordance with
the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such
securities or transferred in compliance with Rule 144 and (ii)
the date that an opinion of counsel to the Company containing
reasonable assumptions shall have been rendered to the effect
that all legends on such Registrable Securities can be properly
removed and such legends shall have been removed.
(g) "Rule 144" shall mean Rule 144 promulgated by
the Commission pursuant to the Securities Act.
(h) "Selling Expenses" shall mean all
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities pursuant to this Warrant.
(i) "Selling Shareholders" shall mean holders of
Registrable Securities that have requested Registration pursuant
to other agreements.
9.2 Registration.
(a) Each time that the Company proposes for any
reason to Register any of its securities, other than pursuant to
a Registration Statement on Form S-4 or Form S-8 or similar or
successor forms, the Company shall promptly give written notice
of such proposed Registration to the Holder, which shall offer
the Holder the right to request inclusion of any Registrable
Securities in the proposed Registration.
(b) The Holder shall have 10 days from the
receipt of such notice to deliver to the Company a written
request specifying the number of shares of Registrable Securities
such Holder intends to sell and the Holder's intended plan of
disposition.
(c) Upon receipt of a written request pursuant to
Section 9.2(b), the Company shall promptly use its best efforts
to cause all such Registrable Securities to be Registered, to the
extent required to permit sale or disposition as set forth in the
written request.
(d) Notwithstanding the forgoing, if the managing
underwriter determines and advises in writing that the inclusion
of all Registrable Securities proposed to be included in the
Registration Statement, together with any other issued and
outstanding shares of Common Stock proposed to be included
therein by holders other than the holders of Registrable
Securities (such other shares hereinafter collectively referred
to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the
underwritten public offering, then the number of such shares of
Common Stock to be included in such Registration Statement shall
be reduced, and shares of Common Stock shall be excluded from
such underwritten public offering in a number deemed necessary by
such managing underwriter, by excluding equal numbers of (i) the
Registrable Securities and (ii) the Other Shares proposed to be
registered, pro rata, based on the number of shares of Common
Stock the respective holders proposed to include. The shares of
Common Stock that are so excluded from the Registration Statement
shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days, that the managing underwriter
reasonably determines as necessary in order to effect the
underwritten public offering.
9.3 Preparation and Filing. If and whenever the
Company is under an obligation pursuant to the provisions of this
Section 9 to use its best efforts to effect the Registration of
any Registrable Securities, the Company shall, as expeditiously
as practicable:
(a) furnish to the Holder such number of copies
of any summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or
other disposition of such Registrable Securities;
(b) use its best efforts to register or qualify
the Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as
the Holder shall reasonably request and do any and all other acts
or things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition in such
jurisdictions of such Registrable Securities; provided, however,
that the Company shall not be required to consent to general
service of process, qualify to do business as a foreign
corporation where it would not be otherwise required to qualify
or submit to liability for state or local taxes where it is not
liable for such taxes;
(c) at any time when a prospectus covered by such
Registration Statement is required to be delivered under the
Securities Act notify the Holder of the happening of any event as
a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and,
at the request of such Holder, prepare, file and furnish to such
Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading
in the light of the circumstances then existing; and
9.4 Expenses. The Company shall pay all Registration
Expenses incurred by the Company in complying with this Section
9; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Securities covered by
registrations effected pursuant to this Section 9 shall be borne
by the seller or sellers thereof, in proportion to the number of
Registrable Securities sold by such seller or sellers.
9.5 Information Furnished by Holder. It shall be a
condition precedent to the Company's obligations under this
Warrant as to the Holder that the Holder furnish to the Company
in writing such information regarding such Holder and the
distribution proposed by such Holder as the Company or any
managing underwriter may reasonably request.
9.6 Indemnification of Company Upon Registration. The
undersigned shall indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
Registrable Securities covered by a Registration Statement, each
person who controls the Company or such underwriter within the
meaning of the Securities Act, and other Selling Shareholders,
each of their respective officers, directors and constituent
partners and each person controlling such other Selling
Shareholders, against all claims, losses, damages and liabilities
(or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in such
Registration Statement or related prospectus, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the undersigned of any rule or
regulation promulgated under the Securities Act applicable to the
undersigned and relating to actions or inaction required of the
undersigned in connection with the Registration of the
Registrable Securities pursuant to such Registration Statement;
and will reimburse the Company, such Selling Shareholders, and
such directors, officers, partners, persons, underwriters and
controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action. Such
indemnification and reimbursement shall be to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by
the undersigned.
10. SURVIVAL. All agreements, covenants, representations
and warranties contained herein shall survive the execution and
delivery of this Warrant and any investigation at any time made
by or on behalf of any party hereto and the exercise, sale and
purchase of this Warrant and the Common Stock (and any other
securities or property) issuable upon exercise hereof.
11. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle
the Holder hereof, in such capacity, to any voting rights or
other rights as a shareholder of the Company.
12. NOTICES. All demands, notices, consents and other
communications to be given hereunder shall be in writing and
shall be deemed duly given when delivered personally or five days
after being mailed by registered or certified mail, postage
prepaid, addressed as follows:
If to the Company: ViewCall America, Inc.
Suite 240
5600 Oak Brook Parkway
Norcross, Georgia 30093
If to the Holder:
The Company or the Holder may change their respective addresses
at any time or times by notice hereunder actually received by the
other.
13. REMEDIES. The Company agrees that the remedies at law
of the Holder, in the event of any default or threatened default
by the Company in the performance of or compliance with any of
the terms of this Warrant, are not and will not be adequate and
such terms may be specifically enforced by a decree of specific
performance of any agreement contained herein or by an injunction
against a violation of any terms hereof or otherwise.
14. GENERAL. This Warrant and any term hereof may be
amended, modified, waived or terminated only by an instrument in
writing signed by the party against which enforcement of such
amendment, modification, waiver or termination is sought. This
Warrant shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of the State of
Georgia. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any
other provision hereof. The headings in this Warrant are for
convenience of reference only and are not part of this Warrant.
Dated: , 1996.
VIEWCALL AMERICA, INC.
By:
Alan McKeon,
President
Attest:
Michael Casey,
Secretary
(CORPORATE SEAL)
ELECTION TO PURCHASE
To ViewCall America, Inc.:
The undersigned, Holder of the attached Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, _______ shares of
Common Stock of ViewCall America, Inc. (or other securities or
property) to which such Holder is entitled thereunder, and
herewith makes payment of $____________ therefor in cash or by
certified or bank check. The undersigned hereby requests that
the certificate(s) for such shares be issued in the name(s) and
delivered to the address(es) as follows:
If the foregoing Election to Purchase evidences an exercise
of the attached Warrant to purchase fewer than all the Shares (or
such other securities or property) to which the undersigned is
entitled under such Warrant, please issue a new warrant, of like
tenor, for the remaining Shares (or other securities or property)
in the name(s), and deliver the same to the address(es), as
follows:
Dated: , 19__.
(Name of Holder)
(Signature of Holder or
Authorized Signatory)
WARRANT AGREEMENT
Warrant Agreement, dated as of June 7, 1996, between
ViewCall America, Inc., a Georgia corporation ("ViewCall" or the
"Company") and Colorocs Information Technologies, Inc., a Georgia
corporation (the "Holder").
R E C I T A L S:
WHEREAS, the Company and the Holder have entered into that
certain agreement of even date hereof (the "Guarantee
Agreement"), whereby the Holder has agreed to provide to the
Lender certain guarantees and obligations as set forth in the
Guarantee Agreement, on the terms and conditions provided
therein.
WHEREAS, as consideration for the Holder to enter into the
Guarantee Agreement, ViewCall has agreed to grant to the Holder a
warrant to purchase common stock of ViewCall on the terms and
conditions provided in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and intending to be legally bound hereby, the parties hereto
agree as follows:
1. ISSUANCE OF WARRANT; FORM OF WARRANT. Concurrently
with the execution of this Agreement, the Company will issue and
deliver a currently exercisable warrant to purchase 500,000
shares of ViewCall common stock, par value $.01 per share (the
"Common Stock"), at a price of $0.70 per share (the "Warrant").
The Warrant and the related form of Election to Purchase shall be
substantially in the form set forth as Exhibit A hereto. The
Warrant shall be executed on behalf of the Company by its
President under its corporate seal and attested by the Secretary
of the Company.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
2.1 The Company hereby represents, warrants and covenants
as follows: (i) this Agreement has been duly authorized,
executed and delivered by the Company and is enforceable against
it in accordance with its terms; (ii) when issued and delivered
in accordance with this Agreement, the Warrant will be duly
authorized, executed and delivered by the Company and enforceable
against it in accordance with its terms and (iii) when issued and
delivered in accordance with this Agreement and upon payment in
full of the purchase price thereof in accordance with the terms
of the Warrant, the shares issuable upon exercise of the Warrant
will be duly authorized, validly issued, fully paid and
non-assessable. The Company has reserved and will continue to
reserve such number of its duly authorized and issued shares of
Common Stock to provide for the exercise of the rights of
purchase represented by the Warrant.
2.2 (a) The Holder represents he is acquiring the Warrant
for the purpose of investment and not with a view to the resale
or distribution thereof, and that the Holder has no present
intention of selling, negotiating or otherwise disposing of the
Warrant or the shares of Common Stock represented thereby. The
Holder acknowledges that neither the Warrant nor the shares of
Common Stock represented thereby have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any
state securities law and that such Warrant or shares must be held
indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is
available.
(b) The Holder represents that he is an "accredited
investor" as defined in Rule 501(a) of the Securities Act, as
promulgated by the Securities and Exchange Commission.
3. MISCELLANEOUS.
3.1 Governing Law. This Agreement and all rights and
obligations of the parties hereunder shall be governed by and be
construed and enforced in accordance with the laws of the State
of Georgia.
3.2 Assignment. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and
assigns.
3.3 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability
of the remainder of this Agreement or the enforceability of such
provision in any other jurisdiction.
3.4 Notices. All notices, requests, demands, directions,
declarations and other communications provided for in this
Agreement shall, except as otherwise expressly provided, be
mailed by registered or certified mail, return receipt requested,
or by facsimile (receipt confirmed) or delivered in hand to the
applicable party at its address indicated next to its signature
on the signature page hereto. Except as otherwise expressly
provided herein, each notice, request, demand, direction,
declaration and other communication shall be effective when
deposited in the mails, postage prepaid, addressed as aforesaid
and shall whenever sent by facsimile or delivered by hand, be
effective when received. Any party may change its address by a
communication in accordance herewith.
3.5 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Holder and ViewCall have executed
this Agreement as of the day and year first above written.
VIEWCALL AMERICA, INC.
By:
Alan McKeon
President
Address:
5600 Oakbrook Parkway
Suite 240
Norcross, Georgia 30093
COLOROCS INFORMATION TECHNOLOGIES INC.
Name: Rudolph P. Russo
Address:
<PAGE>
EXHIBIT A
THIS COMMON STOCK PURCHASE WARRANT (THE "WARRANT") AND ANY
SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE ON CERTAIN EXEMPTIONS PROVIDED THEREUNDER, OR UNDER THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON
CERTAIN EXEMPTIONS PROVIDED THEREUNDER, INCLUDING SECTION
10-5-9(13) OF THAT ACT. THE WARRANT AND ANY SHARES ACQUIRED UPON
THE EXERCISE OF THIS WARRANT HAVE ALSO NOT BEEN REGISTERED UNDER
ANY OTHER FEDERAL OR STATE SECURITIES LAW. THIS WARRANT AND ANY
SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT ARE BEING ACQUIRED
FOR INVESTMENT, AND NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE SECURITIES
ACT OF 1933, THE GEORGIA SECURITIES ACT OF 1973 AND ANY OTHER
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION
IS AVAILABLE UNDER SAID ACTS. NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT, AND NO TRANSFER OF THIS WARRANT OR ANY
OF SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
VOID AFTER 5:00 P.M., E.D.T. , ON JUNE ___, 2001.
VIEWCALL AMERICA, INC.
____ Shares of Common Stock
PURCHASE WARRANT
No. _______
ViewCall America, Inc., a Georgia corporation (the
"Company"), hereby agrees that, for value received,
________________, an individual residing at _________________
(the "Holder"), is entitled, subject to the terms and conditions
set forth below, to purchase from the Company up to ___________
fully paid and nonassessable shares (the "Shares") of the common
stock, par value $.01 per share (the "Common Stock"), of the
Company, at a purchase price per Share of $0.70 (the "Purchase
Price"), subject to certain adjustments contained in Section 3
herein, and prior to the Expiration Date (as defined below). This
Warrant shall expire and be of no further force or effect at the
earlier of the time when it has been exercised with respect to
all Shares which the Holder is or may become entitled to purchase
hereunder or on June ___, 2001 (the "Expiration Date"). The
number and character of the Shares and the Purchase Price are
subject to adjustment as herein provided.
1. EXECUTION; REGISTRATION. This Warrant is executed on
behalf of the Company by its President and attested by its
Secretary under its corporate seal. The Company shall keep or
cause to be kept a register of the Holder of this Warrant (the
"Warrant Register"). Prior to due presentment of this Warrant
for transfer in accordance with Section 7 hereof, the Company
shall treat the Holder in whose name or names this Warrant is
registered as the absolute owner or owners hereof for all
purposes.
2. EXERCISE. This Warrant may be exercised, in whole or
in part, from time to time by the Holder by delivering this
Warrant, together with an Election to Purchase in the form
attached hereto properly completed and duly executed by or on
behalf of the Holder, to the Company or such person as the
Company may have appointed as warrant agent, at its principal
office (or at the office of such agent), accompanied by payment
in cash or by certified or bank check, payable to the order of
the Company, in an aggregate amount equal to the Purchase Price
as then adjusted multiplied by the number of Shares as to which
this Warrant is then exercised. The Company shall cancel this
Warrant on any such exercise and, if such exercise is partial,
shall issue and deliver to the Holder a new Warrant, of like
tender, with respect to the Shares as to which this Warrant has
not then been exercised.
The Company will, or will direct its transfer agent to,
issue, as soon as practicable after any exercise of this Warrant,
and in any event within 15 days thereafter, at the Company's
expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the
Holder may direct (on payment by the Holder of any applicable
transfer taxes and compliance with Section 7 hereof), a
certificate or certificates for the number of fully paid and
nonassessable Shares as to which this Warrant is so exercised,
plus, in lieu of any fractional shares to which the Holder would
otherwise be entitled, cash equal to such fraction multiplied by
the greater of (i) the then fair market value of such shares or
(ii) the Purchase Price as then adjusted.
Any Shares as to which this Warrant is exercised shall be
deemed issued on and as of the date of such exercise and the
Holder or the person or persons designated by the Holder as
therein provided shall thereupon be deemed to be the owner or
owners of record thereof.
Shares of Common Stock purchased pursuant to this Warrant
shall bear a restrictive securities legend similar in substance
to the one at the head of this Warrant.
3. ADJUSTMENTS
3.1 Stock Dividends, Splits, Etc. The number of Shares
purchasable on exercise of this Warrant and the Purchase Price
shall be subject to adjustment from time to time in the event
that the Company shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock (or securities
convertible into, exchangeable for or otherwise entitling a
holder thereof to receive Common Stock), (b) subdivide its
outstanding shares of Common Stock into a greater number of
shares or (c) combine its outstanding shares of Common Stock
into a smaller number of shares. In any such case, the total
number of Shares and the number of shares or other units of such
other securities purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder
shall be entitled to receive at the same aggregate purchase price
the number of shares of Common Stock and the number of shares or
other units of such other securities which the Holder would have
owned or would have been entitled to receive immediately
following the occurrence of any of the events described above had
this Warrant been exercised in full immediately prior to the
occurrence (or applicable record date) of such event. An
adjustment made pursuant to this Section 3.1 shall, in the case
of a stock dividend or distribution, be made as of the record
date therefor and, in the case of a subdivision or combination,
be made as of the effective date thereof.
3.2 Reorganization, Recapitalization, Consolidation, Merger
or Sale of Assets. In the event of any reorganization or
recapitalization of the Company or in the event the Company
consolidates with or merges with or into another corporation or
transfers all or substantially all its assets to another entity,
then and in each such event, the Holder, upon exercise of this
Warrant at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or
transfer, shall be entitled to receive the stock or other
securities or property to which the Holder would have been
entitled if the Holder had exercised this Warrant immediately
prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization,
recapitalization, consolidation, merger or transfer and shall be
applicable to such shares of stock or other securities or
property receivable on the exercise of this Warrant after such
consummation.
3.3 Notice of Adjustment. Upon the occurrence of any event
requiring an adjustment of the Purchase Price or the Shares, then
and in each such case, the Company shall promptly deliver to the
holder of this Warrant an Officer's Certificate stating the
Purchase Price or Shares resulting from such adjustment and
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based; provided,
however, that no notice to holders of this Warrant or of any part
hereof shall be required before the earlier of the public
announcement or notice to shareholders of the same.
4. FURTHER ASSURANCES. The Company will not, by amendment
of its articles of incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the performance of any
terms of this Warrant, but will at all times in good faith take
all necessary action to carry out all such terms. Without
limiting the generality of the foregoing, the Company (a) will
not increase the par value of any shares of stock receivable on
exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary
or appropriate so that the Company may validly and legally issue
fully paid and nonassessable Shares (or other securities or
property deliverable hereunder), free of all liens, encumbrances,
security interests and claims whatsoever, upon the exercise of
this Warrant, and (c) will not transfer all or substantially all
its assets to any other entity or consolidate or merge with or
into any other entity or permit any such entity to consolidate or
merge with or into the Company (if the Company is not the
surviving entity), unless such other entity shall be bound by all
the terms of this Warrant. This Warrant shall bind the
successors and assigns of the Company.
5. NOTICES OF RECORD DATES, ETC.
(a) If the Company shall fix a record date of the
holders of its Common Stock (or other securities at the time
deliverable upon the exercise of this Warrant)for the
purpose of entitling or enabling them to receive any
dividend (including a stock dividend) or other distribution,
or to receive any right to subscribe for or to purchase any
shares of any class of any securities, or to receive any
other right, or
(b) in the event of any reorganization or
recapitalization of the Company, any reclassification of the
capital stock of the Company, any consolidation or merger
of the Company with or into another corporation or any
transfer of all or substantially all the assets of the
Company to another entity, or
(c) in the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in any such event, the Company shall mail or cause to be
mailed to the Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or right and stating
the amount and character of such dividend, distribution or right
or (ii) the date on which a record is to be taken for the
purpose of voting on or approving such reorganization,
recapitalization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding up and the date
on which such event is to take place and the time, if any is to
be fixed, as of which the holders of record of Common Stock (or
any other securities at the time deliverable upon exercise of
this Warrant) shall be entitled to exchange their shares of
Common Stock (or such other securities) for securities or other
property deliverable upon such reorganization, recapitalization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up. Such notice shall be mailed promptly
after definitive information (such as, for example, approval of
the Board of Directors or the signing of a letter of intent) with
respect to such proposed action becomes known to the Company, but
in any event at least 10 days prior to the record date therein
specified; provided, however, that no notice to holders of this
Warrant or any part hereof shall be required before the earlier
of the public announcement or notice to shareholders of the same.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon delivery of any indemnity
bond (or, in the case of any institutional holder, an indemnity
agreement) reasonably satisfactory in form and amount to the
Company or, in the case of any mutilation, upon surrender and
cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like
tenor.
7. TRANSFERS.
7.1 The Holder shall not transfer or assign this
Warrant except by will, by court order or pursuant to the laws of
descent and distribution; provided, however, that any such
transfer shall be subject to compliance with applicable
securities laws. Any attempted or purported assignment or
transfer of this Warrant without compliance with the preceding
sentence shall be void. In the event of any transfer permitted
by this Section 7, the Company shall register or shall cause its
agent to register the transfer or assignment on its Warrant
Register upon surrender of this Warrant, duly endorsed, or
accompanied by a written instrument of transfer duly executed by
the Holder or by the duly appointed legal representative or
attorney thereof. On any such registration of transfer, the
Company shall issue a new Warrant or Warrants, of like tenor, in
lieu of the transferred or assigned Warrant. In no event will the
Company be required to effect any registration of transfer,
assignment or exchange that would result in the issuance of a
fraction of a Share. Any action by the Company required under
this Section 7 shall be taken at its own expense.
7.2 No holder of this Warrant may sell, transfer,
assign, pledge, hypothecate or otherwise dispose of this Warrant,
or any part hereof, unless (i) a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and
all applicable state securities laws then in effect with respect
to this Warrant and the Shares, (ii) the holder delivers to the
Company a written opinion of counsel, satisfactory to counsel for
the Company, to the effect that an exemption from registration
under the Securities Act and any applicable state securities laws
is available with respect to such disposition of this Warrant
and that no such registration is required or (iii) the Company is
satisfied that registration under such acts is not required.
7.3 Issue Tax. The issuance of this Warrant and
certificates for Shares upon the exercise of this Warrant shall
be made without charge to the Holder of such Shares for any
issuance tax in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any Warrant
or certificate in a name other than that of the Holder.
8. RESERVATION OF SHARES. The Company shall reserve, for
the purpose of issuance upon exercise of this Warrant, such
number of its duly authorized and unissued shares of Common Stock
or such class or classes of capital stock or other securities as
shall from time to time be sufficient to comply with this
Warrant. If at any time the authorized and unissued shares of
Common Stock or such other class or classes of capital stock or
other securities are not sufficient for the exercise of this
Warrant, the Company shall immediately take such corporate action
as may be necessary to increase its authorized and unissued
shares of Common Stock or such other class or classes of capital
stock or other securities to such number as shall be sufficient
for that purpose.
9. PIGGYBACK REGISTRATION RIGHTS.
9.1 Certain Definitions. As used in this Section
9, the following terms shall have the following respective
meanings.
(a) "Commission" shall mean the United States
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
(b) "Form S-4" and "Form S-8" shall mean Form S-4
or Form S-8, respectively, promulgated by the Commission or any
substantially similar form then in effect.
(c) The terms "Register," "Registered" and
"Registration" refer to a registration effected by preparing and
filing a registration statement ("Registration Statement") in
compliance with Securities Act and the declaration or ordering of
the effectiveness of such Registration Statement.
(d) "Registrable Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant or
any other warrant originally issued by the Company as of the date
of this Warrant.
(e) "Registration Expenses" shall mean all
expenses incurred by the Company in complying with this Section
9, including, without limitation, all federal and state
registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky fees
and expenses, the expense of any special audits incident to or
required by any such Registration and the reasonable fees and
disbursements of one counsel for the Selling Shareholders, as
defined below.
(f) "Restriction Termination Date" shall mean,
with respect to any Registrable Securities, the earliest of (i)
the date that such Registrable Securities shall have been
Registered and sold or otherwise disposed of in accordance with
the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such
securities or transferred in compliance with Rule 144 and (ii)
the date that an opinion of counsel to the Company containing
reasonable assumptions shall have been rendered to the effect
that all legends on such Registrable Securities can be properly
removed and such legends shall have been removed.
(g) "Rule 144" shall mean Rule 144 promulgated by
the Commission pursuant to the Securities Act.
(h) "Selling Expenses" shall mean all
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities pursuant to this Warrant.
(i) "Selling Shareholders" shall mean holders of
Registrable Securities that have requested Registration pursuant
to other agreements.
9.2 Registration.
(a) Each time that the Company proposes for
any reason to Register any of its securities, other than pursuant
to a Registration Statement on Form S-4 or Form S-8 or similar or
successor forms, the Company shall promptly give written notice
of such proposed Registration to the Holder, which shall offer
the Holder the right to request inclusion of any Registrable
Securities in the proposed Registration.
(b) The Holder shall have 10 days from the
receipt of such notice to deliver to the Company a written
request specifying the number of shares of Registrable Securities
such Holder intends to sell and the Holder's intended plan of
disposition.
(c) Upon receipt of a written request pursuant to
Section 9.2(b), the Company shall promptly use its best efforts
to cause all such Registrable Securities to be Registered, to the
extent required to permit sale or disposition as set forth in the
written request.
(d) Notwithstanding the forgoing, if the managing
underwriter determines and advises in writing that the inclusion
of all Registrable Securities proposed to be included in the
Registration Statement, together with any other issued and
outstanding shares of Common Stock proposed to be included
therein by holders other than the holders of Registrable
Securities (such other shares hereinafter collectively referred
to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the
underwritten public offering, then the number of such shares of
Common Stock to be included in such Registration Statement shall
be reduced, and shares of Common Stock shall be excluded from
such underwritten public offering in a number deemed necessary by
such managing underwriter, by excluding equal numbers of (i) the
Registrable Securities and (ii) the Other Shares proposed to be
registered, pro rata, based on the number of shares of Common
Stock the respective holders proposed to include. The shares of
Common Stock that are so excluded from the Registration Statement
shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days, that the managing underwriter
reasonably determines as necessary in order to effect the
underwritten public offering.
9.3 Preparation and Filing. If and whenever the
Company is under an obligation pursuant to the provisions of this
Section 9 to use its best efforts to effect the Registration of
any Registrable Securities, the Company shall, as expeditiously
as practicable:
(a) furnish to the Holder such number of copies
of any summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or
other disposition of such Registrable Securities;
(b) use its best efforts to register or qualify
the Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as
the Holder shall reasonably request and do any and all other acts
or things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition in such
jurisdictions of such Registrable Securities; provided, however,
that the Company shall not be required to consent to general
service of process, qualify to do business as a foreign
corporation where it would not be otherwise required to qualify
or submit to liability for state or local taxes where it is not
liable for such taxes;
(c) at any time when a prospectus covered by such
Registration Statement is required to be delivered under the
Securities Act notify the Holder of the happening of any event as
a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and,
at the request of such Holder, prepare, file and furnish to such
Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading
in the light of the circumstances then existing; and
9.4 Expenses. The Company shall pay all Registration
Expenses incurred by the Company in complying with this Section
9; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Securities covered by
registrations effected pursuant to this Section 9 shall be borne
by the seller or sellers thereof, in proportion to the number of
Registrable Securities sold by such seller or sellers.
9.5 Information Furnished by Holder. It shall be a
condition precedent to the Company's obligations under this
Warrant as to the Holder that the Holder furnish to the Company
in writing such information regarding such Holder and the
distribution proposed by such Holder as the Company or any
managing underwriter may reasonably request.
9.6 Indemnification of Company Upon Registration. The
undersigned shall indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
Registrable Securities covered by a Registration Statement, each
person who controls the Company or such underwriter within the
meaning of the Securities Act, and other Selling Shareholders,
each of their respective officers, directors and constituent
partners and each person controlling such other Selling
Shareholders, against all claims, losses, damages and liabilities
(or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in such
Registration Statement or related prospectus, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the undersigned of any rule or
regulation promulgated under the Securities Act applicable to the
undersigned and relating to actions or inaction required of the
undersigned in connection with the Registration of the
Registrable Securities pursuant to such Registration Statement;
and will reimburse the Company, such Selling Shareholders, and
such directors, officers, partners, persons, underwriters and
controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action. Such
indemnification and reimbursement shall be to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by
the undersigned.
10. SURVIVAL. All agreements, covenants, representations
and warranties contained herein shall survive the execution and
delivery of this Warrant and any investigation at any time made
by or on behalf of any party hereto and the exercise, sale and
purchase of this Warrant and the Common Stock (and any other
securities or property) issuable upon exercise hereof.
11. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle
the Holder hereof, in such capacity, to any voting rights or
other rights as a shareholder of the Company.
12. NOTICES. All demands, notices, consents and other
communications to be given hereunder shall be in writing and
shall be deemed duly given when delivered personally or five days
after being mailed by registered or certified mail, postage
prepaid, addressed as follows:
If to the Company: ViewCall America, Inc.
Suite 240
5600 Oak Brook Parkway
Norcross, Georgia 30093
If to the Holder:
The Company or the Holder may change their respective addresses
at any time or times by notice hereunder actually received by the
other.
13. REMEDIES. The Company agrees that the remedies at law
of the Holder, in the event of any default or threatened default
by the Company in the performance of or compliance with any of
the terms of this Warrant, are not and will not be adequate and
such terms may be specifically enforced by a decree of specific
performance of any agreement contained herein or by an injunction
against a violation of any terms hereof or otherwise.
14. GENERAL. This Warrant and any term hereof may be
amended, modified, waived or terminated only by an instrument in
writing signed by the party against which enforcement of such
amendment, modification, waiver or termination is sought. This
Warrant shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of the State of
Georgia. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any
other provision hereof. The headings in this Warrant are for
convenience of reference only and are not part of this Warrant.
Dated: , 1996.
VIEWCALL AMERICA, INC.
By:
Alan McKeon,
President
Attest:
Michael Casey,
Secretary
(CORPORATE SEAL)
<PAGE>
ELECTION TO PURCHASE
To ViewCall America, Inc.:
The undersigned, Holder of the attached Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, _______ shares of
Common Stock of ViewCall America, Inc. (or other securities or
property) to which such Holder is entitled thereunder, and
herewith makes payment of $____________ therefor in cash or by
certified or bank check. The undersigned hereby requests that
the certificate(s) for such shares be issued in the name(s) and
delivered to the address(es) as follows:
If the foregoing Election to Purchase evidences an exercise
of the attached Warrant to purchase fewer than all the Shares (or
such other securities or property) to which the undersigned is
entitled under such Warrant, please issue a new warrant, of like
tenor, for the remaining Shares (or other securities or property)
in the name(s), and deliver the same to the address(es), as
follows:
Dated: , 19__.
(Name of Holder)
(Signature of Holder or
Authorized Signatory)
THIS COMMON STOCK PURCHASE WARRANT (THE "WARRANT") AND ANY SHARES
ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE ON CERTAIN EXEMPTIONS PROVIDED THEREUNDER, OR UNDER THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON
CERTAIN EXEMPTIONS PROVIDED THEREUNDER, INCLUDING SECTION
10-5-9(13) OF THAT ACT. THE WARRANT AND ANY SHARES ACQUIRED UPON
THE EXERCISE OF THIS WARRANT HAVE ALSO NOT BEEN REGISTERED UNDER
ANY OTHER FEDERAL OR STATE SECURITIES LAW. THIS WARRANT AND ANY
SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT ARE BEING ACQUIRED
FOR INVESTMENT, AND NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE SECURITIES
ACT OF 1933, THE GEORGIA SECURITIES ACT OF 1973 AND ANY OTHER
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION
IS AVAILABLE UNDER SAID ACTS. NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT, AND NO TRANSFER OF THIS WARRANT OR ANY
OF SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
VOID AFTER 5:00 P.M., E.D.T., ON JANUARY 16, 2002.
VIEWCALL AMERICA, INC.
1,062,500 Shares of Common Stock
PURCHASE WARRANT
No. 5
ViewCall America, Inc., a Georgia corporation (the
"Company"), hereby agrees that, for value received, Rudolph P.
Russo, an individual resident of the State of New York (the
"Holder"), is entitled, subject to the terms and conditions set
forth below, to purchase from the Company up to 1,062,500 fully
paid and nonassessable shares (the "Shares") of the common stock,
par value $.01 per share (the "Common Stock"), of the Company, at
a purchase price per Share of $0.70 (the "Purchase Price"),
subject to certain adjustments contained in Section 3 herein, and
prior to the Expiration Date (as defined below). This Warrant
shall expire and be of no further force or effect at the earlier
of the time when it has been exercised with respect to all Shares
which the Holder is or may become entitled to purchase hereunder
or on January 16, 2002 (the "Expiration Date"). The number and
character of the Shares and the Purchase Price are subject to
adjustment as herein provided.
1. EXECUTION; REGISTRATION. This Warrant is executed on
behalf of the Company by its President and attested by its
Secretary under its corporate seal. The Company shall keep or
cause to be kept a register of the Holder of this Warrant (the
"Warrant Register"). Prior to due presentment of this Warrant
for transfer in accordance with Section 7 hereof, the Company
shall treat the Holder in whose name or names this Warrant is
registered as the absolute owner or owners hereof for all
purposes.
2. EXERCISE. This Warrant may be exercised, in whole or
in part, from time to time by the Holder by delivering this
Warrant, together with an Election to Purchase in the form
attached hereto properly completed and duly executed by or on
behalf of the Holder, to the Company or such person as the
Company may have appointed as warrant agent, at its principal
office (or at the office of such agent), accompanied by payment
in cash or by certified or bank check, payable to the order of
the Company, in an aggregate amount equal to the Purchase Price
as then adjusted multiplied by the number of Shares as to which
this Warrant is then exercised. The Company shall cancel this
Warrant on any such exercise and, if such exercise is partial,
shall issue and deliver to the Holder a new Warrant, of like
tender, with respect to the Shares as to which this Warrant has
not then been exercised.
The Company will, or will direct its transfer agent to,
issue, as soon as practicable after any exercise of this Warrant,
and in any event within 15 days thereafter, at the Company's
expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the
Holder may direct (on payment by the Holder of any applicable
transfer taxes and compliance with Section 7 hereof), a
certificate or certificates for the number of fully paid and
nonassessable Shares as to which this Warrant is so exercised,
plus, in lieu of any fractional shares to which the Holder would
otherwise be entitled, cash equal to such fraction multiplied by
the greater of (i) the then fair market value of such shares or
(ii) the Purchase Price as then adjusted.
Any Shares as to which this Warrant is exercised shall be
deemed issued on and as of the date of such exercise and the
Holder or the person or persons designated by the Holder as
therein provided shall thereupon be deemed to be the owner or
owners of record thereof.
Shares of Common Stock purchased pursuant to this Warrant
shall bear a restrictive securities legend similar in substance
to the one at the head of this Warrant.
3. ADJUSTMENTS
3.1 Stock Dividends, Splits, Etc. The number of Shares
purchasable on exercise of this Warrant and the Purchase Price
shall be subject to adjustment from time to time in the event
that the Company shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock (or securities
convertible into, exchangeable for or otherwise entitling a
holder thereof to receive Common Stock), (b) subdivide its
outstanding shares of Common Stock into a greater number of
shares or (c) combine its outstanding shares of Common Stock into
a smaller number of shares. In any such case, the total number
of Shares and the number of shares or other units of such other
securities purchasable upon exercise of this Warrant immediately
prior thereto shall be adjusted so that the Holder shall be
entitled to receive at the same aggregate purchase price the
number of shares of Common Stock and the number of shares or
other units of such other securities which the Holder would have
owned or would have been entitled to receive immediately
following the occurrence of any of the events described above had
this Warrant been exercised in full immediately prior to the
occurrence (or applicable record date) of such event. An
adjustment made pursuant to this Section 3.1 shall, in the case
of a stock dividend or distribution, be made as of the record
date therefor and, in the case of a subdivision or combination,
be made as of the effective date thereof.
3.2 Reorganization, Recapitalization, Consolidation, Merger
or Sale of Assets. In the event of any reorganization or
recapitalization of the Company or in the event the Company
consolidates with or merges with or into another corporation or
transfers all or substantially all its assets to another entity,
then and in each such event, the Holder, upon exercise of this
Warrant at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or
transfer, shall be entitled to receive the stock or other
securities or property to which the Holder would have been
entitled if the Holder had exercised this Warrant immediately
prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization,
recapitalization, consolidation, merger or transfer and shall be
applicable to such shares of stock or other securities or
property receivable on the exercise of this Warrant after such
consummation.
3.3 Notice of Adjustment. Upon the occurrence of any event
requiring an adjustment of the Purchase Price or the Shares, then
and in each such case, the Company shall promptly deliver to the
holder of this Warrant an Officer's Certificate stating the
Purchase Price or Shares resulting from such adjustment and
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based; provided,
however, that no notice to holders of this Warrant or of any part
hereof shall be required before the earlier of the public
announcement or notice to shareholders of the same.
4. FURTHER ASSURANCES. The Company will not, by amendment
of its articles of incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the performance of any
terms of this Warrant, but will at all times in good faith take
all necessary action to carry out all such terms. Without
limiting the generality of the foregoing, the Company (a) will
not increase the par value of any shares of stock receivable on
exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary
or appropriate so that the Company may validly and legally issue
fully paid and nonassessable Shares (or other securities or
property deliverable hereunder), free of all liens, encumbrances,
security interests and claims whatsoever, upon the exercise of
this Warrant, and (c) will not transfer all or substantially all
its assets to any other entity or consolidate or merge with or
into any other entity or permit any such entity to consolidate or
merge with or into the Company (if the Company is not the
surviving entity), unless such other entity shall be bound by all
the terms of this Warrant. This Warrant shall bind the
successors and assigns of the Company.
5. NOTICES OF RECORD DATES, ETC.
(a) If the Company shall fix a record date of the
holders of its Common Stock (or other securities at the time
deliverable upon the exercise of this Warrant) for the
purpose of entitling or enabling them to receive any
dividend (including a stock dividend) or other distribution,
or to receive any right to subscribe for or to purchase any
shares of any class of any securities, or to receive any
other right, or
(b) in the event of any reorganization or
recapitalization of the Company, any reclassification of the
capital stock of the Company, any consolidation or merger of
the Company with or into another corporation or any transfer
of all or substantially all the assets of the Company to
another entity, or
(c) in the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in any such event, the Company shall mail or cause to be
mailed to the Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or right and stating
the amount and character of such dividend, distribution or right
or (ii) the date on which a record is to be taken for the purpose
of voting on or approving such reorganization, recapitalization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up and the date on which such event is to
take place and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or any other securities at the
time deliverable upon exercise of this Warrant) shall be entitled
to exchange their shares of Common Stock (or such other
securities) for securities or other property deliverable upon
such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding up. Such notice shall be mailed promptly after
definitive information (such as, for example, approval of the
Board of Directors or the signing of a letter of intent) with
respect to such proposed action becomes known to the Company, but
in any event at least 10 days prior to the record date therein
specified; provided, however, that no notice to holders of this
Warrant or any part hereof shall be required before the earlier
of the public announcement or notice to shareholders of the same.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon delivery of any indemnity
bond (or, in the case of any institutional holder, an indemnity
agreement) reasonably satisfactory in form and amount to the
Company or, in the case of any mutilation, upon surrender and
cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like
tenor.
7. TRANSFERS.
7.1 The Holder shall not transfer or assign this
Warrant except by will, by court order or pursuant to the laws of
descent and distribution; provided, however, that any such
transfer shall be subject to compliance with applicable
securities laws. Any attempted or purported assignment or
transfer of this Warrant without compliance with the preceding
sentence shall be void. In the event of any transfer permitted
by this Section 7, the Company shall register or shall cause its
agent to register the transfer or assignment on its Warrant
Register upon surrender of this Warrant, duly endorsed, or
accompanied by a written instrument of transfer duly executed by
the Holder or by the duly appointed legal representative or
attorney thereof. On any such registration of transfer, the
Company shall issue a new Warrant or Warrants, of like tenor, in
lieu of the transferred or assigned Warrant. In no event will
the Company be required to effect any registration of transfer,
assignment or exchange that would result in the issuance of a
fraction of a Share. Any action by the Company required under
this Section 7 shall be taken at its own expense.
7.2 No holder of this Warrant may sell, transfer,
assign, pledge, hypothecate or otherwise dispose of this
Warrant, or any part hereof, unless (i) a registration statement
under the Securities Act of 1933, as amended (the "Securities
Act"), and all applicable state securities laws then in effect
with respect to this Warrant and the Shares, (ii) the holder
delivers to the Company a written opinion of counsel,
satisfactory to counsel for the Company, to the effect that an
exemption from registration under the Securities Act and any
applicable state securities laws is available with respect to
such disposition of this Warrant and that no such registration is
required or (iii) the Company is satisfied that registration
under such acts is not required.
7.3 Issue Tax. The issuance of this Warrant and
certificates for Shares upon the exercise of this Warrant shall
be made without charge to the Holder of such Shares for any
issuance tax in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any Warrant
or certificate in a name other than that of the Holder.
8. RESERVATION OF SHARES. The Company shall reserve, for
the purpose of issuance upon exercise of this Warrant, such
number of its duly authorized and unissued shares of Common Stock
or such class or classes of capital stock or other securities as
shall from time to time be sufficient to comply with this
Warrant. If at any time the authorized and unissued shares of
Common Stock or such other class or classes of capital stock or
other securities are not sufficient for the exercise of this
Warrant, the Company shall immediately take such corporate action
as may be necessary to increase its authorized and unissued
shares of Common Stock or such other class or classes of capital
stock or other securities to such number as shall be sufficient
for that purpose.
9. PIGGYBACK REGISTRATION RIGHTS.
9.1 Certain Definitions. As used in this Section
9, the following terms shall have the following respective
meanings.
(a) "Commission" shall mean the United States
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
(b) "Form S-4" and "Form S-8" shall mean Form S-4
or Form S-8, respectively, promulgated by the Commission or any
substantially similar form then in effect.
(c) The terms "Register," "Registered" and
"Registration" refer to a registration effected by preparing and
filing a registration statement ("Registration Statement") in
compliance with Securities Act and the declaration or ordering of
the effectiveness of such Registration Statement.
(d) "Registrable Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant or
any other warrant originally issued by the Company as of the date
of this Warrant.
(e) "Registration Expenses" shall mean all
expenses incurred by the Company in complying with this Section
9, including, without limitation, all federal and state
registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky fees
and expenses, the expense of any special audits incident to or
required by any such Registration and the reasonable fees and
disbursements of one counsel for the Selling Shareholders, as
defined below.
(f) "Restriction Termination Date" shall mean,
with respect to any Registrable Securities, the earliest of (i)
the date that such Registrable Securities shall have been
Registered and sold or otherwise disposed of in accordance with
the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such
securities or transferred in compliance with Rule 144 and (ii)
the date that an opinion of counsel to the Company containing
reasonable assumptions shall have been rendered to the effect
that all legends on such Registrable Securities can be properly
removed and such legends shall have been removed.
(g) "Rule 144" shall mean Rule 144 promulgated by
the Commission pursuant to the Securities Act.
(h) "Selling Expenses" shall mean all
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities pursuant to this Warrant.
(i) "Selling Shareholders" shall mean holders of
Registrable Securities that have requested Registration pursuant
to other agreements.
9.2 Registration.
(a) Each time that the Company proposes for any
reason to Register any of its securities, other than pursuant to
a Registration Statement on Form S-4 or Form S-8 or similar or
successor forms, the Company shall promptly give written notice
of such proposed Registration to the Holder, which shall offer
the Holder the right to request inclusion of any Registrable
Securities in the proposed Registration.
(b) The Holder shall have 10 days from the
receipt of such notice to deliver to the Company a written
request specifying the number of shares of Registrable Securities
such Holder intends to sell and the Holder's intended plan of
disposition.
(c) Upon receipt of a written request pursuant to
Section 9.2(b), the Company shall promptly use its best efforts
to cause all such Registrable Securities to be Registered, to the
extent required to permit sale or disposition as set forth in the
written request.
(d) Notwithstanding the forgoing, if the managing
underwriter determines and advises in writing that the inclusion
of all Registrable Securities proposed to be included in the
Registration Statement, together with any other issued and
outstanding shares of Common Stock proposed to be included
therein by holders other than the holders of Registrable
Securities (such other shares hereinafter collectively referred
to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the
underwritten public offering, then the number of such shares of
Common Stock to be included in such Registration Statement shall
be reduced, and shares of Common Stock shall be excluded from
such underwritten public offering in a number deemed necessary by
such managing underwriter, by excluding equal numbers of (i) the
Registrable Securities and (ii) the Other Shares proposed to be
registered, pro rata, based on the number of shares of Common
Stock the respective holders proposed to include. The shares of
Common Stock that are so excluded from the Registration Statement
shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days, that the managing underwriter
reasonably determines as necessary in order to effect the
underwritten public offering.
9.3 Preparation and Filing. If and whenever the
Company is under an obligation pursuant to the provisions of this
Section 9 to use its best efforts to effect the Registration of
any Registrable Securities, the Company shall, as expeditiously
as practicable:
(a) furnish to the Holder such number of copies
of any summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or
other disposition of such Registrable Securities;
(b) use its best efforts to register or qualify
the Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as
the Holder shall reasonably request and do any and all other acts
or things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition in such
jurisdictions of such Registrable Securities; provided, however,
that the Company shall not be required to consent to general
service of process, qualify to do business as a foreign
corporation where it would not be otherwise required to qualify
or submit to liability for state or local taxes where it is not
liable for such taxes;
(c) at any time when a prospectus covered by such
Registration Statement is required to be delivered under the
Securities Act notify the Holder of the happening of any event as
a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and,
at the request of such Holder, prepare, file and furnish to such
Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading
in the light of the circumstances then existing; and
9.4 Expenses. The Company shall pay all Registration
Expenses incurred by the Company in complying with this Section
9; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Securities covered by
registrations effected pursuant to this Section 9 shall be borne
by the seller or sellers thereof, in proportion to the number of
Registrable Securities sold by such seller or sellers.
9.5 Information Furnished by Holder. It shall be a
condition precedent to the Company's obligations under this
Warrant as to the Holder that the Holder furnish to the Company
in writing such information regarding such Holder and the
distribution proposed by such Holder as the Company or any
managing underwriter may reasonably request.
9.6 Indemnification of Company Upon Registration. The
undersigned shall indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
Registrable Securities covered by a Registration Statement, each
person who controls the Company or such underwriter within the
meaning of the Securities Act, and other Selling Shareholders,
each of their respective officers, directors and constituent
partners and each person controlling such other Selling
Shareholders, against all claims, losses, damages and liabilities
(or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in such
Registration Statement or related prospectus, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the undersigned of any rule or
regulation promulgated under the Securities Act applicable to the
undersigned and relating to actions or inaction required of the
undersigned in connection with the Registration of the
Registrable Securities pursuant to such Registration Statement;
and will reimburse the Company, such Selling Shareholders, and
such directors, officers, partners, persons, underwriters and
controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action. Such
indemnification and reimbursement shall be to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by
the undersigned.
10. SURVIVAL. All agreements, covenants, representations
and warranties contained herein shall survive the execution and
delivery of this Warrant and any investigation at any time made
by or on behalf of any party hereto and the exercise, sale and
purchase of this Warrant and the Common Stock (and any other
securities or property) issuable upon exercise hereof.
11. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle
the Holder hereof, in such capacity, to any voting rights or
other rights as a shareholder of the Company.
12. NOTICES. All demands, notices, consents and other
communications to be given hereunder shall be in writing and
shall be deemed duly given when delivered personally or five days
after being mailed by registered or certified mail, postage
prepaid, addressed as follows:
If to the Company: ViewCall America, Inc.
Suite 240
5600 Oak Brook Parkway
Norcross, Georgia 30093
If to the Holder: Rudolph P. Russo
35 Market Street
Poughkeepsie, New York 12601
The Company or the Holder may change their respective addresses
at any time or times by notice hereunder actually received by the
other.
13. REMEDIES. The Company agrees that the remedies at law
of the Holder, in the event of any default or threatened default
by the Company in the performance of or compliance with any of
the terms of this Warrant, are not and will not be adequate and
such terms may be specifically enforced by a decree of specific
performance of any agreement contained herein or by an injunction
against a violation of any terms hereof or otherwise.
14. GENERAL. This Warrant and any term hereof may be
amended, modified, waived or terminated only by an instrument in
writing signed by the party against which enforcement of such
amendment, modification, waiver or termination is sought. This
Warrant shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of the State of
Georgia. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any
other provision hereof. The headings in this Warrant are for
convenience of reference only and are not part of this Warrant.
Dated: January 16, 1997.
VIEWCALL AMERICA, INC.
By:
Alan McKeon,
President
Attest:
Michael Casey,
Secretary
(CORPORATE SEAL)
ELECTION TO PURCHASE
To ViewCall America, Inc.:
The undersigned, Holder of the attached Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, _______ shares of
Common Stock of ViewCall America, Inc. (or other securities or
property) to which such Holder is entitled thereunder, and
herewith makes payment of $____________ therefor in cash or by
certified or bank check. The undersigned hereby requests that
the certificate(s) for such shares be issued in the name(s) and
delivered to the address(es) as follows:
If the foregoing Election to Purchase evidences an exercise
of the attached Warrant to purchase fewer than all the Shares (or
such other securities or property) to which the undersigned is
entitled under such Warrant, please issue a new warrant, of like
tenor, for the remaining Shares (or other securities or property)
in the name(s), and deliver the same to the address(es), as
follows:
Dated: , 19__.
(Name of Holder)
(Signature of Holder or
Authorized Signatory)
THIS COMMON STOCK PURCHASE WARRANT (THE "WARRANT") AND ANY SHARES
ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE ON CERTAIN EXEMPTIONS PROVIDED THEREUNDER, OR UNDER THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON
CERTAIN EXEMPTIONS PROVIDED THEREUNDER, INCLUDING SECTION
10-5-9(13) OF THAT ACT. THE WARRANT AND ANY SHARES ACQUIRED UPON
THE EXERCISE OF THIS WARRANT HAVE ALSO NOT BEEN REGISTERED UNDER
ANY OTHER FEDERAL OR STATE SECURITIES LAW. THIS WARRANT AND ANY
SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT ARE BEING ACQUIRED
FOR INVESTMENT, AND NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE SECURITIES
ACT OF 1933, THE GEORGIA SECURITIES ACT OF 1973 AND ANY OTHER
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION
IS AVAILABLE UNDER SAID ACTS. NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT, AND NO TRANSFER OF THIS WARRANT OR ANY
OF SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
VOID AFTER 5:00 P.M., E.D.T., ON APRIL 2, 2002.
VIEWCALL AMERICA, INC.
62,500 Shares of Common Stock
PURCHASE WARRANT
No. 13
ViewCall America, Inc., a Georgia corporation (the
"Company"), hereby agrees that, for value received, Rudolph P.
Russo, an individual resident of the State of New York (the
"Holder"), is entitled, subject to the terms and conditions set
forth below, to purchase from the Company up to 62,500 fully paid
and nonassessable shares (the "Shares") of the common stock, par
value $.01 per share (the "Common Stock"), of the Company, at a
purchase price per Share of $0.70 (the "Purchase Price"), subject
to certain adjustments contained in Section 3 herein, and prior
to the Expiration Date (as defined below). This Warrant shall
expire and be of no further force or effect at the earlier of the
time when it has been exercised with respect to all Shares which
the Holder is or may become entitled to purchase hereunder or on
April 2, 2002 (the "Expiration Date"). The number and character
of the Shares and the Purchase Price are subject to adjustment as
herein provided.
1. EXECUTION; REGISTRATION. This Warrant is executed on
behalf of the Company by its President and attested by its
Secretary under its corporate seal. The Company shall keep or
cause to be kept a register of the Holder of this Warrant (the
"Warrant Register"). Prior to due presentment of this Warrant
for transfer in accordance with Section 7 hereof, the Company
shall treat the Holder in whose name or names this Warrant is
registered as the absolute owner or owners hereof for all
purposes.
2. EXERCISE. This Warrant may be exercised, in whole or
in part, from time to time by the Holder by delivering this
Warrant, together with an Election to Purchase in the form
attached hereto properly completed and duly executed by or on
behalf of the Holder, to the Company or such person as the
Company may have appointed as warrant agent, at its principal
office (or at the office of such agent), accompanied by payment
in cash or by certified or bank check, payable to the order of
the Company, in an aggregate amount equal to the Purchase Price
as then adjusted multiplied by the number of Shares as to which
this Warrant is then exercised. The Company shall cancel this
Warrant on any such exercise and, if such exercise is partial,
shall issue and deliver to the Holder a new Warrant, of like
tender, with respect to the Shares as to which this Warrant has
not then been exercised.
The Company will, or will direct its transfer agent to,
issue, as soon as practicable after any exercise of this Warrant,
and in any event within 15 days thereafter, at the Company's
expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the
Holder may direct (on payment by the Holder of any applicable
transfer taxes and compliance with Section 7 hereof), a
certificate or certificates for the number of fully paid and
nonassessable Shares as to which this Warrant is so exercised,
plus, in lieu of any fractional shares to which the Holder would
otherwise be entitled, cash equal to such fraction multiplied by
the greater of (i) the then fair market value of such shares or
(ii) the Purchase Price as then adjusted.
Any Shares as to which this Warrant is exercised shall be
deemed issued on and as of the date of such exercise and the
Holder or the person or persons designated by the Holder as
therein provided shall thereupon be deemed to be the owner or
owners of record thereof.
Shares of Common Stock purchased pursuant to this Warrant
shall bear a restrictive securities legend similar in substance
to the one at the head of this Warrant.
3. ADJUSTMENTS
3.1 Stock Dividends, Splits, Etc. The number of Shares
purchasable on exercise of this Warrant and the Purchase Price
shall be subject to adjustment from time to time in the event
that the Company shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock (or securities
convertible into, exchangeable for or otherwise entitling a
holder thereof to receive Common Stock), (b) subdivide its
outstanding shares of Common Stock into a greater number of
shares or (c) combine its outstanding shares of Common Stock into
a smaller number of shares. In any such case, the total number
of Shares and the number of shares or other units of such other
securities purchasable upon exercise of this Warrant immediately
prior thereto shall be adjusted so that the Holder shall be
entitled to receive at the same aggregate purchase price the
number of shares of Common Stock and the number of shares or
other units of such other securities which the Holder would have
owned or would have been entitled to receive immediately
following the occurrence of any of the events described above had
this Warrant been exercised in full immediately prior to the
occurrence (or applicable record date) of such event. An
adjustment made pursuant to this Section 3.1 shall, in the case
of a stock dividend or distribution, be made as of the record
date therefor and, in the case of a subdivision or combination,
be made as of the effective date thereof.
3.2 Reorganization, Recapitalization, Consolidation, Merger
or Sale of Assets. In the event of any reorganization or
recapitalization of the Company or in the event the Company
consolidates with or merges with or into another corporation or
transfers all or substantially all its assets to another entity,
then and in each such event, the Holder, upon exercise of this
Warrant at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or
transfer, shall be entitled to receive the stock or other
securities or property to which the Holder would have been
entitled if the Holder had exercised this Warrant immediately
prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization,
recapitalization, consolidation, merger or transfer and shall be
applicable to such shares of stock or other securities or
property receivable on the exercise of this Warrant after such
consummation.
3.3 Notice of Adjustment. Upon the occurrence of any event
requiring an adjustment of the Purchase Price or the Shares, then
and in each such case, the Company shall promptly deliver to the
holder of this Warrant an Officer's Certificate stating the
Purchase Price or Shares resulting from such adjustment and
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based; provided,
however, that no notice to holders of this Warrant or of any part
hereof shall be required before the earlier of the public
announcement or notice to shareholders of the same.
4. FURTHER ASSURANCES. The Company will not, by amendment
of its articles of incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the performance of any
terms of this Warrant, but will at all times in good faith take
all necessary action to carry out all such terms. Without
limiting the generality of the foregoing, the Company (a) will
not increase the par value of any shares of stock receivable on
exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary
or appropriate so that the Company may validly and legally issue
fully paid and nonassessable Shares (or other securities or
property deliverable hereunder), free of all liens, encumbrances,
security interests and claims whatsoever, upon the exercise of
this Warrant, and (c) will not transfer all or substantially all
its assets to any other entity or consolidate or merge with or
into any other entity or permit any such entity to consolidate or
merge with or into the Company (if the Company is not the
surviving entity), unless such other entity shall be bound by all
the terms of this Warrant. This Warrant shall bind the
successors and assigns of the Company.
5. NOTICES OF RECORD DATES, ETC.
(a) If the Company shall fix a record date of the
holders of its Common Stock (or other securities at the time
deliverable upon the exercise of this Warrant) for the
purpose of entitling or enabling them to receive any
dividend (including a stock dividend) or other distribution,
or to receive any right to subscribe for or to purchase any
shares of any class of any securities, or to receive any
other right, or
(b) in the event of any reorganization or
recapitalization of the Company, any reclassification of the
capital stock of the Company, any consolidation or merger of
the Company with or into another corporation or any transfer
of all or substantially all the assets of the Company to
another entity, or
(c) in the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in any such event, the Company shall mail or cause to be
mailed to the Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or right and stating
the amount and character of such dividend, distribution or right
or (ii) the date on which a record is to be taken for the purpose
of voting on or approving such reorganization, recapitalization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up and the date on which such event is to
take place and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or any other securities at the
time deliverable upon exercise of this Warrant) shall be entitled
to exchange their shares of Common Stock (or such other
securities) for securities or other property deliverable upon
such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding up. Such notice shall be mailed promptly after
definitive information (such as, for example, approval of the
Board of Directors or the signing of a letter of intent) with
respect to such proposed action becomes known to the Company, but
in any event at least 10 days prior to the record date therein
specified; provided, however, that no notice to holders of this
Warrant or any part hereof shall be required before the earlier
of the public announcement or notice to shareholders of the same.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon delivery of any indemnity
bond (or, in the case of any institutional holder, an indemnity
agreement) reasonably satisfactory in form and amount to the
Company or, in the case of any mutilation, upon surrender and
cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like
tenor.
7. TRANSFERS.
7.1 The Holder shall not transfer or assign this
Warrant except by will, by court order or pursuant to the laws of
descent and distribution; provided, however, that any such
transfer shall be subject to compliance with applicable
securities laws. Any attempted or purported assignment or
transfer of this Warrant without compliance with the preceding
sentence shall be void. In the event of any transfer permitted
by this Section 7, the Company shall register or shall cause its
agent to register the transfer or assignment on its Warrant
Register upon surrender of this Warrant, duly endorsed, or
accompanied by a written instrument of transfer duly executed by
the Holder or by the duly appointed legal representative or
attorney thereof. On any such registration of transfer, the
Company shall issue a new Warrant or Warrants, of like tenor, in
lieu of the transferred or assigned Warrant. In no event will
the Company be required to effect any registration of transfer,
assignment or exchange that would result in the issuance of a
fraction of a Share. Any action by the Company required under
this Section 7 shall be taken at its own expense.
7.2 No holder of this Warrant may sell, transfer,
assign, pledge, hypothecate or otherwise dispose of this
Warrant, or any part hereof, unless (i) a registration statement
under the Securities Act of 1933, as amended (the "Securities
Act"), and all applicable state securities laws then in effect
with respect to this Warrant and the Shares, (ii) the holder
delivers to the Company a written opinion of counsel,
satisfactory to counsel for the Company, to the effect that an
exemption from registration under the Securities Act and any
applicable state securities laws is available with respect to
such disposition of this Warrant and that no such registration is
required or (iii) the Company is satisfied that registration
under such acts is not required.
7.3 Issue Tax. The issuance of this Warrant and
certificates for Shares upon the exercise of this Warrant shall
be made without charge to the Holder of such Shares for any
issuance tax in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any Warrant
or certificate in a name other than that of the Holder.
8. RESERVATION OF SHARES. The Company shall reserve, for
the purpose of issuance upon exercise of this Warrant, such
number of its duly authorized and unissued shares of Common Stock
or such class or classes of capital stock or other securities as
shall from time to time be sufficient to comply with this
Warrant. If at any time the authorized and unissued shares of
Common Stock or such other class or classes of capital stock or
other securities are not sufficient for the exercise of this
Warrant, the Company shall immediately take such corporate action
as may be necessary to increase its authorized and unissued
shares of Common Stock or such other class or classes of capital
stock or other securities to such number as shall be sufficient
for that purpose.
9. PIGGYBACK REGISTRATION RIGHTS.
9.1 Certain Definitions. As used in this Section
9, the following terms shall have the following respective
meanings.
(a) "Commission" shall mean the United States
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
(b) "Form S-4" and "Form S-8" shall mean Form S-4
or Form S-8, respectively, promulgated by the Commission or any
substantially similar form then in effect.
(c) The terms "Register," "Registered" and
"Registration" refer to a registration effected by preparing and
filing a registration statement ("Registration Statement") in
compliance with Securities Act and the declaration or ordering of
the effectiveness of such Registration Statement.
(d) "Registrable Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant or
any other warrant originally issued by the Company as of the date
of this Warrant.
(e) "Registration Expenses" shall mean all
expenses incurred by the Company in complying with this Section
9, including, without limitation, all federal and state
registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky fees
and expenses, the expense of any special audits incident to or
required by any such Registration and the reasonable fees and
disbursements of one counsel for the Selling Shareholders, as
defined below.
(f) "Restriction Termination Date" shall mean,
with respect to any Registrable Securities, the earliest of (i)
the date that such Registrable Securities shall have been
Registered and sold or otherwise disposed of in accordance with
the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such
securities or transferred in compliance with Rule 144 and (ii)
the date that an opinion of counsel to the Company containing
reasonable assumptions shall have been rendered to the effect
that all legends on such Registrable Securities can be properly
removed and such legends shall have been removed.
(g) "Rule 144" shall mean Rule 144 promulgated by
the Commission pursuant to the Securities Act.
(h) "Selling Expenses" shall mean all
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities pursuant to this Warrant.
(i) "Selling Shareholders" shall mean holders of
Registrable Securities that have requested Registration pursuant
to other agreements.
9.2 Registration.
(a) Each time that the Company proposes for any
reason to Register any of its securities, other than pursuant to
a Registration Statement on Form S-4 or Form S-8 or similar or
successor forms, the Company shall promptly give written notice
of such proposed Registration to the Holder, which shall offer
the Holder the right to request inclusion of any Registrable
Securities in the proposed Registration.
(b) The Holder shall have 10 days from the
receipt of such notice to deliver to the Company a written
request specifying the number of shares of Registrable Securities
such Holder intends to sell and the Holder's intended plan of
disposition.
(c) Upon receipt of a written request pursuant to
Section 9.2(b), the Company shall promptly use its best efforts
to cause all such Registrable Securities to be Registered, to the
extent required to permit sale or disposition as set forth in the
written request.
(d) Notwithstanding the forgoing, if the managing
underwriter determines and advises in writing that the inclusion
of all Registrable Securities proposed to be included in the
Registration Statement, together with any other issued and
outstanding shares of Common Stock proposed to be included
therein by holders other than the holders of Registrable
Securities (such other shares hereinafter collectively referred
to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the
underwritten public offering, then the number of such shares of
Common Stock to be included in such Registration Statement shall
be reduced, and shares of Common Stock shall be excluded from
such underwritten public offering in a number deemed necessary by
such managing underwriter, by excluding equal numbers of (i) the
Registrable Securities and (ii) the Other Shares proposed to be
registered, pro rata, based on the number of shares of Common
Stock the respective holders proposed to include. The shares of
Common Stock that are so excluded from the Registration Statement
shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days, that the managing underwriter
reasonably determines as necessary in order to effect the
underwritten public offering.
9.3 Preparation and Filing. If and whenever the
Company is under an obligation pursuant to the provisions of this
Section 9 to use its best efforts to effect the Registration of
any Registrable Securities, the Company shall, as expeditiously
as practicable:
(a) furnish to the Holder such number of copies
of any summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or
other disposition of such Registrable Securities;
(b) use its best efforts to register or qualify
the Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as
the Holder shall reasonably request and do any and all other acts
or things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition in such
jurisdictions of such Registrable Securities; provided, however,
that the Company shall not be required to consent to general
service of process, qualify to do business as a foreign
corporation where it would not be otherwise required to qualify
or submit to liability for state or local taxes where it is not
liable for such taxes;
(c) at any time when a prospectus covered by such
Registration Statement is required to be delivered under the
Securities Act notify the Holder of the happening of any event as
a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and,
at the request of such Holder, prepare, file and furnish to such
Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading
in the light of the circumstances then existing; and
9.4 Expenses. The Company shall pay all Registration
Expenses incurred by the Company in complying with this Section
9; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Securities covered by
registrations effected pursuant to this Section 9 shall be borne
by the seller or sellers thereof, in proportion to the number of
Registrable Securities sold by such seller or sellers.
9.5 Information Furnished by Holder. It shall be a
condition precedent to the Company's obligations under this
Warrant as to the Holder that the Holder furnish to the Company
in writing such information regarding such Holder and the
distribution proposed by such Holder as the Company or any
managing underwriter may reasonably request.
9.6 Indemnification of Company Upon Registration. The
undersigned shall indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
Registrable Securities covered by a Registration Statement, each
person who controls the Company or such underwriter within the
meaning of the Securities Act, and other Selling Shareholders,
each of their respective officers, directors and constituent
partners and each person controlling such other Selling
Shareholders, against all claims, losses, damages and liabilities
(or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in such
Registration Statement or related prospectus, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the undersigned of any rule or
regulation promulgated under the Securities Act applicable to the
undersigned and relating to actions or inaction required of the
undersigned in connection with the Registration of the
Registrable Securities pursuant to such Registration Statement;
and will reimburse the Company, such Selling Shareholders, and
such directors, officers, partners, persons, underwriters and
controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action. Such
indemnification and reimbursement shall be to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by
the undersigned.
10. SURVIVAL. All agreements, covenants, representations
and warranties contained herein shall survive the execution and
delivery of this Warrant and any investigation at any time made
by or on behalf of any party hereto and the exercise, sale and
purchase of this Warrant and the Common Stock (and any other
securities or property) issuable upon exercise hereof.
11. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle
the Holder hereof, in such capacity, to any voting rights or
other rights as a shareholder of the Company.
12. NOTICES. All demands, notices, consents and other
communications to be given hereunder shall be in writing and
shall be deemed duly given when delivered personally or five days
after being mailed by registered or certified mail, postage
prepaid, addressed as follows:
If to the Company: ViewCall America, Inc.
Suite 240
5600 Oak Brook Parkway
Norcross, Georgia 30093
If to the Holder: Rudolph P. Russo
35 Market Street
Poughkeepsie, New York 12601
The Company or the Holder may change their respective addresses
at any time or times by notice hereunder actually received by the
other.
13. REMEDIES. The Company agrees that the remedies at law
of the Holder, in the event of any default or threatened default
by the Company in the performance of or compliance with any of
the terms of this Warrant, are not and will not be adequate and
such terms may be specifically enforced by a decree of specific
performance of any agreement contained herein or by an injunction
against a violation of any terms hereof or otherwise.
14. GENERAL. This Warrant and any term hereof may be
amended, modified, waived or terminated only by an instrument in
writing signed by the party against which enforcement of such
amendment, modification, waiver or termination is sought. This
Warrant shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of the State of
Georgia. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any
other provision hereof. The headings in this Warrant are for
convenience of reference only and are not part of this Warrant.
Dated: April 2, 1997.
VIEWCALL AMERICA, INC.
By:
Alan McKeon,
President
Attest:
Philip J. Facchina
Secretary
(CORPORATE SEAL)
ELECTION TO PURCHASE
To ViewCall America, Inc.:
The undersigned, Holder of the attached Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, _______ shares of
Common Stock of ViewCall America, Inc. (or other securities or
property) to which such Holder is entitled thereunder, and
herewith makes payment of $____________ therefor in cash or by
certified or bank check. The undersigned hereby requests that
the certificate(s) for such shares be issued in the name(s) and
delivered to the address(es) as follows:
If the foregoing Election to Purchase evidences an exercise
of the attached Warrant to purchase fewer than all the Shares (or
such other securities or property) to which the undersigned is
entitled under such Warrant, please issue a new warrant, of like
tenor, for the remaining Shares (or other securities or property)
in the name(s), and deliver the same to the address(es), as
follows:
Dated: , 19__.
(Name of Holder)
(Signature of Holder or
Authorized Signatory)
THIS COMMON STOCK PURCHASE WARRANT (THE "WARRANT") AND ANY SHARES
ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE ON CERTAIN EXEMPTIONS PROVIDED THEREUNDER, OR UNDER THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON
CERTAIN EXEMPTIONS PROVIDED THEREUNDER, INCLUDING SECTION
10-5-9(13) OF THAT ACT. THE WARRANT AND ANY SHARES ACQUIRED UPON
THE EXERCISE OF THIS WARRANT HAVE ALSO NOT BEEN REGISTERED UNDER
ANY OTHER FEDERAL OR STATE SECURITIES LAW. THIS WARRANT AND ANY
SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT ARE BEING ACQUIRED
FOR INVESTMENT, AND NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE SECURITIES
ACT OF 1933, THE GEORGIA SECURITIES ACT OF 1973 AND ANY OTHER
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION
IS AVAILABLE UNDER SAID ACTS. NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT, AND NO TRANSFER OF THIS WARRANT OR ANY
OF SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
VOID AFTER 5:00 P.M., E.D.T., ON APRIL 2, 2002.
VIEWCALL AMERICA, INC.
875,000 Shares of Common Stock
PURCHASE WARRANT
No. 14
ViewCall America, Inc., a Georgia corporation (the
"Company"), hereby agrees that, for value received, Colorocs
Information Technologies, Inc., a Georgia corporation (the
"Holder"), is entitled, subject to the terms and conditions set
forth below, to purchase from the Company up to 875,000 fully
paid and nonassessable shares (the "Shares") of the common stock,
par value $.01 per share (the "Common Stock"), of the Company, at
a purchase price per Share of $0.70 (the "Purchase Price"),
subject to certain adjustments contained in Section 3 herein, and
prior to the Expiration Date (as defined below).
This Warrant shall expire and be of no further force or
effect at the earlier of the time when it has been exercised with
respect to all Shares which the Holder is or may become entitled
to purchase hereunder or on April 2, 2002 (the "Expiration
Date"). The number and character of the Shares and the Purchase
Price are subject to adjustment as herein provided.
1. EXECUTION; REGISTRATION. This Warrant is executed on
behalf of the Company by its President and attested by its
Secretary under its corporate seal. The Company shall keep or
cause to be kept a register of the Holder of this Warrant (the
"Warrant Register"). Prior to due presentment of this Warrant
for transfer in accordance with Section 7 hereof, the Company
shall treat the Holder in whose name or names this Warrant is
registered as the absolute owner or owners hereof for all
purposes.
2. EXERCISE. This Warrant may be exercised, in whole or
in part, from time to time by the Holder by delivering this
Warrant, together with an Election to Purchase in the form
attached hereto properly completed and duly executed by or on
behalf of the Holder, to the Company or such person as the
Company may have appointed as warrant agent, at its principal
office (or at the office of such agent), accompanied by payment
in cash or by certified or bank check, payable to the order of
the Company, in an aggregate amount equal to the Purchase Price
as then adjusted multiplied by the number of Shares as to which
this Warrant is then exercised. The Company shall cancel this
Warrant on any such exercise and, if such exercise is partial,
shall issue and deliver to the Holder a new Warrant, of like
tender, with respect to the Shares as to which this Warrant has
not then been exercised.
The Company will, or will direct its transfer agent to,
issue, as soon as practicable after any exercise of this Warrant,
and in any event within 15 days thereafter, at the Company's
expense (including the payment by it of any applicable issue
taxes), in the name of and deliver to the Holder, or as the
Holder may direct (on payment by the Holder of any applicable
transfer taxes and compliance with Section 7 hereof), a
certificate or certificates for the number of fully paid and
nonassessable Shares as to which this Warrant is so exercised,
plus, in lieu of any fractional shares to which the Holder would
otherwise be entitled, cash equal to such fraction multiplied by
the greater of (i) the then fair market value of such shares or
(ii) the Purchase Price as then adjusted.
Any Shares as to which this Warrant is exercised shall be
deemed issued on and as of the date of such exercise and the
Holder or the person or persons designated by the Holder as
therein provided shall thereupon be deemed to be the owner or
owners of record thereof.
Shares of Common Stock purchased pursuant to this Warrant
shall bear a restrictive securities legend similar in substance
to the one at the head of this Warrant.
3. ADJUSTMENTS
3.1 Stock Dividends, Splits, Etc. The number of Shares
purchasable on exercise of this Warrant and the Purchase Price
shall be subject to adjustment from time to time in the event
that the Company shall (a) pay a dividend in, or make a
distribution of, shares of Common Stock (or securities
convertible into, exchangeable for or otherwise entitling a
holder thereof to receive Common Stock), (b) subdivide its
outstanding shares of Common Stock into a greater number of
shares or (c) combine its outstanding shares of Common Stock into
a smaller number of shares. In any such case, the total number
of Shares and the number of shares or other units of such other
securities purchasable upon exercise of this Warrant immediately
prior thereto shall be adjusted so that the Holder shall be
entitled to receive at the same aggregate purchase price the
number of shares of Common Stock and the number of shares or
other units of such other securities which the Holder would have
owned or would have been entitled to receive immediately
following the occurrence of any of the events described above had
this Warrant been exercised in full immediately prior to the
occurrence (or applicable record date) of such event. An
adjustment made pursuant to this Section 3.1 shall, in the case
of a stock dividend or distribution, be made as of the record
date therefor and, in the case of a subdivision or combination,
be made as of the effective date thereof.
3.2 Reorganization, Recapitalization, Consolidation, Merger
or Sale of Assets. In the event of any reorganization or
recapitalization of the Company or in the event the Company
consolidates with or merges with or into another corporation or
transfers all or substantially all its assets to another entity,
then and in each such event, the Holder, upon exercise of this
Warrant at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or
transfer, shall be entitled to receive the stock or other
securities or property to which the Holder would have been
entitled if the Holder had exercised this Warrant immediately
prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization,
recapitalization, consolidation, merger or transfer and shall be
applicable to such shares of stock or other securities or
property receivable on the exercise of this Warrant after such
consummation.
3.3 Notice of Adjustment. Upon the occurrence of any event
requiring an adjustment of the Purchase Price or the Shares, then
and in each such case, the Company shall promptly deliver to the
holder of this Warrant an Officer's Certificate stating the
Purchase Price or Shares resulting from such adjustment and
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based; provided,
however, that no notice to holders of this Warrant or of any part
hereof shall be required before the earlier of the public
announcement or notice to shareholders of the same.
4. FURTHER ASSURANCES. The Company will not, by amendment
of its articles of incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the performance of any
terms of this Warrant, but will at all times in good faith take
all necessary action to carry out all such terms. Without
limiting the generality of the foregoing, the Company (a) will
not increase the par value of any shares of stock receivable on
exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary
or appropriate so that the Company may validly and legally issue
fully paid and nonassessable Shares (or other securities or
property deliverable hereunder), free of all liens, encumbrances,
security interests and claims whatsoever, upon the exercise of
this Warrant, and (c) will not transfer all or substantially all
its assets to any other entity or consolidate or merge with or
into any other entity or permit any such entity to consolidate or
merge with or into the Company (if the Company is not the
surviving entity), unless such other entity shall be bound by all
the terms of this Warrant. This Warrant shall bind the
successors and assigns of the Company.
5. NOTICES OF RECORD DATES, ETC.
(a) If the Company shall fix a record date of the
holders of its Common Stock (or other securities at the time
deliverable upon the exercise of this Warrant) for the
purpose of entitling or enabling them to receive any
dividend (including a stock dividend) or other distribution,
or to receive any right to subscribe for or to purchase any
shares of any class of any securities, or to receive any
other right, or
(b) in the event of any reorganization or
recapitalization of the Company, any reclassification of the
capital stock of the Company, any consolidation or merger of
the Company with or into another corporation or any transfer
of all or substantially all the assets of the Company to
another entity, or
(c) in the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in any such event, the Company shall mail or cause to be
mailed to the Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or right and stating
the amount and character of such dividend, distribution or right
or (ii) the date on which a record is to be taken for the purpose
of voting on or approving such reorganization, recapitalization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up and the date on which such event is to
take place and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or any other securities at the
time deliverable upon exercise of this Warrant) shall be entitled
to exchange their shares of Common Stock (or such other
securities) for securities or other property deliverable upon
such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding up. Such notice shall be mailed promptly after
definitive information (such as, for example, approval of the
Board of Directors or the signing of a letter of intent) with
respect to such proposed action becomes known to the Company, but
in any event at least 10 days prior to the record date therein
specified; provided, however, that no notice to holders of this
Warrant or any part hereof shall be required before the earlier
of the public announcement or notice to shareholders of the same.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon delivery of any indemnity
bond (or, in the case of any institutional holder, an indemnity
agreement) reasonably satisfactory in form and amount to the
Company or, in the case of any mutilation, upon surrender and
cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like
tenor.
7. TRANSFERS.
7.1 The Holder shall not transfer or assign this
Warrant except by will, by court order or pursuant to the laws of
descent and distribution; provided, however, that any such
transfer shall be subject to compliance with applicable
securities laws. Any attempted or purported assignment or
transfer of this Warrant without compliance with the preceding
sentence shall be void. In the event of any transfer permitted
by this Section 7, the Company shall register or shall cause its
agent to register the transfer or assignment on its Warrant
Register upon surrender of this Warrant, duly endorsed, or
accompanied by a written instrument of transfer duly executed by
the Holder or by the duly appointed legal representative or
attorney thereof. On any such registration of transfer, the
Company shall issue a new Warrant or Warrants, of like tenor, in
lieu of the transferred or assigned Warrant. In no event will
the Company be required to effect any registration of transfer,
assignment or exchange that would result in the issuance of a
fraction of a Share. Any action by the Company required under
this Section 7 shall be taken at its own expense.
7.2 No holder of this Warrant may sell, transfer,
assign, pledge, hypothecate or otherwise dispose of this
Warrant, or any part hereof, unless (i) a registration statement
under the Securities Act of 1933, as amended (the "Securities
Act"), and all applicable state securities laws then in effect
with respect to this Warrant and the Shares, (ii) the holder
delivers to the Company a written opinion of counsel,
satisfactory to counsel for the Company, to the effect that an
exemption from registration under the Securities Act and any
applicable state securities laws is available with respect to
such disposition of this Warrant and that no such registration is
required or (iii) the Company is satisfied that registration
under such acts is not required.
7.3 Issue Tax. The issuance of this Warrant and
certificates for Shares upon the exercise of this Warrant shall
be made without charge to the Holder of such Shares for any
issuance tax in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any Warrant
or certificate in a name other than that of the Holder.
8. RESERVATION OF SHARES. The Company shall reserve, for
the purpose of issuance upon exercise of this Warrant, such
number of its duly authorized and unissued shares of Common Stock
or such class or classes of capital stock or other securities as
shall from time to time be sufficient to comply with this
Warrant. If at any time the authorized and unissued shares of
Common Stock or such other class or classes of capital stock or
other securities are not sufficient for the exercise of this
Warrant, the Company shall immediately take such corporate action
as may be necessary to increase its authorized and unissued
shares of Common Stock or such other class or classes of capital
stock or other securities to such number as shall be sufficient
for that purpose.
9. PIGGYBACK REGISTRATION RIGHTS.
9.1 Certain Definitions. As used in this Section
9, the following terms shall have the following respective
meanings.
(a) "Commission" shall mean the United States
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
(b) "Form S-4" and "Form S-8" shall mean Form S-4
or Form S-8, respectively, promulgated by the Commission or any
substantially similar form then in effect.
(c) The terms "Register," "Registered" and
"Registration" refer to a registration effected by preparing and
filing a registration statement ("Registration Statement") in
compliance with Securities Act and the declaration or ordering of
the effectiveness of such Registration Statement.
(d) "Registrable Securities" shall mean the
shares of Common Stock issuable upon exercise of this Warrant or
any other warrant originally issued by the Company as of the date
of this Warrant.
(e) "Registration Expenses" shall mean all
expenses incurred by the Company in complying with this Section
9, including, without limitation, all federal and state
registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky fees
and expenses, the expense of any special audits incident to or
required by any such Registration and the reasonable fees and
disbursements of one counsel for the Selling Shareholders, as
defined below.
(f) "Restriction Termination Date" shall mean,
with respect to any Registrable Securities, the earliest of (i)
the date that such Registrable Securities shall have been
Registered and sold or otherwise disposed of in accordance with
the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such
securities or transferred in compliance with Rule 144 and (ii)
the date that an opinion of counsel to the Company containing
reasonable assumptions shall have been rendered to the effect
that all legends on such Registrable Securities can be properly
removed and such legends shall have been removed.
(g) "Rule 144" shall mean Rule 144 promulgated by
the Commission pursuant to the Securities Act.
(h) "Selling Expenses" shall mean all
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities pursuant to this Warrant.
(i) "Selling Shareholders" shall mean holders of
Registrable Securities that have requested Registration pursuant
to other agreements.
9.2 Registration.
(a) Each time that the Company proposes for any
reason to Register any of its securities, other than pursuant to
a Registration Statement on Form S-4 or Form S-8 or similar or
successor forms, the Company shall promptly give written notice
of such proposed Registration to the Holder, which shall offer
the Holder the right to request inclusion of any Registrable
Securities in the proposed Registration.
(b) The Holder shall have 10 days from the
receipt of such notice to deliver to the Company a written
request specifying the number of shares of Registrable Securities
such Holder intends to sell and the Holder's intended plan of
disposition.
(c) Upon receipt of a written request pursuant to
Section 9.2(b), the Company shall promptly use its best efforts
to cause all such Registrable Securities to be Registered, to the
extent required to permit sale or disposition as set forth in the
written request.
(d) Notwithstanding the forgoing, if the managing
underwriter determines and advises in writing that the inclusion
of all Registrable Securities proposed to be included in the
Registration Statement, together with any other issued and
outstanding shares of Common Stock proposed to be included
therein by holders other than the holders of Registrable
Securities (such other shares hereinafter collectively referred
to as the "Other Shares"), would interfere with the successful
marketing of the securities proposed to be included in the
underwritten public offering, then the number of such shares of
Common Stock to be included in such Registration Statement shall
be reduced, and shares of Common Stock shall be excluded from
such underwritten public offering in a number deemed necessary by
such managing underwriter, by excluding equal numbers of (i) the
Registrable Securities and (ii) the Other Shares proposed to be
registered, pro rata, based on the number of shares of Common
Stock the respective holders proposed to include. The shares of
Common Stock that are so excluded from the Registration Statement
shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days, that the managing underwriter
reasonably determines as necessary in order to effect the
underwritten public offering.
9.3 Preparation and Filing. If and whenever the
Company is under an obligation pursuant to the provisions of this
Section 9 to use its best efforts to effect the Registration of
any Registrable Securities, the Company shall, as expeditiously
as practicable:
(a) furnish to the Holder such number of copies
of any summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or
other disposition of such Registrable Securities;
(b) use its best efforts to register or qualify
the Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as
the Holder shall reasonably request and do any and all other acts
or things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition in such
jurisdictions of such Registrable Securities; provided, however,
that the Company shall not be required to consent to general
service of process, qualify to do business as a foreign
corporation where it would not be otherwise required to qualify
or submit to liability for state or local taxes where it is not
liable for such taxes;
(c) at any time when a prospectus covered by such
Registration Statement is required to be delivered under the
Securities Act notify the Holder of the happening of any event as
a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and,
at the request of such Holder, prepare, file and furnish to such
Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading
in the light of the circumstances then existing; and
9.4 Expenses. The Company shall pay all Registration
Expenses incurred by the Company in complying with this Section
9; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Securities covered by
registrations effected pursuant to this Section 9 shall be borne
by the seller or sellers thereof, in proportion to the number of
Registrable Securities sold by such seller or sellers.
9.5 Information Furnished by Holder. It shall be a
condition precedent to the Company's obligations under this
Warrant as to the Holder that the Holder furnish to the Company
in writing such information regarding such Holder and the
distribution proposed by such Holder as the Company or any
managing underwriter may reasonably request.
9.6 Indemnification of Company Upon Registration. The
undersigned shall indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
Registrable Securities covered by a Registration Statement, each
person who controls the Company or such underwriter within the
meaning of the Securities Act, and other Selling Shareholders,
each of their respective officers, directors and constituent
partners and each person controlling such other Selling
Shareholders, against all claims, losses, damages and liabilities
(or actions in respect thereof) suffered or incurred by any of
them and arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in such
Registration Statement or related prospectus, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the undersigned of any rule or
regulation promulgated under the Securities Act applicable to the
undersigned and relating to actions or inaction required of the
undersigned in connection with the Registration of the
Registrable Securities pursuant to such Registration Statement;
and will reimburse the Company, such Selling Shareholders, and
such directors, officers, partners, persons, underwriters and
controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action. Such
indemnification and reimbursement shall be to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by
the undersigned.
10. SURVIVAL. All agreements, covenants, representations
and warranties contained herein shall survive the execution and
delivery of this Warrant and any investigation at any time made
by or on behalf of any party hereto and the exercise, sale and
purchase of this Warrant and the Common Stock (and any other
securities or property) issuable upon exercise hereof.
11. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle
the Holder hereof, in such capacity, to any voting rights or
other rights as a shareholder of the Company.
12. NOTICES. All demands, notices, consents and other
communications to be given hereunder shall be in writing and
shall be deemed duly given when delivered personally or five days
after being mailed by registered or certified mail, postage
prepaid, addressed as follows:
If to the Company: ViewCall America, Inc.
Suite 240
5600 Oak Brook Parkway
Norcross, Georgia 30093
If to the Holder: Colorocs Information Technologies, Inc.
5600 Oakbrook Parkway
Suite 240
Norcross, GA 30093
The Company or the Holder may change their respective addresses
at any time or times by notice hereunder actually received by the
other.
13. REMEDIES. The Company agrees that the remedies at law
of the Holder, in the event of any default or threatened default
by the Company in the performance of or compliance with any of
the terms of this Warrant, are not and will not be adequate and
such terms may be specifically enforced by a decree of specific
performance of any agreement contained herein or by an injunction
against a violation of any terms hereof or otherwise.
14. GENERAL. This Warrant and any term hereof may be
amended, modified, waived or terminated only by an instrument in
writing signed by the party against which enforcement of such
amendment, modification, waiver or termination is sought. This
Warrant shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of the State of
Georgia. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any
other provision hereof. The headings in this Warrant are for
convenience of reference only and are not part of this Warrant.
Dated: April 2, 1997.
VIEWCALL AMERICA, INC.
By:
Alan McKeon,
President
Attest:
Philip J. Facchina
Secretary
(CORPORATE SEAL)
ELECTION TO PURCHASE
To ViewCall America, Inc.:
The undersigned, Holder of the attached Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, _______ shares of
Common Stock of ViewCall America, Inc. (or other securities or
property) to which such Holder is entitled thereunder, and
herewith makes payment of $____________ therefor in cash or by
certified or bank check. The undersigned hereby requests that
the certificate(s) for such shares be issued in the name(s) and
delivered to the address(es) as follows:
If the foregoing Election to Purchase evidences an exercise
of the attached Warrant to purchase fewer than all the Shares (or
such other securities or property) to which the undersigned is
entitled under such Warrant, please issue a new warrant, of like
tenor, for the remaining Shares (or other securities or property)
in the name(s), and deliver the same to the address(es), as
follows:
Dated: , 19__.
(Name of Holder)
(Signature of Holder or
Authorized Signatory)
Exhibit 21
SUBSIDIARIES OF THE ISSUER
State of Doing
Name Incorporation Business As
COPS, Inc. Georgia COPS
ViewCall America, Inc. Georgia ViewCall America
ViewCall South America, Inc. Georgia ViewCall South
America
ViewCall Technology, Inc. Georgia ViewCall
Technology
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated April 4, 1997 included in
Colorocs Information Technologies, Inc.'s Form 10-KSB for the
year ended December 31, 1996 into the Company's previously filed
Form S-8.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
April 10, 1997
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 282,596
<SECURITIES> 94,685
<RECEIVABLES> 475,060
<ALLOWANCES> 141,033
<INVENTORY> 128,876
<CURRENT-ASSETS> 1,173,777
<PP&E> 1,165,525
<DEPRECIATION> 154,596
<TOTAL-ASSETS> 3,850,554
<CURRENT-LIABILITIES> 3,808,808
<BONDS> 0
0
0
<COMMON> 1,802,738
<OTHER-SE> 1,323,337
<TOTAL-LIABILITY-AND-EQUITY> 3,850,554
<SALES> 2,863,448
<TOTAL-REVENUES> 2,863,448
<CGS> 2,553,173
<TOTAL-COSTS> 10,747,674
<OTHER-EXPENSES> 98,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,160,490)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,160,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,160,490)
<EPS-PRIMARY> (3.51)
<EPS-DILUTED> (3.51)
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