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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(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 December 31, 1998
/ / 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)
NEW YORK 13-3236325
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
335 MADISON AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices, including zip code)
(212) 557-0401
(Issuer's telephone number)
None. Securities registered under Section 12(b) of the Exchange Act:
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]
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Issuer's revenues for the fiscal year ended December 31, 1998 were
$21,492,151.
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant on February 25, 1999 was approximately
$4,400,000, 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 February 25, 1999, was: 9,471,534 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
<TABLE>
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Page
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PART I.................................................................. 1
ITEM 1 - DESCRIPTION OF BUSINESS.................................. 1
ITEM 2 -- DESCRIPTION OF PROPERTY................................. 15
ITEM 3 -- LEGAL PROCEEDINGS....................................... 16
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..... 16
PART II................................................................. 16
ITEM 5 -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS............................................... 16
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 17
ITEM 7 - FINANCIAL STATEMENTS..................................... 25
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................... 25
PART III................................................................ 25
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT.......................................... 25
ITEM 10 - EXECUTIVE COMPENSATION.................................. 28
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT........................................... 37
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......... 38
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K........................ 44
FINANCIAL STATEMENTS.................................................... F-1
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PART I
ITEM 1 -- DESCRIPTION OF BUSINESS
INTRODUCTION
Financial Performance Corporation and its subsidiaries (the "Company")
market specialized merger communications consulting services and computer
software to the financial services industry. The Company's services and software
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 principal business is merger communications and marketing
services to financial institutions. The Company has developed a particular
expertise in providing services to banks with respect to communications
concerning mergers and other business combinations, marketing and financial
information software.
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.
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 became
insolvent and was thereby constrained to cease its day-to-day operations. The
Company 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 services
industry. As a result, the Company, together with other parties, formed three
subsidiaries (Michaelson Kelbick Partners Inc. ("MKP"), FPC Information Corp.
("FPC Information") and Aspen Capital Management, LLC ("Aspen")). MKP is engaged
in providing merger communications 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."
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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. For the year ended September 30, 1997, the Company
generated approximately $7,785,000 in revenues, had an operating loss of
approximately $569,000, a loss from continuing operations of approximately
$545,000 and a net loss of approximately $545,000. For the year ended September
30, 1997, two customers of MKP accounted for approximately 72% of the Company's
total revenue, with one customer of MKP accounting for 56% of the Company's
total revenues.
In February 1998, the Company's fiscal year end was changed from September
30 to December 31.
For the year ended December 31, 1998, the Company generated approximately
$21,492,000 in revenues, had operating income of approximately $2,956,000 and
net income of approximately $2,118,000. For the year ended December 31, 1998,
three customers of MKP accounted for approximately 82% of the Company's total
revenues, with one customer of MKP accounting for approximately 55% of the
Company's total revenues.
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 February 25, 1999 were
$2.75 and $0.16, 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.
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.
MICHAELSON KELBICK PARTNERS INC. In October 1994, the Company, together
with Susan Michaelson and Hillary Kelbick, formed Michaelson Kelbick Partners
Inc. ("MKP"). The Company owns 80% of the outstanding equity of MKP and each of
Ms. Michaelson and Ms. Kelbick own 10% of the outstanding equity of 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 and
other business combinations and sales promotions. During the Company's four most
recent fiscal years ended September 30, 1995, September 30, 1996, September 30,
1997 and December 31, 1998, MKP accounted for approximately 100% of the
Company's consolidated revenues.
Ms. Michaelson and Ms. Kelbick have over 34 years of 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,
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development and execution of marketing communications projects for numerous
financial institutions. See "Item 9 -- Directors, Executive Officers, Promoters
and Control Persons."
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 in exchange for a 20% equity interest in FPC
Information. In October, 1997, Mr. Trump acquired an additional 30% equity
interest in FPC Information in exchange for an additional investment of
$225,000. Accordingly, as of February 25, 1999, Mr. Trump owns 50% of the
outstanding equity of FPC Information. However, the Company has the option to
repurchase a 30% equity interest in FPC Information from Mr. Trump exercisable
at any time prior to September 30, 1999 at the fair market value of such
interest, but in no event less than $225,000.
The MARS(TM) software and any rights associated therewith and related
liabilities have been transferred by the Company to FPC Information Corp.
Accordingly, the Company functions as a holding company and will continue to
seek investment and acquisition opportunities in the financial services
industry. As of February 25, 1999, Mr. Trump beneficially owned approximately
57.9% of the Company's shares of Common Stock. See "Item 11 --Security Ownership
of Certain Beneficial Owners and Management."
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. The Company owns 80% of the outstanding
equity of Aspen and each of Messrs. Loos and Brennan own 10% of the outstanding
equity of Aspen. Through the efforts and expertise of Mr. Loos, the Aspen
Worldwide Dollar Fund (the "Fund") was established, ABN--Ambro Bank N.V. was
procured to act as the custodian of the Fund, ABN--Ambro Trust Company (Cayman)
Limited was procured to act as the administrator of the Fund and Lehman Brothers
Global Asset Management Limited was to have acted as investment advisor for the
Fund. Mr. Brennan was retained by Aspen to act as the principal salesperson for
the Fund.
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. Mr. Trump's loans to the Company were subsequently
converted to shares of the Company's common stock at a conversion price of $1.00
per share. See "Item 12 - Certain Relationships and Related Transactions".
In August 1995, Aspen officially commenced operations with the formation
of the Fund. The Fund was administered by ABN--Ambro Trust Company (Cayman)
Limited. The Fund
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received approximately $5,000,000 through initial subscriptions provided by
persons associated with Mr. Trump and raised with Mr. Trump's assistance.
Although Aspen received indications from ABN--Ambro and other institutions that
they intended to invest in the Fund, the Fund never received any additional
subscriptions. The Company believes that strong equity markets and the
performance of equity-based mutual funds during the period that the Fund was
soliciting investments were a significant factor in the Fund's inability to
attract additional subscriptions. During the fiscal year ended September 30,
1996, the initial investors redeemed all of their interests in the Fund in order
to fulfill such investors' cash requirements at that time.
Consequently, the Fund became and is currently inactive.
In July and September 1996, in view of the Fund's inability to attract
subscribers, Messrs. Brennan and Loos, respectively, were asked by the Company
to resign as employees and officers of Aspen. Such individuals have no
continuing affiliation with the Fund. In view of the resignations of Messrs.
Loos and Brennan, the Company was no longer able to continue the operations of
Aspen. 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.
MERGER COMMUNICATIONS SERVICES
Since the resumption of the Company's operations, all or substantially all
of the Company's revenues have been generated by MKP. MKP's primary business is
bank merger communications, which accounts for approximately 85% of MKP's
revenues. MKP also specializes in marketing planning and communications
strategies, sales promotion and direct mail. The principals of MKP have managed
over 50 merger communications and other projects for banks, including First
Union/Corestates Bank of Boston/Bay Bank, The Bank of New York, Citibank, First
Union/First Fidelity, First National Bank of Maryland, Nat West Bank, Fleet
Bank, The Dime Savings Bank of New York, Great Western, First Fidelity, CIT
Group, PNC and Chemical Bank (now The Chase Manhattan Bank).
The merger communications projects which are undertaken by MKP involve
planning, strategizing, managing and executing customer communications in
support of the merger related events, including:
- Systems conversions
- Product consolidations
- Price changes
- Branch Closings
MERGER COMMUNICATIONS SERVICES
MKP's merger communications services include:
- Business Strategies and Marketing Planning
- Advisory Services: impact assessments by product, service and
customer group
- Data Processing: data sources, customer account file integration
- Proprietary methodologies for Matrix programming instructions for
customized copy block messaging
- Communications Development and Execution: Comprehensive layouts,
pre-press production, mail file development, print and mail
production
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- Project Management including milestones and budgets
- Communications Recommendations: vehicles, audiences, timing
- File Collapse Methodology (definition of the customer)
- Regulatory requirements for disclosure
DATA MANAGEMENT
MKP's data management services include:
- PLANNING. Includes defining the communications requirements,
including product/account types, file integration and merge/purge
requirements and level of personalization required.
- DATA SOURCE(S) AND EXTERNAL SUPPLIERS. MKP advises on the most
advantageous data source(s) for each project (i.e., operating
systems, CIF or a combination thereof). In addition, MKP can assist
in assessing internal and external data processing requirements.
- TAPE SPECIFICATIONS. Includes definition of tape formats, record
information, and all file coding required for data integration and
the customization of messages.
- CUSTOMER MAIL FILE DEVELOPMENT. Includes development of
specifications and procedures for record selection, file clean-up
programming, merge/purge and file verification.
- VERIFICATION/QUALITY CONTROL. Includes development of detailed
procedures to ensure that counts are correct (all records are
accounted for), established procedures are followed, all programming
steps are verified and exceptions are identified and properly
handled. A key step includes the creation of a test file including
all copy blocks and block assignment criteria existing in the main
file.
MKP QUALITY CONTROL
MKP's premise is that quality control begins with the initial steps in
planning a project. As MKP works to develop concepts and strategies for its
clients, MKP confirms that the concepts and strategies which are developed can
be properly executed. MKP adheres to strict quality control procedures and uses
numerous quality control/verification checks in this process, including the
following:
- Developing tape specifications and mail house instructions (before
tape is cut)
- Initial tape verification (immediately upon receipt of tape)
- File clean-up verification
- Merge/Purge verification
- Verification of programmed data, including copy block assignment and
line count
- Account number verifications
- Verification of live laser proofs
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- Laser printing quality control
- Lettershop quality control
- Postal receipts
DATA MANAGEMENT/QUALITY CONTROL
MKP has significant experience in developing systems for customizing data
processing and programming verification in order to ensure quality control
integrity of each merger project. MKP must often operate under tight time frames
and legal deadlines that generally accompany merger projects. MKP assembles and
manages both internal and external resources in support of large-scale, complex
projects.
CROSS-SELLING POTENTIAL
The banking institutions which are MKP's clients are potential customers
for the Company's MARS(TM) software marketed by the Company's subsidiary, FPC
Information Corp. The Company believes that after a banking client of MKP has
completed a merger, such bank will be in a position to benefit substantially
from a software product such as MARS(TM) which will provide detailed, on-line
information concerning the performance and profitability of the bank's products
and services and the productivity of the bank's account officers. In that
regard, the Company believes that services furnished by MKP to its banking
clients could provide a significant opportunity for FPC Information Corp. to
introduce its MARS(TM) software and related services to these institutions. The
Company also believes that the type of analysis generally performed by MKP for
its bank clients in connection with its merger communications services can often
be instrumental in planning the foundation for a more efficient MIS gathering
system for such clients. In the Company's view, with this type of information
about potential clients, FPC Information Corp. could have certain advantages
over its competitors when making proposals to implement system-wide computer
software improvements in such banking institutions. To date, none of MKP's
clients have agreed to utilize the Company's MARS(TM) software.
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.
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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.
Another way of describing MARS(TM) is in the context of the emerging trend
toward Sales Force Automation (SFA) which is beginning to have a major impact in
the business world. SFA involves the use of computers, armed with a
sophisticated software program, which allows an organization to more efficiently
and effectively manage the sales function with the objective of enhancing
profitability. The Company believes that the necessity for SFA techniques is
particularly important to the banking industry, which is currently faced with
acute competitive pressures and the necessity to more effectively cross-sell
products to customers. The Company's research suggests that the banking industry
is in serious need of applications that will complement the goal of executing
successful selling strategies. The senior management of the Company, with its
experience in the banking area, recognized the acute need for SFA early in the
development stage for the MARS(TM) product. Accordingly, the MARS(TM) system was
targeted specifically to the banking and financial services community.
In the Company's view, a primary reason that banks and other financial
institutions are in need of a SFA program is represented by the so-called
"80-20" rule, a measure of profitability used in the banking industry which
suggests that, as a general rule of thumb, approximately 80% of a business
enterprise's profits come from approximately 20% of its customers, on average.
Additionally, the wide range of products offered by the typical large bank makes
cross-selling strategies extremely complex. For example, corporate banking
relationships encompass many product categories ranging from loans to cash
management. Larger banks, in particular, have had a difficult time assembling a
company-wide view of what products and services have been sold, or could be
sold, to an established client base. Because banks are usually organized on a
very structured departmental basis, each department operating with its own
systems and sales force, information that would be useful in the cross-selling
of products is often dispersed among a myriad of confusing systems. MARS(TM) is
designed to allow the integration of vital relationship information on a firm
(bank) wide basis, while at the same time providing the tools for enhanced
productivity. The Tower Group, which provides technology consulting services to
financial institutions, has stated in a May 1995 report titled "Sales
Applications for Wholesale Banking" that "successful cross-selling is one of the
keys to bank profitability, as it maximizes the return on each relationship. An
additional component to successful relationship management in the banking
industry is the continuous delivery of high quality customer service, which is
also enhanced by multi-user access to a database which describes a customer
relationship". The Tower Group report also estimates that "85% of the top 100
banks and 20% of all other banks will have installed at least departmental sales
and
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relationship management application for users on the wholesale side of the bank
by the year 2000. Of the larger banks, half will have extended these systems
beyond a single functional department by that time". The Company believes that
the MARS(TM) product is well suited to meet the SFA needs of both larger and
smaller banking institutions.
The Company has completed all necessary programming with regard to the
MARS(TM) software product in order to address all "Year 2000" issues. The
Company believes that the MARS(TM) software product is Year 2000 compliant. See
"Item 6 - - Management's Discussion and Analysis of Financial Condition and
Results of Operations."
MARKETING STRATEGIES RELATING TO MARS(TM)
In the Company's view, the senior management of the Company's subsidiary,
FPC Information Corp., in addition to developing the MARS(TM) software, has
developed an excellent reputation within the banking community for its ability
to provide quality, high level consultation in the areas of strategic business
planning and product management. Moreover, the Company's 80% owned subsidiary,
MKP, specializes in market and communications strategies for the financial
services community involving a wide array of services. The Company believes that
the natural synergy of these closely connected organizations allows for a
cross-selling opportunity with which to successfully launch the MARS(TM)
product.
If reliable references for MARS(TM) are developed, the Company will seek
to build a channel of product distribution to augment its own direct selling
efforts. In this regard, the banking industry is served by a large number of
consulting firms specializing in financial services industry information
technology. For example, the "Big Six" accounting firms and most of the second
tier accounting firms provide information technology services to banks. The
Company believes that the MARS(TM) product is the best available solution for
SFA to the banking and financial services community and that certain accounting
firms could have a substantial interest in representing MARS(TM) to their
clients as part of the services such firms can offer.
In addition to these potential business partners, the Company believes
that the opportunity exists for possible alliances with over a dozen regional
systems integrators whose businesses are primarily concerned with the
installation and modification of banking and financial services applications.
The third group which the Company intends to target in the channel strategy is
software product companies with banking specific applications which would
complement MARS(TM). The Company also intends to explore a less formal lead
sharing relationship with hardware providers who have relationships with the
banking market. The Company believes in the possibility that a MARS(TM) sale
could justify the purchase of a large number of both PC's and laptops. The
Company expects these channel development efforts to result in a number of
product relationships over the course of the next twelve to eighteen months.
If MARS(TM) becomes well accepted within the banking community, the
Company plans to modify the product in a second version which would be suitable
for the insurance industry. A third version of MARS(TM) for the brokerage
community could then be developed. In the view of the Company's management, both
of these industries, like the banking industry, could benefit
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from effective cross selling, but until now have lacked the proper computer
software to achieve this goal. The Company cannot currently project a timetable
for the development of the contemplated additional versions of MARS.
SPECIFIC PRODUCT DESCRIPTION. The MARS(TM) program contains modules for
key areas, including customer information, product information, customization,
management reports, report writer, SOL (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.
- SOL SUPPORT. The Company expects to complete shortly a module for
MARS(TM) which will include SOL (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.
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- 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) ran 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
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<PAGE> 14
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 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.
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.
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<PAGE> 15
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 merger communications services
and software products to financial institutions and other business organizations
is intense. Bank merger communications services are generally rendered by a
relatively small number of specialized firms and require sophisticated and time
critical support services, such as data processing and printing which are
sometimes (as in the case of MKP) provided by outside firms. The Company faces
competition from other companies which offer services or products similar to
those offered by the Company and which have greater financial resources, more
technical personnel and more extensive service capabilities than the Company.
For example, MKP competes against larger and more established companies such as
Harte-Hanks Communication, Dimac Corporation and Arthur Anderson LLP.
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
that product a viable competitor, although at a significantly higher cost than
MARS(TM).
The Company endeavors to distinguish its services and software from those
of its competitors based upon the following factors: (i) its services and
software 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 services and software in the
marketplace. Other entities, with substantially greater resources than the
Company, compete directly with the Company, by offering services and/or software
to the same industry.
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The Company believes, however, that MKP possesses certain competitive
advantages in the merger communications field. Specifically, the principals of
MKP, Susan Michaelson and Hillary Kelbick, have over 34 years of combined
experience and have successfully completed more than 50 merger projects. Prior
to the establishment of MKP in 1994, while employed by another bank merger
communications firm, Ms. Michaelson and Ms. Kelbick were the principal employees
involved in working on and completing the NationsBank merger which created the
then third largest banking organization in the United States. MKP's first two
major merger assignments were the First Union/First Fidelity merger and the Bank
of Boston/Bay Bank merger. MKP was the sole merger communications firm involved
in these mergers. Since its formation, MKP has also performed services for
various other banking institutions, including Chemical Bank (now The Chase
Manhattan Bank), The Bank of New York, Citibank, First National Bank of
Maryland, The Dime Savings Bank of New York, Fleet Bank, CIT Group and PNC
National Bank. MKP was recently awarded the First Union/Signet Bank merger and
has received a "Future Bank Initiative" assignment from First Union National
Bank. This assignment was awarded to MKP by First Union National Bank based upon
MKP's expertise in the banking industry and involves designing and implementing
communications with the Bank's customers which describe the Bank's products and
services. In 1997, MKP received the Vendor of the Year Award from First Union
National Bank. The Vendor of the Year award is presented to the vendor that has
had a major positive impact on First Union National Bank for the year in
question. Only one such award was presented by First Union National Bank in
1997.
MARKETING
The Company's founder and principal executive officer, together with the
Managing Directors of the Company's subsidiary, MKP, are primarily responsible
for marketing its services and software. 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 services and software 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 services and/or software offered by the Company.
The Company also believes that significant opportunities exist for it to sell
its services and/or software 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
services and software 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.
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<PAGE> 17
The Company anticipates that bank merger activity will continue at a rapid
pace for at least the next four years. Additionally, MKP plans to explore
expansion into merger communications for other industries, such as insurance and
brokerage, as a means to increase MKP's revenues and reduce its current
dependence on bank merger communications.
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 written
license agreement exists, is sufficient to protect the Company's rights in its
software and technology, since copyright laws protect the holder of the
copyright against third party infringements. 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.
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
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<PAGE> 18
workbooks. There can be no assurance that the Company would have the ability or
the resources necessary to enforce its rights under such licenses.
EMPLOYEES
As of February 25, 1999, the Company had 16 full-time employees. The
Company also engages independent contractors and consultants from time to time
in connection with certain projects. As of February 25, 1999, the Company had
engaged 2 full time and 5 part time consultants. 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 and independent
contractors.
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 Condition and Results of Operations."
ITEM 2 -- DESCRIPTION OF PROPERTY
The Company's principal executive offices are located in New York City
at 335 Madison Avenue, 8th Floor, 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 llth
floor of 335 Madison Avenue. The sub- sublease expired on December 29, 1996,
which coincided 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, agreed to permit the Company to remain in
occupancy of the llth floor premises until May, 1997 on the same terms and
conditions set forth in the Company's sub-sublease with MCI.
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<PAGE> 19
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
were abated from October 1996 through March 20, 1997 and for the months of
October, November and December in each of the first four years of the lease
term. Additionally, in September 1997, the landlord agreed to a further one
month abatement of fixed minimum rent. The Company will be required to pay
operating expense and real estate tax escalation payments as additional rent.
Also, the landlord has paid or reimbursed the Company for approximately $500,000
of construction and other related costs. The Company assumed occupancy of the
8th floor premises in May 1997.
The Company believes that the facilities which it presently occupies
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
From time to time, the Company is a party to certain lawsuits that
arise in the conduct of its business. The Company is not a party to any legal
proceedings which the Company considers to be material.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company did not submit any matters to a vote of its shareholders
during the Company's fiscal year ended December 31, 1998.
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 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
February 25, 1999 were $2.75 and $0.15, respectively, as reported by the OTC
Bulletin Board. The Company believes that these quotations represent interdealer
quotations, without adjustment for retail mark-up, markdown or commissions. The
average weekly trading volume of the Common Stock since the
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<PAGE> 20
resumption of trading on the OTC Bulletin Board in November 1996 through
December 31, 1997 was approximately 35,000 shares. From January 1, 1998 through
December 31, 1998, the average weekly trading volume of the Common Stock was
approximately 67,000 shares. The Company believes that there are at least
fourteen "market-makers" in the Common Stock including Van Kasper & Company,
Inc., Laidlaw Global Securities, Inc., Fahnestock & Co., Hill Thompson Magid &
Co., Wilson Davis & Co., Herzog Heine Geduld, USCC Trading (a division of Fleet
Securities) and others. 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 February 25, 1999, the Company had approximately 185 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.
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 four fiscal years ended September 30, 1997, it incurred
losses of $146,036, $801,296, $235,049 and $544,848 for the fiscal years ended
September 30, 1994, 1995, 1996 and 1997, 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.
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In February 1998, the Company changed its fiscal year end from
September 30 to December 31. For the fiscal year ended December 31, 1998, the
Company generated revenues of $21,492,151 and had a net profit of $2,107,707.
REVENUES. The Company's revenues historically have been derived from a
limited number of customers. For the Company's fiscal year ended December 31,
1998, three customers accounted for approximately 83% for the Company's
revenues, with one customer accounting for approximately 55% 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.
SUBSIDIARIES. The Company's consolidated financial statements include
the accounts of Financial Performance Corporation and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Summary financial information concerning MKP, excluding intercompany
eliminations, as of December 31, 1998 and 1997 and for the years then ended, is
as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash .............. $ 5,910,000 $ 2,109,000
Accounts receivable 343,000 721,000
Other assets ...... 281,000 209,000
Accounts payable .. 2,478,000 1,576,000
Revenues .......... 21,492,000 8,383,000
Operating costs ... 19,312,000 8,002,000
Net income ........ 1,999,000 401,000
</TABLE>
Summary financial information concerning the Company's other two
subsidiaries, FPC Information and Aspen, as of December 31, 1998 and 1997 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 fiscal ended September 30, 1996 and 1995, respectively. Aspen, whose
operations commenced in March 1995, suspended its operations in September 1996.
Aspen was reported as a discontinued operation at September 30, 1996. The net
assets and liabilities relating to the disposal of the discontinued operation is
immaterial.
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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 December 31, 1998, the Company had net operating loss carryforwards
of approximately $3,567,000, which will expire in various years through and
including 2012. 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 December 31,
1998, the Company had a deferred tax asset of approximately $1,700,000. The
deferred tax asset consists primarily of net operating loss carryforwards and
was fully offset by a valuation allowance of the same amount.
The income tax expense for the year ended December 31, 1998 of $262,106
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 expenses as incurred and classified as research and development
costs. There were no research and development costs incurred by the Company for
the fiscal year ended December 31, 1998, the transition period ended December
31, 1997 and for the fiscal years ended September 30, 1997 and 1996.
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.
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
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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."
YEAR 2000
The Company recognizes the potential business impact relating to the
Year 2000 computer system issue and has implemented a plan to assess and improve
the Company's state of readiness with respect to such issue. The Year 2000 issue
is one where computer systems may recognize the designation "00" as 1900 when it
means 2000, resulting in system failure or miscalculations.
In recognition of the Year 2000 issue, commencing in 1998, the Company
initiated a comprehensive review of its information technology systems, which
the Company is dependent upon for the conduct of its business operations, as
well as the computer hardware and software products, components and other
equipment supplied to the Company by third parties in order to determine the
adequacy of those systems in light of the Company's future business
requirements. Year 2000 readiness was one of the factors considered in the
review of the Company's systems. Such review included testing and analysis of
the Company's systems and inquiries of third parties supplying information
technology systems, computer hardware and software products and components, and
other equipment to the Company in order to receive assurances from such third
parties that these systems, products and components are Year 2000 compliant. The
Company completed its review in January 1999.
As a result of its review, the Company has determined that its internal
financial software systems are adequate for the Company's future business needs,
including Year 2000 compliance, and do not need to be replaced. Also, the
Company has completed all necessary Year 2000 modifications with regard to the
MARS(TM) computer software product developed by the Company's subsidiary, FPC
Information Corp. The Company believes that the MARS(TM) computer software
product is Year 2000 compliant.
The Company has not developed a "worst case" scenario with respect to
Year 2000 issues, but instead has focused its resources on identifying any
material, remediable problems and reducing uncertainties generally, through the
review procedures described above.
The Company has not developed Year 2000 contingency plans, other than
the review described above, and does not believe such plans are merited by the
results of its Year 2000 review. The Company maintains and deploys contingency
plans designed to address various other potential business interruptions. These
plans may be applicable to address the possible interruption of support provided
by third parties resulting from their failure to be Year 2000 compliant.
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<PAGE> 24
If the Company or the third parties with which it has relationships
were to not successfully meet its or their Year 2000 compliance requirements,
the Company would likely encounter disruptions to its business that could have a
material adverse effect on its business, financial position and results of
operations. The Company could be materially and adversely impacted by widespread
economic or financial market disruption or by Year 2000 computer system failures
of third parties with which it has relationships.
RESULTS OF OPERATIONS
CHANGE IN FISCAL YEAR. In February 1998, the Company's fiscal year end
was changed from September 30 to December 31. A Transition Report on Form 10-QSB
was filed by the Company for the transition period commencing October 1, 1997
through December 31, 1997, pursuant to Rule 15d-10 of the Securities Exchange
Act of 1934. Accordingly, the periods for which the Company's results of
operations are compared for purposes of this section are the fiscal year ended
December 31, 1998 and the year period ended December 31, 1997 (which is
comprised of the nine month period of January 1, 1997 through September 30, 1997
and the transition period commencing October 1, 1997 through December 31, 1997)
and the fiscal years ended September 30, 1997 and September 30, 1996. A separate
audited balance sheet and statement of cash flows for the Company for the
transition period is included in this Report on pages F-17 through F-30.
FISCAL YEAR ENDED DECEMBER 31, 1998 AND YEAR ENDED DECEMBER 31, 1997
REVENUES. Revenues for the fiscal year ended December 31, 1998
increased by $13,108,984 or approximately 156.4% to $21,492,151 from $8,383,167
for the year ended December 31, 1997. This increase was attributable to the
increased size of the merger projects for which MKP was engaged during this
period. The amount of revenues generated from each of the merger projects for
which MKP is retained, as well as the cost of generating such revenues, vary
depending upon various factors, including the size of the merger and the number
of products and services offered by the merged entity. MKP accounted for 100% of
the consolidated revenues of the Company for the fiscal year ended December 31,
1998 and the year ended December 31, 1997.
COST OF REVENUES. Cost of revenues increased by $7,917,291 or
approximately 114.6% to $14,823,626 for the fiscal year ended December 31, 1998
from $6,906,335 for the year ended December 31, 1997. This increase was
attributable primarily to the increased size of the merger projects for which
MKP was engaged during this period.
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<PAGE> 25
SALARIES AND RELATED EXPENSES. Payroll expenses increased by $1,559,698
or approximately 230.8% to $2,235,358 for the fiscal year ended December 31,
1998 from $675,660 for the year ended December 31, 1997. This increase was due
primarily to increased levels of base salary and bonus compensation paid to the
managing directors of MKP as well as increased compensation paid to other
employees during this period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $169,293 or approximately 12.8% to
$1,486,869 for the fiscal year ended December 31, 1998 from $1,317,576 for the
year ended December 31, 1997. This increase reflects increased rental payments
required under the Company's lease of office space for this period. However, the
increase in selling, general and administrative expenses for the fiscal year
ended December 31, 1998 is not considered material by the Company in view of the
increased level of revenues during this period.
OPERATING INCOME (LOSS). The Company had operating income of $2,946,298
for the fiscal year ended December 31, 1998 as compared to an operating loss of
$516,404 for the year ended December 31, 1997.
NET INCOME (LOSS). The Company had net income of $2,107,707 for the
fiscal year ended December 31, 1998 as compared to a net loss of $550,738 for
the year ended December 31, 1997.
FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
REVENUES. Revenues for the fiscal year ended September 30, 1997
decreased by $998,887 or approximately 11.4% to $7,785,250 from $8,784,137 for
the fiscal year ended September 30, 1996. This decrease was attributable to a
decrease in revenues generated by MKP, resulting principally from the reduced
size of the merger projects for which MKP was engaged during this period. The
amount of revenues generated from each of the merger projects for which MKP is
retained, as well as the cost of generating such revenues, vary depending upon
various factors, including the size of the merger and the number of products and
services offered by the merged entity. MKP accounted for approximately 100% of
the consolidated revenues of the Company for the fiscal year ended September 30,
1997.
COST OF REVENUES. Cost of revenues decreased by $788,572 or
approximately 10.8% to $6,482,542 for the fiscal year ended September 30, 1997
from $7,271,114 for the fiscal year ended September 30, 1996. This decrease was
attributable primarily to the reduced size of the merger projects for which MKP
was engaged during this period.
SALARIES AND RELATED EXPENSES. Payroll expenses increased by $80,187 or
approximately 15.3% to $605,864 for the fiscal year ended September 30, 1997
from $525,677 for the fiscal year ended September 30, 1996. This increase was
attributable primarily to the increase in staff employed by MKP and FPC
Information during this period. MKP increased its staff during this period due
to the increased complexity of certain merger-related work undertaken by MKP as
well as to improve its ability to respond to various time-sensitive work
requirements of its customers. FPC Information increased its staff in order to
accelerate the completion of various upgrades and enhancements to the Company's
MARS(TM) software product.
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<PAGE> 26
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $556,685 or approximately 78.5% to
$1,265,803 for the fiscal year ended September 30, 1997 from $709,118 for the
fiscal year ended September 30, 1996. This increase was attributable primarily
to increased expenditures relating to the Company's new lease for expanded
premises, increased professional fees as well as additional Company personnel
and independent contractors retained in connection with MKP's business
operations. MKP increased the number of independent contractors retained during
this period due to the increased complexity of certain merger-related work
undertaken by MKP as well as to improve its ability to respond to various
time-sensitive work requirements of its customers.
OPERATING LOSS. The Company had an operating loss of $568,959 for the
fiscal year ended September 30, 1997 as compared to an operating profit of
$278,228 for the fiscal year ended September 30, 1996.
NET LOSS. The Company had a net loss of $544,848 for the fiscal year
ended September 30, 1997 as compared to a net loss of $235,049 for the fiscal
year ended September 30, 1996.
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
through 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 December 31, 1998, the Company had working capital of $3,820,018,
stockholders' equity of $4,161,826 and a working capital ratio (current assets
to current liabilities) of approximately 2.34:1. As of December 31, 1998 and
1997, the Company had cash and cash equivalents of $6,287,148 and $2,256,218,
respectively. The increase in cash and cash equivalents of $4,030,930 or
approximately 178.7% was attributable primarily to MKP's increased revenues and
operating income as well as improved revenue collection during the fiscal year
ended December 31, 1998 over the year ended December 31, 1997.
As of December 31, 1998 and 1997, the Company had accounts receivable of
$342,783 and $720,616, respectively. The decrease in accounts receivable of
$377,833 or approximately 52.4% was attributable primarily to differences in the
timing of MKP's billing and resultant receipt of revenues. As of December 31,
1998 and 1997, the Company had accounts payable and accrued expenses of
$2,841,188 and $1,908,153, respectively. The increase in accounts payable of
$933,035 or approximately 48.9% was attributable primarily to differences in the
timing of MKP's receipt of invoices covering expenses incurred during such
periods as well as the increased level of MKP's business during the fiscal year
ended December 31, 1998.
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<PAGE> 27
For the years ended December 31, 1998 and 1997, the Company generated
positive cash flow from operations of $4,329,565 and $673,503, respectively,
primarily as a result of an increase in revenues and utilized $588,635 and
$372,768 for investing activities during the years ended December 31, 1998 and
1997, respectively. Net cash provided by the Company's financing activities for
the years ended December 31, 1998 and 1997 were $290,000 and $310,743,
respectively.
As of December 31, 1998, the Company had no short-term debt and no
long-term debt.
As of December 31, 1998, the Company has made no material capital
commitments other than those related to non-cancelable operating leases for
office space and equipment. However, the Company expects to continue to fund
the operations of FPC Information Corp., its 50% owned subsidiary. For the years
ended December 31, 1999, 2000, 2001 and 2002, the Company's minimum payments in
connection with these leases are approximately $281,000, $281,000, $374,000 and
$415,000 per year, respectively. The Company does not currently expect to spend
any funds for the fiscal year ending December 31, 1999 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 December 31, 1999.
However, there can be no assurance that the Company will not require additional
financing prior to that time. 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 continuing
to generate revenues and income from its MKP subsidiary and the Company's
marketing efforts, including those related to MARS(TM), the ability of the
Company to successfully market its services and software 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 entities or products (or rights related thereto) 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 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.
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<PAGE> 28
ITEM 7 -- FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company for the fiscal
year ended December 31, 1998 and the year ended December 31, 1997 and for the
transition period commencing October 1, 1997 through December 31, 1997 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.
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 56 President; Chief Executive Officer; Chief Financial
Officer; Chairman of the Board of Directors
Duncan G. Burke 55 Vice President and Director
Richard Levy 63 Secretary and Director
Ottavio Serena 46 Director
Susan Michaelson 41 Managing Director of MKP
Hillary Kelbick 42 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,
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<PAGE> 29
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. 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.
Since March 1998, Mr. Levy has been a Senior Vice President with Tishman Real
Estate Services, a real estate consulting and brokerage firm. Until March 1998,
Mr. Levy was a Senior Director at Cushman & Wakefield, Inc., a real estate
consulting and brokerage firm, and was employed by such firm for more than 38
years. Mr. Levy is also a director of Mascott Corporation, a restaurant and
catering company. Mr. Levy attended Muhlenberg College and Columbia University.
OTTAVIO SERENA was elected in October 1998 by the Board of Directors,
pursuant to the provisions of the Company's by-laws, to fill the vacancy
resulting from the resignation of Philip L. Hage as a director in June 1997. Mr.
Serena has been a consultant with Citicorp Venture Capital, a leveraged buy-out
firm, since 1993. From 1993 to 1997 he was President and Director of Galaxy
Energy USA, a privately held oil trading company based in Houston, Texas. From
1991 to 1993, Mr. Serena served as interim Chairman and Director of RES
Associates, a Citicorp Venture Capital portfolio company. From 1987 to 1993 he
was a Managing Director and co-founder of The Lynx Partners, an investment
banking firm based in New York specializing in mergers and acquisitions,
buy-outs and corporate finance for both U.S. and European companies. From 1982
to 1987, Mr. Serena was a Vice President for Bankers Trust Company responsible
for corporate financing activities for large multinational companies. From 1977
to 1982, Mr. Serena was a management trainee and then an Assistant Treasurer for
J.P. Morgan. Mr. Serena has a graduate degree in business and economics from the
University of Rome. Ms. Serena is on the Advisory Board of the American Museum
of Natural History.
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.
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<PAGE> 30
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. The most recent annual meeting
of Shareholders of the Company was held in August 1996. 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. However, Charlotte
Tuck, an employee of the Company, is the wife of Ottavio Serena, a Director of
the Company.
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 Mr. Levy (who failed to
file a Form 3 in June 1994 and a Form 4 in July and October 1996 and October
1998), Mr. Burke (who failed to file a Form 3 in June 1994 and a Form 4 in
January 1995 and October 1996 and October 1998), Mr. Serena (who failed to
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<PAGE> 31
file a Form 4 in October 1998) 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. This warrant expires in November 1999. The Company registered the shares
of Common Stock underlying the warrant under a registration statement filed by
the Company which was declared effective in February 1997. As of February 25,
1999, the registration statement was no longer current. Under the agreement, Van
Kasper was obligated to 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 provided that Laidlaw
would render general corporate advice to the Company and proposed 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 registered the shares of Common Stock underlying the warrant
under a registration statement filed by the Company which was declared effective
in February 1997. As of February 25, 1999, the registration statement was no
longer current. During the Company's fiscal year ended September 30, 1997, the
Company advised Laidlaw that Laidlaw had abrogated the provisions of this
agreement and that the three-year warrant issued to Laidlaw referred to above
had been cancelled. 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."
ITEM 10 -- EXECUTIVE COMPENSATION
The following table summarizes, for the fiscal years ended December 31,
1998 and September 30, 1997 and 1996, 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 $100,000 for services rendered in all
capacities to the Company (the "named executive officers"). The table also
includes information for each of Susan Michaelson and Hillary Kelbick, who are
not employed by the Company but are each Managing Directors of the Company's
subsidiary, Michaelson Kelbick Partners Inc. See "-- Employment Agreements."
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<PAGE> 32
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
NAME AND FISCAL OTHER ANNUAL OPTIONS/
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION WARRANTS(#)
- ------------------ ------ --------- -------- ------------ -----------
<S> <C> <C> <C> <C>
William F. Finley (1) 1998(2) $187,000 $100,000(8) $18,480(10) --
Chief Executive Officer 1997 $150,000 -- $14,534(11) --
1996 $150,000 $ 25,000 $30,000(12) 200,000
Susan Michaelson (3)(4) 1998 $169,000 $627,000(9) $18,480(13) --
Managing Director of MKP 1997 $160,000 $141,500 $15,500(14) --
1996 $127,000 $215,000 $30,000(10) 200,000(4)
Hillary Kelbick(5) 1998 $169,000 $627,000(9) $18,480(13) --
Managing Director of MKP 1997 $160,000 $141,500 $15,500(14) --
1996 $127,000 $215,000 $30,000(10) 200,000(5)
Sean Brennan(6) 1998 -- -- -- --
Member of Aspen 1997 -- -- -- --
1996 $ 83,334 -- -- --
Richard Loos(7) 1998 -- -- -- --
Member Officer of Aspen 1997 -- -- -- --
1996 $ 37,500 -- -- --
</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. All of the shares of Common Stock underlying
the warrants issued to Mr. Finley were registered by the Company under
a registration statement which was declared effective in February 1997.
This registration statement is no longer current. 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.
Effective as of October 1, 1997, the Company entered into a new
employment agreement with Mr. Finley for a period of three years
providing for an annual salary of $150,000. In November 1997, the
Company's Board of Directors voted to grant Mr.
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<PAGE> 33
Finley a bonus of $100,000. Effective as of October 1, 1998, the
Company entered into a revised employment agreement with Mr. Finley
providing for an increase in Mr. Finley's annual salary to $250,000 and
containing revised provisions concerning change of control, termination
of employment and other matters. See "-- Employment Agreements."
(2) In February 1998, the Company changed its fiscal year end from
September 30 to December 31.
(3) Susan Michaelson is the wife of William F. Finley, the Company's
President, Chief Executive Officer and Chief Financial Officer.
(4) 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. Effective as of September 11,
1997, MKP entered into a new employment agreement with Ms. Michaelson
for a period of three years providing for an annual salary of $150,000.
Effective as of October 1, 1998, the Company entered into a revised
employment agreement with Ms. Michaelson providing for an increase in
Ms. Michaelson's annual salary to $250,000 and containing revised
provisions concerning change of control, termination of employment and
other matters. See "-- Employment Agreements."
(5) 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. Effective as of September 11, 1997, MKP
entered into a new employment agreement with Ms. Kelbick for a period
of three years providing for an annual salary of $150,000. Effective as
of October 1, 1998, the Company entered into a revised employment
agreement with Ms. Kelbick providing for an increase in Ms. Kelbick's
annual salary to $250,000 and containing revised provisions concerning
change of control, termination of employment and other matters. See
"--Employment Agreements."
(6) Mr. Brennan resigned as an officer of Aspen in July 1996 and does not
currently receive any compensation from the Company.
(7) Mr. Loos resigned as an officer of Aspen in September 1996 and does not
currently receive any compensation from the Company.
(8) This bonus was authorized by the Company's Board of Directors during
the Company's fiscal year ended September 30, 1997 but was not paid
until the Company's fiscal year ended December 31, 1998.
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<PAGE> 34
(9) Amount of bonus actually paid during the Company's fiscal year ended
December 31, 1998. The amount of bonus accrued for the fiscal year
ended December 31, 1998 was $857,000.
(10) For the year ended December 31, 1998, the Company contributed an
aggregate of $18,480 for such executive under its 401-K and profit
sharing plan. See "Pension Plan".
(11) For the year ended September 30, 1997, the Company contributed an
aggregate of $14,534 for such executive under its 401-K and profit
sharing plan. See "Pension Plan".
(12) For the year ended September 30, 1996, the Company contributed an
aggregate of $30,000 for such executive under its non-contributing
pension and profit sharing plan.
See "Pension Plan."
(13) For the year ended December 31, 1998, the Company contributed an
aggregate of $18,480 for such executive under its 401-K and profit
sharing plan. See "Pension Plan".
(14) For the year ended September 30, 1997, the Company contributed an
aggregate of approximately $15,500 for such person under its 401-K and
profit sharing plan. See "Pension Plan."
STOCK OPTION AND WARRANT GRANTS IN 1997
No options or warrants were issued by the Company to any of the "named
executive officers" of the Company during the transition period commencing
October 1, 1997 through December 31, 1997 or during the fiscal year ended
December 31, 1998.
OPTION EXERCISES AND FISCAL YEAR-END HOLDINGS
No options or warrants were exercised by any named executive officer for
the transition period commencing October 1, 1997 through December 31, 1997 or
during the fiscal year ended December 31, 1998. The following table sets forth
information, as of December 31, 1998, concerning the number of shares received
upon exercise of warrants, the aggregate dollar value received upon exercise,
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" and the Managing Directors of MKP.
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<PAGE> 35
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS/WARRANTS OPTIONS/WARRANTS
EXERCISE REALIZED(1) AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------ -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F. Finley -- -- 400,000 -- $376,000 --
Susan -- -- 200,000 -- $138,000 --
Michaelson
Hillary Kelbick -- -- 200,000 -- $138,000 --
</TABLE>
..............................
(1) The value realized with regard to exercised warrants is based on the
Company's estimate of the fair market value of the Common Stock
underlying the warrants on the date of exercise, minus the exercise
price of the warrant.
(2) 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 February 25, 1999, which was $1.69, minus the
exercise price of the option or warrant, as the case may be.
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 were previously eligible for grants of stock options pursuant
to the Company's 1988 Incentive Stock Option Plan. As of October 1998, 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 70,000 shares, exercisable at an average exercise price of
approximately $4.60 per share until October 1998. However, the Company's 1988
Incentive Stock Option Plan expired by its terms in October 1998. None of the
options previously issued under such plan were exercised and such options have
expired as of December 31, 1998. (See "Item 10 -- Incentive Stock Option Plan).
In December 1994 and July 1996, Duncan Burke and Richard Levy,
respectively, each 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,
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<PAGE> 36
Philip L. Hage, a former director of the company, received warrants to purchase
25,000 shares of Common Stock at $1.00 per share, exercisable until September
15, 2006. In November 1997, the Company issued to each of Richard Levy and
Duncan Burke warrants to purchase 50,000 shares of Common Stock at $0.50 per
share, exercisable until November 1999, together with "piggyback" registration
rights as to the shares of Common Stock underlying the warrants. In October
1998, the Company issued to each of Richard Levy, Duncan Burke and Ottavio
Serena, warrants to purchase 100,000 shares of Common Stock at $0.50 per share,
exercisable until October 31, 2001. Such warrants may be exercised on a
"cashless" basis and are entitled to "piggyback" registration rights as to the
shares of Common Stock underlying the warrants. The Company also issued to
Ottavio Serena warrants to purchase an additional 100,000 shares of Common
Stock, exercisable on the same terms as the other warrants issued in October
1998, as compensation for investment banking and consulting services furnished
by Mr. Serena to the Company. 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 were reserved
for issuance to officers, directors and key employees of the Company. Under the
Option Plan, options were granted at 100% of fair market value on the date of
grant (or 110% of fair market value, if the grantee was the owner of 10% or more
of the Company's Common Stock as of the date of grant). As of October 1998, the
Company had granted options to 5 individuals to purchase a total of 70,000
shares, exercisable at an average exercise price of approximately $4.60 per
share until October 1998. However, the Company's 1988 Incentive Stock Option
Plan expired by its terms in October 1998. None of the options previously issued
under such plan were exercised and such options have expired as of December 31,
1998.
EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five-year employment
agreement with Mr. Finley which expired on August 31, 2000. Under the agreement,
Mr. Finley's initial annual salary was $125,000, subject to increases as
determined by the Company's Board of Directors, and Mr. Finley's salary was
subsequently increased to $150,000.
Effective as of October 1, 1997, the Company entered into a new three-year
employment agreement with Mr. Finley which expires on September 30, 2000. Under
the new employment agreement, Mr. Finley's initial salary was $150,000 per
annum, subject to periodic increases as determined by the Company's Board of
Directors. In the event of the termination of Mr. Finley's employment by reason
of (a) a "change in control" (as such term is defined in the employment
agreement) of the Company, (b) an uncured default by the Company under the
employment agreement, (c) a material and adverse change in Mr. Finley's
management functions, duties or responsibilities, (d) Mr. Finley's ceasing to be
a director and the Chief Executive Officer of the Company (other than by reason
of Mr. Finley's death, incapacity or resignation) or (e) an improper termination
of Mr. Finley's employment by the Company, then in addition to paying Mr.
Finley's salary and accrued benefits through the date of termination of
employment, the
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Company was obligated to pay to Mr. Finley, as severance pay, an amount equal to
200% of Mr. Finley's annual base salary rate as of the effective date of
termination and to maintain through the remaining balance of the term of the
employment agreement (but not less than two years from the date of termination
of Mr. Finley's employment agreement) all employee benefit plans and programs in
which Mr. Finley was entitled to participate. The Company agreed to pay
reasonable travel and entertainment expenses incurred by Mr. Finley on behalf of
the Company and to provide Mr. Finley with a leased automobile. Pursuant to this
employment agreement, if Mr. Finley did not elect not to renew his employment
agreement at the expiration of the term and the Company did not elect to renew
Mr. Finley's employment upon the expiration of the term thereof, then Mr. Finley
was entitled to receive 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 was prohibited from
disrupting any relationships, contractual or otherwise, between the Company and
any of its customers, clients, employees or independent contractors.
Effective as of October 1, 1998, the Company amended its employment
agreement with Mr. Finley to increase Mr. Finley's annual salary from $150,000
to $250,000 and to increase Mr. Finley's severance payment in the event Mr.
Finley does not elect not to renew his employment agreement at the expiration of
the term thereof and the Company does not elect to renew Mr. Finley's employment
upon the expiration of the term thereof from $100,000 to $350,000. The $350,000
severance payment to Mr. Finley would also become due if Mr. Finley's employment
agreement is terminated by reason of the Company's breach thereof. If Mr. Finley
elects not to renew the employment agreement upon the expiration of the term
thereof, Mr. Finley will be entitled to a severance payment of $250,000. The
amended employment agreement also provides that (i) if the Company elects not to
renew the employment agreement with Mr. Finley upon the expiration of the term
thereof, (ii) Mr. Finley terminates the employment agreement due to a "change in
control" of the Company or MKP or (iii) the Company terminates the employment
agreement with Mr. Finley in breach of the terms thereof, then in addition to
the cash severance payments provided for, Mr. Finley will be entitled to receive
common stock of the Company, with "piggy-back" registration rights, equal in
value to the difference, if any, between the fair market value of all stock and
warrants of the Company then owned by Mr. Finley and $1,000,000.00.
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. All of these
warrants are immediately exercisable.
In October 1994, MKP 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 payable to each
of Ms. Michaelson and Ms. Kelbick was subsequently increased to $115,000.
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Effective as of September 11, 1997, MKP entered into a new three-year
employment agreement with each of Ms. Michaelson and Ms. Kelbick which expires
on September 10, 2000. Under the new agreements, the initial annual base salary
payable to each of Ms. Michaelson and Ms. Kelbick was $150,000, subject to
periodic increases to be determined by MKP's Board of Directors. The employment
agreements further provide for an annual incentive compensation payment for each
of Ms. Michaelson and Ms. Kelbick equal to a percentage, determined annually by
the Board of Directors (not to exceed 30% in the aggregate) of the net income
before taxes of MKP as if MKP was not a member of the Company's consolidated
group. For the year ended December 31, 1998, Ms. Michaelson and Ms. Kelbick
together received payment of an aggregate of approximately $1,254,000 under the
incentive program. Ms. Michaelson and Ms. Kelbick have the option to receive all
or a portion of any bonus payment by means of issuance of securities of the
Company.
Pursuant to these employment agreements, if either Ms. Michaelson or Ms.
Kelbick does not elect 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 $250,000. These employment agreements provide each of
Ms. Michaelson and Ms. Kelbick with a clothing expense allowance of $10,000 for
each year of the term of the agreement and a leased automobile throughout the
term. In the event of the termination of employment of either Ms. Michaelson or
Ms. Kelbick by reason of (a) a "change in control" (as such term is defined in
the employment agreement) of MKP or the Company, (b) an uncured default by MKP
under the employment agreement, (c) a material and adverse change in the
management functions, duties or responsibilities of the employee or (d) an
improper termination by MKP of employment of the employee, then in addition to
paying all salary and accrued benefits through the date of termination of
employment, MKP shall be obligated to pay to the employee, as severance pay, an
amount equal to 200% of the employee's annual base salary rate in effect as of
the date of termination and to maintain through the remaining balance of the
term of the employment agreement (but not less than two years from the date of
termination of the employee's employment agreement) all employee benefit plans
and programs in which the employee was entitled to participate. 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.
Effective as of October 1, 1998, MKP entered into amendments of the
employment agreements with each of Ms. Michaelson and Ms. Kelbick. Pursuant to
the amendments, the annual base salary payable to each of Ms. Michaelson and Ms.
Kelbick was increased to $250,000 and the annual clothing allowance for each of
Ms. Michaelson and Ms. Kelbick was increased from $10,000 to $15,000.
Additionally, the severance payment required if either Ms. Michaelson or Ms.
Kelbick does not elect not to renew her respective employment agreement with MKP
at the expiration of the term and MKP elects not to renew the employment
agreement was increased from $250,000 to $350,000. The $350,000 severance
payment would also become due to each of Ms. Michaelson and Ms. Kelbick if the
employment of such employee is terminated by reason of MKP's breach of the
employment agreement with such employee. Additionally, if either Ms. Michaelson
or Ms. Kelbick elects not to renew her respective employment agreement with MKP
at the expiration of the term, the respective employee will be entitled to
receive a severance payment of $250,000. If the employment of either Ms.
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<PAGE> 39
Michaelson or Ms. Kelbick shall be terminated for any reason other than "for
cause" by MKP, then the respective employee shall be entitled to continued
payment of the annual incentive compensation payment for a period of six (6)
months after termination based upon MKP's net income before taxes for projects
which were active on the date of termination.
Effective as of October 1, 1998, the Shareholders Agreement by and among
the Company, MKP, Susan Michaelson and Hillary Kelbick was amended to provide,
among other things, that in the event of the termination of the employment of
either Ms. Michaelson or Ms. Kelbick for any reason, the respective employee has
the right to require MKP to purchase all of the shares of stock of MKP owned by
such employee for an amount equal to the "cash value" of such stock (i.e., the
amount of cash and cash equivalents less accounts payable and other short term
liabilities, all as reflected on MKP's then current balance sheet, multiplied by
the percentage equity ownership in MKP represented by the stock of MKP owned by
such employee). If this right is not exercised by the employee, then MKP will
have the option to purchase such employee's stock in MKP at the "fair market
value" thereof as provided in the original Shareholders Agreement. "See Item 12
- -- Certain Relationships and Related Transactions -- Transactions with Directors
and Executive Officers."
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 provided 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 of
$90,000 in connection with the plan for the benefit of Mr. Finley, Ms.
Michaelson and Ms. Kelbick. This plan was terminated in March 1997.
In January, 1997, the Company established a 401(k) salary deferred
benefit plan covering substantially all employees who have met certain
requirements. The plan requires contributions by the Company equal to 50% up to
a maximum of 3% of each participant's contribution percentage. In September,
1997, the Company amended its 401(k) plan to provide a provision for
discretionary profit sharing plan contributions. Total contributions to the plan
(401(k) and profit sharing) were approximately $127,000 for the year ended
December 31, 1998.
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ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of February 25, 1999, 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, (iv) each of the managing
directors of the Company's subsidiary and (v) 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
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF CLASS(1)
- ---------------- --------------------- -------------------
<S> <C> <C>
Robert S. Trump(2) 5,555,422 58.7%
William F. Finley(3) 675,000 6.7%
Duncan G. Burke(4) 220,000 2.3%
Richard Levy(5) 220,000 2.3%
Ottavio Serena(6) 266,000 2.7%
Susan Michaelson(7) 275,000 2.8%
Hillary Kelbick(8) 275,000 2.8%
All directors and executive
officers as a group (4 persons) 1,381,000 13.1%
</TABLE>
..............................
(1) Based upon an aggregate of 9,471,534 shares of Common Stock outstanding
as of February 25, 1999, plus, for each listed beneficial owner, the
number of shares which such person has the right to acquire within 60
days of February 25, 1999.
(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) 75,000 shares of Common Stock held by Susan Michaelson;
(ii) 200,000 shares issuable upon the exercise of warrants granted on
September 15, 1995; (iii) 200,000 shares issuable upon the exercise of
warrants granted on September 16, 1996; and (iv) 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
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<PAGE> 41
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 50,000 shares issuable upon the exercise of warrants granted
to Mr. Burke on September 16, 1996, 50,000 shares issuable upon the
exercise of warrants granted to Mr. Burke on December 29, 1997 and
100,000 shares issuable upon the exercise of warrant granted to Mr.
Burke on October 21, 1998. The address of Mr. Burke is c/o Burke
Capital, Two Greenwich Plaza, P.O. Box 628, Greenwich, Connecticut
06836.
(5) Includes 50,000 shares issuable upon the exercise of warrants granted
to Mr. Levy on September 16, 1996, 50,000 shares issuable upon the
exercise of warrants granted to Mr. Levy on December 29, 1997 and
100,000 shares issuable upon the exercise of warrants granted to Mr.
Levy on October 21, 1998. The address of Mr. Levy is c/o Tishman Real
Estate Services, 40 Wall Street, New York, New York 10005.
(6) Includes 200,000 shares issuable upon the exercise of warrants granted
to Mr. Serena on October 21, 1998. Also includes 1,000 shares of Common
Stock and 50,000 shares of Common Stock issuable upon the exercise of
warrants owned by Mr. Serena's wife, Charlotte Tuck, an employee of the
Company. The address of Mr. Serena is 399 Park Avenue, 14th Floor, New
York, New York 10043.
(7) Includes: (i) 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.
(8) 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.
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.
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<PAGE> 42
TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS
ROBERT S. TRUMP. In January 1993, Robert S. Trump (who as of February 25,
1999 beneficially owned approximately 57.9% 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 per share, 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 Mr. Trump in the aggregate principal amount of $986,500 (the "Consolidated
Note"). Indebtedness under the Consolidated
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<PAGE> 43
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 plus accrued
interest thereon, including all of the indebtedness represented by the
Exchangeable Note, the Consolidated Note and the Fifth Secured Promissory Note,
as well as other indebtedness of the Company held by Mr. Trump in the form of
demand loans 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.
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<PAGE> 44
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 were exercised.
In October 1997, Mr. Trump purchased from the Company an additional 30%
equity interest in FPC Information for a purchase price of $225,000.
Accordingly, as of February 25, 1999, Mr. Trump owns a 50% equity interest in
FPC Information and the Company owns a 50% equity interest in FPC Information.
In March 1998, Mr. Trump purchased from the Company 1,000,000 shares of
Common Stock for a purchase price of $0.20 per share, as part of a private
placement by the Company.
For further information concerning certain other arrangements between
the Company and its principal stockholders. See "Item 1 -- Description of
Business."
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 February 25, 1999 may be deemed to
beneficially own approximately 6.7% of the Company's outstanding Common Stock,
received warrants to purchase 100,000 shares of Common Stock with an exercise
price of $0.50 per share, which warrants were 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. As of December 31,
1998, all of these remaining warrants held by Mr. Finley had expired. 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 the Vice President and a 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, in September 1996 Mr. Burke
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received warrants to purchase 50,000 shares of Common Stock which are
exercisable at $1.00 per share for a ten-year period, in December 1997 Mr. Burke
received warrants to purchase 50,000 shares of Common Stock which are
exercisable at $0.50 per share through November 1999 and in October 1998, Mr.
Burke received warrants to purchase 100,000 shares of Common Stock which are
exercisable at $0.50 per share through October 31, 2001. The shares of Common
Stock issued to Mr. Burke in December 1994 and the shares of Common Stock
underlying the warrants issued to Mr. Burke in September 1996 were registered by
the Company under a registration statement which was declared effective in
February 1997. As of February 25, 1999, this registration statement was no
longer current. The shares of Common Stock underlying the warrants issued to Mr.
Burke in December 1997 and in October 1998 are entitled to "piggyback"
registration rights. The warrants issued to Mr. Burke in October 1998 are
entitled to "cashless exercise" rights. All of the warrants owned by Mr. Burke
are immediately exercisable. Mr. Burke was also a Vice President of Laidlaw
Equities, Inc. during 1991 and 1992. In February 1999, the Company agreed that
in the event of any corporate financial transaction involving the Company, such
as the acquisition of another company or business by the Company, a sale or
merger of the Company, or a private offering or other sale or placement of
equity or debt by the Company, with respect to which any of the current outside
directors of the Company (i.e., Messrs. Burke, Levy and Serena) shall act as the
procuring party or shall otherwise have been entitled to payment of a fee or
commission if such outside director were an independent third party, then in any
such event, such outside director shall be entitled to payment of a fee or
commission from the Company in an amount which shall be fair, reasonable and
customary in the financial or banking industry with regard to such transaction
as if such fee or commission were negotiated on an arms-length basis with an
unaffiliated third party such as an independent investment banking firm. 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, was
previously a Senior Director at Cushman & Wakefield, which firm acted as a real
estate broker with regard to the Company's lease of a portion of the 8th floor
at 335 Madison Avenue, New York, New York in October 1996. The Company was 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, 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, in December 1997 Mr. Levy
received warrants to purchase 50,000 shares of Common Stock which are
exercisable at $0.50 per share through November 1999 and in October 1998, Mr.
Levy received warrants to purchase 100,000 shares of Common Stock which are
exercisable at $0.50 per share through October 31, 2001. The shares of Common
Stock issued to Mr. Levy in July 1996 and the shares of Common Stock underlying
the warrants issued to Mr. Levy in September 1996 were registered by the Company
under a registration statement which was declared effective in February 1997. As
of February 25, 1999, this registration statement was no longer current. The
shares of Common Stock underlying the warrants issued to Mr. Levy in December
1997 and in October 1998 are entitled to "piggyback" registration rights. The
warrants issued to Mr. Levy in October 1998 are entitled to "cashless exercise"
rights. All of the warrants owned by Mr. Levy are exercisable immediately. In
February 1999, the Company agreed that in the event of any corporate financial
transaction involving the Company, such as
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<PAGE> 46
the acquisition of another company or business by the Company, a sale or merger
of the Company, or a private offering or other sale or placement of equity or
debt by the Company, with respect to which any of the current outside directors
of the Company (i.e., Messrs. Burke, Levy and Serena) shall act as the procuring
party or shall otherwise have been entitled to payment of a fee or commission if
such outside director were an independent third party, then in any such event,
such outside director shall be entitled to payment of a fee or commission from
the Company in an amount which shall be fair, reasonable and customary in the
financial or banking industry with regard to such transaction as if such fee or
commission were negotiated on an arms-length basis with an unaffiliated third
party such as an independent investment banking firm. See "Item 9 -- Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act -- Consulting Agreements."
OTTAVIO SERENA is currently a Director of the Company. In October 1998, Mr.
Serena received warrants to purchase 100,000 shares of Common Stock which are
exercisable at $0.50 per share through October 31, 2001. In October 1998, the
Company also issued to Mr. Serena warrants to purchase an additional 100,000
shares of Common Stock on the same terms as the other warrants issued in October
1998, as compensation for certain investment banking and consulting services
furnished by Mr. Serena to the Company. The shares of Common Stock underlying
these warrants are entitled to "piggyback" registration rights. All of these
warrants are entitled to "cashless exercise" rights and are immediately
exercisable. In February 1999, the Company agreed that in the event of any
corporate financial transaction involving the Company, such as the acquisition
of another company or business by the Company, a sale or merger of the Company,
or a private offering or other sale or placement of equity or debt by the
Company with respect to which any of the current outside directors of the
Company (i.e., Messrs. Burke, Levy and Serena) shall act as the procuring party
or shall otherwise have been entitled to payment of a fee or commission if such
outside director were an independent third party, then in any such event, such
outside director shall be entitled to payment of a fee or commission from the
Company in an amount which shall be fair, reasonable and customary in the
financial or banking industry with regard to such transaction as if such fee or
commission were negotiated on an arms-length basis with an unaffiliated third
party such as an independent investment banking firm. See "Item 9 -- Directors,
Executive Officers, Promoter and Control Persons; Compliance with Section 16(a)
of the Exchange Act -- Consulting Agreements.
PHILIP L. HAGE is a former Director of the Company and is currently a 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. The shares of Common Stock underlying the warrants
issued to Mr. Hage were registered by the Company under a registration statement
which was declared effective in February 1997. As of February 25, 1999, this
registration statement was no longer current. These warrants are exercisable
immediately. Van Kasper provided advisory services to the Company pursuant to
the terms of a two-year, non-exclusive advisory agreement. As of February 25,
1999, this advisory agreement had expired by its terms. Mr. Hage resigned as a
director of the Company effective as of June 30, 1997. 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
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<PAGE> 47
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. See "Item 9 -- Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act -- Consulting Agreements."
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. See "Item 9 Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act -- Consulting Agreements."
For further information concerning employment agreements and certain
other arrangements between the Company and its directors and executive officers
and other persons, see "Item 10 -- Executive Compensation."
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:
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 10-0 for the period ended March 31,
1988).
3.3 Amendment to Certificate of Incorporation dated July 1, 1986
(incorporated by reference to Exhibit 3.3 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1996).
3.4 Amendment to Certificate of Incorporation dated March 14, 1988
(incorporated by reference to Exhibit 3.4 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1996).
3.5 Amendment to Certificate of Incorporation dated September 13,
1996 (incorporated by reference to Exhibit 3.5 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1996).
3.6 By-laws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-18, No. 33-7778).
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<PAGE> 48
3.7 Amendment to By-Laws dated July 1995 (incorporated by
reference to Exhibit 3.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.1 Specimen Certificate of Common Stock (incorporated by
reference to Exhibit 4.1 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
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).
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).
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<PAGE> 49
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).
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<PAGE> 50
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).
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).
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<PAGE> 51
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).
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).
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<PAGE> 52
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 36, 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).
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<PAGE> 53
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).
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<PAGE> 54
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).
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 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 (incorporated by reference to
Exhibit 10.66 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
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<PAGE> 55
10.67 Letter dated June 20, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.67 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.68 General Form of Subscription Agreement used in private
placements in 1996 (incorporated by reference to Exhibit 10.68
to Report on Form 10-KSB for fiscal year ended September 30,
1996).
10.69 Form of Warrant Agreement for Warrants issued in September
1996 (incorporated by reference to Exhibit 10.69 to Report on
Form 10-KSB for fiscal year ended September 30, 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 (incorporated by
reference to Exhibit 10.70 to Report on Form 10-KSB for
fiscal year ended September 30, 1996).
10.71 Executive Employment Agreement dated as of September 11, 1997
between the Registrant and William F. Finley (incorporated by
reference to Exhibit 10.71 to Report on Form 10-KSB for the
fiscal year ended September 30, 1997).
10.72 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Susan
Michaelson (incorporated by reference to Exhibit 10.72 to
Report on Form 10-KSB for the fiscal year ended September 30,
1997).
10.73 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Hillary Kelbick
(incorporated by reference to Exhibit 10.73 to Report on Form
10-KSB for the fiscal year ended September 30, 1997).
10.74 Form of Warrant dated as of December 29, 1997 issued to Duncan
Burke (incorporated by reference to Exhibit 10.74 to Report on
Form 10-KSB for the fiscal year ended September 30, 1997).
10.75 Form of Warrant dated as of December 29, 1997 issued to
Richard Levy (incorporated by reference to Exhibit 10.75 to
Report on Form 10-KSB for the fiscal year ended September 30,
1997).
10.76 Stock Purchase Agreement dated as of October 1, 1997 by and
between the Company and Robert S. Trump (incorporated by
reference to Exhibit 10.76 to Report on Form 10-KSB for the
fiscal year ended September 30, 1997).
10.77. First Amendment to Executive Employment Agreement by and among
the Company, FPC Information Corp. and William F. Finley dated
as of October 1, 1998 (incorporated by reference to Exhibit
10.77 to Report on Form 10-QSB for the fiscal quarter ended
September 30, 1998).
10.78. First Amendment to Managing Director's Agreement between MKP
and Susan Michaelson dated as of October 1, 1998 (incorporated
by reference to Exhibit 10.78 to Report on Form 10-QSB for the
fiscal quarter ended September 30, 1998).
10.79. First Amendment to Managing Director's Agreement between MKP
and Hillary Kelbick dated as of October 1, 1998 (incorporated
by reference to Exhibit 10.79 to Report on Form 10-QSB for the
fiscal quarter ended September 30, 1998).
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<PAGE> 56
10.80. Restated and Amended Shareholders Agreement dated as of
October 18, 1994 by and among MKP, Susan Michaelson, Hillary
Kelbick and the Company, effective as of October 1, 1998
(incorporated by reference to Exhibit 10.80 to Report on Form
10-QSB for the fiscal quarter ended September 30, 1998).
10.81. Form of Warrant dated as of October 21, 1998 between the
Registrant and Richard Levy.
10.82. Form of Warrant dated as of October 21, 1998 between the
Registrant and Duncan G. Burke.
10.83. Form of Warrant dated as of October 21, 1998 between the
Registrant and Ottavio Serena.
10.84. Form of Warrant dated as of October 21, 1998 between the
Registrant and Gary S. Friedman.
10.85. Form of Warrant dated as of October 21, 1998 between the
Registrant and Charlotte Tuck.
10.86. Form of Warrant Agreement dated as of October 21, 1998
covering warrants issued to Richard Levy, Duncan G. Burke,
Ottavio Serena, Gary S. Friedman and Charlotte Tuck.
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule.
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<PAGE> 57
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.
Dated: March 3, 1999
FINANCIAL PERFORMANCE CORPORATION
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ WILLIAM F. FINLEY Chief Executive Officer and President; March 3, 1999
- ---------------------------- (Principal Executive Officer and
William F. Finley Principal Financial and Accounting
Officer)
/s/ RICHARD LEVY Secretary and Director March 3, 1999
- ----------------------------
Richard Levy
/s/ DUNCAN G. BURKE Vice President and Director March 3, 1999
- ----------------------------
Duncan G. Burke
/s/ OTTAVIO SERENA Director March 3, 1999
- ----------------------------
Ottavio Serena
</TABLE>
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<PAGE> 58
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT ON FORM 10-KSB
YEARS ENDED DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
Page
No.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-3
Statements of Operations F-4
Statements of Cash Flows F-5
Statements of Changes in Stockholders' Equity F-6
Notes to Financial Statements F-7
F-1
<PAGE> 59
[LETTERHEAD]
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 sheets of Financial
Performance Corporation and Subsidiaries as of December 31, 1998 and 1997 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 December 31, 1998 and 1997 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
February 23, 1999
F-2
<PAGE> 60
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 6,287,148 $ 2,256,218
Accounts receivable 342,783 720,616
Prepaid expenses and other current assets 31,275 79,110
----------- -----------
Total current assets 6,661,206 3,055,944
Property and equipment, net of accumulated depreciation 213,729 198,963
Software development costs -- 135,605
Investment in subsidiary 666,039 426,000
Other assets 310,086 303,806
----------- -----------
$ 7,851,060 $ 4,120,318
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 2,841,188 $ 1,908,153
----------- -----------
Total current liabilities 2,841,188 1,908,153
----------- -----------
Minority interest in consolidated subsidiaries 848,046 448,046
----------- -----------
Stockholders' equity
Common stock - authorized 50,000,000 shares of $.01 par
value per share: issued and outstanding 9,471,534 as of
December 31, 1998; 8,021,534 as of December 31, 1997 94,715 80,215
Additional paid in capital 7,756,261 7,480,761
Accumulated (deficit) (3,689,150) (5,796,857)
----------- -----------
Total stockholders' equity 4,161,826 1,764,119
----------- -----------
$ 7,851,060 $ 4,120,318
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 61
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
Revenues $ 21,492,151 $ 8,383,167
------------ -------------
Costs and expenses
Cost of revenues 14,823,626 6,906,335
Salaries and related expenses 2,235,358 675,660
Selling, general and administrative 1,486,869 1,317,576
------------ -------------
18,545,853 8,899,571
------------- -------------
Operating income (loss) 2,946,298 (516,404)
------------ -------------
Other income (expense):
Interest income 80,515 48,444
Minority interest in earnings of subsidiaries (657,000) (53,600)
------------ -------------
(576,485) (5,156)
------------ -------------
Income (loss) before income taxes 2,369,813 (521,560)
Income taxes 262,106 29,178
------------ -------------
Net income (loss) $ 2,107,707 $ (550,738)
============ =============
Earnings (loss) per common share:
Basic $ . 24 $ (.06)
Diluted . 23 (.06)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 62
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ 2,107,707 $ (550,738)
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and amortization 212,435 152,392
Minority interest in earnings of consolidated subsidiaries 657,000 53,600
Increase (decrease) in cash flows from operating activities resulting from
changes in:
Accounts receivable 377,833 376,942
Prepaid expenses and other current assets 47,835 82,587
Other assets (6,280) (143,550)
Accounts payable and accrued expenses 933,035 702,270
----------- -----------
Net cash provided by operating activities 4,329,565 673,503
----------- -----------
Cash flows from investing activities:
Acquisition of equipment (89,635) (154,591)
Software development costs -- (210,177)
Investment in subsidiary (499,000) (8,000)
----------- -----------
Net cash used in investing activities (588,635) (372,768)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of common shares 290,000 140,743
Subsidiary company stock issued to minority shareholder -- 170,000
----------- -----------
Net cash provided by financing activities 290,000 310,743
----------- -----------
Net increase in cash 4,030,930 611,478
Cash and cash equivalents, beginning of year 2,256,218 1,644,740
----------- -----------
Cash and cash equivalents, end of year $ 6,287,148 $ 2,256,218
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes: $ 201,535 $ 23,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 63
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid In Accumulated
Shares Par Value Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 8,021,534 $ 80,215 $ 7,480,761 $(5,796,857) $ 1,764,119
Issuance of shares in private
placement, net of costs 1,450,000 14,500 275,500 -- 290,000
Net income -- -- -- 2,107,707 2,107,707
----------- ----------- ----------- ----------- -----------
Balance, December 31,1998 9,471,534 $ 94,715 $ 7,756,261 $(3,689,150) $ 4,161,826
=========== =========== =========== =========== ===========
Balance, January 1, 1997 7,850,782 $ 78,508 $ 7,341,725 $(5,246,119) $ 2,174,114
Issuance of shares in private
placement, net of costs 170,752 1,707 139,036 -- 140,743
Net income (loss) -- -- -- (550,738) (550,738)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 8,021,534 $ 80,215 $ 7,480,761 $(5,796,857) $ 1,764,119
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 64
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") through its subsidiaries
currently markets merger communications services and computer software 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"), FPC Information Corp. ("FPC Information") and Aspen Capital Management,
LLC ("Aspen").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized merger communications and marketing services to the
financial services industry (see Note B (1)).
FPC Information was formed in November 1994 for the purpose of marketing
the Company's software products.
In October 1997, the Company's investment in FPC Information Corp. was
reduced from eighty percent to fifty percent, as a result of a $225,000
additional investment by the minority shareholder. The Company has the option to
repurchase a thirty percent equity interest in FPC Information Corp. exercisable
at any time prior to September 30, 1999 at the fair market value of such
interest, but in no event less than $225,000.
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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Principles of Consolidation
The consolidated financial statements include the accounts of Financial
Performance Corporation and Subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Investments in FPC Information Corp. in
which the Company does not have control is accounted for by the equity method.
F-7
<PAGE> 65
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(1) Principles of Consolidation (continued)
Condensed financial information of its eighty percent owned subsidiary,
MKP, excluding intercompany eliminations, as of December 31, 1998 and 1997 and
for the years then ended, is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash $ 5,910,000 $ 2,109,000
Accounts receivable 343,000 721,000
Other assets 281,000 209,000
Accounts payable 2,478,000 1,576,000
Revenues 21,492,000 8,383,000
Operating costs 19,312,000 8,002,000
Net income 1,999,000 401,000
</TABLE>
Intercompany management fees of $1,714,000 and $336,526 were included in
operating costs for the years ended December 31, 1998 and 1997, respectively.
These amounts were eliminated upon consolidation.
Condensed financial information for the Company's other subsidiary, FPC
Information Corp. for the years ended December 31, 1998 and 1997 has not been
separately disclosed. This entity had no revenues and it's assets and
liabilities are immaterial.
(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 December 31,
1998 and 1997.
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 product commencing when the product is
available for general release to customers.
F-8
<PAGE> 66
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(3) Software Development Costs and Amortization (continued)
Software Development Costs are are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Balance, beginning of year $ 135,605 $ 135,605
Additions -- --
Amortization (135,605) --
--------- ---------
Balance, end of year $ -- $ 135,605
========= =========
</TABLE>
(4) Earnings (loss) per common share
Basic earnings (loss) per common share was calculated by dividing net
income by the weighted average number of common shares outstanding during the
year. Diluted earnings per share was calculated by dividing net income by the
sum of the weighted average number of common shares outstanding plus all
additional common shares that would have been outstanding if potentially
dilutive common shares had been issued.
(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) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(7) Depreciation and amortization
Property and equipment are stated at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets, 5 to 7
years. When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations for the period. The cost of maintenance and
repairs is charged to operations as incurred. Significant renewals and
betterments are capitalized.
Amortization of an intangible asset, a customer list of $164,000, included
on the balance sheet under the caption, other assets, is being amortized on the
straight line basis, over ten years.
F-9
<PAGE> 67
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(7) Depreciation and amortization (continued)
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Computer equipment $192,513 $107,275
Furniture and fixtures 159,978 155,580
Leasehold improvements 33,977 33,977
-------- --------
386,468 296,832
Less: accumulated depreciation and amortization 172,739 97,869
-------- --------
$213,729 $198,963
======== ========
</TABLE>
(8) 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
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 December 31, 1998, the Company has net operating loss carryforwards of
approximately $3,567,000, which expire in various years through 2012, available
to offset future taxable income. 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 December 31, 1998, the
Company had a deferred tax asset amounting to approximately $1,700,000. The
deferred tax asset consists primarily of net operating loss carryforwards and
has been fully offset by a valuation allowance of the same amount.
The income tax expense for the for the years ended December 31, 1998 and
1997 represents state and local income taxes on the income of MKP.
Income tax expense for the years ended December 31, 1998 and 1997 is
reconciled to Federal statutory rates as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Income taxes at statutory rates $ 782,000 $ --
Utilization of loss carryforwards (782,000) --
State and local income taxes 262,106 29,178
--------- ---------
Income taxes $ 262,106 $ 29,178
========= =========
</TABLE>
F-10
<PAGE> 68
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE C - SIGNIFICANT CUSTOMERS
For the year ended December 31, 1998, three customers of the Company's
subsidiary, MKP, accounted for 82% of the Company's consolidated revenues in the
following respective percentages:
<TABLE>
<S> <C>
Customer A 55%
Customer B 18%
Customer C 10%
----
83%
====
</TABLE>
The total accounts receivable from these customers at December 31, 1998
amounted to 70% of the total accounts receivable balance.
NOTE D - WARRANTS TO PURCHASE COMMON STOCK
At December 31, 1998, the Company had outstanding warrants as follows:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Shares Price Date
------ ----- ----
<S> <C> <C>
250,000 $ .50 November 30, 1999
550,000 .50 October 31, 2001
725,000 1.00 September 15, 2006
20,000 1.00 September 16, 2006
200,000 .50 September 15, 2010
</TABLE>
NOTE E - 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. The plan expired by its terms in October 1998.
F-11
<PAGE> 69
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Presented below is a summary of the status of the Company's stock options:
<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
Weighted Weighted
Shares Average Shares Average
under Exercise under Exercise
Options Price Options Price
------- ----- ------- -----
<S> <C> <C> <C> <C>
Balance, beginning of year 70,000 $2.31 70,000 $2.31
Granted -- -- -- --
Exercised -- -- -- --
Expired (70,000) 2.31 -- --
------- ----- ------- -----
Balance, end of year -- $ -- 70,000 $2.31
======= ===== ======= =====
</TABLE>
NOTE F - EMPLOYEE BENEFIT PLANS
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 plan was terminated in March, 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit
plan covering substantially all employees who have met certain requirements. The
plan requires Company contributions equal to 50% to a maximum of 3% of each
participant's contribution percentage.
In September, 1997, the Company amended its 401(k) plan to provide a
provision for discretionary profit sharing plan contributions. Total
contributions to the plan, (401(k) and profit sharing), were $127,000 and
$82,000 for the years ended December 31, 1998 and 1997, respectively.
NOTE G - 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> 70
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
- ------------
<S> <C>
1999 $ 281,000
2000 281,000
2001 374,000
2002 415,000
2003 419,000
Thereafter 1,292,000
----------
$3,062,000
==========
</TABLE>
Rent and equipment leasing expense for the years ended December 31, 1998 and
1997 was $370,734 and $330,669, respectively.
NOTE H - EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five year employment
agreement with Mr. Finley which expires on August 31, 2000. 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 salary was
subsequently increased to $150,000.
Effective as of October 1, 1997, the Company entered into a new three year
employment agreement with Mr. Finley which expires on September 30, 2000. Under
this employment agreement, Mr. Finley's initial salary was $150,000 per annum,
subject to periodic increases as determined by the Company's Board of Directors.
In the event of the termination of Mr. Finley's employment by reason of a
"change in control" (as such term is defined in the employment agreement) of the
Company or certain other events, then in addition to paying Mr. Finley's salary
and accrued benefits through the date of termination of employment, the company
shall be obligated to pay to Mr. Finley, as severance pay, an amount equal to
200% of Mr. Finley's annual base salary rate as of the effective date of
termination and to maintain through the remaining balance of the term of the
employment (but not less than two years from the date of termination of Mr.
Finley's employment agreement) all employee benefit plans and programs in which
Mr. Finley was entitled to participate. The Company agreed to pay reasonable
travel and entertainment expenses incurred by Mr. Finley on behalf of the
Company and to provide Mr. Finley with a leased automobile. If Mr. Finley does
not elect not to renew his employment agreement at the expiration of the term
and the Company does not elect to renew Mr. Finley's employment upon the
expiration of the term thereof, then Mr. Finley was entitled to receive a
severance payment of $100,000.
F-13
<PAGE> 71
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H - EMPLOYMENT AGREEMENTS (continued)
Effective as of October 1, 1998, the Company amended its employment
agreement with Mr. Finley to increase Mr. Finley's annual salary from $150,000
to $250,000 and to increase Mr. Finley's severance payment in the event Mr.
Finley does not elect not to renew his employment agreement at the expiration of
the term thereof and the Company does not elect to renew Mr. Finley's employment
upon the expiration of the term thereof from $100,000 to $350,000. The $350,000
severance payment to Mr. Finley would also become due if Mr. Finley's employment
agreement is terminated by reason of the Company's breach thereof. If Mr. Finley
elects not be renew the employment agreement upon the expiration of the term
thereof, Mr. Finley will be entitled to a severance payment of $250,000. The
amended employment agreement with Mr. Finley also provides that (i) if the
Company elects not to renew the employment agreement with Mr. Finley upon the
expiration of the term thereof, (ii) Mr. Finley terminates the employment
agreement due to a "change in control" of the Company or MKP or (iii) the
Company terminates the employment agreement in breach of the terms thereof, then
in addition to the cash severance payments provided for, Mr. Finley will be
entitled to receive common stock of the Company, with "piggy-back" registration
rights, equal in value to the difference, if any, between the fair market value
of all stock and warrants of the Company then owned by Mr. Finley and
$1,000,000.
In October, 1994, MKP entered into executive employment agreements with
each of Ms. Michaelson and Ms. Kelbick for a term of three years ending 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 payable to each
of Ms. Michaelson and Ms. Kelbick was subsequently increased to $115,000.
Effective as of September 11, 1997, MKP entered into a new three year employment
agreement with each of Ms. Michaelson and Ms. Kelbick which expires on September
10, 2000. Under these agreements, the initial annual base salary payable to each
of Ms. Michaelson and Ms. Kelbick is $150,000, subject to periodic increases as
shall be determined by MKP's Board of Directors. The employment agreements
further provide for an annual incentive compensation payment to Ms. Michaelson
and Ms. Kelbick not to exceed 30% in the aggregate, determined annually by the
Board of Directors, (such percentage initially established at 30%) of the net
income before taxes of MKP as if MKP was not a member of the Company's
consolidated group. Ms. Michaelson and Ms. Kelbick have the option to take all
or a portion of the bonus in the Company's securities.
Pursuant to the September 1997 executive employment agreements if either
Ms. Michaelson or Ms. Kelbick does not elect 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 $250,000. The employment agreements
provide each of Ms. Michaelson and Ms. Kelbick with a clothing expense allowance
of $10,000 for each year of the term of the agreement and a leased automobile
throughout the term.
F-14
<PAGE> 72
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H - EMPLOYMENT AGREEMENTS (continued)
In the event of the termination of employment of either Ms. Michaelson or
Ms. Kelbick by reason of a "change in control" (as such term is defined in the
employment agreement) of MKP or the Company, or certain other events, then in
addition to paying all salary and accrued benefits through the date of
termination of employment, MKP shall be obligated to pay to the employee, as
severance pay, an amount equal to 200% of the employee's annual base salary rate
in effect as of the date of termination and to maintain through the remaining
balance of the term of the employment agreement (but not less than two years
from the date of termination of the employee's employment agreement) all
employee benefit plans and programs in which the employee was entitled to
participate. The Company has issued 20 shares of MKP and 200,000 shares of the
Company, in the aggregate, to Ms. Michaelson and Ms. Kelbick.
Effective as of October 1, 1998, MKP entered into amendments of the
employment agreements with each of Ms. Michaelson and Ms. Kelbick. Pursuant to
the amendments, the annual base salary payable to each of Ms. Michaelson and Ms.
Kelbick was increased to $250,000 and the annual clothing allowance for each of
Ms. Michaelson and Ms. Kelbick was increased from $10,000 to $15,000.
Additionally, the severance payment required if either Ms. Michaelson or Ms.
Kelbick does not elect not to renew her respective employment agreement with MKP
at the expiration of the term and MKP elects not to renew the employment
agreement was increased from $250,000 to $350,000.
The $350,000 severance payment would also become due to each of Ms.
Michaelson and Ms. Kelbick if the employment of such employee is terminated by
reason of MKP's breach of the employment agreement with such employee.
Additionally, if either Ms. Michaelson or Ms. Kelbick elects not to renew her
respective employment agreement with MKP at the expiration of the term, the
respective employee will be entitled to receive a severance payment of $250,000.
If the employment of either Ms. Michaelson or Ms. Kelbick shall be terminated
for any reason other than "for cause" by MKP, then the respective employee shall
be entitled to continued payment of the annual incentive compensation payment
for a period of six (6) months after termination based upon MKP's net income
before taxes for projects which were active on the date of termination.
NOTE I - RESTRICTED CASH AND CONTINGENCIES
At December 31, 1998, $180,000 was invested in a Certificate of Deposit
and is pledged as security for a letter of credit issued in connection with the
lease for office space (see Note G). The $180,000 Certificate of Deposit is
included on the balance sheet under the caption, other assets. This exceeds the
federally insured limit.
NOTE J - CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents with a major financial
institution. The balance at times may exceed federally insured limits. The
company performs periodic evaluations of the relative credit standing of this
financial institution and limits the amount of credit exposure.
F-15
<PAGE> 73
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value amounts of cash and cash equivalents, prepaid expenses
and accrued expenses approximate fair value because of the short maturity of
these items.
NOTE L - EARNINGS (LOSS) PER SHARE INFORMATION
The calculation of basic and diluted earnings (loss) per share is as
follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net income (loss) available to
Common share owners $ 2,107,707 $ (550,738)
=========== ===========
Average shares outstanding (a) 8,967,367 7,987,741
Dilutive securities
Stock options and warrants 184,821 --
----------- -----------
Average shares outstanding assuming dilution (b) 9,152,188 7,987,741
=========== ===========
</TABLE>
(a) Used to compute basic earnings (loss) per share.
(b) Used to compute diluted earnings per share.
Excluded from 1997 computation was 70,000 of stock options and 1,952,649 of
warrants which would be antidilutive.
NOTE M - CHANGE IN FISCAL YEAR
In February 1998, the Company's Board of Directors unanimously approved a
resolution to change the Company's fiscal year end from September 30 to December
31.
F-16
<PAGE> 74
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
Page
No.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-18
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-19
Statements of Operations F-20
Statements of Cash Flows F-21
Statements of Changes in Stockholders' Equity F-22
Notes to Financial Statements F-23
F-17
<PAGE> 75
[LETTERHEAD]
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 December 31, 1997 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the three months 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 audit 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 audit provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Financial
Performance Corporation and Subsidiaries as of December 31, 1997 and the results
of its consolidated operations and its cash flows for the three months then
ended in conformity with generally accepted accounting principles.
/s/ Goldstein and Morris
New York, New York
April 19, 1998
F-18
<PAGE> 76
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,256,218 $ 1,644,740
Accounts receivable 720,616 1,097,558
Prepaid expenses and other current assets 79,110 161,697
----------- -----------
Total current assets 3,055,944 2,903,995
Computer equipment, net of accumulated depreciation 198,963 102,472
Software development costs (Note B (3)) 135,605 479,720
Investment in subsidiary 426,000 --
Other assets 303,806 160,256
----------- -----------
$ 4,120,318 $ 3,646,443
----------- ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 1,908,153 $ 1,205,883
-----------
Total current liabilities 1,908,153 1,205,883
----------- -----------
Minority interest in consolidated subsidiaries 448,046 266,446
----------- -----------
Stockholders' equity
Common stock - authorized 50,000,000 shares of
$.01 par value per share: issued and
outstanding 8,021,534 as of December 31, 1997 and
7,850,782 as of December 31, 1996 80,215 78,508
Additional paid in capital 7,480,761 7,341,725
Accumulated (deficit) (5,796,857) (5,246,119)
----------- -----------
Total stockholders' equity 1,764,119 2,174,114
----------- -----------
$ 4,120,318 $ 3,646,443
=========== ===========
</TABLE>
See the accompanying notes to the financial statements.
F-19
<PAGE> 77
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Revenues $ 1,970,312 $ 1,372,395
----------- -----------
Costs and expenses
Cost of revenues 1,504,249 1,080,456
Salaries and related expenses 141,397 71,601
Selling, general and administrative 243,818 192,045
----------- -----------
1,889,464 1,344,102
----------- -----------
Operating income 80,848 28,293
----------- -----------
Other income (expense):
Interest income 12,414 13,459
Interest expense -- (2,981)
Minority interest in loss of consolidated
subsidiaries (67,000) (10,400)
----------- -----------
(54,586) 78
----------- -----------
Income before income taxes 26,262 28,371
Income taxes 15,558 11,777
----------- -----------
Net Income $ 10,704 $ 16,594
=========== ===========
Per share data:
Net income $ .001 $ .002
=========== ===========
</TABLE>
See the accompanying notes to the financial statements.
F-20
<PAGE> 78
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1996 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Net Income $ 10,704 $ 16,594
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization 5,175 28,071
Minority interest in income of consolidated
subsidiaries 67,000 10,400
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 925,302 (195,042)
(Increase) decrease in prepaid expenses and other
current assets (9,773) (104,357)
Decrease in other assets 4,112 (100,000)
Increase (decrease) in accounts payable and accrued expenses 174,505 (165,689)
----------- -----------
Net cash provided by (used for) operating activities 1,177,025 (310,023)
----------- -----------
Cash flows from investing activities:
Acquisition of equipment (32,000) (39,627)
Software development costs (20,781) (42,000)
Investment in subsidiary (8,000) --
-----------
Net cash used for investing activities (60,781) (81,627)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of common shares and exercise of warrants -- 64,334
----------- -----------
Net cash provided by financing activities -- 64,334
----------- -----------
Net increase (decrease) in cash 1,116,244 (327,316)
Cash, beginning of period 1,139,974 1,972,056
----------- -----------
Cash, end of period $ 2,256,218 $ 1,644,740
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ -- $ 2,981
Income taxes $ 23,000 $ --
</TABLE>
See the accompanying notes to the financial statements.
F-21
<PAGE> 79
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Stock Paid In
Shares Par Value Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE,
SEPTEMBER 30, 1996 7,192,562 $ 71,926 $ 7,043,986 $(5,262,713) $ 1,853,199
Issuance of common
shares on exercise
of warrants 49,414 494 24,213 -- 24,707
Issuance of common
shares in private
placement, net of
costs 44,192 442 39,185 -- 39,627
Issuance of common
shares on
conversion of
convertible note
and short-term debt 564,614 5,646 234,341 -- 239,987
Net Income -- -- -- 16,594 16,594
----------- ----------- ----------- ----------- -----------
BALANCE -
DECEMBER 31, 1996 7,850,782 $ 78,508 $ 7,341,725 $(5,246,119) $ 2,174,114
=========== =========== =========== =========== ===========
BALANCE -
SEPTEMBER 30, 1997 8,021,534 $ 80,215 $ 7,480,761 $(5,807,561) $ 1,753,415
Net Income -- -- -- 10,704 10,704
----------- ----------- ----------- ----------- -----------
BALANCE -
DECEMBER 31, 1997 8,021,534 $ 80,215 $ 7,480,761 $(5,796,857) $ 1,764,119
=========== =========== =========== =========== ===========
</TABLE>
See the accompanying notes to the financial statements.
F-22
<PAGE> 80
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") through its subsidiaries
currently markets merger communications services and computer software 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"), FPC Information Corp. ("FPC Information") and Aspen Capital Management,
LLC ("Aspen").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized merger communications and marketing services to the
financial services industry (see Note B (1)).
FPC Information was formed in November 1994 for the purpose of marketing
the Company's software products.
In October 1997, the Company's investment in FPC Information Corp. was
reduced from eighty percent to fifty percent, as a result of a $225,000
additional investment by the minority shareholder. The Company has the option to
repurchase a thirty percent equity interest in FPC Information Corp. exercisable
at any time prior to September 30, 1999 at the fair market value of such
interest, but in no event less than $225,000.
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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Principles of Consolidation
The consolidated financial statements include the accounts of Financial
Performance Corporation and Subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Investments in FPC Information Corp. in
which the Company does not have control is accounted for by the equity method.
F-23
<PAGE> 81
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(1) Principles of Consolidation (continued)
Condensed financial information of its eighty percent owned subsidiary,
MKP, excluding intercompany eliminations, as of December 31, 1997 and 1996 and
for the three months ended, is as follows:
<TABLE>
<CAPTION>
1997 1,996
---------- ----------
<S> <C> <C>
Cash $2,103,000 $1,502,000
Accounts receivable 721,000 1,098,000
Other assets 166,000 42,000
Accounts payable 1,576,000 1,077,000
Revenues 1,970,000 1,372,000
Operating costs 1,740,000 1,187,000
Net income 230,000 187,000
</TABLE>
Condensed financial information for the Company's other subsidiaries,
Aspen Capital Management, LC and FPC Information Corp. for the three months
ended December 31, 1997 and 1996, has not been separately disclosed. These
entities had no revenues and their assets and liabilities are immaterial.
(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 three months ended
December 31, 1997 and 1996.
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 product commencing when the product is
available for general release to customers.
F-24
<PAGE> 82
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(7) 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.
Amortization of an intangible asset, a customer list of $164,000, included
on the balance sheet under the caption, other assets, is being amortized on the
straight line basis, over ten years.
(8) 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
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.
F-25
<PAGE> 83
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(8) Income taxes (continued)
At September 30, 1997, the Company had net operating loss carry forwards
of approximately $1,150,000, which would expire by 2012. Certain provisions of
the tax law may limit the net operating loss carry forwards available for use in
any given year in the event of a significant change in ownership interest. At
September 30, 1997, the Company had a deferred tax asset amounting to
approximately $460,000. The deferred tax asset consisted primarily of net
operating loss carry forwards and has been fully offset by a valuation allowance
of the same amount.
The income tax expense for the three months ended December 31, 1997 and
1996 represents state and local income taxes on the income of MKP.
NOTE C - SIGNIFICANT CUSTOMERS
For the three months ended December 31, 1997 three customers of the
Company's subsidiary, MKP, accounted for 81% of the Company's consolidated
revenues in the following respective percentages:
<TABLE>
<S> <C>
Customer A 16%
Customer B 16%
Customer C 49%
----
81%
====
</TABLE>
The total accounts receivable from these customers at December 31, 1997
amounted to 59% of the total accounts receivable balance.
NOTE D - WARRANTS TO PURCHASE COMMON STOCK
At December 31, 1997, the Company had outstanding warrants as follows:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Shares Price Date
------ ----- ----
<S> <C> <C>
330,586 $ .50 August 31, 1998
427,063 .50 September 30, 1998
200,000 .50 September 15, 2010
725,000 1.00 September 15, 2006
250,000 .50 November 30, 1999
20,000 1.00 September 16, 2006
</TABLE>
F-26
<PAGE> 84
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE E- 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
December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Number of Exercise Exercisable at
Shares Price December 31, 1997
------ ----- -----------------
<S> <C> <C>
40,000 $ .4375 40,000
30,000 4.8125 30,000
</TABLE>
NOTE F -EMPLOYEE BENEFIT PLANS
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 plan was terminated in March, 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit
plan covering substantially all employees who have met certain requirements. The
plan requires Company contributions equal to 50% to a maximum of 3% of each
participant's contribution percentage.
In September, 1997, the Company amended its 401(k) plan to provide a
provision for discretionary profit sharing plan contributions.
NOTE G - 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-27
<PAGE> 85
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE G - COMMITMENTS (continued)
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
Years Ending
September 30,
<S> <C>
1998 $ 281,000
1999 281,000
2000 281,000
2001 374,000
2002 415,000
Thereafter 1,711,000
-----------
$ 3,343,000
===========
</TABLE>
Rent and equipment leasing expense for the three months ended December 31,
1997 and 1996 was $88,000 and $100,000, respectively.
NOTE H - EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five year employment
agreement with Mr. Finley which expired on August 31, 2000. Under the agreement,
Mr. Finley's initial annual salary was $125,000, subject to increases as
determined by the Company's Board of Directors, and Mr. Finley's salary was
subsequently increased to $150,000.
Effective as of October 1, 1997, the Company entered into a new three year
employment agreement with Mr. Finley which expires on September 30, 2000. Under
the new employment agreement, Mr. Finley's initial salary is $150,000 per annum,
subject to periodic increases as shall be determined by the Company's Board of
Directors. In the event of the termination of Mr. Finley's employment by reason
of a "change in control" (as such term is defined in the employment agreement)
of the Company or certain other events, then in addition to paying Mr. Finley's
salary and accrued benefits through the date of termination of employment, the
Company shall be obligated to pay to Mr. Finley, as severance pay, an amount
equal to 200% of Mr. Finley's annual base salary rate as of the effective date
of termination and to maintain through the remaining balance of the term of the
employment agreement (but not less than two years from the date of termination
of Mr. Finley's employment agreement) all employee benefit plans and programs in
which Mr. Finley was entitled to participate. The Company agreed to pay
reasonable travel and entertainment expenses incurred by Mr. Finley on behalf of
the Company and to provide Mr. Finley with a leased automobile. If Mr. Finley
does not elect not to renew his employment agreement at the expiration of the
term and the Company does not elect to renew Mr. Finley's employment upon the
expiration of the term thereof, then Mr. Finley shall be entitled to receive a
severance payment of $100,000.
F-28
<PAGE> 86
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H - EMPLOYMENT AGREEMENTS (continued)
In October, 1994, MKP entered into executive employment agreements with
each of Ms. Michaelson and Ms. Kelbick for a term of three years ending 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 payable to each
of Ms. Michaelson and Ms. Kelbick was subsequently increased to $115,000.
Effective as of September 11, 1997, MKP entered into a new three year employment
agreement with each of Ms. Michaelson and Ms. Kelbick which expires on September
10, 2000. Under the new agreements, the initial annual base salary payable to
each of Ms. Michaelson and Ms. Kelbick is $150,000, subject to periodic
increases as shall be determined by MKP's Board of Directors. The employment
agreements further provide for an annual incentive compensation payment for each
of Ms. Michaelson and Ms. Kelbick equal to a percentage not to exceed 30%,
determined annually by the Board of Directors, (such percentage initially
established at 30%) of the net income before taxes of MKP as if MKP was not a
member of the Company's consolidated group. Ms. Michaelson and Ms. Kelbick have
the option to take all or a portion of the bonus in the Company's securities.
If either Ms. Michaelson or Ms. Kelbick does not elect 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 $250,000. The
employment agreements provide each of Ms. Michaelson and Ms. Kelbick with a
clothing expense allowance of $10,000 for each year of the term of the agreement
and a leased automobile throughout the term. In the event of the termination of
employment of either Ms. Michaelson or Ms. Kelbick by reason of a "change in
control" (as such term is defined in the employment agreement) of MKP or the
Company, or certain other events, then in addition to paying all salary and
accrued benefits through the date of termination of employment, MKP shall be
obligated to pay to the employee, as severance pay, an amount equal to 200% of
the employee's annual base salary rate in effect as of the date of termination
and to maintain through the remaining balance of the term of the employment
agreement (but not less than two years from the date of termination of the
employee's employment agreement) all employee benefit plans and programs in
which the employee was entitled to participate. The Company has issued 20 shares
of MKP and 200,000 shares of the Company, in the aggregate, to Ms. Michaelson
and Ms. Kelbick.
NOTE I - RESTRICTED CASH AND CONTINGENCIES
At December 31, 1997 $160,000 was invested in a Certificate of Deposit and
is pledged as security for a letter of credit issued in connection with the
lease for office space (see Note G). The $160,000 Certificate of Deposit is
included on the balance sheet under the caption, other assets. This exceeds the
federally insured limit.
F-29
<PAGE> 87
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE J - CONCENTRATION OF CREDIT RISK
The Company maintains it's cash in bank deposit accounts at one financial
institution. The balance at times, may exceed federally insured limits. At
December 31, 1997 and 1996, the Company exceeded the insured limit by
approximately $2,003,000 and $1,402,000, respectively.
NOTE K - CHANGE IN FISCAL YEAR
In February 1998, the Company's Board of Directors unanimously approved a
resolution to change the Company's fiscal year end from September 30 to December
31.
F-30
<PAGE> 88
Exhibit Index
Description
-----------
Item No.
--------
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 10-0 for the period ended March 31,
1988).
3.3 Amendment to Certificate of Incorporation dated July 1, 1986
(incorporated by reference to Exhibit 3.3 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1996).
3.4 Amendment to Certificate of Incorporation dated March 14, 1988
(incorporated by reference to Exhibit 3.4 to the Company's
Report on Form 10-KSB for the Company's fiscal year ended
September 30, 1996).
3.5 Amendment to Certificate of Incorporation dated September 13,
1996 (incorporated by reference to Exhibit 3.5 to the
Company's Report on Form 10-KSB for the Company's fiscal year
ended September 30, 1996).
3.6 By-laws (incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-18, No. 33-7778).
<PAGE> 89
Exhibit Index
Description
-----------
Item No.
--------
3.7 Amendment to By-Laws dated July 1995 (incorporated by
reference to Exhibit 3.7 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
4.1 Specimen Certificate of Common Stock (incorporated by
reference to Exhibit 4.1 to the Company's Report on Form
10-KSB for the Company's fiscal year ended September 30,
1996).
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).
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).
<PAGE> 90
Exhibit Index
Description
-----------
Item No.
--------
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).
<PAGE> 91
Exhibit Index
Description
-----------
Item No.
--------
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).
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).
<PAGE> 92
Exhibit Index
Description
-----------
Item No.
--------
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).
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).
<PAGE> 93
Exhibit Index
Description
-----------
Item No.
--------
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 36, 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).
<PAGE> 94
Exhibit Index
Description
-----------
Item No.
--------
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).
<PAGE> 95
Exhibit Index
Description
-----------
Item No.
--------
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).
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 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 (incorporated by reference to
Exhibit 10.66 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
<PAGE> 96
Exhibit Index
Description
-----------
Item No.
--------
10.67 Letter dated June 20, 1996 from Robert S. Trump regarding
conversion of debt into equity (incorporated by reference to
Exhibit 10.67 to Report on Form 10-KSB for fiscal year ended
September 30, 1996).
10.68 General Form of Subscription Agreement used in private
placements in 1996 (incorporated by reference to Exhibit 10.68
to Report on Form 10-KSB for fiscal year ended September 30,
1996).
10.69 Form of Warrant Agreement for Warrants issued in September
1996 (incorporated by reference to Exhibit 10.69 to Report on
Form 10-KSB for fiscal year ended September 30, 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 (incorporated by
reference to Exhibit 10.70 to Report on Form 10-KSB for
fiscal year ended September 30, 1996).
10.71 Executive Employment Agreement dated as of September 11, 1997
between the Registrant and William F. Finley (incorporated by
reference to Exhibit 10.71 to Report on Form 10-KSB for the
fiscal year ended September 30, 1997).
10.72 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Susan
Michaelson (incorporated by reference to Exhibit 10.72 to
Report on Form 10-KSB for the fiscal year ended September 30,
1997).
10.73 Managing Director's Agreement dated as of September 11, 1997
between the Registrant's subsidiary, MKP, and Hillary Kelbick
(incorporated by reference to Exhibit 10.73 to Report on Form
10-KSB for the fiscal year ended September 30, 1997).
10.74 Form of Warrant dated as of December 29, 1997 issued to Duncan
Burke (incorporated by reference to Exhibit 10.74 to Report on
Form 10-KSB for the fiscal year ended September 30, 1997).
10.75 Form of Warrant dated as of December 29, 1997 issued to
Richard Levy (incorporated by reference to Exhibit 10.75 to
Report on Form 10-KSB for the fiscal year ended September 30,
1997).
10.76 Stock Purchase Agreement dated as of October 1, 1997 by and
between the Company and Robert S. Trump (incorporated by
reference to Exhibit 10.76 to Report on Form 10-KSB for the
fiscal year ended September 30, 1997).
10.77. First Amendment to Executive Employment Agreement by and among
the Company, FPC Information Corp. and William F. Finley dated
as of October 1, 1998 (incorporated by reference to Exhibit
10.77 to Report on Form 10-QSB for the fiscal quarter ended
September 30, 1998).
10.78. First Amendment to Managing Director's Agreement between MKP
and Susan Michaelson dated as of October 1, 1998 (incorporated
by reference to Exhibit 10.78 to Report on Form 10-QSB for the
fiscal quarter ended September 30, 1998).
10.79. First Amendment to Managing Director's Agreement between MKP
and Hillary Kelbick dated as of October 1, 1998 (incorporated
by reference to Exhibit 10.79 to Report on Form 10-QSB for the
fiscal quarter ended September 30, 1998).
<PAGE> 97
Exhibit Index
Description
-----------
Item No.
--------
10.80. Restated and Amended Shareholders Agreement dated as of
October 18, 1994 by and among MKP, Susan Michaelson, Hillary
Kelbick and the Company, effective as of October 1, 1998
(incorporated by reference to Exhibit 10.80 to Report on Form
10-QSB for the fiscal quarter ended September 30, 1998).
10.81. Form of Warrant dated as of October 21, 1998 between the
Registrant and Richard Levy.
10.82. Form of Warrant dated as of October 21, 1998 between the
Registrant and Duncan G. Burke.
10.83. Form of Warrant dated as of October 21, 1998 between the
Registrant and Ottavio Serena.
10.84. Form of Warrant dated as of October 21, 1998 between the
Registrant and Gary S. Friedman.
10.85. Form of Warrant dated as of October 21, 1998 between the
Registrant and Charlotte Tuck.
10.86. Form of Warrant Agreement dated as of October 21, 1998
covering warrants issued to Richard Levy, Duncan G. Burke,
Ottavio Serena, Gary S. Friedman and Charlotte Tuck.
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.81
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A
WARRANT AGREEMENT DATED AS OF OCTOBER 21, 1998 ON FILE AT
THE COMPANY'S OFFICES
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 ONE HUNDRED THOUSAND
(100,000) 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 OCTOBER 31, 2001
This is to certify that, for value received, Richard Levy, or his assigns (the
"Warrant Holder"), is entitled to purchase at any time during the period
commencing as of October 21, 1998 and ending on or before October 31, 2001
("Exercise Period"), one hundred thousand (100,000) 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
fifty cents ($0.50) 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. In lieu of payment of the purchase price in cash or by check as
aforesaid, the Warrant Holder may elect to effectuate the "cashless exercise"
provisions contained in the Warrant Agreement dated as of October 21, 1998 to
which this Warrant is subject.
<PAGE> 2
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 one
hundred thousand (100,000) 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 purpose of determining
the person entitled to any rights or any notice pursuant to the terms hereof or
for any other purpose.
2
<PAGE> 3
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of October 21, 1998 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
October 31, 2001. 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 21st day of October, 1998.
Financial Performance Corporation
By: /s/
---------------------
William F. Finley
Its: President
By: /s/
---------------------
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE> 4
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 fifty cents ($0.50) 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> 5
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> 1
EXHIBIT 10.82
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A
WARRANT AGREEMENT DATED AS OF OCTOBER 21, 1998 ON FILE AT
THE COMPANY'S OFFICES
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 ONE HUNDRED THOUSAND
(100,000) 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 OCTOBER 31, 2001
This is to certify that, for value received, Duncan G. Burke, or his assigns
(the "Warrant Holder"), is entitled to purchase at any time during the period
commencing as of October 21, 1998 and ending on or before October 31, 2001
("Exercise Period"), one hundred thousand (100,000) 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
fifty cents ($0.50) 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. In lieu of payment of the purchase price in cash or by check as
aforesaid, the Warrant Holder may elect to effectuate the "cashless exercise"
provisions contained in the Warrant Agreement dated as of October 21, 1998 to
which this Warrant is subject.
<PAGE> 2
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 one
hundred thousand (100,000) 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 purpose of determining
the person entitled to any rights or any notice pursuant to the terms hereof or
for any other purpose.
2
<PAGE> 3
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of October 21, 1998 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
October 31, 2001. 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 21st day of October, 1998.
Financial Performance Corporation
By:/s/
--------------------
William F. Finley
Its: President
By:/s/
--------------------
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE> 4
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 fifty cents ($0.50) 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> 5
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> 1
EXHIBIT 10.83
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A
WARRANT AGREEMENT DATED AS OF OCTOBER 21, 1998 ON FILE AT
THE COMPANY'S OFFICES
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 TWO HUNDRED THOUSAND
(200,000) 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 OCTOBER 31, 2001
This is to certify that, for value received, Ottavio Serena, or his assigns (the
"Warrant Holder"), is entitled to purchase at any time during the period
commencing as of October 21, 1998 and ending on or before October 31, 2001
("Exercise Period"), two hundred thousand (200,000) 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
fifty cents ($0.50) 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. In lieu of payment of the purchase price in cash or by check as
aforesaid, the Warrant Holder may elect to effectuate the "cashless exercise"
provisions contained in the Warrant Agreement dated as of October 21, 1998 to
which this Warrant is subject.
<PAGE> 2
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 two
hundred thousand (200,000) 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 purpose of determining
the person entitled to any rights or any notice pursuant to the terms hereof or
for any other purpose.
2
<PAGE> 3
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of October 21, 1998 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
October 31, 2001. 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 21st day of October, 1998.
Financial Performance Corporation
By: /s/
---------------------
William F. Finley
Its: President
By: /s/
---------------------
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE> 4
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 fifty cents ($0.50) 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> 5
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> 1
EXHIBIT 10.84
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A
WARRANT AGREEMENT DATED AS OF OCTOBER 21, 1998 ON FILE AT
THE COMPANY'S OFFICES
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 ONE HUNDRED THOUSAND
(100,000) 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 OCTOBER 31, 2001
This is to certify that, for value received, Gary S. Friedman, or his assigns
(the "Warrant Holder"), is entitled to purchase at any time during the period
commencing as of October 21, 1998 and ending on or before October 31, 2001
("Exercise Period"), one hundred thousand (100,000) 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
fifty cents ($0.50) 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. In lieu of payment of the purchase price in cash or by check as
aforesaid, the Warrant Holder may elect to effectuate the "cashless exercise"
provisions contained in the Warrant Agreement dated as of October 21, 1998 to
which this Warrant is subject.
<PAGE> 2
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 one
hundred thousand (100,000) 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 purpose of determining
the person entitled to any rights or any notice pursuant to the terms hereof or
for any other purpose.
2
<PAGE> 3
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of October 21, 1998 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
October 31, 2001. 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 21st day of October, 1998.
Financial Performance Corporation
By:/s/
--------------------
William F. Finley
Its: President
By:/s/
--------------------
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE> 4
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 fifty cents ($0.50) 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> 5
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> 1
EXHIBIT 10.85
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A
WARRANT AGREEMENT DATED AS OF OCTOBER 21, 1998 ON FILE AT
THE COMPANY'S OFFICES
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 FIFTY THOUSAND
(50,000) 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 OCTOBER 31, 2001
This is to certify that, for value received, Charlotte Tuck, or her assigns (the
"Warrant Holder"), is entitled to purchase at any time during the period
commencing as of October 21, 1998 and ending on or before October 31, 2001
("Exercise Period"), fifty thousand (50,000) 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
fifty cents ($0.50) 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. In lieu of payment of the purchase price in cash or by check as
aforesaid, the Warrant Holder may elect to effectuate the "cashless exercise"
provisions contained in the Warrant Agreement dated as of October 21, 1998 to
which this Warrant is subject.
<PAGE> 2
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 fifty
thousand (50,000) 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 purpose of determining
the person entitled to any rights or any notice pursuant to the terms hereof or
for any other purpose.
2
<PAGE> 3
This Warrant is issued under and in accordance with that certain Warrant
Agreement dated as of October 21, 1998 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
October 31, 2001. 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 21st day of October, 1998.
Financial Performance Corporation
By: /s/
-------------------
William F. Finley
Its: President
By: /s/
-------------------
Richard Levy
Its: Secretary
Exhibit 1 - Warrant Exercise Form
Exhibit 2 - Warrant Transfer or Assignment Form
3
<PAGE> 4
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 fifty cents ($0.50) 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> 5
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> 1
EXHIBIT 10.86
WARRANT AGREEMENT
THIS AGREEMENT, made as of the 21st day of October, 1998, 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 each of the persons set forth on Schedule A annexed hereto
and made a part hereof (hereinafter collectively referred to as the "Warrant
Holders" and each as a "Warrant Holder").
W I T N E S S E T H:
Whereas, the Corporation has determined to issue and deliver to the Warrant
Holders warrants to purchase the Corporation's common stock (the "Warrants")
entitling the holder(s) thereof to purchase an aggregate of five hundred fifty
thousand (550,000) shares of the common stock of the Corporation (hereinafter,
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 Holders;
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 the Warrant Holder agree as follows:
1. ISSUANCE OF WARRANTS. The Warrants are dated as of October 21, 1998 and
evidence the right of the Warrant Holders to purchase the Shares. For purposes
of this Agreement, "common stock" of the Corporation shall be defined as 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. Each Warrant shall
be duly executed on behalf of the Corporation by the 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.
<PAGE> 2
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 October 31, 2001 ("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 Holders to purchase the
Shares at the price of fifty cents ($0.50) per share (the "Warrant Price"),
subject to adjustment as set forth in Section 4 below. Each of the Warrants
shall entitle a Warrant Holder to purchase one (1) 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 original Warrant 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 the 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) In addition to the method of payment set forth in subsection 3(a) above and
in lieu of any cash payment required thereunder, the Warrant Holder shall have
the right, at any time and from time to time, to exercise the Warrants, in whole
or in part, by means of a "cashless exercise" pursuant to which the Warrant
Holder may surrender the original Warrant together with the exercise notice in
the manner specified in subsection 3(a) above without payment of the Warrant
Price, in exchange for the number of shares of Common Stock equal to the product
of (x) the number of shares of Common Stock as to which the Warrants are being
exercised multiplied by (y) a fraction, the numerator of which is the Market
Price (as defined in subsection 3(g) below) of the Common Stock less the
Exercise Price and the denominator of which is the Market Price of the Common
Stock. For the purposes of this Section 3, Market Price shall be calculated
either (i) on the trading day immediately preceding the date on which the
exercise form is delivered to the Corporation as set forth in subsection 3(a)
above (the "Notice Date") or (ii) as the average of the Market Prices for each
of the five (5) trading days immediately preceding the Notice Date, whichever of
(i) or (ii) is higher.
(c) Upon the exercise of any of the Warrants, the Corporation shall, as promptly
as practicable (but in no event more than seven (7) business days after
exercise) 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(d) 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.
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(d) 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 securities
exchange or, if the Common Stock is not then being publicly traded, on another
reasonable basis determined by the Corporation.
(e) 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.
(f) 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.
(g) For purposes of this Section 3, the Market Price for a specified date shall
mean the amount per share of the Common Stock equal to (i) the last reported
sale price of the Common Stock on such date or, in case no such sale takes place
on such date, the average of the closing bid and asked prices of the Common
Stock on such date, in either case as officially reported on the principal
national securities exchange on which such Common Stock is then listed or
admitted for trading, or (ii) if such Common Stock is not then listed or
admitted for trading on any national securities exchange but is designated as a
national market system security by the NASD, the last reported trading price of
the Common Stock on such date, or (iii) if there shall have been no trading on
such date or if the Common Stock is not so designated, the average of the
closing bid and asked prices of the Common Stock on such date as shown by the
NASD automated quotation system, or (iv) if such Common Stock is not then listed
or admitted for trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Corporation as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made
and (y) the fair value thereof (as of a date which is within 20 days of the date
as of which the determination is to be made) determined in good faith by the
Board of Directors of the Corporation.
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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 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
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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 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:
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(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;
(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.
(c) The Warrants may not be redeemed by the Corporation at any time.
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(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.
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 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;
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.
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(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.
9. REGISTRATION RIGHTS. The Shares shall be entitled to customary "piggy-back"
registration rights and shall be registered by the Corporation, at the
Corporation's sole cost and expense, pursuant to next the registration statement
or amended registration statement to be filed by the Corporation with the
Securities and Exchange Commission. All of the terms of the "piggy-back"
registration rights hereby afforded to the Shares shall be as set forth in
Addendum A to this Warrant Agreement.
10. 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, or by hand delivery
with receipt of delivery acknowledged, or by a recognized overnight courier
service furnishing evidence of delivery, addressed as follows:
To the Corporation: Financial Performance Corporation
335 Madison Avenue
8th Floor
New York, New York 10017
Attention: William F. Finley
President
To the Warrant Holders: at the address of each Warrant Holder on file with the
Corporation
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(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 agrees to execute and deliver all such
further documents, agreements and instruments and take such other 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 on behalf of the
Corporation hereto the day, month and year first above written.
Witness: Financial Performance Corporation
________________________ By: /s/
______________________________
William F. Finley
Its: President
________________________ By: /s/
______________________________
Richard Levy
Its: Secretary
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SCHEDULE A
Name of Warrant Holder No. of Warrants Issued
Duncan G. Burke 100,000
Richard Levy 100,000
Ottavio Serena 200,000
Gary S. Friedman 100,000
Charlotte Tuck 50,000
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ADDENDUM A TO WARRANT AGREEMENT
REGISTRATION RIGHTS
A. REGISTRATION RIGHTS. If and at such time that the Company shall next
elect to file with the Commission a registration statement under the Securities
Act with the Commission covering any of the Company's securities, the Company
shall use its best efforts to effect the registration of the shares of the
Company's common stock underlying the warrants which are the subject of this
Warrant Agreement pursuant to such registration statement as more particularly
provided in this Annex A (all of such shares being registered are hereinafter
referred to as the "Registrable Securities").
B. REGISTRATION PROCEDURES. If and whenever the Company is required 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:
(k) prepare and 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
reasonably 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 (a) such time as all
of such Registrable securities have been disposed of
in accordance with the intended methods of
disposition by the Warrant Holder who shall sell or
offer to sell any Registrable Securities pursuant to
such registration statement (hereinafter, a "Selling
Stockholder") set forth in such registration
statement or (b) 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 or "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
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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) promptly notify the Selling Stockholder, at any time
when a prospectus related thereto is required to be
delivered under the Securities Act, of the happening
of any event as a result of which the prospectus
included in such registration statement, as then in
effect, includes an untrue statement of a material
fact or omits to state 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.
C. 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
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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.
D. 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 C) 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
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.
E. 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 C or D, 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 party of its obligations under Section
C or D, 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 reasonably 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
13
<PAGE> 14
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.
F. OTHER INDEMNIFICATION. Indemnification similar to that specified
in Section C and Section D (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.
14
<PAGE> 1
EXHIBIT 21.1
MICHAELSON KELBICK PARTNERS INC.
FPC INFORMATION CORP.
ASPEN CAPITAL MANAGEMENT, LLC
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 66,287,148
<SECURITIES> 0
<RECEIVABLES> 342,783
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,661,206
<PP&E> 522,073
<DEPRECIATION> 308,344
<TOTAL-ASSETS> 7,851,060
<CURRENT-LIABILITIES> 2,841,188
<BONDS> 0
0
0
<COMMON> 94,715
<OTHER-SE> 4,256,541
<TOTAL-LIABILITY-AND-EQUITY> 7,851,060
<SALES> 21,492,151
<TOTAL-REVENUES> 21,492,151
<CGS> 14,823,626
<TOTAL-COSTS> 14,823,626
<OTHER-EXPENSES> 3,722,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,369,813
<INCOME-TAX> 262,106
<INCOME-CONTINUING> 2,107,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,107,707
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.23
</TABLE>
