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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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(Mark One)
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (NO FEE REQUIRED)
For the fiscal year ended September 30, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from to
COMMISSION FILE NO. 0-16530
FINANCIAL PERFORMANCE CORPORATION
(Name of small business issuer in its charter)
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NEW YORK 13-3236325
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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335 MADISON AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices, including zip code)
(212) 557-0401
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant 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 there is no 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 the best of registrant'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. /X/
The issuer's revenues for the fiscal year ended September 30, 1996 were
$8,784,137.
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant on December 20, 1996 was approximately
$2,411,582, based on the volume-weighted average price of such stock on such
date, as reported by the OTC Bulletin Board.
The number of shares outstanding of each of the issuer's classes of common
equity, as of December 24, 1996, was: 7,850,782 shares of Common Stock, $0.01
par value.
DOCUMENTS INCORPORATED BY REFERENCE None.
Transitional Small Business Disclosure Format: Yes __ No <*>X</*>
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FINANCIAL PERFORMANCE CORPORATION
ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
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PAGE
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PART I.................................................................................................... 1
ITEM 1 -- DESCRIPTION OF BUSINESS..................................................................... 1
ITEM 2 -- DESCRIPTION OF PROPERTY..................................................................... 9
ITEM 3 -- LEGAL PROCEEDINGS........................................................................... 9
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS......................................... 9
PART II................................................................................................... 10
ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................................... 10
ITEM 6 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....... 11
ITEM 7 -- FINANCIAL STATEMENTS........................................................................ 16
ITEM 8 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........ 16
PART III.................................................................................................. 17
ITEM 9 -- DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE............................................................................. 17
ITEM 10 -- EXECUTIVE COMPENSATION..................................................................... 20
ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................. 24
ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................. 26
ITEM 13 -- EXHIBITS AND REPORTS ON FORM 8-K........................................................... 30
FINANCIAL STATEMENTS...................................................................................... F-1
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PART I
ITEM 1 -- DESCRIPTION OF BUSINESS
INTRODUCTION
Financial Performance Corporation and its subsidiaries (the "Company")
markets computer software and specialized consulting services to the financial
services industry. The Company's software and services are designed to identify
and analyze the financial impact and competitive position of its customer's
products and services and assist its customers in developing and analyzing
marketing and communications strategies. The Company's current customers include
Chemical Bank, First Fidelity Bancorporation, First National Bank of Maryland,
First Union National Bank and The Dime Savings Bank of New York.
The Company's software, referred to as MARS-TM- (Managing Account
Relationships), functions as an integrated planning and sales management system
designed to coordinate the user's marketing activity and analyze the results of
its sales efforts and the profitability of its products. The Company believes
that MARS-TM- enables its users to monitor the income and new business
contributions of each department, branch, sector or group within a business
enterprise faster and more efficiently than current applications. The Company
also believes that future projections by a business enterprise using MARS-TM-
will be easier since the software regularly maintains information regarding
pending sales.
The Company's principal consulting services include providing product sales
information and business and marketing services to financial institutions. The
Company has developed a particular expertise in providing services to banks with
respect to communications concerning mergers or other business combinations and
sales promotions.
HISTORY
The Company was incorporated in New York in August 1984 under the name
Performance Services Group, Inc. and changed its name to Financial Performance
Corporation in June 1986. In January 1987, the Company consummated an initial
public offering of its Common Stock and in July 1989, the Common Stock was
delisted from the Nasdaq over-the-counter market for failure to maintain
Nasdaq's minimum capital requirements. In February 1990, the Company ceased
day-to-day operations and was inactive from February 1990 to November 1992.
The Company resumed operations in January 1993. At that time, the Company
raised working capital through private debt and equity issuances. In 1994, the
Company began implementing a business strategy of establishing subsidiary
companies to engage in related or complementary areas of the financial service
industry. As a result, the Company, together with other parties, formed three
subsidiaries (Michaelson Kelbick Partners Inc. ("MKP"), Aspen Capital
Management, LLC ("Aspen") and FPC Information Corp. ("FPC Information")). MKP is
engaged in providing specialized business and marketing services to the
financial services industry. FPC Information was formed to market the Company's
software and Aspen was formed to operate as an international sponsor of cash
management funds. For further information concerning these subsidiaries, see "--
Subsidiaries" and "Item 6 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company incurred losses in each of the three fiscal years ended
September 30, 1995. For the year ended September 30, 1996, the Company generated
approximately $8,780,000 in revenues, $278,000 in operating income, a loss of
approximately $15,000 from continuing operations, and a net loss of
approximately $235,000.
As of November 27, 1996, the Company's Common Stock resumed trading on the
OTC Bulletin Board under the symbol "FPCX." The high and low sale price of the
Common Stock for the period from November 29, 1996 to December 23, 1996 were
$2.75 and $1.00, respectively.
The Company's offices are located at 335 Madison Avenue, New York, New York
10017. The Company's telephone number is (212) 557-0401. Unless the context is
otherwise, the term the "Company" shall mean Financial Performance Corporation
and its subsidiaries.
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FINANCIAL INFORMATION SOFTWARE
MARS-TM- (MANAGING ACCOUNT RELATIONSHIPS)
GENERAL. The Company has developed a software program referred to as
MARS-TM- (Managing Account Relationships). MARS-TM- functions as an integrated
planning and sales management system designed to coordinate the user's sales and
marketing activity and analyze the results of its sales efforts and the
profitability of its products. MARS-TM- was designed to allow management at
banks to analyze in greater detail the products it offers in light of an
increasingly competitive industry environment. The Company believes that
MARS-TM- enables its users to monitor income and new business contributions of
each department, branch, sector or group within a business enterprise faster and
more efficiently than current applications. The Company also believes that
future projections by a business enterprise using MARS-TM- will be easier since
the software regularly maintains information regarding pending sales.
The Company believes that the sales management aspect of MARS-TM- can also
provide management with extensive "on line" information to enable fast and
informed decisions to be made based upon total customer sales and other
financial information. MARS-TM- can retrieve data directly from the customer's
mainframe computers, access overall sales information and match the retrieved
data to targets previously set by the customer. Reporting can be done by
customer, product, account officer, department or division.
In addition to the capability of MARS-TM- to coordinate sales and marketing
activities, individual department managers can use MARS-TM-to measure
productivity of each employee on a daily, weekly, monthly or annual basis. The
overall performance of a business enterprise can be evaluated and compared
against the contributions of each employee. Planning and performance results can
be accessed instantly through standard reports or by means of customized
reporting formats.
SPECIFIC PRODUCT DESCRIPTION. The MARS-TM- program contains modules for key
areas, including customer information, product information, customization,
management reports, report writer, SQL (Structured Query Language) Support and
MARS-TM- Remote.
- CUSTOMER AND PRODUCT INFORMATION. The customer and product information
modules of MARS-TM- allow a user to retrieve in real time its client's
record and select marketing and technical information on its products,
programs and services. The customer and product information modules are
designed to enable the user's sales team to offer the most suitable
products to its clients. The product files contain pricing and competitive
information and textual descriptions of features, benefits and various
terms and conditions of the products offered.
- MARS-TM- CUSTOMIZATION. MARS-TM- customization allows a user to set system
capabilities for office automation, passwords and access paths to customer
information and product databases. Additionally, it provides the user with
the ability to pre-load the system with text and terminology for windows
and menus so that the particular culture and methodology of the user is
replicated throughout the system.
- MANAGEMENT REPORTS. MARS-TM- allows the user to generate management
reports on officer performance, sales in process and other sales
information by month and quarter. These reports can be accessed by the
user at any time and viewed on-line or in a printed report. Management can
access a complete picture of the activities of each employee by task,
account or as a calendar of activities. Many of the major reports of the
system are also presented graphically as pie or bar charts, allowing for
alternative presentations of complex relationships.
- REPORT WRITER. In addition to the standard reports provided by MARS-TM-,
the system supports the popular report writer called "Crystal Reports,"
which is considered by the Company and others as virtually an industry
standard. Through the use of this third party product, the Company
believes the user can easily add new reports to its MARS-TM- installation,
thereby potentially increasing the value of the data provided.
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- SQL SUPPORT. The Company expects to complete shortly a module for MARS-TM-
which will include SQL (Structured Query Language) support thus enabling
MARS-TM- to be used as a single desk top sales support system or a system
that is implemented throughout an organization.
- E-MAIL SUPPORT. The Company is currently designing a module to the
MARS-TM- system to include its own E-Mail capability, thereby connecting
all users and enabling effective data sharing for management communication
or team selling efforts. Alternatively, the system could be supported by
connections to popular E-Mail products such as Microsoft Mail and Lotus
Notes.
- ADVANCED SOFTWARE TECHNOLOGY. MARS-TM- is fully compliant with the
Microsoft Windows user interface. MARS-TM- system navigation is mouse
driven requiring minimum keying by the user. A simple export of MARS-TM-
files to Microsoft Word or spread sheets tools, such as EXCEL, allows the
user to quickly gather, sort, and combine information from multiple
sources into one format.
- MARS-TM- REMOTE. MARS-TM- permits mobile computing by the exchange and
synchronization of information between the computer of the remote user and
the server data base. The system supports both direct or Internet
connections, thereby providing its users with greater availability and
flexibility.
TECHNICAL INFORMATION. The MARS-TM- system can produce over 30 on-line
reports to assist the user and management in recommending appropriate products
to customers in a short period of time. Each transaction can be monitored in
real time.
The Company provides a wide range of delivery options for MARS-TM-,
including installation of a fully-configured workstation. MARS-TM-is a
client/server application implemented with state-of-the-art technologies.
MARS-TM- requires an IBM compatible PC with a 386 or higher processor, 8MB RAM
and a 20 MB hard drive. The front-end windows-based application provides a
user-friendly, easy-to-access graphic user interface and is consistent to all
users with different desktop or laptop operating systems, such as Windows, OS/2,
Windows 95 or Windows NT. The back-end server can be implemented with a wide
range of relational database systems such as MS Access, MS Fox-Pro, NS SQL
Server for Windows NT, Sybase Infomix, or Oracle, which also may reside on a
variety of platforms.
MARS-TM- can be used in a wide range of working environments, ranging from a
single PC or a workstation, or a small LAN, to a large corporate setting with
multiple sites connected by Wide Area Network. MARS-TM- supports a variety of
networking communication environments including Novell NetWare, Microsoft
Windows for Workgroups, Microsoft Windows NT, IBM LAN Manager, the TCP/IP
Networks (UNIX bases networks) and remote dial-up.
SOFTWARE LICENSING
The Company expects to license MARS-TM- to customers under nonexclusive
license agreements. Under a standard Company licensing arrangement, the Company
anticipates that the customer will pay a fixed license fee and acquire the
nontransferable and nonexclusive right to use MARS-TM- at one or more designated
sites. The Company anticipates that additional license fees can be negotiated
between the parties depending upon the number of sites at which the customer
intends to use the Company's software. As part of the fixed license fee for
MARS-TM-, customers will receive, for a period of one year after installation,
all announced software enhancements to the licensed software at the latest
standard release level being offered for license by the Company, including all
software and documentation updates. The Company has not derived any revenues
from MARS-TM- since the recommencement of its operations in November 1992 and
there can be no assurance it will generate any such revenues in the future.
The Company expects to recognize revenue from license fees after delivery of
the documentation and the software components to the customer and upon final
customer acceptance, provided that no significant Company obligations remain and
collection of the resulting receivable is deemed probable. Because of the nature
of the Company's software and the overall commitment to a software based,
integrated sales and
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marketing approach, the Company anticipates that the installation of MARS-TM-
can take from up to several months for a single customer and up to twelve months
for an entire integrated system. The period of installation is also dependent
upon the level of commitment made by the customer to installation as well as the
learning speed of the customer's personnel. Lengthy installation periods can
delay the recognition of revenue from the Company's software licensing fees.
CUSTOMER SUPPORT; SOFTWARE MAINTENANCE AND SERVICE
In connection with MARS-TM-, the Company expects to provide support services
such as project planning, system installation, software implementation, user
training and ongoing technical support and documentation. In addition, the
Company expects to offer a full range of consulting services, including
planning, research and custom design for modifications to meet the specific
needs of a customer. Support services will be provided either by Company
personnel or independent subcontractors.
The Company anticipates that it will offer software maintenance services to
its customers for a period of time following the installation of MARS-TM-. The
Company expects that its software maintenance agreements will generally provide
for the maintenance of Company-licensed software at a specific site for a
specified period of time. The Company will be required to remedy significant
programming errors, as well as provide the customer with certain improvements,
revisions or modifications.
There have been no revenues from customer support, software maintenance and
service fees since the recommencement of operations by the Company in November
1992. While it is expected that the Company will recognize revenues from such
activities, there can be no assurance that any such revenues will be generated.
CONSULTING SERVICES
The Company provides the following consulting services primarily through
MKP. The Company believes that these services offer significant cross-selling
opportunities for MARS-TM-.
PRODUCT SALES INFORMATION SERVICES. The Company offers product sales
information services which include the design and preparation of product
profiles for internal use by customers. These product profiles provide organized
and up-to-date details on the services offered by the client and its
competitors. Upon identification of the financial services to be analyzed, the
Company confers with the customer's marketing or product management staff to
obtain current information about the features and pricing of the selected
services. After analyzing this information, the Company, using its database
concerning retail, corporate, trust, capital markets and cash management banking
services, develops product profiles which may include a format relating product
features to customer benefits and needs, recommends solutions to sales obstacles
and analyzes pricing and competitive data. Such information is then packaged and
customized to the customer's specifications.
The Company believes that its methodology and proprietary database in
conjunction with management's experience in the banking industry allows it to
provide more comprehensive profiles and information to financial institutions
than those provided by the Company's competitors. As part of its product sales
information service, the Company also develops slides or slide formats for audio
visual presentation for use by the customer's product management groups. The
Company also has the capacity to train the product managers in product
presentation skills. There have been no revenues from product sales information
services since the recommencement of operations by the Company in November 1992.
MARKETING; COMMUNICATIONS AND MERGER-RELATED SERVICES. The Company offers
consulting services to financial institutions in developing sales, marketing and
business development priorities. Services in this area typically include
discussions with the financial institution's management and identifying,
reviewing and analyzing operations in areas such as market position and customer
information; profitable versus
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marginally profitable or unprofitable services; market segments; and market
niches and product development opportunities. The Company designs a strategic
business plan to enable its customers to address marketing priorities and attain
marketing objectives.
The Company also offers consulting services in connection with the
development of marketing and communication strategies for financial
institutions. The Company has developed a particular expertise in providing
services to banks in connection with merger and acquisition activities.
The Company's clients in this area include The Dime Savings Bank of New
York, NatWest Bank, First Fidelity Bancorporation, First Union National Bank,
Chemical Bank, Bank of New York and First National Bank of Maryland.
FINANCIAL SERVICES INDUSTRY
Consulting services currently provided to the financial services industry
are rendered by a diverse group of companies or firms, substantially all of
which are privately-held. These companies or firms range in size from large
firms which are divisions or subsidiaries of major accounting firms or Fortune
100 companies to organizations which are smaller than the Company.
The Company believes that the recent increase of mergers and acquisitions in
the financial services industry has generated an increase in demand for related
consulting services. The Company believes that this increased demand includes a
trend towards outsourcing certain services and a greater focus on product and
sales analyses and marketing and communications strategies used in connection
with business combinations.
The Company believes that the industry will continue to consider methods to
analyze the financial impact and competitive position of its products and reduce
in-house corporate functions which may be more efficiently effectuated by
outside resources. The Company believes it can capitalize on this trend.
COMPETITION
Competition among enterprises which render software products and management
consulting services to financial institutions and other business organizations
is intense. The Company faces competition from other companies which offer
products or services similar to those offered by the Company and which have
greater financial resources, more technical personnel and more extensive service
capabilities than the Company.
The Company is aware of several competitors which offer computer software
products as comprehensive as MARS-TM- as well as other competitors. The Company
believes that the software products which most directly compete with MARS-TM-
are Lotus NOTES, Siebel Systems SALES ENTERPRISES, Aurum Software SALES TRAK and
Borealis ARSENAL. In particular, Lotus Development Corp. markets the Notes
product as a universal information sharing tool for collaborative work groups.
The Company believes that the flexibility and workflow components of NOTES makes
the product a viable competitor, although at a significantly higher cost than
MARS-TM-.
The Company endeavors to distinguish its software and services from those of
its competitors based upon the following factors: (i) its software and services
are specifically designed for application in financial institution environments,
unlike most competitive products which are designed for more general
applications and require modification for effective utilization by financial
institutions; and (ii) the experience of the Company's management in the
financial services industry.
There can be no assurances that the Company will be successful in its
efforts to distinguish the qualities of its software and services in the
marketplace. Other entities, with substantially greater resources than the
Company, compete directly with the Company by offering software and/or services
to the same industry.
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MARKETING
The Company's founder and principal executive officer, together with several
other executive officers, are primarily responsible for marketing its software
and services. In the past, the Company conducted its marketing activities
primarily through advertising in selected financial institution trade media and
at professional financial institution conventions. The Company currently markets
its software and services primarily through direct sales calls, referral
business and personal contacts.
The Company markets primarily to domestic and foreign banks. The Company
believes that there are approximately 500 banks in the United States engaged in
activities which may require software and/or services offered by the Company.
The Company also believes that significant opportunities exist for it to sell
its software and/or services in Europe and the Far East, where it believes that
market conditions have made financial institutions acutely aware of the
necessity to develop sales, marketing and business development priorities.
The Company's overall marketing strategy includes internal as well as
external channels of distribution. The Company believes that cross-selling its
software and services will provide it with greater opportunities. For example,
the Company believes that it can build a channel of product distribution for
MARS-TM- through its consulting services to augment its own direct selling
efforts. The Company intends to develop relationships with accounting firms
which sponsor information technology services to banks. In addition, the Company
believes that there are additional opportunities for alliances with regional
system integrators whose business is composed entirely of the installation and
modification of banking and financial services applications.
In general, the Company is primarily retained to fulfill specific needs of
its customers. Accordingly, the success of the Company is dependent upon its
ability to attract a flow of new customers as well as new assignments from past
customers. The solicitation of new assignments from past customers has been and
is expected to be an integral part of the Company's marketing strategy.
INTELLECTUAL PROPERTY RIGHTS AND PROTECTION
Like many software companies, the Company does not hold any patents and
relies upon a combination of copyright and trade secret laws and contractual
restrictions to protect its rights in its software, technology and trade
secrets. There can be no assurance that the Company's proprietary technology
will remain a secret or that others will not develop similar technology and use
such technology to compete with the Company.
Although there can be no assurance, the Company believes that its software
and related technology are proprietary and protected by copyright law, license
agreements and non-disclosure agreements. The Company intends to require its
customers to sign license agreements. Although there can be no assurance, the
Company believes that copyright protection, regardless of whether a license
agreement exists, is sufficient to protect the Company's rights in its software
and technology. Certain protections, such as limitations on use of a product and
limitations on warranties and liability, are not afforded by copyright law and
may not be available without an enforceable license agreement. The ability of
software companies to enforce its licenses has not been clearly defined and
there can be no assurances that the Company will be successful in any
enforcement proceedings. In addition, there can be no assurance that the Company
will have the ability or the resources necessary to enforce its rights under
such licenses or agreements or defend any action commenced by another party for
infringement or any other similar claim.
Pursuant to the indemnification provisions included in its license
agreements, the Company generally will agree to indemnify its customers from
losses resulting from any third-party claims that the Company's software
infringes upon proprietary rights of such third-parties. The amount of such
indemnification is generally limited to the amount of the license fee paid by
the customer to the Company. To date, the Company has not received any written
claims of infringement.
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The Company also owns exclusive rights to videotapes, manuals and workbooks
utilized in its sales, marketing and business programs and seeks to protect its
proprietary rights therein through restrictions in its license agreements. The
licenses for videotapes, manuals and workbooks generally have a term of one
year. To date, the Company has not been required to enforce these contractual
safeguards relating to the use of its videotapes, manuals and workbooks. There
can be no assurance that the Company would have the ability or the resources
necessary to enforce its rights under such licenses.
SUBSIDIARIES
In 1994, the Company began implementing a business strategy of establishing
subsidiary companies to engage in related or complementary areas of the
financial services industry. As a result, the Company, together with other
parties, formed three subsidiaries. The Company owns 80% of the outstanding
equity of each subsidiary.
MICHAELSON KELBICK PARTNERS INC. In October 1994, the Company, together
with Susan Michaelson and Hillary Kelbick, formed Michaelson Kelbick Partners
Inc. ("MKP"). MKP is engaged in providing specialized business and marketing
services to the financial services industry. MKP has developed particular
expertise in providing advice to its customers with respect to communications
concerning mergers or other business combinations and sales promotions.
Ms. Michaelson and Ms. Kelbick have over 30 years combined experience in
financial services marketing. They were both formerly employed as Senior Vice
Presidents by Wilcox Associates, in New York, New York, where they were
primarily responsible for the planning, development plans, and execution of
marketing communications projects for numerous financial institutions. See "Item
9 -- Directors, Executive Officers, Promoters and Control Persons."
ASPEN CAPITAL MANAGEMENT, LLC. In January 1995, the Company, together with
Messrs. Richard Loos and Sean Brennan, formed Aspen Capital Management, LLC
("Aspen"). Aspen was established to operate as an international sponsor of cash
management funds. In February 1995, Aspen was converted to a New York limited
liability company.
In connection with Aspen's formation and operation, the Company entered into
shareholders' and executive employment agreements with Richard Loos and Sean
Brennan. Richard J. Loos previously was Managing Director and a member of the
Board of Directors of HSBC Asset Management Americas Inc., a global asset
management group, and Sean P. Brennan previously was affiliated with CS First
Boston Investment Management Group. Pursuant to the terms of the shareholders'
and executive employment agreements, each of Messrs. Loos and Brennan hold 10%
of the outstanding equity of Aspen.
During the period from January through April 1995, Robert S. Trump, one of
the principal stockholders of the Company, loaned the Company an aggregate of
$500,000, which was utilized in connection with the funding and the initial
operations of Aspen. In August 1995, Aspen officially commenced operations with
the formation of the Aspen Worldwide Dollar Fund (the "Fund"). The Fund was
administered by ABN--AMRO Trust Company (Cayman) Limited. The Fund received
approximately $5,000,000 through initial subscriptions provided by persons
associated with Mr. Trump and raised with Mr. Trump's assistance. The Fund never
received any additional subscriptions. As a result, during the fiscal year ended
September 30, 1996, the initial investors redeemed all of their interests in the
Fund. The Fund is currently inactive. In July and September 1996, Messrs.
Brennan and Loos, respectively, resigned as officers of the Company and have no
affiliation with the Fund. There can be no assurance that the Company will
retain an investment advisor for the Fund or that the Fund or Aspen will
recommence operations.
FPC INFORMATION CORP. In November 1994, the Company, together with Robert
S. Trump, formed FPC Information Corp. ("FPC Information"). Mr. Trump furnished
$150,000 to the Company in connection with the establishment and initial
operations of FPC Information. Mr. Trump owns 20% of the outstanding equity of
FPC Information.
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The Company intends to solicit shareholder approval on a proposal to
transfer the MARS-TM- software and any rights associated therewith and related
liabilities to FPC Information Corp. In the event the proposal is approved by
the stockholders, the Company will function as a holding company and will seek
investment and acquisition opportunities in the financial services industry. As
of December 24, 1996, Mr. Trump beneficially owned 62% of the Company's shares
of Common Stock. See "Item 11 -- Security Ownership of Certain Beneficial Owners
and Managment."
EMPLOYEES
As of December 23, 1996, the Company had thirteen full-time employees. The
Company also engages independent contractors and consultants from time to time
in connection with certain projects. The Company expects to employ additional
personnel as needed in connection with its operations. The Company believes that
it has good relations with its employees.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-KSB, including
without limitation, statements containing the words "believes," "anticipates,"
"may," "intends," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, both
nationally and in the regions in which the Company operates; competition;
changes in business strategy or development plans; the development or testing of
the Company's software; technological, engineering, manufacturing, quality
control or other problems which could delay the sale of the Company's software;
the Company's ability to obtain appropriate licenses from third parties, protect
its trade secrets, operate without infringing upon the proprietary rights of
others and prevent others from infringing on the proprietary rights of the
Company; and the Company's ability to obtain sufficient financing to continue
operations. Certain of these factors are discussed in more detail elsewhere in
this Annual Report on Form 10-KSB, including without limitation, under the
caption "Item 6 -- Management's Discussion and Analysis of Financial Conditon
and Results of Operations."
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ITEM 2 -- DESCRIPTION OF PROPERTY
The Company's principal executive offices are located in New York City at
335 Madison Avenue, New York, New York. In September 1995, the Company entered
into a direct sub-sublease agreement with MCI Telecommunications Corp. ("MCI")
covering approximately 5,000 rentable square feet on the 11th floor of 335
Madison Avenue. The sub-sublease expired on December 29, 1996, which coincides
with the expiration date of MCI's sublease arrangement with its sublessor.
However, Builtland Partners, the owner of the building known as 335 Madison
Avenue, New York, New York, has agreed to permit the Company to remain in
occupancy of the 11th floor premises until approximately March 4, 1997 on the
same terms and conditions set forth in the Company's sub-sublease with MCI.
In October 1996, the Company entered into a direct lease with Builtland
Partners, covering approximately 11,142 square feet on the 8th floor at 335
Madison Avenue. This lease has a ten-year term commencing as of October 1996.
Fixed minimum rent of approximately $31,000 per month is payable by the Company
during the first five years of the term and fixed minimum rent of approximately
$35,000 per month is payable by the Company during the final five years of the
term. Under the terms of the lease, the Company's fixed minimum rent obligations
have been abated until March 20, 1997 and for the months of October, November
and December in each of the first four years of the lease term. The Company will
be required to pay operating expense and real estate tax escalation payments as
additional rent. Also, the landlord has agreed to reimburse the Company for up
to approximately $500,000 of construction and other related costs. The Company
expects to assume occupancy of the 8th floor premises in late February 1997.
The Company believes that the facilities which it presently occupies and
those it expects to occupy in February 1997 as described herein are well
maintained, in good condition and suitable for the Company to continue its
operations in the foreseeable future, including the needs generated by any
future growth.
ITEM 3 -- LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On August 22, 1996, the Company held its annual meeting of shareholders (the
"Annual Meeting"). The proposals voted upon at the Annual Meeting and the
results with respect to each proposal are set forth below:
PROPOSALS VOTED UPON
1. To elect four directors to serve for a term of one year and until their
respective successors are duly elected and qualified.
2. To approve the appointment by the Board of Directors of Goldstein &
Morris as independent certified public accountants and auditors of the Company
for the fiscal years ended September 30, 1995 and September 30, 1996.
3. To amend the Company's Certificate of Incorporation to effect a
one-for-five reverse stock split.
4. To amend the Company's Certificate of Incorporation to authorize the
issuance of up to 10,000,000 shares of "blank check" preferred stock.
5. To amend the Company's Certificate of Incorporation to authorize and
empower the Board of Directors to fix, increase or decrease the number of
directors constituting the entire Board of Directors, to remove a director for
cause and to fill any vacancy to the Board for any reason.
VOTING RESULTS
<TABLE>
<CAPTION>
ABSTAIN/NOT
PROPOSALS FOR AGAINST VOTING
- ------------------------------------------------------------------------------ ---------- --------- -----------
<S> <C> <C> <C>
No. 1 (Election of Directors)
Mr. William F. Finley....................................................... 4,721,180 57,172 405,392
Mr. Richard Levy............................................................ 4,721,180 57,172 405,392
Mr. Duncan G. Burke......................................................... 4,721,180 57,172 405,392
Mr. Philip L. Hage.......................................................... 4,778,352 -- 405,392
No. 2......................................................................... 4,763,752 600 419,392
No. 3......................................................................... 4,704,080 60,272 419,392
No. 4......................................................................... 4,517,867 63,572 602,305
No. 5......................................................................... 4,705,780 58,572 419,392
</TABLE>
9
<PAGE>
PART II
ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From January 1987 until July 6, 1989, the Common Stock traded in the
over-the-counter market under the Nasdaq symbol "FPCC." The Company's Common
Stock was delisted by Nasdaq in July 1989 primarily due to its failure to
maintain Nasdaq's minimum capital requirements.
As of November 27, 1996, the Company's Common Stock resumed trading quoted
on the OTC Bulletin Board under the symbol "FPCX." The high and low sale price
quotations for the Company's Common Stock for the period November 29, 1996 to
December 23, 1996 were $2.75 and $1.00 respectively, as reported by the OTC
Bulletin Board. The Company believes that these quotations represent inter-
dealer quotations, without adjustment for retail mark-up, mark-down or
commissions. The average weekly volume of the Common Stock since the resumption
of trading on the OTC Bulletin Board in November 1996 was approximately 48,520
shares. The Company believes that there are at least two "market-makers" in the
Common Stock including Van Kasper & Company, Inc. and Laidlaw Equities, Inc. See
"Item 9 -- Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act" and "Item 12 -- Certain
Relationships and Related Transactions -- Transactions with Directors and
Executive Officers."
As of December 24, 1996, the Company had approximately 193 shareholders of
record, excluding the number of beneficial owners whose securities are held in
"streetname." The Company believes that a substantial number of shares of Common
Stock are held in "streetname."
To date, the Company has not paid any dividends on its Common Stock and does
not anticipate paying any such dividends in the foreseeable future. The Company
intends to retain any future earnings to finance the growth and development of
its business. Any future determination as to the payment of dividends will be at
the discretion of the Board of Directors and will depend on, among other things,
the Company's operating results, financial condition, capital requirements and
such other factors as the Board of Directors may deem relevant.
10
<PAGE>
ITEM 6 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
HISTORY. The Company was incorporated in New York in 1984 under the name
Performance Services Group, Inc. and at that time was primarily engaged in
offering banking institutions a range of proprietary sales and marketing
products, strategic planning and product consulting services and financial
software products. From its inception in 1984 through February 1990, it incurred
continuous losses and working capital deficiencies which limited its marketing
efforts and operations. In July 1989, the Company's Common Stock was delisted
from the Nasdaq over-the-counter market and from February 1990 to November 1992
the Company was inactive.
In January 1993, the Company recommenced its operations and raised working
capital through private debt and equity issuances, including issuances to one of
the Company's principal stockholders. Although the Company generated revenues
for each of the last three fiscal years ended September 30, 1996, it incurred
losses of $146,036, $801,296 and $235,049 for the fiscal years ended September
30, 1994, 1995 and 1996, respectively. In addition, the report of the Company's
independent accountants for its balance sheet as of September 30, 1995 and 1994
and the results of operations, stockholders' equity and cash flows for the years
then ended included an explanatory paragraph which referred to the Company's
substantial losses and concluded that such results raised substantial doubt
about its ability to continue as a going concern.
REVENUES. The Company's revenues historically have been derived from a
limited number of customers. For the year ended September 30, 1996, six
customers accounted for approximately 98% for the Company's revenues, with one
customer accounting for approximately 75% of its revenues. The Company
anticipates that a substantial amount of its revenues will continue to be
concentrated from a limited number of customers. As a result, the Company's
sales and operating results are subject to substantial variations in any given
year and from quarter to quarter. The Company's sales and net income (if any) in
a particular quarter may be lower than the sales and net income (if any) of the
Company for the comparable quarter in the prior year. In addition, sales and net
income (if any) of the Company in any particular quarter may not necessarily
reflect the results of operations for the Company for the full year.
Revenues from software products are recognized upon delivery to the customer
provided that no significant vendor obligations remain and collection of the
resulting receivable is deemed probable. Because of the nature of the Company's
software and the overall commitment to a software based, integrated sales
marketing approach, the Company anticipates that the installation of MARS-TM-
can take from up to several months for a single customer and up to twelve months
for an entire integrated system. The period of installation is also dependent
upon the level of commitment made by the customer to installation as well as the
learning speed of the customer's personnel. Lengthy installation periods can
delay the recognition of revenues related to the Company's software.
SUBSIDIARIES. The Company's consolidated financial statements include the
accounts of Financial Performance Corporation and its three 80% owned
subsidiaries. The Company's investment in the subsidiaries is accounted for by
the equity method. All significant intercompany accounts and transactions have
been eliminated.
11
<PAGE>
Summary financial information concerning MKP, excluding intercompany
eliminations, as of September 30, 1996 and 1995 and for the years then ended, is
as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Cash............................................................... $ 1,685,000 $ 301,000
Accounts receivable................................................ 903,000 227,000
Other assets....................................................... 14,000 --
Accounts payable................................................... 1,705,000 146,000
Revenues........................................................... 8,784,000 1,251,000
Operating costs.................................................... 8,178,000 1,138,000
Net income......................................................... 504,000 113,000
</TABLE>
Summary financial information concerning the Company's other two 80% owned
subsidiaries, Aspen and FPC Information, as of September 30, 1996 and 1995 and
for the years then ended, is not separately set forth as these entities had no
revenues for such periods and their assets and liabilities during such periods
were immaterial.
Aspen had no revenues and incurred losses of $219,872 and $530,644 for the
years ended September 30, 1996 and 1995, respectively. Aspen, whose operations
commenced in March 1995, suspended its operations in September 1996. Aspen is
reported as a discontinued operation at September 30, 1996. The net assets and
liabilities relating to the disposal of the discontinued operation is
immaterial.
FPC Information had no revenues and incurred losses of $428,245 and $190,885
for the years ended September 30, 1996 and 1995, respectively.
OTHER. Income taxes are computed in accordance with the provisions of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At September 30, 1996, the Company had net operating loss carryforwards of
approximately $487,000, which will expire in 2011. Certain provisions of the tax
law may limit the net operating loss carryforwards available for use by the
Company in the event of a significant change in the ownership interest of the
Company. At September 30, 1996, the Company had a deferred tax asset of
approximately $195,000. The deferred tax asset consisted primarily of net
operating loss carryforwards and was fully offset by a valuation allowance of
the same amount.
The income tax expense of $116,062 represents state and local income taxes
on the income of MKP.
Costs associated with software development subsequent to the establishment
of technological feasibility, including enhancements to software products, are
capitalized and amortized as required by Statement of Financial Accounting
Standards No. 86. Costs incurred prior to achieving technological feasibility
are expensed as incurred and classified as research and development costs. There
were no research and development costs incurred by the Company for the years
ended September 30, 1996 and 1995.
Amortization of capitalized software development costs is generally provided
on a product-by-product basis at the greater of the amount computed by using the
ratio of current gross revenue to total current and anticipated gross revenue of
the product or on the straight-line method over the sixty-month estimated useful
life of the product, commencing when the product is available for general
release to customers.
12
<PAGE>
The Company's consolidated financial statements listed under "Item 7 --
Financial Statements" should be read in connection herewith.
FORWARD-LOOKING STATEMENTS. Certain statements contained in this Annual
Report on Form 10-KSB, including without limitation, statements containing the
words "believes," "anticipates," "may," "intends," "expects" and words of
similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company or
industry results to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which the Company operates;
competition; changes in business strategy or development plans; the development
or testing of the Company's software; technological, engineering, manufacturing,
quality control or other problems which could delay the sale of the Company's
software; the Company's ability to obtain appropriate licenses from third
parties, protect its trade secrets, operate without infringing upon the
proprietary rights of others and prevent others from infringing on the
proprietary rights of the Company; and the Company's ability to obtain
sufficient financing to continue operations. Certain of these factors are
discussed in more detail elsewhere in this Annual Report on Form 10-KSB,
including without limitation, under the caption "Item 1 -- Description of
Business.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
REVENUES. Consolidated revenues during the fiscal year ended September 30,
1996 increased by $7,468,537 to $8,784,137 from $1,315,600 for the prior year.
This increase was attributable to revenues generated by MKP. During this period,
MKP was awarded a contract to work on merger and marketing communications for
two major banking institutions. MKP generated approximately 100% of the
consolidated revenues of the Company for the fiscal year ended September 30,
1996.
COST OF REVENUES. Cost of revenues increased by $6,454,999 to $7,271,114
for the fiscal year ended September 30, 1996 from $816,115 for the fiscal year
ended September 30, 1995. This increase resulted primarily from a substantial
increase in outsourcing expenses and fees for independent contractors retained
by MKP in connection with its increased business during such period and bonuses
paid to the two Managing Directors of MKP in the aggregate amount of
approximately $344,000.
SALARIES AND RELATED EXPENSES . Payroll expenses increased by $161,497 to
$525,677 for the fiscal year ended September 30, 1996 from $364,180 for the
fiscal year ended September 30, 1995. This increase was primarily due to the
increase in staff employed by MKP as well as the payment of year-end bonuses to
the two Managing Directors of MKP.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $312,230 to $615,106 for the fiscal year
ended September 30, 1996 from $302,876 for the fiscal year ended September 30,
1995. This increase was due primarily to increased expenditures related to
additional Company personnel and independent contractors.
OPERATING PROFIT. The Company had an operating profit of $278,228 for the
fiscal year ended September 30, 1996 compared to an operating loss of $284,898
for the fiscal year ended September 30, 1995.
NET INCOME (LOSS). The Company had a net loss of $235,049 for the fiscal
year ended September 30, 1996 as compared to a net loss of $801,296 for the
fiscal year ended September 30, 1995. The Company's operating loss from
continuing operations after income taxes for the fiscal year ended September 30,
1996
13
<PAGE>
was $15,177. Without giving effect to payments made to two of the Company's
executive officers (the two Managing Directors of MKP) in the aggregate of
approximately $430,000, the Company would have had net income of approximately
$155,000 for the fiscal year ended September 30, 1996. These payments were made
in connection with annual incentive pool provisions contained in such
executives' employment agreements with the Company. See "Item 10 -- Executive
Compensation -- Employment Agreements."
FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
REVENUES. Revenues for the fiscal year ended September 30, 1995 increased
by $1,266,434 to $1,315,600 from $49,166 for the fiscal year ended September 30,
1994. This increase was attributable almost entirely to revenues generated by
the Company's 80%-owned subsidiary, MKP, which commenced business operations
during the Company's 1995 fiscal year.
COST OF REVENUES. Cost of revenues increased by $816,115 to $816,115 for
the fiscal year ended September 30, 1995 from $0 for the fiscal year ended
September 30, 1994. This increase was attributable solely to the commencement of
MKP's business operations during the 1995 fiscal year.
SALARIES AND RELATED EXPENSES. Payroll expenses increased by $305,661 to
$364,180 for the fiscal year ended September 30, 1995 from $58,519 for the
fiscal year ended September 30, 1994. This increase was attributable primarily
to the commencement of MKP's business operations during the fiscal year ended
September 30, 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $258,279 to $302,876 for the fiscal year
ended September 30, 1995 from $44,597 for the fiscal year ended September 30,
1994. This increase was attributable primarily to increased expenditures
relating to additional Company personnel and independent contractors retained in
connection with the commencement of MKP's business operations.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
decreased by $81,736 to $0 for the fiscal year ended September 30, 1995 from
$81,736 for the fiscal year ended September 30, 1994. This decrease was
attributable to research and development costs being capitalized for the 1995
fiscal year as MARS-TM- reached technological feasibility.
OPERATING EXPENSES. Operating expenses for the fiscal year ended September
30, 1995 increased by $1,328,773 to $1,600,498 from $271,725 for the fiscal year
ended September 30, 1994. This increase was due primarily to the commencement of
MKP's business operations during the fiscal year ended September 30, 1995.
OPERATING LOSS. The Company's operating loss increased by $62,339 to
$284,898 for the fiscal year ended September 30, 1995 as compared to an
operating loss of $222,559 for the prior year.
OTHER INCOME (EXPENSES). Other expenses were $516,398 for the fiscal year
ended September 30, 1995 as compared to other income of $76,523 for the prior
period. The change was primarily related to expenses recorded by the Company in
the 1995 fiscal year for those expenses incurred by MKP when it was in its
development stage. In addition, such expenses were offset by an unusual item
relating to the reversal of trade payables of approximately $123,000 that were
outstanding for at least six years.
NET LOSS. The Company's net loss increased by $655,260 to $801,296 for the
1995 fiscal year from a net loss of $146,036 in the prior period, after
adjustments for interest expenses and an unusual item relating to the reversal
of trade payables that were outstanding for at least six years.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the past, the Company required continuous capital to fund its operating
losses which were primarily attributable to expenses in connection with
marketing activities, research and development costs and other expenses
including salaries and related expenses and selling, general and administrative
expenses. The Company has financed its operations to date primarily through
public and private sales of its debt and equity securities, including
significant sales to one of its principal stockholders, and more recently
revenues generated by the Company's subsidiary, MKP. See "Item 1 -- Description
of Business" and "Item 12 -- Certain Relationships and Related Transactions --
Transactions with Principal Stockholders."
As of September 30, 1996, the Company had working capital of $1,448,822,
stockholders' equity of $1,853,199 and a working capital ratio (current assets
to current liabilities) of 1.98:1. As of September 30, 1996 and 1995, the
Company had cash and cash equivalents of $1,972,056 and $348,755, respectively.
For the years ended September 30, 1996 and 1995, the Company generated positive
cash flow from operations of $262,290 and used cash for operations of $880,183,
respectively, primarily as a result of an increase in revenues and utilized
$320,076 and $289,489 for investing activities during the years ended September
30, 1996 and 1995, respectively. Net cash provided by the Company's financing
activities for the years ended September 30, 1996 and 1995 were $1,681,087 and
$1,418,748, respectively.
As of September 30, 1996, the Company had short-term debt (including the
current portion of long-term debt) of $120,520 and long-term debt, net of
current maturities, of $168,095. Of the total debt of $288,615, the sum of
$281,095 was due to a principal stockholder and the sum of $7,520 was due to a
principal stockholder -- former director. In November 1996, long and short-term
debt in the aggregate amount of $281,095 which was due to a principal
stockholder was converted into shares of the Company's common stock at a price
of $1.00 per share. Accordingly, as of December 24, 1996, the Company had no
short-term or long-term debt commitments other than the current portion of
long-term debt due to a principal stockholder -- former director in the amount
of $7,520.
The Company's business, as presently conducted, is not capital intensive. As
of September 30, 1996, the Company has made no material capital commitments
other than those related to non-cancelable operating leases for office space and
equipment. For the years ended September 30, 1997, 1998, 1999 and 2000, the
Company's minimum payments in connection with these leases are $198,000,
$292,000, $292,000 and $292,000, respectively. In addition, the Company expects
to spend approximately $150,000 each year for the next two fiscal years in
connection with its research and development activities.
Based on the Company's current plan of operations, it is anticipated that
the Company's existing working capital and expected operating revenues will
provide sufficient working capital for operations through September 30, 1997.
However, there can be no assurance that the Company will not require additional
financing prior to that time. For the years ended September 30, 1997, 1998, 1999
and 2000, the Company's minimum payments in connection with the leases are
$198,000 $292,000, $292,000 and $292,000, respectively. The Company anticipates
that it will require additional capital to fund its operations. The Company's
capital requirements depend on, among other things, whether the Company is
successful in generating revenues and income from its marketing efforts,
including those related to MARS-TM-, the progress and costs of the Company's
research and development programs, the ability of the Company to successfully
market its software and services and the effect of such efforts on the Company's
operations, competing technological and market developments, the costs involved
in protecting and enforcing its proprietary rights and any litigation related
thereto and the cost and availability of third-party financing.
The Company may also seek additional financing in connection with the
acquisition of one or more products (or rights related thereto) or entities or
the consummation of other business combinations. Although the Company has
engaged in discussions with third parties from time to time concerning potential
acquisitions and other business combinations and anticipates continuing such
activities in the
15
<PAGE>
future, the Company has no current commitments regarding such acquisitions or
other business combinations.
Financing may be raised by the Company through additional equity offerings,
joint ventures or other collaborative relationships, borrowings and other
transactions. The Company may seek additional funding through any such
transaction or a combination thereof. There can be no assurance that additional
financing will be available to the Company or, if available, that such financing
will be available on acceptable terms.
INFLATION
In general, the Company believes that it will be able to offset any
inflationary pressures by increasing operating efficiency, monitoring and
controlling expenses and increasing prices to the extent permitted by
competitive factors.
ITEM 7 -- FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company for the fiscal
years ended September 30, 1996 and 1995 are set forth at the end of this Annual
Report on Form 10-KSB and begin on page F-1.
ITEM 8 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
16
<PAGE>
PART III
ITEM 9 -- DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth certain information concerning the Company's
directors, executive officers and key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
William F. Finley.................................... 53 President; Chief Executive Officer; Chief Financial
Officer; Chairman of the Board of Directors
Duncan G. Burke...................................... 53 Vice President and Director
Richard Levy......................................... 61 Secretary and Director
Philip L. Hage....................................... 50 Director
Susan Michaelson..................................... 39 Managing Director of MKP
Hillary Kelbick...................................... 40 Managing Director of MKP
</TABLE>
The business experience of each of the directors, executive officers and key
employees of the Company for at least the most recent five years is as follows:
WILLIAM F. FINLEY is the founder of the Company and has served as its
President, Chief Executive Officer and Chairman of the Board since its inception
in 1984, and has served as its Chief Financial Officer since December 1987. From
1978 through 1984, Mr. Finley served as Vice President-Corporate Banking and
Manager of a consulting services group known as the Performance Services
Department of Marine Midland Bank, N.A. Prior thereto, from 1971 to 1978, Mr.
Finley held the position of Personnel-Training Director at Irving Trust Company.
From 1969 to 1971, Mr. Finley was employed in the Corporate and Management
Development Department at Chase Manhattan Bank. Mr. Finley has a Masters Degree
in Business Administration from New York University and a Bachelors of Arts
Degree in Psychology and Sociology from Miami University (Ohio). Mr. Finley is
the husband of Susan Michaelson, one of the two Managing Directors of MKP.
DUNCAN G. BURKE has served as a Director of the Company since April 1994. He
has also been the sole principal of Burke Capital Group, Greenwich, Connecticut
since 1994. From 1992 to 1994, Mr. Burke was a Senior Vice President of Laidlaw
Holdings Asset Management, Inc. and from August 1991 to November 1992 he served
as a Vice President of Laidlaw Equities, Inc. From 1989 to 1991, Mr. Burke was a
Vice President with Tucker Anthony Incorporated. He was in the investment
banking group with Dean Witter Reynolds, Inc. from 1970 to 1989, serving as
Managing Director, Investment Banking, from 1979 to 1989. Mr. Burke holds a B.A.
in Economics from Dartmouth College and an M.B.A. in Finance from Columbia
University Graduate School of Business.
RICHARD LEVY has served as a Director of the Company since April 1994. He is
a Senior Director at Cushman & Wakefield, Inc., a real estate consulting and
brokerage firm, and has been employed by that firm for more than 35 years. Mr.
Levy is also a director of Mascott Corporation, a restaurant and catering
company. Mr. Levy attended Muhlenberg College and Columbia University.
PHILIP L. HAGE has served as a Director of the Company since August 1996. He
is a Vice President at Van Kasper & Company, an investment banking and brokerage
firm, and heads the Financial Institutions Group and serves as a regional bank
analyst at that firm. Prior to joining Van Kasper & Company in July 1989, Mr.
Hage was President of Golden Sierra Financial Advisors, a mergers and
acquisitions advisory firm specializing in financial industry companies, from
December 1986 to June 1989. Mr. Hage
17
<PAGE>
also served as Senior Vice President and Partner at A.G. Becker & Company, an
international investment banking firm, from 1973 prior to its merger with
Merrill Lynch in 1984 and was thereafter employed by BankAmerica Corporation.
Mr. Hage holds a B.A. from The Johns Hopkins University and an M.B.A. from the
Darden School at the University of Virginia.
SUSAN MICHAELSON is one of the co-founders of MKP, together with Hillary
Kelbick and the Company, and has been a Managing Director of MKP since its
inception in October 1994. From 1990 to 1994, Ms. Michaelson served as Senior
Vice President at Wilcox Associates. From 1986 to 1990, Ms. Michaelson was also
a Senior Vice President of the Company. Ms. Michaelson is the wife of William F.
Finley, President, Chairman of the Board and Chief Executive Officer of the
Company. Ms. Michaelson holds a Bachelor of Arts Degree from Syracuse
University.
HILLARY KELBICK is one of the co-founders of MKP, together with Susan
Michaelson and the Company, and has been a Managing Director of MKP since its
inception in October 1994. From 1982 to 1994, Ms. Kelbick served as Senior Vice
President at Wilcox Associates. Ms. Kelbick holds a Bachelor of Arts Degree from
SUNY Albany.
There are currently four members on the Company's Board of Directors. The
Company's certificate of incorporation and by-laws authorize the Board of
Directors to fix the number of authorized directors. The Company's by-laws also
authorize the Board of Directors to fill any vacancy on the Board of Directors.
The Company's by-laws provide that directors are to be elected annually by the
shareholders and hold office until the next annual meeting and until their
respective successors are elected and qualified. Executive officers are elected
by the Board of Directors and hold office until their respective successors are
elected and qualified. The Company has employment agreements with each of its
executive officers and key employees. Other than Mr. Finley and Ms. Michaelson
who are married, there are no other family relationships between the Company's
directors, executive officers and key personnel.
LIMITATION ON PERSONAL LIABILITY; INDEMNIFICATION
The Company's Certificate of Incorporation and By-Laws contain provisions
exculpating the Company's directors from personal liability for actions taken or
omitted to be taken by them in connection with their positions, with limited
exceptions. The Company's By-Laws also contain provisions which require the
Company to indemnify current and former officers and directors for any
judgments, fines, amounts paid in settlement or reasonable attorneys' fees
incurred in the defense of certain actions and proceedings to the fullest extent
permitted under New York law. Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Securities and Exchange Commission (the "Commission") has comprehensive
rules relating to the reporting of securities transactions by directors,
officers and stockholders who beneficially own more than 10% of the Company's
Common Stock (collectively, the "Reporting Persons"). These rules are complex
and difficult to interpret. Based solely on a review of Section 16 reports
received by the Company from Reporting Persons, the Company believes that no
Reporting Person has failed to file a Section 16 report on a timely basis during
the most recent fiscal year (or any prior fiscal year discovered prior to the
filing of this Annual Report on Form 10-KSB), other than each of Ms. Kelbick and
Ms. Michaelson (who each failed to file a Form 3 in October 1994 and a Form 4 in
October 1996), Mr. Levy (who failed to file a Form 3 in June 1994 and a Form 4
in July and October 1996), Mr. Burke (who failed to file a Form 3 in June 1994
and a Form 4 in January 1995 and October 1996), Mr. Hage (who failed to file a
Form 3 in
18
<PAGE>
September 1996 and a Form 4 in October 1996), and Mr. Finley (who failed to file
a Form 3 and failed to file a Form 4 in October 1993, December 1993, October
1995 and October 1996).
CONSULTING AGREEMENTS
In November 1996, the Company entered into a two-year, non-exclusive
advisory agreement with Van Kasper & Company ("Van Kasper"). Pursuant to the
terms of the agreement, the Company issued Van Kasper a three-year warrant to
purchase 150,000 shares of Common Stock with an exercise price of $0.50 per
share. The Company also granted Van Kasper "piggyback" registration rights for
the shares of Common Stock underlying the warrant with respect to the first
registration statement filed by the Company after November 1996. Under the
agreement, Van Kasper will provide general corporate advice to the Company
including advice in connection with developing relationships with analysts and
market-makers and advice on investor presentations. See "Item 5 -- Market for
Common Equity and Related Stockholder Matters" and "Item 12 -- Certain
Relationships and Related Transactions -- Transactions with Directors and
Executive Officers."
In November 1996, the Company entered into a non-exclusive advisory
agreement with Laidlaw Equities, Inc. ("Laidlaw") which provides that Laidlaw
will render general corporate advice to the Company and will propose to act as a
placement agent in connection with potential acquisition financing. Pursuant to
the terms of the agreement, the Company issued Laidlaw a three-year warrant to
purchase 150,000 shares of Common Stock with an exercise price of $0.50 per
share. The Company also granted Laidlaw "piggyback" registration rights as to
the shares of Common Stock underlying the warrant. See "Item 5 -- Market for
Common Equity and Related Stockholder Matters" and "Item 12 -- Certain
Relationships and Related Transactions -- Transactions with Directors and
Executive Officers."
19
<PAGE>
ITEM 10 -- EXECUTIVE COMPENSATION
The following table summarizes, for the fiscal years ended September 30,
1996, 1995 and 1994, the compensation paid by the Company to the Company's Chief
Executive Officer and to each other executive officer whose total annual salary
and bonus exceeded $100,000 for services rendered in all capacities to the
Company (the "named executive officers"). See "-- Employment Agreements."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------- --------------------
FISCAL OTHER ANNUAL AWARDS OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION WARRANTS(#)
- -------------------------------------------- ----------- ---------- ---------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
William F. Finley(1)........................ 1996 $ 150,000 $ 25,000 $ 30,000(7) 200,000
Chief Executive Officer 1995 $ 125,000 -- -- 200,000
1994 $ 100,000 -- -- 100,000
Susan Michaelson(2)(3)...................... 1996 $ 127,000 $ 215,000 $ 30,000(7) 200,000(3)
Managing Director of MKP 1995 $ 92,000 -- $ 100,000 --
1994 -- -- -- --
Hillary Kelbick(4).......................... 1996 $ 127,000 $ 215,000 $ 30,000(7) 200,000(4)
Managing Director of MKP 1995 $ 92,000 -- $ 100,000 --
1994 -- -- -- --
Sean Brennan(5)............................. 1996 $ 83,334 -- -- --
Member of Aspen 1995 $ 185,000 -- -- --
1994 -- -- -- --
Richard Loos(6)............................. 1996 $ 37,500 -- -- --
Member Officer of Aspen 1995 $ 111,000 -- -- --
1994 -- -- -- --
</TABLE>
- ------------------------------
(1) On November 11, 1993, Mr. Finley received warrants to purchase 100,000
shares of Common Stock at $0.50 per share, exercisable until August 31,
1998. On September 15, 1995, the Company issued to Mr. Finley warrants to
purchase 200,000 shares of Common Stock at $0.50 per share, exercisable
until September 15, 2010. On September 16, 1996, the Company issued to Mr.
Finley warrants to purchase 200,000 shares of Common Stock with an exercise
price of $1.00 per share, exercisable until September 15, 2006. Effective as
of January 1, 1995, the Company entered into an employment agreement with
Mr. Finley for a period of five years providing for an annual salary of
$125,000.00. Effective as of July 1, 1996, the Company agreed to amend the
employment agreement to increase Mr. Finley's annual salary to $150,000.00
and to grant Mr. Finley a bonus in the amount of $25,000. See "-- Employment
Agreements."
(2) Susan Michaelson is the wife of William F. Finley, the Company's President,
Chief Executive Officer and Chief Financial Officer. The Company has entered
into an employment agreement with Ms. Michaelson. See "-- Employment
Agreements."
(3) As of October 1994, Ms. Michaelson received 100,000 shares of Common Stock
pursuant to the terms of the Company's agreement dated October 17, 1994 with
Ms. Michaelson and Hillary Kelbick. On September 16, 1996, the Company
issued to Ms. Michaelson warrants to purchase 200,000 shares of Common Stock
with an exercise price of $1.00 per share, exercisable until September 15,
2006.
(4) As of October 1994, 100,000 shares of Common Stock were issued to Ms.
Kelbick pursuant to the terms of the Company's agreement dated October 17,
1994 with Susan Michaelson and Ms. Kelbick. On September 16, 1996, the
Company issued to Ms. Kelbick warrants to purchase 200,000 shares of Common
Stock with an exercise price of $1.00 per share, exercisable until September
15, 2006.
(5) Mr. Brennan resigned as an officer of Aspen in July 1996 and does not
currently receive any compensation from the Company.
(6) Mr. Loos resigned as an officer of Aspen in September 1996 and does not
currently receive any compensation from the Company.
(7) For the year ended September 30, 1996, the Company contributed an aggregate
of $30,000 to such executive under its non-contributory pension and profit
sharing plan. See "-- Pension Plan."
20
<PAGE>
STOCK OPTION AND WARRANT GRANTS IN 1996
The following table sets forth certain information concerning individual
option/warrant grants to each of the "named executive officers" of the Company
during the fiscal year ended September 30, 1996.
OPTION/WARRANT GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF TOTAL
SECURITIES OPTIONS/
UNDERLYING WARRANTS
OPTIONS/ GRANTED TO EXERCISE OR
WARRANTS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE
- --------------------------------------------------------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
William F. Finley(1)........................................... 200,000 33 1/3% $ 1.00 9/15/2006
Susan Michaelson(2)............................................ 200,000 33 1/3% $ 1.00 9/15/2006
Hillary Kelbick(3)............................................. 200,000 33 1/3% $ 1.00 9/15/2006
Sean Brennan................................................... -- -- -- --
Richard Loos................................................... -- -- -- --
</TABLE>
- ------------------------------
(1) On September 16, 1996, the Company issued to Mr. Finley warrants to purchase
200,000 shares of Common Stock, exercisable with an exercise price of $1.00
per share until September 15, 2006. These warrants are exercisable
immediately.
(2) On September 16, 1996, the Company issued to Ms. Michaelson warrants to
purchase 200,000 shares of Common Stock with an exercise price of $1.00 per
share, exercisable until September 15, 2006. These warrants are exercisable
immediately.
(3) On September 16, 1996, the Company issued to Ms. Kelbick warrants to
purchase 200,000 shares of Common Stock with an exercise price of $1.00 per
share, exercisable until September 15, 2006. These warrants are exercisable
immediately.
OPTION EXERCISES AND FISCAL YEAR-END HOLDINGS
No options or warrants were exercised by any named executive officer for the
fiscal year ended September 30, 1996. The following table sets forth
information, as of September 30, 1996, concerning the number of shares issuable
as to exercisable and nonexercisable options or warrants and the value of "in
the money" options and warrants held by the Company's "named executive
officers."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS OPTIONS/WARRANTS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ----------------- ----------- -----------------
William F. Finley......................................... 200,000 -- $ 26,000 --
Susan Michaelson.......................................... 200,000 -- $ 26,000 --
Hillary Kelbick........................................... 200,000 -- $ 26,000 --
</TABLE>
- ------------------------------
(1) The value of exercisable options and warrants is based on the
volume-weighted average price of the Common Stock as reported on the OTC
Bulletin Board on December 20, 1996, which was $1.13, minus the exercise
price of the option or warrant, as the case may be.
21
<PAGE>
COMPENSATION OF DIRECTORS
The Company has no standard arrangement relating to the compensation of its
directors. Directors who are also officers of the Company are not paid any
monetary compensation for attendance at directors' meetings or for attending or
participating in any committee meetings. Historically, directors of the Company
have been compensated for their services and attendance at meetings through the
grant of options and warrants to purchase shares of Common Stock.
All directors are eligible for grants of stock options pursuant to the
Company's 1988 Incentive Stock Option Plan. As of September 30, 1996, the
Company had granted options to two of its directors (including the chief
executive officer) and two former directors under the Option Plan, representing
a total of 60,000 shares, exercisable at an average exercise price of
approximately $4.60 per share until October 1998.
In December 1994 and July 1996, Duncan Burke and Richard Levy, respectively,
received 20,000 shares of Common Stock for services rendered to the Company. In
addition, in September 1996, Messrs. Burke and Levy each received warrants to
purchase 50,000 shares of Common Stock at $1.00 per share exercisable until
September 15, 2006. In September 1996, Philip L. Hage received warrants to
purchase 25,000 shares of Common Stock at $1.00 per share, exercisable until
September 15, 2006. All of the warrants are immediately exercisable. See "Item
12 -- Certain Relationships and Related Transactions -- Transactions with
Directors and Executive Officers."
INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted an Incentive Stock Option Plan (the
"Option Plan") pursuant to which 140,000 shares of Common Stock have been
reserved for issuance to officers, directors and key employees of the Company.
Under the Option Plan, options are granted at 100% of fair market value on the
date of grant (or 110% of fair market value, if the grantee is the owner of 10%
or more of the Company's Common Stock as of the date of grant). As of September
30, 1996, the Company had granted options to 5 individuals to purchase a total
of 60,000 shares, exercisable at an average exercise price of approximately
$4.60 per share until October 1998.
EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five-year employment
agreement with Mr. Finley which expires on August 31, 2001. Under the agreement,
Mr. Finley's initial annual salary was $125,000, subject to increases as
determined by the Company's Board of Directors. Mr. Finley's current salary is
$150,000 per annum. The Company has also agreed to pay reasonable travel and
entertainment expenses incurred by Mr. Finley on behalf of the Company. In the
event of the termination of Mr. Finley's employment with the Company for any
reason, Mr. Finley is entitled to receive all accrued salary and vacation pay
due plus a severance payment of $100,000. Pursuant to the terms of the
employment agreement, for a period of one year after the expiration or
termination of the employment agreement, Mr. Finley may not disrupt any
relationships, contractual or otherwise, between the Company and any of its
customers, clients, employees or independent contractors.
Mr. Finley's executive employment agreement does not provide for the
issuance of any Common Stock, warrants or options. On September 15, 1995, the
Company granted Mr. Finley warrants to purchase 200,000 shares of the Common
Stock with an exercise price of $0.50 per share, exercisable through September
15, 2010. Additionally, on September 16, 1996, the Company granted Mr. Finley
warrants to purchase 200,000 shares of the Common Stock with an exercise price
of $1.00 per share, exercisable through September 15, 2006.
MKP has entered into executive employment agreements with each of Ms.
Michaelson and Ms. Kelbick for a term of three years ending on October 17, 1997.
Under the terms of the agreements, the initial annual salary of Ms. Michaelson
and Ms. Kelbick was $80,000. The annual base salary currently
22
<PAGE>
payable to each of Ms. Michaelson and Ms. Kelbick is $115,000. In the event that
either Ms. Michaelson or Ms. Kelbick elects not to renew her respective
employment agreement with MKP at the expiration of the term and MKP elects not
to renew the employment agreement, the respective executive will be entitled to
receive a severance payment in the amount of $30,000. The employment agreements
further provide an annual incentive compensation payment for each of Ms.
Michaelson and Ms. Kelbick equal to a percentage, determined annually by the
Board of Directors, of the net income before taxes of MKP as if MKP was not a
member of the Comany's consolidated group. For the year ended September 30,
1996, Ms. Michaelson and Ms. Kelbick received an aggregate of $430,000 under the
incentive program. "See Item 12 -- Certain Relationships and Related
Transactions -- Transactions with Directors and Executive Officers." For a
period of one year after the expiration or termination of the respective
employment agreements, Ms. Michaelson and Ms. Kelbick may not disrupt or
interfere with any relationship, contractual or otherwise, between MKP and any
of its customers, clients, employees or independent contractors.
PENSION PLAN
In September 1996, the Company established a non-contributory pension and
profit sharing plan for the benefit of its eligible full-time employees. The
plan provides for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes. For
the year ended September 30, 1996, the Company contributed an aggregate $90,000
in connection with the plan for the benefit of Mr. Finley, Ms. Michaelson and
Ms. Kelbick.
23
<PAGE>
ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of December 24, 1996, certain information
regarding the beneficial ownership of Common Stock by (i) each person who is
known to the Company to be the beneficial owner of more than 5% of the Common
Stock, (ii) each director and executive officer of the Company, (iii) each of
the Company's "named executive officers" as determined in accordance with the
rules and regulations of the Commission, and (iv) all directors and executive
officers of the Company as a group. The following information is based in part
upon data furnished by the persons indicated below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED(1) CLASS(1)
- ---------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Robert S. Trump(2).................................. 4,867,422 62.00%
William F. Finley(3)................................ 837,546 9.64%
Marvin M. Reiss(4).................................. 560,173 6.83%
Duncan G. Burke(5).................................. 70,000 0.86%
Richard Levy(6)..................................... 70,000 0.86%
Philip L. Hage(7)................................... 25,200 0.32%
Susan Michaelson(8)................................. 330,000 4.08%
Hillary Kelbick(9).................................. 300,000 3.73%
Richard Loos(10).................................... -- --
Sean Brennan(11).................................... -- --
All directors and executive officers as a group (6
persons).......................................... 1,863,319 20.11%
</TABLE>
- ------------------------------
(1) Based upon an aggregate of 7,850,782 shares of Common Stock outstanding as
of December 24, 1996, plus, for each listed beneficial owner, the number of
shares which such person has the right to acquire within 60 days of December
24, 1996.
(2) The address of Mr. Trump is c/o Trump Management, Inc. 2611 West Second
Street, Brooklyn, New York 11223. For further information concerning Mr.
Trump's relationships to the Company, see "Item 12 -- Certain Relationships
and Related Transactions -- Transactions with Principal Stockholders."
(3) Includes: (i) 15,000 shares issuable upon the exercise of an option granted
pursuant to the Option Plan; (ii) 81,960 shares issuable upon the exercise
of warrants granted on September 30, 1993 in partial consideration for the
exchange of approximately $25,612 of indebtedness owed by the Company; (iii)
10,586 shares issuable upon the exercise of warrants granted on November 11,
1993; (iv) 10,000 shares issuable upon the exercise of an option granted to
Susan Michaelson pursuant to the Option Plan; (v) 20,000 shares issuable
upon the exercise of warrants granted to Susan Michaelson on November 11,
1993; (vi) 100,000 shares of Common Stock held by Susan Michaelson; (vii)
200,000 shares issuable upon the exercise of warrants granted on September
15, 1995; (viii) 200,000 shares issuable upon the exercise of warrants
granted on September 16, 1996; and (ix) 200,000 shares issuable upon the
exercise of warrants granted to Susan Michaelson on September 16, 1996.
Susan Michaelson is the wife of Mr. Finley and a Managing Director and 10%
stockholder of MKP. Mr. Finley disclaims beneficial ownership of the shares
beneficially owned by his wife. The address of Mr. Finley is 335 Madison
Avenue, New York, New York 10017.
(4) Includes: (i) 15,000 shares issuable upon the exercise of an option granted
pursuant to the Option Plan; (ii) 205,392 shares of Common Stock held by
Rebot Corporation, a private corporation whose sole stockholder is Mr.
Reiss; (iii) 239,781 shares issuable upon the exercise of warrants granted
to Rebot Corporation on September 30, 1993 in consideration for the exchange
of $74,931 of indebtedness owed by the Company; and (iv) 100,000 shares
issuable upon the exercise of warrants granted on November 11, 1993. The
address of Mr. Reiss is 5 Walden Lane, Rye, New York 10580.
(5) Includes 50,000 shares issuable upon the exercise of warrants granted to Mr.
Burke on September 16, 1996. The address of Mr. Burke is c/o Burke Capital,
Two Greenwich Plaza, P.O. Box 628, Greenwich, Connecticut 06836.
(6) Includes 50,000 shares issuable upon the exercise of warrants granted to Mr.
Levy on September 16, 1996. The address of Mr. Levy is c/o Cushman &
Wakefield, 100 Wall Street, New York, New York 10005.
(7) Includes 25,000 shares issuable upon the exercise of warrants granted to Mr.
Hage on September 16, 1996. The address of Mr. Hage is c/o Van Kasper &
Company, 600 California Street, Suite 1700, San Francisco, California 94108.
24
<PAGE>
(8) Includes: (i) 10,000 shares issuable upon the exercise of an option granted
pursuant to the Option Plan; (ii) 20,000 shares issuable upon the exercise
of an option to purchase Common Stock granted on November 11, 1993; and
(iii) 200,000 shares issuable upon the exercise of warrants granted on
September 16, 1996. Does not include any equity securities of the Company
beneficially owned by Ms. Michaelson's husband, William F. Finley, the
Company's Chairman of the Board, President and Chief Executive Officer. Ms.
Michaelson disclaims beneficial ownership of the shares beneficially owned
by her husband. The address of Ms. Michaelson is 335 Madison Avenue, New
York, New York 10017.
(9) Includes 200,000 shares issuable upon the exercise of warrants granted to
Ms. Kelbick on September 16, 1996. The address of Ms. Kelbick is 335 Madison
Avenue, New York, New York 10017.
(10) Mr. Loos resigned as an officer of Aspen in September 1996.
(11) Mr. Brennan resigned as an officer of Aspen in July 1996.
25
<PAGE>
ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a discussion of certain transactions entered into by the
Company and its principal stockholders, executive officers and directors. The
Company believes that the terms of these transactions were no less favorable to
the Company than would have been obtained from non-affiliated third parties for
similar transactions at the time of such transactions. The Company's current
policy is that all transactions between the Company and its directors, officers
and principal stockholders should be on terms no less favorable to the Company
than could be obtained from unaffiliated parties.
TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS
ROBERT S. TRUMP. In January 1993, Robert S. Trump (who as of December 24,
1996 beneficially owned approximately 62% of the Common Stock) loaned the
Company an aggregate of $125,000 in connection with the recommencement of its
operations. The loan was evidenced by a secured, exchangeable promissory note
which bore interest at the rate of 10% per annum and was due on December 31,
1995 (the "Exchangeable Note"). The indebtedness under the Exchangeable Note was
secured by a first priority security interest in the Company's accounts
receivable, contract rights and rights relating to certain computer software. In
connection with the issuance of the Exchangeable Note, Mr. Trump received
warrants to purchase 400,000 shares of Common Stock at an exercise price of
$0.3125 per share, which were exercisable until January 6, 1998.
In September 1993, the Company sold 320,000 shares of Common Stock to Mr.
Trump for an aggregate of $100,000 in cash. In connection therewith, Mr. Trump
also received warrants to purchase 320,000 shares of Common Stock, with an
exercise price of $0.50, which were exercisable until August 31, 1998. In March
1994, the Company sold an aggregate of 133,334 shares of Common Stock to Mr.
Trump for $100,000 in cash.
In July 1994, Mr. Trump loaned the Company an aggregate of $150,000 pursuant
to a secured promissory note which bore interest at the rate of 10% per annum
and was due on December 31, 1997 (the "Secured Promissory Note"). The Secured
Promissory Note was cross-collateralized and cross-defaulted with the
Exchangeable Note.
In October 1994, Mr. Trump loaned the Company an aggregate of $280,000
pursuant to a secured promissory note which bore interest at the rate of 8% per
annum and was due on December 31, 1997 (the "Second Secured Promissory Note").
The net proceeds therefrom were utilized by the Company primarily for the
formation and initial operations of its 80% subsidiary, MKP. The Second Secured
Promissory Note was cross-collateralized and cross-defaulted with the
Exchangeable Note and the Secured Promissory Note.
In December 1994, Mr. Trump loaned the Company an aggregate of $150,000
pursuant to a secured promissory note which bore interest at the rate of 8% per
annum and was due on December 31, 1997 (the "Third Secured Promissory Note").
The Third Secured Promissory Note was cross-collateralized and cross-defaulted
with the $125,000 Exchangeable Note issued to Mr. Trump in January 1993, the
$150,000 Secured Promissory Note issued to Mr. Trump in July 1994 and the
$280,000 Second Secured Promissory Note issued to Mr. Trump in October 1994.
In January 1995, Mr. Trump loaned the Company an aggregate of $250,000
pursuant to a secured promissory note (the "Fourth Secured Promissory Note").
The net proceeds of the Fourth Secured Promissory Note were utilized by the
Company primarily in connection with the formation and initial operations of
Aspen. Pursuant to agreements between Mr. Trump and the Company dated as of
January 13, 1995, all accrued and unpaid interest in respect of the Exchangeable
Note and the Secured Promissory Note were added to the principal of each note
and such notes were consolidated, cross-collateralized and cross-defaulted with
the Second Secured Promissory Note, the Third Secured Promissory Note and the
Fourth Secured Promissory Note, thereby representing consolidated indebtedness
to
26
<PAGE>
Mr. Trump in the aggregate principal amount of $986,500 (the "Consolidated
Note"). Indebtedness under the Consolidated Note bore interest at the rate of 8%
per annum and was due and payable on December 31, 1997. Under the terms of the
Consolidated Note, the Company was entitled to receive 30% of the pre-tax net
operating income of its subsidiaries and was obligated to apply the balance of
such income on an annual basis towards the payment of accrued interest on such
indebtedness and then to reduce principal. On January 11, 1995, the Company also
agreed to extend for an additional period of three years the exchange period in
respect to the Exchangeable Note and the exercise periods for all of the
warrants held by Mr. Trump to purchase Common Stock.
In April 1995, Mr. Trump loaned the Company an aggregate of $250,000
pursuant to a secured promissory note (the "Fifth Secured Promissory Note"). The
net proceeds therefrom were utilized by the Company primarily in connection with
the further development of Aspen's operations. Pursuant to agreements between
Mr. Trump and the Company dated April 6, 1995, this note was consolidated,
cross-collateralized and cross-defaulted with the indebtedness under the
Consolidated Note and contained identical terms. During the period from March to
November 1996, all of the Company indebtedness held by Mr. Trump, including all
of the indebtedness represented by the Exchangeable Note, the Consolidated Note
and the Fifth Secured Promissory Note, was converted into Common Stock, at an
exchange rate to $1.00 per share.
In September 1995, the Company issued to Mr. Trump warrants to purchase
1,000,000 shares of Common Stock with an exercise price of $0.50 per share,
exercisable through September 15, 2010, in consideration for, among other
things, (i) Mr. Trump's prior debt and equity investments in the Company (which
provided the Company with substantially all of the working capital required to
continue operations during the fiscal years ended September 30, 1994 and 1995);
(ii) Mr. Trump's agreement to exercise all of his remaining warrants to purchase
Common Stock under the warrant agreement dated January 7, 1993; (iii) Mr.
Trump's assistance in raising $5,000,000 in subscriptions for the international
cash management fund established by the Company's subsidiary, Aspen; and (iv)
Mr. Trump's willingness to consider future proposals by the Company to provide
additional capital.
In March 1996, Mr. Trump exercised warrants to purchase 1,000,000 shares of
Common Stock for an aggregate purchase price of $500,000. In addition, Mr. Trump
agreed to convert approximately $1,000,000 of Company indebtedness under the
Consolidated Note into 1,000,000 shares of Common Stock at a conversion price of
$1.00 per share.
In June 1996, Mr. Trump converted an additional $517,474 of Company
indebtedness into 517,474 shares of Common Stock at a conversion price of $1.00
per share. In connection with the conversion, the Company agreed with Mr. Trump
that if the Company issues additional shares of Common Stock at any time after
March 29, 1996 for less than $1.00 per share, then the conversion price
applicable to the shares issued to Mr. Trump in connection with the debt
conversion would be correspondingly decreased and the Company would issue Mr.
Trump an appropriate number of additional shares so that the total number of
shares issued in connection with this debt conversion corresponds to the
adjusted conversion price.
In November 1996, Mr. Trump exercised his right to exchange the Exchangeable
Note into 400,000 shares of Common Stock, which represents an effective exchange
rate of $0.3125 per share and converted the remaining balance of all outstanding
indebtedness of the Company which aggregated $164,614, represented by the
balance of the outstanding amount under the Consolidated Note and other
outstanding demand loans held by Mr. Trump, into 164,614 shares of Common Stock
at a conversion rate of $1.00 per share.
As of December 24, 1996, all of the warrants to purchase Common Stock held
by Mr. Trump have been exercised.
For further information concerning certain other arrangements between the
Company and its principal stockholders. See "Item 1 -- Description of Business."
27
<PAGE>
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
WILLIAM F. FINLEY. In November 1993, Mr. Finley, the Company's Chief
Executive Officer and President who as of December 24, 1996 may be deemed to
beneficially own approximately 9.64% of Common Stock, received warrants to
purchase 100,000 shares of Common Stock with an exercise price of $0.50 per
share, which warrants are exercisable until August 31, 1998. In November 1995,
Mr. Finley sold 40,000 of these warrants to a shareholder and former director of
the Company. In November 1996, Mr. Finley exercised a portion of these warrants
and received 49,414 shares of Common Stock. On September 15, 1995, the Company
issued to Mr. Finley warrants to purchase 200,000 shares of Common Stock with an
exercise price of $0.50 per share, which warrants are exercisable through
September 15, 2010, in consideration of Mr. Finley's past services performed on
behalf of the Company. On September 16, 1996, the Company issued Mr. Finley
warrants to purchase 200,000 shares of Common Stock with an exercise price of
$1.00 per share, which warrants are exercisable through September 15, 2006, in
consideration of Mr. Finley's past services performed on behalf of the Company.
All of the warrants which have been issued by the Company to Mr. Finley are
exercisable immediately.
DUNCAN G. BURKE, currently a Vice President and Director of the Company, was
a Senior Vice President of Laidlaw Holdings Asset Management, Inc. from 1992 to
1994. That firm acted as a consultant to the Company during 1994 and 1995. To
date, neither Mr. Burke nor Laidlaw Holdings Asset Management, Inc. received any
compensation from the Company for services performed other than as described in
this Annual Report on Form 10-KSB. As consideration for past services performed
by Mr. Burke on behalf of the Company, in December 1994 Mr. Burke received
20,000 shares of Common Stock, and in September 1996 Mr. Burke received warrants
to purchase 50,000 shares of Common Stock which are exercisable at $1.00 per
share for a ten-year period. These warrants are immediately exercisable, Mr.
Burke was also a Vice President of Laidlaw Equities, Inc. during 1991 and 1992.
See "Item 9 -- Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act -- Consulting Agreements."
RICHARD LEVY, currently the Secretary and a Director of the Company, is a
Senior Director at Cushman & Wakefield, which firm has acted as a real estate
broker with regard to the Company's recent lease of a portion of the 8th floor
at 335 Madison Avenue, New York, New York in October 1996. The Company is not
obligated to pay any commissions to Mr. Levy in connection with the lease.
However, Cushman & Wakefield did receive brokerage commissions from the lessor
in connection with the consummation of the lease with the Company. As
consideration for past services performed by Mr. Levy on behalf of the Company,
in July 1996, Mr. Levy received 20,000 shares of Common Stock and in September
1996, Mr. Levy received warrants to purchase 50,000 shares of Common Stock
exercisable at $1.00 per share for a ten-year period. These warrants are
exercisable immediately.
PHILIP L. HAGE is a Director of the Company and Vice President of Van Kasper
& Company. As consideration for past services performed by Mr. Hage on behalf of
the Company, in September 1996, Mr. Hage received warrants to purchase 25,000
shares of Common Stock exercisable at $1.00 per share for a ten-year period.
These warrants are exercisable immediately. Van Kasper provides advisory
services to the Company pursuant to the terms of a two-year, non-exclusive
advisory agreement. See "Item 9 -- Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act -- Consulting
Agreements."
SUSAN MICHAELSON is the President and Treasurer and a Managing Director of
the Company's subsidiary, MKP. As of October 1994, Ms. Michaelson received
100,000 shares of Common Stock pursuant to the terms of the Managing Director's
Agreement dated October 18, 1994 by and among the Company, Ms. Michaelson and
MKP. On September 16, 1996, Ms. Michaelson received warrants to purchase 200,000
shares of Common Stock at an exercise price of $1.00 per share for a ten-year
period, for services previously rendered to the Company.
28
<PAGE>
HILLARY KELBICK is the Vice President and Secretary and a Managing Director
of the Company's subsidiary, MKP. As of October 1994, Ms. Kelbick received
100,000 shares of Common Stock pursuant to the terms of the Managing Director's
Agreement dated October 18, 1994 by and among the Company, Ms. Kelbick and MKP.
On September 16, 1996, Ms. Kelbick received warrants to purchase 200,000 shares
of Common Stock at an exercise price of $1.00 per share for a ten-year period,
for services previously rendered to the Company.
For further information concerning employment agreements and certain other
arrangements between the Company and its directors and executive officers, see
"Item 10 -- Executive Compensation."
29
<PAGE>
ITEM 13 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) The Company's consolidated financial statements that are listed in Item
7 are set forth at the end of this Annual Report on Form 10-KSB.
(c) The following exhibits are included herewith unless otherwise indicated:
<TABLE>
<C> <S>
3.1 Certificate of Incorporation dated August 9, 1984 (incorporated by reference to
Exhibit 3.1 to Registration Statement on Form S-8, No. 33-7778).
3.2 Amendment to Certificate of Incorporation dated August 29, 1984 (incorporated
by reference to Exhibit (i) to Registrant's Quarterly Report on Form 10-Q for
the period ended March 31, 1988).
3.3 Amendment to Certificate of Incorporation dated July 1, 1986.
3.4 Amendment to Certificate of Incorporation dated March 14, 1988.
3.5 Amendment to Certificate of Incorporation dated September 13, 1996.
3.6 By-laws (incorporated by reference to Exhibit 3.2 to Registration Statement on
Form S-18, No. 33-7778).
3.7 Amendment to By-Laws dated July 1995.
4.1 Specimen Certificate of Common Stock.
4.2 Incentive Stock Option Plan (incorporated by reference to Exhibit 4.7 to
Registration Statement on Form S-1, No. 33-20886).
10.1 Agreement between Marine Midland Bank, N.A. and William F. Finley (incorporated
by reference to Exhibit 10.12 to Registration Statement on Form S-18, No.
33-7778).
10.2 Form of Indemnification Agreement between Registrant and its Officers and
Directors (incorporated by reference to Exhibit 10.35 to Registration Statement
on Form S-1, No. 33-20886).
10.3 Promissory Note due on May 1, 1989 in the principal amount of $50,000 executed
by the Registrant in favor of Marvin M. Reiss (incorporated by reference to
Exhibit 10.41 to Amendment No. 2 to Registration Statement on Form S-1, No.
33-20886).
10.4 Promissory Note due on November 1, 1989 in the principal amount of $50,000
executed by the Registrant in favor of William F. Finley (incorporated by
reference to Exhibit 10.4 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.5 Promissory Note due on November 1, 1989 in the principal amount of $50,000
executed by the Registrant in favor of Marvin M. Reiss (incorporated by
reference to Exhibit 10.5 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.6 Form of Subscription Agreement dated as of June 23, 1989 between the Registrant
and Julius London (incorporated by reference to Exhibit 10.6 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.7 Form of Subscription Agreement dated as of June 23, 1989 between the Registrant
and Marie Monell (incorporated by reference to Exhibit 10.7 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
</TABLE>
30
<PAGE>
<TABLE>
<C> <S>
10.8 Promissory Note due on November 1, 1989 in the principal amount of $12,500
executed by the Registrant in favor of Paul M. Diamond (incorporated by
reference to Exhibit 10.8 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.9 Promissory Note due on November 1, 1989 in the principal amount of $10,000
executed by the Registrant in favor of Paul M. Diamond (incorporated by
reference to Exhibit 10.9 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.10 Promissory Note due on November 1, 1989 in the principal amount of $2,500
executed by the Registrant in favor of Paul M. Diamond (incorporated by
reference to Exhibit 10.10 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.11 Promissory Note due on November 1, 1989 in the principal amount of $30,000
executed by the Registrant in favor of Marvin M. Reiss (incorporated by
reference to Exhibit 10.11 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.12 Promissory Note due on November 1, 1989 in the principal amount of $20,000
executed by the Registrant in favor of Marvin M. Reiss (incorporated by
reference to Exhibit 10.12 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.13 Promissory Note due on November 1, 1989 in the principal amount of $10,000
executed by the Registrant in favor of Marvin M. Reiss (incorporated by
reference to Exhibit 10.13 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.14 Promissory Note due on November 1, 1989 in the principal amount of $15,000
executed by the Registrant in favor of Marvin M. Reiss (incorporated by
reference to Exhibit 10.14 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.15 Demand Promissory Note in the principal amount of $5,000 executed by the
Registrant in favor of Marvin M. Reiss (incorporated by reference to Exhibit
10.15 to the Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1993).
10.16 Form of Exchangeable Note due on December 31, 1995 in the principal amount of
$125,000 executed by the Registrant in favor of Robert S. Trump (incorporated
by reference to Exhibit 10.16 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1993).
10.17 Security Agreement dated as of January 7, 1993 between the Registrant and
Robert S. Trump (incorporated by reference to Exhibit 10.17 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.18 Letter Agreement dated January 7, 1993 between the Registrant and Robert S.
Trump (incorporated by reference to Exhibit 10.18 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.19 Warrant Agreement dated as of January 7, 1993 between the Registrant and Robert
S. Trump (incorporated by reference to Exhibit 10.19 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1993).
</TABLE>
31
<PAGE>
<TABLE>
<C> <S>
10.20 Subscription Agreement dated as of June 1, 1993 between the Registrant and
Henry T. Doherty (incorporated by reference to Exhibit 10.20 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.21 Subscription Agreement dated as of June 1, 1993 between the Registrant and Nick
Varsames (incorporated by reference to Exhibit 10.21 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.22 Letter Agreement dated September 1, 1993 between the Registrant and Robert S.
Trump (incorporated by reference to Exhibit 10.22 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.23 Warrant Agreement dated as of September 1, 1993 between the Registrant and
Robert S. Trump (incorporated by reference to Exhibit 10.23 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.24 Form of Subscription Agreement dated September 22, 1993 between the Registrant
and Henry T. Doherty (incorporated by reference to Exhibit 10.24 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1993).
10.25 Term Note in the principal amount of $112,397.27 executed by the Registrant in
favor of The Rebot Corporation (incorporated by reference to Exhibit 10.25 to
the Company's Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1993).
10.26 Form of Warrant dated as of September 30, 1993 between the Registrant and Rebot
Corporation (incorporated by reference to Exhibit 10.26 to the Company's Report
on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.27 Term Note in the principal amount of $38,418.40 executed by the Registrant in
favor of William F. Finley (incorporated by reference to Exhibit 10.27 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1993).
10.28 Form of Warrant dated as of September 30, 1993 between the Registrant and
William F. Finley (incorporated by reference to Exhibit 10.28 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.29 Letter Agreement dated September 30, 1993 between the Registrant and Paul M.
Diamond (incorporated by reference to Exhibit 10.29 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.30 Form of Warrant dated as of September 30, 1993 between the Registrant and Paul
M. Diamond (incorporated by reference to Exhibit 10.30 to the Company's Report
on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.31 Form of Warrant dated as of November 11, 1993 between the Registrant and Paul
M. Diamond (incorporated by reference to Exhibit 10.31 to the Company's Report
on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.32 Form of Warrant dated as of November 11, 1993 between the Registrant and
William F. Finley (incorporated by reference to Exhibit 10.32 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.33 Form of Warrant dated as of November 11, 1993 between the Registrant and Marvin
M. Reiss (incorporated by reference to Exhibit 10.33 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1993).
</TABLE>
32
<PAGE>
<TABLE>
<C> <S>
10.34 Form of Warrant dated as of November 11, 1993 between the Registrant and Alan
M. Swiedler (incorporated by reference to Exhibit 10.34 to the Company's Report
on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.35 Form of Warrant dated as of November 11, 1993 between the Registrant and Susan
M. Michaelson (incorporated by reference to Exhibit 10.35 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.36 Form of Warrant dated as of November 11, 1993 between the Registrant and
Leonard Gartner (incorporated by reference to Exhibit 10.36 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.37 Form of Warrant dated as of November 11, 1993 between the Registrant and Ted
Prince (incorporated by reference to Exhibit 10.37 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1993).
10.38 Form of Subscription Agreement dated November 17, 1993 between the Registrant
and Henry T. Doherty (incorporated by reference to Exhibit 10.38 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1993).
10.39 Form of Subscription Agreement dated February 28, 1994 between the Registrant
and Robert S. Trump (incorporated by reference to Exhibit 10.39 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1993).
10.40 Letter Agreement dated November 24, 1992 between the Registrant and Management
Technologies, Incorporated (incorporated by reference to Exhibit 10.40 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1993).
10.41 Agreement dated April 29, 1994 between the Registrant and New Paradigm Software
Corporation (incorporated by reference to the Registrant's Report on Form
10-QSB for the Quarter Ended March 31, 1994).
10.42 Occupancy Agreement dated October 10, 1994 between the Registrant and New
Paradigm Software Corp. (incorporated by reference to Exhibit 10.42 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1994).
10.43 Letter agreement dated October 10, 1994 between the Registrant and New Paradigm
Software Corp. (incorporated by reference to Exhibit 10.43 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1994).
10.44 Letter agreement dated August 10, 1994 between the Registrant and Management
Technologies, Inc. concerning the conversion of the MARS-TM- product to Windows
IBM (incorporated by reference to Exhibit 10.44 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30, 1994).
10.45 $150,000 Secured Promissory Note dated July 21, 1994 issued by the Registrant
in favor of Robert S. Trump (incorporated by reference to Exhibit 10.45 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1994).
10.46 Letter agreement dated July 21, 1994 between the Registrant and Robert S. Trump
concerning $125,000 Exchangeable Note dated January 7, 1993 (incorporated by
reference to Exhibit 10.46 to the Company's Report on Form 10-KSB for the
Company's fiscal year ended September 30, 1994).
10.47 $280,000 Secured Promissory Note dated October 17, 1994 issued by the
Registrant in favor of Robert S. Trump (incorporated by reference to Exhibit
10.47 to the Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
</TABLE>
33
<PAGE>
<TABLE>
<C> <S>
10.48 $150,000 Secured Promissory Note dated December 13, 1994 issued by the
Registrant in favor of Robert S. Trump (incorporated by reference to Exhibit
10.48 to the Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.49 $149,791.67 Amended and Restated Exchangeable Note dated January 1, 1995 issued
by the Registrant in favor of Robert S. Trump (incorporated by reference to
Exhibit 10.49 to the Company's Report on Form 10-KSB for the Company's fiscal
year ended September 30, 1994).
10.50 $156,708.37 Amended and Restated Secured Promissory Note dated January 1, 1995
issued by the Registrant in favor of Robert S. Trump (incorporated by reference
to Exhibit 10.50 to the Company's Report on Form 10-KSB for the Company's
fiscal year ended September 30, 1994).
10.51 $250,000 Secured Promissory Note dated January 11, 1995 issued by the
Registrant in favor of Robert S. Trump (incorporated by reference to Exhibit
10.51 to the Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1994).
10.52 Letter agreement dated December 29, 1994 between the Registrant and Robert S.
Trump (incorporated by reference to Exhibit 10.52 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1994).
10.53 Letter agreement dated January 13, 1995 between the Registrant and Robert S.
Trump (incorporated by reference to Exhibit 10.53 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1994).
10.54 Letter agreement dated January 13, 1995 between the Registrant and Robert S.
Trump (incorporated by reference to Exhibit 10.54 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1994).
10.55 Letter of Intent dated October 17, 1994 by and among the Registrant, Hillary
Kelbick and Susan Michaelson concerning Michaelson Kelbick Partners Inc. (then
known as FPC Consulting Corp.) (incorporated by reference to Exhibit 10.55 to
the Company's Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1994).
10.56 Managing Director's Agreement dated October 17, 1994 by and among Michaelson
Kelbick Partners Inc. (then known as FPC Consulting Corp.), Susan Michaelson
and the Registrant (incorporated by reference to Exhibit 10.56 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1994).
10.57 Managing Director's Agreement dated October 17, 1994 by and among Michaelson
Kelbick Partners Inc. (then known as FPC Consulting Corp.), Hillary Kelbick and
the Registrant (incorporated by reference to Exhibit 10.57 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended September 30, 1994).
10.58 Shareholders Agreement dated as of January 5, 1995 by and among the Registrant,
Aspen Capital Management Corp. (then known as FPC Funds Corp.), Richard J. Loos
and Sean P. Brennan (incorporated by reference to Exhibit 10.58 to the
Company's Report on Form 10-KSB for the Company's fiscal year ended September
30, 1994).
10.59 Executive Employment Agreement dated January 5, 1995 between Aspen Capital
Management Corp. (then known as FPC Funds Corp.), the Registrant and Richard J.
Loos (incorporated by reference to Exhibit 10.59 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1994).
</TABLE>
34
<PAGE>
<TABLE>
<C> <S>
10.60 Executive Employment Agreement dated January 5, 1995 between Aspen Capital
Management Corp. (then known as FPC Funds Corp.), the Registrant and Sean P.
Brennan (incorporated by reference to Exhibit 10.60 to the Company's Report on
Form 10-KSB for the Company's fiscal year ended September 30, 1994).
10.61 $250,000 Secured Promissory Note dated April 6, 1995 issued by the Registrant
in favor of Robert S. Trump (incorporated by reference to Exhibit 10.14 to
Report of Form 10-QSB for fiscal quarter ended March 31, 1995).
10.62 Letter agreement dated May 3, 1995 between the Registrant and New Paradigm
Software Corp. (incorporated by reference to Exhibit 10.15 to Report on Form
10-QSB for fiscal quarter ended March 31, 1995).
10.63 Agreement dated July 28, 1995 by and among the Company, Scott Rhodes, Scott
Rhodes d/ b/a "Metamorphic Computing", Scott Rhodes d/b/a "Metamorphic
Systems", Scott Rhodes d/b/a "MCC", Scott Rhodes d/b/a "Metamorphic Computing
Corp." and Metamorphic Computing Corp. (incorporated by reference to Exhibit
10.63 to Report on Form 10-KSB for fiscal year ended September 30, 1995).
10.64 Form of Warrant dated as of September 15, 1995 between the Registrant and
Robert S. Trump (incorporated by reference to Exhibit 10.64 to Report on Form
10-KSB for fiscal year ended September 30, 1995.
10.65 Form of Warrant dated as of September 15, 1995 between the Registrant and
William F. Finley (incorporated by reference to Exhibit 10.65 to Report on Form
10-KSB for fiscal year ended September 30, 1995).
10.66 Letter dated March 29, 1996 from Robert S. Trump regarding conversion of debt
into equity.
10.67 Letter dated June 20, 1996 from Robert S. Trump regarding conversion of debt
into equity.
10.68 General Form of Subscription Agreement used in private placements in 1996.
10.69 Form of Warrant Agreement for Warrants issued in September 1996.
10.70 Letter agreement dated November 12, 1996 with Robert S. Trump regarding
exercise of Restated Exchangeable Note dated January 1, 1995 and conversion of
debt into equity.
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule.
</TABLE>
35
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FINANCIAL PERFORMANCE CORPORATION
Dated: December 30, 1996
By: /s/ WILLIAM F. FINLEY
-----------------------------------------
William F. Finley
CHIEF EXECUTIVE OFFICER AND PRESIDENT
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ WILLIAM F. FINLEY Chief Executive Officer and December 30, 1996
- ------------------------------ President; (Principal
William F. Finley Executive Officer and
Principal Financial and
Accounting Officer)
/s/ RICHARD LEVY Secretary and Director December 30, 1996
- ------------------------------
Richard Levy
/s/ DUNCAN G. BURKE Vice President and Director December 30, 1996
- ------------------------------
Duncan G. Burke
/s/ PHILIP L. HAGE Director December 30, 1996
- ------------------------------
Philip L. Hage
36
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT ON FORM 10-KSB
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................................... F-2
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND 1995.......................... F-3
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
SEPTEMBER 30, 1996 AND 1995......................................................... F-4
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND
1995................................................................................ F-5
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND
1995................................................................................ F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Financial Performance Corporation and Subsidiaries
New York, New York
We have audited the accompanying consolidated balance sheet of Financial
Performance Corporation and Subsidiaries as of September 30, 1996 and 1995 and
the related consolidated statements of changes in stockholders' equity,
operations and cash flows for the years then ended. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Financial
Performance Corporation and Subsidiaries as of September 30, 1996 and 1995 and
the results of its consolidated operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Goldstein and Morris
New York, New York
December 12, 1996
F-2
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................................................... $ 1,972,056 $ 348,755
Accounts receivable............................................................... 902,516 227,387
Prepaid expenses and other current assets......................................... 57,340 37,298
------------- -------------
Total current assets.......................................................... 2,931,913 613,440
Computer equipment, net of accumulated depreciation of $46,193 and $20,736 (Note B
(6)).............................................................................. 111,852 69,400
Software development costs (Note B (3))............................................. 452,299 238,289
Goodwill (Note B (8))............................................................... 148,050 164,500
Security deposits................................................................... 116,318 --
------------- -------------
$ 3,760,431 $ 1,085,629
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (Note D)........................................ $ 7,520 $ 38,400
Short-term borrowings (Note C).................................................... 113,000 125,000
Accounts payable and accrued expenses............................................. 1,362,571 326,115
------------- -------------
Total current liabilities..................................................... 1,483,091 489,515
------------- -------------
Long-term debt, net of current maturities (Note D).................................. 168,095 1,290,994
------------- -------------
Minority interest in consolidated subsidiaries...................................... 256,046 155,046
------------- -------------
Stockholders' equity (capital deficiency) (Note K)
Common stock--authorized 50,000,000 shares of $.01 par value per share: issued and
outstanding 7,192,562 (including 258,500 shares to be issued) as of September
30, 1996 and 3,500,617 as of September 30, 1995................................. 71,926 35,006
Additional paid in capital........................................................ 7,043,986 4,142,732
Accumulated (deficit)............................................................. (5,262,713) (5,027,664)
------------- -------------
Total stockholders' equity (deficiency)....................................... 1,853,199 (849,926)
------------- -------------
$ 3,760,431 $ 1,085,629
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID IN
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
---------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE--SEPTEMBER 30, 1994................... 2,724,617 $ 27,246 $ 3,772,492 $ (4,226,368) $ (426,630)
Issuance of common shares on exercise of
warrants.................................... 620,000 6,200 303,800 -- 310,000
Sale of common shares......................... 56,000 560 27,440 -- 28,000
Issuance of common shares for compensation.... 100,000 1,000 39,000 -- 40,000
Net (loss) for year........................... -- -- -- (801,296) (801,296)
---------- ----------- ------------ ------------- ------------
Balance--SEPTEMBER 30, 1995................... 3,500,617 35,006 4,142,732 (5,027,664) (849,926)
Issuance of common shares in private
placement, net of costs..................... 879,500 8,795 691,992 -- 700,787
Issuance of common shares for compensation and
services.................................... 294,971 2,950 216,963 -- 219,913
Issuance of common shares on exercise of
warrants.................................... 1,000,000 10,000 490,000 -- 500,000
Issuance of common shares on conversion of
convertible note and short-term debt........ 1,517,474 15,175 1,502,299 -- 1,517,474
Net (loss) for year........................... -- -- -- (235,049) (235,049)
---------- ----------- ------------ ------------- ------------
BALANCE--SEPTEMBER 30, 1996................... 7,192,562 $ 71,926 $ 7,043,986 $ (5,262,713) $ 1,853,199
---------- ----------- ------------ ------------- ------------
---------- ----------- ------------ ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues.............................................................................. $ 8,784,137 $ 1,315,600
------------ ------------
Costs and expenses
Cost of revenues.................................................................... 7,271,114 816,115
Salaries and related expenses....................................................... 525,677 364,180
Selling, general and administrative................................................. 615,106 302,876
Legal fees.......................................................................... 94,012 117,327
------------ ------------
8,505,909 1,600,498
------------ ------------
Operating income (loss)......................................................... 278,228 (284,898)
------------ ------------
Other income (expense):
Interest income..................................................................... 13,081 4,589
Interest expense.................................................................... (89,424) (90,299)
Minority interest in income of consolidated subsidiaries............................ (101,000) (22,546)
Unusual item (Note H)............................................................... -- 122,502
------------ ------------
(177,343) 14,246
------------ ------------
Income (loss) from continuing operations before income taxes.......................... 100,885 (270,652)
Income taxes.......................................................................... 116,062 --
------------ ------------
Income (loss) from continuing operations........................................ (15,177) (270,652)
Loss from discontinued operations (Note N)............................................ (219,872) (530,644)
------------ ------------
Net income (loss)............................................................... $ (235,049) $ (801,296)
------------ ------------
------------ ------------
Net (loss) per share.................................................................. $ (.05) $ (.25)
------------ ------------
------------ ------------
Weighted average number of common and common equivalent shares outstanding............ 4,899,023 3,182,451
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows provided by operating activities:
Net (loss).......................................................................... $ (235,049) $ (801,296)
Adjustments to reconcile net (loss) to net cash used for operating activities:
Depreciation and amortization..................................................... 80,063 23,339
Minority interest in income of consolidated subsidiaries.......................... 101,000 22,546
Issuance of stock for compensation................................................ 91,309 8,000
Changes in operating assets and liabilities:
Increase in accounts receivable................................................. (675,129) (227,387)
Increase in prepaid expenses and other current assets........................... (20,042) (29,099)
Increase in deposits............................................................ (116,318) --
Increase in accounts payable.................................................... 1,036,456 123,714
------------ ------------
Net cash provided by (used for) operating activities.......................... 262,290 (880,183)
------------ ------------
Cash flows from investing activities:
Purchase of equipment............................................................... (67,909) (68,958)
Software development costs.......................................................... (252,167) (220,531)
------------ ------------
Net cash used for investing activities........................................ (320,076) (289,489)
------------ ------------
Cash flows from financing activities:
Repayments on notes payable to stockholders......................................... (37,174) (53,952)
Proceeds from sale of common shares and exercise of warrants, net of costs.......... 857,952 338,000
Proceeds from long-term borrowings.................................................. 72,309 1,009,700
Proceeds from short-term borrowings................................................. 788,000 125,000
------------ ------------
Net cash provided by financing activities..................................... 1,681,087 1,418,748
------------ ------------
Net increase in cash.................................................................. 1,623,301 249,076
Cash, beginning of year............................................................... 348,755 99,679
------------ ------------
Cash, end of year..................................................................... $ 1,972,056 $ 348,755
------------ ------------
------------ ------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.............................................. $ -- $ 6,185
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") currently markets computer
software and specialized consulting services to the financial services industry.
The Company was incorporated in New York on August 14, 1984. The Company ceased
operations from February 1990 through November 1992.
During the fiscal year ended September 30, 1995, the Company established
three eighty percent owned subsidiaries, Michaelson Kelbick Partners Inc.
("MKP"), Aspen Capital Management, LLC ("Aspen"), and FPC Information Corp.
("FPC Information").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized business and marketing services to the financial services
industry. (See Note B (1)).
Aspen was formed in January 1995 as an international sponsor of cash
management funds and planned to engage in the development, investment management
and administration of such funds. Aspen, which was in the development stage,
ceased operations in September 1996 (See Note N).
FPC Information was formed in November 1994 for the purpose of marketing the
Company's software products.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Financial
Performance Corporation and Subsidiaries (its three eighty percent owned
subsidiaries). The Company's investment in the subsidiaries is accounted for by
the equity method. All significant intercompany accounts and transactions have
been eliminated.
Condensed financial information of its eighty percent owned subsidiary, MKP
excluding intercompany eliminations, as of September 30, 1996 and 1995 and for
the years then ended, is as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Cash............................................................... $ 1,685,000 $ 301,000
Accounts receivable................................................ 903,000 227,000
Other assets....................................................... 14,000 --
Accounts payable................................................... 1,705,000 146,000
Revenues........................................................... 8,784,000 1,251,000
Operating costs.................................................... 8,178,000 1,138,000
Net income......................................................... 504,000 113,000
</TABLE>
Condensed financial information for the Company's other two eighty percent
subsidiaries, Aspen Capital Management, LLC and FPC Information Corp., have not
been separately disclosed. These entities had no revenues and their assets and
liabilities are immaterial.
Aspen, whose operations commenced in March 1995, suspended its operations in
September 1996 (See Note N). Aspen had no revenues and incurred losses of
$219,872 and $530,644 for the years ended September 30, 1996 and 1995,
respectively. FPC Information had no revenues and incurred losses of $428,245
and $190,885 for the years ended September 30, 1996 and 1995, respectively.
F-7
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(2) REVENUE RECOGNITION
Revenue from software products is recognized upon delivery to the customer,
provided that no significant vendor obligations remain, and collection of the
resulting receivable is deemed probable.
(3) SOFTWARE DEVELOPMENT COSTS AND AMORTIZATION
Costs associated with software development subsequent to the establishment
of technological feasibility, including enhancements to software products, are
capitalized and amortized as required by Statement of Financial Accounting
Standards No. 86. Costs incurred prior to achieving technological feasibility
are expensed as incurred and classified as research and development costs. There
were no research and development costs incurred for the years ended September
30, 1996 and 1995.
Amortization of capitalized software development costs is generally provided
on a product-by-product basis at the greater of the amount computed by using the
ratio that current gross revenue bears to the total current and anticipated
gross revenue of the product or on the straight-line method over the sixty-month
estimated useful life of the products commencing when the product is available
for general release to customers.
Software development costs are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Balance--beginning of year............................................ $ 238,289 $ 25,000
Additions............................................................. 252,166 220,531
Amortization.......................................................... (38,156) (7,242)
---------- ----------
Balance--end of year.................................................. $ 452,299 $ 238,289
---------- ----------
---------- ----------
</TABLE>
(4) INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is computed using the weighted average number
of common shares outstanding for each period adjusted for incremental shares
assumed issued for common stock equivalents using the treasury stock method,
provided that the effect is not antidilutive.
(5) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
(6) DEPRECIATION AND AMORTIZATION
Computer equipment is stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets.
(7) INCOME TAXES
Income taxes are computed in accordance with the provisions of Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
F-8
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At September 30, 1996, the Company had net operating loss carryforwards of
approximately $487,000, which would expire in 2011. Certain provisions of the
tax law may limit the net operating loss carryforwards available for use in any
given year in the event of a significant change in ownership interest. At
September 30, 1996, the Company had a deferred tax asset amounting to
approximately $195,000. The deferred tax asset consisted primarily of net
operating loss carryforwards and has been fully offset by a valuation allowance
of the same amount.
The income tax expense of $116,062 represents state and local income taxes
on the income of MKP.
(8) GOODWILL
The Company's goodwill arises from the establishment of MKP, which is
included in the Company's consolidated financial statements. Goodwill is
amortized over a ten-year period utilizing the straight-line method.
NOTE C--SHORT-TERM BORROWINGS
During the fiscal year ended September 30, 1996, $675,000 of short-term
financing was advanced to the Company by a principal shareholder. These advances
plus prior short-term borrowings which aggregated $125,000 at September 30, 1995
totaled $800,000. This aggregate amount ($800,000) was converted into 800,000
shares of the Company's common stock on March 29, 1996 and June 20, 1996.
Subsequent to the conversion, an additional $113,000 was advanced to the Company
by the same principal shareholder. In November 1996, the short-term debt of
$113,000 was converted into 113,000 shares of the Company's common stock. See
Note J regarding the conversion of the $113,000 short-term debt.
All the short-term borrowings were payable on demand with interest at eight
percent per annum.
F-9
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D--LONG-TERM DEBT
Long-term debt as of September 30, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ------------
<S> <C> <C>
Note payable, stockholders, matures on October 1, 1996 and requires monthly payments of
$3,575 including interest at 9% per annum............................................. $ 7,520 $ 44,694
Amended and restated secured convertible note payable to a principal shareholder,
matures on December 31, 1997 with accrued interest from January 1, 1995 at 8% per
annum, see note D (1) and (2)......................................................... 168,095 154,792
Amended and restated secured note payable to a principal shareholder, matures on
December 31, 1997 with accrued interest from January 1, 1995 at 8% per annum, see note
D (2)................................................................................. -- 162,708
Secured notes payable to a principal shareholder, matures on December 31, 1997 and bear
interest at 8% per annum, see note D (2).............................................. -- 967,200
---------- ------------
175,615 1,329,394
Less: current portion due within one year............................................... 7,520 38,400
---------- ------------
$ 168,095 $ 1,290,994
---------- ------------
---------- ------------
</TABLE>
- ------------------------
(1) The note is convertible at the option of the holder into 400,000 shares of
the Company's common stock.
(2) Until such time as the convertible note is paid, the Company is obligated to
cause an amount equal to 30% of the pre-tax income of all of the operating
income of the Company and its subsidiaries to be paid to the holder of the
note annually in arrears, on or before the 60th day following the end of the
Company's fiscal year commencing with the fiscal year ending September 30,
1995. Such payments are to be applied first to accrued interest with the
balance applied to principal. The note is secured by the Company's accounts
receivable, contract rights, patents, trademarks and any other rights in
computer software. In November 1996, the outstanding amount under this note
was converted into shares of the Company's common stock at a conversion rate
of $1.00 per share. Accordingly, the Company's obligations under the note
and the security interests granted as collateral therein are no longer in
effect. See Note J regarding the conversion of the convertible note.
F-10
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE E--SIGNIFICANT CUSTOMERS
For the year ended September 30, 1996, six customers of the Company's
subsidiary, MKP, accounted for 98% of the Company's consolidated revenues in the
following respective percentages:
<TABLE>
<S> <C>
Customer A............................................................. 5%
Customer B............................................................. 75%
Customer C............................................................. 4%
Customer D............................................................. 5%
Customer E............................................................. 5%
Customer F............................................................. 4%
--
98%
--
--
</TABLE>
The total accounts receivable from these customers at September 30, 1996
amounted to 92% of the total accounts receivable balance.
NOTE F--WARRANTS TO PURCHASE COMMON STOCK
At September 30, 1996, the Company had outstanding warrants as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
SHARES PRICE DATE
- ---------- ----------- ----------------------
<S> <C> <C>
380,000 $ .50 August 31, 1998
427,063 .50 September 30, 1998
200,000 .50 September 15, 2010
725,000 1.00 September 15, 2006
</TABLE>
During the year ended September 30, 1996, 1,000,000 warrants held by a
principal shareholder were converted into 1,000,000 shares of the Company's
common stock at an exercise price of $0.50 per share.
See Note J for further information concerning the issuance of warrants by
the Company during its 1997 fiscal year.
NOTE G--INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted a stock option plan. The plan provides
for the granting of options to purchase up to 140,000 shares of common stock to
key employees, officers and directors at an exercise price equal to fair market
value at the date of grant. The right to exercise options granted under the plan
commences one year from the date of the grant and such options are exercisable
in increments of 25% each year provided employment with the Company is
continuous.
Outstanding options granted pursuant to the stock option plan, as of
September 30, 1996, are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXERCISABLE AT
SHARES PRICE SEPTEMBER 30, 1996
- ----------- --------- -------------------
<S> <C> <C>
40,000 $ .4375 40,000
30,000 4.8125 30,000
</TABLE>
F-11
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H--UNUSUAL ITEM
Unusual item consists of the reversal of trade payables which were
outstanding for excess of six years.
NOTE I--PENSION AND PROFIT SHARING PLAN
In September 1996, the Company established a non-contributory pension and
profit sharing plan for the benefit of eligible full-time employees. The plan
provides for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes.
The Company contributed $90,000 to the plan for the year ended September 30,
1996.
NOTE J--SUBSEQUENT EVENTS
In November 1996, the remaining balance under the convertible note, $168,095
(principal and interest), and short-term debt of $113,000, was converted into
564,614 shares of the Company's common stock, at a conversion price of $1.00 per
share.
In November 1996, the Company entered into non-exclusive advisory agreements
with two investment banking firms. In consideration for advisory services to be
rendered, the Company issued three-year warrants to purchase 150,000 shares of
the Company's common stock to each of the investment banking firms, at an
exercise price of $.50 per share. In addition, the Company also granted
"piggyback" registration rights to such firms for the shares of common stock
underlying the warrants.
In November 1996, the Company issued warrants to four employees to purchase
an aggregate of 20,000 shares of common stock with an exercise price of $1.00
per share, which warrants are exercisable through September 16, 2006.
NOTE K--STOCKHOLDERS' EQUITY
In September 1996, the Company effectuated a one-for-five reverse stock
split of its common stock. All share and price per share information in the
consolidated financial statements and related notes have been adjusted to give
retroactive effect for this reverse stock split.
NOTE L--COMMITMENTS
The Company has commitments under non-cancelable operating leases for office
space and equipment, which expire on October 31, 2006 and September 30, 2000,
respectively. The office lease includes provisions requiring the Company to pay
a proportionate share of increases in real estate taxes and operating expenses
over base period amounts.
F-12
<PAGE>
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE L--COMMITMENTS (CONTINUED)
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
SEPTEMBER 30,
- --------------------------------------------------------------------------------
<S> <C>
1997............................................................................ $ 198,000
1998............................................................................ 292,000
1999............................................................................ 292,000
2000............................................................................ 292,000
2001............................................................................ 281,000
Thereafter...................................................................... 2,095,000
------------
$ 3,450,000
------------
------------
</TABLE>
NOTE M--EMPLOYMENT AGREEMENTS
The Company has entered into a five-year employment agreement with the
Company's Chairman of the Board, Chief Executive Officer, Chief Financial
Officer and President commencing September 1, 1995. At the conclusion of the
five-year term, the agreement provides for an automatic one year renewal,
subject to cancellation by prior notice. Under the agreement, Mr. Finley's
initial annual salary was $125,000, subject to increases determined by the Board
of Directors. Mr. Finley's current annual salary is $150,000. In the event Mr.
Finley's employment is terminated for any reason, he is entitled to receive all
accrued salary and vacation due through the date of termination plus a severance
payment of $100,000.
The Company's subsidiary, MKP, has entered into two three-year employment
agreements with the Managing Directors commencing October 18, 1994. At the
conclusion of the initial three-year term, the agreements provide for an
automatic one year renewal, subject to cancellation by prior notice. Under the
agreements, the initial annual salary to each Managing Director was $80,000.
Such agreements were amended to provide the Managing Directors with an annual
salary of $115,000. The employment agreements also provide for the establishment
of an annual compensation pool equal to a percentage, determined annually by the
Board of Directors (initiallly 30%), of the net income before taxes of MKP as if
MKP was not a member of the Company's consolidated group. If both MKP and a
Managing Director elect not to renew the agreement by June 1, 1997, the
individual will be entitled to receive a severance payment in the amount of
$30,000. The Company has issued these Managing Directors an aggregate of 200,000
and 20 shares of the Company's common stock and of MKP's common stock,
respectively.
NOTE N--DISCONTINUED OPERATIONS
Effective September 1996, the Company elected to suspend operations of
Aspen. Accordingly, Aspen, which was in the development stage, is reported as a
discontinued operation at September 30, 1996. The net assets and liabilities
relating to the disposal of the discontinued operation is immaterial. Aspen had
no revenues and incurred losses of $219,872 and $530,644 for the years ended
September 30, 1996 and 1995, respectively.
F-13
<PAGE>
Exhibit 3.3
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF
PERFORMANCE SERVICES GROUP, INC.
----------
Under Section 805 of the
Business Corporation Law
----------
- --------------------------------------------------------------------------------
BAUMGARTEN, SWIEDLER & WAXMAN
291 Broadway
New York, New York 10007
<PAGE>
Certificate of Amendment of the Certificate of Incorporation
of
PERFORMANCE SERVICES GROUP, INC.
Under Section 805 of the Business Corporation Law
----------
It is hereby certified that:
FIRST: The name of the Corporation is PERFORMANCE SERVICES GROUP, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on August 14, 1984.
THIRD: The amendments of the Certificate of Incorporation of the
Corporation effected by this Certificate of Amendment are as follows:
1. To change the name of the Corporation.
2. To change 100,000 authorized Common Shares of the Corporation, each
with a par value of $.10, all of which are issued, into 3,122,000
issued Common Shares, each with a par value of $.05, the
terms of the change being at the rate of 31.22 issued
Common Shares of a par value of $.05 each for 1 issued Common Share of
a par value of $.10; and to change 100,000 authorized Common Shares of
a par value of $.10 each, none of which are issued, into 46,878,000
unissued Common Shares of a par value of $.05 each, the
terms of change being at the rate of 468.78 unissued Common
Shares of a par value of $.05 each for 1 unissued Common Share of a
par value of $.10.
<PAGE>
FOURTH: To accomplish the foregoing amendments, Articles "FIRST" and
"FOURTH" of the Certificate of Incorporation of the Corporation, respectively,
relating to the name of the Corporation, respectively, relating to the name of
the Corporation and to the aggregate number of shares which the Corporation is
authorized to issue, the par value thereof and the classes into which the shares
are divided, are hereby amended to read as follows:
FIRST: The name of the Corporation is FINANCIAL PERFORMANCE
CORPORATION
FOURTH: The aggregate number of shares which the Corporation shall
have authority to issue is Fifty Million (50,000,000) shares which
shall have a par value of $.05 and shall be designated as Common
Shares.
FIFTH: The foregoing amendments of the Certificate of Incorporation of
the Corporation were duly authorized by the vote at a meeting the Board of
Directors of the Corporation, followed by the vote, at a meeting of
shareholders, of the holders of at least a majority of all of the outstanding
shares of the Corporation entitled to vote on the said amendments of the
Certificate of Incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and correct.
Date: July 1, 1986
/s/ William F. Finley
-----------------------------
William F. Finley
Chairman of the Board
and President
/s/ Mark S. Pfeifer
-----------------------------
Mark S. Pfeifer
Secretary and
Executive Vice President
<PAGE>
Exhibit 3.4
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF
FINANCIAL PERFORMANCE CORPORATION
----------
Under Section 805 of the
Business Corporation Law
----------
- --------------------------------------------------------------------------------
BAUMGARTEN & SWIEDLER
Attorneys-at-Law
6 East 43rd Street
New York, NY 10017-4609
<PAGE>
Certificate of Amendment of the Certificate of Incorporation
of
FINANCIAL PERFORMANCE CORPORATION
Under Section 805 of the Business Corporation Law
----------
It is hereby certified that:
FIRST: The name of the Corporation is FINANCIAL PERFORMANCE
CORPORATION
SECOND: The Certificate of Incorporation of the Corporation was filed
by the Department of State on August 14, 1984. The Certificate of Incorporation
of the Corporation has heretofore been amended by Certificates of Amendment
filed on August 31, 1984 and July 24, 1986, respectively. The original
certificate was filed under the original name of: PERFORMANCE SERVICES GROUP,
INC.
THIRD: The amendments of the Certificate of Incorporation of the
Corporation effected by this Certificate of Amendment are as follows:
1. To change the post-office address to which the Secretary of State
shall mail a copy of any process against the Corporation served upon
the office of the Secretary of State.
2. To add a provision to the Certificate of Incorporation eliminating
the personal liability of directors to the Corporation or its
shareholders for damages for any breach of duty in such a capacity to
the extent permitted by law.
FOURTH: To accomplish the foregoing amendments, Article "FIFTH" of the
Certificate of Incorporation of the Corporation, as amended, relating to the
post-office address to which the Secretary of State shall mail a copy of any
process against the Corporation served upon the Office of the Secretary of
State, is hereby amended to read as follows:
FIFTH: The Secretary of State is designated as the agent of the
Corporation upon whom process against the Corporation may be served.
The post-office address within the State of New York to which the
Secretary of State shall mail a copy of any process against the
Corporation served upon him is: c/o Baumgarten & Swiedler, Esqs., 6
East 43rd Street, New York, NY 10017-4609
<PAGE>
To further accomplish the foregoing amendments, a new Article "TENTH"
is hereby added to the Certificate of Incorporation of the Corporation relating
to the elimination of the personal liability of directors to the Corporation or
its shareholders for damages for any breach of duty in such capacity, as
follows:
TENTH: Except as may otherwise be specifically provided in this
certificate of incorporation, the personal liability of the directors
of the Corporation to the Corporation or its shareholders for damages
for any breach of duty in such capacity is hereby eliminated to the
fullest extent permitted by the provisions of Section 402(b) of the
Business Corporation law, as the same may be amended and supplemented.
FIFTH: The foregoing amendments of the Certificate of Incorporation of
the Corporation were duly authorized by unanimous vote at a meeting the Board of
Directors of the Corporation, followed by the vote, at a meeting of shareholders
of the Corporation, of the holders of at least a majority of all of the
outstanding shares of the Corporation entitled to vote on the said amendments to
the Certificate of Incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and correct.
Date: March 14, 1988
/s/ William F. Finley
------------------------
William F. Finley
Chairman of the Board
and President
/s/ Alan M. Swiedler
------------------------
Alan M. Swiedler
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FINANCIAL PERFORMANCE CORPORATION
------------------------------------
Under Section 805 of the
Business Corporation Law
------------------------------------
It is hereby certified that:
FIRST: The name of the corporation is Financial Performance Corporation.
SECOND: The Certificate of Incorporation of the corporation was filed by
the Department of State on August 14, 1984. The Certificate of Incorporation of
the corporation has heretofore been amended by Certificates of Amendment filed
on August 31, 1984, July 24, 1986 and April 11, 1988, respectively. The original
Certificate of Incorporation was filed under the name of Performance Services
Group, Inc.
THIRD: The amendments of the Certificate of Incorporation of the
corporation effected by this Certificate of Amendment are as follows:
1. To change the number of shares which the corporation has the authority
to issue from Fifty Million (50,000,000) shares of one class of Common Stock,
with a par value of $.05 per share, to Sixty Million (60,000,000) shares, which
are divided into two classes as follows:
Ten Million (10,000,000) shares of Preferred Stock with a par
value of $.01 per share; and
Fifty Million (50,000,000) shares of Common Stock with a par value
of $.01 per share.
This amendment to the Certificate of Incorporation of the corporation provides
for a change of in the aggregate number of shares the corporation has the
authority to issue. The corporation is currently authorized to issue Fifty
Million (50,000,000) shares of common stock with a par value of .05 per share.
Of the currently authorized Fifty Million (50,000,000) shares, Thirty Four
Million Six Hundred Eleven Thousand Two Hundred Sixty-One (34,611,261)shares are
issued and Fifteen Million Three Hundred Eighty-Eight Thousand Seven Hundred
Thirty-Nine (15,388,739) shares are unissued. The Thirty Four Million Six
Hundred Eleven Thousand Two Hundred Sixty-One (34,611,261) issued shares will be
changed into Six Million Nine Hundred Twenty-Two Thousand Two Hundred Fifty-Two
(6,922,252) shares of common stock with a par value of $0.01 per share at a rate
of one-fifth (1/5) new share for every one (1) old share. The Fifteen Million
Three Hundred Eighty-Eight Thousand Seven Hundred Thirty-
<PAGE>
Nine (15,388,739) unissued shares will be changed into Three Million
Seventy-Seven Thousand Seven Hundred Forty Eight (3,077,748) shares of common
stock with a par value of $0.01 per share at a rate of one-fifth (1/5) new share
for every one (1) old share. In addition, this amendment creates an additional
Forty Million (40,000,000) authorized and unissued shares of common stock,
resulting in an aggregate of Fifty Million (50,000,000) authorized shares of
common stock of the corporation.
The corporation will also create a new class of stock which will consist of ten
million (10,000,000) shares of preferred stock with a par value of $0.01 per
share.
This amendment to the certificate of incorporation of the corporation reduces
the stated capital of the corporation by (i) reducing the par value of the
issued common shares of the corporation from $0.05 per share to $0.01 per share
and (ii) reducing the number of issued shares of the corporation from Thirty
Four Million Six Hundred Eleven Thousand Two Hundred Sixty-One (34,611,261) to
Six Million Nine Hundred Twenty-Two Thousand Two Hundred Fifty-Two (6,922,252).
The stated capital is thereby reduced from One Million Seven Hundred Thirty
Thousand Five Hundred Sixty-Three and 52/100 ($1,730,563.52) Dollars to Sixty
Nine Thousand Two Hundred Twenty-Two and 52/100 ($69,222.52) Dollars, which
amount represents the aggregate reduction in par value of the issued common
shares and the aggregate reduction in the number of issued common shares
affected by this amendment, and which amount is transferred from stated capital
to capital surplus.
2. To provide for the power of the shareholders or the board of directors
of the corporation to fix, increase or decrease the number of directors
constituting entire board or to remove a director and to provide for the power
of the board of directors of the corporation to fill vacancies occurring in the
board for any reason.
FOURTH: To accomplish the foregoing amendments, Article "THIRD" of the
Certificate of Incorporation is hereby deleted in its entirety and a new Article
"THIRD" is hereby added to read as follows:
"THIRD: The aggregate number of shares of all classes of capital
stock which the Company has the authority to issue is Sixty Million
(60,000,000), which is divided into two classes as follows:
Ten Million (10,000,000) shares of Preferred Stock ("Preferred
Stock") with a par value of $0.01 per share, and
Fifty Million (50,000,000) shares of Common Stock ("Common Stock")
with a par value of $0.01 per share.
<PAGE>
I. Preferred Stock
(1) Issuance in Series.
Shares of Preferred Stock may be issued in one or more series at such time
or times, and for such consideration or considerations as the Board of Directors
may determine. All shares of any one series of Preferred Stock will be identical
with each other in all respects, except that shares of one series issued at
different times may differ as to dates from which dividends thereon may be
cumulative. All series will rank equally and be identical in all respects,
except as permitted by the following provisions of paragraph 2 of this Division
I.
(2) Authority of the Board with Respect to Series.
The Board of Directors is authorized, at any time and from time to time, to
provide for the issuance of the shares of Preferred Stock in one or more series
with such designations, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions thereof as
are stated and expressed in the resolution or resolutions providing for the
issue thereof adopted by the Board of Directors, and as are not stated and
expressed in this Certificate of Incorporation or any amendment hereto
including, but not limited to, determination of any of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate or rates on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, the
payment date or dates for dividends and the relative rights of priority, if
any, of payment of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in addition to
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(v) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or
date upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different dates;
(vi) Whether that series shall have a sinking or retirement fund for
the redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking or retirement fund;
(vii) The rights of the shares of the series in the event of voluntary
or involuntary
<PAGE>
liquidation, dissolution or winding up of the Company, and the relative
rights of priority, if any, of payment of shares of that series;
(viii) Any other preferences, privileges and powers, and relative
participating, optional or other special rights, and qualifications,
limitations or restrictions of a series, as the Board of Directors may deem
advisable and which are not inconsistent with the provisions of this
Certificate of Incorporation.
(3) Dividends.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment in accordance with their respective
preferential and relative rights before any dividends shall be paid or declared
and set apart for payment on the outstanding shares of Common Stock with respect
to the same dividend period.
(4) Liquidation.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of the Company, the assets available for distribution to holders of shares of
Preferred Stock of all series shall be insufficient to pay such holders the full
preferential amount to which they are entitled, then such assets shall be
distributed ratably among the shares of all series of Preferred Stock in
accordance with the respective preferential and relative amounts (including
unpaid cumulative dividends, if any) payable with respect thereto.
(5) Reacquired Shares.
Shares of Preferred Stock which have been issued and reacquired in any
manner by the Company (excluding, until the Company elects to retire them,
shares which are held as treasury shares but including shares redeemed, shares
purchased and retired, and shares which have been converted into shares of
Common Stock) will have the status of authorized and unissued shares of
Preferred Stock and may be reissued.
(6) Voting Rights.
Unless and except to the extent otherwise required by law or provided in
the resolution or resolutions of the Board of Directors creating any series of
Preferred Stock pursuant to this Division I, the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever. In no event
shall the Preferred Stock be entitled to more than one vote in respect of each
share of stock except as may be required by law or by this Certificate of
Incorporation.
<PAGE>
II. Common Stock
(1) Dividends.
Subject to the preferential rights of the Preferred Stock, the holders of
the Common Stock are entitled to receive, to the extent permitted by law, such
dividends as may be declared from time to time by the Board of Directors.
(2) Liquidation.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the Company, after distribution in full
of the preferential amounts, if any, to be distributed to the holders of shares
of Preferred Stock, holders of Common Stock shall be entitled to receive all of
the remaining assets of the Company of whatever kind available for distribution
to stockholders ratably in proportion to the number of shares of Common Stock
held by them respectively. The Board of Directors may distribute in kind to the
holders of Common Stock such remaining assets of the Company or may sell,
transfer or otherwise dispose of all or any part of such remaining assets to any
other corporation, trust or other entity and receive payment therefor in cash,
stock or obligations of such other corporation, trust or other entity, or any
combination thereof, and may sell all or any part of the consideration so
received and distribute any balance thereof in kind to holders of Common Stock.
The merger or consolidation of the Company into or with any other corporation,
or the merger of any other corporation into it, or any purchase or redemption of
shares of stock of the Company of any class, shall not be deemed to be a
dissolution, liquidation or winding up of the Company for the purposes of this
paragraph.
(3) Voting Rights.
Except as may be otherwise required by law or this Certificate of
Incorporation, each holder of one (1) share of Common Stock has one vote in
respect of each share of stock held by him of record on the books of the Company
on all matters voted upon by the stockholders."
and a new Article "TENTH" is hereby added to read as follows:
"TENTH
(a) The number of directors constituting the entire Board of
Directors may be fixed, increased or decreased by amendment of
the Company's by-laws, or by action of the shareholders, or by
a vote of the majority of the entire Board of Directors.
(b) Any or all of the directors may be removed with or without
cause by vote of the shareholders. Any or all of the directors
may be removed for cause by action of the Board of Directors.
<PAGE>
(c) The Board of Directors may fill vacancies occurring in the
Board of Directors for any reason, including by reason of the
increase in the number of members constituting the entire
Board of Directors by a vote of the majority of the entire
Board of Directors and by reason of the removal of directors
with or without cause."
FIFTH: The foregoing amendments of the certificate of incorporation of the
corporation were authorized by vote of the Board of Directors, followed by vote
of a majority of all shareholders.
IN WITNESS WHEREOF, the undersigned have made and signed this Certificate this
13th day of September, 1996 and the undersigned affirm the statements contained
herein as true under penalties of perjury.
/s/ William F. Finley
----------------------------------
William F. Finley, President
/s/ Richard Levy
----------------------------------
Richard Levy, Secretary
<PAGE>
PROVISION OF THE BY-LAWS OF
FINANCIAL PERFORMANCE CORPORATION REGARDING
INDEMNIFICATION OF DIRECTORS AND OFFICERS
ARTICLE IX
Indemnification
Section 1. Nonexclusivity. The indemnification and advancement of expenses
granted pursuant to, or provided by, this Article shall not be deemed exclusive
of any other rights to which a director or officer seeking indemnification may
be entitled, including such rights to indemnification as may be authorized by
(a) a resolution of the shareholders of the Corporation, (b) a resolution of the
Board of Directors, or (c) an agreement providing for such indemnification,
provided that no indemnification may be made to or on behalf of any director or
officer if a judgment or other final adjudication adverse to the director or
officer establishes that such director's or officer's acts were committed in bad
faith or were the result of active and deliberate dishonesty and were material
to the cause of action so adjudicated, or that such director or officer
personally gained in fact a financial profit or other advantage to which such
director or officer was not legally entitled. Nothing contained in this Article
shall affect any rights to indemnification to which corporate personnel other
than directors and officers may be entitled by contract or otherwise under law.
Section 2. Indemnification of Directors and Officers.
(a) The Corporation shall indemnify any person made, or threatened to be
made, a party to an action or proceeding (other than one by or in the right of
the Corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee,
benefit plan or other enterprise, which any director or officer of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that such director or officer, or such director's or officer's
testator in intestate, was a director or officer of the Corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, amounts paid in
settlement and
<PAGE>
reasonable expenses, including attorneys' fees actually and necessarily incurred
as a result of such action or proceeding, or any appeal therein, if such
director or officer acted, in good faith, for a purpose which such director or
officer reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the Corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that such director's or officer's conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which such director or officer
did not act, in good faith, for a purpose which such director or officer
reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the Corporation or that
such director or officer had reasonable cause to believe that such director's or
officer's conduct was unlawful.
(c) The Corporation shall indemnify any person made, or threatened to be
made, a party to an action by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person, or such person's
testator or intestate, is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of any
other corporation of any type or kind, domestic or foreign, of any partnership,
joint venture, trust, employee benefit plan or other enterprise, against amounts
paid in settlement and reasonable expenses, including attorneys' fees, actually
and necessarily incurred by such person in connection with the defense or
settlement of such action, or in connection with an appeal therein if such
director or officer acted, in good faith, for a purpose which such director or
officer reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the Corporation, except
that no indemnification under this paragraph shall be made in respect of (i) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (ii) any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation, unless and only to the extent that the
court in which the action was brought, or, if no action was brought, any court
of competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
2
<PAGE>
(d) For the purpose of this Section, the Corporation shall be deemed to
have requested a person to serve an employee benefit plan where the performance
by such person of his or her duties to the Corporation also imposes duties on,
or otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines; and
action taken or omitted by a person with respect to an employee benefit plan in
the performance of such person's duties for a purpose reasonably believed by
such person to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to the best
interests of the Corporation.
Section 3. Payment of Indemnification.
(a) A person who has been successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in Section 2 of this Article shall be entitled to indemnification as
authorized in such Section.
(b) Except as provided in paragraph (a) of this Section, any
indemnification under Section 2 of this Article or otherwise permitted by
Section 1 of this Article, unless ordered by a court under the applicable
provisions of the Business Corporation Law, shall be made by the Corporation,
only if authorized in the specific case:
(i) By the Board of Directors acting by a quorum consisting of
directors who are not parties to such action or proceeding upon a finding
that the director or officer has met the standard of conduct set forth in
Section 2 of this Article or established pursuant to Section 1 of this
Article, as the case may be; or
(ii) If a quorum under subparagraph (i) is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs:
(A) By the Board of Directors upon the opinion in writing of
independent legal counsel that the indemnification is proper in the
circumstances because all applicable standard of conduct set forth in
such Sections has been met by such director or officer, or
(B) By the shareholders of the Corporation upon a finding that
the director or officer has met the applicable standard of conduct set
forth in such Sections.
3
<PAGE>
(c) Expenses incurred in defending a civil or criminal action or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount, and to the extent, required by
paragraph (a) of Section 4 of this Article.
Section 4. Other Provisions Affecting Indemnification
of Directors and Officers.
(a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the Corporation under paragraph (c) of Section
3 of this Article shall be repaid in case the person receiving such advancement
or allowance is ultimately found, under the procedure set forth in this Article,
not to be entitled indemnification or, where indemnification is granted, to the
extent the expenses so advanced by the Corporation exceed the indemnification to
which such person is entitled.
(b) No indemnification, advancement or allowance shall be made under
this Article in any circumstance where it appears:
(i) That the indemnification would be inconsistent with a provision of
the Certificate of Incorporation of the Corporation, these By-Laws, a
resolution of the Board of Directors or of the shareholders, an agreement
or other proper corporate action, in effect at the time of the accrual of
the alleged cause of action asserted in the threatened or pending action or
proceeding in which the expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or
4
<PAGE>
(ii) If there has been a settlement approved by a court, that the
indemnification would be inconsistent with any condition with respect to
indemnification expressly imposed by the court in approving the settlement.
(c) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the shareholders,
the Corporation shall, not later than the next annual meeting of shareholders
unless such meeting is held within three (3) months from the date of such
payment, and, in any event, within fifteen (15) months from the date of such
payment, mail to its shareholders of record at the time entitled to vote for the
election of directors a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
(d) If any action with respect to indemnification of directors and
officers is taken by way of amendment of these ByLaws, resolution of the Board
of Directors, or by agreement, then the Corporation shall, not later than the
next annual meeting of shareholders, unless such meeting is held within three
(3) months from the date of such action, and, in any event, within fifteen (15)
months from the date of such action, mail to its shareholders of record at the
time entitled to vote for the election of directors a statement specifying the
action taken.
Section 5. Insurance for Indemnification of Directors and Officers.
(a) Subject to paragraph (b) of this Section, the Corporation shall
have power to purchase and maintain insurance:
(i) To indemnify the Corporation for any obligation which it incurs as
a result of the indemnification of directors and officers under the
provisions of this Article; and
(ii) To indemnify directors and officers in instances in which they
may be indemnified by the Corporation under the provisions of this Article;
and
(iii) To indemnify directors and offices in instances in which they
may not otherwise be indemnified by the Corporation under the provisions of
this Article provided the contract of insurance covering such directors
5
<PAGE>
and officers provides, in a manner acceptable to the New York State
Superintendent of Insurance, for a retention amount and for co-insurance.
(b) No insurance under paragraph (a) of this Section may provide for
any payment, other than cost of defense, to or on behalf of any director or
officer:
(i) if a judgment or other final adjudication adverse to the insured
director or officer establishes that his or her acts of active and
deliberate dishonesty were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled; or
(ii) in relation to any risk the insurance of which is prohibited
under the Insurance Law of the State of New York.
(c) Insurance under any or all subparagraphs of paragraph (a) of this
Section may be included in a single contract or supplement thereto.
Retrospective rated contracts are prohibited.
(d) The Corporation shall, within the time and to the persons provided
in paragraph (c) of Section 4 of this Article, mail a statement in respect of
any insurance it has purchased or renewed under this Section, specifying the
insurance carrier, date of the contract, cost of the insurance, corporate
positions insured, and a statement to shareholders, paid under any
indemnification insurance contract.
6
<PAGE>
FINANCIAL PERFORMANCE CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
COMMON STOCK
CUSIP 317630 30
SEE REVERSE FOR
CERTAIN DESIGNEE
THIS
CERTIFIES
THAT
to the
order of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK
OF THE PAR VALUE OF $.01 EACH OF
=======================FINANCIAL PERFORMANCE CORPORATION========================
CERTIFICATE OF STOCK
transferable on the books of the Corporation by the Holder thereof in person or
by duly authorized attorney upon surrender of the Certificate properly endorsed.
This Certificate and the shares represented hereby are issued and shall be
subject to all the provisions of the Certificate of Incorporation of the
Corporation, as now or hereinafter amended, to all of which the holder hereof by
acceptance hereof assents. This Certificate is not valid unless countersigned by
the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its authorized officers.
Dated:
FINANCIAL /s/ Richard Levy /s/ William F. Finley
PERFORMANCE SECRETARY PRESIDENT
CORPORATION
CORPORATE
SEAL
1984
NEW YORK
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
STTEN -- as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- __________ Custodians __________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_____________________
(Name)
Additional abbreviations may also be used though not in the above list.
For value received, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OR ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _______________________
____________________________________________________________
NOTICE: The signature to the assignee must correspond with
the name as written upon the area of the certificate in
every particular without alteration or arrangement or any
change whatever. The signature of the person executing this
power must be guaranteed by an Eligible Guarantor named such
by a Commercial Bank, Trust Company, Securities
Broker/Dealer, Credit Union, or a Service Association
participating in a Medallion program approved by the
Securities Transfer Association, Inc.
<PAGE>
Exhibit 10.66
Mr. Robert S. Trump
2611 West 2nd Street
Brooklyn, New York 11223
March 29, 1996
Financial Performance Corporation
335 Madison Avenue, 11th Floor
New York, New York 10016
Attention: Mr. William F. Finley
President
Re: Financial Performance Corporation (the "Company")
Dear Bill:
Please be advised that I have elected to exercise warrants to purchase
5,000,000 shares of the Company's common stock at an exercise price of $0.10 per
share pursuant to the terms of the warrants issued to me on September 15, 1995.
Further, this letter shall confirm that I have agreed with the Company
to convert $1,000,000 of Company indebtedness held by me into an aggregate of
5,000,000 shares of the Company's common stock at a conversion price of $0.20
per share.
With regard to such conversion, it is understood and agreed that if,
at any future date(s), the Company shall issue post-reverse split shares of
common stock to any other party for a price of less than $0.20 per share, I
shall thereupon be issued such number of additional shares of the Company's
common stock without payment of any additional consideration so that the
effective conversion rate for al shares of the Company's common stock issued to
me resulting from the conversion of debt to equity is equal to the lowest
per-share price at which the Company's common stock is hereafter issued to any
other party.
Thank you for your kind attention to these matters.
Sincerely,
/s/ Robert S. Trump
Robert S. Trump
Confirmed and Agreed To:
Financial Performance Corporation
By: /s/ William F. Finley
----------------------------------
William F. Finley, President
<PAGE>
Exhibit 10.67
Mr. Robert S. Trump
2611 West 2nd Street
Brooklyn, New York 11223
June 20, 1996
Financial Performance Corporation
335 Madison Avenue, 11th Floor
New York, New York 10016
Attention: Mr. William F. Finley
President
Re: Financial Performance Corporation (the "Company")
Dear Bill:
This letter shall confirm that I have agreed with the Company to
convert the indebtedness of the Company held by me in the amount of $517,474
into an aggregate of 2,587,370 shares of the Company's common stock at a
conversion price of $0.20 per share.
With regard to such conversion, as well as the prior conversion of
other indebtedness of the Company held by me in March 1996, it is understood and
agreed that if, at any future date(s), the Company shall issue post-reverse
split shares of common stock to any other party for a price of less than $1.00
per share, I shall thereupon be issued such number of additional shares of the
Company's common stock without payment of any additional consideration so that
the effective conversion rate for al shares of the Company's common stock issued
to me resulting from the conversion of debt to equity is equal to the lowest
per-share price at which the Company's common stock is hereafter issued to any
other party.
Thank you for your kind attention to these matters.
Sincerely,
/s/ Robert S. Trump
Robert S. Trump
Confirmed and Agreed To:
Financial Performance Corporation
By: /s/ William F. Finley
------------------------------
William F. Finley, President
<PAGE>
- FORM -
SUBSCRIPTION AGREEMENT
FINANCIAL PERFORMANCE CORPORATION
Re: Subscription Agreement for _____
______ Shares of Common Stock,
par value $0.05 per share
A. The undersigned hereby subscribes for and agrees to purchase
________ shares of Common Stock, par value $0.05 per share, (the "Shares" or
the "Securities") set forth above, of Financial Performance Corporation, a
corporation organized and existing under the laws of the State of New York
(the "Company"). The undersigned agrees to pay the Company
_____________________ Dollars ($__________) per Share for each Share
purchased. The undersigned herewith tenders to the Company the entire amount
of such purchase price in the aggregate amount of __________________
_______________ ($______________) Dollars, by wire transfer or by certified
or official bank check made payable to the direct order of "Financial
Performance Corporation."
B. The undersigned acknowledges that the Shares are not registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state and, absent an exemption, would require
registration for resale. The Units are being offered for sale in reliance
upon exemptions from registration contained in the Securities Act and
applicable state laws, and the Company's reliance upon such exemptions is
based in part upon the undersigned's representations and warranties contained
in this Subscription Agreement.
C. In order to induce the Company to accept this Subscription Agreement,
the undersigned represents and warrants to the Company and its employees,
agents, attorneys and representatives, as follows:
(1) The undersigned understands that (i) the Company makes no
representation that the proceeds from the sale of Shares will be sufficient for
working capital for any particular period, (ii) this Subscription Agreement may
be accepted or rejected in whole or in part in the sole and absolute discretion
of the Company and (iii) this Subscription Agreement, unless properly revoked
before closing of a sale of the Shares to the undersigned, shall survive the
undersigned's death, disability or insolvency, except that the undersigned shall
have no obligations hereunder in the
<PAGE>
event that it is rejected by the Company.
(2) The undersigned has read carefully this Subscription Agreement
and, to the extent believed necessary, has discussed the representations,
warranties and agreements which the undersigned makes by signing it, and the
applicable limitations upon the undersigned's resale of the Securities, with
counsel.
(3) The undersigned understands that no federal or state agency has
made any finding or determination regarding the fairness of the offering of the
Securities, or any recommendation or endorsement of the Securities.
(4) The undersigned is purchasing the Securities for the undersigned's
own account, with the intention of holding the Securities for investment, with
no present intention of dividing or allowing others to participate in this
investment or of reselling or otherwise participating, directly or indirectly,
in a distribution of the Securities; and shall not make any sale, transfer or
other disposition of the Securities without registration under the Securities
Act and any applicable securities laws of any state, unless an exemption from
registration is available under those laws.
(5) The undersigned's overall commitment to investments which are not
readily marketable is not disproportionate to the undersigned's net worth, and
the undersigned's investment in the Securities will not exceed 10% of the
undersigned's net worth or cause such overall commitment to become excessive.
(6) The undersigned, if an individual, has adequate means of providing
for his or her current needs and personal and family contingencies, and has no
need for liquidity in his or her investment in the Securities.
(7) The undersigned is financially able to bear the economic risk of
this investment, including the ability to afford holding the Securities for an
indefinite period and to afford a complete loss of this investment.
(8) The address shown under the undersigned's signature at the end of
this Subscription Agreement is the undersigned's principal residence, if he or
she is an individual, or its principal business address if a corporation or
other entity.
(9) The undersigned has such knowledge and experience in financial and
business matters as to be capable of evaluating the
2
<PAGE>
merits and risks of an investment in the Securities.
(10) The undersigned has received and read and understands this
Subscription Agreement.
(11) The undersigned has been given the opportunity to ask questions
of, and receive answers from, the Company concerning the terms and conditions of
the offering and to obtain additional information necessary to verify the
accuracy of the information the undersigned has received from the Company, or
such other information as the undersigned desired in order to evaluate the
investment; and the undersigned availed itself of such opportunity to the extent
considered appropriate in order to evaluate the merits and risks of the proposed
investment.
(12) The undersigned has made an independent evaluation of the merits
of the investment and acknowledges the high risk nature of the investment.
(13) The undersigned has accurately completed the Qualified Purchaser
Questionnaire provided herewith and has executed such Qualified Purchaser
Questionnaire and any applicable exhibits thereto.
(14) The undersigned understands that: (i) the Company is a "reporting
company" under the Securities Exchange Act of 1934, as amended; (ii) the
provisions of Rule 144 promulgated under the Securities Act to permit resales of
the Securities are not available for at least two (2) years, and there can be no
assurance that the conditions necessary to permit routine sales of the
Securities under Rule 144 will be satisfied; and (iii) if Rule 144 is available,
routine sales made in reliance on its provisions can be made only in limited
amounts and in accordance with the terms and conditions of Rule 144. The
undersigned further understands that in connection with sales of Securities for
which Rule 144 is not available, compliance with some other registration
exemption or registration will be required.
(15) The undersigned understands that the Company has no obligation
to register the Securities under the Securities Act or the securities laws of
any state, except pursuant to the terms of the registration rights, if any,
granted to the undersigned pursuant to this Subscription Agreement.
3
<PAGE>
The terms of such registration rights, if any, are set forth in Annex A to
this Subscription Agreement, and are specifically incorporated herein by
reference.
(16) (a) The undersigned understands that the Securities have not been
registered under the Securities Act, or any state securities laws in reliance on
exemptions for private offerings; the Securities cannot be resold or otherwise
disposed of unless they are subsequently registered under the Securities Act and
applicable state securities laws or an exemption from registration is available
and the certificate(s) representing the securities will bear the following
legend until (i) such Securities shall have been registered under the Securities
Act and properly disposed of in accordance with the related registration
statement; or (ii) in the opinion of counsel satisfactory to the Company and its
counsel such Securities may be sold without registration under the Securities
Act:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT") OR THE "BLUE SKY" OR SECURITIES LAWS OR ANY STATE
AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO
THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT THE PROPOSED DISPOSITION IS CONSISTENT
WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT, AS WELL AS ANY
APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAW."
(b) The undersigned understands that, in the absence of registration
by the Company of other Company securities, the Securities will not be, and the
undersigned will have no rights to require that the Securities be, registered
under the Securities
4
<PAGE>
Act or any state securities laws, except pursuant to the terms of the
registration rights, if any, granted to the undersigned pursuant hereto;
there is currently no public market for the Securities, there is no assurance
that one will develop in the future and, if a market develops, there is no
assurance it will be sustained; the undersigned may have to hold the Securities
indefinitely and it may not be possible for the undersigned to liquidate its
investment in the Company; and the undersigned should not purchase any Units
unless it can afford a complete loss of its investment and bear the burden of
such loss for an indefinite period of time.
(17) The undersigned, if an individual, is at least 21 years of age.
(18) The undersigned understands the meaning and legal consequences of
the representations, warranties and acknowledgments contained in this
Subscription Agreement and in the Qualified Purchaser Questionnaire attached.
D. The undersigned covenants to the Company as follows:
(1) If, at any time prior to issuance of the Securities of the Company
to the undersigned, any representation or warranty of the undersigned contained
herein or in the Qualified Purchaser's Questionnaire shall no longer be true,
the undersigned promptly shall give written notice to the Company specifying
which representations and warranties are not true and the reason therefor,
whereupon the undersigned's subscription may be rejected or, if accepted, such
acceptance may be rescinded.
(2) The undersigned hereby waives trial by jury in any action or
proceeding involving, directly or indirectly, any matter (whether sounding in
tort, contract, fraud or otherwise) in any way arising out of or in connection
with this Subscription Agreement or the undersigned's purchase of the
Securities.
E. The undersigned and the Company agree as follows:
(1) Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, all of the terms and provisions hereof
shall be construed in accordance with and governed by the laws of the State of
New York, without giving effect to its conflict of law principles. Any dispute
which may arise out of or in connection with this Subscription Agreement shall
be adjudicated before a court located in New York City and the parties hereby
submit to the exclusive jurisdiction of the courts of the State of New York
located in New York, New York, and of the federal courts in the Southern
District of New York with
5
<PAGE>
respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Subscription Agreement or any acts or omissions relating to the sale of the
Securities, and the undersigned consents to the service of process in any such
action or legal proceeding by means of registered or certified mail, return
receipt requested, in care of the address set forth below or such other address
as the undersigned shall furnish in writing to the Company. In the event any
such action is brought, whether at law or in equity, then the prevailing party
shall be paid its reasonable attorney's fees, expenses and disbursements arising
out of such action.
(2) Except as expressly provided herein, this Subscription Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder, and may be amended only by a writing
executed by all of the parties hereto. This Subscription Agreement supersedes
any and all prior arrangements or understandings with respect thereto, whether
verbal or written. The terms and conditions of this Subscription Agreement shall
inure to the benefit of and be binding upon the parties and their respective
successors, heirs and assigns.
F. The undersigned acknowledges that the undersigned understands the
meaning and legal consequences of the representations, warranties and
acknowledgments contained in this Subscription Agreement and in the Qualified
Purchaser Questionnaire, and the undersigned agrees to indemnify and hold
harmless the Company and its officers, directors, affiliates, "controlling
persons", agents, attorneys and representatives, from and against any and all
loss, damage, expense, claim, action, suit or proceeding (including the
reasonable fees and expenses of legal counsel) as incurred arising out of or in
any manner whatsoever connected with a breach of any representation or warranty
of the undersigned contained in this Subscription Agreement or in the Qualified
Purchaser Questionnaire. The undersigned acknowledges that such damage could be
substantial since (1) the Units are being offered without registration under the
Securities Act in reliance upon the exemption pursuant to Section 4(2) of the
Securities Act for transactions by an issuer not involving any public offering
and, in various states, pursuant to exemptions from registration, (2) the
availability of such exemptions is, in part, dependent upon the truthfulness and
accuracy of the representations made by the undersigned herein and in its
Qualified Purchaser Questionnaire and (3) the Company will rely on such
representations in accepting the undersigned's subscription.
6
<PAGE>
G. The undersigned hereby acknowledges the following specific information
concerning the Company and confirms the following:
(i) The undersigned has been furnished with and has had an opportunity to
review copies of all Annual Reports (Form 10-KSB), Quarterly Reports (Form
10-QSB), including all exhibits thereto and other materials filed in
connection therewith and filed by the Company pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, commencing with the Annual Report for
the fiscal year ended September 30, 1993 and is familiar with all information
and documentation disclosed therein and/or which may be reasonably inferred
in and from said Reports and all exhibits thereto and other materials filed
in connection therewith;
(ii) The Company's most recently filed Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on Form 10-K, was for the Company's
fiscal year ended September 30, 1995, a copy of which has heretofore been
furnished to the undersigned;
(iii) The Company's most recently filed Quarterly Report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 on Form 10-QSB was for the
Company's fiscal quarter ended March 31, 1996, a copy of which has heretofore
been furnished to the undersigned; and
7
<PAGE>
8
<PAGE>
ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on
this _____ day of _______________, 1995.
____________ X $__________ Per Unit Subscribed for = $___________
Manner in which Title is to be held (Please Check One):
1. // Individual 6. // IRA
2. // Joint Tenants With 7. // Trust/Estate/Pension
Right of Survivorship or Profit Sharing Plan
Date Opened:
______________________
3. // Community Property 8. // As a Custodian for
______________________
Under the Uniform Gift
to Minors Act of the
State of ____________
4. // Tenants in Common 9. // Married with Separate
Property
5. // Corporation/ 10. // Keogh
Partnership
- --------------------------------------------------------------------------------
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 8; SUBSCRIBERS WHICH
ARE ENTITIES MUST COMPLETE PAGE 9.
_______________________________
Name of Purchaser
_______________________________
Registered Representative
(Broker)
9
<PAGE>
EXECUTION BY SUBSCRIBER WHO IS A NATURAL PERSON
________________________________________________________________________________
Exact Name(s) in Which Title is to be Held
________________________________________________________________________________
Signature(s)
(If Joint Tenant or Tenants in Common, both persons must sign and this page must
contain all information for both persons.)
________________________________________________________________________________
Name(s) (Please Print)
________________________________________________________________________________
Residence: Number and Street
________________________________________________________________________________
City State Zip Code
________________________________________________________________________________
Telephone Number
________________________________________________________________________________
Social Security Number(s)
Accepted this ___ day of _____________, 199__, on behalf of the Company.
Financial Performance Corporation
By:________________________________
William F. Finley, President and
Chief Executive Officer
10
<PAGE>
EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, Trust, Etc.)
________________________________________________________________________________
Name of Entity (Please Print)
________________________________________________________________________________
Address of Principal Office of Entity
BY:______________________
TITLE:___________________
[seal]
Attest:______________________________
(If Entity is a Corporation)
_________________________
Address
_________________________
Telephone Number
_________________________
Taxpayer Identification
Number
ACCEPTED, this ____ day of ______________, 199__, on behalf of the
Company.
Financial Performance Corporation
By:________________________________
William F. Finley, President and
Chief Executive Officer
11
<PAGE>
ANNEX A TO SUBSCRIPTION AGREEMENT
REGISTRATION RIGHTS
A. REGISTRATION PROCEDURES. The Company will immediately commence to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section A, the Company will:
(i) prepare and promptly file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective as promptly as
practicable;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement until the earlier of such time as all such Registrable
Securities have been disposed of in accordance with the intended methods of
Disposition by the Selling Stockholder set forth in such registration
statement or the expiration of nine (9) months after such registration
statement becomes effective;
(iii) furnish to each Selling Stockholder, without charge, such number
of conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement (including
each preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by reference in
such registration statement or prospectus, and such other documents as a
Selling Stockholder may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under the securities of "blue
sky" laws of such jurisdictions as a Selling Stockholder (or in an underwritten
offering, the managing underwriter) shall reasonably request, and do any and
all other acts and things which may be necessary or advisable to enable the
Selling Stockholder to consummate the disposition in such jurisdictions of his
Registrable Securities covered by such registration statement, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(v) furnish to the Selling Stockholder a signed counterpart, addressed
to the Selling Stockholder a signed counterpart, addressed to the Selling
Stockholder, of (A) an opinion of counsel for the Company, dated the effective
date of such registration statement, or, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement speaking both as of the effective date of the
registration statement and the date of the closing under the underwriting
agreement) and (B) a "cold comfort" letter dated
12
<PAGE>
the effective date of such registration statement (and, if such registration
statement includes an underwritten public offering, dated the date of the
closing under the underwriting agreement) signed by the independent public
accountants who have certified the Company's financial statements included in
such registration statement, covering substantially the same matters with
respect of such registration statement (and the prospectus included therein),
and, in the case of such accountant's letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities; and
(vi) promptly notify the Selling Stockholder, at any time when a
prospectus related thereto is required to be delivered under the Securities
Act, if 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 any material fact required to be stated
therein or necessary to make the statement therein not misleading in light of
the circumstances then existing, and at the request of such Selling Stockholder
prepare and furnish 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 Registrable Securities, 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 statements
therein not misleading in light of the circumstances then existing.
The Company may require the Selling Stockholder to furnish the Company
such reasonable information regarding the Selling Stockholder and the
distribution of his Registrable Securities as the Company may from time to time
reasonably request and as shall be required by law or by the Securities and
Exchange Commission in connection therewith.
B. EXPENSES The Company will pay all "Registration Expenses" in
connection with each registration of Registrable Securities requested pursuant
to Section A. Registration Expenses means all expenses incident to the
Company's performance of or compliance with its obligations pursuant to this
Annex A and the completion of transactions relating thereto including, without
limitation, all registration and filing fees, all fees and expenses of
complying with securities or "blue sky" laws, all printing expenses, the fees
and disbursements of the Company's independent public accountants, including
the expenses of any special audits, reviews, compilations or other reports or
information required by or incident to such performance and compliance, and any
fees or expenses of special counsel to represent the Selling Stockholder, and
(ii) any underwriting discounts and commissions relating to the Registrable
Securities being sold by the Selling Stockholder.
C. PREPARATION: REASONABLE INVESTIGATION. In connection with the
preparation and filing of such registration statement registering Registrable
Securities under the Securities Act, the Company will give the Selling
Stockholder and his underwriters, if any, and his counsel and accountant, the
opportunity to review and comment upon such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and will give him such access to its books and
records and such opportunities to discuss the business of the Company with its
13
<PAGE>
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the reasonable opinion of such
Selling Stockholder's counsel, the Company's counsel and such underwriters,
to conduct a reasonable investigation within the meaning of the Securities
Act.
D. COMPANY'S INDEMNIFICATION. In the event of any registration of any
Registrable Securities of the Company under the Securities Act, the Company
will, and hereby does, indemnify and hold harmless, the Selling Stockholder,
and each other person, if any, who controls the Selling Stockholder within
the meaning of the Securities Act against any losses, claims, damages,
liabilities and expenses, joint or several, to which the Selling Stockholder
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings
or investigations in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or
(ii) 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 (iii) any violation by the Company of any securities laws, and
the Company will reimburse the Selling Stockholder for any legal or any other
expenses reasonably incurred by him in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable to the Selling Stockholder,
director, officer, participating person or controlling person in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company in an
instrument executed by or under the direction of the Selling Stockholder, for
use in the preparation thereof. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Selling
Stockholder and shall survive the transfer of such Registrable Securities by
the Selling Stockholder.
E. STOCKHOLDERS' INDEMNIFICATION. The Company may require as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Section A, that the Company shall have received an
undertaking satisfactory to it from the Selling Stockholder and the
underwriters, if the offering is underwritten, to indemnify and hold harmless
(in the same manner and to the same extent as set forth in Section D) the
Company, each director of the Company, each officer of the Company who shall
sign such registration statement, the attorneys for the Company and each
other person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus, final prospectus or
summary prospectus included therein, or any amendment or supplement thereto,
but only if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed or provided by the Selling Stockholder. Such
14
<PAGE>
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer, attorney or controlling person and shall survive the transfer of
such Registrable Securities by the Selling Stockholder.
F. INDEMNIFICATION MECHANISM. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in either Section D or E, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying part of its
obligations under Section D or E, as is applicable, except to the extent that
the indemnifying party's liabilities and obligations are increased as a
result of such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof unless (i) the
indemnifying party shall have failed to retain counsel for the indemnified
party as aforesaid, (ii) representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other person represented by such counsel in such proceeding, or (iii) the
indemnified party shall have reasonable concluded that there may be legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party
shall not have the right to direct the defense of such action on behalf of
the indemnified party). In the circumstances described in subsection (ii) and
(iii), the Company shall pay for the reasonable legal or other expenses of no
more than one separate counsel. No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation, the indemnifying party shall not be liable for any settlement of
any proceeding effected without the written consent of such indemnifying
party, but if settled with such consent or if there shall be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify each
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
G. OTHER INDEMNIFICATION. Indemnification similar to that specified in
Section D and Section E (with appropriate modifications) shall be given by the
Company and the Selling Stockholder with respect to any required registration
or other qualification of such Registrable Securities under any federal or
state law or regulation or governmental authority other than the Securities
Act.
15
<PAGE>
FINANCIAL PERFORMANCE CORPORATION
QUALIFIED PURCHASER QUESTIONNAIRE
PURPOSE OF THIS QUESTIONNAIRE
The Units of Financial Performance Corporation (the "Company"), are
being offered without registration under the Securities Act of 1933 (the "1933
Act"), or the securities laws of any state, in reliance on the exemption
contained in Regulation D under the 1933 Act and on similar exemptions under
applicable state laws. Under Regulation D and/or certain state laws, the Company
is required to determine that an individual, or an individual together with such
individual's "purchaser representative", or each individual equity owner of an
"investing entity" meets certain suitability requirements before selling Units
to such individual or entity. THE COMPANY WILL NOT SELL UNITS TO ANY INDIVIDUAL
WHO HAS NOT FILLED OUT, AS THOROUGHLY AS POSSIBLE, A QUESTIONNAIRE. IN THE CASE
OF AN INVESTOR THAT IS A PARTNERSHIP, TRUST OR CORPORATION, EACH EQUITY OWNER
MUST COMPLETE A QUESTIONNAIRE. This Questionnaire does not constitute an offer
to sell or a solicitation of an offer to buy Common Stock or any other security
of the Company.
INSTRUCTIONS
One (1) copy of this Questionnaire should be completed, signed, dated
and delivered to the Company, 335 Madison Avenue, 11th Floor, New York, New York
10017, Attention: Mr. William F. Finley. Please contact Gary S. Friedman, Esq.
of Kaufman Friedman Plotnicki & Grun, LLP, 300 East 42nd Street, New York, New
York 10017 (Telephone No. 212-973-3320) if you have any questions with respect
to the Questionnaire.
PLEASE ANSWER ALL QUESTIONS. If the appropriate answer is "None" or
"Not Applicable", please so state. Please print or type your answers to all
questions. Attach additional sheets if necessary to complete your answers to any
item.
Your answers will be kept strictly confidential at all times.
However, the Company or its counsel may present this Questionnaire to such
parties as it deems appropriate in order to assure itself that the offer and
sale of Units will not result in a violation of the registration provisions of
the 1933 Act or a violation of the securities laws of any state.
16
<PAGE>
1. Please provide the following personal information:
Name:__________ Age:_____
Residence Address:______________________________________________________________
(Including Zip Code)____________________________________________________________
Business Address:_______________________________________________________________
(Including Zip Code)____________________________________________________________
Telephone Nos. Res:__________________ Business:______________
2. Please describe your present or most recent business occupation and indicate
such information as the nature of your employment, the principal business of
your employer, the principal activities under your management or supervision and
the scope (e.g. dollar volume, industry rank, etc.) of such activities.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
3. (a) Please state whether you or any of your associates or affiliates (i) are
a member or a person associated with a member of the National Association of
Securities Dealers, Inc. (the "NASD"), (ii) are an owner of stock or other
securities of an NASD member (other than purchased on the open market), or (iii)
has made a subordinated loan to any NASD member?
___ ___
Yes No
(b) If you marked yes, please briefly describe the facts
below:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
17
<PAGE>
4. Applicable to individuals ONLY. Please answer the following questions
concerning your financial condition:
(a) Does your net worth* (or joint net worth with your spouse) exceed
$1,000,000?
___ ___
Yes No
(b) Did you have an individual income ** in excess of $200,000 or joint
income together with your spouse in excess of $300,000 in each of the two most
recent years and do you reasonably expect to reach the same income level in the
current year?
___ ___
Yes No
(c) Please describe any obligations which you currently have or which
become due in the next 24 months which you do not expect to pay out of available
funds.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
4A. Applicable to Corporations, Partnerships and other Entities only.
Do your total assets exceed $5,000,000 or, alternatively, do all of your
equity holders who are individuals meet the requirements of subparagraphs 4(a)
or 4(b) above?
___ ___
Yes No
- ---------------------------------
* For purposes hereof, net worth shall be deemed to include ALL of your
assets, liquid or illiquid (including such items as home, furnishings,
automobile and restricted securities) MINUS any liabilities (including
such items as home mortgages and other debts and liabilities).
** For purpose hereof the term "income" is not limited to "adjusted gross
income" as that term is defined for Federal income tax purposes, but
rather includes certain items of income which are deducted in computing
adjusted gross income. For investors who are salaried employees, the gross
salary of such investor, minus any significant expenses personally
18
<PAGE>
incurred by such investor in connection with earning the salary, plus any
income from any other source including unearned income, is a fair measure
of "income" for purposes hereof. For investors who are self-employed,
"income" is generally construed to mean total revenues received during the
calendar year minus significant expenses incurred in connection with
earning such revenues.
5. Check, if appropriate:
[ ] I hereby represent and warrant that I am an "accredited investor", as
defined in Section 501(a) of Regulation D under the Securities Act of 1933, as
amended, and have such knowledge and experience in financial and business
matters that I am capable of evaluating the merits and risks of any prospective
investment in the Units.
6. By signing this Questionnaire, I hereby confirm the following statements:
(a) I have read and understand the Subscription Agreement and other
accompanying documents of the Company.
(b) I am aware that no market for the Units or the Common Stock comprising
the Units currently exists, thereby requiring any investment to be maintained
for an indefinite period of time.
(c) I acknowledge that any delivery to me of the documents relating to the
Units prior to the determination by the Company of my suitability as an investor
shall not constitute an offer of Units until such determination of suitability
shall be made, and I agree that I shall promptly return such documents to the
Company upon request.
(d) My answers to the foregoing questions are true and complete to the
best of my information and belief and I will promptly notify the Company of any
changes in the information I have provided.
(e) I also understand and agree that, although the Company will use its
best efforts to keep the information provided in answers to this Questionnaire
strictly confidential, the Company and its counsel may present this
Questionnaire and the information provided in answer to it to such parties as
they may deem advisable if called upon to establish the availability under any
Federal or state securities laws of an exemption from registration of the
private placement or if the contents thereof are relevant to any issue in any
action, suit or proceeding to which the Company or its
19
<PAGE>
affiliates is a party, or by which it or they are or may be bound.
(f) I realize that this Questionnaire does not constitute an offer by the
Company or its affiliates to sell Units but is merely a request for information.
________________________________
Printed Name
_______________________________
Signature
_______________________________
Social Security Number or
Taxpayer Identification Number
Date and Place Executed:
Date:______________________
Place:_____________________
20
<PAGE>
EXHIBIT __
FORM OF LOCK-UP AGREEMENT
Financial Performance Corporation
335 Madison Avenue
11th Floor
New York, New York 10017
(Name and Address
- -----------------------
of Managing Underwriter
- -----------------------
- -----------------------
Ladies and Gentlemen:
In connection with the purchase by the undersigned of units, each unit
comprised of 50,000 shares of the common stock, par value $.01 per share of New
Paradigm Software Corp. (the "Company"), the undersigned hereby agrees that for
a period of thirteen months following the effective date of any public offering
that is registered under the Securities Act of 1933, as amended (the Securities
Act"), the undersigned will not, without the prior written consent of the
managing underwriter of such public offering and the Company, directly or
indirectly, offer to sell, sell, grant an option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber or dispose of any shares of
any debt or equity securities of the Company, securities into which the debt or
equity securities of the Company may be convertible or securities convertible
into or exchangeable for or evidencing any right to purchase or subscribe for
any shares of such securities of the Company (collectively, the "Securities"),
either pursuant to Rule 144 of the regulations under the Securities Act of 1933,
as amended (the "Act"), or otherwise, whether or not beneficially owned by the
undersigned, or dispose of any beneficial interest therein, except for bona fide
gifts of the Securities whereby the recipients agree to be bound by the terms
hereof. Any sale of the Securities must be made through the managing
underwriter.
The foregoing restrictions shall cease to apply thirteen months after the
closing date of such public offering.
21
<PAGE>
In order to enable the aforesaid covenants, the undersigned hereby
consents to the placing of legends and/or a stop-transfer order with the
Transfer Agent of the Company's securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned.
Dated:________________, 199__
________________________________
Signature
________________________________
Print Name
________________________________
Print Address
_______________________________
Print Social Security Number
or Taxpayer I.D. Number
22
<PAGE>
WARRANT AGREEMENT
THIS AGREEMENT, made as of the 16th day of September 1996, by and between
Financial Performance Corporation, a New York corporation having an address at
335 Madison Avenue, New York, New York 10017, (hereinafter referred to as the
"Corporation") and the various individuals and entities set forth on Schedule I
annexed hereto and made a part hereof (each of such parties is hereinafter
referred to as "Warrant Holder").
W I T N E S S E T H:
Whereas, the Corporation has determined to issue and deliver to Warrant Holder
warrants (the "Warrants") to purchase shares of the Corporation's common stock,
par value $0.01 per share, (CUSIP No. 317630 30 9) in the amount set forth for
each Warrant Holder in Schedule I (the "Shares");
Whereas, the Corporation desires to provide for the form and provisions of the
Warrants, the terms upon which they will be issued and may be exercised, and the
respective rights, limitations of rights and immunities of the Corporation and
the Warrant Holder;
Whereas, the Corporation desires to make the Warrants, when executed on behalf
of the Corporation, the valid, binding and legal obligation of the Corporation,
and has done and performed all acts and things necessary to make the Warrants
the valid, binding and legal obligations of the Corporation; and
Whereas, the Corporation desires to act on its own behalf in connection with the
issuance, registration, transfer and exchange of the Warrants, the issuance of
certificates representing the Warrants and the exercise of the Warrants, except
to the extent that the Corporation's transfer agent may be required to issue the
Shares.
Now, therefore, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Corporation and Warrant Holder agree as follows:
1. Issuance of Warrants. The Corporation shall issue to Warrant Holder the
Warrants evidenced by a Warrant Certificate which shall be dated as of September
16, 1996 and shall evidence the right of the Warrant Holder to purchase the
Shares. For purposes of this Agreement, "Common Stock" of the Corporation shall
be defined as "Common Stock" and shall mean any and all shares of common stock
of the Corporation, whether now or hereafter authorized or issued, shares issued
by way of dividend or upon an increase, reduction, substitution or
reclassification of common stock, and upon any merger, consolidation or
reorganization of the Corporation and by the Secretary of the Corporation. Each
Warrant shall be duly executed on behalf of the Corporation by the
<PAGE>
President or a Vice President of the Corporation and by the Secretary or
Assistant Secretary of the Corporation. If any officer whose signature has been
placed upon any of the Warrants ceases to be that officer before any of the
Warrants are issued, the Warrants may be issued with the same effect as if the
officer had not ceased to be that officer on the date of issuance.
2. Warrant Price and Duration of the Warrants. The Warrants may be exercised
from time to time and at any time, in whole or in part, from and after the date
of issuance through September 15, 2006 ("Warrant Expiration Date"), except that
if notice has been given as provided in subsection 5(a) below in connection with
the liquidation, dissolution or winding up of the Corporation, the right to
exercise the Warrants shall expire on the date specified in such notice as the
record date for determining holders of stock of the Corporation entitled to
receive any distribution upon the liquidation, dissolution or winding up of the
Corporation. The Warrants shall entitle the Warrant Holder to purchase the
Shares at the price of one ($1.00) dollar per share (the "Warrant Price"). Each
of the Warrants shall entitle the Warrant Holder to purchase one of the Shares
at the Warrant Price, subject to adjustment as set forth in Section 4 below.
3. Exercise of Warrants.
(a) The Warrants may be exercised by surrendering the Warrants at the office of
the Corporation, and by delivering to the Corporation a duly completed and
executed exercise form substantially in the form attached to Warrant, together
with the Warrant Price for each full share of Common Stock as to which the
Warrants are exercised. The Warrant Price shall be paid in cash or by certified
or official bank check payable to the order of the Corporation.
(b) Upon the exercise of any of the Warrants, the Corporation shall instruct the
Corporation's transfer agent to issue and deliver to the Warrant Holder a
certificate or certificates for the number of full shares of Common Stock to
which the Warrant Holder is entitled, registered in the name or names specified
by the Warrant Holder, and cash with respect to any remaining fractional
interest in a share as set forth in subsection 3(c) below. If the Warrants are
not exercised in full (except with respect to a remaining fraction of a share)
the Corporation shall also issue and deliver new Warrants for the number of
shares (including fractional shares) as to which the Warrants have not been
exercised.
(c) The Corporation shall not be required to issue fractional shares upon the
exercise of the Warrants. If the Warrant Holder exercises the purchase rights
under the Warrants in a manner that leaves the right to purchase a fraction of a
share unexercised, the Corporation shall purchase the fractional interest for an
amount in cash equal to the then current market value of the fractional
interest, computed on the basis of the average closing bid and asked prices of
its shares of Common Stock on the date of exercise as furnished to the
Corporation by any member or member firm of a registered national
2
<PAGE>
securities exchange or, if the Common Stock is not then being publicly traded,
on another reasonable basis determined by the Corporation.
(d) All of the Shares issued upon the exercise of the Warrants shall be duly and
validly issued, fully paid and nonassessable and the Corporation shall pay all
documentary, stamp or other taxes and governmental charges in connection with
the issuance of the Warrants and the issuance or delivery of any Shares upon
exercise of the Warrants. In addition, upon issuance, the Shares shall be free
and clear of any and all liens, encumbrances, adverse interests, claims,
charges, levies, restrictions, agreements and taxes of any nature whatsoever
except only for applicable restrictions under state and federal securities laws
with regard to the transfer of the Warrants and the Shares.
(e) Each person in whose name any certificate or certificates for shares of
Common Stock is issued shall for all purposes be deemed to have become the
holder of record of such shares on the date on which the Warrants were
surrendered in connection with the exercise of the Warrants and payment of the
Warrant Price was tendered, irrespective of the date of delivery of the
certificate or certificates, except that if the date of surrender and payment is
a date when the stock transfer books of the Corporation are closed, a person
shall be deemed to have become the holder of the Shares at the close of business
on the immediately preceding date on which the stock transfer books are open.
4. Adjustments in Warrant Price and Shares.
(a) Change in Class of Shares. If, at any time or from time to time, the
Corporation, by stock dividend, stock split, subdivision, reverse split,
consolidation, reorganization, reclassification of shares, or otherwise, changes
as a whole its outstanding Common Stock into a different class of shares, the
class of shares into which the Common Stock has been changed shall replace the
Common Stock for the purposes of the Warrants so that the Warrant Holder shall
be entitled to receive, and shall receive upon the exercise of the Warrants,
shares of the class of stock into which the Common Stock has been changed.
(b) Stock Dividends and Split-ups. If at any time or from time to time, the
number of outstanding shares of Common Stock of the Corporation is increased by
a stock dividend payable in shares of Common Stock or by a stock split or
subdivision of Common Stock, or otherwise, then, on the day following the date
fixed for the determination of holders of Common Stock entitled to receive the
stock dividend or split-up, the number of Shares issuable on the exercise of
each Warrant shall be increased in proportion to the increase in outstanding
shares of Common Stock and the then applicable Warrant Price shall be
correspondingly decreased.
(c) Aggregation of Shares. If at any time or from time to time, the number of
outstanding shares of Common Stock of the Corporation is decreased by a reverse
split, consolidation or reclassification of shares of Common Stock, or
otherwise, then, after the
3
<PAGE>
effective date of the reverse split, consolidation or reclassification, the
number of Shares issuable on exercise of each Warrant shall be decreased in
proportion to the decrease in outstanding shares of Common Stock and the then
applicable Warrant Price shall be correspondingly increased.
(d) Special Stock Dividends. If at any time or from time to time, shares of any
class of stock of the Corporation (other than Common Stock) are issued by way of
a stock dividend on outstanding Common Stock, then, commencing with the day
following the date fixed for the determination of holders of Common Stock
entitled to receive the stock dividend, in addition to any shares of Common
Stock receivable upon exercise of the Warrants, the Warrant Holder shall upon
exercise of the Warrants be entitled to receive, as nearly as practicable, the
same number of shares of dividend stock, plus any shares issued upon any
subsequent change, replacement, subdivision, or combination of the stock
dividend, to which the Warrant Holder would have been entitled if the Warrants
would have been exercised immediately prior to the stock dividend. No adjustment
in the Warrant Price shall be made by virtue of the happening of any event
specified in this Subsection 4(d).
(e) Merger, Consolidation and Sale. If at any time, a consolidation or merger of
the Corporation with or into another corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any reclassification or change of outstanding shares issuable upon
exercise of the Warrants), or sale or transfer of all or substantially all of
its assets to another corporation, is effective, then, as a condition of the
consolidation, merger or sale, the holder(s) of the Warrants then outstanding
shall have the right to exercise the Warrants for the kind and amount of shares
and other securities and property receivable upon the consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock which might
have been purchased upon exercise of the Warrants immediately prior to the
consolidation, merger, sale or transfer and provision shall be made whereby the
Warrant Holder after the transaction shall have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in the
Warrants, the same number of shares purchasable immediately prior to the
transaction upon the exercise of the rights represented by the Warrants. The
Corporation shall not effect any consolidation, merger, transfer or sale unless,
prior to the consummation of the transaction, the successor corporation (if
other than the Corporation) resulting from the consolidation or merger, or the
corporation purchasing the assets of the Corporation, assumes by written
instrument executed and delivered to the Warrant Agent and the Warrant Holder
the obligation to deliver to the Warrant Holder the shares of stock in
accordance with the preceding sentence.
(f) Pre-emptive or Other Rights. If at any time prior to the exercise of all of
the Warrants, the Corporation offers any shares of its Common Stock to the
holders of its Common Stock as a class for subscription in accordance with the
preemptive or other rights of those stockholders, the Warrant Holder shall be
entitled to subscribe for the
4
<PAGE>
same number of shares of Common Stock as the Warrant Holder would have been
entitled to purchase, upon exercising the Warrants and becoming a stockholder of
the Corporation, immediately prior to the record or effective date with respect
to the preemptive or other rights.
(g) Distribution of Assets. If at any time after the date of this Agreement, the
Corporation makes any distribution of its assets upon or with respect to its
shares of Common Stock as a liquidating or partial liquidating dividend (other
than upon a liquidation, dissolution or winding up of the Corporation as
provided for in Subsection 5(a) below, or other than as a cash dividend payable
out of earnings or any surplus legally available for dividends), the holder(s)
of the Warrants then outstanding shall, upon exercise of the Warrants after the
record date of distribution or in the absence of a record date, after the date
of distribution, receive, in addition to the shares subscribed for, the amount
of the assets or a sum equal to the value of the assets at the time of the
distribution, which would have been distributed to the holder if the Warrants
had been exercised immediately prior to the record date for the distribution or,
in the absence of a record date, immediately prior to the date of the
distribution.
(h) Other Change. If the Corporation takes any action with respect to its shares
of Common Stock, other than as set forth in this Agreement, which would
adversely affect the rights of the holder(s) of the Warrants, then the Shares
shall be changed in a manner which is equitable under the circumstances. Unless
the context otherwise indicates, all references to shares of Common Stock in
this Agreement and the Warrants shall, in the event of a change under this
Section 4, be deemed to refer to any other securities or property included in
the Common Stock pursuant to the change.
(i) Form of Warrants. The form of the Warrants need not be changed due to any
change pursuant to this Section 4, and warrants issued after a change may state
the same Warrant Price and the same number of shares as is stated in the
Warrants initially issued pursuant hereto.
(j) Notice of Adjustment. Upon any adjustment of the Warrant Price or number of
shares issuable on exercise of the Warrants pursuant to the provisions of this
Section 4, then and in each case, the Corporation shall give prompt written
notice of adjustment to the Warrant Holder by certified mail, return receipt
requested at the address registered with the Corporation. The notice shall set
forth in reasonable detail the facts requiring the change, the Warrant Price
resulting from the adjustment and the increase or decrease if any, in the number
of Shares as so changed, setting forth in reasonable detail the method of
calculation and the facts upon which the calculation is based. Without limiting
the foregoing notice requirement, in case at any time:
(i) the Corporation pays any dividends payable in stock upon its Common
Stock or makes any distributions (other than regular cash dividends) to the
holders of its Common Stock;
5
<PAGE>
(ii) the Corporation offers for subscription pro-rata to the holders of
its Common Stock any additional shares of stock of any class or any other
rights; or
(iii) there is a capital reorganization, a reclassification of the capital
stock of the Corporation, or a consolidation or merger of the Corporation with,
or a sale of all or substantially all of its assets to another corporation;
then, in any or more of these cases, the Corporation shall give written notice
to the Warrant Holder in the manner set forth above of the date on which (i) the
books of the Corporation close or a record is taken for the dividend,
distribution or subscription rights, or (ii) the reorganization,
reclassification, consolidation, merger or sale takes place. The notice also
shall specify the date as of which the holders of the Common Stock of record
shall participate in dividend distribution or subscription rights, or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon the reorganization, reclassification, consolidation, merger or
sale. The notice shall be given at least 30 days prior to the transaction in
question and not less than 20 days prior to the record date or the date on which
the Company's transfer books are closed with respect to the transaction.
5. Provisions for Protection of Warrant Holders.
(a) In the event of the liquidation, dissolution or winding up of the
Corporation, a notice shall be filed by the Corporation with the Warrant Holder
at least 60 days before the record date (which shall be specified in the notice)
for determining holders of the shares of Common Stock entitled to receive any
distribution upon the liquidation, dissolution or winding up. The notice must
contain: (i) the date on which the transaction is to take place; (ii) the record
date (which must be at least 60 days after the giving of the notice) as of which
holders of Common Stock entitled to receive distributions upon the liquidation,
dissolution or winding up shall be determined; (iii) a brief description of the
transaction; (iv) a brief description of the distributions, if any, to be made
to holders of the Common Stock as a result of the transaction; and (v) an
estimate of the fair market value of the distributions. The notice shall also
specify the date on which the right to exercise the Warrants shall expire. A
copy of the notice shall be mailed to Warrant Holder and to each other holder of
Warrants at the address(es) registered with the Corporation not more than 30 and
not less than 20 days before the record date.
(b) The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock the number of shares that are
from time to time sufficient to permit the exercise of all outstanding Warrants
and the issuance of the Shares. If at any time the number of authorized but
unissued shares of Common Stock is not sufficient for these purposes, the
Corporation shall take all action that may be necessary to increase its
authorized but unissued shares to the number of shares sufficient for these
purposes.
6
<PAGE>
(c) The Warrants may not be redeemed by the Corporation at any time.
(d) If any of the Warrant Certificate(s) becomes lost, stolen, mutilated or
destroyed, the Corporation shall issue a new Warrant Certificate(s) of like
denomination, tenor and date as the Warrant Certificate(s) lost, stolen,
mutilated or destroyed. Any new Warrant shall constitute an original contractual
obligation of the Corporation, regardless of whether the allegedly lost, stolen,
mutilated or destroyed Warrant Certificate(s) is (are) at any time enforceable
by anyone.
(e) All rights of action are vested in the Warrant Holder and all other
holder(s) of the Warrants. Any holder of any Warrant may, in the holder's own
behalf and for the holder's own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Corporation suitable to enforce, the
right to exercise the Warrant for the purchase of Common Stock, and for any
other purpose in connection with the Warrants.
6. Representations of the Corporation.
The Corporation represents, warrants and covenants to the Warrant Holder as
follows:
(a) All shares of Common Stock that may be issued upon the exercise of the
Warrants shall, upon issuance, be duly and validly issued, fully paid and
nonassessable, and free from all liens, encumbrances, adverse interests, claims,
charges, levies, restrictions, agreements and taxes of any nature whatsoever
with respect to the purchase and issuance of the Shares except only for
applicable restrictions under state and federal securities laws with regard to
the transferability thereof. The Corporation has done and performed all acts and
things necessary to make the Warrants the valid, binding and legal obligations
of the Corporation and the Warrants are the valid, binding and legal obligations
of the Corporation;
(b) The Corporation is a corporation duly organized and validly existing under
the laws of the State of New York, has all requisite corporate power and
authority to own, operate and carry on its business and to enter into this
Agreement and to perform all of its obligations hereunder and is duly qualified
and in good standing in the State of New York;
(c) The Corporation has obtained all necessary authorizations and approvals from
its Board of Directors required for the execution and delivery of this Agreement
and all collateral documents arising out of or relating to this transaction.
This Agreement has been duly executed and delivered by the Corporation and
constitutes the legal, valid and binding obligation of the Corporation
enforceable against the Corporation in accordance with its terms (except as may
be limited by applicable bankruptcy and insolvency laws);
(d) Neither the execution and delivery of this Agreement nor any of the other
instruments or documents contemplated hereby, nor the issuance of the Shares or
the
7
<PAGE>
Warrants, nor the incurrence of the obligations herein set forth (i) will result
in a violation of, or constitute a default under, the certificate of
incorporation or by-laws of the Corporation, or any material obligations,
agreements, covenants or conditions contained in any bond, debenture, mortgage,
loan agreement, lease, joint venture or other agreement or instrument, mortgage,
loan agreement, lease, joint venture or other agreement or instrument to which
the Corporation is a party or by which it or any of its properties may be bound,
or (ii) is in violation of any order, rule, regulation, writ, injunction, or
decree of any domestic government, governmental instrumentality or court;
(e) The Corporation has complied with and shall comply with all applicable
federal, state and local laws, ordinances, rules, regulations, orders and
standards applicable to the issuance of the Warrants. The transactions
underlying or giving rise to the Warrants and the issuance of the Shares upon
the exercise thereof shall not violate any federal, state or local law, rule or
regulation.
7. Transfer and Ownership of Warrants.
(a) Title to the Warrants shall pass by delivery in the same manner as a
negotiable instrument payable to bearer, accompanied by a transfer form
substantially in the form annexed to the Warrant. Each holder of the Warrants
may be treated by the Corporation and the Corporation's transfer agent as the
absolute owner thereof for all purposes and as the person entitled to exercise
the Warrants or transfer title to it.
(b) One or more Warrants may be surrendered to the Corporation for exchange and,
upon their cancellation, the Corporation shall countersign and deliver in
exchange one or more new Warrants, as requested by the bearer of the cancelled
Warrant or Warrants, for the same aggregate number of Shares as were evidenced
by the Warrant or Warrants so cancelled. The Corporation shall give notice to
the registered holders of the Warrants of any change in the address of, or in
the designation of the Corporation's transfer agent.
(c) The Warrant Holder represents to the Corporation that he is acquiring the
Warrants and will acquire the Shares for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof. If, in
the future, the Warrant Holder shall decide to dispose of the Warrants or the
Shares, any such disposition shall be made only in a transaction which is exempt
from registration under then applicable federal and state securities laws or
pursuant to registration under such laws.
8. Assignability. Neither this Warrant Agreement nor any of the Warrants may be
assigned by the Corporation. The Warrant Holder or any other holder(s) of the
Warrants may assign this Warrant Agreement and the Warrants, in whole or in
part, in compliance with applicable state and federal securities laws.
8
<PAGE>
9. Miscellaneous.
(a) Applicable Law. The validity, interpretation and performance of this
Agreement and of the Warrants shall be governed by the internal laws of the
State of New York.
(b) Agreement. Copies of this agreement shall be available at the office of the
Corporation for examination by the Warrant Holder and all holder(s) of any of
the Warrants.
(c) Notices and Demands. Any and all notices, demands or other communications
provided for in this Agreement shall be given in writing and by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
To the Corporation: Financial Performance Corporation
335 Madison Avenue
New York, New York 10017
Attention: William F. Finley, President
With a copy served Kaufman Friedman Plotnicki
in like manner to: & Grun, LLP
300 East 42nd Street
New York, New York 10017
Attention: Gary S. Friedman, Esq.
To Warrant Holder: See Schedule I Annexed Hereto
(d) Assigns. The term "Warrant Holder" as used in this Agreement shall, unless
otherwise specifically indicated, mean and include the Warrant Holder, all
assignees of the Warrant Holder and all future holder(s) of any of the Warrants.
(e) No Modifications. This agreement shall not be changed, modified or amended
except by a writing signed by the party to be charged, and this agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.
(f) No Waiver. It is agreed that a waiver by any party of a breach of any
provision of this agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
(g) Further Performance. The Corporation and the Warrant Holder agree to execute
and deliver all such further documents, agreements and instruments and take such
other
9
<PAGE>
and further action as may be necessary or appropriate to carry out the purposes
and intent of this agreement.
(h) Counterparts. This agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
In witness whereof, this Agreement has been duly executed by the parties hereto
the day, month and year first above written.
Witness: Financial Performance Corporation
___________________________ By:_____________________________
William F. Finley
Its: President
___________________________ By:_____________________________
Richard Levy
Its: Secretary
10
<PAGE>
THE NUMBER OF SHARES AND EXERCISE PRICE REFERRED TO IN THIS WARRANT CERTIFICATE
ARE THOSE IN EFFECT SUBSEQUENT TO THE COMPANY'S ONE-FOR-FIVE REVERSE STOCK SPLIT
EFFECTIVE AS OF SEPTEMER 23, 1996.
FORM OF FPC 9-96 WARRANT CERTIFICATE
THIS WARRANT AND THE SECURITIES WHICH MAY BE ISSUED UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS, BY REASON OF SPECIFIC EXEMPTIONS
THEREUNDER, AND CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY
PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED THEREUNDER OR UNLESS APPLICABLE
EXEMPTIONS THEREFROM ARE AVAILABLE.
WARRANT
FOR THE PURCHASE OF 1
( 2 ) SHARES OF COMMON STOCK, PAR VALUE
$0.01 PER SHARE (CUSIP NO. 317630 30 9), OF
FINANCIAL PERFORMANCE CORPORATION
Incorporated under the laws of the State of New York
VOID AFTER SEPTEMBER 15, 2006
This is to certify that, for value received, 3 , or his/her/its assigns (the
"Warrant Holder"), is entitled to purchase at any time during the period
commencing as of September 16, 1996 and ending on or before September 15, 2006
("Exercise Period"), 1 (2) shares of the Common Stock, par value $0.01 per share
(CUSIP No. 317630 30 9), of Financial Performance Corporation (the
"Corporation") from the Corporation at a purchase price of one ($1.00) dollar
per share, and to receive a certificate or certificates for the shares of Common
Stock purchased upon presentation and surrender to the Corporation at the office
of the Corporation or at the offices of Corporation's warrant agent, if any, or
its successor as warrant agent, of this Warrant with the exercise form annexed
hereto as Exhibit "1" duly completed and executed, and accompanied by payment of
the purchase price of each share purchased either in cash or by certified or
bank cashier's check payable to the direct order of the Corporation.
<PAGE>
This Warrant may be exercised at any time and from time to time during the
Exercise Period by the registered owner or owners hereof in whole, or in part,
for not less than one (1) full share of Common Stock of the Corporation. If this
Warrant is exercised at any time for less than the maximum number of shares of
Common Stock purchasable upon the exercise hereof, the Corporation shall issue
to the registered owner or owners of this Warrant a new warrant of like tenor
and date representing the number of shares of Common Stock equal to the
difference between the number of shares purchasable upon full exercise of this
Warrant and the number of shares that were purchased upon exercise of this
Warrant. No fractional shares of Common Stock will be issued upon the exercise
of rights to purchase hereunder.
The Corporation covenants and agrees that all shares that may be issued upon
exercise of this Warrant shall, upon issuance, be duly and validly issued, fully
paid and non-assessable, and free of all taxes, liens and charges with respect
to the purchase and the issuance of the shares.
The aggregate number of shares of Common Stock of the Corporation that the
Warrant Holder is entitled to receive upon exercise of this Warrant is 1 (2)
shares. The Corporation shall at all times reserve from its authorized and
unissued Common Stock and hold available a sufficient number of shares of Common
Stock to cover the number of shares issuable upon exercise of this Warrant.
This Warrant is assignable and transferable by delivery, in whole or in part, to
an "Accredited Investor" (as such term is defined in the Securities Act of 1933,
as amended, and the Rules promulgated thereunder), in accordance with the
provisions of the Warrant Agreement referred to below. This Warrant is
transferable in whole or in part on the books of the Corporation by the record
holder hereof in person or by duly authorized attorney upon surrender hereof,
properly endorsed, at the office of the Corporation, or at the office of the
Corporation's warrant agent, if any, in the City of New York and State of New
York, accompanied by a form substantially in the form of the assignment form
annexed hereto as Exhibit "2" duly completed and executed. Every holder of this
Warrant, by taking and holding the same, consents and agrees that title to this
Warrant (together with all rights represented hereby) is assignable and
transferable with the same effect as in the case of a negotiable instrument if
endorsed to a specified person and delivery is made to such person, and that if
endorsed in blank the holder hereof may be treated by the Corporation and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose, and as the person entitled to exercise this Warrant or to the transfer
thereof on said books, but until such transfer on such books, the Corporation
may treat the record holder as the owner hereof for the
2
<PAGE>
purpose of determining the person entitled to any rights or any notice pursuant
to the terms hereof or for any other purpose.
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of September 16, 1996 and is subject to the terms and
provisions contained therein, as to all of which terms and conditions the
Corporation and the Warrant Holder are bound. Copies of the Warrant Agreement
are on file at the office of the Corporation.
This Warrant will be void unless exercised by 5:00 P.M. Eastern Standard Time on
September 15, 2006. If such date shall in the State of New York be a holiday or
a day on which banks are authorized to close, then the Warrant may be exercised
on the next following day which in the State of New York is not a holiday or a
day on which banks are authorized to close.
This Warrant may not be redeemed by the Corporation at any time.
In witness whereof, the Corporation has caused this Warrant to be duly executed,
by two of its officers duly authorized, as of the 16th day of September, 1996.
Financial Performance Corporation
By:__________________________
William F. Finley
Its: President
By:_________________________
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE>
Exhibit "1"
EXERCISE FORM
The undersigned hereby: (1) subscribes for and offers to purchase ___________
shares of Common Stock of Financial Performance Corporation, par value $0.01 per
share (CUSIP No. 317630 30 9), pursuant to the Warrant to which this exhibit is
attached; (2) encloses payment of $________________ for these shares at a price
of one ($1.00) dollar per share; and (3) requests that a certificate for the
shares be issued in the name of the undersigned or such other name as may be
designated in writing by the undersigned and delivered to the undersigned at the
address specified below.
Date: _____________________
(Please sign exactly as your
name appears on the Warrant)
____________________________________
____________________________________
____________________________________
(Address of warrant holder)
Warrant holder's social security number
________________________
4
<PAGE>
Exhibit "2"
TRANSFER OR ASSIGNMENT FORM
To be Completed and Executed by the Registered Owner
in Order to Transfer or Assign Warrants
FOR VALUE RECEIVED, ________________________________ hereby sells, assigns and
transfers unto
Name: _________________________________________
Address: _______________________________________
Social Security No.:_______________________________
this Warrant and hereby irrevocably appoints
___________________________________
attorney with full power of substitution to transfer this Warrant Certificate on
the books of Financial Performance Corporation.
Date: ______________, _____ x_________________________________
5
<PAGE>
Mr. Robert S. Trump
2611 West 2nd Street
Brooklyn, New York 11223
November 12, 1996
Financial Performance Corporation
335 Madison Avenue, 11th Floor
New York, New York 10017
Attention: Mr. William F. Finley
President
Re: Financial Performance Corporation (the "Company")
Dear Bill:
Please be advised that I have elected to exchange $125,000.00 of the principal
amount of the Restated Exchangeable Note dated as of January 1, 1995 (the
"Note') into 400,000 post-reverse split shares of the Company's common stock
pursuant to the terms of the Note, at the effective post-reverse split exchange
price of $0.3125 per share.
Further, this letter shall confirm that I have agreed with the Company to
convert the current remaining principal balance and accrued interest thereon
through the date hereof in respect of the Note after effectuating the
aforementioned exchange ($47,154) together with the current principal balance
and accrued interest thereon through the date hereof in respect of all other
indebtedness of the Company held by me ($117,460) into an aggregate of 164,614
additional post-reverse split shares of the Company's common stock at the
conversion rate of $1.00 per share.
With regard to such conversion, as well as the prior conversions of other
indebtedness of the Company held by me in March 1996 and June 1996, it is
understood and agreed that if, at any future date(s), the Company shall issue
post-reverse split shares of common stock to any other party for a price of less
than $1.00 per share, I shall thereupon be issued such number of additional
shares of the Company's common stock without payment of any additional
consideration so that the effective conversion rate for all shares of the
Company's common stock issued to me resulting from the conversion of debt to
equity is equal to the lowest per-share price at which the Company's
post-reverse split common stock is hereafter issued to any other party.
This letter shall also confirm that the Company has granted me "piggy-back"
registration rights converting all shares of the Company's common stock which I
currently own, whether issued to me by the Company (either directly, by exercise
of warrants, by exchange of the Note or by conversion of the debt) or acquired
by me from any third party(ies).
Thank you for your kind attention to these matters.
Confirmed and Agreed To: Sincerely,
Financial Performance Corporation
By: /s/ William F. Finley /s/ Robert S. Trump
------------------------------ -------------------
William F. Finley, President Robert S. Trump
<PAGE>
Exhibit 21.1
FINANCIAL PERFORMANCE CORPORATION
Subsidiaries of the Registrant
The subsidiaries of the registrant are Michaelson Kelbick Partners Inc.,
Aspen Capital Management, LLC., and FPC Information Corp.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements filed herewith on this Form 10-KSB for the fiscal year ended
September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-01-1995
<PERIOD-END> Sep-30-1996
<CASH> 1,972,056
<SECURITIES> 0
<RECEIVABLES> 902,516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,931,913
<PP&E> 610,344
<DEPRECIATION> 84,349
<TOTAL-ASSETS> 3,760,431
<CURRENT-LIABILITIES> 1,483,091
<BONDS> 168,095
0
0
<COMMON> 71,926
<OTHER-SE> 1,781,273
<TOTAL-LIABILITY-AND-EQUITY> 3,760,431
<SALES> 8,784,137
<TOTAL-REVENUES> 8,797,218
<CGS> 7,271,114
<TOTAL-COSTS> 7,271,114
<OTHER-EXPENSES> 1,234,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89,424
<INCOME-PRETAX> 100,885
<INCOME-TAX> 116,062
<INCOME-CONTINUING> (15,177)
<DISCONTINUED> (219,872)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (235,049)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
