U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number 1-12687
IFS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Delaware 13-3393646
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Rensselaer Technology Park, 300 Jordan Rd., Troy, NY 12180
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (518)283-7900
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.001 per share Boston Stock Exchange
Redeemable Stock Purchase Warrants Boston Stock Exchange
Securities registered under Section 12(g) of the Exchange Act:
Title of each class Common Stock, par value $.001 per share
Redeemable Stock Purchase Warrants
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. [ ]
Issuer's revenues for its most recent fiscal year. $10,164,618
The aggregate market value of the Common Stock held by non-affiliates on July
21, 1999 was approximately $7,369,552.
As of July 21, 1999 there were 2,780,485 shares of IFS International, Inc.
Common Stock outstanding.
<PAGE>
PART I
This report on Form 10-KSB contains herewith forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and in "Management's Discussion and Analysis
of Financial Condition and Plan of Operations."
ITEM 1. Business
Business Developments
IFS International, Inc. (the "Company"), a Delaware corporation, is engaged in
the business of developing, marketing and supporting software products for the
electronic funds transfer ("EFT") and retail banking markets. These markets are
served through the Company's two wholly-owned subsidiaries, IFS International,
Inc. ("IFS"), a New York corporation and Network Controls International, Inc.
("NCI"), a North Carolina corporation.
The Company was incorporated in Delaware in September 1986 under the name
Wellsway Ventures, Inc. ("WWV"). WWV subsequently changed its name to IFS
International, Inc. The Company's principal offices are located at Rensselaer
Technology Park, 300 Jordan Road, Troy, New York 12180 and its telephone number
is (518) 283-7900.
On January 30, 1998, the merger of a wholly owned subsidiary of IFS with and
into NCI Holdings, Inc. ("Holdings") was consummated pursuant to a Plan and
Merger Agreement, dated January 30, 1998 (the "Merger Agreement"). Holdings
owned approximately 94% of the issued and outstanding shares of capital stock of
NCI, which develops and markets software products for bank automation. On June
1, 1998 NCI was merged into Holdings and Holdings subsequently changed its name
to Network Controls International, Inc. In July 1998, the Company acquired the
remaining outstanding shares of capital stock of NCI for cash and stock valued
at approximately $35,000.
On March 16, 1999, the stockholders of the Company approved an amendment to the
terms of the Series A Convertible Preferred Stock (the "Preferred Stock")
pursuant to which each share of Preferred Stock was (i) convertible into 1.1
shares of Common Stock ("Adjusted Conversion Number") instead of one share of
Common Stock and (ii) automatically converted into such Adjusted Conversion
Number of shares of Common Stock on April 1, 1999. Therefore, the then
outstanding shares of the Series A Preferred Stock became 1.1 shares of Common
Stock and each Redeemable Series A Convertible Preferred Stock Purchase Warrant
(the "Warrants") is now exercisable into 1.1 shares of Common Stock at an
exercise price of $6.25 (or approximately $5.68 per share) until February 21,
2002.
Private Placement
On July 6, 1999, the Company sold $1,000,000 of convertible promissory notes
(the "Notes") to three purchasers. The Notes are due in July 2001 and accrue
interest at 10% per year. Interest does not accrue for the first three months
and does not accrue for a given month if the value weighted average stock price
for the previous month, was at or above $3 per share or 90% of the lowest daily
value weighted average stock prices over a specified period from 15 to 30 days
prior to conversion. The purchasers received warrants to purchase an aggregate
of 100,000 shares of the Company's Common Stock at an exercise price of $3.37
per share subject to dilution. One investor and another company received $75,000
of additional convertible promissory notes and additional warrants to purchase
an aggregate of 100,000 shares of the Company's common stock in return for their
assistance with the transaction. The proceeds of the note and warrant placement,
after placement fees, were $965,000.
Introduction to Business
IFS' family of software products, marketed under the name TPII ("TPII"), serve
as a UNIX-based manager for EFT systems. TPII software products are compatible
with a significant portion of the industry standard computer platforms, are
designed to operate with computers utilizing the UNIX operating system, are
written in C and 4GL programming languages and incorporate Oracle relational
database technology and object oriented design concepts.
An EFT system ("EFT System") of a bank or other financial institution permits
the processing of transactions involving credit cards and debit cards (e.g., ATM
cards). An EFT System typically consists of one or more of the following
facilities in various configurations: automatic teller machines ("ATMs"), point
of sale ("POS") terminals, a host computer of the financial institution and
regional, national and international networks ("Networks"), such as
MasterCard/CIRRUS, NYCE, MAC, EUROPAY or Visa/PLUS. TPII software products
primarily route and authorize the processing of transactions through an EFT
System.
TPII software is offered in separate modules which perform different functions,
including (i) interfacing with ATMs, POS terminals, a financial institution's
host computer and financial Networks, (ii) updating credit and debit card
information, (iii) providing stand-in authorization for transactions when the
financial institution's host computer is not operating, (iv) computing fees for
processed transactions (v) generating reports, and (vi) processing smart card
transactions. The TPII software products are typically installed at the
financial institution's main processing facility. TPII software is also capable
of managing EFT Systems that involve the "loading" of value on smart cards. A
smart card is a plastic card with an electronic chip that acts as a small
computer which can enable the holder to "load" a fixed amount of purchasing
power or cash equivalent on the card as authorized. This solution has been
selected for various pilot sites implementing Visa Cash solutions world wide.
Additionally, the TPII system has been designed to be totally extendible with
regard to the devices it can support. This has been accomplished by insulating
the CORE business logic from the device specific protocol. Examples of this
include introduction and support of Home Banking and Personal ATM's.
IFS principally derives its revenues from the licensing of its family of
software products. A substantial portion of such revenues are generated by
licensing through or to computer manufacturers, which incorporate the TPII
software products into a turnkey system installed at a financial institution.
The preparation of functional specifications, customization and installation of
TPII software products and the training by IFS of the financial institution's
personnel in the use of the TPII software products take an average of six to
twelve months, depending upon the timing of installation and final acceptance of
the EFT System by the customer. IFS generally receives payment of a substantial
portion of the license fee prior to the final acceptance by the customer. The
Company provides its customers with maintenance services for its software
products for a separate fee. The Company also offers other support services,
such as additional training of customer personnel, project management and
consulting, for additional consideration.
NCI provides bank platform automation and networking solutions to large
financial institutions and major suppliers of branch automation equipment. NCI
is currently developing a new product line, NCI Business Centre (TM), which is
scheduled be implemented as a beta in two US banks during August 1999. It is
expected that NCI Business Centre (TM) version 1.0, will be officially released
and available during the next fiscal year.. NCI Business Centre (TM) is a
server-centric and enterprise-wide retail banking solution designed to automate
delivery channels, such as teller, platform, Internet banking, call center and
kiosks. NCI Business Centre (TM) uses Windows NT, browsers and TCP/IP protocol
technologies for delivery of functionality over Intranet and Internet networks.
NCI is headquartered in Charlotte, North Carolina.
NCI GmbH, a wholly owned subsidiary of NCI based in Germany , was established in
1988 and operates primarily as a reseller of NCI products throughout Germany,
Switzerland, Italy, and Austria. NCI Ltd., a wholly owned subsidiary of NCI
based in London, was established in January 1990. With a business focus on
systems integration, money brokering consulting, software product development,
and software product integration, NCI Ltd. provides solutions to customers
across Europe. NCI also maintains a branch office in Melbourne Australia, and
has an inactive subsidiary in Spain.
BUSINESS OF THE COMPANY
Software / Hardware Products
TPII software products are EFT Systems managers, primarily acting to facilitate
the processing of debit card or credit card transactions or the "loading" of
value to smart cards. TPII products primarily route and authorize the processing
of transactions through an EFT System, thereby enabling the system to interface
or communicate with other systems and Networks, as well as to provide other
functions. Such transactions involve several steps managed by an EFT System.
First, the bank customer or a retailer inserts the customer's debit, credit or
smart card issued by the bank into an ATM, POS terminal or smart card "load"
device thereby requiring authorization of a transaction. The request is routed
to a Network or bank computer for authorization after performing several
pre-authorization checks typically deferred by the institution; the
authorization message is then returned to the terminal at which the transaction
was originated and the transaction then is completed. The whole process is
generally accomplished within thirty seconds or less. Most EFT Systems operate
twenty-four hours a day, seven days a week.
TPII software products generally can be configured to (i) act as a front-end to
a financial institution's host computer, (ii) perform as a switch connected to
multiple financial institutions' host computers and Networks or (iii) act as an
authorization-only system for financial transactions. As a front-end system,
TPII software products can intercept transactions from a financial institution's
terminals and route them to the institution's host computer. This eliminates
expenses that may be charged by data processing facilities or Networks. As a
switch, TPII software products can route transactions between multiple host
computers of financial institutions for authorization of transactions. In this
environment, ATMs, POS terminals and smart card "loading" devices of a financial
institution are on-line to such financial institution's host computer and such
host computer is on-line to the TPII software. If such financial institution's
host computer receives a transaction request from an ATM, POS terminal or smart
card "load device" requiring an authorization from another financial institution
which is part of the Network, then the request is transmitted to the Network
utilizing TPII software and TPII software routes the request to the proper
financial institution's host computer for authorization, which then transmits
the authorization response back to the Network. TPII software then routes the
authorization response to the original requesting financial institution. In this
environment, TPII software can also authorize the transaction if the financial
institution from which the authorization is requested is unavailable.
As an authorization-only system, TPII software products receive authorization
requests from various Network switches. In this environment, TPII software is
installed at the financial institution's main office, but is not interfaced with
any of that institution's ATMs, POS terminals or smart card load devices.
Instead, it will authorize transactions initiated by credit cards, debit cards
and/or smart cards issued by the institution to its customers when the customers
utilize terminals and devices owned by other financial institutions. In this
environment, a transaction request originating at another financial
institution's ATM, POS terminal or smart card "loading" device by the customer
is transmitted to a Network switch and the Network switch will route the
transaction request to TPII software. TPII software will then route the
transaction to the host computer of the financial institution utilizing TPII
software for authorization. If such institution's host computer is unavailable,
then TPII software will authorize the transaction and transmit the response back
to the proper Network switch.
TPII software products can be installed at the financial institution's main
office, a branch or at a data processing facility. TPII software products permit
7-day, 24-hour remote banking by storing customer balance files and
communicating with the customers' in-house computer(s) or data center(s) on a
continuous (real time) or batch (delayed) basis with no changes required to
existing host application software. TPII software products are capable of
sending or receiving messages from ATMs, POS terminals, Networks and host
computers. Such products may authorize transactions without the necessity of
interfacing with the host computer and can periodically input the transactions
into the host computer.
NCI entered the application software market in 1989 with the NCI BANC-Mgr(TM)
product, a full featured bank teller and platform sales and support automation
system. The solution allows a bank to automate their branch in supporting
customers at teller lines and in new product sales and service with a powerful
PC based application solution. In 1993, NCI introduced NCI ClientServer Mgr(TM)
as an integral part of the configuration of current solutions. NCI ClientServer
Mgr(TM) is a middleware support solution designed to manage all of the computing
resources on a local area network in conjunction with an application solution.
The product is marketed and sold separately as an alternative for the IBM LANDP
middleware support product. NCI is marketing its new flagship product called NCI
Business Centre (TM), a browser-based enterprise retail delivery solution that
is designed to automate all delivery channels in an organization; marketing,
platform, teller, call center, and virtual banking, under a single technology.
NCI's Wizard(TM), XOVER(TM), and BANC-Mgr(TM) solutions provide tactical
solutions to financial institutions by allowing for a low cost migration
strategy from the legacy IBM 4700 environment to a PC based environment.
Both IFS and NCI expect to deliver new product sets, namely TP-CMS, discussed
below and NCI Business Centre (TM) during the next fiscal year to compliment the
Company's existing products.
Licensing, Services and Training
IFS licenses its TPII software products pursuant to a non-exclusive perpetual
licensing agreement. Under these agreements, the customer receives the
non-exclusive right to use one copy of the software product on designated
equipment upon payment of a one-time fixed license fee. IFS trains the financial
institution's personnel in the use of the software products as part of the
license fee.
NCI licenses its software products pursuant to a end user licensing agreement.
Under these agreements, the customer receives the right to use the software
product on designated work stations or in designated locations upon payment of
agreed upon fees. Depending upon the type of license purchased, the software
product may be installed at several different locations or it may be limited to
specified number of work stations. NCI will train the financial institution's
personnel in the use of its software products upon request, for an additional
fee .
The TPII software products generally involve customization to enable the TPII
software to interface with a customer's unique host software and to meet the
particular needs of the customer. For example, each financial institution has
different software operating various ATMs or POS terminals, as well as bank and
Network computers, requiring modification to configure with the IFS' TPII
software. Licenses for TPII software products generally begin at $180,000 and
average approximately $300,000 per contract depending upon the modules selected.
Payments under these types of contracts are usually made in several stages
commencing with signing of the license agreement and then as certain milestones
are completed.
The Company generally warrants its software products for 90 days. Subsequent to
the warranty period of the software products, the Company provides maintenance
services with respect to such software products. Yearly service fees are
typically 15% of the original software license fee, subject to annual increases
based on changes in the Consumer Price Index in the United States, and are
generally payable annually in advance. During the period of service, the
customer receives any new program releases, which contain functional
enhancements and documentation updates that the Company deems necessary.
Hardware products are generally warranted for one year.
For an additional fee, IFS will provide additional training of customer
personnel. Depending on the complexity of the customer's system, training can
take from 2-4 days to 2-4 weeks.
Oracle Corporation has granted IFS, in exchange for the payment of royalties to
Oracle, a nonexclusive license to use, and grant sublicenses with the respect
to, the Oracle relational database software which is incorporated into the TPII
software products. NCI participates in the Oracle Corporation Business Alliance
Program with the NCI Business Centre (TM) product.
There is little customization involved with NCI's legacy software products.
Licenses for NCI software products can vary in price significantly dependent
upon the type of license purchased. An enterprise license can be for several
hundred thousands of dollars versus a significantly lesser amount for a single
user license.
Special Development Contracts
IFS performs specialized software modifications or enhancements to its TPII
software for its customers. IFS generally receives a fee for the modification
and has all proprietary rights to the software developed and may then include
the modification in its standard TPII software products. IFS finds these
contracts to be beneficial because of the resulting enhancements to its base
software products.
NCI may perform specific development contracts for customers. NCI typically
retains ownership of the final product. The customer is billed on a time and
material or on a fixed fee basis.
Customers And Marketing
TPII software products have been installed in EFT Systems of banks and other
financial institutions located primarily in emerging countries and former
Eastern Bloc nations which operate, or are members of,
geographically-distributed EFT Systems or Networks servicing large volumes of
transactions.
In 1994, IFS entered into a strategic alliance with Compaq Computer Corporation
("Compaq"), formerly known as Digital Equipment International BV ("DEC"),
pursuant to which Compaq agreed to market on a nonexclusive basis TPII software
products in connection with Compaq's world-wide sale of its computers for EFT
Systems. In connection with Compaq's sale of computers for EFT Systems, Compaq,
rather than the financial institutions, is generally the licensee of IFS' TPII
software products. For the fiscal years ended April 30, 1999 and 1998,
approximately 7% and 19%, respectively, of the Company's total revenues were
derived pursuant to this relationship. The Company is, therefore, not currently
as dependent upon this relationship as it was in prior years and would not be
adversely affected by the loss of such relationship. IFS is currently seeking to
enter into alliances with additional computer manufacturers.
In 1998, IFS entered into a re-licensing agreement with Banking Production
Center ("BPC"), which is located in the Russian Federation. IFS has agreed to
allow BPC to market its TPII products in the Russian Federation, Commonwealth of
Independent States ("C.I.S.") and the "Stans" including Kazhakstan. For the
fiscal year ended April 30, 1999, approximately 10% of the Company's total
revenues were derived pursuant to this relationship. The Company expects
revenues, as a result of the relationship to continue to grow in the future and
therefore, the loss of this relationship could have an adverse effect on the
Company.
IFS has also entered into a number of other distributor and alliance
relationships within international and regional organizations. The Company
expects revenue to be generated from these sources in the future.
IFS' software product information is disseminated by its partners through
in-house newsletters and other promotional tools. Products are also advertised,
to a limited extent, in user publications and at various trade shows.
As a result of the smart card pilot programs, Visa accounted for approximately
14% and 16% of the Company's total revenues for the year ended April 30, 1999
and 1998 respectively.
IFS markets its products directly through a sales team directed by Simon J.
Theobald, Executive Vice President as well as through a growing number of sales
agents and distributors. Presently, the sales and marketing staff comprises 17%
of IFS' total staff, as compared to 11% at April 30, 1998. The staffing increase
is consistent with IFS' global commitment to expand its sales and marketing
efforts. Mr. Theobald is located in IFS' European office based in London.
NCI markets its products primarily through Per Olof Ezelius, its President and
CEO together with Ken Russell, NCI's Vice President of North American
Operations, Garry Benson, Managing Director of NCI Ltd., Hartmuth Nitze,
Managing Director of NCI GmbH and James Ling, NCI's regional sales manager for
Asia/Pacific. Mr. Ezelius and Mr. Russell are located at NCI's headquarters in
Charlotte, N.C., Mr. Benson is located in London, Mr. Nitze is located in
Germany and Mr. Ling is located at NCI's branch office in Australia. Mr. Ling
has also begun to market IFS products as well. NCI also markets its products
through its two active subsidiaries, as well as several regional re-sellers
worldwide.
Backlog and Deferred Maintenance Service Revenues
Backlog
As of April 30, 1999 and 1998, the Company had backlog of approximately
$1,367,000 and $1,297,000 respectively, in software license fees and hardware
orders. Backlog was approximately $1,337,000 and $30,000 for IFS and NCI
respectively at April 30, 1999. The increase in backlog is a result of TPII
contracts signed during the twelve months ended April 30, 1999 with new
customers as well as contracts signed with existing customers for system
upgrades. The Company includes in its backlog all license and service fees
pursuant to executed orders or license agreements not included as revenues under
the percentage of completion method to the extent that the Company contemplates
recognition of the related revenues within one year. There can be no assurance
that the contracts included in backlog will actually generate the specified
revenues or that the actual revenues will be generated within the one year
period.
Deferred Maintenance Service Revenues
As of April 30, 1999 and 1998, the Company had deferred maintenance service
revenues of approximately $701,000 and $753,000, respectively. Deferred
maintenance was approximately $567,000 and $134,000 for IFS and NCI respectively
at April 30, 1999 and approximately $438,000 and $315,000 for IFS and NCI
respectively at April 30, 1998. Deferred maintenance service revenues for NCI at
April 30, 1998 included approximately $111,000 which represented a customer
deposit which was recognized as revenue during 1999. Deferred revenue related to
maintenance services revenues increased by approximately $59,000 from
approximately $642,000 in fiscal year April 30, 1998 to approximately $701,000
in fiscal year April 30, 1999. The increase in deferred revenue related to
maintenance services revenue is a result of an increase in the installed base of
TPII customers. As more IFS software products are installed and NCI software
licenses are sold, maintenance revenues are expected to increase.
Competition
The development and marketing of software for financial institutions is highly
competitive. Many of the Company's competitors have greater financial resources
than the Company. In addition, many of the larger financial institutions have
developed their own systems internally. However, the Company believes its
current software products will continue to be competitive based on cost and
technology.
TPII software products face strong competition from proprietary (legacy) and
UNIX-based software. In the international EFT market, well established worldwide
competition includes Transaction Systems Architects, Inc., Deluxe Data Systems,
Inc., SDM International, Inc., S2 Systems, Inc., a subsidiary of Stratus, SLM
Software, Inc., Consolidated Software, Mosaic's Position and Oasis Systems,
whose products run on Tandem or Stratus fault-tolerant computers with
proprietary operating systems or on IBM host or industry standard computers with
UNIX operating systems.
IFS is aware of only a limited number of companies primarily marketing
UNIX-based products for EFT Systems. The Company is also aware that S2 Systems,
Inc. has developed its own UNIX-based transaction processing package and
Transaction Systems Architects, Inc. has begun to market a UNIX-based product,
TRANS 24.
There are numerous companies which offer EFT outsourcing services. These third
party providers primarily drive ATMs belonging to financial institutions. A
significant portion of all of ATM transactions in the USA are processed by these
third party providers. The principal companies in this area are: Electric Data
Systems (EDS), Deluxe Data Corporation, Affiliated Computer Services, Inc.,
Fiserv, Inc., Money Access Services (MAC), Information Services and First Data
Corporation.
The retail POS market is rapidly growing and numerous participants are
positioning themselves to capture various segments of the market. Most of these
companies are well established, have greater financial resources than the
Company and an established customer base. There can be no assurance that the
Company can make any inroads in this highly competitive marketplace or that its
efforts will be successful.
In the smart card market, other financial institutions and companies including
certain institutions and companies which have greater resources then the
Company, have developed and are developing their own smart card technology. The
Company is unable to predict which technology, if any, will become the industry
standard.
NCI has limited direct competition with most of its IBM 4700 migration products
as the Company is unaware of any equivalent products that are offered by
industry suppliers. There are several competitors for NCI's 3270 Coax solution
and IBM's LANDP product is a competitor for NCI's middleware product NCI
ClientServer-Mgr. The NCI Business Centre (TM) enterprise retail delivery
solution competes with the major branch automation solution providers, such as
IBM with it's CT product and ARGO Data, NCR with it's SellStation product and
Broadway, and Seymour with it's TouchPoint product. NCI also experiences
competition with core banking solutions that include a branch and teller system
integrated with their product, like Alltel, OSI, FISERV, Jack Henry and
Associates, and Unisys. Most of the Company's competition comes from competitors
with substantial financial resources who possess greater abilities to market
their products and withstand general economic and sales volatility.
Although all of the competitors of the NCI Business Centre (TM) Product offer
similar business functions, NCI does not believe that competitors have
enterprise wide, browser-based solution that allows customers to re-use common
business objects across multiple delivery channels through the use of the same
technology platform.
Software Development And Future Products
Competition, technological advances, changes in customer requirements,
deregulation and other regulatory changes affecting financial institutions
necessitate an ongoing enhancement and development effort to meet the
comprehensive processing needs of banks and other financial institutions. As a
result, the Company will continue ongoing expenditures for enhancement of the
Company's existing software products that take advantage of technological
advances and respond to the increasingly sophisticated requirements of its
customers. Enhancements to existing customers are delivered as add-ons to the
licensing agreements for additional license fees or as new license agreements.
TP-CMS is IFS' newest addition to the Company's product portfolio. TP-CMS is
currently in closed release and is due for global release during the second half
of 1999.The product is an open architecture payment card management solution for
credit, debit, electronic purse and biometric cards. Incorporating the latest
technologies available for information management, TP-CMS enables IFS to provide
a complete migration of a banks payment card systems to state-of-the-art
solutions. Presently, two financial institutions have already contracted to have
TP-CMS implemented in conjunction with TPII.
IFS will further develop products, services, and enhancements relating to the
"loading" of value on the smart card. Financial institutions utilizing smart
cards must provide for the personalization of the smart cards as well as a
purchase terminal system, a collection system and a clearing system. IFS may
consider developing, itself or jointly, one or all of these products and
services and may also explore the possibility of providing a turnkey or single
vendor solution for financial institutions in this area.
IFS believes that its TPII software products can be adapted for Internet/home
banking. IFS is currently testing a home banking system utilizing the NCI
Business Centre (TM) product and TPII software.
IFS will also attempt to market additional services to the EFT industry. New
products may be developed internally or obtained through acquisitions.
Research and development expenses for the fiscal year ended April 30, 1999 was
approximately $1,945,000 as compared to approximately $1,054,000 for the fiscal
year ended April 30, 1998. The increase is a result of incorporating twelve
months of operations from NCI whereas in April 30, 1998 research and development
expenses only reflected three months of operations of NCI. Research and
development expenses for the fiscal year ended April 30, 1999 were approximately
$779,000 and $1,166,000 for IFS and NCI respectively.
Proprietary Rights
The Company does not own any patents or registered copyrights. The Company
relies on a combination of trade secret and copyright laws, nondisclosure and
other contractual provisions and technical measures to protect its proprietary
rights. The Company distributes its software products under software license
agreements which typically grant customers nonexclusive licenses to use the
products. Use of the software products is usually restricted to designated
computers at specified locations and is subject to terms and conditions
prohibiting unauthorized reproduction or transfer of the software products. The
Company also seeks to protect the source code of its software products as a
trade secret. The Company also obtains confidentiality agreements from its
employees, customers and others who have access to its software products.
Despite these precautions, there can be no assurance that misappropriation of
the Company's software products and technology will not occur.
Although the Company believes that its intellectual property rights do not
infringe upon the proprietary rights of third parties, there can be no assurance
that third parties will not assert infringement claims against the Company.
Further, there can be no assurance that intellectual property protection will be
available for the Company's products in certain foreign countries.
Regulations
The Company's applications are utilized primarily by financial institutions.
Such institutions are subject to state, federal or foreign regulation. Hence, it
is possible that banking regulations may have a material effect on the Company's
operations. In addition, the software products are subject to export
regulations, including regulations relating to encrypted software, which require
prior approval of the licensing of the software to customers located in foreign
countries. To date, however, the Company has not experienced problems complying
with these regulations.
Employees
As of April 30, 1999, the Company had ninety-six employees, eighty-seven of whom
were full time. Nine employees comprise the direct sales force; sixty-six
employees are involved in product development, technical support and services
and twenty one employees are involved in office administration. The Company
intends to hire additional sales staff in the next fiscal year. Additionally,
the Company engages various consultants from time to time to assist with product
development and enhancements to existing products.
The Company believes it can continue to attract skilled personnel for all areas
and has been able to keep turnover to a minimum. However, the competition to
employ skillful professionals is intense. None of the employees are covered by a
collective bargaining agreement and there have been no work stoppages.
Management believes that relations with its employees are good.
ITEM 2. Properties
In March 1997, IFS purchased a ground lease expiring in May 2083 and a building
with approximately 35,000 square feet of space located at 300 Jordan Road,
Rensselaer Technology Park, Troy, New York. The Ground lease is subject to a
mortgage in the original amount of $2,081,442.
The Town of North Greenbush Industrial Development Agency ("IDA") passed a
resolution on March 25, 1997 authorizing the IDA to provide certain financial
assistance ("Financial Assistance") to IFS upon the completion of certain
events, including financing of the property located at 300 Jordan Road,
Rensselaer Technology Park, Troy, New York and its renovation. Such Financial
Assistance was in the form of (i) a New York State sales tax abatement, (ii) a
mortgage recording tax exemption and (iii) graduated payments by the Company in
lieu of real property taxes with respect to such property.
The Company's European office is leased and is located at Salamander Quay
(West), Park Lane, Harefield, Uxbridge, Middlesex, UB9 6NZ, England. This office
consists of approximately 890 square feet. The term of this lease expires in
June 2005. The annual base rental amount is approximately $28,000.
NCI's headquarters, which consist of approximately 13,500 square feet of leased
office space, is located at Nine Woodlawn Green, Suite 120, Charlotte, N.C.
28217. The term of this lease expires on February 28, 2004. The Company has the
option to renew the lease at a mutually agreeable rental. The current annual
base rental amount is approximately $175,000. NCI subsidiaries also lease space
on a short term basis.
ITEM 3. Legal Proceedings
The Company is not a party to any pending material legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company's shareholders voted on three separate matters at the Annual
Shareholder's Meeting held on March 16, 1999. These include the approval of (i)
the 1998 Stock Plan, (ii) the mandatory conversion of the Company's outstanding
Series A Convertible Preferred Stock into Common Stock at a ratio of 1:1.1, and
(iii) the name change of the Company from IFS International, Inc. to IFS
Holdings, Inc. Due to a conflict, the Company has not proceeded with the name
change.
All three matters were approved by the shareholders on March 16, 1999.
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
Prior to April 1, 1999, the Company's Common Stock had been quoted on the Nasdaq
SmallCap Market under the symbol "MNYC". Commencing on April 1, 1999, the Common
Stock has been quoted on The Nasdaq SmallCap Market under the symbol "IFSH." The
Company also changed the symbol for the Redeemable Stock Purchase Warrants (the
"IPO Warrants") from "MNYCW" to "IFSHW" at the same time. Prior to April 1,
1999, the Company's Series A Convertible Preferred Stock (the "Preferred Stock")
had been quoted on the Nasdaq SmallCap Market under the symbol "MNYCP". On March
16, 1999, the shareholders of the Company approved an amendment to the terms of
the Preferred Stock pursuant to which each share of Preferred Stock was (i)
convertible into 1.1 shares of Common Stock ("Adjusted Conversion Number")
instead of one share of Common Stock and (ii) automatically converted into such
Adjusted Conversion Number of shares of Common Stock on April 1, 1999.
Therefore, the then outstanding shares of Preferred Stock became 1.1 shares of
Common Stock and each IPO Warrant is now exercisable into 1.1 shares of Common
Stock at an exercise price of $6.25 per 1.1 shares (or approximately $5.68 per
share) until February 21, 2002. The following table sets forth the range of the
high and low sales prices of the Common Stock on The Nasdaq SmallCap Market for
the periods indicated. The following table also sets forth the range of the high
and low bid quotations of the Series A Preferred Stock "MNYCP" (which was
delisted from The Nasdaq SmallCap Market on the close of business March 31, 1999
pursuant to the mandatory conversion) and the Warrants "IFSHW" on The Nasdaq
Small Cap Market commencing on February 21, 1997.
SERIES A
COMMON STOCK PREFERRED STOCK WARRANTS
Quarter Ended High* Low* High* Low* High* Low*
- ---------------- ------- ------- ------- ------- ------- -------
April 30, 1999 $4.25 $2.00 $3.38 $2.25 $1.50 $.63
January 31, 1999 $3.50 $2.00 $3.38 $2.13 $1.50 $.63
October 31, 1998 $3.25 $1.25 $3.00 $1.13 $1.50 $.25
July 31, 1998 $3.00 $1.38 $2.50 $1.06 $1.06 $.19
April 30, 1998 $5.63 $2.75 $10.25 $1.88 $3.75 $.56
January 31, 1998 $6.88 $4.50 $9.88 $6.50 $4.00 $2.13
October 31, 1997 $7.75 $5.50 $12.00 $9.00 $4.00 $2.63
July 31, 1997 $9.00 $4.25 $11.50 $6.00 $6.25 $2.75
* The sources of such quotations are Nasdaq and IDC.
The above quotations reflect inter-dealer prices, without mark-up, mark-down or
commission, and may not represent actual transactions.
As of April 30, 1999 there were approximately 230 recordholders and 1,247
beneficial owners of Common Stock.
As of April 30, 1999 there were approximately 26 recordholders and 454
beneficial owners of the Warrants.
The Company has not paid a dividend on its outstanding securities. The Company
plans to retain any future earnings for use in its business and, accordingly,
the Company does not anticipate paying dividends on its Common Stock The payment
of any dividends on the Common Stock will be at the discretion of the Company's
Board of Directors and will be dependent upon the Company's results of
operations, financial condition, capital requirements, contractual restrictions
and other factors deemed relevant by the Board of Directors.
Issuance of Stock
The Company issued the following securities during the fiscal year ended April
30, 1999 exclusive of securities pursuant to the Company's employee benefits
plan:
(a) a total of 500,000 warrants to purchase 500,000 shares issued to
two persons providing investment banking services and in one case,
financial public relations. The Company believes the issuance of
these shares is exempt from registration provisions of the
Securities Act of 1933 Section (4)2 thereof.
(b) 1,590,136 shares of common stock issued to former holders of the
Company's Series A Preferred Stock, including shares pursuant to
Mandatory Conversion. The Company believes the issuance of these
shares is exempt from the registration provisions of the
Securities Act of 1933 pursuant to Section 3(a)9 thereof.
ITEM 6. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
Introduction
The Company is engaged in the business of developing, marketing, automating and
supporting software for the EFT market. The Company's revenues have resulted
from the licensing of its family of TPII software products and from revenue from
NCI. The preparation of functional specifications, customization and
installation of TPII software products and the training by IFS of the financial
institution's personnel in the use of the TPII software products takes an
average of six to twelve months, depending upon the timing of installation and
final acceptance of the EFT System by the customer. Completion of an NCI license
agreement typically takes an average of two to six months. IFS' customers
generally pays 30% to 50% of the project costs including licensing fees upon
execution of the licensing agreement and also make progress payments prior to
acceptance. NCI customers typically pay the license fees upon installation of
the product. IFS recognizes revenue under the percentage of completion method
for software installation contracts. The percentage of completion method is
measured by estimates of the progress towards completion as determined by costs
incurred. NCI recognizes software license revenue upon installation and hardware
revenues upon shipment. The Company also derives recurrent revenues from
furnishing certain maintenance services to its customers for its products. The
Company may also receive additional revenues for additional training of customer
personnel and consulting services (collectively "service revenues"). With
respect to revenues for maintenance services, the Company generally receives
annual payments at the beginning of the contract year. Such payments are
reflected as deferred revenues and are recognized ratably during such year.
Results Of Operations
Fiscal Year Ended April 30, 1999 Compared With Fiscal Year Ended April 30, 1998
Results of operations for the fiscal year ended April 30, 1999 incorporate
twelve months of business activity of NCI, as compared to three months of
business activity for the fiscal year ended April 30, 1998. Accordingly, fiscal
year Results of Operations for fiscal year 1999 will generally be significantly
greater than fiscal year 1998.
Total revenues of $10,164,618, for the fiscal year ended April 30, 1999
represent an increase of $4,956,284, or 95.2%, over total revenues of $5,208,334
for the fiscal year ended April 30, 1998. The increase primarily resulted from
the inclusion of revenues from NCI for twelve months. IFS' revenues also
increased for the fiscal year ended April 30, 1999 primarily due to increases in
software license and installation contract fees and in maintenance revenue.
Service and maintenance revenues for the fiscal year ended April 30, 1999
increased by $1,002,979 or 39.0%, over service and maintenance revenues for the
fiscal year ended April 30, 1998. The increase in service and maintenance
revenues is primarily a result of service and maintenance revenues generated by
NCI for the full year. Service and maintenance revenues of IFS for the fiscal
year ended April 30, 1999 were $945,914 as compared to $1,912,617 for the fiscal
year ended April 30, 1998. The decrease in IFS' service and maintenance revenues
is due to the successful completion of several smart card pilots in fiscal year
1998. This decrease was partially offset by an increase in maintenance revenue.
The Company believes that the successful completion of the smart card pilots
will generate future revenues for the Company. Service and maintenance revenues
of NCI for the twelve months ended April 30, 1999 were $2,300,014. As of April
30, 1999, the Company had approximately $701,000 of deferred maintenance service
revenues. Service and maintenance revenue growth is expected to continue as long
as the number of licenses for software products increases and the customers
continue to utilize such software products.
Hardware revenues increased in the fiscal year ended April 30, 1999 as a result
of revenues generated by NCI. NCI's hardware revenues for the twelve months
ended April 30, 1999 approximated $1,830,000.
Revenues from licensing of software products and hardware sales in countries
outside the United States accounted for 82.4% of total revenues for the fiscal
year ended April 30, 1999 as compared to 73.6% for the fiscal year ended April
30, 1998. The increase as a percentage of total revenues resulted primarily from
an increase in foreign sales and a decrease in domestic sales. The Company
expects total revenues from foreign countries to continue to be a significant
portion of its revenues in the future.
Gross profit, as expressed as a percentage of total revenues, increased to 76.7%
for the fiscal year ended April 30, 1999, as compared to 73.6% for the fiscal
year ended April 30, 1998. This increase is associated with the increase in
service and maintenance revenues. Service and maintenance revenues typically
have a higher gross margin than the Company's other sources of revenues. Service
and maintenance revenues were $3,575,783 for the fiscal year ended April 30,
1999 as compared to $2,572,804 for the fiscal year ended April 30, 1998.
Operating expenses of $8,391,227 for the fiscal year ended April 30, 1999
represent an increase of $3,237,851, or 62.8%, from operating expenses of
$5,153,376 for the fiscal year ended April 30, 1998. This increase in operating
expenses resulted primarily from the incorporation of NCI operating expenses for
twelve months, as previously stated. IFS' operating expenses for the fiscal year
ended April 30, 1999 were $5,176,695 as compared to $4,113,244 for the fiscal
year ended April 30, 1998. This increase in IFS' operating expenses resulted
primarily from substantial non recurring expenses incurred during the fiscal
year ended April 30, 1999.
Capitalized software costs for the fiscal year ended April 30, 1999 were
$686,118, as compared to $531,639 for the fiscal year ended April 30, 1998. This
increase in capitalized software costs resulted primarily from costs incurred
with respect to NCI Business Centre (TM) software technology. Such capitalized
costs are being amortized on a straight line basis over the estimated five year
marketing lives of the software.
Net loss was $703,907 for the fiscal year ended April 30, 1999, as compared to a
net loss of $1,261,473 for the fiscal year ended April 30, 1998.
The Company has net operating loss carryforwards of approximately $3,800,000 as
of April 30, 1999. The use of such net operating loss carryforwards as an offset
against future taxable income in any particular year may be limited.
Liquidity And Capital Resources
The Company's primary source of funds has historically been its operating
revenue. The Company's working capital increased from $1,644,102 at April 30,
1998 to $1,666,451, at April 30, 1999 primarily as a result of an increase in
accounts receivable and an increase in cost and estimated earnings in excess of
billings on uncompleted contracts offset by a decrease in cash and accrued
expenses.
The Company believes that anticipated cash flow from operations, proceeds from
the recent private placement financing and the availability of a $600,000 line
of credit will be sufficient to finance the Company's working capital
requirements for the foreseeable future. However, since a portion of TPII
software contracts are not paid until acceptance by the customer and, as a
result, the Company is required to fund a portion of the costs of configuration
and installation of such products from available capital, any substantial
increase in the number of installations or delay in payment could create a need
for additional financing. In such event, there can be no assurance that
additional financing will be available on terms acceptable to the Company, or at
all. The above statements and certain other statements contained in this annual
report on Form 10-KSB are based on current expectations. Such statements are
forward looking statements that involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially include the
following (i) general economic conditions, (ii) competitive market influences,
(iii) the development of the capacity to accommodate additional and larger
contracts, (iv) establishing the ability of TPII software products to process
transactions for larger EFT systems, and/or (v) acceptance of TPII software
products by a significant number of new customers and the Company's continued
relationship with computer manufacturers.
In April 1999 IFS obtained $1,081,442 and $1,000,000 from Hudson River Bank &
Trust and New York Business Development Corporation, respectively, in a
refinancing transaction. The loan of $1,100,000 with KeyBank National
Association was satisfied as a result of the refinance transaction.
The financing from Hudson River Bank & Trust is the form of two mortgage notes
payable, bearing interest at 6% and 8%, with the entire unpaid principal and
accrued interest due April 2009. The notes are secured by a mortgage on the
Company's New York operating facility. Interest on the first note is fixed for
two years at which time the note will be increased to 8%. Interest on both notes
will be adjusted after five years to the weekly average yield to an investor on
United States Treasury Securities, adjusted to a constant maturity of five
years, plus 3%.
The financing from New York Business Development Corporation is in the form of a
mortgage note payable, bearing interest of 8.11%, with the entire unpaid
principal and accrued interest due April 2009. The note is secured by a mortgage
on the Company's New York operating facility.
QUARTER TO QUARTER SALES AND EARNING VOLATILITY
Quarterly revenues and operating results have fluctuated and will fluctuate as a
result of a variety of factors. The Company can experience long delays (i.e.,
between three to twelve months) before a customer executes a software licensing
agreement. These delays are primarily due to extended periods of software
evaluation, contract review and the selection of the computer system. In
addition following execution of the agreement, the preparation of functional
specifications, customization and installation of software products and the
training by the Company of the financial institution's personnel in the use of
the TPII software products take an average of six to twelve months, depending
upon the timing of installation and final acceptance of the EFT System by the
customer. Accordingly, the Company's revenues may fluctuate dramatically from
one quarter to another, making quarterly comparisons extremely difficult and not
necessarily indicative of any trend or pattern for the year as a whole.
Additional factors effecting quarterly results include the timing of revenue
recognition of advance payments of license fees, the timing of the hiring or
loss of personnel, capital expenditures, operating expenses and other costs
relating to the expansion of operations, general economic conditions and
acceptance and use of EFT.
YEAR 2000
State of Readiness
In March 1998 the Company assigned project teams to insure that its base code
for TPII would be year 2000 and beyond ("Y2K") ready. The project teams were
also dedicated to prepare the Company's computer systems, applications, current
installed customers and future products for the year 2000. In October 1998 IFS
completed Y2K testing of its base code. By February 1999 IFS successfully
completed certification of one of its Visa Cash installations. All of the
Company's customers have either received Y2K ready systems, currently have a Y2K
ready system being developed, or have conducted enterprise wide
re-certifications to conform to the standards set by the regulatory bodies of
the banking industry such as the FFIEC (Federal Financial Institutions
Examination Council) and the OCC (Office of the Comptroller of the Currency).
The Company's Y2K state of readiness is currently being evaluated by an
independent firm. Results of the evaluation are expected to be received during
the second quarter of fiscal year 2000.
Costs
Management expects to incur internal costs to prepare its computer systems,
applications and customers for Y2K. Management also expects to incur external
costs associated with the Y2K state of readiness evaluation to be provided by an
independent firm. These costs are being expensed and are not expected to have a
material impact on the future results of operations. As of April 30, 1999 the
Company has incurred approximately $83,000 of internal costs, primarily in the
form of employee compensation, associated with Y2K readiness.
Risks
There could be a material adverse effect on the results of operations if the
system enhancements and modifications for Y2K prove not to be effective. In this
event, installed customers would have non-working systems and could possibly
seek out other Y2K ready systems. This would eliminate future maintenance
revenues from these customers. A system that is not Y2K ready would impact new
sales until such time that a Y2K ready system is completed. There are also many
external environments that are associated with the operation of the Company's
systems. The operations of installed systems are dependent upon software and
infrastructure provided by third parties, such as networks, host systems, phone
lines, hardware and other software. The Company has no responsibility to insure
that the third party software and infrastructure Y2K ready. However, failure by
the customer to make sure that these are Y2K ready may effect the operations of
the Company's products and the customer. Contingency Plans
If the system enhancements, modifications or patches for Y2K prove not to be
effective, the Company is prepared to correct the situation via dial up
communications to the customer location. If this were to occur, the Company
currently believes that it would not be significant enough to cause an adverse
effect on operations.
INFLATION
The Company has not experienced any meaningful impact on its sales or costs as
the result of inflation.
ITEM 7. Financial Statements
The consolidated financial statements required to be filed herein are set forth
at the pages indicated at item 13.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
<PAGE>
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons of the
Registrant
The directors and executive officers of the Company are as follows:
Name Age Position
- ------------------- ----- ---------------------------------------
John P. Singleton..........62 Chairman of the Board and Director
David L. Hodge.............60 President, CEO and Director
Frank A. Pascuito..........43 Executive Vice President and Director
Simon J. Theobald .........35 Executive Vice President and Director
Carmen A. Pascuito.........39 Controller, Secretary and CFO
Arnold Wells .............79 Director
DuWayne J. Peterson........67 Director
Per Olof Ezelius...........49 Director
C. Rex Welton..............59 Director
John P. Singleton is currently Chairman of the Board and has been a director of
the Company since April 1997. In July 1997 he was appointed Chairman of its
Executive Committee. From 1992-1996, Mr. Singleton had been General Manager,
Business Development of IBM/Integrated Systems Solution Corporation. Between
1982-1992, he held several positions with Security Pacific Corporation ranging
from Senior Vice President Central Information Group to Vice Chairman and Chief
Operating Officer and member of the Office of the Chairman. Mr. Singleton is a
graduate of Arizona State University with a B.S. degree in Business Management.
David L. Hodge has been President and CEO of the Company since February 1998.
Mr. Hodge has been a director of the Company since September 1997. Mr. Hodge is
a graduate of West Point, and has over 30 years experience in software
development. His last position was vice president in charge of product
development for the Cable and Broad band Solutions Group of Cincinnati Bell
Information Systems (CBIS). Prior to CBIS, Mr. Hodge held various senior
management positions at Ernst & Young, CBS/Newtrend, Anacomp and Great Western
Bank. Notable projects completed by Mr. Hodge include the development and
delivery for production of the client/server-based Precedent 2000 system
currently used to provide customer care and billing services to a large segment
of the Telecommunications personal communication systems (PCS) market, a
client/server based Centrex provisioning system for British Telecom in the
United Kingdom and several products for the banking industry for advanced
imaging and document management. In addition to his technical management
responsibilities at CBIS, Mr. Hodge led initial CBIS efforts to attain ISO 9000
compliance. This initiative led to the ISO 9000 certification of a major
international data system serving British Telecom.
Frank A. Pascuito is currently an Executive Vice President of the Company and a
member of the Board. Mr. Pascuito was the Chief Executive Officer and Chairman
of the Board of the Company from 1989 to 1998. Mr. Pascuito co-founded the
Company's predecessor company, Avant-Garde Computer Systems, Inc., a New York
corporation engaged in the development and marketing of software (the
"Predecessor"), in 1981 and served as its President until November 1987 and as
its Vice President of Product Planning until 1989. Prior to 1981, he was
employed by NCR Corporation's ATM software development team. As a consultant to
NCR in 1979, he assisted in the development and performed the installation of
the first on-line/off-line ATM system for NCR in the United States. Mr. Pascuito
has over ten years of operating and marketing experience in EFT system design,
sales and service. Mr. Pascuito is a graduate of the State University of New
York at Potsdam with a B.S. degree in Computer Science. He is active in several
area professional organizations dealing with technology, software, and world
trade.
Simon J. Theobald is currently an Executive Vice President of the Company and a
member of the Board. Mr. Theobald has been a director of the Company since
December 1994 and was the Director of Sales and Marketing of the European
Division based in London between 1992 and July. From 1986 to April 1992, he was
employed by Applied Communications Inc., a subsidiary of Transaction Systems
Architects, Inc. Mr. Theobald has more than fifteen years experience in the
electronic funds transfer industry. Mr. Theobald is a graduate of De-Havilland
College with qualifications in computer studies and technology.
Carmen A. Pascuito has been CFO of the Company since May 1999, Secretary of the
Company since December 1996 and its Controller since 1989. Mr. Pascuito joined
the Predecessor in 1985 as a staff accountant and became its controller in 1988.
Mr. Pascuito is a graduate of Siena College with a B.A. degree in Accounting.
Arnold Wells has been a director of the Company since 1986. Since 1976, Mr.
Wells has been a private investor and consultant in the health and
communications fields. Mr. Wells organized Wells Television (subsequently named
Wells National Services). In 1978, Mr. Wells formed WellsArt Limited, a company
which is engaged in the publishing and licensing work of prominent artists. Mr.
Wells is a graduate of Western Reserve University with a B.A. degree.
DuWayne J. Peterson has been a director of the Company since July 1997. Mr.
Peterson is also the Chairman of the Company's Compensation Committee. Mr.
Peterson is President of DuWayne Peterson Associates, a consulting firm
specializing in the effective management of information technology. Prior to
forming his firm in 1991, he held the position of Executive Vice President,
Operations, Systems and Telecommunications at Merrill Lynch. Mr. Peterson holds
a B.S. degree from M.I.T. and an MBA from UCLA.
Per Olof Ezelius has been a director of the Company since May 1998. Mr. Ezelius
has held the office of President and CEO of NCI since October 1992. Since
starting with NCI in 1986 where he launched the European Sales operation, Mr.
Ezelius has also held positions of Vice President of Worldwide sales and Chief
Operating Officer. Prior to NCI, Mr. Ezelius held the position of Vice President
of Marketing and Project Management for Inter Innovation AB in Stockholm,
Sweden. Mr. Ezelius started his career in 1971 with systems design and
application software development for the first generation of programmable branch
automation systems.
C. Rex Welton has been a director of the Company since October 1998. Mr. Welton
is also a principal of Carolina Income Management Group, LLC. Prior to this
endeavor, Mr. Welton served as president of Parnell-Martin Companies, LLC for 26
years. Mr. Welton is a graduate of the University of North Carolina at Chapel
Hill with a B.S. degree in Business Administration.
Frank A. Pascuito and Carmen A. Pascuito are brothers.
The Company has appointed an Audit Committee consisting of Directors Arnold
Wells, John P. Singleton, and DuWayne J. Peterson. All members are independent
directors.
The Company has also appointed an Executive Committee, a Compensation Committee,
an Acquisition Committee, a Strategic Planning Committee and a Sales and
Marketing Committee. The members of the Executive Committee are Arnold Wells,
Frank A. Pascuito, David L. Hodge, DuWayne J. Peterson, and John P. Singleton.
The members of the Compensation Committee are David L. Hodge, DuWayne J.
Peterson, and John P. Singleton. The members of the Acquisition Committee are
Frank A. Pascuito, John P. Singleton, Simon J. Theobald, and Per Olof Ezelius.
The members of the Strategic Planning committee are Simon J. Theobald, John P.
Singleton, Per Olof Ezelius, and Frank A. Pascuito. The members of the Sales and
Marketing Committee are Simon J. Theobald, Per Olof Ezelius and C. Rex Welton.
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") requires
the Company's officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than 10% stockholders are required by regulations promulgated under the Exchange
Act to furnish the Company with copies of all Section 16(a) forms they file.
<PAGE>
ITEM 10. Executive Compensation
The following table sets forth information concerning compensation paid or
accrued by the Company or its subsidiary for services rendered during the fiscal
years ended April 30, 1999, 1998 and 1997 by its Chief Executive Officer and
each of its executive officers whose compensation exceeded $100,000 during its
fiscal year end April 30, 1999.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Other
Annual Securities
Name and Fiscal Compen- Underlying
Principal Position Year Salary Bonus sation Option(s)
- ----------------------- -------- ------------ -------- --------- -----------
David Hodge.............. 1999 200,769 - 27,500(1) 310,000
President and CEO 1998 41,538 - 10,500(2) 60,000
Frank Pascuito........... 1999 130,038 - - 221,750
Executive Vice President 1998 114,810 50,000 - 18,722
1997 94,061(3) 50,305 - 87,485
Simon Theobald........... 1999 265,029 - - 175,000
Executive Vice President 1998 206,408 - - 15,000
1997 183,790 - - 25,000
Per Olof Ezelius......... 1999 151,500 - 27,960(4) 40,000
President and CEO/NCI 1998 55,767 100,000 50,000(5) 18,000
1997 - - - -
- --------
(1) Represents 10,000 shares of the Company's Common Stock at market value of
$2.75 at May 26, 1999.
(2) Amount in Other Annual Compensation represents amounts paid for board member
fees prior to appointment of President and CEO.
(3) Does not include accrued interest of $2,367 for the fiscal year ended April
30, 1997 for salaries earned but deferred. The interest rate on such deferred
salaries was 12% per annum.
(4) Real estate fees paid to Mr. Per Olof Ezelius in connection with the sale of
property.
(5) 25,000 shares issued to Mr. Per Olof Ezelius pursuant to Extension
Agreement. Market Value $2.00 per share.
<PAGE>
Set forth below with respect to the executive officers named in the Summary
Compensation Table (the "Named Officers") is further information concerning
options to purchase Common Stock under the Company's stock option plans, and
employment agreements.
Option Grants in Fiscal Year Ended April 30, 1999
Number of
Shares % of Total
of Common Stock Options
Underlying Granted to
Options Employees in Per Share Expiration
Name Granted Fiscal Year Exercise Price Date
- ------- ----------------- ------------ -------------- -----------
Frank A. Pascuito.........10,000 0.8 % $2.63 02/15/09
Frank A. Pascuito........150,000 12.7 % $2.63 02/15/09
Frank A. Pascuito.........59,536 5.0 % $1.50 09/01/08
Frank A. Pascuito............214 0.0 % $2.81 11/07/07
Frank A. Pascuito..........2,000 0.2 % $3.50 04/14/09
David L. Hodge............20,000 1.7 % $2.63 02/15/09
David L. Hodge...........270,000 22.8 % $2.63 02/15/09
Simon J. Theobald.........10,000 0.8 % $2.63 02/15/09
Simon J. Theobald........150,000 12.7 % $2.63 02/15/09
Per Olof Ezelius..........15,000 1.3 % $2.63 02/15/09
<TABLE>
Fiscal Year - End Option Values
Number of Securities Value of Unexercised
Number of Shares Underlying Unexercised In-the-Money
of Common Stock Options as of April 30, 1999 Options as of April 30, 1999(1)
Acquired on -----------------------------------------------------------
Name Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
--------------------- ---------------- ---------------- ----------- ------------- ----------- -------------
David L. Hodge
<S> <C> <C> <C> <C> <C> <C>
President and CEO..............0 $0 43,756 306,244 $0 $0
Frank Pascuito,
Executive Vice President.......0 $0 205,386 150,921 $215,967 $0
Simon Theobald,
Executive Vice President.......0 $0 74,959 160,041 $54,750 $0
Per Olof Ezelius,
President and CEO/NCI..........0 $0 16,509 41,491 $1,126 $2,374
- --------
(1) Based on a market price of $2.45 per share at April 30, 1999.
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS
In January, 1999, the Company entered into amended employment agreements (the
"Employment Agreements") with each of Messrs. David Hodge, Frank Pascuito and
Simon Theobald (each an "Executive").
The initial term of Mr. Hodge's Employment Agreement extends from February 15,
1998 to February 14, 2003, and is automatically renewed annually thereafter.
Under Mr. Hodge's Employment Agreement, Mr. Hodge will receive (i) an annual
base salary of $200,000, subject to an increase commencing on June 1, 1998 based
on the increase in the consumer price index and periodic review after May 31,
1999; (ii) an annual bonus (which shall not exceed 80% of the annual base
salary) based on the achievement of performance goals agreed to by the Executive
and the Board; (iii) stock options granted immediately under the 1998 Stock Plan
for the purchase of 270,000 shares of the Company's common stock vesting over a
period of five years, 54,000 shares on February 15, 1998 and 54,000 shares
thereafter on each February 15 through 2002; (iv) life insurance or death
benefits in the amount of $500,000; (v) an annuity of $40,000 per year for the
joint lives of the Executive and his spouse.
The initial term of Mr. Pascuito's Employment agreement extends from January 1,
1997 to December 31, 2001, and is automatically renewed annually thereafter. Mr.
Pascuito will receive (i) an annual base salary of $130,000; (ii) a commission;
(iii) an annual performance bonus; (iv) stock options previously granted for the
purchase of 75,000 shares of the Company's common stock at $1.31 per share; (v)
stock options under the 1998 stock plan for the purchase of 150,000 shares of
the Company's common stock vesting over a period of five years, 30,000 shares on
each anniversary date of his employment agreement.
The initial term of Mr. Theobald's Employment Agreement extends from February
24, 1998 to December 31, 2003, and is automatically renewed annually thereafter.
Mr. Theobald will receive: (i) an annual base salary composed of a fixed portion
totaling $130,000 per year; (ii) a commission (iii) an annual performance bonus;
(iv) stock options (previously granted) for the purchase of 55,000 shares of the
Company's common stock; (v) stock options under the 1998 stock plan for the
purchase of 150,000 shares of the Company's common stock vesting over a period
of five years, 30,000 shares on each anniversary date of his employment
agreement.
Each of the three agreements provides automobile allowances and allowances for
club membership.
The Employment Agreement's of Messrs. Pascuito and Theobald, provide upon
termination for death or disability, the executive shall receive: his annual
fixed salary accrued and other benefits and compensation, but no less than 6
months fixed salary. Additionally, all unvested stock options which have been or
are scheduled to be granted pursuant to the Agreement shall immediately vest.
Where a termination is due to a "Change in Control," without cause or by the
Executive for good reason as defined in the Agreement provides that the Company
will pay compensation and certain allowances and benefits to the Executive
through the end of the then-applicable term.
The Employment Agreement of Mr. Hodge, provides that if the termination of the
Agreement is due to death, disability or by the Company for "Cause," the
Executive shall receive: 6 months of his annual salary, accrued compensation and
benefits to date plus other allowances. Where a termination is due to a "Change
in Control," or without cause, or by the Executive for good reason, as defined
in the Agreement provides that the Company will pay compensation and certain
allowances and benefits to the Executive through the end of the then applicable
term. Additionally, all unvested stock options which have been or are scheduled
to be granted pursuant to the Agreement shall immediately vest.
Under the Employment Agreements a "Change in Control" includes (i) an
acquisition whereby immediately after such acquisition, a person holds
beneficial ownership of more than 50% of the total combined voting power of the
Company's then outstanding voting securities; (ii) if in any period of three
consecutive years after the date of the Employment Agreements, the then
incumbent board, ceases to constitute a majority of the Board for reasons other
than voluntary resignation, refusal by one or more Board members to stand for
election, or removal of one or more Board member for good cause; or (iii) the
Board of Directors or the stockholders of the Company approve (A) a merger,
consolidation or reorganization; (B) a complete liquidation or dissolution of
the Company; or (C) the agreement for the sale or other disposition of all or
substantially all of the assets of the Company.
On January 30, 1998, Mr. Per Olof Ezelius entered into an employment agreement
with Network Controls International, Inc. ("NCI") to serve as its President and
Chief Executive Officer for an initial term of three years and three months,
commencing January 30, 1998, and ending April 30, 2001 (the "Original Employment
Agreement"). On May 12, 1998, the Company entered into an extension agreement
(the "Extension Agreement") with Mr. Ezelius which provides that the term of the
covenant not to compete (as referred to in the Original Employment Agreement) is
extended from a period of one-year to two-years commencing from the expiration
of the Original Employment Agreement. Such Extension Agreement further provides
that the Company grant to Mr. Ezelius: (i) 25,000 shares of common stock; (ii)
25,000 options to purchase Company common stock (such exercise price being equal
to the fair market value of such common stock on May 12, 1998); and (iii) a cash
bonus equal to $100,000.
The original employment agreement provides for Mr. Ezelius to receive an annual
base salary composed of a fixed portion totaling $150,000 per year and an annual
performance bonus.
The foregoing summaries are intended as general descriptions of the terms of the
Employment Agreements and the Extension Agreement, and are limited in their
entirety by the actual language of the Employment Agreements and the Extension
Agreement, which are included as Exhibits to this report.
STOCK OPTION PLANS
The Company has three option plans: the 1998 Stock Plan (the "1998 Plan"), the
1996 Stock Option Plan (the "1996 Plan") and the 1988 Stock Option Plan (the
"1988 Plan").
The purpose of all the Option Plans is to provide the Company with a vehicle to
attract, compensate and motivate selected eligible persons, and to appropriately
compensate them for their efforts, by creating a broad-based stock plan which
will enable the Company, in its sole discretion and from time to time, to offer
to or provide such eligible persons with incentives or inducements in the form
of awards as such term is defined below, thereby affording such persons an
opportunity to share in potential capital appreciation in the common stock of
the Company.
The 1998 Plan was approved by the Board of Directors on May 12, 1998, and by the
shareholders on March 16, 1999. A total of 1,400,000 shares of Common Stock
("Plan Shares") are available for issuance under the 1998 Plan.
The 1998 Plan will replace the 1996 Plan, the last broad-based plan approved by
the stockholders of the Company. As of April 30, 1999, the Company had 290,000
shares subject to the existing 1996 Stock Option Plan. On May 12, 1998 the
Board, subject to shareholder approval, which was later obtained, authorized the
exchange of the 1996 Plan options for options to purchase 290,000 shares at an
exercise price of $1.31 under the 1998 Plan.. The foregoing was conditioned on
the 1996 Option holder exchanging the outstanding 1996 Options for new Options.
Because the exercise price of the 1996 Options are generally higher than the
1998 Plan Options granted, it is likely all of the 1996 Options will be
exchanged. If any 1996 Plan options are not exchanged, then the 1996 Plan will
be continued so long as the options remain outstanding, then terminated. It was
intended that no additional options would be granted under the 1996 Plan after
approval of the 1998 Plan by the stockholders.
Under the 1998 Plan, an "Eligible Person" means any person who, at the
applicable time of the grant or award under the Plan, is an employee, a director
and/or a consultant or advisor to the Company, or of any parent or subsidiary of
the Company. An award can consist of: (i) an outright grant of shares of Common
Stock or (ii) the grant of options to purchase shares of Common Stock.
As of April 30, 1999, there were commitments to issue 1,376,795 shares of Common
Stock under the 1998 Plan. Of these shares, 290,000 are shares subject to
Options to be exchanged for outstanding 1996 Options as described above, Options
to purchase 988,000 shares to be issued to officers and directors with the
balance of new options to be issued to non officer employees. The exercise
prices range from $1.31 to $2.94, under the 1998 Plan and expire in various
years between 2008 - 2009.
The above description of the 1998 Plan is qualified in its entirety by reference
to the full text of the Plan, as well as the terms and conditions of any award
agreement governing the grant of an award under the 1998 Plan. A copy of the
full text of the Plan has been attached as Appendix 1 to the Company's most
recent Proxy Statement.
Both the 1996 Plan and the 1998 Plan provide for the granting of options which
are intended to qualify either as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of 1986
or as options which are not intended to meet the requirements of such section
("Nonstatutory Stock Options"). The exercise price of all Incentive Stock
Options must be at least equal to the fair market value of such shares on the
date of the grant or, in the case of Incentive Stock Options granted to the
holder of more than 10% of the Company's Common Stock, at least 110% of the fair
market value of such shares on the date of the grant. The maximum exercise
period for which Incentive Stock Options may be granted is ten years from the
date of grant (five years in the case of an individual owning more than 10% of
the Company's Common Stock). The aggregate fair market value (determined at the
date of the option grant) of shares with respect to which Incentive Stock
Options are exercisable for the first time by the holder of the option during
any calendar year shall not exceed $100,000.
The total number of shares of Common Stock reserved for issuance under the 1996
Plan is 300,000. Options to purchase shares may be granted under the 1996 Plan
to persons who, in the case of Incentive Stock Options, are key employees
(including officers) of the Company or any subsidiary of the Company, or, in the
case of Nonstatutory Stock Options, are key employees (including officers) or
nonemployee directors of, or nonemployee consultants to, the Company or any
subsidiary of the Company.
Both the 1996 Plan and the 1998 Plan provide for its administration by the Board
of Directors or a committee chosen by the Board of Directors, which has
discretionary authority, subject to certain restrictions, to determine the
number of shares issued pursuant to Incentive Stock Options and Nonstatutory
Stock Options and the individuals to whom, the times at which and the exercise
price for which options will be granted.
The 1996 Plan provides for the issuance of options to purchase Common Stock to
key employees, officers, directors and consultants. As of April 30, 1999, there
were options outstanding to purchase 290,000 shares of Common Stock under the
1996 Plan. All options are exercisable at prices ranging from $2.94 to $7.31 per
share and expire in various years between 2007 - 2008. As of April 30, 1999,
there were no options available for grant to purchase shares of Common Stock
under the 1996 Plan.
The 1988 Plan provides for the issuance of options to purchase Common Stock to
key employees, officers, directors and consultants. As of April 30, 1999, there
were options outstanding to purchase 216,140 shares of Common Stock under the
1988 Plan. All options are exercisable at prices ranging from $0.66 to $3.50 per
share and expire in various years between 1999 - 2009. As of April 30, 1999,
there were no options available for grant to purchase shares of Common Stock
under the 1988 Plan.
The exercise price of all future option grants will be at least 85% of the fair
market value of the Common Stock on the date of grant.
<PAGE>
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of July 25, 1999 by (i) each stockholder known
by the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) each director of the Company, (iii) each Named Officer, (iv)
and all directors and executive officers as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
The following table does reflect Common Stock issuable pursuant to stock options
exercisable within sixty days.
Name and Address of Number Of Shares Percentage
Beneficial Owner Beneficially Owned of Class
- ------------------------------------------- ------------------ ----------
Frank Pascuito............................. 313,735(1) 10.6%
Rensselaer Technology Park
300 Jordan Road
Troy, NY 12180
Simon J. Theobald.......................... 99,017(2) 3.4%
Little Elms, 12 Green Lane,
Croxley Green, Rickmansworth,
Hertfordshire, WD3 3HR England
Arnold Wells............................... 16,828(3) 0.6%
1100 Madison Avenue
New York, NY 10028
John P. Singleton.......................... 98,672(4) 3.5%
4331 Rosecliff Drive
Charlotte, NC 28277
DuWayne J. Peterson........................ 44,893(5) 1.6%
225 South Lake Ave.
Pasadena, Ca. 91101
David L. Hodge............................. 105,995(6) 3.7%
300 Jordan Road
Troy, NY 12180
Per Olof Ezelius........................... 49,257(7) 1.8%
Nine Woodlawn Green
Charlotte, NC 28217
C. Rex Welton.............................. 60,501(8) 2.2%
2323 Hopedale Avenue
Charlotte, NC 28207
John Shahda................................ 200,800 7.2%
30 S. Pearl Street
Albany, NY 12207
All directors and executive officers as a group (8
persons) .................................. 818,132(9) 24.5%
- --------
(1) Includes 167,104 shares issuable upon exercise of stock options.
(2) Includes 98,997 shares issuable upon exercise of stock options.
(3) Includes 16,328 shares issuable upon exercise of stock options.
(4) Includes 36,572 shares issuable upon exercise of stock options.
(5) Includes 12,193 shares issuable upon exercise of stock options.
(6) Includes 90,495 shares issuable upon exercise of stock options.
(7) Includes 24,254 shares issuable upon exercise of stock options.
(8) Includes 2,001 shares issuable upon exercise of stock options.
(9) Includes 447,944 shares issuable upon exercise of stock options.
ITEM 12. Certain Relationships and Related Transactions
On September 1, 1998, Mr. Charles J. Caserta, co-founder of IFS International,
Inc., resigned from the Company as Director of Business Development and a
Director. At that time, Mr. Caserta and the Company entered into a termination,
severance and release agreement (the "Termination Agreement"). As part of the
Termination Agreement, the Company was obligated to pay Mr. Caserta an aggregate
of $502,660 of which $361,446 ($2.00 per share) represented consideration for
his shares ("Caserta Shares") , $21,214 for the surrender of his options and
$120,000 representing other termination benefits. The Company sold, the Caserta
Shares to several individuals for $382,660 or approximately $2.12 per share
simultaneously with the purchase of the shares from Mr. Caserta. Of the Caserta
Shares sold Messrs. John Singleton and DuWayne Peterson, directors of the
Company, purchased 50,000 and 25,000 shares respectively. Messr. C. Rex Welton
also purchased 50,000 of the Caserta Shares prior to his appointment as a
director of the Company.
In April, 1998, IFS issued a purchase order for $259,600 to Euro-Tech
International ("ETI") to obtain ISO 9000 registration. ETI is an Arizona based
corporation that specializes in guiding companies through the ISO 9000
certification process. ISO 9000 is an established international business
standard. ISO 9000 requires that the core processes of company's business is
documented, understood and followed by company personnel. ISO 9000 is becoming a
standard for companies in the global market. ETI is also a subsidiary of Tech
Metrics International, Inc. of which Mr. David L. Hodge, President and CEO of
IFS International, Inc. is a director.
On January 30, 1998 the Company acquired all of the outstanding shares of
capital stock of NCI Holdings, Inc. ("Holdings"). Pursuant to the terms of the
Merger Agreement, Per Olof Ezelius ("Ezelius"), the sole beneficial owner of
Holdings' capital stock, received 87,094 shares (the "Base Consideration") of
Preferred Stock valued at $620,545. The Company is obligated to register all of
these shares of Preferred Stock under the Securities Act of 1933.
Ezelius may receive additional shares of Common Stock (the "Additional Shares")
if the consolidated pre-tax profit of NCI exceeds certain levels during each of
the years ending April 30, 1999, 2000 and 2001 and during the three years ending
April 30, 2001. Any Additional Shares issued to Ezelius up to a value of
$200,000 will be held in escrow to further secure the Indemnification
Obligations. The Merger Agreement required Holdings to satisfy indebtedness to
former stockholders of Holdings and NCI arising pursuant to agreements for the
purchase of shares entered into in 1993 and 1995. Immediately prior to the
merger, the Company advanced $840,000 to Holdings, which was utilized to satisfy
existing indebtedness of Holdings as required by the Merger Agreement. Pursuant
to the terms of the Merger Agreement, Ezelius entered into a separate employment
agreement with NCI to serve as Chief Executive Officer of NCI for a period of 39
months, commencing January 30, 1998, at a base salary of $150,000 per year.
Ezelius also was granted options to purchase 18,000 shares of the Company's
Common Stock at $5.00 per share. Pursuant to the Merger Agreement, additional
shares may be issued to Ezelius if the consolidated pre tax profits of NCI
exceeds certain levels during each of the three years ending April 30, 1999,
2000, and 2001 and during the three year period ending April 30, 2001. While
Ezelius is likely to receive additional shares for the fiscal year ended April
30, 1999, the ultimate amount has not yet been determined.
<PAGE>
ITEM 13. Financial Statements, Exhibits and Reports on Form 8-K
(1) Consolidated Financial Statements and Auditor's Report
See Index to Consolidated Financial Statements on Page F-1.
(2) Exhibits
3.1 Certificate of Incorporation and amendments thereto of the Company (1)
3.2 By-laws, as amended, of the Company (1)
4.1 Certificate of Designation of the Series A Convertible Preferred Stock
(2)
4.1b Certificate of Amendment of Certificate of Designation of the Series A
Convertible Preferred Stock (5)
4.2 Form of certificate evidencing shares of Preferred Stock (1)
4.3 Form of certificate evidencing Warrants (1)
4.4 Form of certificate evidencing shares of Common Stock (1)
4.5 Warrant Agreement between the Company and the Underwriter (2)
4.6 Form of Warrant Agreement between the Company and American Stock
Transfer and Trust Company, as Warrant agent (1)
4.7 Debenture Investment Agreement, dated July 6, 1989, between the
Company and New York State Science and Technology Foundation, and
amendments thereto (1)
4.8 Loan Agreement, dated January 11, 1989, between the Company and North
Greenbush Industrial Development Agency and amendments thereto (1)
4.9 Warrant Agreement, dated November 6, 1998, between the Company and MDB
Capital Group LLC.
4.10 Investment Banking Agreement, dated November 6, 1998, between the
Company and MDB Capital Group LLC.
4.11 Form of Convertible Promissory Note Agreements, dated July 6, 1999,
between the Company and Gilston Corporation, Ltd., Manchester Asset
Management, Ltd., Headwaters Capital, and Colbrooke Capital.
4.12 Form of Warrant Agreements, dated July 6, 1999, between the Company
and Gilston Corporation, Ltd., Manchester Asset Management, Ltd.,
Headwaters Capital, and Colbrooke Capital.
4.13 Registration Rights Agreement, dated July 2, 1999, between the Company
and Gilston Corporation, Ltd., Manchester Asset Management, Ltd., and
Headwaters Capital.
4.14 Note And Warrant Purchase Agreement, dated July 2, 1999, between the
Company and Gilston Corporation, Ltd., Manchester Asset Management,
Ltd., and Headwaters Capital.
4.15 Market Access Program Marketing Agreement, dated as of April 29, 1999,
between the Company and Continental Capital & Equity Corporation.
10.1 * 1998 Stock Plan (5)
10.2 * 1996 Stock Option Plan (1)
10.3 * 1988 Stock Option Plan (1)
10.4 Lease Agreement, dated October 1, 1986 between the Company and
Rensselaer Polytechnic Institute and amendments thereto (the "Lease
Agreement") (1)
10.5 Addendum A to the Lease Agreement, dated January 7, 1997. (1)
10.6 Digital Prime Contracting Agreement, dated June 6, 1994, between the
Company and Digital Equipment International BV (1)
10.7 Software Development and License Agreement, dated July 8, 1996,
between the Company and Visa International Service Association (1)
10.8 * Employment Agreement, dated as of May 12, 1998 between the Company
and David L. Hodge. (6)
10.8b* Amendment to Employment Agreement, dated as of January 22, 1999
between the Company and David L. Hodge.
10.9 * Employment Agreement, dated as of May 12, 1998, between the Company
and Frank A. Pascuito. (6)
10.9b* Amendment to Employment Agreement, dated as of January 22, 1999,
between the Company and Frank A. Pascuito.
10.10* Employment Agreement, dated as of May 12, 1998, between the Company
and Simon J. Theobald. (2)
10.10b * Amendment to Employment Agreement, dated as of January 22, 1999,
between the Company and Simon J. Theobald.
10.11* Extension Agreement, dated as of May 12, 1998 between the Company
and Per Olof Ezelius. (6)
10.12Purchase and Sale Agreement, dated as of December 17, 1996, between
the Company and Trustco Bank, National Association. (1)
10.13Form of Consulting and Investment Banking Agreement between the
Company and the Underwriter. (1)
10.14Promissory Note, dated March 14, 1997, between the Company and Key
Bank of New York. (3)
10.15* Consulting agreement, dated April 9, 1997, between the Company and
Jerald Tishkoff. (6)
10.16Plan and Merger Agreement, dated as of January 30, 1998, between the
Company and NCI Holdings, Inc. (4)
10.17Amended and Restated Note, dated as of April 15, 1999, between the
Company and Hudson River Bank and Trust Company.
10.18Amended and Restated Note, dated as of April 15, 1999, between the
Company and Hudson River Bank and Trust Company.
10.19Note And Mortgage Consolidation, Modification, Spreader, Extension
And Security Agreement, dated as of April 15, 1999, between the
Company, the Town of North Greenbush Industrial Development Agency and
New York Business Development Corporation.
10.20Note And Mortgage Consolidation, Modification, Spreader, Extension
And Security Agreement, dated as of April 15, 1999, between the
Company, the Town of North Greenbush Industrial Development Agency and
New York Business Development Corporation.
10.21Mortgage And Security Agreement, dated as of April 15, 1999, between
the Company, the Town of North Greenbush Industrial Development Agency
and New York Business Development Corporation.
10.22Mortgage Note, dated as of April 15, 1999, between the Company and
New York Business Development Corporation.
10.23Amended And Restated Mortgage Note, dated as of April 15, 1999,
between the Company New York Business Development Corporation.
10.24General Security Agreement, dated as of April 15, 1999, between the
Company and Hudson River Bank and Trust Company.
21.1 Subsidiaries of the Company (1)
27 Financial Data Schedule
* Management contract or compensatory plan or arrangement.
1 Denotes document filed as an exhibit to the Company's Registration
Statement on Form SB-2 (File No. 333-11653) and incorporated herein by
reference.
2 Denotes document filed as an exhibit to the Company's Quarterly Report
on Form 10- QSB for the quarter ended January 31, 1997 and
incorporated herein by reference.
3 Denotes document filed as an exhibit to the Company's Current Report,
dated, March 14, 1997 and incorporated herein by reference.
4 Denotes document filed as an exhibit to the Company's Current Report,
dated, January 30, 1998 and incorporated herein by reference.
5 Denotes document filed as an exhibit to the Company's Proxy Statement,
dated, February 1, 1999 and incorporated herein by reference.
6 Denotes document filed as an exhibit to the Company's Annual Report,
dated , April 30, 1998 and incorporated herein by reference.
(3) Reports on Form 8-K filed during the three months ended April 30, 1999:
None
<PAGE>
IFS International, Inc.
Index to Consolidated Financial Statements
INDEPENDENT AUDITOR'S REPORT.................................................F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheet........................................................F-3
Statements of operations.............................................F-4
Statements of shareholders' equity...................................F-5
Statements of cash flows.............................................F-6
Notes to consolidated financial statements....................F-7 - F-20
<PAGE>
Independent Auditor's Report
To the Board of Directors and Shareholders
IFS International, Inc.
We have audited the accompanying consolidated balance sheet of IFS
International, Inc. and subsidiaries as of April 30, 1999, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the two years in the period ended April 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of IFS International,
Inc. and subsidiaries as of April 30, 1999, and the results of their operations
and their cash flows for each of the two years in the period ended April 30,
1999, in conformity with generally accepted accounting principles.
URBACH KAHN & WERLIN PC
Albany, New York July 2, 1999 except for Note 7 as to which the date is August
11, 1999
F-2
<PAGE>
<TABLE>
IFS International, Inc.
Consolidated Balance Sheet
April 30, 1999
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $1,326,708
Trade accounts receivable, net 2,225,665
Costs and estimated earnings in excess of billings on uncompleted contracts 751,616
Other current assets 553,597
Inventory 133,699
- --------------------------------------------------------------------------------------------------------------------
Total current assets 4,991,285
- --------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, net 2,571,461
- --------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Capitalized software and product enhancement costs, net 1,269,660
Excess of cost over fair value of net assets of business acquired, net 324,260
Other 129,161
- --------------------------------------------------------------------------------------------------------------------
Total other assets 1,723,081
- --------------------------------------------------------------------------------------------------------------------
$9,285,827
====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 362,174
Accounts payable 682,675
Accrued compensation and related liabilities 478,635
Other accrued expenses 790,115
Billings in excess of costs and estimated earnings on uncompleted contracts 237,089
Deferred revenue and customer deposits 774,146
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,324,834
- --------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, less current maturities 2,133,392
- --------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value; 25,000,000 shares authorized,
no shares issued or outstanding -
Common stock, $.001 par value; 50,000,000 shares authorized,
2,770,485 shares issued and outstanding 2,770
Additional paid-in capital 8,415,328
Accumulated deficit (4,583,841)
Accumulated other comprehensive (loss) (6,656)
- --------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 3,827,601
- --------------------------------------------------------------------------------------------------------------------
$ 9,285,827
====================================================================================================================
See Notes to Consolidated Financial Statements.
F-3
</TABLE>
<PAGE>
<TABLE>
IFS International, Inc.
Consolidated Statements of Operations
Years Ended April 30, 1999 and 1998
1999 1998
- -------------------------------------------------------------------------------------------------------------------
Revenues:
<S> <C> <C>
Software license and installation contract fees $4,757,888 $1,935,907
Hardware sales 1,830,947 699,623
Service and maintenance revenue 3,575,783 2,572,804
- -------------------------------------------------------------------------------------------------------------------
10,164,618 5,208,334
- -------------------------------------------------------------------------------------------------------------------
Cost of revenues:
Software license and installation contract fees 896,777 499,531
Hardware sales 462,842 210,718
Service and maintenance revenue 1,004,117 666,088
- -------------------------------------------------------------------------------------------------------------------
2,363,736 1,376,337
- -------------------------------------------------------------------------------------------------------------------
Gross profit 7,800,882 3,831,997
- -------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 1,944,903 1,054,043
Salaries 2,942,466 1,837,063
Selling, general and administrative 2,498,565 1,932,869
Rent and occupancy 578,277 150,471
Other 427,016 178,930
- -------------------------------------------------------------------------------------------------------------------
8,391,227 5,153,376
- -------------------------------------------------------------------------------------------------------------------
Loss from operations (590,345) (1,321,379)
Other income (expense):
Interest expense (145,793) (86,765)
Interest income 148,034 169,219
Other income (expense) (93,003) 76,552
- -------------------------------------------------------------------------------------------------------------------
Loss before income taxes (681,107) (1,162,373)
Provision for income taxes (22,800) (92,500)
- -------------------------------------------------------------------------------------------------------------------
Loss before minority interest (703,907) (1,254,873)
Minority interest in income of majority-owned subsidiary - (6,600)
- -------------------------------------------------------------------------------------------------------------------
Net loss $ (703,907) $ (1,261,473)
===================================================================================================================
Basic and diluted net loss per common share $ (0.53) $ (1.15)
===================================================================================================================
Weighted average common shares outstanding 1,325,300 1,098,800
===================================================================================================================
See Notes to Consolidated Financial Statements.
F-4
</TABLE>
<PAGE>
<TABLE>
IFS International, Inc.
Consolidated Statements of Shareholders' Equity
Years Ended April 30, 1999 and 1998
[--Preferred Stock--] [--Common Stock--] Accumulated
Additional Other
Shares Par Shares Par Paid-in Accumulated Comprehensive Comprehensive
Outstanding Value Outstanding Value Capital Deficit Income (Loss) Total Income (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at
<S> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1997 1,380,000 $1,380 1,072,945 $1,073 $7,976,188 $(2,618,461) $ - $5,360,180
Issuance of preferred
stock for acquisition
of Network Controls
International, Inc. 24,638 25 - - 175,521 - - 175,546
Issuance of
common stock - - 56,408 56 89,742 - - 89,798
Conversion of
preferred stock (8,000) (8) 8,000 8 - - - -
Foreign currency
translation adjustment - - - - - - 3,452 3,452 $3,452
Net loss - - - - - (1,261,473) - (1,261,473) (1,261,473)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at
April 30, 1998 1,396,638 1,397 1,137,353 1,137 8,241,451 (3,879,934) 3,452 4,367,503 $ (1,258,021)
--------------
Issuance of
common stock - - 42,996 43 81,614 - - 81,657
Sale of warrants - - - - 30,000 - - 30,000
Issuance of
additional preferred
stock for acquisition
of Network Controls
International, Inc. 62,456 62 - - 62,394 - - 62,456
Other conversions of
preferred stock (148,675) (149) 148,675 149 - - - -
Mandatory conversions
of preferred stock to
common stock (1,310,419) (1,310) 1,441,461 1,441 (131) - - -
Foreign currency
translation adjustment - - - - - - (10,108) (10,108) $(10,108)
Net loss - - - - - (703,907) - (703,907) (703,907)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at
April 30, 1999 - $ - 2,770,485 $ 2,770 8,415,328 $(4,583,841) $ (6,656) $3,827,601 $ (714,015)
====================================================================================================================================
See Notes to Consolidated Financial Statements.
F-5
</TABLE>
<PAGE>
<TABLE>
IFS International, Inc.
Consolidated Statements of Cash Flows
Years Ended April 30, 1999 and 1998
1999 1998
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (703,907) $ (1,261,473)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 769,640 420,524
Deferred taxes - 27,222
Changes in operating assets and liabilities, net of effects of
Network Controls International, Inc. acquisition in 1998:
Inventory (61,400) 40,452
Trade accounts receivable, net (697,800) (373,412)
Costs, estimated earnings and billings on uncompleted
contracts (406,535) (65,287)
Other current assets 12,736 71,991
Accounts payable 143,729 (115,663)
Accrued expenses 191,064 285,062
Deferred revenue and customer deposits (92,357) 238,781
- -------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (844,830) (731,803)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Facilities acquisition expenditures and equipment purchases (171,110) (1,382,493)
Purchase of Network Controls International, Inc., net of cash acquired - (595,919)
Capitalized license costs (21,479) (19,787)
Capitalized software and product enhancement costs (686,118) (531,639)
Acquisition of minority interest (34,540) -
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (913,247) (2,529,838)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (1,201,013) (51,209)
Proceeds from notes payable 2,081,442 208,376
Proceeds from issuance of common stock and warrants 111,657 39,799
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 992,086 196,966
- -------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (10,108) 6,072
- -------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (776,099) (3,058,603)
Cash and cash equivalents:
Beginning of year 2,102,807 5,161,410
- -------------------------------------------------------------------------------------------------------------------
End of year $1,326,708 $2,102,807
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid during the year
for:
Interest, net of capitalized amounts in 1998 $ 145,793 $ 86,611
Income taxes $ 30,385 $ 16,235
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Short-term note payable converted to long-term debt $ - $1,190,000
Capitalized interest $ - $ 41,563
PURCHASE OF NETWORK CONTROLS INTERNATIONAL, INC.
Fair value of assets acquired $ 62,456 $1,934,000
Cash paid for capital stock - (840,000)
Preferred stock issued (62,456) (175,521)
- -------------------------------------------------------------------------------------------------------------------
Liabilities assumed $ - $ 918,479
===================================================================================================================
See Notes to Consolidated Financial Statements.
F-6
</TABLE>
<PAGE>
IFS International, Inc.
Notes to Consolidated Financial Statements
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Description of Business
The consolidated financial statements include the accounts of IFS
International, Inc. (a Delaware Corporation) and its wholly-owned
subsidiaries, IFS International, Inc. (IFS) (a New York
Corporation), and Network Controls International, Inc. (NCI) (all
collectively referred to as the Company). All significant
intercompany accounts and transactions have been eliminated.
The Company is engaged in the design and development of computer
software for use with automatic teller machines (ATMs), electronic
fund transfers (EFTs), and point of sale (POS) systems used by
financial institutions and retailers. The Company is also engaged
in the sale of computer equipment and software to the financial
services industry and provides its customers with support and
maintenance services for such systems.
A significant portion of the Company's sales and revenues are
derived from financial institutions and other customers located
outside of the United States (see Notes 13 and 14). The Company
extends credit to its customers and generally requires deposits
upon execution of software development contracts. With respect to
foreign customers, collection may be more difficult upon default.
Summary of Significant Accounting Policies
Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and reported amounts of revenue and expenses during the reporting
period, as well as amounts disclosed for contingencies. Among the
more significant estimates included in the financial statements
are the estimated costs to complete software installation
contracts, amortization of capitalized software and product
enhancement costs and the valuation allowance reducing the
Company's deferred tax asset. Actual results could differ from
those estimates.
Revenue recognition:
Revenues from sales of hardware and software are recognized upon
shipment of product or upon satisfaction of material ongoing
commitments, if any. Revenue from software installation
contracts, except for the portion attributable to base license
fees for pilot programs which are recognized when pilot sites are
identified, is recognized on the percentage-of-completion method,
measured by the ratio of costs incurred to date to management's
estimates of total anticipated costs. This method is used because
management considers costs incurred to be the best available
measure of progress on software installation contracts. Because
of the inherent uncertainties in estimating contracts, it is at
least reasonably possible that the Company's estimates of costs
and revenues will change in the near term. Uncertainty inherent
in initial estimates is reduced progressively as work on the
contract nears completion.
F-7
<PAGE>
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Summary of Significant Accounting Policies, Continued
Revenue recognition, continued:
Deposits received in advance for hardware sales are deferred and
recognized as revenue upon installation and acceptance of the
system. Amounts received on service contracts are initially
deferred and recognized ratably over the life of the contract,
generally one year. With the exception of revenues earned through
foreign subsidiaries, all revenues derived outside of the United
States are denominated in U.S. dollars.
Cash and cash equivalents:
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash
equivalents consist of money market funds which focus on high
quality, short-term money market instruments of all types.
Allowance for doubtful accounts:
Accounts receivable are stated net of an allowance for doubtful
accounts.
Bad debts are provided for on the allowance method based upon
historical experience and management's estimation of collection
losses on outstanding accounts receivable.
Inventories:
Inventories are stated at the lower of identified cost, or
market, and consist principally of hardware products for resale.
Property, plant and equipment:
Property, plant and equipment are stated at cost, with related
depreciation provided by the declining-balance and straight-line
methods over the estimated useful lives of the related assets,
ranging from three to forty years. Interest incurred on
obligations incurred to finance construction of building
improvements in 1998 was capitalized in the cost of such
improvements.
Capitalized software and product enhancement costs:
The cost of adding new functions and features (i.e.,
enhancements) to existing systems and the cost of development of
new systems, for which technological feasibility has been
established and which are not covered by outside funding, are
capitalized. Research and development costs incurred in the
establishment of technological feasibility of new systems are
expensed as incurred.
F-8
<PAGE>
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Summary of Significant Accounting Policies, Continued
Capitalized software and product enhancement costs, continued:
Capitalized amounts are reported at the lower of unamortized cost
or net realizable value. Amortization is recorded over the
estimated marketing lives of the software and enhancements which
range from two to five years, and is computed on the greater of
the percent-of-revenue method, based on the total estimated
future revenues expected to be derived from sales of the
software, or the straight-line method. Adjustments are made to
accelerate amortization when, in management's estimation, the
unamortized capitalized costs exceed the net realizable value for
specific products.
Income taxes:
Current or deferred taxes are recognized for the tax consequences
of all events recognized in the financial statements. Deferred
taxes are computed on the differences between the financial
reporting and the tax reporting basis of assets and liabilities.
The Company has not recognized the benefit of any net operating
loss carryforwards due to the uncertainty of the realizability of
such carryforwards. The Company files a consolidated Federal
income tax return with its domestic subsidiaries.
Accounting for stock-based compensation:
The Company records compensation expense for employee stock
options and warrants only if the current market price of the
underlying stock exceeds the exercise price on the date of the
grant in accordance with Accounting Principles Board Opinion No.
25 Accounting for Stock Issued to Employees ("APB 25"). On May 1,
1996, the Company adopted the disclosure provisions of Financial
Accounting Standard No. 123, Accounting for Stock-Based
Compensation. The Company has elected not to implement the fair
value based accounting method for employee and directors' stock
options and warrants, but has elected to disclose the pro forma
net loss and pro forma basic and diluted net loss per share to
account for employee and directors' stock option and warrant
grants, as if such method had been used to account for such
stock-based compensation.
Foreign currency translation:
All assets and liabilities of foreign subsidiaries of NCI whose
functional currency is other than the U.S. dollar are translated
at exchange rates in effect at the balance sheet date, while the
parent's investment is translated at historical exchange rates.
Revenues and expenses of such subsidiaries are translated at
average exchange rates for the period. Translation gains and
losses are not included in determining net loss but are
accumulated in a separate component of shareholders' equity.
Foreign currency transaction gains and losses, which are
generally not material, are included in other expense (income) in
the statement of operations when incurred.
F-9
<PAGE>
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Summary of Significant Accounting Policies, Continued
Basic and diluted net loss per share:
Basic and diluted net loss per share is computed using the
weighted average number of common shares outstanding during the
period. Diluted net loss per share is computed using the weighted
average number of common and potential common shares outstanding
during the period. Potential common shares consist of the
incremental common shares issuable upon the exercise of stock
options and warrants (using the treasury stock method). Potential
common shares are excluded from the computation if their effect
is anti-dilutive, as was the case for the years ended April 30,
1999 and 1998.
Comprehensive income (loss):
The Company adopted Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("SFAS No. 130") during
1999. Comprehensive income (loss) of the Company includes net
income (loss), adjusted for the change in foreign currency
translation adjustments. The net effect of income taxes on
comprehensive income (loss) is immaterial.
Asset impairment assessments:
The Company reviews long-lived assets for impairment whenever
events or circumstances indicate that the carrying value of such
assets may not be fully recoverable. An impairment is recognized
to the extent that the sum of undiscounted estimated future cash
flows expected to result from the use of assets is less than the
carrying value. No impairment has been recognized through April
30, 1999.
Reclassification:
Certain items have been reclassified in the 1998 financial
statements to conform to the current year's presentation.
Recent accounting pronouncements:
In March 1998, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or
Obtained For Internal Use," ("SOP 98-1"). This statement
establishes capitalization criteria for external and internal
computer software costs and is effective for financial statements
for fiscal years beginning after December 15, 1998. The Company
does not believe this standard will have a material impact on its
financial position, results of operations, or cash flows.
F-10
<PAGE>
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Summary of Significant Accounting Policies, Continued
Recent accounting pronouncements, continued:
In December 1998, the AICPA issued, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain
Transactions" which amends SOP 97-2, "Software Revenue
Recognition" ("SOP 98-9"), to require recognition of revenue
using the residual method. Under the residual method, the total
fair value of the undelivered elements, as indicated by
vendor-specific objective evidence, is deferred and subsequently
recognized in accordance with the relevant sections of SOP 97-2
and the difference between the total arrangement fee and the
amount deferred for the undelivered elements is recognized as
revenue related to the delivered elements. Effective December 15,
1998, this SOP amends SOP 98-4, Deferral of the Effective Date of
a Provision of SOP 97-2, Software Revenue Recognition, to extend
the deferral of the application of certain passages of SOP 97-2
provided by SOP 98-4 through fiscal years beginning on or after
March 15, 1999. All other provisions of this SOP are effective
for transactions entered into in fiscal years beginning after
March 15, 1999. The Company does not believe this standard will
have a material impact on its financial position, results of
operations, or cash flows.
NOTE 2. ACQUISITION OF NCI HOLDINGS, INC.
In January 1998, the Company acquired NCI Holdings, Inc.
(Holdings). Holdings was the majority owner of NCI. NCI is engaged
primarily in the sale of computer equipment and software to
financial institutions. NCI also sells related services including
installation, training, consulting and programming. NCI has three
wholly-owned subsidiaries which provide marketing and sales support
to customers in European markets. The subsidiaries are as follows:
Network Controls GmbH (Germany)
Network Controls International Ltd. (London)
Network Controls International Espana, S.A. (Spain) (Inactive)
The Company acquired all of the outstanding shares of capital stock
of Holdings in exchange for $1.11 million, consisting of $840,000
in cash and $176,000 representing the fair value of 24,638 shares
of preferred stock. Costs incurred in connection with the
acquisition approximated $102,000. In accordance with provisions of
the acquisition agreement, the Company initially recorded the
issuance of preferred shares at an amount which considered an
allowance for equity deficiencies of NCI.
The acquisition was accounted for as a purchase and the operating
results of NCI were included in the consolidated financial
statements commencing February 1, 1998.
F-11
<PAGE>
NOTE 2. AQUISITION OF NCI HOLDINGS, INC., CONTINUED
During 1999, the Company waived the equity deficiency clause of the
acquisition agreement. Accordingly, the allowance established as
April 30, 1998 was reversed and an additional 62,456 shares of
preferred stock were issued and recorded as additional purchase
costs. The excess of the cost of acquiring NCI over the fair value
of net assets acquired, approximating $396,000, is being amortized
over eight years. Amortization approximated $49,000 and $23,000 for
the years ended April 30, 1999 and 1998, respectively.
Pro forma selected results of operations for the year ended April
30, 1998, as if the acquisition had taken place at the beginning of
that year, is as follows:
----------------------------------------------------------------
Revenues $ 7,825,000
----------------------------------------------------------------
Net loss $ (1,341,000)
----------------------------------------------------------------
Basic and diluted net loss per common share $ (1.22)
----------------------------------------------------------------
Pursuant to the acquisition agreement, additional shares are
issuable if the consolidated pre-tax profits of NCI exceed certain
levels during each of the three years ending April 30, 1999, 2000,
and 2001 and during the three year period ending April 30, 2001, as
contingent consideration. These issuances will also be treated as
additional purchase cost.
(See Note 11).
During 1999, NCI was merged into Holdings and Holdings changed its
name to Network Controls International, Inc.
NOTE 3. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts are
summarized as follows:
-------------------------------------------------------------
Expenditures on uncompleted contracts $ 543,504
Estimated earnings thereon 1,097,938
-------------------------------------------------------------
1,641,442
Less billings to date 1,126,915
-------------------------------------------------------------
$ 514,527
-------------------------------------------------------------
These costs and estimated earnings are included in the accompanying
balance sheet under the following captions:
-------------------------------------------------------------------
Costs and estimated earnings in
excess of billings on uncompleted contracts $ 751,616
Billings in excess of costs and estimated
earnings on uncompleted contracts 237,089
-------------------------------------------------------------------
$ 514,527
-------------------------------------------------------------------
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
-------------------------------------------------------------------
Building $ 1,917,731
Machinery and equipment 1,828,725
Furniture and fixtures 511,761
Leasehold improvements 38,817
-------------------------------------------------------------------
4,297,034
Less accumulated depreciation (1,725,573)
-------------------------------------------------------------------
Property, equipment and improvements, net $ 2,571,461
-------------------------------------------------------------------
F-12
<PAGE>
NOTE 4. PROPERTY, PLANT AND EQUIPMENT, CONTINUED
During 1998, the Company completed the renovation of a building
purchased in 1997 to house the Company's New York facility.
Capitalized interest amounted to $41,563 during the year ended
April 30, 1998. The land underlying the facility is subject to a
long-term ground lease arrangement with no annual rental
requirements.
Depreciation related to property, equipment, and improvements was
$359,898 and $178,930 for the years ended April 30, 1999 and 1998,
respectively.
NOTE 5. CAPITALIZED SOFTWARE AND PRODUCT ENHANCEMENT COSTS:
Capitalized software and product enhancement costs consist of the
following:
-------------------------------------------------------------------
Capitalized software and product enhancement costs $ 2,324,147
Less accumulated amortization 1,054,487
-------------------------------------------------------------------
Capitalized software costs, net $ 1,269,660
-------------------------------------------------------------------
Amortization expense approximated $414,800 and $218,600 for the
years ended April 30, 1999 and 1998, respectively.
NOTE 6. LINE OF CREDIT
The Company has available a $600,000 bank line of credit subject to
annual review. Borrowings under the line of credit accrue interest
at prime plus 3/4% and are secured by inventory, receivables,
property and equipment. No amounts were outstanding under the line
as of April 30, 1999.
NOTE 7. LONG-TERM DEBT
Long-term debt consists of the following at April 30, 1999:
- -------------------------------------------------------------------------------
Two mortgage notes payable, bank, monthly payments of
$3,582 and $4,863, including interest at 6% and 8%,
respectively, with the entire unpaid principal and accrued
interest due April 2009. The notes are secured by a
mortgage on the Company's New York operating facility.
Interest on the first note is fixed for two years at which
time the note will be increased to 8%. Interest on both
notes will be adjusted after five years to the weekly
average yield to an investor of United States Treasury
Securities, adjusted to a constant maturity of five years,
plus 3%. $ 1,081,442
Mortgage note payable, public benefit corporation, monthly
payments of $8,433, including interest at 8.11%, with the
entire unpaid principal and accrued interest due April 2009.
The note is also secured by a mortgage on the Company's New
York operating facility. 1,000,000
Restructured convertible subordinated debentures payable to
a governmental agency due in 2000. Interest is payable
quarterly at 7.5%. The debentures are convertible into shares
of common stock at $5.74 per share through April 2000. At
April 30, 1999, approximately 43,500 shares of common stock
were issuable under this conversion feature. 250,000
Restructured note payable, government agency, principal and
interest payments of $3,804 per month, including interest at
7.5%, due April 2002. This note is unsecured and subordinated
to all other debt. 140,130
Other long-term debt 23,994
- --------------------------------------------------------------------------------
2,495,566
Less current portion 362,174
- --------------------------------------------------------------------------------
$2,133,392
================================================================================
F-13
<PAGE>
NOTE 7. LONG-TERM DEBT, CONTINUED
Certain of the Company's long-term debt obligations require
compliance with financial and non-financial covenants. As of April
30, 1999, the Company was not in compliance with certain of these
requirements relating to its mortgage notes payable, however
covenant violation waivers have been received.
Aggregate maturities of long-term debt are as follows:
----------------------------------------------------
Year Ending April 30
----------------------------------------------------
2000 $ 362,174
2001 100,671
2002 100,813
2003 55,615
Thereafter 1,876,293
----------------------------------------------------
$2,495,566
====================================================
NOTE 8. INCOME TAXES
The provision for income taxes consists primarily of current
foreign taxes in 1998, and current foreign taxes net of domestic
refunds in 1999. Deferred tax account balances at April 30, 1999
and 1998 were not material.
The provision (benefit) for income taxes for the years ended April
30, 1999 and 1998 differs from the amount obtained by applying the
U.S. federal income tax rate to pretax loss due to the following:
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
Federal income tax (benefit) at statutory rates $ (232,000) $ (395,200)
State income tax (benefit), net of federal benefits (40,000) (69,800)
Foreign taxes 80,900 89,400
Change in valuation allowance for net operating losses 213,900 468,100
- --------------------------------------------------------------------------------
Provision for income taxes $ 22,800 $ 92,500
================================================================================
At April 30, 1999, the Company has net operating loss carryforwards
of approximately $3,800,000 which begin to expire in 2004 to offset
future federal taxable income. Utilization of these carryforwards
may be limited due to the ownership change provisions as enacted by
the Tax Reform Act of 1986 and subsequent legislation.
Because of the uncertainty as to realizability, the deferred tax
benefit attributable to net operating loss carryforwards at April
30, 1999 and 1998 of approximately $1,295,000 and $1,090,000,
respectively, has been offset by an equivalent valuation allowance.
F-14
<PAGE>
NOTE 9. STOCK OPTION PLANS
The Company has stock option plans (the 1988 Plan, the 1996 Plan,
and the 1998 Plan) which provide for the granting of either options
intended to qualify as "incentive stock options" under the Internal
Revenue Code or "supplemental stock options" not intended to
qualify. Under these plans, the Board of Directors determines the
exercise and expiration dates of the options which may not be later
than 10 years from the date of the grant. The purchase prices of
the shares under incentive stock options must be at least equal to
the fair market value of the common stock at the date of the grant.
Options outstanding at April 30, 1999 under the 1988 Plan, may be
exercised at prices ranging from $.66 to $3.50 per share. At April
30, 1999, no options were available for future issuance under this
Plan. An aggregate of 332,779 shares of common stock were
originally reserved in connection with the 1988 Plan.
The following table summarizes option activity during 1999 and 1998
under the 1988 Stock Option Plan:
- ---------------------------------------------------------------------------
Shares Under Option
[------------- Year Ended April 30-------------]
Weighted Weighted
Average Average
Exercise Exercise
1999 Price 1998 Price
- ---------------------------------------------------------------------------
Outstanding beginning of year 227,136 $ 1.94 248,544 $ 1.37
Granted 61,750 1.57 27,445 4.88
Exercised (10,996) (0.88) (21,408) (0.66)
Canceled (61,750) (2.42) (27,445) (0.66)
- ---------------------------------------------------------------------------
Outstanding end of year 216,140 $ 1.45 227,136 $ 1.94
- ---------------------------------------------------------------------------
Exercisable 214,112 $ 1.43 218,186 $ 1.86
===========================================================================
The weighted-average remaining contractual life of outstanding
options under the 1988 Plan is 5.054 years.
The following table summarizes option activity during 1999 and 1998
under the 1996 Stock Option Plan:
- ---------------------------------------------------------------------------
Shares Under Option
[---------- Year Ended April 30----------]
Weighted Weighted
Average Average
Exercise Exercise
1999 Price 1998 Price
- ---------------------------------------------------------------------------
Outstanding beginning of year 286,500 $ 6.00 35,000 $ 6.75
Granted 49,000 4.57 261,750 5.03
Exercised - - - -
Canceled (335,500) (5.12) (10,250) (5.51)
Outstanding end of year - $ - 286,500 $ 6.00
- ---------------------------------------------------------------------------
Exercisable - $ - 112,578 $ 5.77
===========================================================================
F-15
<PAGE>
NOTE 9. STOCK OPTION PLANS, CONTINUED
An aggregate of 300,000 shares of common stock has been reserved in
connection with the 1996 Plan.
The following table summarizes option activity during 1999 under
the 1998 Stock Option Plan:
-------------------------------------------------------------------
Shares Under Option
Year Ended April 30
Weighted
Average
Exercise
1999 Price
-------------------------------------------------------------------
Outstanding beginning of year $ - -
Granted 1,387,245 2.17
Exercised - -
Canceled (10,450) (1.31)
-------------------------------------------------------------------
Outstanding end of year 1,376,795 $ 2.18
-------------------------------------------------------------------
Exercisable 251,725 $ 1.64
===================================================================
An aggregate of 1,400,000 shares of common stock has been reserved
in connection with the 1998 Plan. The weighted-average remaining
contractual life of outstanding options under the 1998 Plan is
9.703 years. Options outstanding under the 1998 Plan may be
exercised at prices ranging from $1.31 to $2.94 per share. At April
30, 1999, 313,205 options were available for future issuance.
In accordance with APB 25, no employee compensation cost has been
recognized in accounting for the stock option plans in 1999 or
1998. Had compensation costs and fair values been determined
pursuant to FAS 123, net loss for 1999 would have increased by
approximately $2,925,000 and net loss for 1998 would have increased
by approximately $723,000. Basic and diluted net loss per common
share would have approximated $2.74 and $1.80 in 1999 and 1998,
respectively, under FAS 123. The weighted average fair value of
options granted during 1999 and 1998, for the purpose of FAS 123,
is $2.22 and $5.02 per share, respectively.
In accordance with FAS 123, the fair value of each option for 1999
was estimated on the grant date using the Black-Scholes Single
Option Model, assuming no dividend yield, and with the following
assumptions: risk-free interest rates ranging from 4.44% to 6.87%;
and volatility factors of the expected market price of the
Company's common stock of 156.0367%.
NOTE 10. EMPLOYEE BENEFIT PLANS
The Company has adopted qualified profit sharing plans with 401(k)
deferred compensation provisions. Substantially all employees are
eligible to participate in either of the plans. The plans provide
for contributions by the Company at the Board of Director's
discretion and on a matched basis. Contributions under the plans
approximated $79,400 during the year ended April 30, 1999 ($19,200
in 1998).
F-16
<PAGE>
NOTE 11. COMMITMENTS AND CONTINGENCIES
Leasing Arrangements
The Company leases office space and certain equipment under
operating leases. The lease arrangements generally contain renewal
options at various terms. Future minimum lease payments under
noncancellable operating leases with an initial or remaining term
of one year or more are as follows:
------------------------------------------------------------
Year Ending April 30
------------------------------------------------------------
2000 $ 183,840
2001 202,555
2002 193,580
2003 192,448
Thereafter 164,414
------------------------------------------------------------
$ 936,837
============================================================
Issuance of Contingent Consideration - NCI
In accordance with the acquisition of NCI, the Company is
contingently obligated to issue shares of common stock based upon
pre-tax profits, as defined, of NCI for the year ended April 30,
1999. Approximately 1,000,000 shares of common stock were otherwise
issuable in this connection as of April 30, 1999. Management of the
Company, however, believes that the number of shares ultimately
issuable pursuant to the agreement is not presently determinable
inasmuch as the provisions of the original agreement are subject to
interpretation and/or renegotiation. Accordingly, no additional
purchase cost has been recognized at April 30, 1999 in this
connection.
Marketing Agreement
In April 1999, the Company entered into a marketing agreement for a
one year term with a public relations firm. Pursuant to the
agreement, the Company is obligated to pay the firm $90,000 and has
issued 200,000 common stock purchase warrants redeemable at
exercise prices ranging from $3.50 to $6.50 per share.
NOTE 12. RELATED PARTY TRANSACTIONS
Certain officers/directors receive commissions based upon a
percentage of software license fees generated by their respective
sales efforts. Approximately $234,600 and $149,000 were earned
under the commission agreements during 1999 and 1998, respectively.
The Company entered into a consulting agreement with a director in
1999 to provide consulting services through February 2002. The
agreement provides for an annual fee of $120,000 plus reasonable
and necessary business expenses. Consulting fees pursuant to this
agreement were $120,000 for the year ended April 30, 1999.
F-17
<PAGE>
NOTE 12. RELATED PARTY TRANSACTIONS, CONTINUED
The Company had a consulting agreement with another director to
provide consulting services for an indefinite term. The agreement
called for the payment of monthly compensation and monthly travel
and housing expenses. Consulting fees under this arrangement,
exclusive of expense reimbursements, were approximately $162,000 in
1998. The agreement was canceled effective April 30, 1998.
Accounts payable and accrued expenses include approximately
$298,000 and $99,000 as of April 30, 1999 and 1998, respectively,
due to these officers/directors.
The Company is a party to a consulting arrangement with an entity
affiliated with an organization in which an officer/director of IFS
serves as a director. This arrangement requires that consulting
fees of approximately $260,000 be paid to this entity in connection
with "ISO 9000" certification assistance. Consulting fees under
this arrangement were $64,900 for the year ended April 30, 1999.
NOTE 13. EXPORT REVENUES, MAJOR CUSTOMERS, CERTAIN CONCENTRATIONS
One domestic customer accounted for approximately 14% and 16% of
total revenues for the years ended April 30, 1999 and 1998,
respectively. Amounts due from this customer at April 30, 1999 were
approximately $59,800.
Total revenues considered export revenues, including sales of NCI's
foreign subsidiaries, approximated $8,376,000 and $3,793,000, or
82% and 74% of total revenues, for the years ended April 30, 1999
and 1998, respectively. Such revenues were derived primarily from
customers located in Europe, Eastern Europe, and the Far East.
Approximately 7% and 19% of the Company's total revenues for the
years ended April 30, 1999 and 1998, respectively, were derived
pursuant to a relationship with one computer manufacturer and
approximately 10% and 1%, respectively, were derived pursuant to a
reseller agreement.
NOTE 14. FOREIGN AND DOMESTIC OPERATIONS
<TABLE>
-------------------------------------------------------------------------------------------------------
April 30, 1999 April 30, 1998
------------------------ --------------------
NCI NCI
Foreign Foreign
IFS NCI Subsidiaries IFS NCI Subsidiaries
-------------------------------------------------------------------------------------------------------
Net revenues from unaffiliated customers:
<S> <C> <C> <C> <C> <C> <C>
United States $288,678 $1,499,240 $ - $1,222,571 $192,680 $ -
Foreign 4,020,279 597,100 3,759,141 2,383,302 543,100 866,681
-------------------------------------------------------------------------------------------------------
$4,308,957 $2,096,340 $ 3,759,141 $3,605,873 $735,780 $ 866,681
-------------------------------------------------------------------------------------------------------
Operating earnings (loss):
United States $(2,096,138) $1,200,862 $ - $(1,364,632) $ (286) $ -
Foreign - - 304,931 - - 103,445
-------------------------------------------------------------------------------------------------------
$(2,096,138) $ 1,200,862 $ 304,931 $(1,364,632) $ (286) $ 103,445
-------------------------------------------------------------------------------------------------------
Identifiable assets:
United States $ 6,331,378 $ 1,348,085 $ - $ 6,429,720 $ 1,184,824 $ -
Foreign - - 1,606,364 - - 1,005,119
-------------------------------------------------------------------------------------------------------
$ 6,331,378 $ 1,348,085 $ 1,606,364 $ 6,429,720 $ 1,184,824 $1,005,119
=======================================================================================================
</TABLE>
F-18
<PAGE>
NOTE 14. FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES, CONTINUED
In determining operating earnings (loss) for each geographic area,
revenues and costs of revenues between areas have been accounted
for on the basis of internal transfer prices set by the Company.
NOTE 15. SHAREHOLDERS' EQUITY
Public Offering
In February 1997, the Company sold 1,380,000 shares of preferred
stock and 1,955,000 warrants to purchase preferred stock in a
public offering. Proceeds of the offering approximated $5,700,000
after deducting underwriting discounts and expenses. Proceeds of
the public offering were used to retire long-term debt, facilities
construction and renovation, and for working capital purposes.
The preferred stock was convertible, at the option of the holder,
into one share of the Company's common stock, subject to
adjustment, until February 2002 or earlier upon the occurrence of
certain events. Each warrant entitled the holder to purchase one
share of preferred stock at a price of $6.25 per share, subject to
adjustment, for a three year period beginning in February 1999, or
earlier upon the occurrence of certain events.
Other Warrant Issuances
In connection with the public offering discussed above, the Company
sold to the underwriter warrants to purchase 120,000 shares of
preferred stock at $6.25 per share and 170,000 warrants to purchase
an equivalent number of preferred shares at an exercise price of
$1.6875 per warrant, exercisable over a period of four years
commencing in February 1998.
In September 1996, also in connection with the public offering, the
Company obtained bridge financing and issued warrants to purchase
100,000 shares of common stock. The warrants are exercisable at
$2.50 per share, subject to adjustment, through September 2001.
In November 1998, the Company sold warrants to purchase up to
300,000 shares of common stock at an exercise price of $2.50 per
share. Proceeds from the sale of the warrants were $30,000.
Conversion of Preferred Shares
During 1999, shareholders of the Company approved the conversion of
all issued and outstanding shares of preferred stock into common
shares. Each share of preferred stock was converted into 1.1 shares
of common stock. Holders of warrants and options to purchase
preferred shares prior to the conversion may now exercise their
rights for conversion into common shares at a ratio of 1.1 to 1.
NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, consisting
principally of cash equivalents and long-term debt, has been
estimated to approximate their carrying amounts, based on current
interest rates.
F-19
<PAGE>
NOTE 17. SUBSEQUENT EVENT
In July 1999, the Company issued a series of convertible promissory
notes in the aggregate principal amount of $1,075,000. The notes
bear interest at 10% and mature in July 2001. Holders of the notes
may convert the principal balance into shares of common stock of
the Company at any time prior to maturity. Warrants to purchase up
to 200,000 shares of common stock were also issued in connection
with the transaction.
NOTE 18. INVESTMENTS
The Company has a 42% equity interest in a foreign joint venture
arrangement at April 30, 1999. The joint venture is involved in
establishing a EFT network in an Asian country and is currently in
its start-up phase. The Company's total investment in the joint
venture approximated $42,000 at April 30, 1999, and is classified
as an other asset.
NOTE 19. FOURTH QUARTER RESULTS (UNAUDITED)
Operations for the fourth quarter of 1999 include adjustments
approximating $400,000 relating to reductions in previously
recognized license revenues, capitalized software and capitalized
joint venture costs. Additionally, approximately $60,000 of
refinancing costs and $120,000 of termination and severance
compensation costs were incurred in the fourth quarter.
F-20
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
IFS INTERNATIONAL, INC.
(Registrant)
Date: August 12, 1999 By: \s\ David L. Hodge
------------------------------
David L. Hodge, President and
Chief Executive Officer, Director
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Date: August 12, 1999 By: \s\ David L. Hodge
------------------------------
David L. Hodge, President and
Chief Executive Officer, Director
Date: August 12, 1999 By: \s\ John P. Singleton
------------------------------
John P. Singleton
Chairman of the Board, Director
Date: August 12, 1999 By: \s\ Frank A. Pascuito
------------------------------
Frank A. Pascuito
Executive Vice President, Director
Date: August 12, 1999 By: \s\ Simon Theobald
------------------------------
Simon Theobald
Executive Vice President, Director
Date: August 12, 1999 By: \s\ Carmen A. Pascuito
------------------------------
Carmen A. Pascuito
CFO, Controller and Secretary
Date: August 12, 1999 By: \s\ Arnold Wells
------------------------------
Arnold Wells, Director
Date: August 12, 1999 By:
------------------------------
DuWayne J. Peterson, Director
Date: August 12, 1999 By:
------------------------------
Per Olof Ezelius, Director
Date: August 12, 1999 By: \s\ C. Rex Welton
------------------------------
C. Rex Welton, Director
EXHIBIT 4.9
THESE WARRANTS HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO THE
DISTRIBUTION HEREOF OR OF THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS
THEREUNDER. NEITHER THESE WARRANTS NOR THE COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF MAY BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR UPON RECEIPT BY THE
COMPANY OF AN OPINION SATISFACTORY AS TO FORM, SCOPE AND SUBSTANCE OF COUNSEL
ACCEPTABLE TO THE COMPANY AS TO AN EXEMPTION THEREFROM.
Warrants to Purchase
300,000 Shares of Common Stock
IFS INTERNATIONAL, INC.
Dated: November 6 , 1998
THIS CERTIFIES THAT for $30,000 and other good and valuable
consideration, MDB Capital LLC, its successors and assigns, 100 Wilshire
Boulevard, Suite 1750, Santa Monica, California 90401 (herein sometimes called
the "Holder") is entitled to purchase from IFS International, Inc., a Delaware
corporation (hereinafter called the "Company"), at the prices and during the
periods as hereinafter specified, up to 300,000 shares of Common Stock (the
"Warrant Shares").
1. (a) The rights represented by this instrument (the "Warrant
Certificate") shall be exercised at $2.50 per share subject to adjustment in
accordance with Section 8 of these Warrants (the "Exercise Price") and shall
expire on the later of November 1, 2003 and 36 months after the Warrant Shares
are registered for public resale under the Securities Act of 1933, as amended
and the rules and regulations promulgated thereunder (the "Act").
(b) Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, if the Holder elects to exercise Warrants and if fair market
value of one share of the Company's Common Stock is greater than the Stock
Purchase Price (at the date of calculation as set forth below), in lieu of
exercising Warrants for cash, the Company may elect for the Holder to receive
shares equal to the value (as determined below) of Warrants underlying this
Warrant Certificate (or the portion thereof being canceled). Holder shall
surrender this Warrant Certificate at the notice of such election and the
Company promptly shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised,
the portion of the Warrant being canceled
(as of one day prior to the date of such
calculation)
A = the fair market value of one share of the
Company's Common Stock (as of one day prior
to the date of such calculation)
B = Stock Purchase Price (as adjusted to one
day prior to the date of such calculation)
For purposes of the above calculation, the fair market value of one share of
Common Stock shall mean:
(i) If traded on a securities exchange, the fair market
value of the Common Stock shall be deemed to be the average of
the closing prices of the Common Stock on such exchange over the
30-day period ending five business days prior to the net issuance
exercise date;
(ii) If traded on the NASDAQ National Market or the NASDAQ
SmallCap Market, the fair market value of the Common Stock shall
be deemed to be the average of the last reported sales prices of
the Common Stock on such market over the 30-day period ending
five business days prior to the net issuance exercise date;
(iii) If traded over-the-counter other than on the NASDAQ
National Market or the NASDAQ SmallCap Market, the fair market
value of the Common Stock shall be deemed to be the average of
the closing bid prices of the Common Stock over the 30-day period
ending five business days prior to the net issuance exercise
date; and
(iv) If there is no public market for the Common Stock, then
fair market value shall be determined by mutual agreement of the
Holder and the Company, and if the Holder and the Company are
unable to so agree, at the Company's sole expense, by an
investment banker of national reputation selected by the Company
and reasonably acceptable to the Holder.
(c) Exercise Disputes. In the case of any dispute with respect
to an exercise, the Company shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with this Warrant. If such dispute
involves the calculation of the Stock Purchase Price, the Company shall submit
the disputed calculations to a "Big Six" independent accounting firm (selected
by the Company) via facsimile within three (3) business days of receipt of the
Form of Subscription. The accounting firm shall audit the calculations and
notify the Company and the converting Holder of the results no later than two
(2) business days from the date it receives the disputed calculations. The
accounting firm's calculation shall be deemed conclusive, absent manifest error.
The Company shall then issue the appropriate number of shares of Common Stock in
accordance with this Section.
2. The rights represented by this Warrant Certificate may be exercised
at any time within the period above specified, in whole or in part, by (i) the
surrender of this Warrant Certificate (with the purchase form at the end hereof
properly executed) at the principal executive office of the Company or such
other office or agency of the Company as it may designate by notice in writing
to the Holder at the address of the Holder appearing on the books of the
Company); (ii) payment to the Company of the Exercise Price then in effect for
the number of Warrant Shares specified in the above-mentioned purchase form
together with applicable stock transfer taxes, if any; and (iii) delivery to the
Company of a duly executed agreement signed by the person(s) designated in the
purchase form to the effect that such person(s) agree(s) to be bound by the
provisions of Section 6 and Subsections (b), (c) and (d) of Section 7 hereof.
These Warrants shall be deemed to have been exercised, in whole or in part to
the extent specified, immediately prior to the close of business on the date
this Warrant Certificate is surrendered and payment is made in accordance with
the foregoing provisions of this Section 2, and the person or persons in whose
name or names the certificates for shares of Common Stock shall be issuable upon
such exercise shall become the holder or holders of record of such Common Stock
at that time and date. The Common Stock and the certificates for the Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by these Warrants
shall have been so exercised. If the Company does not make the election allowed
under Subsection 1.(b) to the fullest extent reasonable the Company shall in
good faith cooperate with Holder in effecting a prompt "cashless exercise" of
these Warrants through any stock brokerage firm selected by Holder (the effect
of which will be that the Company may receive proceeds from the exercise of
Warrants directly from such brokerage firm).
3. These Warrants may be transferred, sold, assigned, or hypothecated.
Any such assignment shall be effected by the Holder (1) executing the form of
assignment at the end hereof and (ii) surrendering these Warrants for
cancellation at the office or agency of the Company referred to in Section 2
hereof; whereupon the Company shall issue, in the name or names specified by the
Holder (including the Holder) new Warrants of like tenor and representing in the
aggregate rights to purchase the same number of Warrant Shares as are
purchasable hereunder. Any transfer must be in compliance with the Act and the
rules and regulations promulgated thereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued upon the exercise of the Warrants will, upon issuance, be
duly and validly issued, fully paid and nonassessable and no personal liability
will attach to the Holder thereof. The Company further covenants and agrees that
during the periods within which these Warrants may be exercised, the Company
will at all times have authorized and reserved a sufficient number of shares of
its Common Stock to provide for the exercise of these Warrants.
5. These Warrants shall not entitle the Holder to any voting, dividend
or other rights as a shareholder of the Company.
6. (a) If at any time the Company determines to proceed with the
preparation and filing of one or more registration statements under the Act in
connection with the proposed offer and sale for money of any of its equity
securities (other than on Forms S-4 or S-8 or any successor or similar form),
the Company shall give prompt written notice of its determination to the Holder,
whether the Holder holds the Warrant or has exercised the Warrant in whole or in
part. Upon the written request of the Holder given to the Company within 30 days
after such notice has bee received, the Company shall, subject to Subsection (c)
below, use its best efforts to cause all shares of its Common Stock which the
Company has been requested to register by Holder to be registered under the Act
and to cause such shares to be registered under the appropriate blue sky laws of
up to five states designated by such Holder, to the extent required to permit
the sale or other disposition of such shares.
(b) If and whenever the Company is required by the provisions of
Subsection (a) to effect the registration of shares under the Act, the
Company will:
(i) subject to the provisions of Subsection (b) of this
Section 6 prepare and file with the Securities and Exchange
Commission ("SEC"), within 90 days after receipt of such request
a registration statement with respect to such securities, and use
its best efforts to cause such registration statement to become
effective within 120 days of receipt of such request and remain
effective for such period as may be reasonably necessary to
effect the sale of such securities, not to exceed 270 days;
provided that prior to filing a registration statement or
prospectus or any material amendment (or any amendment which
refers to Holder) thereto, the Company will furnish to counsel
selected by the Holder copies of such documents and provide
counsel the opportunity to comment;
(ii) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration
statement effective until the earlier of (a) the date on which
all securities covered by such registration statement have been
sold and (b) 365 days after the effective date of such
registration statement;
(iii) use its best efforts to register or qualify the shares
for sale under such other securities or blue sky laws of such
jurisdictions as the Holder or Holders may reasonably request (up
to five states) and do any and all other acts and things which
may be reasonably necessary or desirable to consummate the
disposition of the shares in such jurisdictions; provided,
however, that the Company shall not be required to qualify to do
business or to file a general consent to service of process in
any such jurisdictions;
(iv) notify the Holder at any time when a prospectus
relating thereto is required to be delivered under the Act, of
the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make
the statements therein not misleading, and, if in the reasonable
judgment of the Company it is necessary to prepare a supplement
or amendment to such prospectus, the Company will prepare such
supplement or amendment to such prospectus, so that, as
thereafter delivered to the Holder, such prospectus will not
contain an untrue statement of a material fact or omit to state
any fact necessary to make the statements therein not misleading;
(v) cause all such shares to be listed on each securities
exchange on which similar securities issued by the Company are
then listed and, if not so listed and if the Company would
otherwise qualify, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use
its best efforts to secure designation of all such securities,
which the Holder desires to register covered by such registration
statement, to be listed on the NASDAQ National Market;
(vi) use its reasonable efforts to cause the shares covered
by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be
necessary to enable the Holder to consummate the disposition of
such shares.
(f) (i) If any 50% holder (as defined below) shall give notice
to the Company at any time during the period set forth in Section 1 hereof to
the effect that such holder desires to register under the Act the Warrant Shares
under such circumstances that a public distribution (within the meaning of the
Act) of any such securities will be involved then the Company will promptly, but
no later than forty-five (45) days after receipt of such notice, file a
post-effective amendment to any then current registration statement or file a
new registration statement on Form S-3 (or, if the use of Form S-3 is not
available to the Company, on such other form as may be appropriate) pursuant to
the Act (the "Registration Statement"), to the end that the Warrant Shares may
be publicly sold under the Act as promptly as practicable thereafter and the
Company will use its best efforts to cause such registration to become and
remain effective for a period of two hundred seventy (270) days (including the
taking of such steps as are reasonably necessary to obtain the removal of any
stop order); provided, that such holder shall furnish the Company with
appropriate information in connection therewith as the Company may reasonably
request in writing. The 50% holder (which for purposes hereof shall mean any
direct or indirect transferee of such holder) may, at its option, request the
filing of a post-effective amendment to the then current Registration Statement
or a new registration statement under the Act with respect to the Warrant Shares
on only one occasion during the term of these Warrants. The Holder may, at its
option request the registration of the Warrant Shares in a registration
statement made by the Company as contemplated by Section 6(a) or in connection
with a request made pursuant to this Section 6(f) prior to acquisition of the
Warrant Shares issuable upon exercise of these Warrants and even though the
Holder has not given notice of exercise of these Warrants. The 50% holder may,
at its option, request such post-effective amendment or new registration
statement during the described period with respect to the Warrant Shares and
such registration rights may be exercised by the 50% holder prior to or
subsequent to the exercise of these Warrants. Within ten (10) business days
after receiving any such notice pursuant to this subsection (f) of Section 6,
the Company shall give notice to the other holders of Warrants that were
originally a part of this Warrant Certificate, advising that the Company is
proceeding with such post-effective amendment or registration statement and
offering to include therein the securities underlying the options of the other
holders. Each holder electing to include his or its Warrant Shares in any such
offering shall provide written notice to the Company that is received by the
Company within thirty (30) days after mailing notice to them by the Company. The
failure to provide such notice to the Company shall be deemed conclusive
evidence of such holder's election not to include his or its Warrant Shares in
such offering. Each holder electing to include its Warrant Shares shall furnish
the Company with such appropriate information (relating to the intentions of
such holder) in connection therewith as the Company shall reasonably request in
writing. In the event the Registration Statement is not filed within the period
specified herein, the expiration dates of these Warrants shall be extended to a
date which is not less than ninety (90) days after the effective date of such
Registration Statement. Only two such post-effective amendments or one new
registration statement shall be filed pursuant to this Section 6(f) and all
costs and expenses of only the first such post-effective amendment or new
registration statement shall be borne by the Company, except that the holders
shall bear the fees of their own counsel and any underwriting discounts or
commissions applicable to any of the Warrant Shares sold by them. If the Company
determines to include securities to be sold by it in any registration statement
pursuant to this Section 6(f), such registration statement shall be deemed to
have been a registration statement under Section 6(a).
(iii) The Company will use its best efforts to maintain such
registration statement or post-effective amendment current under the Act
for a period of at least six months (and for up to an additional three
months if requested by the Holder) from the effective date thereof. The
Company shall supply prospectuses, and such other documents as the Holder
may reasonably request in order to facilitate the public sale or other
disposition of the Warrant Shares, use its best efforts to register and
qualify any of the Registrable Securities for sale in a maximum of five
states as such holder designates (provided that the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or
execute a general consent to service of process in any jurisdiction in any
action) and furnish indemnification in the manner provided in Section 7
hereof.
(iv) The term "50% holder" as used in this Section 6(f) shall mean the
holder or holders of at least 50% of the Warrants and the Warrant Shares
(considered in the aggregate) and shall include any owner or combination of
owners of such securities, which ownership shall be calculated by
determining the number of shares of Common Stock as well as the number of
Warrant Shares then issuable upon exercise of the Warrants held by such
owner or owners.
(g) If any Holder requests a registration of shares, he shall provide all
such information and materials and shall take all such actions as may be
reasonably required in order to permit the Company to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of the effective
date of such registration statement. Specifically, the Company may require the
Holder to furnish the Company with such information regarding the Holder and the
distribution of its securities as the Company may from time to time reasonably
request in writing and as shall be required by law or the SEC.
(h) With respect to inclusion of shares in a registration statement
pursuant to Subsection (a) hereof, the Company shall bear the following fees,
costs and expenses of such registrations: all registration, filing and stock
exchange fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, fees and disbursements of other persons retained by
the Company, and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified, except as
otherwise provided upon withdrawal; and the Holders participating in such
registration shall be responsible for, and shall pay, its shares of underwriting
discounts and commissions, and reasonable and necessary fees and disbursements
of counsel for such Holder.
7. (a) Whenever pursuant to Section 6 a registration statement relating to
the Warrant Shares is filed under the Act or amended or supplemented, the
Company will indemnify and hold harmless each holder of the securities covered
by such registration statement, amendment or supplement (such holder being
hereinafter called the "Distributing Holder" and such securities being
hereinafter called the "Registered Securities"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished by such
Distributing Holder or any other Distributing Holder, for use in the preparation
thereof.
(b) The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said registration
statement and such amendments and supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act) against any losses, claims,
damages or liabilities, joint and several, to which the Company or any such
director, officer or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in said registration statement, said preliminary prospectus, said
final prospectus, or said amendment or supplement, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in said registration statement, said preliminary prospectus, said final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Distributing Holder for use in the
preparation thereof; and will reimburse the Company or any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action. The maximum amount which may be recovered
from any Distributing Holder shall not under any circumstances exceed in the
aggregate the amount of net proceeds received by such Distributing Holder from
sales of his Registered Securities.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party written notice of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this Section 7.
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after written notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 7 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a stock dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action. In the event an adjustment to the Exercise Price is
effected pursuant to this Subsection (a) (and a corresponding adjustment to the
number of Warrant Shares is made pursuant to Subsection (f) below), the Exercise
Price of the Warrants shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price of the Warrants by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such action and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) In case the Company shall fix a record date for the issuance of rights
or warrants to all holders of its Common Stock entitling them to subscribe for
or purchase shares of Common Stock (or securities convertible into Common Stock)
at a price (the "Subscription Price") (or having a conversion price per share)
less than the current market price of the Common Stock (as defined in Subsection
(h) below) on the record date mentioned below, the Exercise Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the date of such issuance by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate conversion
price of the convertible securities so offered) would purchase at such current
market price per share of the Common Stock, and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding on such record
date and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so offered
are convertible). Such adjustment shall be made successively whenever such
rights or warrants are issued and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
rights or warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not delivered) after
the expiration of such rights or warrants the Exercise Price shall be readjusted
to the Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to the holders of its
Common Stock evidences of its indebtedness or assets (excluding cash dividends
or distributions and dividends or distributions referred to in Subsection (a)
above) or subscription rights or warrants (excluding those referred to in
Subsection (b) above), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the
total number of shares of Common Stock outstanding multiplied by the current
market price per share of Common Stock (as defined in Subsection (h) below),
less the fair market value (as determined by the Company's Board of Directors)
of said assets or evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of shares of
Common Stock outstanding multiplied by such current market price per share of
Common Stock. Such adjustment shall be made successively whenever such a record
date is fixed. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
(d) In case the Company shall issue shares of its Common Stock (excluding
shares issued in any of the transactions described in Subsections (a), (b) and
(c) above) for a consideration per share (the "Offering Price") less than the
current market price per share [as defined in Subsection (h) below] on the date
the Company fixes the offering price of such additional shares) then the
Exercise Price shall be adjusted immediately thereafter so that it shall equal
the price determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional shares and the number of shares of Common Stock which the
aggregate consideration received [determined as provided in Subsection (g)
below] for the issuance of such additional shares would purchase at such current
market price per share of Common Stock, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made.
(e) In case the Company shall issue any securities convertible into or
exchangeable for its Common Stock [excluding securities issued in transactions
described in Subsections (a), (b), (c) and (d) above] for a consideration per
share of Common Stock (the "Conversion Price") initially deliverable upon
conversion or exchange of such securities [determined as provided in Subsection
(g) below] less than the current market price per share [as defined in
Subsection (h) below] in effect immediately prior to the issuance of such
securities, then the Exercise Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such securities and the number of shares of Common Stock which
the aggregate consideration received [determined as provided in Subsection (g)
below] for such securities would purchase at such current market price per share
of Common Stock, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance and the
maximum number of shares of Common Stock of the Company deliverable upon
conversion of or in exchange for such securities at the initial conversion or
exchange price or rate. Such adjustment shall be made successively whenever such
an issuance is made.
(f) Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to Subsections (a), (b), (c), (d) or (e) above in this Section
8, the number of Warrant Shares purchasable upon exercise of these Warrants
shall simultaneously be adjusted by multiplying the number of Warrant Shares
initially issuable upon exercise of these Warrants by the Exercise Price in
effect on the date hereof and dividing the product so obtained by the Exercise
Price, as adjusted and, in connection with any event (whether or not leading to
an adjustment of the Exercise Price) causing the Target Percentage to equal less
than two percent (2%), shall be further adjusted (the "Anti-Dilution
Adjustment") so as to increase the number of Warrant Shares issuable upon
exercise of these Warrants so that the Holder (together with its transferees and
assignees) shall hold not less than two percent (2%) of the issued and
outstanding shares of Common Stock then outstanding (including any shares
issuable on exercise or conversion of any rights then outstanding to acquire
shares of the Company's Common Stock), provided that the Anti-Dilution
Adjustment shall terminate upon, and not be calculated with respect to, the
closing of an initial bona fide public offering of Common Stock pursuant to a
firm commitment underwriting under a registration statement declared effective
by the Securities and Exchange Commission under the Act.
(g) For purposes of any computation respecting consideration received
pursuant to Subsections (d) and (e) above, the following shall apply:
(i) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
in good faith by the Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be conclusive; and
(iii) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion or
exchange thereof [the consideration in each case to be determined in the
same manner as provided in clauses (i) and (ii) of this Subsection (g)].
(iv) in case the Company shall sell and issue Common Stock together
with one or more other securities as part of a unit at a price per unit,
then in determining consideration per share for purposes of this Section 8,
the Board of Directors of the Company shall determine, in good faith, whose
determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, the fair value
of the Common Stock then being sold as part of such unit, and such
determination, in the absence of fraud or bad faith, shall be binding upon
the holder of these Warrants.
(h) For the purpose of any computation under Subsections (b), (c), (d) and
(e) above in this Section 8, the current market price per share of Common Stock
at any date shall be deemed to be the average Fair Market Value of the Common
Stock for 30 consecutive business days before such date.
"Fair Market Value" shall mean an amount that is determined as
follows: (i) If the Common Stock is listed on the New York Stock Exchange, the
American Stock Exchange or such other securities exchange designated by the
Board of Directors of the Company, or admitted to unlisted trading privileges on
any such exchange, or if the Common Stock is quoted on a National Association of
Securities Dealers, Inc. system that reports closing prices, the Fair Market
Value shall be the closing price of the Common Stock as reported by the Wall
Street Journal on the day the Fair Market Value is to be determined, or if no
such price is reported for such day, then the determination of such closing
price shall be as of the last immediately preceding day on which the closing
price is so reported; or (ii) If the Common Stock is not so listed or admitted
to unlisted trading privileges or so quoted, the Fair Market Value shall be the
average of the last reported highest bid and the lowest asked prices quoted on
the National Association of Securities Dealers, Inc. Automated Quotations System
or, if not so quoted, then by the National Quotation Bureau, Inc. on the day the
Fair Market Value is determined; or (iii) If the Common Stock is not so listed
or admitted to unlisted trading privileges or so quoted, and bid and asked
prices are not reported, the Fair Market Value shall be determined in such
reasonable manner as may be presented by the Board of Directors of the Company.
(i) All calculations under this Section 8 shall be made to the nearest
one cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 8 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes in the
Exercise Price, in addition to those required by this Section 8, as it
shall determine, in its sole discretion, to be advisable in order that any
dividend or distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter made by the
Company shall not result in any federal income tax liability to the holders
of Common Stock.
(j) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly, but no later than ten (10) days after any request for
such an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Warrant Shares issuable upon exercise of
these Warrants and, if requested, information describing the transactions giving
rise to such adjustments, to be mailed to the Holder at the address set forth
herein, and shall cause a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(k) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder of these Warrants thereafter shall
become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of these
Warrants shall be subject to adjustment from time-to-time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (a) to (i), inclusive above.
9. In the event of any loss, theft or destruction of these Warrants, upon
delivery of a written agreement to indemnify the Company (which agreement may be
unsecured if from the original Holder of these Warrants), or in the event of any
mutilation of these Warrants, upon surrender of these Warrants to the Company,
the Company, at its expense, will execute and deliver, in lieu thereof, new
Warrants representing the right to purchase at the Exercise Price a like
aggregate number of Warrant Shares.
10. This Agreement shall be governed by and in accordance with the laws of
the State of Delaware and in the event of any action to enforce any provision of
these Warrants the prevailing party shall be entitled to all costs of suit,
including without limitation, attorneys' fees and court costs, and shall be
entitled to the interests on any award until paid.
IN WITNESS WHEREOF, IFS International, Inc. has caused these Warrants to be
signed by its duly authorized officers under its corporate seal, and these
Warrants to be dated as of November 6, 1998.
IFS International Inc.
A Delaware Corporation
By _____________________________________________________
Frank Pascuito, Chairman of the Board
(Corporate Seal)
ATTEST:
---------
PURCHASE FORM
(To be signed only upon exercise of Warrants)
The undersigned, the holder of the foregoing Warrants, hereby irrevocably
elects to exercise the purchase rights represented by such Warrants for, and to
purchase thereunder, _____ shares of Common Stock of IFS International, Inc.,
and herewith makes payment of $___________ therefor and requests that
certificates for shares of Common Stock be issued in the name(s) of, and
delivered to____________________________________, whose address(es) is (are)
______________________________________________________.
DATED: ___________, 199__
---------
TRANSFER FORM
(To be signed only upon transfer of the Warrants)
For value received, the undersigned hereby sells, assigns, and transfers
unto ______________________________ the right to purchase Warrant Shares
represented by the foregoing Warrants to the extent of ________ Warrant Shares,
and appoints _____________________ attorney to transfer such rights on the books
of IFS International, Inc., with full power of substitution in the premises.
DATED: ____________, 199__
---------
_________ By
---------
_________ (Address)
EXHIBIT 4.10
INVESTMENT BANKING AGREEMENT
This Investment Banking Agreement (the "Agreement") is made and entered
into this day of November 6, 1998, between IFS International, Inc., Inc., a
Delaware corporation ("Company"), and MDB Capital Group LLC ("MDB").
In consideration of and for the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged the parties agree as follows:
1. Purpose. Company hereby engages MDB as a non-exclusive, independent
advisor and consultant (and not as an agent) during the term specified
hereinafter to render financial consulting and investment banking advice to
Company upon the terms and conditions as set forth herein. The parties
contemplate that MDB at a future date may act as a placment agent for
securities of the company. The parties will agree on terms and fees at the
time of the offering.
2. Term. This Agreement shall be effective for a period of twelve (12)
months (the "Term"), commencing on the date of this Agreement.
3. Duties of MDB.
(a) During the term of this Agreement, MDB will provide Company
with such consulting advice with respect to acquisitions and financial
planning, capital structure issues, the continued refinement of a
business plan and the evaluation of financing alternatives as is
reasonably requested by Company. In performance of these duties, MDB
shall provide Company with the benefits of its reasonable judgment and
efforts. MDB's duties shall include, but will not necessarily be
limited to, the following:
(i) Advice regarding the formulation of business and
financing goals and plans;
(ii) Advice concerning strategic issues, including
acquisitions, other alliance partnerships and joint ventures;
(iii) Advice concerning short and long range financial
planning;
(iv) Exposing the Company to business opportunities and
potential institutional and other investors;
(v) Advice regarding the implementation of the Company's
goals and plans;
(vi) Not to disclose any information or make any
representations or warranties to or in favor of any person
whatsoever in relation to the Company or its business or
activities or relating to shares in the Company without the prior
written consent of the Company, at its absolute and unfettered
discretion following full disclosure having been made of the
identity of the persons to whom the disclosures, representations
or warranties will be made and the content, manner, and context
thereof; and
(vii) To use its reasonable best endeavors to comply with
all reasonable requests of the Company in relation to the
performance of the duties of MDB hereunder.
(b) In connection with rendering its advice hereunder, MDB and
its employees and agents shall be given reasonable access to Company's
officers, premises, and records.
(c) Company acknowledges that MDB's advice pursuant hereto does
not and will not constitute any guarantee or other assurance as to the
ability of the Company to obtain financing or to accomplish any other
goals or plans of Company. This Agreement contains the entire
compensation payable by Company to MDB for any and all services.
(d) Company acknowledges that MDB retains the right to provide
consulting advice to other parties. Nothing herein contained shall be
construed to limit or restrict MDB in conducting such business with
respect to others, or in rendering advice to others or conducting any
other business. MDB, however, will not provide consulting advice in
favor of any other parties engaged in (or who may use the advice or
pass on their advice in favor of any other persons engaged in) the
same business without Company's prior written consent.
4. Compensation. The Company shall compensate MDB in amounts to be
mutuall agreed upon in the event MDB originates a bank financing or other
transaction, provides a fairness opinion or other valuation analysis,
introduces the company to a source of business from which the Company
derives revenue, or acts as placement agent or underwriter for the
Company's securities.
5. Expenses. Company shall advance or, upon billing, promptly
reimburse MDB for reasonable out-of-pocket expenses incurred by MDB in
connection with the services rendered by MDB pursuant to this Agreement.
Expenses that shall be reimbursable include travel, food, lodging and
transportation, research materials, long distance telephone, facsimile,
messenger and other expenses needed to be incurred to perform MDB's
services. Expenses in excess of $1,000 will be reimbursed only upon the
Company's prior approval of the expense.
6. Proprietary Information. MDB acknowledges and agrees that it is in
a fiduciary relationship with Company and agrees that it will not sell or
use in any manner not authorized in writing by Company, or disclose any
information provided to MDB by the Company or its employees, agents, or
representatives, including without limitation any of the Company's trade
secrets, technical information, agreements, or other proprietary
information or information concerning the Company's current and any future
proposed operations, services, or products, regardless of whether such
information was obtained prior to, during or after the engagement of MDB by
the Company pursuant to this Agreement, unless MDB is authorized to do so
in writing by the Company and/or Company releases such information to the
public via public announcements or announcements on recognized stock
exchanges.
7. Representations and Warranties of the Company and of MDB. Each
party hereto represents and warrants to the other party hereto as follows:
(a) The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby (i) are within
the corporate power and authority of such party, (ii) do not require
the approval or consent of any stockholders of such party, and (iii)
have been duly authorized by all necessary corporate action on the
part of such party.
(b) This Agreement has been duly executed and delivered by such
party and constitutes the legal, valid, binding and enforceable
obligation of party, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
8. Arbitration. Any and all controversies or claims arising out of or
relating to this Agreement shall be settled by binding arbitration in Los
Angeles County in accordance with the rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrator(s) may be
entered by any court having jurisdiction thereof. The parties shall be
entitled to discovery in accordance with the provisions of California Code
of Civil Procedure Section 1283.05 which, by this reference, is made
applicable to this Agreement. Nothing herein shall prohibit either party
from seeking injunctive relief in a court of law while the arbitration is
pending.
9. Assignment. This Agreement and the rights hereunder may not be
assigned by either party (except by operation of law) without prior written
consent of the other party, but, subject to the foregoing limitation, this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, and legal representatives of the parties.
10. Notice. Any notice or other communications between the parties
hereto shall be sufficiently given if sent by certified registered mail,
postage prepaid, or by telecopy, if to Company addressed to it at,
Rensselear Technology Park, 300 Jordan Road, Troy, New York 12180, or if to
MDB, addressed to it at 100 Wilshire Boulevard, Suite 1750, Santa Monica,
California 90401, or to such other address as hereafter by designated in
writing by one party to the other. Such notice or other communications
shall, if sent by telecopy, be deemed to be given upon receipt of the
confirmation of its proper transmission and if outside the hours of 9:00 am
to 5:00 pm on any business day in the jurisdiction of the addressee, shall
be deemed to given at 9:00 am on the next business day. Notices sent by
certified or registered mail or prepaid postage shall be deemed to be
received three business days after the date of forwarding the same. For the
purposes of this Agreement, "business day" shall refer to a day in which
trading banks are open for business.
11. Captions. The heading of the sections of this Agreement are
intended solely for convenience of reference and are not intended and shall
not be deemed for any purpose whatsoever to modify or explain or place any
constriction upon any of the provisions of this Agreement.
12. Attorneys' Fees. In the event any party hereto shall institute an
action, including arbitration pursuant to Section 8 of this Agreement, to
enforce any rights hereunder, the prevailing party in such action shall be
entitled, in addition to any other relief granted, to reasonable attorneys'
fees and costs.
13. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of
the parties, and there are not representations, warranties, or other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth herein. No supplement, modification
amendment, waiver or termination of this Agreement shall be binding unless
executed in writing by the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver
of any provisions hereof (whether or not similar) nor shall waiver
constitute a continuing waiver.
14. Options. The Company shall as of this date enter into an agreement
to sell MDB a warrant or warrants to purchase up to 300,000 shares of
common stock of the Company (the "Warrants") at an exercise price per share
of $2.50. MDB shall pay the Company $30,000 for the Warrants.
15. Indemnification by the Company and by MDB.
(a) MDB hereby agrees to indemnify and save Company and hold
Company harmless in respect of all causes of actions, liabilities,
costs, charges and expenses, loss and damage (including consequential
loss) suffered or incurred by the Company (including legal fees)
arising from any willful or grossly negligent act or omission of MDB
or its employees, servants, and agents and arising from contravention
by MDB of any of its employees, servants, and agents of any of the
terms and conditions imposed on MDB pursuant to this Agreement.
(b) Company hereby agrees to indemnify and save MDB and hold MDB
harmless in respect of all causes of actions, liabilities, costs,
charges and expenses, loss and damage (including consequential loss)
suffered or incurred by MDB (including legal fees) arising from any
intentional or grossly negligent act or omission of the Company or its
employees, servants, and agents and arising from contravention by
Company or any of its employees, servants, and agents of any of the
terms and conditions imposed on the Company pursuant to this
Agreement.
(c) No party shall be liable to any other party hereunder for any
claim covered by insurance, except to the extent that the liability of
such party exceeds the amount of such insurance coverage. Nothing in
this clause (c) shall be construed to reduce insurance coverage to
which any party may otherwise be entitled.
16. Termination. This Agreement may be terminated by either party upon
written notice delivered to the other 60 days in advance of the date
noticed for termination. The Company shall continue to pay fees under this
Agreement and MDB shall continue to render services under this Agreement
through date of termination.
17. Severability. Any portion of the indemnification and/or
confidentiality provisions herein which may be prohibited or unenforceable
in any applicable jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability, but
shall not invalidate the remaining portions of such provisions or the other
provisions hereof or affect any such provisions or portion thereof in any
other jurisdiction.
18. Governing Law. The parties hereto hereby agree that this Agreement
shall be governed by the laws of the State of California.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
day and year first above written.
MDB: MDB CAPITAL LLC
By _____________________________________________________
Christopher A. Marlett, Partner
COMPANY: IFS International, Inc., Inc.
A Delaware Corporation
By _____________________________________________________
Frank A. Pascuito, Chairman
EXHIBIT 4.11
THE SALE AND ISSUANCE OF THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR UNDER THE SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED
OF, UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
IFS INTERNATIONAL, INC.
Convertible Promissory Note
July __, 1999
No. CN-__ $_____.00
For value received, IFS INTERNATIONAL, INC., a Delaware corporation
(the "Company"), hereby promises to pay to the order of _______________________,
a ________ corporation, with offices located at ______________________________
(together with its successors, representatives, and permitted assigns, the
"Holder"), in accordance with the terms hereinafter provided, the principal
amount of ________________ Dollars ($______.00), together with interest thereon.
<PAGE>
-16-
459745-7 8/10/99 Beginning on the date hereof, the outstanding principal balance
of this Note shall bear interest, in
arrears, at a rate per annum equal to ten percent (10%), payable quarterly
unless earlier converted or redeemed as provided herein. Interest shall be
computed on the basis of a 360-day year of twelve (12) 30-day months (each, a
"Monthly Period") and shall accrue commencing on the 91st day from the Closing
Date (as defined in the Purchase Agreement) as follows: (i) if the VWAP of the
Common Stock during days 61-90 after the Closing Date (the "Initial Test
Period") is less than $3.00, interest shall accrue for the period from the 91st
day after the Closing Date through and including the 120th day after the Closing
Date; and (ii) if the VWAP for any Monthly Period subsequent to the Initial Test
Period (the "Subsequent Test Period" and together with the Initial Test Period,
the "Test Periods") is less than $3.00, interest shall accrue for the Monthly
Period commencing on the first day after the end of such Subsequent Test Period.
The interest shall be payable, at the option of the Company, in cash or shares
of the Company's common stock, par value $.001 per share (the "Common Stock"),
provided, that if the Company elects to pay any interest in Common Stock, such
Common Stock must be registered and freely tradeable at the time of issuance.
The number of shares of Common Stock to be issued as payment of accrued and
unpaid interest shall be determined by dividing (a) the total amount of accrued
and unpaid interest for the applicable Test Period by (b) the average of the
lowest VWAPs for a number of days equal to one-half of the trading days during
such Test Period.
The outstanding principal balance of this Note shall be due and payable
in its entirety in lawful money of the United States of America in immediately
available funds on July __, 2001, or at such earlier time as provided herein
(the "Maturity Date"); provided, that on the Maturity Date, all of the then
outstanding principal amount of this Note plus all unpaid accrued interest
thereon shall be converted into Common Stock in accordance with Article III of
this Note. Principal and interest shall be payable at the address of the Holder
first set forth above or at such other place as the Holder may designate from
time to time in writing to the Company or by wire transfer of funds to the
Holder's account, instructions for which are attached hereto as Exhibit A. This
Note may, without the prior written consent of the Holder, be prepaid by the
Company, in whole or in part, in accordance with Section 3.3 herein.
ARTICLE I
1.1 Purchase Agreement.
This Note has been executed and delivered pursuant to the Note and
Warrant Purchase Agreement, dated as of July __, 1999 (the "Purchase
Agreement@), by and among the Company, Gilston Corporation, Ltd., Manchester
Asset Management, Ltd. and Headwaters Capital. This Note is subject to each of
the terms and conditions of the Purchase Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth for such
terms in the Purchase Agreement.
1.2 Payment on Non-Business Days.
Whenever any payment to be made shall be due on a Saturday, Sunday or a
public holiday under the laws of the State of New York, such payment may be due
on the next succeeding business day and such next succeeding day shall be
included in the calculation of the amount of accrued interest payable on such
date.
1.3 Transfer.
This Note may be transferred or sold, subject to the provisions of
Section 4.5 of this Note, or pledged, hypothecated or otherwise granted as
security by the Holder.
<PAGE>
1.4 Replacement.
Upon receipt of a duly executed, notarized and unsecured written
statement from the Holder with respect to the loss, theft or destruction of this
Note (or any replacement hereof), and without requiring an indemnity bond or
other security, or, in the case of a mutilation of this Note, upon surrender and
cancellation of such Note, the Company shall issue a new Note, of like tenor and
amount, in lieu of such lost, stolen, destroyed or mutilated Note.
ARTICLE II
1.5 Events of Default.
The occurrence of any of the following events shall be an "Event of
Default" under this Note:
(1) the failure of the Common Stock to be listed on the Nasdaq Small Cap
Market, Inc. ("Nasdaq") for a period of five (5) consecutive trading days; or
(2) trading in the Common Stock is suspended on Nasdaq for a period of five
(5) consecutive trading days, other than as a result of the suspension of
trading in securities on such market in general; or
(3) the Company shall fail to make any payment of principal on the date
such payment is due hereunder, whether upon the Maturity Date or otherwise; or
(4) the Company shall fail to make any payment of interest for a period of
five (5) days after the date such interest is due; or
(5) default shall be made in the timely delivery of shares of Common Stock
upon conversion of the Note and/or exercise of the Warrants, the timely filing
and/or effectiveness of the Registration Statement (as defined in the
Registration Rights Agreement) or the payment of any fees and/or liquidated
damages under this Note, the Purchase Agreement, the Warrants or the
Registration Rights Agreement; or
(6) default shall be made in the performance or observance of any covenant,
condition or agreement contained in this Note (other than as set forth in clause
(e) of this Section 2.1), the Purchase Agreement, the Warrants or the
Registration Statement and such default shall continue unremedied for a period
of fifteen (15) days after notice from the Holder; or
<PAGE>
(7) any representation or warranty made by the Company herein or in the
Purchase Agreement, the Warrants or the Registration Rights Agreement shall
prove to have been false or incorrect or breached in a material respect on the
date as of which made; or
(8) the Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or assets, (ii) admit in
writing its inability to pay its debts as such debts become due, (iii) make a
general assignment for the benefit of its creditors, (iv) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in effect),
(v) file a petition seeking to take advantage of any bankruptcy, insolvency,
moratorium, reorganization or other similar law affecting the enforcement of
creditors' rights generally, (vi) acquiesce in writing to any petition filed
against it in an involuntary case under United States Bankruptcy Code, or (vii)
take any action under the laws of any jurisdiction (foreign or domestic)
analogous to any of the foregoing; or
(9) a proceeding or case shall be commenced in respect of the Company,
without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets or (iii) similar relief in respect of it under
any law providing for the relief of debtors, and such proceeding or case
described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed
and in effect, for a period of 60 days or any order for relief shall be entered
in an involuntary case under United States Bankruptcy Code (as now or hereafter
in effect) against the Company or action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing shall be taken with
respect to the Company and shall continue undismissed, or unstayed and in effect
for a period of 60 days.
1.6 Remedies Upon An Event of Default.
If an Event of Default shall have occurred and shall be continuing, the
Holder of this Note may at any time at its option (i) declare the entire unpaid
principal balance of this Note, together with all interest accrued hereon, due
and payable, and thereupon, the same shall be accelerated and so due and
payable, without presentment, demand, protest, or notice, all of which are
hereby expressly unconditionally and irrevocably waived by the Company;
provided, however, that upon the occurrence of an Event of Default described in
Section 2.1(h) or 2.1(i), the outstanding principal balance and accrued interest
hereunder shall be automatically due and payable or (ii) demand that the
principal amount of this Note then outstanding and all accrued and unpaid
interest thereon shall be converted into shares of Common Stock at a conversion
price per share calculated pursuant to Section 3.1 hereof assuming that the date
that the Event of Default occurs is the Conversion Notice Date. No course of
delay on the part of the Holder shall operate as a waiver thereof or otherwise
prejudice the right of the Holder. No remedy conferred hereby shall be exclusive
of any other remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise.
<PAGE>
ARTICLE III
CONVERSION; ANTIDILUTION; REDEMPTION
1.7 Conversion Option.
(1) This Note shall be convertible (in whole or in part), at the option
(the "Conversion Option") of the Holder, at any time on or after the earlier of
(i) the effective date of the Registration Statement or (ii) the 91st date after
the Closing Date, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (x) that portion of the outstanding
principal balance under the Note as of such date that the Holder elects to
convert by (y) the Conversion Price (as hereinafter defined) then in effect on
the Conversion Date (as hereinafter defined) provided, however, that the
Conversion Price shall be subject to adjustment as described in Section 3.2
below.
For purposes of this Section 3.1, (A) the "Conversion Price"
means an amount equal to the lesser of (1) $3.00 per share or (2) 90% of the
"Market Price", where the "Market Price" is defined as the average of the three
lowest VWAPs of the Common Stock during the fifteen (15) day trading period
immediately preceding the Conversion Date (the "Lookback Period"; and (B)
"Conversion Date" means the date on which the Holder faxes a notice of
conversion (the "Conversion Notice"), duly executed, to the Company (facsimile
number (518) 283-7336, Attn.: Carmen Pascuito) On the last trading day of each
month, starting on the first day of the fourth month after the Closing Date, the
Lookback Period will be increased by two (2) trading days until the Lookback
Period equals a maximum of thirty (30) trading days.
(2) In connection with the conversion of this Note in accordance with this
Section 3.1, at any time on or after the earlier of (i) the effective date of
the Registration Statement or (ii) the 91st date after the Closing Date, the
Holder may exercise its Conversion Option by delivering an original Conversion
Notice which shall specify the amount of this Note that the Holder desires to
convert and surrendering to the Company the Note to be converted, marked
"Canceled," and acknowledged by the Holder to be paid-in-full within three (3)
business day from the Conversion Date, in exchange for certificate(s)
representing the number of shares of Common Stock determined in accordance with
Section 3.1(a) above and, in the event of a partial conversion, a new Note for
the remainder of the principal balance, which certificates and new Note, if
applicable, which shall be delivered to the Holder within three (3) business
days after the Conversion Date. Upon the Holder's exercise of the Conversion
Option, the Company shall, within three (3) business days from the Conversion
Date, pay and deliver to the Holder, in cash or as otherwise provided in this
Note, all accrued but unpaid interest on the Note through the date of such
conversion.
<PAGE>
(3) If the Company fails to deliver the Common Stock within three (3) business
days from the Conversion Date, the Company shall pay as liquidated damages for
such failure and not as a penalty to the Holder an amount equal to two percent
(2%) of the principal amount of this Note to be converted for the first 30-day
period following the required delivery of the Common Stock, which amount shall
be pro rated for such period less than thirty (30) days, and three percent (3%)
of the principal amount of this Note to be converted for each 30-day period
thereafter until delivery of the Common Stock, which shall also be pro rated for
such period less than thirty (30) days (the "Periodic Amount"). Payments made
pursuant to this Section 3.2(c) shall be due and payable in cash immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties as of the date of this Note of the amount of
damages that may be incurred by the Holders if the Common Stock is not delivered
as set forth herein.
(4) Subject to the Exchange Cap (as defined in Section 3.1(e) below), any Note
which remains outstanding on the second anniversary of the Closing Date shall
automatically be converted on such date into shares of Common Stock.
(5) The Company shall not be obligated to issue any shares of Common Stock upon
conversion of this Note if the issuance of such shares of Common Stock, together
with any shares of Common Stock issued upon exercise of the Warrants, would
exceed that number of shares of Common Stock which the Company may issue upon
conversion of the Note (the "Exchange Cap") without breaching the Company's
obligations under the rules and regulations of Nasdaq or any other principal
securities exchange or market upon which the Common Stock is or becomes traded.
If the conversion of all or any portion of this Note, together with any shares
of Common Stock issued upon exercise of the Warrants, would result in the
issuance of shares of Common Stock which in the aggregate will equal or exceed
the Exchange Cap, the Company shall within sixty (60) days from the Closing Date
file a proxy statement in order to seek approval of the stockholders of the
Company as required by the applicable rules or regulations of Nasdaq for
issuances of Common Stock in excess of the Exchange Cap. The Company shall
comply with all applicable rules and regulation of the Securities Act of 1933,
as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Nasdaq, as applicable, at the expense of the
Company. If the Company obtains the approval of stockholders as required under
the rules or regulations of Nasdaq, the Company shall be obligated to issue upon
conversion of the Note, together with any shares of Common Stock issued upon
exercise of the Warrants, in the aggregate, shares of Common Stock in excess of
the Exchange Cap. If the Company does not obtain the approval of stockholders as
required under the rules or regulations of Nasdaq or fails to call the
stockholders meeting within the time herein, the Holder shall have the right, at
the Holder's option, to require the Company to redeem, subject to the terms of
Paragraph 3.1(f) below, all or a portion of this Note which the Company is
unable to convert (the "Mandatory Redemption"), at a cash price equal to the
applicable Redemption Price set forth in Section 3.3(b) (the "Mandatory
Redemption Price").
<PAGE>
(6) Upon receipt of a Conversion Notice from Holder which cannot be fully
satisfied, the Company shall immediately notify via facsimile to Holder of the
Company's inability to fully satisfy such Conversion Notice (the "Inability to
Fully Convert Notice"). The Inability to Fully Convert Notice shall indicate the
amount of the Note which cannot be converted and the applicable Mandatory
Redemption Price. Holder shall notify the Company within five (5) business days
of receipt of the Inability to Fully Convert Notice of its election to cause a
Mandatory Redemption by delivering written notice via facsimile to the Company
("Notice in Response to Inability to Convert"). If such Holder shall elect to
have its Note redeemed pursuant to Section 3.1(e) above, the Company shall pay
the applicable Mandatory Redemption Price in cash to such holder within five (5)
business days after the Company's receipt of the holders Notice in Response to
Inability to Convert, provided that prior to the Company's receipt of the
holder's Notice in Response to Inability to Convert, the Company has not
delivered a notice to such holder stating that the event or condition triggering
the Mandatory Redemption has been cured. From and after the date of the
Mandatory Redemption (unless the Company shall default in duly paying the
Mandatory Redemption Price in which case all the rights of the Holder shall
continue), the Holder of Notes so redeemed shall have the right to receive the
Mandatory Redemption Price thereof upon surrender of certificates representing
the Note, and such Note shall not thereafter be transferred (except with the
consent of the Company) on the books of the Company and shall not be deemed
outstanding for any purpose whatsoever.
(7) Notwithstanding the foregoing provisions, in no event (except with respect
to an automatic conversion of this Note as provided in Section 3.1(d) above)
shall Holder be entitled to convert any portion of this Note to the extent after
such conversion, the sum of (1) the number of shares of Common Stock
beneficially owned by Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of this Note and the unexercised portion of any Warrants),
and (2) the number of shares of Common Stock issuable upon the conversion of the
Note and exercise of the Warrants with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the holders
and their affiliates of more than 4.99% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act, except as otherwise provided in clause (1) of such proviso. The
preceding shall not interfere with Holder's right to convert this Note or
exercise the Warrants which in the aggregate total more than 4.99% of the
outstanding shares of Common Stock, over time, as long as Holder does not own
more than 4.99% of the outstanding Common Stock at any given time.
<PAGE>
(8) The Company recognizes and acknowledges that a breach by the Company of the
provisions of this Section 3.1 will cause irreparable and material harm to the
Holder, that the Holder may bring a suit to enforce or remedy a breach of the
provisions of this Section 3.1, that in any such suit an action for damages
would be inadequate, and that the Holder may seek and obtain such equitable
relief (without being required to post a bond or other security), including but
not limited to injunctive relief, as may be appropriate in any court of
competent jurisdiction, in addition to any and all other rights and remedies at
law or in equity, and all such rights and remedies shall be cumulative.
1.8 Adjustment of Conversion Price.
(1) The Conversion Price shall be subject to adjustment from time to time as
follows:
(1) If the Company shall, at any time or from time to time after
the Closing Date, issue any shares of Common Stock (other than
Excluded Stock (as hereinafter defined)) for a consideration per share
less than the Conversion Price, then the Conversion Price in effect
immediately prior to each such issuance shall forthwith be lowered to
a price equal to the product of the Conversion Price times a fraction,
(1) the numerator of which is an amount equal to the sum of (x)
the total number of shares of Common Stock outstanding (on a fully
diluted basis) immediately prior to such issuance, multiplied by the
Conversion Price in effect immediately prior to such issuance, and (y)
the consideration received by the Company upon such issuance; and
(2) the denominator of which is the total number of shares of Common Stock
outstanding after giving effect to such issuance of such Common Stock.
As used herein, "Excluded Stock" means all Common Stock issued (v) upon
conversion of any convertible security of the Company outstanding as of the date
hereof, (w) upon exercise of any existing or future stock options or grants
issued to any director, employee or consultant of the Company under any employee
incentive stock option and/or any qualified stock option plan adopted by the
Company, (x) in connection with an acquisition by the Company or any of its
subsidiaries of all or substantially all of the assets of another Person (as
hereinafter defined) or at least a majority of the outstanding equity securities
of another Person, which acquisition has been approved by the Board of Directors
of the Company, (y) upon exercise of the Warrants, and (z) upon exercise of any
warrants outstanding on the date hereof. For purpose of this Section, "Person"
shall mean an individual, corporation, limited liability company, partnership,
joint stock company, trust, unincorporated organization, joint venture,
Governmental Authority or other entity of whatever nature, and "Governmental
Authority" means any governmental, regulatory or self-regulatory entity,
department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
(2) For the purposes of any adjustment of the Conversion Price pursuant to
subsection (a) above, the following provisions shall be applicable.
<PAGE>
(1) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefore prior to deducting
therefrom any discounts, commissions or placement fees paid by the
Company to any underwriter or placement agent in connection with the
issuance and sale thereof.
(2) In the case of the options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in clause (A)), if any, received by the Company
upon the issuance of such options or rights plus the minimum
exercise and/or purchase price provided in such options or rights
for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options or rights were issued and for a consideration
equal to the consideration received by the Company for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued intent), plus
the additional consideration, if any to be received by the
Company upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in clause (A));
(3) on any change in the number of shares or exercise price
of Common Stock deliverable upon exercise of any such options or
rights or conversions of or exchange for such securities, the
Conversion Price shall forthwith be readjusted to such Conversion
Price as would have been obtained had the adjustment made upon
the issuance of such options, rights or securities not converted
prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change; and
<PAGE>
(4) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible
or exchangeable securities, the Conversion Price shall forthwith
be readjusted to such Conversion Price as would have obtained had
the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities been
made upon the basis of the issuance of only the number of shares
of Common stock actually issued upon the exercise of such options
or rights, upon the conversion or exchange of such securities, or
upon the exercise of the options or rights related to such
securities and subsequent conversion or exchange thereof.
(2) If, at any time after the Closing Date, the number of shares of Common Stock
outstanding is increased by a stock dividend payable in shares of Common Stock
or by the subdivision or split-up of shares of Common Stock, then, following the
record date for the determination of holders of Common Stock, entitled to
receive such stock dividend, subdivision or split-up (or if no record date is
set, the date such stock dividend, subdivision or stock split is consummated),
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of this Note shall be increased in
proportion to such increase in outstanding shares.
(3) If, at any time after the Closing Date, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date for such combination, the Conversion
Price shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of this Note shall be decreased in proportion to
such decrease in outstanding shares.
(4) If, at any time after the Closing Date, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date for such combination, the Conversion
Price shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of this Note shall be decreased in proportion to
such decreased in outstanding shares.
(5) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par value
or from no par value to par value or from par value to no par value or as a
result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Company, this Note shall after such
reorganization, reclassification, consolidation, or merger be convertible into
the kind and number of shares of Common Stock deliverable (immediately prior to
the time of such reorganization, reclassification, consolidation or merger) upon
conversion of this Note would have been entitled upon such reorganization,
reclassification, consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations, reclassifications, consolidations
or mergers.
<PAGE>
(6) If any event occurs of the type contemplated by the provisions of this
Section 3.2 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's Board of
Directors shall make an appropriate reduction in the Conversion Price so as the
protect the rights of the Holder in accordance with the provisions hereof.
(7) All calculations under this paragraph shall be made to the nearest one
hundredth (1/100) of a cent.
(8) In any case in which the provisions of this Section 3.2(g) shall require
that an adjustment shall become effective immediately after a record date of an
event, the Company may defer until the occurrence of such event issuing to the
Holder of any Note converted after such record date and before the occurrence of
such event the shares of capital stock issuable upon such conversation by reason
of the adjustment required by such event in addition to the shares of capital
stock issuable upon such conversion by reason of the adjustment required by such
event in addition to the shares of capital stock issuable upon event in addition
to the shares of capital stock issuable upon such conversion before giving
effect to such adjustments; provided, however, that the Company shall, within
fifteen (15) days after such event, deliver to the Holder an appropriate
instrument evidencing the Holder's right to receive such additional shares and
such cash.
(9) Whenever the Conversion Price shall be adjusted as provided in this Section
3.2, the Company shall make available for inspection during regular business
hours, at its principal executive offices or at such other place as may be
designated by the Company, a statement, signed by its chief executive officer,
showing in detail the facts requiring such adjustment and the Conversion Price
that shall be in effect after such adjustment. The Company shall also cause a
copy of such statement to be sent, not later than fifteen (15) days after such
adjustment, by first class certified mail, return receipt requested and postage
prepaid, to the Holder at the Holder's address appearing on the Company's
records.
(10) The Company shall at all times when any Notes shall be outstanding, reserve
and keep available out of its authorized but unissued stock, such number of
share of Common Stock as shall from time to time be sufficient to effect the
conversion of all Notes then outstanding; provided that the number of shares of
Common Stock so reserved shall at no time be less than 175% of the number of
shares of Common Stock for which the Notes are at any time convertible and the
Warrants are exercisable.
1.9 Redemption.
<PAGE>
(1) The Company may, at the option of its Board of Directors, redeem all or any
portion of the outstanding principal amount of this Note and pay the accrued and
unpaid interest thereon upon five (5) business days prior written notice to the
Holder (the "Redemption Notice") at the redemption price set forth in
subparagraph (b) below. The Company may not deliver a Redemption Notice to the
Holder unless the Company has clear and good funds for a minimum of the amount
it intends to redeem in a bank account controlled by the Company. The Redemption
Notice shall state the date of redemption (the "Redemption Date"), the
Redemption Price (as hereinafter defined), the amount of the Note of such Holder
to be redeemed, the amount of accrued and unpaid interest through the Redemption
Date and shall call upon such holders to surrender to the Company on the
Redemption Date at the place designated in the Redemption Notice such Holder's
redeemed Note. The Redemption Date shall be no more than five (5) trading days
after the date on which the Holder is notified of the Company's intent to redeem
the Note (the "Redemption Notice Date"). If the Company fails to pay the
Redemption Price by the sixth trading day following the Redemption Notice Date,
the redemption will be declared null and void and the Company shall lose its
right to deliver a Redemption Notice to the Holder in the future. On or after
the Redemption Date, the Holder called for redemption shall surrender the Notes
called for redemption to the Company at the place designated in the Redemption
Notice and shall thereupon be entitled to receive payment of the applicable
Redemption Price. Subject to the notice requirement of the immediately following
sentence, the Holder has the option to convert up to a maximum of ten percent
(10%) of the amount called for redemption. If the Holder elects to convert the
Note after receipt of the Redemption Notice, the Company must receive such
conversion within twenty-four (24) hours from the time the Redemption Notice is
received by such Holder.
(2) Subject to the terms of Section 3.3(a) above, the Company shall have the
option to redeem all or a portion of the Notes at a cash price equal to:
(1) if the redemption occurs within 90 days from the Closing Date,
107% of the principal amount of the Note outstanding plus any accrued but
unpaid interest;
(2) if the redemption occurs between 91 and 120 days from the Closing
Date, 111% of the principal amount of the Note outstanding plus any accrued
but unpaid interest;
(3) if the redemption occurs between 121 and 150 days from the Closing
Date, 115% of the principal amount of the Note outstanding plus any accrued
but unpaid interest;
(4) if the redemption occurs 151 or more days after the Closing Date,
the greater of: (a) 119% of the principal amount of the Note outstanding
plus any accrued but unpaid interest or (b) the "Economic Benefit", where
"Economic Benefit" means the price the Holder would derive from converting
the Note and selling the Common Stock on the Redemption Notice Date (the
"Redemption Price)".
<PAGE>
1.10 No Fractional Shares.
The Company shall not issue fractional shares upon conversion of this
Note, but in lieu of such fractional shares, the Company shall make a cash
payment therefor upon the basis of the fair market value of a share of Common
Stock on the Conversion Date.
1.11 No Rights as Shareholder.
Nothing contained in this Note shall be construed as conferring upon
the Holder, prior to the conversion of this Note, the right to vote or to
receive dividends or to consent or to receive notice as a shareholder in respect
of any meeting of shareholders for the election of directors of the Company or
of any other matter, or any other rights as a shareholder of the Company.
ARTICLE IV
MISCELLANEOUS
1.12 Governing Law.
This Note is being delivered as a sealed instrument in the State of New
York and shall be construed in accordance with the laws thereof.
1.13 Headings.
Article and section headings in this Note are included herein for
purposes of convenience of reference only and shall not constitute a part of
this Note for any other purpose.
1.14 Enforcement Expenses.
The Company agrees to pay all costs and expenses of enforcement of this
Note, including, without limitation, reasonable attorney's fees and expenses.
1.15 Binding Effect.
The obligations of the Company and the Holder set forth herein shall be
binding upon the successors and assigns of each such party, whether or not such
successors or assigns are permitted by the terms hereof.
1.16 Amendments.
This Note may not be modified or amended in any manner except in
writing executed by the Company and the Holder.
<PAGE>
1.17 Compliance with Securities Laws.
The Holder of this Note acknowledges that this Note is being acquired
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder shall not offer, sell or otherwise
dispose of this Note. This Note and any Note issued in substitution or
replacement therefor shall be stamped or imprinted with a legend in
substantially the following form:
"THE SALE AND ISSUANCE OF THE SECURITIES REPRESENTED BY THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, UNLESS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS.
1.18 Jurisdiction.
The Company and the Holder hereby submit to the exclusive jurisdiction
of any Federal or State court sitting in the City of New York for any action
brought in connection with this Note. By executing and delivering this Note, the
Company and the Holder hereby irrevocably accept and submit to the personal
jurisdiction of the Federal and State courts sitting in the City of New York,
generally and unconditionally, in connection with any action brought in
connection with this Note.
1.19 Parties in Interest.
(1) This Note shall be binding upon, inure to the benefit of and be enforceable
by the Company, the Holder and their respective successors and permitted
assigns.
1.20 Company Waivers.
<PAGE>
(1) Except as otherwise specifically provided herein, the Company and all others
that may become liable for all or any part of the obligations evidenced by this
Note, hereby waive presentment, demand, notice of nonpayment, protest and all
other demands' and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, and do hereby consent to any number of
renewals of extensions of the time or payment hereof and agree that any such
renewals or extensions may be made without notice to any such persons and
without affecting their liability herein and do further consent to the release
of any person liable hereon, all without affecting the liability of the other
persons, firms or Company liable for the payment of this Note, AND DO HEREBY
WAIVE TRIAL BY JURY.
(2) No delay or omission on the part of the Holder in exercising its rights
under this Note, or course of conduct relating hereto, shall operate as a waiver
of such rights or any other right of the Holder, nor shall any waiver by the
Holder of any such right or rights on any one occasion be deemed a waiver of the
same right or rights on any future occasion.
(3) THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART
IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
IFS INTERNATIONAL, INC.
By:
Name: Frank A. Pascuito
Title: Executive Vice President
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of IFS
INTERNATIONAL, INC. (the "Company") according to the conditions hereof, as of
the date written below.
Date of Conversion* _________________________________________________________
Applicable Conversion Price * __________________________________________________
Signature___________________________________________________________________
[Name]
Address:__________________________________________________________________
-----------------------------------------------------------------------
* This original Notice of Conversion must be received by the Company by the
third business date following the Conversion Date, and, if such conversion
represents the remaining principal balance of the Note, the original Note.
EXHIBIT 4.12
FORM OF WARRANT
THE SALE AND ISSUANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER THE SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED
OF, UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
IFS INTERNATIONAL, INC.
Expires July ___, 2004
No.: W-__ Number of Shares: __________
Date of Issuance: July __, 1999
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, IFS International, Inc., a Delaware corporation (together with
its successors and assigns, the "Issuer"), hereby certifies that
___________________ or its registered assigns is entitled to subscribe for and
purchase, during the period specified in this Warrant, up to ___________ shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 7 hereof.
<PAGE>
-15-
1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date of issuance of this Warrant
and shall expire at 5:00 p.m., eastern time, on the fifth anniversary of the
Closing Date (as such term is defined in the Purchase Agreement) (such period
being the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer and
Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or (ii) by surrender to the Issuer for cancellation of a portion of this
Warrant representing that number of unissued shares of Warrant Stock which is
equal to the quotient obtained by dividing (A) the product obtained by
multiplying the Warrant Price by the number of shares of Warrant Stock being
purchased upon such exercise by (B) the difference obtained by subtracting the
Warrant Price from the Per Share Market Value as of the date of such exercise,
or (iii) by a combination of the foregoing methods of payment selected by the
Holder of this Warrant. In any case where the consideration payable upon such
exercise is being paid in whole or in part pursuant to the provisions of clause
(ii) of this subsection (b), such exercise shall be accompanied by written
notice from the Holder of this Warrant specifying the manner of payment thereof
and containing a calculation showing the number of shares of Warrant Stock with
respect to which rights are being surrendered thereunder and the net number of
shares to be issued after giving effect to such surrender.
(c) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
<PAGE>
(d) Transferability of Warrant. Subject to Section 2(e), this Warrant
may be transferred by a Purchaser without the consent of the Company. If
transferred pursuant to this paragraph and subject to the provisions of
subsection (e) of this Section 2, this Warrant may be transferred on the books
of the Issuer by the Holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto) and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
"THE SALE AND ISSUANCE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAW OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF,
UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS."
<PAGE>
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such securities
shall have been effectively registered under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws or
(C) upon the Issuer's receipt of other evidence reasonably satisfactory
to the Issuer that such registration and qualification under state
securities laws is not required. Whenever such restrictions shall cease
and terminate as to any such securities, the Holder thereof shall be
entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legend
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
3. Stock Fully Paid: Reservation and Listing of Shares: Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
<PAGE>
(c) Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(e) Rights and Obligations under the Registration Rights Agreement. The
shares of Warrant Stock are entitled to the benefits and subject to the terms of
the Registration Rights Agreement dated as of even date herewith between the
Issuer and the Holders listed on the signature pages thereof (as amended from
time to time, the "Registration Rights Agreement"). The Issuer shall keep or
cause to be kept a copy of the Registration Rights Agreement, and any amendments
thereto, at its chief executive office and shall furnish, without charge, copies
thereof to the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
<PAGE>
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
Merger or Sale. (i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event"): (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled (x) upon the exercise hereof at any
time after the consummation of such Triggering Event, to the extent this Warrant
is not exercised prior to such Triggering Event, or is redeemed in connection
with such Triggering Event, to receive at the Warrant Price in effect at the
time immediately prior to the consummation of such Triggering Event in lieu of
the Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments and increases (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for in Section 4
hereof or (y) with the consent of the Issuer or the Person continuing after or
surviving such Triggering Event, to sell this Warrant (or, at such Holder's
election, a portion hereof) concurrently with the Triggering Event to the Person
continuing after or surviving such Triggering Event, or to the Issuer (if Issuer
is the continuing or surviving Person) at a sales price equal to the amount of
cash, property and/or Securities to which a holder of the number of shares of
Common Stock which would otherwise have been delivered upon the exercise of this
Warrant would have been entitled upon the effective date or closing of any such
Triggering Event (the "Event Consideration"), less the amount or portion of such
Event Consideration having a fair value equal to the aggregate Warrant Price
applicable to this Warrant or the portion hereof so sold.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
(iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of subparagraph (i) of
this subsection (a) to sell this Warrant or a portion thereof, the Issuer agrees
that as a condition to the consummation of any such Triggering Event the Issuer
shall secure such right of Holder to sell this Warrant to the Person continuing
after or surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause (y) are
delivered to the Holder of this Warrant. The obligation of the Issuer to secure
such right of the Holder to sell this Warrant shall be subject to such Holder's
cooperation with the Issuer, including, without limitation, the giving of
customary representations and warranties to the purchaser in connection with any
such sale. Prior notice of any Triggering Event shall be given to the Holder of
this Warrant in accordance with Section 11 hereof.
<PAGE>
(b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the Holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying
the Warrant Price in effect immediately prior to such record date (or
if no such record is taken, then immediately prior to such payment or
other distribution), by a fraction (1) the numerator of which shall be
the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (2) the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately after such dividend or distribution (plus in the event that
the Issuer paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Issuer issued
fractional shares in connection with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not
limited to, a distribution of its property as a dividend in liquidation
or partial liquidation or by way of return of capital), the Common
Stock (other than as described in clause (i) of this subsection (c)),
or in the event that the Company shall offer options or rights to
subscribe for shares of Common Stock, or issue any Common Stock
Equivalents, to all of its holders of Common Stock, then on the record
date for such payment, distribution or offer or, in the absence of a
record date, on the date of such payment, distribution or offer, the
Holder shall receive what the Holder would have received had it
exercised this Warrant in full immediately prior to the record date of
such payment, distribution or offer or, in the absence of a record
date, immediately prior to the date of such payment, distribution or
offer.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at
any time while this Warrant is outstanding, shall issue any Additional Shares of
Common Stock (otherwise than as provided in the foregoing subsections (a)
through (c) of this Section 4), at a price per share less than the Warrant Price
then in effect or less than the Per Share Market Value then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price (rounded to the nearest cent) determined by multiplying the
Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of Common Stock plus (B) the
number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price
per share equal to the greater of the Per Share Market Value then in
effect and the Warrant Price then in effect, and
<PAGE>
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (Y) no adjustment was required pursuant to
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more,
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time
while this Warrant is outstanding, shall issue any Common Stock Equivalent and
the price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
Warrant Price then in effect or less than the Per Share Market Value then in
effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
Warrant Price or less than the Per Share Market Value in effect at the time of
such amendment, then the Warrant Price upon each such issuance or amendment
shall be adjusted as provided in the first sentence of subsection (d) of this
Section 4 on the basis that (1) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued (whether or not such Common Stock Equivalents are
actually then exercisable, convertible or exchangeable in whole or in part) as
of the earlier of (A) the date on which the Issuer shall enter into a firm
contract for the issuance of such Common Stock Equivalent, or (B) the date of
actual issuance of such Common Stock Equivalent, and (2) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum consideration received or receivable by the Issuer
for the issuance of such Additional Shares of Common Stock pursuant to such
Common Stock Equivalent. No adjustment of the Warrant Price shall be made under
this subsection (e) upon the issuance of any Convertible Security which is
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustment shall previously have been made in
the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e). If no adjustment is required under this
subsection (e) upon issuance of any Common Stock Equivalent or once an
adjustment is made under this subsection (e) based upon the Per Share Market
Value in effect on the date of such adjustment, no further adjustment shall be
made under this subsection (e) based solely upon a change in the Per Share
Market Value after such date.
<PAGE>
(f) Purchase of Common Stock by the Issuer. If the Issuer at any time
while this Warrant is outstanding shall, directly or indirectly through a
Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value then
in effect, then the Warrant Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value;
and (ii) the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Per Share Market Value
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase, redemption or acquisition of such
Common Stock, or (y) the date of actual purchase, redemption or acquisition of
such Common Stock. For the purposes of this subsection (f), a purchase,
redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required
shall be made on the basis of the full exercise, conversion or exchange of such
Common Stock Equivalent on the date as of which such computation is required
hereby to be made, whether or not such Common Stock Equivalent is actually
exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4.
The following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
<PAGE>
(i) Computation of Consideration. The consideration received
by the Issuer shall be deemed to be the following: to the extent that
any Additional Shares of Common Stock or any Common Stock Equivalents
shall be issued for a cash consideration, the consideration received by
the Issuer therefor, or if such Additional Shares of Common Stock or
Common Stock Equivalents are offered by the Issuer for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are sold to underwriters or dealers for
public offering without a subscription offering, the public offering
price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any
compensation, discounts, commissions, or expenses paid or incurred by
the Issuer for or in connection with the underwriting thereof or
otherwise in connection with the issue thereof; to the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the fair market value of such
consideration at the, time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Issuer for issuing such Common Stock
Equivalents, plus the additional consideration payable to the Issuer
upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Capital Stock of the
Issuer other than Common Stock, the Issuer shall be deemed to have
received for such Additional Shares of Common Stock or Common Stock
Equivalents a consideration equal to the amount of such dividend so
paid or satisfied. In any case in which the consideration to be
received or paid shall be other than cash, the Board shall notify the
Holder of this Warrant of its determination of the fair market value of
such consideration prior to payment or accepting receipt thereof. If,
within thirty days after receipt of said notice, the Majority Holders
shall notify the Board in writing of their objection to such
determination, a determination of the fair market value of such
consideration shall be made by an Independent Appraiser selected by the
Majority Holders with the approval of the Board (which approval shall
not be unreasonably withheld), whose fees and expenses shall be paid by
the Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of shares
of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Warrant Price made pursuant to the provisions
of this Section 4 after the issuance of such Common Stock Equivalent)
had the adjustment of the Warrant Price been made in accordance with
the issuance or sale of the number of Additional Shares of Common Stock
actually issued upon conversion, exchange or issuance of such Common
Stock Equivalent and thereupon only the number of Additional Shares of
Common Stock actually so issued shall be deemed to have been issued and
only the consideration actually received by the Issuer (computed as in
clause (i) of this subsection (g)) shall be deemed to have been
received by the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof
then directly or indirectly owned or held by or for the account of the
Issuer or any of its Subsidiaries, and (B) be deemed to include all
shares of Common Stock then issuable upon conversion, exercise or
exchange of any then outstanding Common Stock Equivalents or any other
evidences of Indebtedness, shares of Capital Stock or other Securities
which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(h) Other Action Affecting Common Stock. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (g) of
this Section 4, inclusive, and the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.
<PAGE>
(i) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(j) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty days after submission to it
of such dispute. Such opinion shall be final and binding on the parties hereto.
The fees and expenses of such accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
<PAGE>
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the
Original Issue Date, except (i) any shares of Common Stock issued upon
conversion of any convertible security of the Company outstanding as
of the date hereof, (ii) any shares of Common Stock issued upon
exercise of any existing or future stock options or grants issued to
any director, employee or consultant of the Issuer under any employee
incentive stock option and/or any qualified stock option plan adopted
by the Issuer, (iii) any shares of Common Stock issued in connection
with an acquisition by the Company or any of its subsidiaries of all
or substantially all of the assets of another Person or at least a
majority of the outstanding equity securities of another Person, which
acquisition has been approved by the Board of Directors of the
Company, (iv) the Warrant Stock, and (v) any shares of Common Stock
issued upon exercise of any warrants outstanding on the date hereof.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership
interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability
company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Closing Price" means the average of the VWAP of the Common Stock
for the five (5) trading days ending on the trading date immediately
preceding the Closing Date.
"Common Stock" means the Common Stock, $.001 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness, shares
of Capital Stock or other Securities which are or may be at any time
convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state
or local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
<PAGE>
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means IFS International, Inc., a Delaware corporation,
and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Original Issue Date" means July __, 1999.
"Other Common" means any other Capital Stock of the Issuer of any
class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
<PAGE>
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the
NASDAQ system or other registered national stock exchange on which the
Common Stock is then listed or if there is no such price on such date,
then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not
listed then on the American Stock Exchange or any registered national
stock exchange, the closing bid price for a share of Common Stock in
the over-the-counter market, as reported by the OTC Bulletin Board or
in the National Quotation Bureau Incorporated or similar organization
or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then
reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet"
quotes for the relevant conversion period, as determined in good faith
by the holder, or (d) if the Common Stock is not then publicly traded
the fair market value of a share of Common Stock as determined by an
Independent Appraiser selected in good faith by the Majority Holders;
provided, however, that the Issuer, after receipt of the determination
by such Independent Appraiser, shall have the right to select an
additional Independent Appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such
Independent Appraiser; and provided, further that all determinations
of the Per Share Market Value shall be appropriately adjusted for any
stock dividends, stock splits or other similar transactions during
such period. The determination of fair market value by an Independent
Appraiser shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties.
In determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the
Common Stock imposed by agreement or by federal or state securities
laws, or to the existence or absence of, or any limitations on, voting
rights.
"Purchase Agreement" means the Note and Warrant Purchase
Agreement dated as of July __, 1999 among the Issuer and the investors
a party thereto.
"Registration Rights Agreement" has the meaning specified in
Section 3(e) hereof.
"Securities" means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into
or exchangeable for Securities or a Security, and any option, warrant
or other right to purchase or acquire any Security. "Security" means
one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is traded
on NASDAQ as reported by Bloomberg Financial L.P., or (b) if the
Common Stock is not listed on the American Stock Exchange, a day on
which the Common Stock is traded on any other registered national
stock exchange, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the event
that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday,
Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a
majority of the members of the Board of Directors (or other governing
body) of such corporation, other than Capital Stock having such power
only by reason of the happening of a contingency.
"VWAP" means the volume weighted average price of the Common
Stock (based on a trading day from 9:00 a.m to 4:00 p.) on NASDAQ as
reported by Bloomberg Financial L.P. using the AQR function.
<PAGE>
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange
for any thereof pursuant to the provisions of Section 2(c), 2(d) or
2(e) hereof or of any of such other Warrants.
"Warrant Price" means 110% of the Closing Price, as such price
may be adjusted from time to time as shall result from the adjustments
specified in Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.
9. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the
holders of Common Stock; or
(B) the Issuer shall authorize the granting to all
holders of its Common Stock of rights to subscribe for or
purchase any shares of Capital Stock of any class or of any
Common Stock Equivalents or Convertible Securities or other
rights; or
(C) there shall be any reclassification of the Capital
Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving
corporation and its shares of Capital Stock shall continue
to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a
wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Issuer or any
partial liquidation of the Issuer or distribution to holders
of Common Stock;
<PAGE>
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by it to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
10. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
11. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
12. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile or e-mail at the
facsimile telephone number or e-mail address specified for notice prior to 5:00
p.m., pacific standard time, on a Business Day, (ii) the Business Day after the
date of transmission, if such notice or communication is delivered via facsimile
or e-mail at the facsimile telephone number or e-mail address specified for
notice later than 5:00 p.m., pacific standard time, on any date and earlier than
11:59 p.m., pacific standard time, on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
IFS International, Inc.
<PAGE>
Rensselaer Technology Park
300 Jordan Road
Troy, New York 12180
Attn: Carmen Pascuito
Fax No.: 518-283-7336
E-mail: [email protected]
or to such other address or addresses, facsimile number or numbers, e-mail
address or addresses as any such party may most recently have designated in
writing to the other parties hereto by such notice. Copies of notices to the
Issuer shall be sent to Parker Duryee Rosoff & Haft, 529 Fifth Avenue, New York,
New York 10017, Attn: Michael D. DiGiovanna, Facsimile no.: (212) 972-9487,
E-mail:[email protected]. Copies of notices to the Holder shall be sent to
Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New
York 10036, Attention: Christopher S. Auguste, Esq., Facsimile no.: (212)
704-6288, E-mail:[email protected].
13. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
14. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
15. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock
16. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
17. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
<PAGE>
IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
IFS INTERNATIONAL, INC.
By:__________________________
Name: Frank A. Pascuito
Title: Executive Vice President
<PAGE>
EXERCISE FORM
IFS INTERNATIONAL, INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address _____________________
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
---------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
---------------------
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ cancelled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
EXHIBIT 4.13
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 2, 1999, among IFS International, Inc., a Delaware
corporation (the "Company"), and the entities listed on Schedule A attached
hereto ("Purchasers").
This Agreement is being entered into pursuant to the Note and
Warrant Purchase Agreement, dated as of the date hereof, by and among the
Company and the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Blackout Period" shall have the meaning set forth in Section
3(n).
"Board" shall have the meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$.001 per share.
"Effectiveness Date" means with respect to the Registration
Statement the 120th day following the Closing Date (as that term is defined in
the Purchase Agreement).
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
<PAGE>
"Event" shall have the meaning set forth in Section 7(e)(i).
"Event Date" shall have the meaning set forth in Section
7(e)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 30th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
<PAGE>
"Registrable Securities" means (i) the Common Stock and the
shares of Common Stock issuable upon conversion of the Notes (the "Notes
Shares") and exercise of the Warrants (the "Warrant Shares"), and upon any stock
split, stock dividend, recapitalization or similar event with respect to such
Note Shares or Warrant Shares and (ii) the Common Stock and the shares of Common
Stock issuable upon exercise of Warrants issued to Gilston Corporation, Ltd. or
its assignees in connection with the sale of the Notes and the Warrants;
provided, however, that Registrable Securities shall include (but not be limited
to) a number of shares of Common Stock equal to no less than 175% of the maximum
number of shares of Common Stock which would be issuable upon conversion of the
Notes and upon exercise of the Warrants, assuming such conversion and exercise
occurred on the Closing Date or the Filing Date, whichever date would result in
the greater number of Registrable Securities. Notwithstanding anything herein
contained to the contrary, such registered shares of Common Stock shall be
allocated among the Holders pro rata based on the total number of Registrable
Securities issued or issuable as of each date that a Registration Statement, as
amended, relating to the resale of the Registrable Securities is declared
effective by the Commission. Notwithstanding anything contained herein to the
contrary, if the actual number of shares of Common Stock issuable upon
conversion of the Notes and exercise of the Warrants exceeds 175% of the number
of shares of Common Stock issuable upon conversion of the Notes and exercise of
the Warrants based upon a computation as at the Closing Date or the Filing Date,
the term "Registrable Securities" shall be deemed to include such additional
shares of Common Stock.
"Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
2. Shelf Registration.
<PAGE>
On or prior to the Filing Date the Company shall prepare and
file with the Commission a "shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith). The Company shall (i) not permit any securities
other than the Registrable Securities to be included in the Registration
Statement and the securities disclosed on Schedule 2 hereto and (ii) use its
best efforts to cause the Registration Statement to be declared effective under
the Securities Act within ninety (90) days from the Closing Date, but in any
event prior to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until such date as is the
earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period"). If the Company is notified orally or in writing by the Commission that
the Commission has no comments with respect to the Registration Statement (the
"Commission Notice"), the Company shall use its best efforts to cause the
Registration Statement to be declared effective no later than five (5) business
days after receipt of the Commission Notice. If an additional Registration
Statement is required to be filed because the actual number of shares of Common
Stock into which the Notes are convertible and Warrants are exercisable exceeds
the number of shares of Common Stock initially registered in respect of the Note
Shares and the Warrant Shares based upon the computation on the Closing Date,
the Company shall have twenty (20) Business Days to file such additional
Registration Statement, and the Company shall use its best efforts to cause such
additional Registration Statement to be declared effective by the Commission as
soon as possible, but in no event later than thirty (30) days after filing.
3. Registration Procedures.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and any Special Counsel, by mail, facsimile or e-mail, copies of all such
documents proposed to be filed, which documents (other than those incorporated
by reference) will be subject to the review of such Holders and such Special
Counsel, and (ii) at the request of any Holder cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries on information related to Holders or that may result in a material
misstatement or omission as shall be necessary, in the reasonable opinion of
counsel to such Holders, to conduct a reasonable investigation regarding such
information within the meaning of the Securities Act. The Company shall not file
the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel shall reasonably object to such information in
writing within three (3) Business Days of their receipt thereof.
<PAGE>
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and any Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
material representations and warranties of the Company contained in any
agreement contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event that makes any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal
of, (i) any order suspending the effectiveness of the Registration Statement or
(ii) any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(e) If requested by the Holders of a majority in interest of
the Registrable Securities, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Company reasonably agrees should be included therein and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
<PAGE>
(f) Furnish to each Holder and any Special Counsel, by mail,
facsimile or e-mail, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder and any Special Counsel,
by mail, facsimile or e-mail, without charge, as many copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates shall be free of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any Holder may request at least two (2) Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain 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,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on NASDAQ and any other
securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then listed
as and when required pursuant to the Purchase Agreement.
<PAGE>
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
<PAGE>
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
20 consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12 month period (each, a "Blackout Period"); provided, however, that no such
postponement or suspension shall be permitted for consecutive 20 day periods,
arising out of the same set of facts, circumstances or transactions.
4. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with the OTC Bulletin Board and each other securities exchange or market on
which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, (C) with respect to
filings required to be made under NASDAQ and (C) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
to a maximum amount of $10,000, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification
<PAGE>
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Holders.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus. Notwithstanding anything to the contrary contained herein, the
Holder shall be liable under this Section 5(b) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
<PAGE>
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party) in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
<PAGE>
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying, Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. Notwithstanding anything to the contrary contained
herein, the Holder shall be liable or required to contribute under this Section
5(c) for only that amount as does not exceed the net proceeds to such Holder as
a result of the sale of Registrable Securities pursuant to such Registration
Statement.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties
6. Rule 144.
As long as any Holder owns Notes, Warrants, Note Shares or
Warrant Shares, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true
and complete copies of all such filings. As long as any Holder owns Notes,
Warrants, Note Shares or Warrant Shares, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell the Note Shares and the Warrant
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions referred to in the Purchase Agreement.
Upon the request of any Holder, the Company shall deliver to such Holder a
written certification of a duly authorized officer as to whether it has complied
with such requirements.
7. Miscellaneous.
<PAGE>
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except as disclosed on
Schedule 7(b) hereto, neither the Company nor any of its subsidiaries has, as of
the date hereof entered into and currently in effect, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement, or the Registration Rights Agreement has been
declared effective by the SEC.
(c) No Piggyback on Registrations. Except as disclosed on
Schedule 7(c) hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement, and the Company shall not after the date
hereof enter into any agreement providing such right to any of its security
holders, unless the right so granted is subject in all respects to the prior
rights in full of the Holders set forth herein, and is not otherwise in conflict
with the provisions of this Agreement.
<PAGE>
(d) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement covering the Registrable Securities, the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or its then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to such holder of Registrable Securities written notice of such
determination and, if within thirty (30) days after receipt of such notice, any
such holder shall so request in writing (which request shall specify the
Registrable Securities intended to be disposed of by the Purchasers), the
Company will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holder, to
the extent requisite to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act.
(e) Failure to File Registration Statement and Other Events.
The Company and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Time or if
certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
Filing Date, or is not declared effective by the Commission on or prior to the
Effectiveness Date (or in the event an additional Registration Statement is
filed because the actual number of shares of Common Stock into which the Notes
are convertible and the Warrants are exercisable exceeds the number of shares of
Common Stock initially registered is not filed and declared effective within the
time periods set forth in Section 2(a)), or (ii) the Company fails to file with
the Commission a request for acceleration in accordance with Rule 12dl-2
promulgated under the Exchange Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(iv) trading in the Common Stock shall be suspended or if the Common Stock is
delisted from NASDAQ for any reason for more than three Business Days in the
aggregate, or (v) the conversion rights of the Holders are suspended for any
reason, including by the Company, or (vi) the Company breaches in a material
respect any covenant or other material term or condition to this Agreement,
Purchase Agreement (other than a representation or warranty contained therein)
or any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, and such
breach continues for a period of thirty days after written notice thereof to the
Company, or (vii) the Company has breached Section 3(n) of this Agreement (any
such failure or breach being referred to as an "Event"), the Company shall pay
in cash as liquidated damages for such failure and not as a penalty to each
Holder an amount equal to 2% of such Holder's pro rata share of the purchase
price paid by all Holders for the convertible Notes purchased and then
outstanding pursuant to the Purchase Agreement for the initial thirty (30) day
period until the applicable Event has been cured, which shall be pro rated for
such period less than thirty (30) days, and 3% of the such Holder's pro rata
share of the purchase price paid by all Holders for each additional thirty (30)
day period thereafter until the applicable Event has been cured, which shall
also be pro rated for such periods less than thirty (30) days (the "Periodic
Amount"). Payments to be made pursuant to this Section 7(e) shall be due and
payable in cash immediately upon demand. The parties agree that the Periodic
Amount represents a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of damages that may be incurred by the
Holders if the Registration Statement is not filed on or prior to the Filing
Date or has not been declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Time or if any other Event as described herein has occurred.
(f) Specific Enforcement, Consent to Jurisdiction.
<PAGE>
(i) The Company and the Purchasers acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Registration
Rights Agreement or the Purchase Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Registration Rights Agreement or the Purchase
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(ii) Each of the Company and the Purchasers (i) hereby irrevocably submits
to the jurisdiction of the United States District Court sitting in the Southern
District of New York for the purposes of any suit, action or proceeding arising
out of or relating to this Agreement or the Purchase Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 7(f) shall affect or limit any right to serve process in any other
manner permitted by law.
(g) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(h) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile or
e-mail at the facsimile telephone number or e-mail address specified for notice
prior to 5:00 p.m., eastern standard time, on a Business Day, (ii) the Business
Day after the date of transmission, if such notice or communication is delivered
via facsimile or e-mail at the facsimile telephone number or e-mail address
specified for notice later than 5:00 p.m., eastern standard time, on any date
and earlier than 11:59 p.m., eastern standard time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Holder at its address set forth under its name on Schedule
A attached hereto, or with respect to the Company, addressed to:
<PAGE>
IFS International, Inc.
Renssalaer Technology Park
300 Jordan Road
Troy, New York 12180
Attention: Carmen Pascuito
Facsimile No.: 518-283-7336
E-mail: [email protected]
or to such other address or addresses, facsimile number or numbers or e-mail
address or addresses as any such party may most recently have designated in
writing to the other parties hereto by such notice. Copies of notices to the
Company shall be sent to Parker Duryee Rosoff & Haft, 529 Fifth Avenue, New
York, New York 10017, Attention: Michael D. DiGiovanna, Facsimile No.: (212)
972-9487, E-mail:[email protected]. Copies of notices to any Holder shall be
sent to Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New
York, New York 10036, Attention: Christopher S. Auguste, Esq., Facsimile No.:
(212) 704-6288, E-mail:[email protected].
(i) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. Each
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(j) Assignment of Registration Rights. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the shares of Common Stock or the Registrable Securities if: (i)
the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.
<PAGE>
(k) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(l) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law thereof.
(m) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(n) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(o) Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(p) Shares Held by the Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(q) Within two (2) business days after the Registration
Statement which includes the Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Holders whose Registrable Securities are included in such
Registration Statement) confirmation that the Registration Statement has been
declared effective by the Commission in the form attached hereto as Exhibit A.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
IFS INTERNATIONAL, INC.
By:_____________________________________
Name: Frank A. Pascuito
Title: Executive Vice President
GILSTON CORPORATION, LTD.
By:_____________________________________
Name: Dawn E. Davies
Title:
MANCHESTER ASSET MANAGEMENT, LTD.
By:_____________________________________
Name: Dawn E. Davies
Title:
HEADWATERS CAPITAL
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn:
Re: IFS International, Inc.
Ladies and Gentlemen:
We are counsel to IFS International, Inc., a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Note and Warrant Purchase Agreement (the "Purchase Agreement") dated as of July
2, 1999 entered into by and among the Company and the purchasers named therein
(the "Holders") pursuant to which the Company issued to the Holders notes
convertible into its common stock, par value $.001 per share (the "Common
Stock"), and warrants to purchase shares of the Common Stock (the "Warrants").
Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon exercise of the
Warrants, under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 1999, the Company filed a Registration Statement
on Form S-3 (File No. 333-_____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[COMPANY'S COUNSEL]
By:
cc: [LIST NAMES OF HOLDERS]
<PAGE>
SCHEDULE A
LIST OF PURCHASERS
Investor Address
Investor Name and Facsimile Number
Gilston Corporation, Ltd. Charlotte House
Charlotte Street
P.O. Box N-9204
Nassau, Bahamas
Fax No.: (242) 394-8348
Attn: Anthony L. M. Inder Rieden
Manchester Asset Management, Ltd. Charlotte House
Charlotte Street
P.O. Box N-9204
Nassau, Bahamas
Fax No.: (242) 394-8348
Attn: Anthony L. M. Inder Rieden
Headwaters Capital 220 Montgomery Street
Suite 500
San Francisco, California 94104
Fax No.: (415) 398-8204
Attn: Timothy Keating
EXHIBIT 4.14
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of July 2, 1999
by and among
IFS INTERNATIONAL, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A HERETO
<PAGE>
vi
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
ARTICLE I Definitions.....................................................................................1
Section 1.1 Definitions........................................................................1
(a) "Material Adverse Effect"..............................................................1
(b) "Note Shares"..........................................................................1
(c) "Registration Statement"...............................................................2
(d) "Securities"...........................................................................2
(e) "VWAP".................................................................................2
(f) "Warrant Shares".......................................................................2
ARTICLE II Purchase and Sale of Notes and Warrants.........................................................2
Section 2.1 Purchase and Sale of the Notes and Warrants........................................2
Section 2.2 The Securities.....................................................................2
Section 2.3 Purchase Price and Closing.........................................................2
ARTICLE III Representations and Warranties..................................................................2
Section 3.1 Representation and Warranties of the Company.......................................3
(a) Organization, Good Standing and Power..................................................3
(b) Authorization; Enforcement.............................................................3
(c) Capitalization.........................................................................3
(d) Issuance of Securities.................................................................4
(e) No Conflicts...........................................................................4
(f) Commission Documents, Financial Statements.............................................5
(g) Subsidiaries...........................................................................5
(h) No Material Adverse Change.............................................................6
(i) No Undisclosed Liabilities.............................................................6
(j) No Undisclosed Events or Circumstances.................................................6
(k) Indebtedness...........................................................................6
(l) Title to Assets........................................................................6
(m) Actions Pending........................................................................7
(n) Compliance with Law....................................................................7
(o) Taxes..................................................................................7
(p) Certain Fees...........................................................................7
(q) Disclosure.............................................................................7
(r) Operation of Business..................................................................8
(s) Environmental Compliance...............................................................8
(t) Books and Record: Internal Accounting Controls.........................................8
(u) Material Agreements....................................................................9
(v) Transactions with Affiliates...........................................................9
(w) Securities Act of 1933.................................................................9
(x) Employees..............................................................................9
(y) Absence of Certain Developments.......................................................10
(z) Use of Proceeds.......................................................................11
Section 3.2 Representations and Warranties of the Purchasers..................................12
(a) Organization and Standing of the Purchasers...........................................12
(b) Authorization and Power...............................................................12
(c) No Conflicts..........................................................................12
(d) Acquisition for Investment............................................................13
(e) Accredited Purchasers.................................................................13
(f) Information...........................................................................13
(g) General...............................................................................13
(h) Shorting..............................................................................14
ARTICLE IV Covenants......................................................................................14
Section 4.1 Securities Compliance.............................................................14
Section 4.2 Registration and Listing..........................................................14
Section 4.3 Beneficial Ownership..............................................................14
Section 4.4 Legends...........................................................................15
Section 4.5 Registration Statement............................................................15
Section 4.6 Compliance with Laws..............................................................15
Section 4.7 Keeping of Records and Books of Account...........................................16
Section 4.8 Intentionally Omitted.............................................................16
Section 4.9 Amendments........................................................................16
Section 4.10 Other Agreements.................................................................16
Section 4.11 Reservation of Shares............................................................16
ARTICLE V Conditions to Closing..........................................................................16
Section 5.1 Conditions Precedent to the Obligation
of the Company to Sell the Securities.
(a) Accuracy of Each of the Purchaser's Representations
and Warranties...............................................................16
(b) Performance by the Purchasers.........................................................17
(c) No Injunction.........................................................................17
` Section 5.2 Conditions Precedent to the Obligation of the Purchasers to Close.................17
(a) Accuracy of the Company's Representations and Warranties..............................17
(b) Performance by the Company............................................................17
(c) No Suspension, Etc....................................................................17
(d) No Injunction.........................................................................17
(e) No Proceedings or Litigation..........................................................17
(f) No Material Adverse Effect............................................................18
(g) Opinion of Counsel, Etc...............................................................18
(h) Registration Rights Agreement.........................................................18
(i) Resolutions...........................................................................18
(j) Reservation of Shares.................................................................18
(k) Secretary's Certificate...............................................................18
(l) Certificates..........................................................................18
ARTICLE VI Intentionally Omitted..........................................................................19
ARTICLE VII Indemnification......................................................................................19
Section 7.1 General Indemnity.................................................................19
Section 7.2 Indemnification Procedure.........................................................19
ARTICLE VIII Miscellaneous..................................................................................20
Section 8.1 Fees and Expenses...............................................................20
Section 8.2 Specific Enforcement, Consent to Jurisdiction...................................20
Section 8.3 Entire Agreement; Amendment.....................................................21
Section 8.4 Notices.........................................................................21
Section 8.5 Waivers.........................................................................22
Section 8.6 Headings........................................................................22
Section 8.7 Successors and Assigns..........................................................22
Section 8.8 No Third Party Beneficiaries....................................................22
Section 8.9 Governing Law...................................................................23
Section 8.10 Survival.........................................................................23
Section 8.11 Counterparts.....................................................................23
Section 8.12 Publicity........................................................................23
Section 8.13 Severability.....................................................................23
Section 8.14 Further Assurances...............................................................23
</TABLE>
<PAGE>
Schedules
Schedule 3.1(c) Capitalization ...
Schedule 3.1(g) Subsidiaries
Schedule 3.1(i) No Undisclosed Liabilities
Schedule 3.1(j) No Undisclosed Events or Circumstances
Schedule 3.1(k) Indebtedness
Schedule 3.1(l) Title to Assets
Schedule 3.1(o) Taxes
Schedule 3.1(p) Certain Fees
Schedule 3.1(r) Operation of Business
Schedule 3.1(u) Material Agreements
Schedule 3.1(x) Employees
Schedule 3.1(y) Absence of Certain Developments
Exhibits
Exhibit A List of Purchasers
Exhibit B Form of Note
Exhibit C Form of Warrant
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Opinion of Counsel
<PAGE>
NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is dated as
of July 2, 1999 by and among IFS International, Inc., a Delaware corporation
(the "Company") and the entities listed on Exhibit A attached hereto (each a
"Purchaser" and collectively referred to herein as the "Purchasers").
RECITALS
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchasers,
and the Purchasers shall purchase from the Company, (i) separate convertible
promissory notes in the aggregate principal amount of $1,000,000 bearing
interest at the rate of 10% per annum, due July 6, 2001, each convertible into
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), in the form attached hereto as Exhibit B (the "Notes"), and (ii)
warrants to purchase up to 100,000 shares of Common Stock, in the form attached
hereto as Exhibit C (the "Warrants").
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), including Regulation
D ("Regulation D"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
Section I.1 Definitions.
(a) "Material Adverse Effect" shall mean any effect on the
business, operations, prospects, properties or financial condition of the
Company that is material and adverse to the Company and its subsidiaries, taken
as a whole and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement or the Registration Rights Agreement
in any material respect.
(b) "Note Shares" shall mean any shares of Common Stock
issuable upon conversion of any Note or Notes or otherwise issuable pursuant to
any Note or Notes.
<PAGE>
-8-
(c) "Registration Statement" shall mean the registration
statement under the Securities Act, to be filed with the Securities and Exchange
Commission for the registration of the Note Shares and Warrant Shares.
(d) "Securities" shall mean, collectively, the Notes, the
Warrants, the Note Shares and the Warrant Shares.
(e) "VWAP" shall mean the daily volume weighted average price
(based on a trading day from 9:00 a.m. to 4:00 p.m. eastern standard time) of
the Common Stock on the relevant exchange as reported by Bloomberg Financial
using the AQR function.
(f) "Warrant Shares" shall mean any shares of Common Stock
issuable upon exercise of any Warrant or Warrants or otherwise issuable pursuant
to any Warrant or Warrants.
ARTICLE II
Purchase and Sale of Notes and Warrants
Section II.1 Purchase and Sale of the Notes and Warrants. Subject to
the terms and conditions of this Agreement, the Company hereby issues and sells
to the Purchasers and each Purchaser hereby severally purchases from the Company
the amount of Notes and Warrants set forth opposite each Purchaser's name on
Exhibit A hereto.
Section II.2 The Securities. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock, to effect the conversion of
the Notes and exercise of the Warrants.
Section II.3 Purchase Price and Closing. The Company agrees to issue
and sell to the Purchasers and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchasers, severally but not jointly, agree to purchase that
Notes and Warrants to be issued under this Agreement for an aggregate purchase
price equal to $1,000,000. The closing under this Agreement shall take place at
the offices of Parker Chapin Flattau & Klimpl, LLP (the "Escrow Agent"), 1211
Avenue of the Americas, New York, New York 10036 (the "Closing") at 10:00 a.m.
E.S.T. on (i) July 2, 1999 or (ii) such other time and place or on such date as
the Purchasers and the Company may agree upon (the "Closing Date"). Each party
shall deliver all documents, instruments and writings required to be delivered
by such party pursuant to this Agreement at or prior to the Closing. Each of the
Purchasers shall pay the amount set forth opposite such purchaser's name on
Exhibit A by delivering good funds in United States Dollars by check, wire
transfer or as the Company shall otherwise agree, to the Escrow Agent who shall
deliver such amounts less the fees and expenses set forth in Section 8.1 hereof
to the Company against delivery of the certificates representing the Notes and
Warrants that each Purchaser is purchasing.
<PAGE>
ARTICLE III
Representations and Warranties
Section III.1 Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any subsidiaries (as defined in
Section 3.1(g)) except as set forth on Schedule 3.1(g), in the Company's most
recent Form 10-K, including the accompanying financial statements (the "Form
10-K"), or in the Company's most recent Form 10-Q (the "Form 10-Q"), or in the
Company's filings on Form 8-K or public filings made by the Company with the
Securities and Exchange Commission (the "Commission"), pursuant to the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including the Commission Documents referred to in Section 3.1(f) below
(the "Commission Filings"). The Company and each such subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction in
which the failure to be so qualified will not have a material adverse effect on
the Company's financial condition.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement in the form attached hereto as Exhibit D (the
"Registration Rights Agreement"), the Notes and Warrants (collectively, the
"Transaction Documents") and to issue and sell the Notes and Warrants in
accordance with the terms hereof. The execution, delivery and performance of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly and validly authorized by
all necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required. Each of the
Transaction Documents has been duly executed and delivered by the Company. Each
of the Transaction Documents constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
<PAGE>
(c) Capitalization. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of the date hereof are
set forth, on Schedule 3.1(c) hereto or in the Commission Filings. All of the
outstanding shares of the Company's Common Stock have been duly and validly
authorized. Except as set forth on Schedule 3.1(c) hereto or in the Commission
Filings, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and the Registration
Rights Agreement and as set forth on Schedule 3.1(c) hereto or in the Commission
Filings, there are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities or as provided on Schedule 3.1(c) hereto or in the
Commission Filings, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. The Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable Federal and state securities laws,
and no stockholder has a right of rescission or damages with respect thereto
which would have a Material Adverse Effect. The Company has furnished or made
available to the Purchasers true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof (the "Articles"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws").
(d) Issuance of Securities. The Notes and Warrants to be
issued under this Agreement have been duly authorized by all necessary corporate
action and, when issued and paid for in accordance with the terms hereof, the
Notes and Warrants shall be validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances, and rights of first
refusal of any kind. When the Note Shares and the Warrant Shares are issued in
accordance with the terms of the Notes and Warrants, respectively, such shares
will be duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, and the Purchasers shall be entitled
to all rights accorded to a holder of Common Stock.
<PAGE>
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated therein do not (i) violate any provision of the
Company's Articles or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including Federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries are bound or affected, except for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under Federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents, or issue and sell the Notes, the Warrants, the Note Shares and the
Warrant Shares in accordance with the terms hereof (other than any filings which
may be required to be made by the Company with the Commission, the National
Association of Securities Dealers, Inc. (the "NASD"), or state securities
administrators subsequent to the Closing, and, any registration statement which
may be filed pursuant hereto); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of each of the Purchasers herein.
(f) Commission Documents, Financial Statements. The Common
Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act and the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a), 14 or 15(d) of the Exchange Act (all of the
foregoing including filings incorporated by reference therein being referred to
herein as the "Commission Documents"). The Company has delivered to the
Purchasers true and complete copies of the Commission Documents filed with the
Commission since July 31, 1997 and prior to the Closing Date. The Company has
not provided to the Purchasers any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the Form 10-K for
the year ended April 30, 1998 and the Forms 10-Q for the fiscal quarters ended
January 31,1999, October 31, 1998 and July 31, 1998 complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such documents, and, as of their
respective dates, none of the Form 10-K and the Form 10-Q referred to above
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
<PAGE>
(g) Subsidiaries. Schedule 3.1(g) hereto or the Commission
Filings sets forth each subsidiary of the Company, showing the jurisdiction of
its incorporation or organization and showing the percentage of the Company's
ownership of the outstanding stock or other interests of such subsidiary. For
the purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries. Except as set forth in the Commission Filings, none of such
subsidiaries is a "significant subsidiary" as defined in Regulation S-X.
(h) No Material Adverse Change. Since January 31, 1999, the
date through which the most recent quarterly report of the Company on Form 10-Q
has been prepared and filed with the Commission, a copy of which is included in
the Commission Documents, the Company has not experienced or suffered any
Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed on
Schedule 3.1(i) hereto, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP not disclosed in the
Commission Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries respective businesses since January 31, 1999 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Except as
disclosed on Schedule 3.1(j) hereto, no event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. Schedule 3.1(k) hereto or the Commission
Filings sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness (as defined hereinafter) of the Company or any subsidiary, or for
which the Company or any subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $25,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $25,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.
<PAGE>
(l) Title to Assets. Each of the Company and its subsidiaries
has good and marketable title to all of its real and personal property reflected
in the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated on Schedule
3.1(l) hereto or such that could not reasonably be expected to cause a Material
Adverse Effect on the Company's financial condition or operating results. All
said leases of the Company and each of its subsidiaries are valid and subsisting
and in full force and effect in all material respects.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets and which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
subsidiary or any officers or directors of the Company or subsidiary in their
capacities as such.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, or such that, individually or in the aggregate, could not reasonably
be expected to cause a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 3.1(o) hereto, the
Company and each of the subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) pending or threatened
against the Company or any subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 3.1(p)
hereto, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any subsidiary with respect to the transactions
contemplated by this Agreement.
<PAGE>
(q) Disclosure. To the best of the Company's knowledge,
neither this Agreement (including the Schedules hereto) nor any other documents,
certificates or instruments furnished to the Purchasers by or on behalf of the
Company or any subsidiary in connection with the transactions contemplated by
this Agreement contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein or
therein, not misleading.
(r) Operation of Business. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth on Schedule 3.1(r)
hereto or in the Commission Filings, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others, except to the extent that a
Material Adverse Effect could not reasonably be expected to result from such
conflict.
(s) Environmental Compliance. The Company and each of its
subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except as set forth on Schedule 3.1(s) hereto, the Company
has all necessary governmental approvals required under all Environmental Laws
and used in its business or in the business of any of its subsidiaries. The
Company and each of its subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Closing or that could reasonably be expected to give
rise to any environmental liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the presence, manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
<PAGE>
(t) Books and Record: Internal Accounting Controls. The
records and documents of the Company and its subsidiaries accurately reflect in
all material respects the information relating to the business of the Company
and the subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company or any subsidiary. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions is taken
with respect to any differences.
(u) Material Agreements. Except as set forth on Schedule
3.1(u) hereto or in the Commission Filings, neither the Company nor any
subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on
Form S-3 or applicable form (collectively, "Material Agreements") if the Company
or any subsidiary were registering securities under the Securities Act. The
Company and each of its subsidiaries has in all material respects performed all
the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement now in effect, the
result of which could reasonably be expected to cause a Material Adverse Effect.
(v) Transactions with Affiliates. Except as set forth in the
Commission Filings, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions exceeding $50,000 between (a) the Company, any subsidiary or any of
their respective customers or suppliers on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person who would be covered by Item 404(a) of
Regulation S-K or any corporation or other entity controlled by such officer,
employee, consultant, director or person.
(w) Securities Act of 1933. The Company has complied and will
comply with all applicable Federal and state securities laws in connection with
the offer, issuance and sale of the Notes, Warrants and other securities
hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy the
Securities or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any person, so as to bring the issuance and sale of the Securities
under the registration provisions of the Securities Act and applicable state
securities laws. Neither the Company nor any of its affiliates, nor any person
acting on its or their behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Notes, Warrants and other
securities hereunder.
<PAGE>
(x) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees.
Except as set forth on Schedule 3.1(x) hereto, neither the Company nor any
subsidiary has any employment contract, agreement regarding proprietary
information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since January 31, 1999,
except as disclosed in Schedule 3.1(x) hereto, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or
any subsidiary.
(y) Absence of Certain Developments. Except as provided on
Schedule 3.1(y) hereto, since January 31, 1999 neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
<PAGE>
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its subsidiaries; or
(xv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(z) Use of Proceeds. The proceeds from the sale of the
Securities will be used by the Company and its subsidiaries for general
corporate purposes.
(aa) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
<PAGE>
(bb) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which has had or could reasonably be expected to have a
Material Adverse Effect on the Company and its subsidiaries. The execution and
delivery of this Agreement and the issue and sale of the Securities will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of
the Purchasers, or any person or entity that owns a beneficial interest in any
of the Purchasers, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 3.1(bb), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(cc) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the Purchasers is
acting individually and solely in the capacity of arm's length purchaser with
respect to this Agreement, the other Transaction Documents and the transactions
contemplated hereunder and thereunder. The Company further acknowledges that
each of the Purchasers is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement, the
Registration Rights Agreement and the transactions contemplated hereunder and
thereunder and any advice given by any of the Purchasers or any of their
representatives or agents in connection with this Agreement, the Registration
Rights Agreement and the transactions contemplated hereunder and thereunder is
merely incidental to such Purchaser's purchase of the Securities.
(dd) Dilutive Effect. The Company understands and acknowledges
that the number of Note Shares and Warrant Shares issuable upon conversion of
the Notes and exercise of the Warrants, respectively, will increase in certain
circumstances. The Company further acknowledges that its obligation to issue the
Note Shares and Warrant Shares upon conversion of the Note Shares and exercise
of the Warrants, respectively, in accordance with this Agreement, the Notes and
the Warrants, as applicable, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
Section III.2 Representations and Warranties of the Purchasers. The
Purchasers hereby severally and not jointly make the following representations
and warranties to the Company:
(a) Organization and Standing of the Purchasers. Such
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
(b) Authorization and Power. Such Purchaser has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Securities being sold to it hereunder. The execution, delivery and performance
of this Agreement and the Registration Rights Agreement by such Purchaser and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action. Each of this Agreement
and the Registration Rights Agreement constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of such Purchaser
enforceable against such Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
<PAGE>
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the consummation by
such Purchaser of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which such Purchaser
is a party, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable to such
Purchaser or its properties, except for such conflicts, defaults and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of such Purchaser to enter into and perform its obligations
under this Agreement in any material respect. Such Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement or to purchase the Notes, the Warrants or the
Warrant Shares in accordance with the terms hereof, provided that for purposes
of the representation made in this sentence, such Purchaser is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Company herein.
(d) Acquisition for Investment. Such Purchaser is purchasing
the Securities solely for its own account for the purpose of investment. Such
Purchaser does not have a present arrangement or intention to effect any
organized distribution of the Securities to or through any person or entity and
agrees to not to sell, assign or otherwise transfer any of its Securities except
in accordance with Federal and state securities laws applicable to such
disposition. Such Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Securities and that it has been given
full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. Such Purchaser is
capable of evaluating the risks and merits of an investment in the Securities by
virtue of its experience as an investor and its knowledge, experience, and
sophistication in financial and business matters and such Purchaser is capable
of bearing the entire loss of its investment in the Securities.
(e) Accredited Purchasers. Such Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act.
(f) Information. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Purchaser. Such Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Such Purchaser has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Securities. Such Purchaser understands that it (and not
the Company) shall be responsible for its own tax liabilities that may arise as
a result of this investment or the transactions contemplated by this Agreement.
<PAGE>
(g) General. Such Purchaser understands that the Securities
are being offered and sold in reliance on a transactional exemption from the
registration requirement of Federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Securities.
(h) Shorting. Such Purchaser and any and all of its agents and
affiliates will comply with all Commission regulations regarding shorting.
Furthermore, as of the Closing Date, neither Purchaser, its agents nor any of
its affiliates has a short position in the Company's Common Stock.
ARTICLE IV
Covenants
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Section IV.1 Securities Compliance.
(a) The Company shall notify the Commission and NASD, if
applicable, in accordance with their rules and regulations, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Purchasers
or subsequent holders.
(b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
each of the Purchasers set forth herein in order to determine the applicability
of Federal and state securities laws exemptions and the suitability of each of
the Purchasers to acquire the Securities.
Section IV.2 Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the Nasdaq Small Cap Market or any
relevant market or system, if applicable, and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the NASD or any relevant market or system.
<PAGE>
Section IV.3 Beneficial Ownership. Notwithstanding the provisions
hereof, in no event (except with respect to an automatic conversion of the Notes
as provided in the Notes) shall the Company be obligated to convert any portion
of the Notes to the extent after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by the Purchasers and their affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Notes and the
unexercised portion of any Warrants), and (2) the number of shares of Common
Stock issuable upon the conversion of the Notes and exercise of the Warrants
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Purchasers and their affiliates of more
than 4.99% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act, except as
otherwise provided in clause (1) of such proviso. The preceding shall not
interfere with a Purchaser's right to convert the Notes or exercise the Warrants
which in the aggregate total more than 4.99% of the outstanding shares of Common
Stock, over time, as long as no single Purchaser owns more than 4.99% of the
outstanding Common Stock at any given time.
Section IV.4 Legends. Unless otherwise provided below, each certificate
representing the Notes, the Warrants, the Note Shares and the Warrant Shares
shall bear the following legend or equivalent:
"THE SALE AND ISSUANCE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, UNLESS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS."
Section IV.5 Registration Statement. The Company shall cause to be
filed the Registration Statement, which Registration Statement shall provide for
the resale of the Securities purchased by and issued to the Purchasers in
accordance of this Agreement and the Registration Rights Agreement. The Company
shall take all action necessary to cause such Registration Statement to be
declared effective by the Commission in accordance with the Registration Rights
Agreement.
<PAGE>
Section IV.6 Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section IV.7 Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section IV.8 Intentionally Omitted.
Section IV.9 Amendments. The Company shall not amend or waive any
provision of the Articles of Incorporation or Bylaws of the Company in any way
that would adversely affect the dividend rights or voting rights of the holders
of any Securities.
Section IV.10 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any subsidiary under this
Agreement or the Articles of Incorporation of the Company. So long as any of the
Purchasers are the beneficial owners of any Notes, Warrants, Note Shares or
Warrant Shares, the Company is restricted from issuing any Common Stock or any
financial instruments convertible into shares of Common Stock for a period
commencing as of the date hereof and ending on the earlier of (i) 120 days
following the Closing Date or (ii) 14 calendar days after the effective date of
the Registration Statement without the prior consent of the Purchasers.
Section IV.11 Reservation of Shares. So long as any of the Notes or
Warrants remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than 175% of the aggregate number of shares of Common Stock needed to provide
for the issuance of the Note Shares and Warrant Shares.
ARTICLE V
Conditions to Closing
Section V.1 Conditions Precedent to the Obligation of the Company to
Sell the Securities. The obligation hereunder of the Company to issue and sell
the Securities to the Purchasers is subject to the satisfaction or waiver, at or
before the Closing, of each of the conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
<PAGE>
(a) Accuracy of Each of the Purchaser's Representations and
Warranties. The representations and warranties of each Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Closing as though made at that time, except for representations and warranties
that are expressly made as of a particular date.
(b) Performance by the Purchasers. The Purchasers shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section V.2 Conditions Precedent to the Obligation of the Purchasers to
Close. The obligation hereunder of the Purchasers to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for each Purchaser's sole
benefit and may be waived by such Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made at that time (except for representations and warranties that
speak as of a particular date).
(b) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing.
(c) No Suspension, Etc. From the date hereof to the Closing
Date, trading in the Company's Common Stock shall not have been suspended by the
Commission or NASDAQ (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to
Closing), and, at any time prior to the Closing, trading in securities generally
as reported by NASDAQ shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by NASDAQ, or on the New York Stock Exchange, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of a Purchaser, makes it impracticable or inadvisable to
purchase the Notes and Warrants.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
<PAGE>
(e) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(f) No Material Adverse Effect. From the date hereof to the
Closing Date, no event resulting in a Material Adverse Effect has occurred.
(g) Opinion of Counsel, Etc. At the Closing, the Purchasers
shall have received an opinion of counsel to the Company, dated the date of
Closing, in the form of Exhibit E hereto, and such other certificates and
documents as the Purchasers or their counsel shall reasonably require incident
to the Closing.
(h) Registration Rights Agreement. At the Closing the Company
shall have executed and delivered the Registration Rights Agreement to each
Purchaser.
(i) Resolutions. The Board of Directors of the Company shall
have adopted resolutions consistent with Section 3.1(b) above in a form
reasonably acceptable to each Purchaser (the "Resolutions").
(j) Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Notes and the exercise of the
Warrants, a number of shares of Common Stock equal to at least 175% of the
aggregate number of Note Shares and Warrant Shares issuable upon conversion of
the Notes and exercise of the Warrants assuming such Notes and Warrants were
converted or exercised on the Closing Date (and assuming all such Notes and
Warrants were fully convertible and exercisable on such date regardless of any
limitation on the timing or amount of such conversion exercises).
(k) Secretary's Certificate. The Company shall have delivered
to each Purchaser a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Articles, (iii) the Bylaws, each as in effect at
the Closing, and (iv) the authority and incumbency of the officers of the
Company executing this Agreement, the Registration Rights Agreement, the Notes
and the Warrants and any other documents required to be executed or delivered in
connection therewith.
(l) Certificates. At the Closing the Company shall have
executed and delivered to the Purchasers the Notes and Warrants (in such
denomination as the Purchasers shall request) representing the amount of
Securities being purchased by such Purchaser hereunder.
<PAGE>
ARTICLE VI
Intentionally Omitted.
ARTICLE VII
Indemnification
Section VII.1 General Indemnity. The Company agrees to indemnify and
hold harmless each Purchaser (and its directors, officers, affiliates, agents,
successors and assigns but excluding consequential damages) from and against any
and all actual losses, liabilities, deficiencies, costs, damages and reasonable
expenses (including, without limitation, reasonable attorney's fees, charges and
disbursements) incurred by such Purchaser as a result of any breach of the
covenants made by the Company herein. Each Purchaser severally agrees to
indemnify and hold harmless the Company and its directors, officers, affiliates,
agents, successors and assigns from and against any and all actual losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys fees, charges and disbursements but excluding
consequential damages) incurred by the Company as result of any breach of the
covenants made by such Purchaser herein.
<PAGE>
Section VII.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VII to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent (which consent shall not be unreasonable withheld), settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
ARTICLE VIII
Miscellaneous
Section VIII.1 Fees and Expenses. The Company shall pay to Gilston
Corporation, Ltd. or its assignees an amount equal to (i) 2.5% of the aggregate
principal amount of the Notes in cash and (ii) 7.5% of the aggregate principal
amount of the Notes in convertible promissory notes on the same terms as the
Notes issued to the Purchasers. In addition, the Company shall issue to Gilston
Corporation, Ltd., or its assignees, warrants to purchase 100,000 shares of
Common Stock on the same terms as the Warrants issued to the Purchasers. The
Company shall pay, at the Closing, all reasonable attorneys fees and expenses
(exclusive of disbursements and out-of-pocket expenses) incurred by the
Purchasers up to 1% of the aggregate principal amount of the Notes in cash in
connection with the preparation, negotiation, execution and delivery of this
Agreement. In addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchasers in connection with any amendments, modifications or
waivers of this Agreement or the Registration Rights Agreement or incurred in
connection with the enforcement of this Agreement and the Registration Rights
Agreement, including, without limitation, all reasonable attorneys fees and
expenses. The Company shall pay all stamp or other similar taxes and duties
levied in connection with issuance of the Securities pursuant hereto.
Section VIII.2 Specific Enforcement, Consent to Jurisdiction.
<PAGE>
(a The Company and each Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the Registration Rights Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the Registration Rights
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b Each of the Company and each Purchaser (i) hereby
irrevocably submits to the jurisdiction of the United States District Court and
other courts of the United States sitting in the Southern District of New York
for the purposes of any suit, action or proceeding arising out of or relating to
this Agreement or the Registration Rights Agreement and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and each
Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section VIII.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby,
supersedes all prior agreements with respect to subject matter hereof and,
except as specifically set forth herein or in the Registration Rights Agreement,
neither the Company nor any Purchaser makes any representations, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
Section VIII.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy, facsimile or e-mail at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: IFS International, Inc.
Rensselaer Technology Park
300 Jordan Road
Troy, New York 12180
Attn: Carmen Pascuito
Fax No.: 518-283-7336
E-mail: [email protected]
<PAGE>
with copies to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Michael D. DiGiovanna
Fax No.: (212) 972-9487
E-mail: [email protected]
If to the Purchasers: at the address set forth on Exhibit A attached hereto
with copies to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Fax: (212) 704-6288
Attention: Christopher S. Auguste, Esq.
E-mail: [email protected]
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section VIII.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section VIII.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section VIII.7 Successors and Assigns. The Purchasers may not assign
this Agreement to any person (other than to an affiliate of such Purchaser)
without the prior consent of the Company, which consent will not be unreasonably
withheld. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. The parties hereto may not amend this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company and each Purchaser to be affected by the amendment. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
<PAGE>
Section VIII.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section VIII.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section VIII.10 Survival. The representations and warranties of the
Company and the Purchasers contained in Article III shall survive the execution
and delivery hereof and the Closing until the date three years from the Closing
Date, and the agreements and covenants set forth in Articles II, IV, VI, VII and
VIII of this Agreement shall survive the execution and delivery hereof and the
Closing hereunder.
Section VIII.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section VIII.12 Publicity. Prior to the Closing, neither the Company
nor the Purchasers shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. In the event the Company
is required by law, based upon an opinion of the Company's counsel, that the
Company must issue a press release or otherwise make a public statement or
announcement with respect to this Agreement prior to the Closing, the Company
will use its best efforts to consult with the Purchasers on the form and
substance of such press release. After the Closing, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement; provided, that prior to issuing any such press release, making
any such public statement or announcement, the Company obtains the prior consent
of the Purchasers, which consent shall not be unreasonably withheld or delayed.
Section VIII.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
<PAGE>
Section VIII.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, each of the
Company and the Purchasers shall execute and deliver such instrument, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement, the
Notes, the Warrants, the Note Shares, the Warrant Shares and the Registration
Rights Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
IFS INTERNATIONAL, INC.
By:
Name: Frank A. Pascuito
Title: Executive Vice President
GILSTON CORPORATION, LTD.
By:_____________________________________
Name: Dawn E. Davies
Title:
MANCHESTER ASSET MANAGEMENT, LTD.
By:_____________________________________
Name: Dawn E. Davies
Title:
HEADWATERS CAPITAL
By:_____________________________________
Name:
Title:
<PAGE>
459460-7
IFS INTERNATIONAL, INC.
DISCLOSURE SCHEDULES
RELATING TO THE NOTE AND WARRANT
PURCHASE AGREEMENT, DATED AS OF JULY 2, 1999
AMONG IFS INTERNATIONAL, INC. AND
THE PURCHASERS NAMED HEREIN
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH
NUMBERS AND LETTERS AS SET FORTH IN THE NOTE AND WARRANT PURCHASE AGREEMENT (THE
"AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED IN
THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES CONTAINED IN THESE
DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL THE DISCLOSURES
SHALL BE READ TOGETHER; PROVIDED, HOWEVER, THAT DISCLOSURE OF THE INFORMATION IN
ONE SECTION OF THE DISCLOSURE SCHEDULE SHALL NOT BE DEEMED TO RELATE TO OR
QUALIFY ANY OTHER SECTION UNLESS THE RELEVANCE OF SUCH MATTER TO ANOTHER SECTION
IS READILY APPARENT.
<PAGE>
<TABLE>
Exhibit A
List of Purchasers
Amount of Notes Purchase
Investor Name Address &Warrants Purchased Price
<S> <C> <C>
Gilston Corporation, Ltd. Charlotte House Notes: $250,000 $250,000
Charlotte Street Warrants: 25,000
P.O. Box N-9204
Nassau, Bahamas
Fax No: (242) 394-8348
Attn: Anthony L. M. Inder Rieden
E-mail: [email protected]
Manchester Asset Management, Ltd. Charlotte House Notes: $250,000 $250,000
Charlotte Street Warrants: 25,000
P.O. Box N-9204
Nassau, Bahamas
Fax No: (242) 394-8348
Attn: Anthony L. M. Inder Rieden
E-mail: [email protected]
Headwaters Capital 220 Montgomery Street Notes: $500,000 $500,000
Suite 500 Warrants: 50,000
San Francisco, California 94104
Fax No.: 415-398-8204
Attn: Timothy Keating
E-mail: [email protected]
</TABLE>
EXHIBIT 4.15
MARKET ACCESS PROGRAM
MARKETING AGREEMENT
THIS AGREEMENT (the "Agreement") made and entered into this 29th day of April,
1999, by and between CONTINENTAL CAPITAL & EQUITY CORPORATION, located at 195
Wekiva Springs Road, Suite 200, Longwood, FL 32779 (hereinafter referred to as
"CCEC,") and IFS INTERNATIONAL, INC., located at Renssalaer Technology Park, 300
Jordan Road, Troy, New York 12180 (hereinafter referred to as "Company.")
WITNESSETH:
For and consideration of the mutual promises and covenants contained herein, the
parties hereto agree as follows:
1. EMPLOYMENT. Company hereby hires and employs CCEC as an independent
contractor; and CCEC does hereby accept its position as an independent
contractor to the Company upon the terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall be from April 30, 1999 through April
29, 2000. The Company has the right to terminate this Agreement following six
consecutive months of representation; said termination must be provided in
written form and submitted to CCEC 30 days prior to the desired termination
date.
3. DUTIES AND OBLIGATIONS OF CCEC. CCEC shall have the following duties and
obligations under this Agreement:
3.1 Establish a financial public relations methodology designed to increase
awareness of the Company within the investment community. 3.2 Assist the Company
in the implementation of its business plan and in accurately disseminating
information to the market place,which information has been provided by the
Company. 3.3 To expose the Company to a broad network of active retail brokers,
financial analysts, institutional fund managers, private investors and active
financial newsletter writers. 3.4 Prepare Company due diligence reports,
corporate profile and fact sheets. 3.5 Conduct a tele-marketing campaign to the
investment community and brokerage community and conduct tele-conferences with a
CCEC moderator, Company executive(s), and brokers, financial analysts, fund
managers and the like. 3.6 Feature the Company(1)s corporate profile or fact
sheet on CCEC(1)s web site(s). 3.7 Assist the Company in the preparation of all
press releases and coordinate the releases via a Company paid account with PR
NewsWire or BusinessWire. 3.8 Fax broadcast press releases, broker updates,
Company newsletters to brokers, institutional fund managers, financial analysts,
and accredited investors. 3.9 E-mail press releases, corporate announcements,
broker updates, Company news developments to a targeted e-mail database of
brokers, institutional fund managers, financial analysts, and accredited
investors. 3.10 Serve as the Company's external publicist and endeavor to obtain
media coverage on the Company in both trade and industry press, on local and
national radio and/or TV programming, in subscription-based financial
newsletters, and on the worldwide web. 3.11 Strive to obtain the Company
institutional analyst coverage and investment banking sponsorship.
ALL OF THE FOREGOING CCEC PREPARED DOCUMENTATION CONCERNING THE COMPANY,
INCLUDING, BUT NOT LIMITED TO, DUE DILIGENCE REPORTS, CORPORATE PROFILE, FACT
SHEETS, AND QUARTERLY NEWSLETTERS, SHALL BE PREPARED BY CCEC FROM MATERIALS
SUPPLIED TO IT BY THE COMPANY AND SHALL BE APPROVED BY THE COMPANY PRIOR TO
DISSEMINATION BY CCEC.
4. CCEC(1)S COMPENSATION. Upon the execution of this Agreement, Company hereby
covenants and agrees to pay CCEC as follows: 4.1 $7,500.00 (Seven Thousand Five
Hundred Dollars) cash payable monthly for the term of the Agreement with first
payment of $7,500.00 due upon execution of this agreement and subsequent
payments of $7,500.00 due the 1st of each month, beginning June 1, 1999 and
continuing for the duration of this Agreement (12 months) with the final payment
due April 1, 2000. 4.2 Each time that an industry-recognized research analyst,
defined as any analyst employed by a registered investment banking firm having a
regional or national reputation - who has been first introduced to the Company
by CCEC, initiates published coverage of the Company, then the Company agrees to
pay CCEC an additional one time payment of $5,000.00 (Five Thousand United
States Dollars); when applicable, CCEC will invoice the Company for the
additional fee(s) due. 4.3 Each time that an institutional investor acquires no
less than 5% of the issued and outstanding shares of the Company's common stock,
then the Company agrees to pay CCEC an additional one time payment $5,000 (Five
Thousand United States Dollars); when applicable CCEC will invoice the Company
for the additional fee(s) due. This provision excludes any positioning by
American International Industries, who is already in active discussion with the
company. 4.4 CCEC shall be entitled to receive an option or warrant to purchase
up to 200,000 common shares of the Company's stock, with the following exercise
prices: * 35,000 shares - $3.50 * 45,000 shares - $4.50 * 55,000 shares - $5.50
* 65,000 shares - $6.50
The Company agrees to issue CCEC piggyback registration rights for the common
shares underlying the options/warrants listed above, whereby these shares will
be registered for resale by CCEC on the first applicable S-3 Registration
Statement filed by the Company with the U.S. Securities and Exchange Commission;
said underlying common shares shall be held by the Company until such time as
CCEC elects to exercise its option or warrant to purchase the common shares. The
term of the option/warrant shall expire 12 months from the date the Registration
Statement is deemed effective by the U.S. Securities and Exchange Commission.
5.CCEC(1)S EXPENSES AND COSTS. Company shall pay all reasonable out of pocket
costs and expenses incurred by CCEC, its directors, officers, employees and
agents, in carrying out its duties and obligations pursuant to the provisions of
this Agreement, excluding CCEC(1)s general and administrative expenses and
costs, but including and not limited to the following costs and expenses;
provided all costs and expense items in excess of $500.00 (Five Hundred U.S.
Dollars) must be approved by the Company in writing prior to CCEC(1)s incurrence
of the same: 5.1Travel expenses, including but not limited to transportation,
lodging and food expenses, when such travel is conducted on behalf of the
Company. 5.2 Seminars, expositions, money and investment shows. 5.3 Radio and
television time and print media advertising costs, when applicable. 5.4
Subcontract fees and costs incurred in preparation of research reports, when
applicable. 5.5 Cost of on-site due diligence meetings, if applicable. 5.6
Printing and publication costs of brochures and marketing materials which are
not supplied by the Company. 5.7 Corporate web site development costs. 5.8
Printing and publication costs of Company annual reports, quarterly reports,
and/or other shareholder communication collateral material which are not
supplied by Company. 5.9 Creation, production, and mailing of Inside Wall Street
lead generation pieces and associated fulfillment material and services, i.e.
corporate profiles, presidential cover letters, pre-printed envelopes, 1-800
numbers, postage, list selection, lead distribution, etc., at an established
price of $2.00 per Inside Wall Street piece mailed (minimum of 25,000 pieces).
Company shall pay to CCEC reasonable costs and expenses incurred within ten (10)
days of receipt of CCEC(1)s written invoice for the same, excluding any costs
associated with material and services defined in Section 5.9 above, which are
due and payable in advance of material production.
6. COMPANY(1)S DUTIES AND OBLIGATIONS. Company shall have the following duties
and obligations under this Agreement: 6.1 Cooperate fully and timely with CCEC
so as to enable CCEC to perform its obligations under this Agreement. 6.2 Within
ten (10) days of the date of execution of this Agreement to deliver to CCEC a
complete due diligence package on the Company including all the Company(1)s
filings with the Securities and Exchange Commission within the last twelve
months, the last twelve months of press releases on the Company and all other
relevant materials with respect to such filings, including but not limited to
corporate reports, brochures, and the like; a list of the names and addresses of
all the Company(1)s shareholders known to the Company; and a list of the brokers
and market makers in the Company(1)s securities and which have been following
the Company. 6.3 The Company will act diligently and promptly in reviewing
materials submitted to it from time to time by CCEC and inform CCEC of any
inaccuracies contained therein prior to the dissemination of such materials. 6.4
Immediately give written notice to CCEC of any change in Company(1)s financial
condition or in the nature of its business or operations which reasonably could
be expected to have an adverse material effect on its operations, assets,
properties or prospects of its business. 6.5 Pay when due all costs and expenses
incurred by CCEC under the provisions of this Agreement when presented with
invoices for the same by CCEC. 6.6 Give full disclosure of all material facts
concerning the Company to CCEC and update such information on a timely basis.
6.7 Promptly pay the compensation due CCEC under the provisions of this
Agreement.
7. NONDISCLOSURE. Except as may be required by law, Company, its officers,
directors, employees, agents and affiliates shall not disclose the contents and
provisions of this Agreement to any individual or entity without CCEC(1)s
expressed written consent subject to disclosing same further to Company counsel,
accountants and other persons performing investment banking, financial, or
related functions for Company.
8. COMPANY(1)S DEFAULT. In the event of any default in the payment of CCEC(1)s
compensation to be paid to it pursuant to this Agreement, or any other charges
or expenses on the Company(1)s part to be paid or met, or any part or
installment thereof, at the time and in the manner herein prescribed for the
payment thereof and as when the same becomes due and payable, and such default
shall continue for twenty five (25) days after CCEC(1)s written notice thereof
is received by Company; in the event of any default in the performance of any of
the other covenants, conditions, restrictions, agreements, or other provisions
herein contained on the part of the Company to be performed, kept, complied with
or abided by, and such default shall continue for twenty five (25) days after
CCEC has given Company written notice thereof, or if a petition in bankruptcy is
filed by the Company, or if the Company is adjudicated bankrupt, or if the
Company shall compromise all its debts or assign over all its assets for the
payment thereof, or if a receiver shall be appointed for the Company(1)s
property, then upon the happening of any of such events, CCEC shall have the
right, at its option, forthwith or thereafter to received from the Company all
damages that may be recoverable under applicable law, including costs and
expenses due or coming due hereunder and to recover the same from the Company by
suit or otherwise and further, to terminate this Agreement. The Company
covenants and agrees to pay all reasonable attorney fees, paralegal fees, costs
and expenses of CCEC, including court costs, (including such attorney fees,
paralegal fees, costs and expenses incurred on appeal) if CCEC employs an
attorney to collect the aforesaid amounts or to enforce other rights of CCEC
provided for in this Agreement in the event of any default as set forth above
and CCEC prevails in such litigation. If the Company prevails, then CCEC shall
pay for the Company's legal fees and expenses as set forth above. Further, until
CCEC has received the first cash payment as described above in Section 4.1, CCEC
shall not be required to commence performing hereunder.
9. COMPANY(1)S REPRESENTATIONS AND WARRANTIES. Company represents and warrants
to CCEC for the purpose of inducing CCEC to enter into and consummate this
Agreement as follows:
9.1 Company has the power and authority to execute, deliver and perform this
Agreement.
9.2 The execution and delivery by the Company of this Agreement have been duly
and validly authorized by all requisite action by the Company. No license,
consent or approval of any person is required for the Company(1)s execution and
delivery of this Agreement. 9.3 This Agreement has been duly executed and
delivered by the Company. This Agreement is the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms, subject to the effect to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors(1)
rights generally and to general principles of equity. 9.4 The execution and
delivery by the Company of this Agreement do not conflict with, constitute a
breach of or a default under: (i) any applicable law, or any applicable rule,
judgment, order, writ, injunction, or decree of any court; (ii) any applicable
rule or regulation of any administrative agency or other governmental authority;
(iii) the certificate of incorporation and By-Laws of the Company; (iv) any
agreement, indenture, instrument or contract to which the Company is now a party
or by which it is bound. 9.5 No representation or warranty by the Company in
this Agreement and no information in any statement, certificate, exhibit,
schedule or other document furnished, or to be furnished by the Company to CCEC
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. There is no fact which the Company has not
disclosed to CCEC, in writing, or in SEC filings or press releases, which
materially adversely affects, nor, so far as the Company can now reasonably
foresee, may adversely affect the business, operations, prospects, properties,
assets, profits or condition (financial or otherwise) of the Company.
10. MISCELLANEOUS
10.1 Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing, and shall be deemed to have been duly given
when delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid to the parties hereto at their addresses
indicated hereinafter. Either party may change his or its address for the
purpose of this paragraph by written notice similarly given. Parties(1)
addresses are as follows:
COMPANY: Renssalaer Technology Park
300 Jordan Road
Troy, New York 12180
CCEC: Suite 200
195 Wekiva Springs Road
Longwood, Florida 32779
10.2 Entire Agreement. This Agreement represents the entire agreement between
the Parties in relation to its subject matter and supersedes and voids all prior
agreements between such Parties relating to such subject matter. 10.3 Amendment
of Agreement. This Agreement may be altered or amended, in whole or in part,
only in a writing signed by both Parties. 10.4 Waiver. No waiver of any breach
or condition of this Agreement shall be deemed to be a waiver of any other
subsequent breach or condition, whether of a like or different nature, unless
such shall be signed by the person making such waiver and/or which so provides
by its terms. 10.5 Captions. The captions appearing in this Agreement are
inserted as a matter of convenience and for reference and in no way affect this
Agreement, define, limit or describe its scope or any of its provisions. 10.6
Situs. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. 10.7 Benefits. This Agreement shall inure to the
benefit of and be binding upon the Parties hereto, their heirs, personal
representatives, successors and assigns. 10.8 Severability . If any provision of
this Agreement shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and shall not in any way
affect or render invalid or unenforceable any other provision of this Agreement,
and this Agreement shall be carried out as if such invalid or unenforceable
provision were not contained herein. 10.9 Arbitration. Any controversy, dispute
or claim arising out of or relating to this Agreement or the breach thereof
shall be settled by arbitration. Arbitration proceedings shall be conducted in
accordance with the rules then prevailing of the American Arbitration
Association or any successor. The award of the Arbitration shall be binding on
the Parties. Judgment may be entered upon an arbitration award of in a court of
competent jurisdiction and confirmed by such court. Venue for Arbitration
proceedings shall be Seminole County, Florida. The costs of arbitration,
reasonable attorneys(1) fees of the Parties, together with all other expenses,
shall be paid as provided in the Arbitration award. 10.10 Currency. In all
instances, references to monies used in this Agreement shall be deemed to be
United States dollars. 10.11 Multiple Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, and all of such counterparts shall constitute one (1) instrument.
11. Cancellation: After 80 days of contractual performance, the Company has the
right to issue written notification of any perceived problems or legitimate
concerns regarding CCEC(1)s performance. Upon receipt of written notifications,
CCEC will have 10 days to correct or formally address the Company(1)s written
concerns. If an amicable solution cannot be achieved the contract becomes
cancelable by either party following the expiration of the 10 day cure period.
During the written notification and correction review period CCEC shall continue
to receive full compensation, and such cancellation shall not relieve the
Company of any fees or compensation earned by or owed to CCEC, including
irrevocable rights to the options referenced in section 4.2.
12. This Agreement may be executed in counterparts and by fax transmission, each
counterpart being deemed an original.
13. Notwithstanding the representations and warranties defined within Section 9
herein, the granting of options, as defined in Section 4.4, is subject to
approval of the Company's Board of Directors, which is expected to occur on or
before May 15, 1999.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year
first above written.
CONFIRMED AND AGREED ON THIS ________DAY OF ________, 1999.
CONTINENTAL CAPITAL & EQUITY CORPORATION
- ------------------------------------ ---------------------------------
Corporate Officer Witness
- ------------------------------------ ---------------------------------
Company Representative Witness
CONFIRMED AND AGREED ON THIS ________DAY OF ________, 1999.
IFS INTERNATIONAL, INC.
- ------------------------------------ ---------------------------------
Corporate Officer Witness
EXHIBIT 10.8b
AMENDMENT TO EMPLOYMENT AGREEMENT
This "Amendment to Employment Agreement" (this "Amendment") is made on the
22nd day of January 1999 by and between IFS International, Inc., a Delaware
corporation (the "Company"), IFS International, Inc., a New York corporation and
a wholly owned subsidiary of the Company, and any other subsidiary of the
Company and David L. Hodge (the "Executive"), based on the following:
A. On May 12, 1998, the Company and the Executive executed that certain
"Employment Agreement" (the "Agreement") whereby the Company retained the
services of the Executive as its President and Chief Executive Officer.
B. The Company and the Executive wish to modify the Agreement pursuant to
the terms of this Amendment.
NOW, THEREFORE, the parties to this Amendment agree as follows:
1. Modification to Section 3(a). Section 3(a) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Initial Term. Unless this Agreement is previously terminated by either
party as provided in sections 11 or 12 below, the Companies hereby employ the
Executive pursuant to the terms of this Agreement, and the Executive hereby
accepts such employment, for the period beginning on February 15, 1998 and
ending on February 14, 2003 (the "Initial Term").
2. Modification to Section 4(b). Section 4(b) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Annual Bonus. The Executive and the Board shall meet no later than 90 days
from the start of each of the Company's fiscal years to establish performance
standards and goals to be met by the Executive, which standards and goals shall
be based upon earnings, cash flows, EBITDA and other objectives that are
mutually agreed to by the Executive and the Board. During the Term, the
Companies shall pay to the Executive, no later than thirty (30) days after the
completion of each fiscal year, a bonus which shall be computed as no more than
80% of Executive's annual salary (the "Annual Bonus"). Executive may elect to
receive payment of the Annual Bonus in cash, in common stock of IFS
International, Inc., a Delaware corporation, or any combination of the two. Any
common stock delivered in payment of the Annual Bonus shall be valued at the
then-current market value (closing average of bid and asked prices) on the
payment date. Nothing in this section shall prevent the Executive and the Board
from mutually agreeing to an alternative computation of the Annual Bonus, which
may be implemented and paid to the Executive in place of the Annual Bonus
described herein. Any Annual Bonus calculated for payment to the Executive for
the period from February 1998 through June 1, 1999 shall take into consideration
the fact that the Executive will have been employed by the Companies for a
period of sixteen (16) months (rather than twelve (12) months) prior to the
calculation of the Annual Bonus. The Companies shall, therefore, calculate the
Annual Bonus for the period starting on June 1, 1998 and ending on May 31, 1999
and shall add to it an additional 33 1/3% of the Annual Bonus amount. The Annual
Bonus shall be subject to any Applicable Tax Withholdings and/or Employee
Deductions.
<PAGE>
3. Modification to Section 4(e). Section 4(e) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Stock Options. In conjunction with his agreement to render services to the
Companies, and in conjunction with the execution of this Agreement, the
Executive shall receive a total of three hundred thirty thousand (330,000)
options to purchase the Company's common stock. The Executive and the Company
acknowledge that the Executive has received a total of sixty thousand (60,000)
options (the "1996 Options"), the terms and conditions of which are governed by
the 1996 IFS International, Inc. Stock Option Plan. The remaining two hundred
seventy thousand (270,000) options (the "1998 Options") shall be governed by the
terms and conditions of the 1998 IFS International, Inc. Stock Plan (the "1998
Plan"). The 1998 Options shall vest over a period of five (5) years, fifty-four
thousand (54,000) shares on February 15, 1998 and fifty-four thousand (54,000)
shares on each February 15th thereafter through 2002. The purchase price per
share shall be the fair market value of the Company's common stock as of the
date of approval of the grant. Subject to the requirements of any state or
federal securities laws of the United States, the common stock to be acquired by
exercise of the options granted hereunder shall be freely tradeable. Subject to
the terms and conditions of the 1996 Plan and the 1998 Plan, the Executive shall
be entitled to exercise the options with cash, or will be entitled to a
"cashless" exercise using other common stock of the Company, or will be entitled
to exercise the options using any other consideration acceptable to the Company.
The Executive agrees to be bound by the terms of the 1996 Plan and the 1998 Plan
as adopted.
4. Deletion to Section 4(f). Section 4(f) shall be deleted in its entirety
and not replaced.
5. Modification to Section 12(e). The last sentence of Section 12(e) shall
be modified to state the following: "Notwithstanding the foregoing, amounts
which are vested in any Employee Benefit Plans, including stock options, shall
be payable in accordance with such plan."
6. Modification to Section 13. Section 13 shall be deleted in its entirety
and the following shall appear in its place:
In the event the Executive's employment hereunder is terminated before the
expiration of a Term, and such termination is attributable to (i) an event
defined as a Change in Control; (ii) an event defined as a Termination by the
Executive for Good Reason; and/or (iii) termination by the Board of Directors of
IFS International, Inc., a Delaware corporation, which does not constitute a
Termination for Cause; then all rights and obligations of the Companies and the
Executive under section 2 [Employment Obligations], section 4 [Compensation],
section 5 [Allowances], section 6 [Business Expenses], and section 8 [Personal
Time-Off] shall terminate as of the effective date of the termination date;
provided, however: that the Executive shall receive, in a lump sum and without
discount to present value, an amount equal to: the sum of the Executive's Annual
Salary (calculated at the then current rate) plus Annual Bonus (calculated as
eighty percent (80%) of the Executive's Annual Salary) multiplied by the larger
of either (x) the number of years then remaining in the term of this Agreement
(calculated to the nearest day as of the termination date), or (y) two years. In
addition:
(a) All stock options which have been or are scheduled to be granted during
the Term of this Agreement pursuant to section 4(e) shall become fully vested at
the prevailing grant price and the Companies shall pay to the Executive a sum
which shall permit the Executive to exercise, in his sole and absolute
discretion, all or some of the options;
(b) At the election of the Executive, the Companies shall (i) provide to
the Executive and his spouse and dependents, for a period of twelve (12) months,
medical, dental, and vision insurance and, to the Executive, disability
insurance, which benefits shall be comparable to the benefits received by the
Executive at the time of termination of his employment; or (ii) provide to the
Executive additional compensation, payable on a monthly basis, which would
approximate the cost to the Executive to obtain such comparable benefits;
(c) The Companies shall provide to the Executive a fully paid up life
insurance policy insuring the life of the Executive in the amount of Five
Hundred Thousand dollars ($500,000);
(d) The Companies shall forgive any unpaid loans or indebtedness owed by
the Executive to the Companies or any of them;
(e) The Companies shall immediately purchase the Annuity;
(f) The Companies shall immediately purchase the Executive's automobile and
transfer title, free and clear of all liens and encumbrances, to the Executive;
and
(g) The Companies shall reimburse the Executive for the Executive's
business expenses incurred through the effective date of the termination, within
three (3) business days of the Executive's submission of the Executive's expense
report to the Companies.
The Companies shall gross-up the payment comprised of the Executive's
Annual Salary plus Annual Bonus to cover the payment of any and all taxes, of
any kind or nature, that are incurred by the Executive as a result of his
receipt of the foregoing compensation.
The Executive shall not be required to mitigate the amount of any payment
pursuant to this section 13 by seeking other employment or otherwise, and no
such payment shall be offset or reduced by the amount of any compensation or
benefits provided to the Executive in any subsequent employment. The provisions
of this section 13 shall not be deemed to prejudice the rights of the Companies
or the Executive to any remedy or damages to which such party may be entitled by
reason of a breach of this Agreement by the other party, whether at law or
equity.
7. Deletion of Section 14. Section 14 shall be deleted in its entirety
and not replaced.
8. All Other Terms and Provisions of the Agreement To Remain. The parties
agree that all other terms and provisions of the Agreement shall remain the
same.
9. Electronically Transmitted Documents. This Amendment shall have no force
and effect until it is fully executed by all parties hereto. If a copy or
counterpart of this Amendment is originally executed and such copy or
counterpart is thereafter transmitted electronically by facsimile or similar
device, such facsimile document shall for all purposes be treated as if manually
signed by the party whose facsimile signature appears.
<PAGE>
WHEREFORE, the parties hereto have executed this Agreement in the City of
Albany, State of New York, as of the date first set forth above.
IFS INTERNATIONAL, INC.
A Delaware Corporation
By:_____________________________________
Chairman of the Board of Directors
By:_____________________________________
Chairman of the Compensation Committee
of the Board of Directors
By:_____________________________________
Secretary
IFS INTERNATIONAL, INC.
A New York Corporation
By:_____________________________________
Executive Vice President
By:_____________________________________
Secretary
EXECUTIVE:
----------------------------------------
David L. Hodge
EXHIBIT 10.9b
AMENDMENT TO EMPLOYMENT AGREEMENT
This "Amendment to Employment Agreement" (this "Amendment") is made on the
22nd day of January 1999 by and between IFS International, Inc., a Delaware
corporation (the "Company"), IFS International, Inc., a New York corporation and
a wholly owned subsidiary of the Company, and any other subsidiary of the
Company and Frank Pascuito (the "Executive"), based on the following:
A. On May 12, 1998, the Company and the Executive executed that certain
"Employment Agreement" (the "Agreement") whereby the Company retained the
services of the Executive as the Chairman of its Board of Directors and as an
Officer of its wholly owned subsidiary, IFS International, Inc. In October 1998,
the Executive resigned as Chairman of the Board of Directors and accepted a
position as Executive Vice President of the Company reporting to the new
Chairman of the Board of Directors. The Executive retained his position as a
member of the Board of Directors.
B. The Company and the Executive wish to modify the Agreement pursuant to
the terms of this Amendment.
NOW, THEREFORE, the parties to this Amendment agree as follows:
1. Modification to Section 2(a). The first sentence of Section 2(a) of the
Agreement shall be modified to state, "The Company hereby engages the Executive
as a member of the Board of Directors and the Companies hereby engage the
Executive as an Officer.
2. Modification to Section 3(a). Section 3(a) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Initial Term. Unless this Agreement is previously terminated by either
party as provided in sections 11 or 12 below, the Companies hereby employ the
Executive pursuant to the terms of this Agreement, and the Executive hereby
accepts such employment, for the period beginning on January 1, 1997 and ending
on December 31, 2001 (the "Initial Term").
3. Modification to Section 4(a). Section 4(a) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Annual Base Salary. During the Term, the Companies shall pay to the
Executive an annual salary in the amount of One Hundred Thirty Thousand dollars
($130,000) (the "Annual Salary"). The Annual Salary shall be subject to any Tax
Withholdings and/or Employee Deductions that are applicable. The Annual Salary
shall be paid to the Executive in equal installments in accordance with the
periodic payroll practices of the Companies for executive employees.
4. Modification to Section 4(b). Section 4(b) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Performance Bonus. The Chairman of the Board of Directors shall from
time-to-time, but not less than one (1) time per year, evaluate the performance
of the Executive and award to the Executive a performance bonus (the
"Performance Bonus") in such amount as the Chairman of the Board of Directors
may determine, in his sole discretion, to be reasonable, after taking into
consideration other compensation paid or payable to the Executive under this
Agreement, as well as the financial and non-financial progress of the business
of the Companies and the contributions of the Executive toward that progress. In
no event shall the Performance Bonus be more than forty percent (40%) of the
Executive's annual salary. Payment of the Performance Bonus shall be subject to
any applicable Tax Withholdings and/or Employee Deductions.
5. Modification to Section 4(e). A second paragraph shall be added to
Section 4(e) of the Agreement which shall state:
In conjunction with the execution of this Agreement, the Executive shall
receive one hundred fifty thousand (150,000) options to purchase the Company's
common stock (the "1998 Options"), the terms and conditions of which shall be
governed by the 1998 IFS International, Inc. Stock Plan. The Executive agrees to
be bound by the terms of the 1998 IFS International, Inc. Stock Plan as adopted.
The 1998 Options shall vest over a period of five (5) years, thirty thousand
(30,000) shares on each anniversary of the execution of this Agreement. The
purchase price per share for the 1998 Options shall be the fair market value of
the Company's common stock as of the date of the grant. Subject to the
requirements of any state or federal securities laws of the United States, the
common stock to be acquired by exercise of the options granted hereunder shall
be freely tradeable. Subject to the terms and conditions of the 1998 IFS
International, Inc. Stock Plan, the Executive shall be entitled to exercise the
options with cash, or will be entitled to a "cashless" exercise using other
common stock of the Company, or will be entitled to exercise the options using
any other consideration acceptable to the Company.
6. Deletion to Section 4(f). Section 4(f) shall be deleted in its entirety
and not replaced.
7. Deletion to Section 12(g). Section 12(g) shall be deleted in its
entirety and not replaced.
8. Modification to Section 12(h). The last sentence of Section 12(h) shall
be modified to state the following: "Notwithstanding the foregoing, amounts
which are vested in any Employee Benefit Plans, including stock options, shall
be payable in accordance with such plan."
9. Modification to Section 13. Section 13 shall be deleted in its entirety
and the following shall appear in its place:
In the event the Executive's employment hereunder is terminated before the
expiration of a Term, and such termination is attributable to (i) an event
defined as a Change in Control; (ii) an event defined as a Termination by
Executive for Good Reason; and/or (iii) termination by the Board of Directors of
IFS International, Inc., a Delaware corporation, which does not constitute a
Termination for Cause; then all rights and obligations of the Companies and the
Executive under section 2 [Employment Obligations], section 4 [Compensation],
section 5 [Allowances], section 6 [Business Expenses], and section 8 [Personal
Time-Off] shall terminate as of the effective date of the termination date;
provided, however: that the Executive shall receive, in a lump sum and without
discount to present value, an amount equal to: the sum of the Executive's Annual
Salary (calculated at the then current rate) plus Performance Bonus (calculated
as forty percent (40%) of the Executive's Annual Salary) multiplied by the
larger of either (x) the number of years then remaining in the term of this
Agreement (calculated to the nearest day as of the termination date), or (y) two
years. In addition:
(a) All stock options which have been or are scheduled to be granted during
the Term of this Agreement pursuant to section 4(e) shall become fully vested at
the grant price and the Companies shall pay to the Executive a sum which shall
permit the Executive to exercise, in his sole and absolute discretion, all or
some of the options;
(b) At the election of the Executive, the Companies shall (i) provide to
the Executive and his spouse and dependents, for a period of twelve (12) months,
medical, dental, and vision insurance and, to the Executive, disability
insurance, which benefits shall be comparable to the benefits received by the
Executive at the time of termination of his employment; or (ii) provide to the
Executive additional compensation, payable on a monthly basis, which would
approximate the cost to the Executive to obtain such comparable benefits;
(c) The Companies shall reimburse the Executive for the Executive's
business expenses incurred through the effective date of the termination, within
three (3) business days of the Executive's submission of the Executive's expense
report to the Companies.
The Companies shall gross-up the payment comprised of the Executive's
Annual Salary plus Performance Bonus to cover the payment of any and all taxes,
of any kind or nature, that are incurred by the Executive as a result of his
receipt of the foregoing compensation.
The Executive shall not be required to mitigate the amount of any payment
pursuant to this section 13 by seeking other employment or otherwise, and no
such payment shall be offset or reduced by the amount of any compensation or
benefits provided to the Executive in any subsequent employment. The provisions
of this section 13 shall not be deemed to prejudice the rights of the Companies
or the Executive to any remedy or damages to which such party may be entitled by
reason of a breach of this Agreement by the other party, whether at law or
equity.
10. Deletion of Section 14. Section 14 shall be deleted in its entirety and
not replaced.
11. All Other Terms and Provisions of the Agreement To Remain. The parties
agree that all other terms and provisions of the Agreement shall remain the
same.
12. Electronically Transmitted Documents. This Amendment shall have no
force and effect until it is fully executed by all parties hereto. If a copy or
counterpart of this Amendment is originally executed and such copy or
counterpart is thereafter transmitted electronically by facsimile or similar
device, such facsimile document shall for all purposes be treated as if manually
signed by the party whose facsimile signature appears.
WHEREFORE, the parties hereto have executed this Agreement in the City of
Albany, State of New York, as of the date first set forth above.
IFS INTERNATIONAL, INC.
A Delaware Corporation
By:_____________________________________
President and Chief Executive Officer
By:_____________________________________
Chairman of the Compensation Committee
of the Board of Directors
By:_____________________________________
Chairman of the Board of Directors
By:_____________________________________
Secretary
IFS INTERNATIONAL, INC.
A New York Corporation
By:_____________________________________
President and Chief Executive Officer
By:_____________________________________
Secretary
EXECUTIVE:
----------------------------------------
Frank Pascuito
EXHIBIT 10.10b
AMENDMENT TO EMPLOYMENT AGREEMENT
This "Amendment to Employment Agreement" (this "Amendment") is made on the
22nd day of January 1999 by and between IFS International, Inc., a Delaware
corporation (the "Company"), IFS International, Inc., a New York corporation and
a wholly owned subsidiary of the Company, and any other subsidiary of the
Company and Simon Theobald (the "Executive"), based on the following:
A. On May 12, 1998, the Company and the Executive executed that certain
"Employment Agreement" (the "Agreement") whereby the Company retained the
services of the Executive as its Senior Vice President of Sales. In October
1998, the Executive was appointed as Executive Vice-President of IFS
International, Inc., a New York corporation, and continues to be responsible for
worldwide sales and marketing of the Company's products and services.
B. The Company and the Executive wish to modify the Agreement pursuant to
the terms of this Amendment.
NOW, THEREFORE, the parties to this Amendment agree as follows:
1. Modification to Section 3(a). Section 3(a) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Initial Term. Unless this Agreement is previously terminated by either
party as provided in sections 11 or 12 below, the Companies hereby employ the
Executive pursuant to the terms of this Agreement, and the Executive hereby
accepts such employment, for the period beginning on February 24, 1998 and
ending on February 24, 2003 (the "Initial Term").
2. Modification to Section 4(a). Section 4(a) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Annual Base Salary. During the Term, the Companies shall pay to the
Executive an annual base salary which shall consist of a fixed portion and a
commission portion. (Together, the fixed portion and the commission portion
shall be hereinafter referred to as the "Annual Salary.") The fixed portion of
the Annual Salary shall initially be in the amount of One Hundred Thirty
Thousand United States dollars (US$130,000), converted to UK Sterling at a fixed
exchange rate of one (1) pound Sterling to one and one half United States
dollars ($1.50). The commission portion of the Annual Salary shall consist of:
(i) an amount which equals 8% of gross revenues earned on the sale of the
Companies' licenses and services obtained through the efforts of the Executive,
and (ii) an amount which shall be computed as the difference between the
commissions earned by each of the remaining sales employees as a result of his
or her sale of the Companies' licenses and services and 8% of such sales
(sometimes called a "commission over-ride"). The Annual Salary shall be subject
to any Tax Withholdings and/or Employee Deductions that are applicable. The
fixed portion of the Annual Salary shall be paid to the Executive in equal
installments in accordance with the periodic payroll practices of the Companies
for executive employees. The percentage portion of the Annual Salary shall be
paid to the Executive upon receipt by the Companies of payment from the
customer.
3. Modification to Section 4(b). Section 4(b) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Performance Bonus. The Chief Executive Officer shall from time-to-time, but
not less than one (1) time per year, evaluate the performance of the Executive
and award to the Executive a performance bonus (the "Performance Bonus") in such
amount as the Chief Executive Officer may determine, in his sole discretion, to
be reasonable, after taking into consideration other compensation paid or
payable to the Executive under this Agreement, as well as the financial and
non-financial progress of the business of the Companies and the contributions of
the Executive toward that progress. In no event shall the Performance Bonus be
more than twenty-five percent (25%) of the fixed portion of the Executive's
annual salary. Payment of the Performance Bonus shall be subject to any
applicable Tax Withholdings and/or Employee Deductions.
4. Modification to Section 4(e). Section 4(e) of the Agreement shall be
deleted in its entirety and the following shall appear in its place:
Stock Options. The Company has granted to the Executive, prior to the
execution of this Agreement, fifty-five thousand (55,000) options (the "1988
Options") to purchase the Company's common stock pursuant to the terms and
conditions of the 1988 IFS International, Inc. Stock Option Plan and twenty
thousand (20,000) options (the "1996 Options") to purchase the Company's common
stock pursuant to the terms and conditions of the 1996 IFS International, Inc.
Stock Option Plan. The purchase price per share for the 1988 Options and the
1996 Options shall be in accordance with the plans under which they were issued.
In conjunction with the execution of this Agreement, the Executive shall receive
one hundred fifty thousand (150,000) options to purchase the Company's common
stock (the "1998 Options"), the terms and conditions of which shall be governed
by the 1998 IFS International, Inc. Stock Plan. The Executive agrees to be bound
by the terms of the 1998 IFS International, Inc. Stock Plan as adopted. The 1998
Options shall vest over a period of five (5) years, thirty thousand (30,000)
shares on each anniversary of the execution of this Agreement. The purchase
price per share for the 1998 Options shall be the fair market value of the
Company's common stock as of the date of the grant. Subject to the requirements
of any state or federal securities laws of the United States, the common stock
to be acquired by exercise of the options granted hereunder shall be freely
tradeable. Subject to the terms and conditions of the 1998 IFS International,
Inc. Stock Plan, the Executive shall be entitled to exercise the options with
cash, or will be entitled to a "cashless" exercise using other common stock of
the Company, or will be entitled to exercise the options using any other
consideration acceptable to the Company.
5. Deletion to Section 4(f). Section 4(f) shall be deleted in its entirety
and not replaced.
6. Deletion to Section 12(g). Section 12(g) shall be deleted in its
entirety and not replaced.
7. Modification to Section 12(h). The last sentence of Section 12(h) shall
be modified to state the following: "Notwithstanding the foregoing, amounts
which are vested in any Employee Benefit Plans, including stock options, shall
be payable in accordance with such plan."
8. Modification to Section 13. Section 13 shall be deleted in its entirety
and the following shall appear in its place:
In the event the Executive's employment hereunder is terminated before the
expiration of a Term, and such termination is attributable to (i) an event
defined as a Change in Control; (ii) an event defined as a Termination by
Executive for Good Reason; and/or (iii) termination by the Board of Directors of
IFS International, Inc., a Delaware corporation, which does not constitute a
Termination for Cause; then all rights and obligations of the Companies and the
Executive under section 2 [Employment Obligations], section 4 [Compensation],
section 5 [Allowances], section 6 [Business Expenses], and section 8 [Personal
Time-Off] shall terminate as of the effective date of the termination date;
provided, however: that the Executive shall receive, in a lump sum and without
discount to present value, an amount equal to: the sum of the Executive's Annual
Salary (calculated at the then current rate) plus Performance Bonus (calculated
as twenty-five percent (25%) of the fixed portion of the Executive's Annual
Salary) multiplied by the larger of either (x) the number of years then
remaining in the term of this Agreement (calculated to the nearest day as of the
termination date), or (y) two years. In addition:
(a) All stock options which have been or are scheduled to be granted during
the Term of this Agreement pursuant to section 4(e) shall become fully vested at
the grant price and the Companies shall pay to the Executive a sum which shall
permit the Executive to exercise, in his sole and absolute discretion, all or
some of the options;
(b) At the election of the Executive, the Companies shall (i) provide to
the Executive and his spouse and dependents, for a period of twelve (12) months,
medical, dental, and vision insurance and, to the Executive, disability
insurance, which benefits shall be comparable to the benefits received by the
Executive at the time of termination of his employment; or (ii) provide to the
Executive additional compensation, payable on a monthly basis, which would
approximate the cost to the Executive to obtain such comparable benefits;
(c) The Companies shall reimburse the Executive for the Executive's
business expenses incurred through the effective date of the termination, within
three (3) business days of the Executive's submission of the Executive's expense
report to the Companies.
The Companies shall gross-up the payment comprised of the Executive's
Annual Salary plus Performance Bonus to cover the payment of any and all taxes,
of any kind or nature, that are incurred by the Executive as a result of his
receipt of the foregoing compensation.
The Executive shall not be required to mitigate the amount of any payment
pursuant to this section 13 by seeking other employment or otherwise, and no
such payment shall be offset or reduced by the amount of any compensation or
benefits provided to the Executive in any subsequent employment. The provisions
of this section 13 shall not be deemed to prejudice the rights of the Companies
or the Executive to any remedy or damages to which such party may be entitled by
reason of a breach of this Agreement by the other party, whether at law or
equity.
9. Deletion of Section 14. Section 14 shall be deleted in its entirety and
not replaced.
10. All Other Terms and Provisions of the Agreement To Remain. The parties
agree that all other terms and provisions of the Agreement shall remain the
same.
11. Electronically Transmitted Documents. This Amendment shall have no
force and effect until it is fully executed by all parties hereto. If a copy or
counterpart of this Amendment is originally executed and such copy or
counterpart is thereafter transmitted electronically by facsimile or similar
device, such facsimile document shall for all purposes be treated as if manually
signed by the party whose facsimile signature appears.
WHEREFORE, the parties hereto have executed this Agreement in the City of
Albany, State of New York, as of the date first set forth above.
IFS INTERNATIONAL, INC.
A Delaware Corporation
By:_____________________________________
President and Chief Executive Officer
By:_____________________________________
Chairman of the Compensation Committee
of the Board of Directors
By:_____________________________________
Chairman of the Board of Directors
By:_____________________________________
Secretary
IFS INTERNATIONAL, INC.
A New York Corporation
By:_____________________________________
President and Chief Executive Officer
EXECUTIVE:
----------------------------------------
Simon Theobald
EXHIBIT 10.17
AMENDED AND RESTATED NOTE THIS AMENDED AND RESTATED NOTE AMENDS
AND RESTATES A PERCENTAGE PORTION OF THAT CERTAIN PROMISSORY NOTE
DATED OCTOBER 2, 1997 IN THE PRINCIPAL AMOUNT OF $1,190,000 FROM
IFS INTERNATIONAL, INC. TO KEYBANK NATIONAL ASSOCIATION
$581,442.00 April 15, 1999
Albany, New York
For value received, IFS INTERNATIONAL, INC., a New York business
corporation with an office and its principal place of business located at 300
Jordan Road, Troy, New York 12180, (the "Borrower") promises to pay to the order
of HUDSON RIVER BANK & TRUST COMPANY, a domestic banking corporation with an
office and its principal place of business located at One Hudson City Center,
Hudson, New York 12534 (the "Lender"), or at such other place as Lender may from
time to time designate, the principal sum of FIVE HUNDRED EIGHTY ONE THOUSAND
FOUR HUNDRED AND FOURTY TWO AND NO/100 ($581,442.00) DOLLARS, with interest, in
the following manner:
On May 1, 1999 a payment of accrued interest at the Note Rate (as
hereinafter defined) shall be due and owing. On June 1, 1999 and on the first
calendar day of each month thereafter during the term hereof, through and
including March 1, 2009, the Borrower shall make payments of interest at the
Note Rate together with payments of principal calculated in accordance with a
twenty (20) year amortization schedule. In addition, the entire unpaid principal
balance hereof, together with accrued interest thereon and accrued late charges,
if any, and all other sums due hereunder and under the Mortgage (as hereinafter
defined), shall be finally due and payable on April 1, 2009 (the "Maturity
Date").
The Note Rate shall, from the date hereof through April 14, 2004, be
equal, at all times, to eight percent (8.00%). The Note Rate shall be adjusted
on and as of April 15, 2004 (a "Change Date") to be equal to the weekly average
yield to an investor on United States Treasury Securities, adjusted to a
constant maturity of five (5) years, published and made available by the Federal
Reserve Board in Statistical Release H.15 (519) on a weekly basis (the "Index"),
plus three percent (3.00%) as of the most recent publication of the Index prior
to each Change Date.
All payments hereunder shall be applied first to the payment of accrued
late payments, if any, then to the payment of interest at the aforesaid rate on
the principal amount remaining unpaid and the balance, if any, shall be applied
in reduction of principal.
Interest shall be computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed and shall accrue from the
date of advance of funds until receipt of payment by Lender.
The Borrower shall have the option of paying the principal sum hereof
in advance of the Maturity Date, in whole or in part, at any time and from time
to time upon written notice received by the Lender at least thirty (30) days
prior to making such payment, provided, however, that in the event said
prepayment is made prior to April 15, 2004, the Borrower shall pay to the Lender
a premium equal to one (1%) percent of the principal repaid.
In the event that any payment required by this Note on account of the
terms hereof, by acceleration, maturity or otherwise shall become overdue for a
period in excess of ten (10) days a "late charge" of ten cents ($.10) for each
dollar ($1.00) so overdue may be charged by the holder hereof for the purpose of
defraying the expense incident to handling such delinquent payment.
The Borrower agrees that in the event of the happening of any one or
more of the following: (1) the breach of any of the covenants and agreements
contained in this Note or in the Note and Mortgage Modification, Spreader,
Extension and Security Agreement dated of even date herewith, by and among the
Borrower, the Lender, Town of North Greenbush Industrial Development Agency with
consent from Renssselaer Polytechnic Institute (the "Mortgage") which secures
this Note or any other agreement by and between the Borrower and the Lender; (2)
the occurrence of an Event of Default as defined in the Mortgage; (3) the
dissolution of the Borrower; (4) any petition of bankruptcy being filed by or
against the Borrower or any guarantor hereof; (5) the making by the Borrower or
any guarantor hereof of an assignment for the benefit of creditors; or (6) the
sale or other conveyance of any portion of the premises which are the subject of
the Mortgage, then the whole of the principal sum or any part thereof, and of
other sums of money secured by the Mortgage shall, forthwith or thereafter, at
the option of the Lender, become immediately due and payable without demand or
notice, and all of the covenants, agreements, terms and conditions of the
Mortgage are hereby incorporated herein with the same force and effect as if
herein set forth at length.
Notwithstanding anything to the contrary herein contained, to the
extent that the total amount of interest received in any year exceeds the
maximum rate permitted by law, then the amount so determined to be in excess
shall be applied in reduction of principal of this Note.
This Note is secured by, among other things, the Mortgage, which
consolidates mortgages given or assigned to the Lender on the real property
described therein.
This Note may not be changed or terminated orally.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived.
If this Note is placed with an attorney for collection, the Borrower
shall pay all reasonable attorney's fees and expenses incurred by Lender in
connection therewith.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note the day and
year first above written.
IFS INTERNATIONAL, INC.
By:___________________________
Its:___________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
--------------------------------
Notary Public
EXHIBIT 10.18
AMENDED AND RESTATED NOTE THIS AMENDED AND RESTATED NOTE
AMENDS AND RESTATES A PERCENTAGE PORTION OF THAT CERTAIN
PROMISSORY NOTE DATED OCTOBER 2, 1997 IN THE PRINCIPAL
AMOUNT OF $1,190,000 FROM IFS INTERNATIONAL, INC. TO KEYBANK
NATIONAL ASSOCIATION
$500,000.00 April 15, 1999
Albany, New York
For value received, IFS INTERNATIONAL, INC., a New York business
corporation with an office and its principal place of business located at 300
Jordan Road, Troy, New York 12180, (the "Borrower") promises to pay to the order
of HUDSON RIVER BANK & TRUST COMPANY, a domestic banking corporation with an
office and its principal place of business located at One Hudson City Center,
Hudson, New York 12534 (the "Lender"), or at such other place as Lender may from
time to time designate, the principal sum of FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($500,000.00), with interest, in the following manner:
On May 1, 1999 a payment of accrued interest at the Note Rate (as
hereinafter defined) shall be due and owing. On June 1, 1999 and on the first
calendar day of each month thereafter during the term hereof, through and
including March 1, 2009, the Borrower shall make payments of interest at the
Note Rate together with payments of principal calculated in accordance with a
twenty (20) year amortization schedule. In addition, the entire unpaid principal
balance hereof, together with accrued interest thereon and accrued late charges,
if any, and all other sums due hereunder and under the Mortgage (as hereinafter
defined), shall be finally due and payable on April 1, 2009 (the "Maturity
Date").
The Note Rate shall, from the date hereof up to but not including the
Deposit Date (as hereinafter defined) shall be equal to eight percent (8.00%)
(the "Initial Rate"). From the Deposit Date up to and not including the second
year anniversary of the Deposit Date, the Note Rate shall be equal to the
Initial Rate less two percent (2.00%). Thereafter up to but not including April
15, 2004, the Note Rate shall equal the Initial Rate. The Note Rate shall be
adjusted on and as of April 15, 2004 (a "Change Date") to be equal to the weekly
average yield to an investor on United States Treasury Securities, adjusted to a
constant maturity of five (5) years, published and made available by the Federal
Reserve Board in Statistical Release H.15 (519) on a weekly basis (the "Index"),
plus three percent (3.00%) as of the most recent publication of the Index prior
to each Change Date. "Deposit Date" shall mean the date of the deposit by the
State of New York of the principal amount of $500,000 into an account held with
the Bank representing a funding by the State of New York of its Linked Deposit
Account program as to the Borrower.
All payments hereunder shall be applied first to the payment of accrued
late payments, if any, then to the payment of interest at the aforesaid rate on
the principal amount remaining unpaid and the balance, if any, shall be applied
in reduction of principal.
Interest shall be computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed and shall accrue from the
date of advance of funds until receipt of payment by Lender.
The Borrower shall have the option of paying the principal sum hereof
in advance of the Maturity Date, in whole or in part, at any time and from time
to time upon written notice received by the Lender at least thirty (30) days
prior to making such payment, provided, however, that in the event said
prepayment is made prior to April 15, 2004, the Borrower shall pay to the Lender
a premium equal to one (1%) percent of the principal repaid.
In the event that any payment required by this Note on account of the
terms hereof, by acceleration, maturity or otherwise shall become overdue for a
period in excess of ten (10) days a "late charge" of ten cents ($.10) for each
dollar ($1.00) so overdue may be charged by the holder hereof for the purpose of
defraying the expense incident to handling such delinquent payment.
The Borrower agrees that in the event of the happening of any one or
more of the following: (1) the breach of any of the covenants and agreements
contained in this Note or in the Note and Mortgage Modification, Spreader,
Extension and Security Agreement dated of even date herewith, by and among the
Borrower, the Lender, Town of North Greenbush Industrial Development Agency with
consent from Renssselaer Polytechnic Institute (the "Mortgage") which secures
this Note or any other agreement by and between the Borrower and the Lender; (2)
the occurrence of an Event of Default as defined in the Mortgage; (3) the
dissolution of the Borrower; (4) any petition of bankruptcy being filed by or
against the Borrower or any guarantor hereof; (5) the making by the Borrower or
any guarantor hereof of an assignment for the benefit of creditors; or (6) the
sale or other conveyance of any portion of the premises which are the subject of
the Mortgage, then the whole of the principal sum or any part thereof, and of
other sums of money secured by the Mortgage shall, forthwith or thereafter, at
the option of the Lender, become immediately due and payable without demand or
notice, and all of the covenants, agreements, terms and conditions of the
Mortgage are hereby incorporated herein with the same force and effect as if
herein set forth at length.
Notwithstanding anything to the contrary herein contained, to the
extent that the total amount of interest received in any year exceeds the
maximum rate permitted by law, then the amount so determined to be in excess
shall be applied in reduction of principal of this Note.
This Note is secured by, among other things, the Mortgage, which
consolidates mortgages given or assigned to the Lender on the real property
described therein.
This Note may not be changed or terminated orally.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived.
If this Note is placed with an attorney for collection, the Borrower
shall pay all reasonable attorney's fees and expenses incurred by Lender in
connection therewith.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note the day and
year first above written.
IFS INTERNATIONAL, INC.
By:___________________________
Its:___________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
--------------------------------
Notary Public
EXHIBIT 10.19
NOTE AND MORTGAGE CONSOLIDATION, MODIFICATION,
SPREADER, EXTENSION AND SECURITY AGREEMENT
THIS NOTE AND MORTGAGE CONSOLIDATION, MODIFICATION, SPREADER, EXTENSION
AND SECURITY AGREEMENT (hereinafter referred to as the "Agreement" or the
"Mortgage"), dated April 15, 1999 by IFS INTERNATIONAL, INC., a New York
business corporation with its principal executive office and an office for the
transaction of business located at 300 Jordan Road, Troy, New York 12180 (the
"Borrower"), TOWN OF NORTH GREENBUSH INDUSTRIAL DEVELOPMENT AGENCY, a public
benefit corporation existing under the laws of the State of New York with its
principal executive office and an office for the transaction of business located
at Wyantskill School Building, 2 Douglas Street, Wyantskill, New York 12198 (the
"Mortgagor"), NEW YORK BUSINESS DEVELOPMENT CORPORATION, a banking corporation
organized and existing under Article 5 of the Banking Law of the State of New
York having an office at 41 State Street, Albany, New York 12207 (the
"Mortgagee") and RENSSELAER POLYTECHNIC INSTITUTE, a New York not-for-profit
corporation having an address of 110 8th Street, Troy, New York 12180 (the
"Ground Lessor").
W I T N E S S E T H:
WHEREAS, pursuant to a certain bond and mortgage separation and
assignment agreement dated on or about the date hereof by and among the
Mortgagor, the Mortgagee, Hudson River Bank & Trust Company and KeyBank National
Association and recorded in the Office of the Rensselaer County Clerk
immediately prior to the recordation hereof, the Mortgagee is the holder of the
following mortgages (the "Existing Mortgages") and the notes secured thereby
(the "Existing Notes"):
a four and one half percent (4.50%) interest in a certain mortgage and
security agreement given by the Mortgagor with consent from the Ground
Lessor to KeyBank National Association in the original principal amount
of One Million One Hundred Ninety Thousand and 00/100 Dollars
($1,190,000.00) dated as of October 2, 1997 and recorded in the Office
of the Rensselaer County Clerk on December 24, 1997 in Roll 79 at Frame
1952 having an outstanding principal balance as of the date hereof of
$1,132,400.00.
a mortgage and security agreement from the Borrower and the Mortgagor
with consent from the Ground Lessor in the original principal amount of
Nine Hundred Forty Nine Thousand Forty Two and 00/100 Dollars
($949,042.00) dated the date hereof and recorded in the Office of the
Rensselaer County Clerk simultaneously herewith.
WHEREAS, the Mortgagee and the Mortgagor, the fee simple owner of the
Improvements (as hereinafter defined) and the Borrower have mutually agreed to
consolidate and modify the terms of the Existing Notes and the Existing
Mortgages in the manner hereinafter appearing; and
NOW THEREFORE, in pursuance of said agreement and in consideration of
the sum of One Dollar ($1.00) and other good and valuable consideration each to
the other in hand paid, receipt of which is hereby acknowledged, the parties
hereto mutually covenants and agree as follows:
A. The Borrower covenants, represents and warrants that:
(i) There is, as of the date hereof, secured by the Existing
Mortgages, the aggregate unpaid principal sum of One Million and 00/100 Dollars
($1,000,000.00) together with interest thereon from the date hereof and other
sums or charges evidenced thereby;
(ii) There are no defenses, offsets or counterclaims of any
kind or nature whatsoever against the Existing Mortgages or the Existing Notes
and as of the date hereof, no Event of Default has occurred, nor has any event
occurred which would be an Event of Default under the Existing Mortgages or the
Existing Notes with the passage of time, the giving of notice or both;
(iii) The Borrower is a business corporation duly formed,
validly existing and in good standing under the laws of the State of New York
and has the power and capacity to enter into this Agreement and to mortgage and
pledge the property encumbered hereby in the manner and to the extent herein set
forth and the foregoing has been authorized by all requisite corporate action.
The Existing Mortgages and the Existing Notes constitute legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms;
(iv) The execution and delivery of this Agreement have not
violated and will not violate the terms of (i) the articles of incorporation or
by-laws of the Borrower, (ii) any statute, law, rule, order, judgment or decree
of any governmental authority binding upon the Borrower or any of the property
of the Borrower or (iii) any agreement, indenture or other instrument binding
upon or affecting the Borrower or its property; and
(v) There are no actions, suits, appeals or proceedings
pending or, to the best of the Borrower's knowledge, threatened against or
affecting, the Borrower which may materially adversely affect the financial
condition of the Borrower, or the validity or enforceability of the Existing
Notes or the Existing Mortgages or the priority of the lien thereof, at law or
in equity, or before or by any governmental authority; and the Borrower is not
in default with respect to any order, writ, judgment, decree or demand of any
court or any governmental authority.
B. The Mortgagor covenants, represents and warrants that:
(i) The Mortgagor is a public benefit corporation duly formed,
validly existing and in good standing under the laws of the State of New York
and has the power and capacity to enter into this Agreement and to mortgage and
pledge the property encumbered hereby in the manner and to the extent herein set
forth and the foregoing has been authorized by all requisite corporate action.
The Existing Mortgages constitute legal, valid and binding obligations of the
Mortgagor enforceable against the Mortgagor in accordance with their respective
terms;
(ii) The execution and delivery of this Agreement have not
violated and will not violate the terms of (i) the by-laws of the Mortgagor,
(ii) any statute, law, rule, order, judgment or decree of any governmental
authority binding upon the Mortgagor or any of the property of the Mortgagor or
(iii) any agreement, indenture or other instrument binding upon or affecting the
Mortgagor or its property; and
(iii) There are no actions, suits, appeals or proceedings
pending or, to the best of the Mortgagor's knowledge, threatened against or
affecting, the Mortgagor which may materially adversely affect the financial
condition of the Mortgagor, or the validity or enforceability of the Existing
Mortgages or the priority of the lien thereof, at law or in equity, or before or
by any governmental authority; and the Mortgagor is not in default with respect
to any order, writ, judgment, decree or demand of any court or any governmental
authority.
C. The liens of the Existing Mortgages are hereby consolidated and
coordinated so that together they shall hereafter constitute in law but one
mortgage, a single lien upon the Mortgaged Property (hereinafter defined)
securing the Existing Notes.
D. If not heretofore granted, conveyed, bargained, sold, set over,
transferred, assigned, pledged and mortgaged unto the Mortgagee, the liens,
grants, conveyances, transfers, assignments and pledges of the Existing
Mortgages are hereby spread so that the Existing Mortgages shall cover, create a
security interest in and be a mortgage Lien upon, and the Borrower and the
Mortgagor do hereby grant, convey, bargain, sell, transfer, assign and pledge
unto the Mortgagee, and grant a security interest unto the Mortgagee in, all of
the following property (the "Mortgaged Property") as security for the
Indebtedness (hereinafter defined):
ALL right, title and interest of the Mortgagor and the
Borrower in and to a leasehold interest pursuant to the Ground Lease (as
hereinafter defined) in that certain real property described in Schedule "A"
attached hereto and made a part hereof (such leasehold interest being
hereinafter referred to as the "Land"), together with the right, title and
interest of Mortgagor and the Borrower, now owned or hereinafter acquired, in
and to the streets, the land lying in the bed of any streets, roads or avenues,
opened or proposed, in front of, adjoining or abutting the Land to the center
line thereof and strips and gores within or adjoining the Land, the air space
and right to use said air space above the Land, all rights of way, privileges,
liberties, hereditaments and all easements now or hereafter affecting the Land,
all royalties and all rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights;
TOGETHER with the buildings and improvements now or hereafter
erected on the land (the "Improvements") (the Land and Improvements are
hereinafter collectively referred to as the "Real Estate");
TOGETHER with all and singular the tenements, hereditament and
appurtenances belonging or in any way appertaining to the Real Estate, and the
reversion or reversions, remainder or remainders, rents, issues, profits and
revenue thereof; and also all of the estate, right, title, interest, dower and
right of dower, courtesy and rights of courtesy, property, possession, claim and
demand whatsoever, both in law and equity, of Mortgagor and Borrower, of, in and
to the Real Estate and of, in and to every part and parcel thereof, with the
appurtenances, at any time belonging or in any wise appertaining thereto;
TOGETHER with all of the fixtures and equipment of every kind
and nature whatsoever currently owned or hereafter acquired by Borrower or
Mortgagor, and all appurtenances and additions thereto and substitutions or
replacements thereof, now or hereafter attached to, or intended to be attached
to (though not attached to) the Real Estate or placed on any part thereof (such
fixtures and equipment are hereinafter collectively referred to as the
"Equipment"), including, but not limited to all plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, incinerating, and
escalator, elevator, power loading and unloading equipment and systems,
sprinkler systems and other fire prevention and extinguishing apparatus and
pipes, pumps, above ground or underground storage tanks, conduits, fittings and
fixtures; it being understood and agreed that all Equipment is appropriated to
the use of the Real Estate and, whether affixed or annexed or not, for the
purposes of this Mortgage shall be deemed conclusively to be Real Estate and
mortgaged hereby; and Mortgagor and Borrower hereby agree to execute and
deliver, from time to time, such further instruments (including security
agreements), as may be requested by Mortgagee to confirm the lien of this
Mortgage on the Equipment;
TOGETHER with all right, title and interest of the Mortgagor
and the Borrower in, to and under that certain ground lease dated May 26, 1983
from the Ground Lessor to Pacamor Bearings, Inc. a memorandum of which was
recorded in the Rensselaer County Clerk's Office on December 17, 1984 in Liber
1372 of Deeds at Page 891 as subsequently amended and assigned (as further
amended or supplemented from time to time, the "Ground Lease");
TOGETHER with all unearned premiums, accrued, accruing or to
accrue under insurance policies now or hereafter obtained by Mortgagor and/or
Borrower and Mortgagor's and Borrower's interest in and to all proceeds of the
conversion and the interest payable thereon, voluntary or involuntary, of the
Real Estate, and/or Equipment, or any part thereof, into cash or liquidated
claims, including, without limitation, proceeds of casualty insurance, title
insurance or any other insurance maintained on the Mortgaged Property, and the
right to collect and receive the same and all awards and/or other compensation
including the interest payable thereon and the right to collect and receive the
same heretofore and hereafter made to the present and all subsequent owners of
the Mortgaged Property by the United States, the State of New York or any
political subdivision thereof or any agency, department, bureau, board,
commission, or instrumentality of any of them, now existing or hereafter created
(collectively, "Governmental Authority") for the taking by eminent domain,
condemnation or otherwise, of all or any part of Mortgaged Property, including
all awards for any change or changes of grade or the widening of streets, roads
or avenues affecting the Real Estate;
TOGETHER with all rights, title and interest of Mortgagor and
the Borrower in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by or released to Mortgagor and/or
Borrower or constructed, assembled or placed by Mortgagor and/or Borrower on the
Real Estate, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in each such case, without further
mortgage, conveyance, assignment or other act by Mortgagor and/or Borrower, the
same shall become subject to the lien of this Mortgage as fully and completely,
and with the same effect, an though now owned by Mortgagor and/or Borrower and
specifically described herein;
TOGETHER with all proceeds, both cash and noncash, of the
foregoing which may be sold or otherwise be disposed of;
TOGETHER with any and all monies or hereafter on deposit for
the payment of real estate taxes or special assessments against the Real Estate
or for the payment of premiums on policies of fire and other hazard insurance
covering the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property and the properties,
rights and privileges hereby granted, bargained, sold, conveyed, mortgaged,
warranted, pledged and assigned, and in which a security interest is granted or
intended to be, unto Mortgagee, its successors and assigns, forever, for the
uses and purposes herein set forth.
E. The Borrower shall pay the indebtedness evidenced by the Existing
Notes in accordance with the terms set forth in that certain amended and
restated note, dated the date hereof, in the principal amounts of $1,000,000.00,
from the Borrower in favor of the Mortgagee and by this reference made a part
hereof. The terms, covenants, conditions and provisions of the Existing Notes
shall be and hereby are modified, superseded and replaced by the terms,
covenants, conditions and provisions set forth therein such that any reference
herein to "Note", "note", "Notes" or "notes" or indebtedness shall be deemed to
refer collectively thereto.
E. The Borrower certifies that this Agreement secures the same
indebtedness evidenced by the Existing Notes and secured by the Existing
Mortgages and secures no further or other indebtedness or obligation.
F. The Borrower and the Mortgagor hereby (i) ratify and confirm the
lien, conveyance and grant contained in and created by the Existing Mortgages
and (ii) agrees that nothing contained in this Agreement is intended to or shall
impair the lien, conveyance and grant of the Existing Mortgages.
G. The terms, covenants and conditions of the Existing Mortgages shall
be and hereby are modified, superseded and replaced by the following terms,
covenants and conditions, and the Borrower and the Mortgagor agree to comply
with and be subject to all of the terms, covenants and conditions of the
Existing Mortgages, as modified hereby:
1. Warranty of Title. Borrower represents and warrants to Mortgagee that it
and the Mortgagor are lawfully seized of a leasehold interest in the Land and a
fee simple interest in the Improvements and the Equipment, and that it has good
and marketable title thereto free and clear of all encumbrances, liens,
covenants, restrictions, reservations, conditions, and easements other than
those identified in and not omitted from Schedule B to Chicago Title Insurance
Policy No. 9903.30450. Borrower represents and warrants that this Mortgage
constitutes a valid first mortgage lien on the Mortgaged Property; and Borrower
covenants to (a) warrant and preserve such title and the validity and priority
of the lien hereof and defend the same to Mortgagee against the claims of all
and every person or persons, corporation or corporations and parties whomsoever
claiming or threatening to claim the same or any part thereof and (b) make,
execute, acknowledge and deliver all such further or other documents,
instruments or assurances, and cause to be done all such further acts and things
as may at any time hereafter be reasonably desired or required by Mortgagee to
fully protect the lien of this Mortgage.
2. Payment of Indebtedness. Borrower shall duly and punctually pay the
Indebtedness at the times and places and in the manner specified in the Existing
Note and in this Agreement and shall perform all of its obligations in
accordance with the terms of this Agreement.
3. Proper Care and Use.
(a) Borrower shall:
(i) not abandon the Mortgaged Property or any part
thereof;
(ii) maintain the Mortgaged Property and the abutting
grounds, sidewalks, roads, parking and landscape areas in
good repair, order and condition;
(iii) promptly make all necessary repairs, renewals,
replacements and additions to the Mortgaged Property;
(iv) not commit or suffer wastes (other than
ameliorative waste) with respect to the Mortgaged Property:
(v) complete promptly and in a good workerlike manner
any new improvements constructed on the Land;
(vi) not commit, suffer or permit any act to be done in
or upon the Mortgaged Property in violation of any law,
ordinance or regulation;
(vii) (A) refrain from impairing or diminishing the
value or integrity of the Mortgaged Property or the security
value of this Mortgage; (B) not remove, demolish or in any
material respect alter any of the Improvements, Equipment or
Personalty without the prior written consent of Mortgagee;
or (C) not make, install or permit to be made or installed,
any alterations or additions thereto if doing so will impair
the value of the Mortgaged Property; and
(viii) not make, suffer or permit any nuisance to exist
on any of the Mortgaged Property.
(b) Mortgagee and any persons authorized by Mortgagee shall have
the right to enter and inspect the Mortgaged Property at all
reasonable times upon reasonable notice. If an Event of Default shall
have occurred and be continuing or in the event of an emergency,
Mortgagee and any persons authorized by Mortgagee may (without being
obligated to do so) enter or cause entry to be made upon the Real
Estate and repair and/or maintain the same as Mortgagee may reasonably
deem necessary or advisable, and may (without being obligated to do
so) make such expenditures and outlays of money as Mortgagee may deem
reasonably appropriate for the preservation of the Mortgaged Property.
All expenditures and outlays of money made by Mortgagee pursuant
hereto shall be secured hereby and shall be payable on demand together
with interest at the rate set forth in the Note from the date of such
expenditure or outlay until paid.
4. Requirements.
(a) Borrower represents and warrants that the Mortgaged Property
complies with and conforms to, and Borrower, at Borrower's sole cost
and expense, shall continue to promptly comply with and conform to, or
cause the Mortgaged Property to comply with and conform to, all
present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, injunctions, rules, regulations and requirements
pertaining to the Mortgaged Property, including any and all applicable
federal, state or local environmental laws and regulations, all zoning
or building, use and land use laws, ordinances, rules or regulations
and all covenants, restrictions and conditions now or hereafter of
record which may be applicable to Borrower or to any of the Mortgaged
Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of
the Mortgaged Property (collectively, the "Legal Requirements").
(b) Without limiting the generality of the foregoing, Borrower
covenants to operate the Mortgaged Property (whether or not such
property constitutes a "Facility" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") so that no cleanup or other obligation arises in
respect of CERCLA or other applicable Federal law or under any state,
local or municipal law, statute, ordinance, rule or regulation
designed to protect the environment, which would constitute a lien or
charge on the Mortgaged Property prior to that of Mortgagee. If any
such claim be made or any obligation should nevertheless arise
hereafter, Borrower agrees that it will, at its own expense, (a)
promptly cure same and (b) will indemnify Mortgagee from any
liability, responsibility or obligation in respect thereof or in
respect of any cleanup or other liability as successor, secured party
or otherwise (regardless of whether or not Mortgagee may deem to be
"owner or operator" under CERCLA) for any reason including, but not
limited to, the enforcement of Mortgagee's rights as a secured party
under this Mortgage, or any obligation of law.
5. Payment of Impositions.
(a) Borrower shall pay and discharge before the last date payment may
be made without the imposition of interest or a penalty all taxes of every
kind and nature (including, without limitation, all real and personal
property, payments in lieu of real property, income, franchise,
withholding, profits and gross receipts taxes), all charges for any
easement or agreement maintained for the benefit of any of the Mortgaged
Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other
public charges whether of a like or different nature, even if unforeseen or
extraordinary, imposed upon or assessed on or against Borrower or any of
the Mortgaged Property, together with any interest or penalties on any of
the foregoing (all of the foregoing are hereinafter collectively referred
to as the "Impositions"). Borrower shall deliver to Mortgagee receipts
satisfactory to Mortgagee evidencing the payment of all such impositions
within thirty days of the date each such imposition is due and payable.
Upon Borrower's failure to submit evidence of payment within such thirty
day period, it shall be deemed an Event of Default under Section 15 hereof.
(b) Mortgagee shall have the right to pay any Imposition not paid by
Borrower on or after the last date payment of such Imposition may be made
without imposition of interest or a penalty (subject to Borrower's right to
contest such Imposition as hereinbefore provided), and the amount thereof
together with interest thereon at the Default Rate (as hereinafter
defined), shall be added to the Indebtedness, payable on demand, and shall
be secured by this Agreement.
6. Insurance.
(a) Borrower shall, (i) keep the Real Estate (A) insured against loss
or damage by fire, lightning, windstorm, tornado and by such other further
and additional risks and hazards as now or hereinafter may be covered by
extended coverage and "all risk" endorsements, (B) insured against loss or
damage by any other risk commonly insured against by persons occupying or
using like properties in the locality in which the Real Estate is situated,
(ii) keep the equipment and personality insured against loss or damage by
fire, lightning, windstorm, tornado and theft and by such other further and
additional risks as now or hereinafter may be covered by extended coverage
and "all risks" endorsement, (iii) obtain and maintain comprehensive public
liability insurance on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury, death or property
damage occurring on, in or about the Mortgaged Property and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than One Million Dollars
($1,000,000.00) combined single limit for personal injury or death to one
or more persons or damage to property, (iv) to the extent the Land lies
within an area identified by the Secretary of Housing and Urban Development
as an area having special flood hazards, keep the Real Estate insured under
a policy of flood insurance in an amount reasonably requested by Mortgagee.
Each insurance policy shall (i) be noncancelable (which terms shall include
any reduction in the scope or limits of coverage) without at least ten (10)
days prior written notice to Mortgagee or (ii) except in the case or
worker's compensation and comprehensive public liability insurance, be
endorsed to name Mortgagee as its interest may appear, with loss payable to
Mortgagee, without contribution, under a standard mortgagee clause and in
the case of comprehensive public liability insurance, be endorsed to name
mortgagee as its interest may appear, with loss payable to Mortgagee,
without contribution, under a standard mortgagee clause and in the case of
comprehensive public liability insurance be endorsed to name Mortgagee as
an additional named insured, (iii) in the case of property insurance,
provide for deductibles acceptable to Mortgagee, (iv) be written by
companies acceptable to Mortgagee, and (v) contain an endorsement or
agreement by the insurer that any loss shall be payable in accordance with
the terms of such policy notwithstanding any act or negligence of Borrower
which might otherwise result in forfeiture of said insurance and the
further agreement of the insurer waiving all rights of set off,
counterclaim, deduction or subrogation against Borrower. Borrower hereby
directs all insurers under such policies (except worker's compensation and
comprehensive public liability insurance) to pay all proceeds payable
thereunder directly to Mortgagee.
(b) Borrower shall (i) pay as they become due all premiums for such
insurance, and (ii) not later than ten (10) days prior to the expiration of
each policy to be furnished pursuant to the provisions of this Section 6,
deliver a valid certificate of insurance (or if such certificate is not
then available, a renewal binder), evidencing a renewed policy or policies
marked "premium paid", or accompanied by such other evidence of payment
satisfactory to Mortgagee with standard noncontributory mortgage clauses in
favor or and acceptable to Mortgagee. Notwithstanding the foregoing,
Borrower shall not be required to provide proof of payment if Borrower and
such insurance company agree to an alternative, i.e., installment, method
of payment, and Mortgagee receives reasonably satisfactory evidence of the
terms of such payment arrangement. Such certificate of insurance (or
renewal binder) shall be accompanied by a written statement of Borrower
certifying that the insurance coverage evidenced thereby complies with the
requirements of this Section 6.
(c) If Borrower shall be in default of its obligations to so insure or
deliver any such prepaid certificate of insurance or renewal binder then
Mortgagee, at Mortgagee's option, after notice to Borrower (except that no
notice shall be required if the insurance has expired or been canceled or
terminated), may effect such insurance and pay the premium or premiums
therefor, and the amount of such premium or premiums so paid by Mortgagee,
with interest from the time of payment at the Default Rate (as hereinafter
defined), shall be added to the Indebtedness, payable on demand, and shall
be secured by this Mortgage.
7. Impositions and Insurance Escrow. Borrower, upon Mortgagee's request,
shall pay to Mortgagee an amount equal to one-twelfth of the estimated aggregate
annual amount of (i) all Impositions payable on the Mortgaged Property, and (ii)
insurance premiums on all policies of insurance required by this Mortgage, on a
specified date each month. Following receipt of Mortgagee's request, Borrower
shall cause all bills, statements or other documents relating to such
Impositions and insurance premiums to be sent or mailed directly to Mortgagee
pursuant to this Section 7. Mortgagee shall pay such amounts as may be due
thereunder out of the funds so deposited with Mortgagee. if at any time and for
any reason the funds deposited with Mortgagee are or will be insufficient to pay
such amounts as may then or subsequently be due, Mortgagee may notify Borrower
and Borrower shall immediately deposit an amount equal to such deficiency with
Mortgagee. Notwithstanding the foregoing, nothing contained herein shall cause
Mortgagee to be deemed a trustee of said funds or to be obligated to pay any
amounts in excess of the amount of funds deposited with Mortgagee pursuant to
this Section 7, and Borrower shall be entitled to no interest thereon.
8. Condemnation/Eminent Domain. Mortgagor and Borrower hereby irrevocably
assign to Mortgagee, as additional security for the payment of the Indebtedness,
all of their respective awards and/or other compensation, including interest
payable thereon, hereafter made by any Governmental Authority for the taking by
eminent domain, condemnation or otherwise, of all or any part of the Mortgaged
Property ("Awards"). Mortgagor and Borrower agree that all such Awards shall be
paid to Mortgagee and, subject to the provisions of Article VII of the Lease
Agreement (as hereinafter defined), shall be applied by Mortgagee, after the
payment of all of its expenses in connection with such proceedings, including
costs and attorneys' fees, to the reduction of the Indebtedness with the balance
(if any) to be paid to Borrower. Mortgagor and Borrower hereby authorize
Mortgagee, on behalf and in the name of Mortgagor and Borrower, to collect,
execute and deliver valid acquittances for, and to appeal from, any such Awards.
9. Discharge of Liens, Utilities. (a) Mortgagor and Borrower shall not,
without prior written consent of Mortgagee, create, consent to or suffer the
creation of any liens, charges or encumbrances (each, a "Prohibited Lien") on
any of the Mortgaged Property, whether or not such Prohibited Lien is
subordinate to this Mortgage, or fail to have any Prohibited Lien which may be
imposed without Borrower's consent discharged and satisfied or record within
thirty (30) days after it is imposed, except those liens bonded while being
contested. Borrower shall pay when due all lawful claims and demands of
mechanics, material persons, laborers and others which, if unpaid, might result
in, or permit the creation of a Prohibited Lien, except that Borrower shall have
the right to contest such claims or demands, provided that Borrower shall
furnish a good and sufficient bond, surety or other security satisfactory to
Mortgagee.
(b) Borrower shall pay when due all utility charges which are incurred
by it for gas, electricity, water or sewer services and all other
assessments or charges of a similar nature, whether public or private and
whether or not such taxes, assessments or charges are liens on the
Mortgaged Property.
10. Estoppel Certificates. From time to time, within ten (10) days after a
request of Mortgagee, Borrower shall furnish a written statement, signed and, if
requested, acknowledged, setting forth the amount of the Indebtedness which the
Borrower acknowledges to be secured hereby, specifying any claims of offset or
defense which Borrower asserts against the Indebtedness, and, at the request of
the Mortgagee, the then state of facts relevant to the condition of the
Mortgaged Property.
11. Expenses. Borrower shall pay, together with any interest or penalties
imposed in connection therewith, all expenses incident to the preparation,
execution, acknowledgment, delivery and/or recording of this Mortgage,
including, without limitation, all filing, registration or recording fees and
all federal, state, county and municipal, internal revenue or other stamp taxes
and other taxes, duties, imposts, assessments and charges now or hereafter
required by the federal, state, county or municipal government, the legal fees
of the Mortgagee's Attorney, survey charges, title insurance premiums, and any
other expenses connected with this transaction.
12. Mortgagee's Costs and Expenses. Upon the occurrence of any Event of
Default or the proper exercise by Mortgagee of any Mortgagee's rights hereunder,
or if any action or proceeding be commenced, to which action or proceeding
Mortgagee is or becomes party or in which it becomes necessary to defend or
uphold the lien of this Mortgage, or if the taking, holding or servicing of this
Mortgage by Mortgagee is alleged to subject Mortgagee to any civil fine, or if
Mortgagee's review and approval of any document is requested by Borrower or
required by Mortgagee in connection therewith, then any fees incurred by
Mortgagee in connection therewith (including any civil fines and attorneys' fees
and disbursements) shall, after notice and demand, be paid by Borrower, or, if
paid by Mortgagee, the amount thereof, together with interest thereon at the
Default Rate (as such term is hereinafter defined) shall be added to the
Indebtedness, payable on demand, and shall be secured by this Mortgage; and, in
any action to foreclose this Mortgage, or to recover or collect the
Indebtedness, the provisions of this Section 12 with respect to the recovery of
costs, disbursements and allowances shall prevail unaffected by the provisions
of any law with respect to the same to the extent that the provisions of this
Section 12 are not violative thereof.
13. Mortgagee's Right to Perform. If any Event of Default shall have
occurred hereunder and be continuing, Mortgagee, may (but shall be under no
obligation), cure the same, and the cost thereof, with interest at a fluctuating
per annum rate (the "Default Rate") equal to the rate of interest announced
publicly by Mortgagee from time to time as its Prime Rate plus three percent
(3%) per annum, shall be added to the Indebtedness, payable on demand, and shall
be secured by this Mortgage. No payment or advance of money by Mortgagee under
this Mortgage shall be deemed or construed to cure any Event of Default arising
out of the non-payment of such amount by Borrower or waive any right or remedy
of Mortgagee hereunder. The lien of this Mortgage with respect to such amounts
shall be prior to any right, title to, interest in or claim upon the Mortgaged
Property attaching subsequent to the lien of this Mortgage.
14. Further Assurances. Mortgagor and Borrower agree, upon demand of
Mortgagee, to do any act or execute any additional documents (including, but not
limited to, security agreements on any Equipment or Personalty included or to be
included in the Mortgaged Property) as may be reasonably required by Mortgagor
and Borrower to confirm the lien of this Mortgage.
15. Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default by Borrower hereunder:
(a) default in the payment of all or any portion of any installment of
principal and/or interest as and when the same become due under the
Existing Note, which default continues for a period in excess of fifteen
(15) days from such due date; or
(b) default in the performance or observance of any covenant on the
part of the Mortgagor or Borrower to be performed or observed hereunder, or
under any other agreement between Borrower and Mortgagee which default
continues beyond the expiration of any applicable grace or notice period
expressly provided herein, or if no grace period is expressly provided, if
the default continues more than fifteen (15) days after the giving of
written notice thereof from Mortgagee, or, if such default is of such a
nature that it cannot with due diligence be cured within fifteen (15) days,
if Borrower shall fail to commence to cure such default with such fifteen
(15) day period and thereafter prosecute such cure diligently; or
(c) if Mortgagor or Borrower shall sell, convey, assign or transfer
(other than a transfer as the result of a taking by condemnation or eminent
domain) the Mortgaged Property or any part thereof or interest therein (any
sale, conveyance, assignment or transfer of a controlling interest in
Borrower being deemed a sale of the Mortgaged Property for purposes
hereof), or of the Mortgaged Property or any part thereof or interest
therein, including, without limitation, any rents, royalties, profits,
income or revenue arising therefrom, is further mortgaged, pledged or
encumbered; or
(d) the voluntary suspension of all or a substantial part of its
business by Borrower, the insolvency of the Borrower or any guarantor
hereof, the commencement of any proceedings under any bankruptcy or
insolvency law by or against the Borrower, an assignment for the benefit of
creditors by Borrower, or any guarantor hereof, application for consent to
the appointment of any receiver or trustee for the Borrower, or any
assignment to an agent authorized to liquidate any substantial part of the
assets of Borrower; or
(e) the occurrence of an Event of Default under the Note or under any
of the Lease Documents (as defined in the hereinafter defined Lease
Agreement); or
(f) failure to provide copies of paid tax bills required to be
provided pursuant to Article 5 of this Mortgage; or
(g) failure to provide copies of any financial statement required to
be provided to article 26 of this mortgage.
16. Remedies. Upon the occurrence of any Event of Default hereunder,
Mortgagee may declare the entire Indebtedness to be immediately due and payable
without presentment, demand, protest or notice of any kind, and Mortgagee may
take any and all actions permitted at law or in equity, without notice or
demand, as it deems advisable to protect and enforce Mortgagee's rights against
Mortgagor and Borrower in and to the Mortgaged Property, including, but not
limited to, the following actions:
(a) Either in person or by agent, with or without bringing any action
or proceeding, or by a receiver appointed by a court and without regard to
the adequacy of its security, enter upon or take possession of Mortgaged
Property, or any part thereof, and do any acts which it deems necessary or
desirable to preserve the value, marketability or rentability of the
Mortgaged Property, or any part thereof or interest therein, or increase
the income therein, or increase the interest therefrom or protect the
security hereof and, with or without taking possession of the Mortgaged
Property, sue for or otherwise collect the rents, issues and profits
thereof, including those past due and unpaid and apply the same, less costs
and expenses of operations and collection, including reasonable attorneys'
fees and expenses, against the Indebtedness, all in such order as Mortgagee
may determine. The entering upon and taking possession of the Mortgaged
Property, the collection of such rents, issues and profits and the
application thereof as foresaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done in response to such
default, and notwithstanding the continuance in possession of the Mortgaged
Property or the collection, receipt and application of rents, issues or
profits, Mortgagee shall be entitled to exercise every right provided for
in the Existing Note, this Mortgage or by law upon occurrence of any Event
of Default, including the right to exercise the power of sale.
(b) Commence an action to foreclose this Mortgage as a lien, and sell
the Mortgaged Property under the judgment or decree of a court of competent
jurisdiction.
(c) Appoint a receiver, as provided herein.
(d) Specifically enforce any of the covenants on the part of the
Mortgagor and Borrower contained herein.
In the event that Mortgagee elects to exercise its right to declare the
entire indebtedness immediately due and payable, Mortgagee shall not be deemed
to have waived its right to collect any prepayment penalty payable pursuant to
the Existing Note.
17. Proceeds of Sale Under Security Agreement. The purchase money proceeds
of any sale made pursuant to any security agreement contained in this Mortgage
shall be distributed according to the provisions of the Uniform Commercial Code
of the State of New York.
18. Appointment of Receiver. If an Event of Default shall have occurred and
be continuing, Mortgagee as a matter of right without notice to Mortgagor or
Borrower, and without regard to the then value of the Mortgaged Property or the
interest of Mortgagor or Borrower therein, shall have the right to apply to any
court having jurisdiction to appoint a receiver or receivers of the Mortgaged
Property. Mortgagor and Borrower irrevocably consent to such appointment and
waive notice of any application therefor.
19. Extension, Release, etc. Without affecting the lien or charge of this
Mortgage upon any portion of the Mortgaged Property not then or therefore
released as security for the full amount of all unpaid obligations, Mortgagee
may, from time to time and without notice, agree to (i) release any persons so
liable, (ii) extend the maturity or alter any of the terms of any such
obligation (provided, however, that Borrowers shall have consented to any such
extension or alteration), (iii) grant other indulgences, release or reconvey, or
caused to be released or reconveyed at any at Mortgagee's option any parcel,
portion or all of the Mortgaged Property, (iv) take or release any other or
additional security for the Indebtedness, or (v) make compromises or other
arrangements with debtors in relation thereto.
20. Remedies Not Exclusive. Mortgagee shall be entitled to enforce payment
or performance of the Indebtedness and to exercise all rights and powers under
this Mortgage or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, lien, security
interest, assignment or otherwise. Neither the acceptance of this Mortgage nor
its enforcement, whether by court action or pursuant to the power of sale or
other powers herein contained, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or hereafter
held by Mortgagee, it being agreed that Mortgagee shall be entitled to enforce
this Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as it may in its absolute discretion determine. No remedy
herein conferred upon or reserved to Mortgagee is intended to be exclusive of
any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law in equity or by statute. Every power or remedy
given to Mortgagee or to which it may be exercised, concurrently or
independently, from time to time as often as may be deemed expedient by
Mortgagee.
21. Security Agreement Under Uniform Commercial Code. It is the intention
of the parties hereto that this Mortgage shall constitute a Security Agreement
within the meaning of Article 9 of the Uniform Commercial Code of the State of
New York. Notwithstanding the filing of a financing statement covering any of
the Mortgaged Property in the records normally pertaining to personal property,
all of the Mortgaged Property, for all purposes and in all proceedings, legal or
equitable, shall be regarded, at Mortgagees' option (to the extent permitted by
law) as part of the Real Estate whether or not any such item is physically
attached to the Real Estate or serial numbers are used for the better
identification of certain items. The mention in any such financing statement of
any of the Mortgaged Property shall never be construed as in any way derogating
from or impairing this declaration and it is the hereby stated intention of the
parties that such mention in protection of Mortgagee in the event any court
shall at any time hold that notice of Mortgagee's priority of interest, to be
effective against any third party, including the federal government and any
authority or agency thereof, must be filed in the Uniform Commercial Code
records. Mortgagor and Borrower hereby agree that each shall execute and hereby
authorizes Mortgagee to file any financing and continuation statements which
Mortgagee shall determine in its sole discretion are necessary or advisable in
order to perfect it security interest in the Equipment and Personalty covered by
this Mortgage, and Borrower shall pay any expenses incurred by Mortgagee in
connection with the preparation, execution and filing of such statements that
may be filed by Mortgagee, or, if paid by Mortgagee, such amounts, together with
interest at the Default Rate, shall be added to the Indebtedness, payable on
demand, and shall be secured by this Mortgage.
22. Indemnification; Waiver of Claim. If Mortgagee is made a party
defendant to any litigation concerning this Mortgage or the Mortgaged Property,
or any part thereof or interest therein, or the occupancy thereof by Borrower,
then Borrower shall indemnify, defend and hold Mortgagee harmless from all
liability by reason of said litigation (other than that arising from Mortgagee's
own willful misconduct or gross negligence), including reasonable attorneys'
fees and expenses incurred by Mortgagee in such litigation, whether or not any
such litigation is prosecuted to judgment. If Mortgagee commences an action
against Mortgagor and/or Borrower to enforce any of the terms thereof or because
of the breach by Mortgagor and/or Borrower of any of the terms hereof, or for
the recovery of any sum secured hereby, Borrower shall pay Mortgagee's
reasonable attorneys' fees and expenses, or, if paid by Mortgagee, the amount
thereof, together with interest thereon at the Default Rate, shall be added to
the Indebtedness, payable on demand, and shall be secured by this Mortgage. The
right to such attorneys' fees and expenses shall be deemed to have accrued on
the commencement of such action, and shall be enforceable whether or not such
action is prosecuted to judgment. If an Event of Default shall have occurred,
Mortgagee may engage an attorney or attorneys to protect its rights hereunder,
and in the event of such fees and expenses incurred by Mortgagee, whether or not
action is actually commenced against Mortgagor and/or Borrower by reason of such
Event of Default.
23. No Waivers, etc. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor or Borrower of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor and Borrower of
any and of all of the terms and provisions of this Mortgage to be performed by
Mortgagor and Borrower; Mortgagee may release, regardless of consideration and
without the necessity for any notice to or consent by the holder of any
subordinate lien on the Mortgaged Property, any part of the security held for
the obligations secured by this Mortgage without, was to the remainder of the
security, in any wise impairing or affecting the lien of this Mortgage or the
priority of such lien over any subordinate lien.
24. Notices. Whenever it is provided herein that notice, demand, request,
consent, approval or other communication shall or may be given to or served upon
either of the parties by the other, or whenever either of the parties desires to
give or serve upon the other any notice, demand, request, consent, approval, or
other communication with respect to this Mortgage or to the Mortgaged Property,
each such notice, demand, request, consent, approval or other communication
shall be in writing and shall be deemed to have been sufficiently given or
served when delivered by hand or by overnight courier service or when sent by
registered or certified mail, return receipt requested, postage prepaid,
directed to the party to receive the same at its address stated above or at such
other addresses as may be substituted by notice given upon receipt or, if
receipt is refused, three (3) days after waiting.
25. No Modification. This Mortgage may not be modified, amended, discharged
or waived in whole or in part except by an agreement in writing signed by the
party against whom enforcement of any such modification, amendment, discharge or
waiver is sought.
26. Financial Information; Covenants. (a) So long as the Indebtedness shall
be outstanding, Borrower shall deliver to Mortgagee, or shall cause to be
delivered to Mortgagee, as soon as they are available and in any event within
five (5) days of the issuance thereof, a copy of the annual 10k report and
quarterly 10Q report for the Borrower's corporate parent, IFS International,
Inc. Additionally, the Borrower shall submit or cause to be submitted such other
financial information as the Mortgagee shall reasonably request concerning any
tenant at the Mortgaged Premises. Upon Borrower's failure to submit any
statement or information required by this section within the time specified
therefore, it shall be deemed an event of default under Section 15 hereof.
(b) So long as the Indebtedness shall remain outstanding, the Borrower
shall maintain a minimum debt service coverage ratio combined with respect
to the Indebtedness and all indebtedness due and owing to Hudson River Bank
& Trust Company, its successors and assigns, of 1.20 to 1.00 to be tested
annually as of the close of each fiscal year of the Borrower.
(c) So long as the Indebtedness shall remain outstanding, the Borrower
shall maintain a debt to worth ratio not in excess of 1.25 to 1.00 to be
tested annually as of the close of each fiscal year of the Borrower.
27. Captions. The captions or headings at the beginning of each Article
hereof are for the convenience of the parties and are not a part of this
Mortgage.
28. Successors and Assigns. The covenants contained herein shall run with
the land and bind Borrower, its successors and assigns and all subsequent
owners, encumbrancers, tenants and subtenants of the Mortgaged Property, and
shall insure to the benefit of the Mortgagee, its successors, assigns and
endorsees.
29. Enforceability. All provisions of this Mortgage shall be construed as
affording to Mortgagee additional rights to and not exclusive of the rights
conferred under the provisions of Section 254 and 272 of the Real Property law
of the State of New York. The creation of this Mortgage, the perfection of the
lien or security interest in the Mortgaged Property, and the rights and remedies
of Mortgagee with respect to the Mortgaged Property, as provided herein and by
the laws of the State of New York, shall be governed by and construed in
accordance with the laws of the State of New York. Whenever possible, each
provision of this Mortgage shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Mortgage
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or validity, without invalidating
the remaining provisions of this Mortgage. Nothing in this Mortgage shall
require Borrower to pay, or Mortgagee to accept, interest or other payments in
an amount which would subject Mortgagee to penalty under applicable law. In the
event that the payment of any interest or other amounts due hereunder would be
in excess of the maximum amount allowed by applicable law, then ipso facto the
obligation of Borrower to make such payment shall be reduced to the highest rate
authorized by such law.
30. Trust Fund. This Mortgage is subject to the trust fund provisions of
Section 13 of the Lien Law of the State of New York; the Borrower shall receive
the proceeds of the Existing Note secured hereby, and shall hold the right to
receive such proceeds, as a trust fund to be applied first for the purpose of
paying the cost of any improvements before using any part of such proceeds for
any other purpose.
31. Miscellaneous. As used in this Mortgage, the singular shall include the
plural as the context requires and the following words and phrases shall have
the following meaning: (a) "including" shall mean "included but not limited to";
(b) "provisions" shall mean "provisions, terms, covenants and/or conditions";
(c) "lien" shall mean "lien, charge, encumbrance, security interest, mortgage
and/or deed of trust"; (d) "obligation" shall mean "obligation, duty, covenant
and/or condition"; and (e) "any of the Mortgaged Property" shall mean "the
Mortgaged Property or any part thereof or interest therein." Any act which
Mortgagee is permitted to perform hereunder may be performed at any time and
from time to time by Mortgagee or any person or entity designated by Mortgagee.
Any act which is prohibited to Borrower hereunder is also prohibited to all
lessees of any of the Mortgaged Property. Each appointment of Mortgagee and
attorney-in-fact for Borrower under the Mortgage is irrevocable and coupled with
an interest. Mortgagee has the right to refuse to grant its consent, approval or
acceptance or to indicate its satisfaction is required hereunder, except as
otherwise expressly provided herein.
32. Town of North Greenbush Industrial Development Agency Special
Obligations; Recording. (a) This Mortgage is executed by the Mortgagor solely
for the purpose of subjecting its fee ownership interest in the Premises to the
lien of this Mortgage and for no other purpose. All representations, covenants
and warranties of the Mortgagor herein are hereby deemed to have been made by
Borrower, and not by the Mortgagor. The parties hereby expressly agree that the
terms "Borrower" and "Mortgagor", as such are used in this Mortgage, shall not
be defined to include the Mortgagor.
(b) The obligations and agreements of the Mortgagor contained herein
and other instrument or documents executed in connection herewith or
therewith, and any other instrument or document supplemental thereto or
hereto, shall be deemed the obligations and agreements of the Mortgagor,
and not of any member, officer, agent (other than the Borrower) or employee
of the Mortgagor in his individual capacity, and the members, officers,
agents (other than the Borrower) and employees of the Mortgagor, shall not
be liable personally hereon or thereon or be subject to any personal
liability or accountability based upon or in respect hereof or thereof or
any transaction contemplated hereby or thereby.
(c) The obligations and agreements of the Mortgagor contained herein
and therein shall not constitute or give rise to an obligation of the State
of New York or the Town of North Greenbush, New York, and neither the State
of New York nor the Town of North Greenbush, New York, shall be liable
hereon or thereon, and, further, such obligations and agreements shall not
constitute or give rise to a general obligation of the Mortgagor, but
rather shall constitute limited obligations of the Mortgagor payable solely
from the revenues of the Mortgagor derived and to be derived from the
lease, sale or other disposition of the Mortgaged Property.
(d) No order or decree of specific performance with respect to any of
the obligations of the Mortgagor hereunder shall be sought or enforced
against the Mortgagor unless (i) the party seeking such order or decree
shall first have requested the Mortgagor in writing to take the action
sought in such order or decree of specific performance, and ten (10) days
shall have elapsed from the date of receipt of such request, and the
Mortgagor shall have refused to comply with such request (or, if compliance
therewith would reasonably be expected to take longer than ten days, shall
have failed to institute and diligently pursue action to cause compliance
with such request within such ten day period) or failed to respond within
such notice period, (ii) if the Mortgagor refuses to comply with such
request and the Mortgagor's refusal to comply is based on its reasonable
expectation that it will incur fees and expenses, the party seeking such
order or decree shall have placed in an account with the Mortgagor in
amount of undertaking sufficient to cover such reasonable fees and expenses
and (iii) if the Mortgagor refuses to comply with such request and the
Mortgagor's refusal to comply is based on its reasonable expectation that
it or any of its members, officers, agents (other than the Borrower) or
employees shall be subject to potential liability, the party seeking such
order or decree shall (A) agree to indemnify, defend and hold harmless the
Mortgagor and its members, officers, agents (other than the Borrower) and
employees against any liability incurred as a result of its compliance with
such demand, and (B) if requested by the Mortgagor, furnish to the
Mortgagor satisfactory security to protect the Mortgagor and its members,
officers, agents (other than the Borrower) and employees against all
liability expected to be incurred as a result of compliance with such
request.
(e) The Mortgagee will record or cause this Mortgage to be recorded in
all offices where the recordation hereof is necessary and will pay, or
cause to be paid, all documentary stamp taxes, if any, which may be imposed
by the United States of America or any agency thereof or by the State of
New York or other governmental authority upon this Mortgage.
33. Execution by Ground Lessor.
(a) This Mortgage has been executed by the Ground Lessor for the sole
purpose of having the Ground Lessor consent to this Mortgage.
(b) Notwithstanding any other provisions of this Mortgage, the parties
hereto agree as follows:
(i) the proceeds of any insurance or condemnation award allocable
to the Land and the Improvements shall be applied as required under
the terms of that certain lease agreement dated as of October 2, 1997
by and between the Mortgagor and the Borrower as amended by a first
amendment to lease agreement dated the date hereof as further amended
or supplemented from time to time, (the "Lease Agreement"); provided,
however, that in the event of a conflict between the provisions of the
Lease Agreement and the Ground Lease with respect to the application
of the proceeds of such insurance or condemnation award, the Lease
Agreement with respect thereto shall control; and
(ii) the Ground Lessor and the Borrower shall receive a copy of
all notices given or received by the Mortgagee pursuant to the
provisions of this Mortgage and the Mortgagee shall accept performance
of any covenant in default by the Ground Lessor, it is performed
within the time allotted to the Borrower or the Mortgagor to perform.
(c) The Mortgagee hereby agrees that in no event shall the Ground
Lessor be liable personally under this Mortgage or the Note or the Lease
Agreement and in no event shall any deficiency or personal judgment or
order or decree of specific performance with respect to the Ground Lessor
under the Note or this Mortgage or the Lease Agreement be sought or
enforced against the Ground Lessor, and the Mortgagee hereby specifically
waives and relinquishes any right it might otherwise have had to seek such
deficiency or personal judgment or order or decree of specific performance.
(d) The provisions of this Section 33 shall control over any contrary
or inconsistent provisions contained in this Mortgage or the Lease
Agreement.
(e) The Ground Lessor's execution of this Mortgage shall in no way be
construed as a waiver or modification of the Ground Lessor's rights against
the Borrower as provided in the Ground Lease except as expressly set forth
in this Section 33.
(f) The Mortgagee shall observe and perform all of the terms and
conditions in the Ground Lease on the part of the tenant thereunder to be
observed and performed if and when the Mortgagee shall enter into
possession of the Mortgagor's leasehold estate, or otherwise take steps to
enforce its security having the effect of depriving the said tenant of the
ability to fully perform its covenants and obligations under the Ground
Lease, and upon the exercise of any power of sale or any sale pursuant to
foreclosure or any other legal proceedings, the Mortgagee shall cause the
purchaser of the tenant's leasehold estate under the Ground Lease to
covenant with the Ground Lease landlord to observe and perform all the
terms and conditions of the Ground Lease on the part of the said tenant to
be observed and performed.
<PAGE>
17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IFS INTERNATIONAL, INC.
By:_____________________________________
Name:___________________________________
Title:____________________________________
TOWN OF NORTH GREENBUSH
INDUSTRIAL DEVELOPMENT AGENCY
By:_____________________________________
Name:___________________________________
Title:____________________________________
NEW YORK BUSINESS DEVELOPMENT CORPORATION
By:_____________________________________
Name:___________________________________
Title:____________________________________
The Ground Lessor hereby executes this Agreement pursuant to the provisions of
Section 33 hereof.
RENSSELAER POLYTECHNIC INSTITUTE
By:_____________________________________
Name:___________________________________
Title:____________________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the ____ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at _________________________, New York, that he is the
____________ of the TOWN OF NORTH GREENBUSH INDUSTRIAL DEVELOPMENT AGENCY, the
public benefit corporation of the State of New York described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of said public benefit corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
)SS.:
COUNTY OF )
On this ___ day of April, 1999, before me personally came
________________ to me personally known, who, being by me duly sworn, did depose
and say that he resides at ______________________, New York, that he is a
_________________________ of NEW YORK BUSINESS DEVELOPMENT CORPORATION, the
banking corporation described in and which executed the foregoing instrument;
and that he signed his name thereto by authority of the Board of Directors of
such banking corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of RENSSELAER POLYTECHNIC INSTITUTE the not-for-profit
corporation described in and which executed the foregoing instrument, and he
acknowledged that he executed the foregoing for and on behalf of said
not-for-profit corporation.
---------------------------------------
Notary Public
<PAGE>
A-1
SCHEDULE "A"
PROPERTY DESCRIPTION
EXHIBIT 10.20
NOTE AND MORTGAGE MODIFICATION,
SPREADER, EXTENSION AND SECURITY AGREEMENT
THIS NOTE AND MORTGAGE MODIFICATION, SPREADER, EXTENSION AND SECURITY
AGREEMENT (hereinafter referred to as the "Agreement" or the "Mortgage"), dated
April 15, 1999 by IFS INTERNATIONAL, INC., a New York business corporation with
its principal executive office and an office for the transaction of business
located at 300 Jordan Road, Troy, New York 12180 (the "Borrower"), TOWN OF NORTH
GREENBUSH INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation existing
under the laws of the State of New York with its principal executive office and
an office for the transaction of business located at Wyantskill School Building,
2 Douglas Street, Wyantskill, New York 12198 (the "Mortgagor"), HUDSON RIVER
BANK & TRUST COMPANY, a New York banking corporation having an office at One
Hudson City Center, Hudson, New York 12514 (the "Mortgagee") and RENSSELAER
POLYTECHNIC INSTITUTE, a New York not-for-profit corporation having an address
of 110 8th Street, Troy, New York 12180 (the "Ground Lessor").
W I T N E S S E T H:
WHEREAS, pursuant to a certain bond and mortgage separation and
assignment agreement dated on or about the date hereof by and among the
Mortgagor, the Mortgagee, New York Business Development Corporation and KeyBank
National Association and recorded in the Office of the Rensselaer County Clerk
immediately prior to the recordation hereof, the Mortgagee is the holder of a
ninety-five and one half percent (95.50%) interest in the following mortgage
(said interest being hereinafter referred to as the "Existing Mortgage") and the
note secured thereby (said interest being hereinafter referred to as the
"Existing Note"):
mortgage and security agreement given by the Mortgagor with consent
from the Ground Lessor to KeyBank National Association in the original
principal amount of One Million One Hundred Ninety Thousand and 00/100
Dollars ($1,190,000.00) dated as of October 2, 1997 and recorded in the
Office of the Rensselaer County Clerk on December 24, 1997 in Roll 79
at Frame 1952 having an outstanding principal balance as of the date
hereof of $1,132,400.00.
WHEREAS, the Mortgagee and the Mortgagor, the fee simple owner of the
Improvements (as hereinafter defined) and the Borrower have mutually agreed to
modify the terms of the Existing Note and the Existing Mortgage in the manner
hereinafter appearing; and
NOW THEREFORE, in pursuance of said agreement and in consideration of
the sum of One Dollar ($1.00) and other good and valuable consideration each to
the other in hand paid, receipt of which is hereby acknowledged, the parties
hereto mutually covenants and agree as follows:
A. The Borrower covenants, represents and warrants that:
(i) There is, as of the date hereof, secured by the Existing Mortgage,
the aggregate unpaid principal sum of One Million Eighty One Thousand Four
Hundred Forty-Two and 00/100 Dollars ($1,081,442.00) together with interest
thereon from the date hereof and other sums or charges evidenced thereby;
(ii) There are no defenses, offsets or counterclaims of any kind or
nature whatsoever against the Existing Mortgage or the Existing Note and as
of the date hereof, no Event of Default has occurred, nor has any event
occurred which would be an Event of Default under the Existing Mortgage or
the Existing Note with the passage of time, the giving of notice or both;
(iii) The Borrower is a business corporation duly formed, validly
existing and in good standing under the laws of the State of New York and
has the power and capacity to enter into this Agreement and to mortgage and
pledge the property encumbered hereby in the manner and to the extent
herein set forth and the foregoing has been authorized by all requisite
corporate action. The Existing Mortgage and the Existing Note constitute
legal, valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms;
(iv) The execution and delivery of this Agreement have not violated
and will not violate the terms of (i) the articles of incorporation or
by-laws of the Borrower, (ii) any statute, law, rule, order, judgment or
decree of any governmental authority binding upon the Borrower or any of
the property of the Borrower or (iii) any agreement, indenture or other
instrument binding upon or affecting the Borrower or its property; and
(v) There are no actions, suits, appeals or proceedings pending or, to
the best of the Borrower's knowledge, threatened against or affecting, the
Borrower which may materially adversely affect the financial condition of
the Borrower, or the validity or enforceability of the Existing Note or the
Existing Mortgage or the priority of the lien thereof, at law or in equity,
or before or by any governmental authority; and the Borrower is not in
default with respect to any order, writ, judgment, decree or demand of any
court or any governmental authority.
B. The Mortgagor covenants, represents and warrants that:
(i) The Mortgagor is a public benefit corporation duly formed, validly
existing and in good standing under the laws of the State of New York and
has the power and capacity to enter into this Agreement and to mortgage and
pledge the property encumbered hereby in the manner and to the extent
herein set forth and the foregoing has been authorized by all requisite
corporate action. The Existing Mortgage and constitutes a legal, valid and
binding obligation of the Mortgagor enforceable against the Mortgagor in
accordance with its terms;
(ii) The execution and delivery of this Agreement have not violated
and will not violate the terms of (i) the by-laws of the Mortgagor, (ii)
any statute, law, rule, order, judgment or decree of any governmental
authority binding upon the Mortgagor or any of the property of the
Mortgagor or (iii) any agreement, indenture or other instrument binding
upon or affecting the Mortgagor or its property; and
(iii) There are no actions, suits, appeals or proceedings pending or,
to the best of the Mortgagor's knowledge, threatened against or affecting,
the Mortgagor which may materially adversely affect the financial condition
of the Mortgagor, or the validity or enforceability of the Existing
Mortgage or the priority of the lien thereof, at law or in equity, or
before or by any governmental authority; and the Mortgagor is not in
default with respect to any order, writ, judgment, decree or demand of any
court or any governmental authority.
C. If not heretofore granted, conveyed, bargained, sold, set over,
transferred, assigned, pledged and mortgaged unto the Mortgagee, the lien,
grant, conveyance, transfer, assignment and pledge of the Existing Mortgage is
hereby spread so that the Existing Mortgage shall cover, create a security
interest in and be a mortgage Lien upon, and the Borrower and the Mortgagor do
hereby grant, convey, bargain, sell, transfer, assign and pledge unto the
Mortgagee, and grant a security interest unto the Mortgagee in, all of the
following property (the "Mortgaged Property") as security for the Indebtedness
(hereinafter defined):
ALL right, title and interest of the Mortgagor and the
Borrower in and to a leasehold interest pursuant to the Ground Lease (as
hereinafter defined) in that certain real property described in Schedule "A"
attached hereto and made a part hereof (such leasehold interest being
hereinafter referred to as the "Land"), together with the right, title and
interest of Mortgagor and the Borrower, now owned or hereinafter acquired, in
and to the streets, the land lying in the bed of any streets, roads or avenues,
opened or proposed, in front of, adjoining or abutting the Land to the center
line thereof and strips and gores within or adjoining the Land, the air space
and right to use said air space above the Land, all rights of way, privileges,
liberties, hereditaments and all easements now or hereafter affecting the Land,
all royalties and all rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights;
TOGETHER with the buildings and improvements now or hereafter
erected on the land (the "Improvements") (the Land and Improvements are
hereinafter collectively referred to as the "Real Estate");
TOGETHER with all and singular the tenements, hereditament and
appurtenances belonging or in any way appertaining to the Real Estate, and the
reversion or reversions, remainder or remainders, rents, issues, profits and
revenue thereof; and also all of the estate, right, title, interest, dower and
right of dower, courtesy and rights of courtesy, property, possession, claim and
demand whatsoever, both in law and equity, of Mortgagor and Borrower, of, in and
to the Real Estate and of, in and to every part and parcel thereof, with the
appurtenances, at any time belonging or in any wise appertaining thereto;
TOGETHER with all of the fixtures and equipment of every kind
and nature whatsoever currently owned or hereafter acquired by Borrower or
Mortgagor, and all appurtenances and additions thereto and substitutions or
replacements thereof, now or hereafter attached to, or intended to be attached
to (though not attached to) the Real Estate or placed on any part thereof (such
fixtures and equipment are hereinafter collectively referred to as the
"Equipment"), including, but not limited to all plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, incinerating, and
escalator, elevator, power loading and unloading equipment and systems,
sprinkler systems and other fire prevention and extinguishing apparatus and
pipes, pumps, above ground or underground storage tanks, conduits, fittings and
fixtures; it being understood and agreed that all Equipment is appropriated to
the use of the Real Estate and, whether affixed or annexed or not, for the
purposes of this Mortgage shall be deemed conclusively to be Real Estate and
mortgaged hereby; and Mortgagor and Borrower hereby agree to execute and
deliver, from time to time, such further instruments (including security
agreements), as may be requested by Mortgagee to confirm the lien of this
Mortgage on the Equipment;
TOGETHER with all right, title and interest of the Mortgagor
and the Borrower in, to and under that certain ground lease dated May 26, 1983
from the Ground Lessor to Pacamor Bearings, Inc. a memorandum of which was
recorded in the Rensselaer County Clerk's Office on December 17, 1984 in Liber
1372 of Deeds at Page 891 as subsequently amended and assigned (as further
amended or supplemented from time to time, the "Ground Lease");
TOGETHER with all unearned premiums, accrued, accruing or to
accrue under insurance policies now or hereafter obtained by Mortgagor and/or
Borrower and Mortgagor's and Borrower's interest in and to all proceeds of the
conversion and the interest payable thereon, voluntary or involuntary, of the
Real Estate, and/or Equipment, or any part thereof, into cash or liquidated
claims, including, without limitation, proceeds of casualty insurance, title
insurance or any other insurance maintained on the Mortgaged Property, and the
right to collect and receive the same and all awards and/or other compensation
including the interest payable thereon and the right to collect and receive the
same heretofore and hereafter made to the present and all subsequent owners of
the Mortgaged Property by the United States, the State of New York or any
political subdivision thereof or any agency, department, bureau, board,
commission, or instrumentality of any of them, now existing or hereafter created
(collectively, "Governmental Authority") for the taking by eminent domain,
condemnation or otherwise, of all or any part of Mortgaged Property, including
all awards for any change or changes of grade or the widening of streets, roads
or avenues affecting the Real Estate;
TOGETHER with all rights, title and interest of Mortgagor and
the Borrower in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by or released to Mortgagor and/or
Borrower or constructed, assembled or placed by Mortgagor and/or Borrower on the
Real Estate, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in each such case, without further
mortgage, conveyance, assignment or other act by Mortgagor and/or Borrower, the
same shall become subject to the lien of this Mortgage as fully and completely,
and with the same effect, an though now owned by Mortgagor and/or Borrower and
specifically described herein;
TOGETHER with all proceeds, both cash and noncash, of the
foregoing which may be sold or otherwise be disposed of;
TOGETHER with any and all monies or hereafter on deposit for
the payment of real estate taxes or special assessments against the Real Estate
or for the payment of premiums on policies of fire and other hazard insurance
covering the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property and the properties,
rights and privileges hereby granted, bargained, sold, conveyed, mortgaged,
warranted, pledged and assigned, and in which a security interest is granted or
intended to be, unto Mortgagee, its successors and assigns, forever, for the
uses and purposes herein set forth.
D. The Borrower shall pay the indebtedness evidenced by the Existing Note
in accordance with the terms set forth in those certain amended and restated
notes, each dated the date hereof, in the principal amounts of $581,442.00 and
$500,000.00 respectively, from the Borrower in favor of the Mortgagee and by
this reference made a part hereof. The terms, covenants, conditions and
provisions of the Existing Note shall be and hereby are modified, superseded and
replaced by the terms, covenants, conditions and provisions set forth therein
such that any reference herein to "Note", "note", "Notes" or "notes" or
indebtedness shall be deemed to refer collectively thereto.
E. The Borrower certifies that this Agreement secures the same indebtedness
evidenced by the Existing Note and secured by the Existing Mortgage and secures
no further or other indebtedness or obligation.
F. The Borrower and the Mortgagor hereby (i) ratify and confirm the lien,
conveyance and grant contained in and created by the Existing Mortgage and (ii)
agrees that nothing contained in this Agreement is intended to or shall impair
the lien, conveyance and grant of the Existing Mortgage.
G. The terms, covenants and conditions of the Existing Mortgage shall be
and hereby are modified, superseded and replaced by the following terms,
covenants and conditions, and the Borrower and the Mortgagor agree to comply
with and be subject to all of the terms, covenants and conditions of the
Existing Mortgage, as modified hereby:
1. Warranty of Title. Borrower represents and warrants to Mortgagee
that it and the Mortgagor are lawfully seized of a leasehold interest in
the Land and a fee simple interest in the Improvements and the Equipment,
and that it has good and marketable title thereto free and clear of all
encumbrances, liens, covenants, restrictions, reservations, conditions, and
easements other than those identified in and not omitted from Schedule B to
Chicago Title Insurance Policy No. 9903.30450. Borrower represents and
warrants that this Mortgage constitutes a valid first mortgage lien on the
Mortgaged Property; and Borrower covenants to (a) warrant and preserve such
title and the validity and priority of the lien hereof and defend the same
to Mortgagee against the claims of all and every person or persons,
corporation or corporations and parties whomsoever claiming or threatening
to claim the same or any part thereof and (b) make, execute, acknowledge
and deliver all such further or other documents, instruments or assurances,
and cause to be done all such further acts and things as may at any time
hereafter be reasonably desired or required by Mortgagee to fully protect
the lien of this Mortgage.
2. Payment of Indebtedness. Borrower shall duly and punctually pay the
Indebtedness at the times and places and in the manner specified in the
Existing Note and in this Agreement and shall perform all of its
obligations in accordance with the terms of this Agreement.
3. Proper Care and Use.
(a) Borrower shall:
(i) not abandon the Mortgaged Property or any part thereof;
(ii) maintain the Mortgaged Property and the abutting
grounds, sidewalks, roads, parking and landscape areas in good
repair, order and condition;
(iii) promptly make all necessary repairs, renewals,
replacements and additions to the Mortgaged Property;
(iv) not commit or suffer wastes (other than ameliorative
waste) with respect to the Mortgaged Property:
(v) complete promptly and in a good workerlike manner any
new improvements constructed on the Land;
(vi) not commit, suffer or permit any act to be done in or
upon the Mortgaged Property in violation of any law, ordinance or
regulation;
(vii) (A) refrain from impairing or diminishing the value or
integrity of the Mortgaged Property or the security value of this
Mortgage; (B) not remove, demolish or in any material respect
alter any of the Improvements, Equipment or Personalty without
the prior written consent of Mortgagee; or (C) not make, install
or permit to be made or installed, any alterations or additions
thereto if doing so will impair the value of the Mortgaged
Property; and
(viii) not make, suffer or permit any nuisance to exist on
any of the Mortgaged Property.
(b) Mortgagee and any persons authorized by Mortgagee shall have
the right to enter and inspect the Mortgaged Property at all
reasonable times upon reasonable notice. If an Event of Default shall
have occurred and be continuing or in the event of an emergency,
Mortgagee and any persons authorized by Mortgagee may (without being
obligated to do so) enter or cause entry to be made upon the Real
Estate and repair and/or maintain the same as Mortgagee may reasonably
deem necessary or advisable, and may (without being obligated to do
so) make such expenditures and outlays of money as Mortgagee may deem
reasonably appropriate for the preservation of the Mortgaged Property.
All expenditures and outlays of money made by Mortgagee pursuant
hereto shall be secured hereby and shall be payable on demand together
with interest at the rate set forth in the Note from the date of such
expenditure or outlay until paid.
4. Requirements.
(a) Borrower represents and warrants that the Mortgaged Property
complies with and conforms to, and Borrower, at Borrower's sole cost
and expense, shall continue to promptly comply with and conform to, or
cause the Mortgaged Property to comply with and conform to, all
present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, injunctions, rules, regulations and requirements
pertaining to the Mortgaged Property, including any and all applicable
federal, state or local environmental laws and regulations, all zoning
or building, use and land use laws, ordinances, rules or regulations
and all covenants, restrictions and conditions now or hereafter of
record which may be applicable to Borrower or to any of the Mortgaged
Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of
the Mortgaged Property (collectively, the "Legal Requirements").
(b) Without limiting the generality of the foregoing, Borrower
covenants to operate the Mortgaged Property (whether or not such
property constitutes a "Facility" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") so that no cleanup or other obligation arises in
respect of CERCLA or other applicable Federal law or under any state,
local or municipal law, statute, ordinance, rule or regulation
designed to protect the environment, which would constitute a lien or
charge on the Mortgaged Property prior to that of Mortgagee. If any
such claim be made or any obligation should nevertheless arise
hereafter, Borrower agrees that it will, at its own expense, (a)
promptly cure same and (b) will indemnify Mortgagee from any
liability, responsibility or obligation in respect thereof or in
respect of any cleanup or other liability as successor, secured party
or otherwise (regardless of whether or not Mortgagee may deem to be
"owner or operator" under CERCLA) for any reason including, but not
limited to, the enforcement of Mortgagee's rights as a secured party
under this Mortgage, or any obligation of law.
5. Payment of Impositions.
(a) Borrower shall pay and discharge before the last date payment
may be made without the imposition of interest or a penalty all taxes
of every kind and nature (including, without limitation, all real and
personal property, payments in lieu of real property, income,
franchise, withholding, profits and gross receipts taxes), all charges
for any easement or agreement maintained for the benefit of any of the
Mortgaged Property, all general and special assessments, levies,
permits, inspection and license fees, all water and sewer rents and
charges and all other public charges whether of a like or different
nature, even if unforeseen or extraordinary, imposed upon or assessed
on or against Borrower or any of the Mortgaged Property, together with
any interest or penalties on any of the foregoing (all of the
foregoing are hereinafter collectively referred to as the
"Impositions"). Borrower shall deliver to Mortgagee receipts
satisfactory to Mortgagee evidencing the payment of all such
impositions within thirty days of the date each such imposition is due
and payable. Upon Borrower's failure to submit evidence of payment
within such thirty day period, it shall be deemed an Event of Default
under Section 15 hereof.
(b) Mortgagee shall have the right to pay any Imposition not paid
by Borrower on or after the last date payment of such Imposition may
be made without imposition of interest or a penalty (subject to
Borrower's right to contest such Imposition as hereinbefore provided),
and the amount thereof together with interest thereon at the Default
Rate (as hereinafter defined), shall be added to the Indebtedness,
payable on demand, and shall be secured by this Agreement.
6. Insurance.
(a) Borrower shall, (i) keep the Real Estate (A) insured against
loss or damage by fire, lightning, windstorm, tornado and by such
other further and additional risks and hazards as now or hereinafter
may be covered by extended coverage and "all risk" endorsements, (B)
insured against loss or damage by any other risk commonly insured
against by persons occupying or using like properties in the locality
in which the Real Estate is situated, (ii) keep the equipment and
personality insured against loss or damage by fire, lightning,
windstorm, tornado and theft and by such other further and additional
risks as now or hereinafter may be covered by extended coverage and
"all risks" endorsement, (iii) obtain and maintain comprehensive
public liability insurance on an occurrence basis against claims for
personal injury, including, without limitation, bodily injury, death
or property damage occurring on, in or about the Mortgaged Property
and the adjoining streets, sidewalks and passageways, such insurance
to afford immediate minimum protection to a limit of not less than One
Million Dollars ($1,000,000.00) combined single limit for personal
injury or death to one or more persons or damage to property, (iv) to
the extent the Land lies within an area identified by the Secretary of
Housing and Urban Development as an area having special flood hazards,
keep the Real Estate insured under a policy of flood insurance in an
amount reasonably requested by Mortgagee. Each insurance policy shall
(i) be noncancelable (which terms shall include any reduction in the
scope or limits of coverage) without at least ten (10) days prior
written notice to Mortgagee or (ii) except in the case or worker's
compensation and comprehensive public liability insurance, be endorsed
to name Mortgagee as its interest may appear, with loss payable to
Mortgagee, without contribution, under a standard mortgagee clause and
in the case of comprehensive public liability insurance, be endorsed
to name mortgagee as its interest may appear, with loss payable to
Mortgagee, without contribution, under a standard mortgagee clause and
in the case of comprehensive public liability insurance be endorsed to
name Mortgagee as an additional named insured, (iii) in the case of
property insurance, provide for deductibles acceptable to Mortgagee,
(iv) be written by companies acceptable to Mortgagee, and (v) contain
an endorsement or agreement by the insurer that any loss shall be
payable in accordance with the terms of such policy notwithstanding
any act or negligence of Borrower which might otherwise result in
forfeiture of said insurance and the further agreement of the insurer
waiving all rights of set off, counterclaim, deduction or subrogation
against Borrower. Borrower hereby directs all insurers under such
policies (except worker's compensation and comprehensive public
liability insurance) to pay all proceeds payable thereunder directly
to Mortgagee.
(b) Borrower shall (i) pay as they become due all premiums for
such insurance, and (ii) not later than ten (10) days prior to the
expiration of each policy to be furnished pursuant to the provisions
of this Section 6, deliver a valid certificate of insurance (or if
such certificate is not then available, a renewal binder), evidencing
a renewed policy or policies marked "premium paid", or accompanied by
such other evidence of payment satisfactory to Mortgagee with standard
noncontributory mortgage clauses in favor or and acceptable to
Mortgagee. Notwithstanding the foregoing, Borrower shall not be
required to provide proof of payment if Borrower and such insurance
company agree to an alternative, i.e., installment, method of payment,
and Mortgagee receives reasonably satisfactory evidence of the terms
of such payment arrangement. Such certificate of insurance (or renewal
binder) shall be accompanied by a written statement of Borrower
certifying that the insurance coverage evidenced thereby complies with
the requirements of this Section 6.
(c) If Borrower shall be in default of its obligations to so
insure or deliver any such prepaid certificate of insurance or renewal
binder then Mortgagee, at Mortgagee's option, after notice to Borrower
(except that no notice shall be required if the insurance has expired
or been canceled or terminated), may effect such insurance and pay the
premium or premiums therefor, and the amount of such premium or
premiums so paid by Mortgagee, with interest from the time of payment
at the Default Rate (as hereinafter defined), shall be added to the
Indebtedness, payable on demand, and shall be secured by this
Mortgage.
7. Impositions and Insurance Escrow. Borrower, upon Mortgagee's request,
shall pay to Mortgagee an amount equal to one-twelfth of the estimated aggregate
annual amount of (i) all Impositions payable on the Mortgaged Property, and (ii)
insurance premiums on all policies of insurance required by this Mortgage, on a
specified date each month. Following receipt of Mortgagee's request, Borrower
shall cause all bills, statements or other documents relating to such
Impositions and insurance premiums to be sent or mailed directly to Mortgagee
pursuant to this Section 7. Mortgagee shall pay such amounts as may be due
thereunder out of the funds so deposited with Mortgagee. if at any time and for
any reason the funds deposited with Mortgagee are or will be insufficient to pay
such amounts as may then or subsequently be due, Mortgagee may notify Borrower
and Borrower shall immediately deposit an amount equal to such deficiency with
Mortgagee. Notwithstanding the foregoing, nothing contained herein shall cause
Mortgagee to be deemed a trustee of said funds or to be obligated to pay any
amounts in excess of the amount of funds deposited with Mortgagee pursuant to
this Section 7, and Borrower shall be entitled to no interest thereon.
8. Condemnation/Eminent Domain. Mortgagor and Borrower hereby irrevocably
assign to Mortgagee, as additional security for the payment of the Indebtedness,
all of their respective awards and/or other compensation, including interest
payable thereon, hereafter made by any Governmental Authority for the taking by
eminent domain, condemnation or otherwise, of all or any part of the Mortgaged
Property ("Awards"). Mortgagor and Borrower agree that all such Awards shall be
paid to Mortgagee and, subject to the provisions of Article VII of the Lease
Agreement (as hereinafter defined), shall be applied by Mortgagee, after the
payment of all of its expenses in connection with such proceedings, including
costs and attorneys' fees, to the reduction of the Indebtedness with the balance
(if any) to be paid to Borrower. Mortgagor and Borrower hereby authorize
Mortgagee, on behalf and in the name of Mortgagor and Borrower, to collect,
execute and deliver valid acquittances for, and to appeal from, any such Awards.
9. Discharge of Liens, Utilities. (a) Mortgagor and Borrower shall not,
without prior written consent of Mortgagee, create, consent to or suffer the
creation of any liens, charges or encumbrances (each, a "Prohibited Lien") on
any of the Mortgaged Property, whether or not such Prohibited Lien is
subordinate to this Mortgage, or fail to have any Prohibited Lien which may be
imposed without Borrower's consent discharged and satisfied or record within
thirty (30) days after it is imposed, except those liens bonded while being
contested. Borrower shall pay when due all lawful claims and demands of
mechanics, material persons, laborers and others which, if unpaid, might result
in, or permit the creation of a Prohibited Lien, except that Borrower shall have
the right to contest such claims or demands, provided that Borrower shall
furnish a good and sufficient bond, surety or other security satisfactory to
Mortgagee.
(b) Borrower shall pay when due all utility charges which are incurred
by it for gas, electricity, water or sewer services and all other
assessments or charges of a similar nature, whether public or private and
whether or not such taxes, assessments or charges are liens on the
Mortgaged Property.
10. Estoppel Certificates. From time to time, within ten (10) days after a
request of Mortgagee, Borrower shall furnish a written statement, signed and, if
requested, acknowledged, setting forth the amount of the Indebtedness which the
Borrower acknowledges to be secured hereby, specifying any claims of offset or
defense which Borrower asserts against the Indebtedness, and, at the request of
the Mortgagee, the then state of facts relevant to the condition of the
Mortgaged Property.
11. Expenses. Borrower shall pay, together with any interest or penalties
imposed in connection therewith, all expenses incident to the preparation,
execution, acknowledgment, delivery and/or recording of this Mortgage,
including, without limitation, all filing, registration or recording fees and
all federal, state, county and municipal, internal revenue or other stamp taxes
and other taxes, duties, imposts, assessments and charges now or hereafter
required by the federal, state, county or municipal government, the legal fees
of the Mortgagee's Attorney, survey charges, title insurance premiums, and any
other expenses connected with this transaction.
12. Mortgagee's Costs and Expenses. Upon the occurrence of any Event of
Default or the proper exercise by Mortgagee of any Mortgagee's rights hereunder,
or if any action or proceeding be commenced, to which action or proceeding
Mortgagee is or becomes party or in which it becomes necessary to defend or
uphold the lien of this Mortgage, or if the taking, holding or servicing of this
Mortgage by Mortgagee is alleged to subject Mortgagee to any civil fine, or if
Mortgagee's review and approval of any document is requested by Borrower or
required by Mortgagee in connection therewith, then any fees incurred by
Mortgagee in connection therewith (including any civil fines and attorneys' fees
and disbursements) shall, after notice and demand, be paid by Borrower, or, if
paid by Mortgagee, the amount thereof, together with interest thereon at the
Default Rate (as such term is hereinafter defined) shall be added to the
Indebtedness, payable on demand, and shall be secured by this Mortgage; and, in
any action to foreclose this Mortgage, or to recover or collect the
Indebtedness, the provisions of this Section 12 with respect to the recovery of
costs, disbursements and allowances shall prevail unaffected by the provisions
of any law with respect to the same to the extent that the provisions of this
Section 12 are not violative thereof.
13. Mortgagee's Right to Perform. If any Event of Default shall have
occurred hereunder and be continuing, Mortgagee, may (but shall be under no
obligation), cure the same, and the cost thereof, with interest at a fluctuating
per annum rate (the "Default Rate") equal to the rate of interest announced
publicly by Mortgagee from time to time as its Prime Rate plus three percent
(3%) per annum, shall be added to the Indebtedness, payable on demand, and shall
be secured by this Mortgage. No payment or advance of money by Mortgagee under
this Mortgage shall be deemed or construed to cure any Event of Default arising
out of the non-payment of such amount by Borrower or waive any right or remedy
of Mortgagee hereunder. The lien of this Mortgage with respect to such amounts
shall be prior to any right, title to, interest in or claim upon the Mortgaged
Property attaching subsequent to the lien of this Mortgage.
14. Further Assurances. Mortgagor and Borrower agree, upon demand of
Mortgagee, to do any act or execute any additional documents (including, but not
limited to, security agreements on any Equipment or Personalty included or to be
included in the Mortgaged Property) as may be reasonably required by Mortgagor
and Borrower to confirm the lien of this Mortgage.
15. Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default by Borrower hereunder:
(a) default in the payment of all or any portion of any installment of
principal and/or interest as and when the same become due under the
Existing Note, which default continues for a period in excess of fifteen
(15) days from such due date; or
(b) default in the performance or observance of any covenant on the
part of the Mortgagor or Borrower to be performed or observed hereunder, or
under any other agreement between Borrower and Mortgagee which default
continues beyond the expiration of any applicable grace or notice period
expressly provided herein, or if no grace period is expressly provided, if
the default continues more than fifteen (15) days after the giving of
written notice thereof from Mortgagee, or, if such default is of such a
nature that it cannot with due diligence be cured within fifteen (15) days,
if Borrower shall fail to commence to cure such default with such fifteen
(15) day period and thereafter prosecute such cure diligently; or
(c) if Mortgagor or Borrower shall sell, convey, assign or transfer
(other than a transfer as the result of a taking by condemnation or eminent
domain) the Mortgaged Property or any part thereof or interest therein (any
sale, conveyance, assignment or transfer of a controlling interest in
Borrower being deemed a sale of the Mortgaged Property for purposes
hereof), or of the Mortgaged Property or any part thereof or interest
therein, including, without limitation, any rents, royalties, profits,
income or revenue arising therefrom, is further mortgaged, pledged or
encumbered; or
(d) the voluntary suspension of all or a substantial part of its
business by Borrower, the insolvency of the Borrower or any guarantor
hereof, the commencement of any proceedings under any bankruptcy or
insolvency law by or against the Borrower, an assignment for the benefit of
creditors by Borrower, or any guarantor hereof, application for consent to
the appointment of any receiver or trustee for the Borrower, or any
assignment to an agent authorized to liquidate any substantial part of the
assets of Borrower; or
(e) the occurrence of an Event of Default under the Note or under any
of the Lease Documents (as defined in the hereinafter defined Lease
Agreement); or
(f) failure to provide copies of paid tax bills required to be
provided pursuant to Article 5 of this Mortgage; or
(g) failure to provide copies of any financial statement required to
be provided to article 26 of this mortgage.
16. Remedies. Upon the occurrence of any Event of Default hereunder,
Mortgagee may declare the entire Indebtedness to be immediately due and payable
without presentment, demand, protest or notice of any kind, and Mortgagee may
take any and all actions permitted at law or in equity, without notice or
demand, as it deems advisable to protect and enforce Mortgagee's rights against
Mortgagor and Borrower in and to the Mortgaged Property, including, but not
limited to, the following actions:
(a) Either in person or by agent, with or without bringing any action
or proceeding, or by a receiver appointed by a court and without regard to
the adequacy of its security, enter upon or take possession of Mortgaged
Property, or any part thereof, and do any acts which it deems necessary or
desirable to preserve the value, marketability or rentability of the
Mortgaged Property, or any part thereof or interest therein, or increase
the income therein, or increase the interest therefrom or protect the
security hereof and, with or without taking possession of the Mortgaged
Property, sue for or otherwise collect the rents, issues and profits
thereof, including those past due and unpaid and apply the same, less costs
and expenses of operations and collection, including reasonable attorneys'
fees and expenses, against the Indebtedness, all in such order as Mortgagee
may determine. The entering upon and taking possession of the Mortgaged
Property, the collection of such rents, issues and profits and the
application thereof as foresaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done in response to such
default, and notwithstanding the continuance in possession of the Mortgaged
Property or the collection, receipt and application of rents, issues or
profits, Mortgagee shall be entitled to exercise every right provided for
in the Existing Note, this Mortgage or by law upon occurrence of any Event
of Default, including the right to exercise the power of sale.
(b) Commence an action to foreclose this Mortgage as a lien, and sell
the Mortgaged Property under the judgment or decree of a court of competent
jurisdiction.
(c) Appoint a receiver, as provided herein.
(d) Specifically enforce any of the covenants on the part of the
Mortgagor and Borrower contained herein.
In the event that Mortgagee elects to exercise its right to
declare the entire indebtedness immediately due and payable, Mortgagee shall not
be deemed to have waived its right to collect any prepayment penalty payable
pursuant to the Existing Note.
17. Proceeds of Sale Under Security Agreement. The purchase money proceeds
of any sale made pursuant to any security agreement contained in this Mortgage
shall be distributed according to the provisions of the Uniform Commercial Code
of the State of New York.
18. Appointment of Receiver. If an Event of Default shall have occurred and
be continuing, Mortgagee as a matter of right without notice to Mortgagor or
Borrower, and without regard to the then value of the Mortgaged Property or the
interest of Mortgagor or Borrower therein, shall have the right to apply to any
court having jurisdiction to appoint a receiver or receivers of the Mortgaged
Property. Mortgagor and Borrower irrevocably consent to such appointment and
waive notice of any application therefor.
19. Extension, Release, etc. Without affecting the lien or charge of this
Mortgage upon any portion of the Mortgaged Property not then or therefore
released as security for the full amount of all unpaid obligations, Mortgagee
may, from time to time and without notice, agree to (i) release any persons so
liable, (ii) extend the maturity or alter any of the terms of any such
obligation (provided, however, that Borrowers shall have consented to any such
extension or alteration), (iii) grant other indulgences, release or reconvey, or
caused to be released or reconveyed at any at Mortgagee's option any parcel,
portion or all of the Mortgaged Property, (iv) take or release any other or
additional security for the Indebtedness, or (v) make compromises or other
arrangements with debtors in relation thereto.
20. Remedies Not Exclusive. Mortgagee shall be entitled to enforce payment
or performance of the Indebtedness and to exercise all rights and powers under
this Mortgage or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, lien, security
interest, assignment or otherwise. Neither the acceptance of this Mortgage nor
its enforcement, whether by court action or pursuant to the power of sale or
other powers herein contained, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or hereafter
held by Mortgagee, it being agreed that Mortgagee shall be entitled to enforce
this Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as it may in its absolute discretion determine. No remedy
herein conferred upon or reserved to Mortgagee is intended to be exclusive of
any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law in equity or by statute. Every power or remedy
given to Mortgagee or to which it may be exercised, concurrently or
independently, from time to time as often as may be deemed expedient by
Mortgagee.
21. Security Agreement Under Uniform Commercial Code. It is the intention
of the parties hereto that this Mortgage shall constitute a Security Agreement
within the meaning of Article 9 of the Uniform Commercial Code of the State of
New York. Notwithstanding the filing of a financing statement covering any of
the Mortgaged Property in the records normally pertaining to personal property,
all of the Mortgaged Property, for all purposes and in all proceedings, legal or
equitable, shall be regarded, at Mortgagees' option (to the extent permitted by
law) as part of the Real Estate whether or not any such item is physically
attached to the Real Estate or serial numbers are used for the better
identification of certain items. The mention in any such financing statement of
any of the Mortgaged Property shall never be construed as in any way derogating
from or impairing this declaration and it is the hereby stated intention of the
parties that such mention in protection of Mortgagee in the event any court
shall at any time hold that notice of Mortgagee's priority of interest, to be
effective against any third party, including the federal government and any
authority or agency thereof, must be filed in the Uniform Commercial Code
records. Mortgagor and Borrower hereby agree that each shall execute and hereby
authorizes Mortgagee to file any financing and continuation statements which
Mortgagee shall determine in its sole discretion are necessary or advisable in
order to perfect it security interest in the Equipment and Personalty covered by
this Mortgage, and Borrower shall pay any expenses incurred by Mortgagee in
connection with the preparation, execution and filing of such statements that
may be filed by Mortgagee, or, if paid by Mortgagee, such amounts, together with
interest at the Default Rate, shall be added to the Indebtedness, payable on
demand, and shall be secured by this Mortgage.
22. Indemnification; Waiver of Claim. If Mortgagee is made a party
defendant to any litigation concerning this Mortgage or the Mortgaged Property,
or any part thereof or interest therein, or the occupancy thereof by Borrower,
then Borrower shall indemnify, defend and hold Mortgagee harmless from all
liability by reason of said litigation (other than that arising from Mortgagee's
own willful misconduct or gross negligence), including reasonable attorneys'
fees and expenses incurred by Mortgagee in such litigation, whether or not any
such litigation is prosecuted to judgment. If Mortgagee commences an action
against Mortgagor and/or Borrower to enforce any of the terms thereof or because
of the breach by Mortgagor and/or Borrower of any of the terms hereof, or for
the recovery of any sum secured hereby, Borrower shall pay Mortgagee's
reasonable attorneys' fees and expenses, or, if paid by Mortgagee, the amount
thereof, together with interest thereon at the Default Rate, shall be added to
the Indebtedness, payable on demand, and shall be secured by this Mortgage. The
right to such attorneys' fees and expenses shall be deemed to have accrued on
the commencement of such action, and shall be enforceable whether or not such
action is prosecuted to judgment. If an Event of Default shall have occurred,
Mortgagee may engage an attorney or attorneys to protect its rights hereunder,
and in the event of such fees and expenses incurred by Mortgagee, whether or not
action is actually commenced against Mortgagor and/or Borrower by reason of such
Event of Default.
23. No Waivers, etc. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor or Borrower of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor and Borrower of
any and of all of the terms and provisions of this Mortgage to be performed by
Mortgagor and Borrower; Mortgagee may release, regardless of consideration and
without the necessity for any notice to or consent by the holder of any
subordinate lien on the Mortgaged Property, any part of the security held for
the obligations secured by this Mortgage without, was to the remainder of the
security, in any wise impairing or affecting the lien of this Mortgage or the
priority of such lien over any subordinate lien.
24. Notices. Whenever it is provided herein that notice, demand, request,
consent, approval or other communication shall or may be given to or served upon
either of the parties by the other, or whenever either of the parties desires to
give or serve upon the other any notice, demand, request, consent, approval, or
other communication with respect to this Mortgage or to the Mortgaged Property,
each such notice, demand, request, consent, approval or other communication
shall be in writing and shall be deemed to have been sufficiently given or
served when delivered by hand or by overnight courier service or when sent by
registered or certified mail, return receipt requested, postage prepaid,
directed to the party to receive the same at its address stated above or at such
other addresses as may be substituted by notice given upon receipt or, if
receipt is refused, three (3) days after waiting.
25. No Modification. This Mortgage may not be modified, amended, discharged
or waived in whole or in part except by an agreement in writing signed by the
party against whom enforcement of any such modification, amendment, discharge or
waiver is sought.
26. Financial Information; Covenants. (a) So long as the Indebtedness shall
be outstanding, Borrower shall deliver to Mortgagee, or shall cause to be
delivered to Mortgagee, as soon as they are available and in any event within
five (5) days of the issuance thereof, a copy of the annual 10k report and
quarterly 10Q report for the Borrower's corporate parent, IFS International,
Inc. Additionally, the Borrower shall submit or cause to be submitted such other
financial information as the Mortgagee shall reasonably request concerning any
tenant at the Mortgaged Premises. Upon Borrower's failure to submit any
statement or information required by this section within the time specified
therefore, it shall be deemed an event of default under Section 15 hereof.
(b) So long as the Indebtedness shall remain outstanding, the Borrower
shall maintain a minimum debt service coverage ratio combined with respect
to the Indebtedness and all indebtedness due and owing to New York Business
Development Corporation, its successors and assigns, of 1.20 to 1.00 to be
tested annually as of the close of each fiscal year of the Borrower.
(c) So long as the Indebtedness shall remain outstanding, the Borrower
shall maintain a debt to worth ratio not in excess of 1.25 to 1.00 to be
tested annually as of the close of each fiscal year of the Borrower.
27. Captions. The captions or headings at the beginning of each Article
hereof are for the convenience of the parties and are not a part of this
Mortgage.
28. Successors and Assigns. The covenants contained herein shall run with
the land and bind Borrower, its successors and assigns and all subsequent
owners, encumbrancers, tenants and subtenants of the Mortgaged Property, and
shall insure to the benefit of the Mortgagee, its successors, assigns and
endorsees.
29. Enforceability. All provisions of this Mortgage shall be construed as
affording to Mortgagee additional rights to and not exclusive of the rights
conferred under the provisions of Section 254 and 272 of the Real Property law
of the State of New York. The creation of this Mortgage, the perfection of the
lien or security interest in the Mortgaged Property, and the rights and remedies
of Mortgagee with respect to the Mortgaged Property, as provided herein and by
the laws of the State of New York, shall be governed by and construed in
accordance with the laws of the State of New York. Whenever possible, each
provision of this Mortgage shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Mortgage
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or validity, without invalidating
the remaining provisions of this Mortgage. Nothing in this Mortgage shall
require Borrower to pay, or Mortgagee to accept, interest or other payments in
an amount which would subject Mortgagee to penalty under applicable law. In the
event that the payment of any interest or other amounts due hereunder would be
in excess of the maximum amount allowed by applicable law, then ipso facto the
obligation of Borrower to make such payment shall be reduced to the highest rate
authorized by such law.
30. Trust Fund. This Mortgage is subject to the trust fund provisions of
Section 13 of the Lien Law of the State of New York; the Borrower shall receive
the proceeds of the Existing Note secured hereby, and shall hold the right to
receive such proceeds, as a trust fund to be applied first for the purpose of
paying the cost of any improvements before using any part of such proceeds for
any other purpose.
31. Miscellaneous. As used in this Mortgage, the singular shall include the
plural as the context requires and the following words and phrases shall have
the following meaning: (a) "including" shall mean "included but not limited to";
(b) "provisions" shall mean "provisions, terms, covenants and/or conditions";
(c) "lien" shall mean "lien, charge, encumbrance, security interest, mortgage
and/or deed of trust"; (d) "obligation" shall mean "obligation, duty, covenant
and/or condition"; and (e) "any of the Mortgaged Property" shall mean "the
Mortgaged Property or any part thereof or interest therein." Any act which
Mortgagee is permitted to perform hereunder may be performed at any time and
from time to time by Mortgagee or any person or entity designated by Mortgagee.
Any act which is prohibited to Borrower hereunder is also prohibited to all
lessees of any of the Mortgaged Property. Each appointment of Mortgagee and
attorney-in-fact for Borrower under the Mortgage is irrevocable and coupled with
an interest. Mortgagee has the right to refuse to grant its consent, approval or
acceptance or to indicate its satisfaction is required hereunder, except as
otherwise expressly provided herein.
32. Town of North Greenbush Industrial Development Agency Special
Obligations; Recording. (a) This Mortgage is executed by the Mortgagor solely
for the purpose of subjecting its fee ownership interest in the Premises to the
lien of this Mortgage and for no other purpose. All representations, covenants
and warranties of the Mortgagor herein are hereby deemed to have been made by
Borrower, and not by the Mortgagor. The parties hereby expressly agree that the
terms "Borrower" and "Mortgagor", as such are used in this Mortgage, shall not
be defined to include the Mortgagor.
(b) The obligations and agreements of the Mortgagor contained herein
and other instrument or documents executed in connection herewith or
therewith, and any other instrument or document supplemental thereto or
hereto, shall be deemed the obligations and agreements of the Mortgagor,
and not of any member, officer, agent (other than the Borrower) or employee
of the Mortgagor in his individual capacity, and the members, officers,
agents (other than the Borrower) and employees of the Mortgagor, shall not
be liable personally hereon or thereon or be subject to any personal
liability or accountability based upon or in respect hereof or thereof or
any transaction contemplated hereby or thereby.
(c) The obligations and agreements of the Mortgagor contained herein
and therein shall not constitute or give rise to an obligation of the State
of New York or the Town of North Greenbush, New York, and neither the State
of New York nor the Town of North Greenbush, New York, shall be liable
hereon or thereon, and, further, such obligations and agreements shall not
constitute or give rise to a general obligation of the Mortgagor, but
rather shall constitute limited obligations of the Mortgagor payable solely
from the revenues of the Mortgagor derived and to be derived from the
lease, sale or other disposition of the Mortgaged Property.
(d) No order or decree of specific performance with respect to any of
the obligations of the Mortgagor hereunder shall be sought or enforced
against the Mortgagor unless (i) the party seeking such order or decree
shall first have requested the Mortgagor in writing to take the action
sought in such order or decree of specific performance, and ten (10) days
shall have elapsed from the date of receipt of such request, and the
Mortgagor shall have refused to comply with such request (or, if compliance
therewith would reasonably be expected to take longer than ten days, shall
have failed to institute and diligently pursue action to cause compliance
with such request within such ten day period) or failed to respond within
such notice period, (ii) if the Mortgagor refuses to comply with such
request and the Mortgagor's refusal to comply is based on its reasonable
expectation that it will incur fees and expenses, the party seeking such
order or decree shall have placed in an account with the Mortgagor in
amount of undertaking sufficient to cover such reasonable fees and expenses
and (iii) if the Mortgagor refuses to comply with such request and the
Mortgagor's refusal to comply is based on its reasonable expectation that
it or any of its members, officers, agents (other than the Borrower) or
employees shall be subject to potential liability, the party seeking such
order or decree shall (A) agree to indemnify, defend and hold harmless the
Mortgagor and its members, officers, agents (other than the Borrower) and
employees against any liability incurred as a result of its compliance with
such demand, and (B) if requested by the Mortgagor, furnish to the
Mortgagor satisfactory security to protect the Mortgagor and its members,
officers, agents (other than the Borrower) and employees against all
liability expected to be incurred as a result of compliance with such
request.
(e) The Mortgagee will record or cause this Mortgage to be recorded in
all offices where the recordation hereof is necessary and will pay, or
cause to be paid, all documentary stamp taxes, if any, which may be imposed
by the United States of America or any agency thereof or by the State of
New York or other governmental authority upon this Mortgage.
33. Execution by Ground Lessor.
(a) This Mortgage has been executed by the Ground Lessor for the sole
purpose of having the Ground Lessor consent to this Mortgage.
(b) Notwithstanding any other provisions of this Mortgage, the parties
hereto agree as follows:
(i) the proceeds of any insurance or condemnation award allocable
to the Land and the Improvements shall be applied as required under
the terms of that certain lease agreement dated as of October 2, 1997
by and between the Mortgagor and the Borrower as amended by a first
amendment to lease agreement dated the date hereof as further amended
or supplemented from time to time, (the "Lease Agreement"); provided,
however, that in the event of a conflict between the provisions of the
Lease Agreement and the Ground Lease with respect to the application
of the proceeds of such insurance or condemnation award, the Lease
Agreement with respect thereto shall control; and
(ii) the Ground Lessor and the Borrower shall receive a copy of
all notices given or received by the Mortgagee pursuant to the
provisions of this Mortgage and the Mortgagee shall accept performance
of any covenant in default by the Ground Lessor, it is performed
within the time allotted to the Borrower or the Mortgagor to perform.
(c) The Mortgagee hereby agrees that in no event shall the Ground
Lessor be liable personally under this Mortgage or the Note or the Lease
Agreement and in no event shall any deficiency or personal judgment or
order or decree of specific performance with respect to the Ground Lessor
under the Note or this Mortgage or the Lease Agreement be sought or
enforced against the Ground Lessor, and the Mortgagee hereby specifically
waives and relinquishes any right it might otherwise have had to seek such
deficiency or personal judgment or order or decree of specific performance.
(d) The provisions of this Section 33 shall control over any contrary
or inconsistent provisions contained in this Mortgage or the Lease
Agreement.
(e) The Ground Lessor's execution of this Mortgage shall in no way be
construed as a waiver or modification of the Ground Lessor's rights against
the Borrower as provided in the Ground Lease except as expressly set forth
in this Section 33.
(f) The Mortgagee shall observe and perform all of the terms and
conditions in the Ground Lease on the part of the tenant thereunder to be
observed and performed if and when the Mortgagee shall enter into
possession of the Mortgagor's leasehold estate, or otherwise take steps to
enforce its security having the effect of depriving the said tenant of the
ability to fully perform its covenants and obligations under the Ground
Lease, and upon the exercise of any power of sale or any sale pursuant to
foreclosure or any other legal proceedings, the Mortgagee shall cause the
purchaser of the tenant's leasehold estate under the Ground Lease to
covenant with the Ground Lease landlord to observe and perform all the
terms and conditions of the Ground Lease on the part of the said tenant to
be observed and performed.
<PAGE>
17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IFS INTERNATIONAL, INC.
By:_____________________________________
Name:___________________________________
Title:____________________________________
TOWN OF NORTH GREENBUSH
INDUSTRIAL DEVELOPMENT AGENCY
By:_____________________________________
Name:___________________________________
Title:____________________________________
HUDSON RIVER BANK & TRUST COMPANY
By:_____________________________________
Name:___________________________________
Title:____________________________________
The Ground Lessor hereby executes this Agreement pursuant to the provisions of
Section 33 hereof.
RENSSELAER POLYTECHNIC INSTITUTE
By:_____________________________________
Name:___________________________________
Title:____________________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the ____ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at _________________________, New York, that he is the
____________ of the TOWN OF NORTH GREENBUSH INDUSTRIAL DEVELOPMENT AGENCY, the
public benefit corporation of the State of New York described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of said public benefit corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
)SS.:
COUNTY OF )
On this ___ day of April, 1999, before me personally came
________________ to me personally known, who, being by me duly sworn, did depose
and say that he resides at ______________________, New York, that he is a
_________________________ of HUDSON RIVER BANK & TRUST COMPANY, the banking
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by authority of the Board of Directors of such
banking corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of RENSSELAER POLYTECHNIC INSTITUTE the not-for-profit
corporation described in and which executed the foregoing instrument, and he
acknowledged that he executed the foregoing for and on behalf of said
not-for-profit corporation.
---------------------------------------
Notary Public
<PAGE>
A-1
SCHEDULE "A"
PROPERTY DESCRIPTION
EXHIBIT 10.21
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (hereinafter referred to as the
"Agreement" or the "Mortgage"), dated April 15, 1999 from IFS INTERNATIONAL,
INC., a New York business corporation with its principal executive office and an
office for the transaction of business located at 300 Jordan Road, Troy, New
York 12180 (the "Borrower") and TOWN OF NORTH GREENBUSH INDUSTRIAL DEVELOPMENT
AGENCY, a public benefit corporation existing under the laws of the State of New
York with its principal executive office and an office for the transaction of
business located at Wyantskill School Building, 2 Douglas Street, Wyantskill,
New York 12198 (the "Mortgagor") in favor of NEW YORK BUSINESS DEVELOPMENT
CORPORATION, a banking corporation organized and existing under Article 5 of the
Banking Law of the State of New York having an office at 41 State Street,
Albany, New York 12207 (the "Mortgagee") and RENSSELAER POLYTECHNIC INSTITUTE, a
New York not-for-profit corporation having an address of 110 8th Street, Troy,
New York 12180 (the "Ground Lessor").
W I T N E S S E T H:
WHEREAS, the Mortgagee has agreed to make a loan to the Borrower in the
principal amount of $949,042.00 to be evidenced by a mortgage note dated the
date hereof in the principal amount of $949,042.00 (as amended or supplemented
from time to time, the "Note"); and
WHEREAS, to secure the Note, the Borrower and the Mortgagor intend to
grant to the Mortgagee a mortgage lien on and security interest in the Mortgaged
Property (as hereinafter defined);
NOW, THEREFORE, THIS MORTGAGE FURTHER WITNESSETH:
To secure repayment of the principal of and premium, if any and
interest on the Note together with all other sums due and payable under the Note
in the original principal amount of Nine Hundred Forty Nine Thousand Forty Two
and no/100 Dollars ($949,042.00) (collectively, the "Indebtedness"), the
Borrower and the Mortgagor do hereby grant, convey, bargain, sell, transfer,
assign and pledge unto the Mortgagee, and grant a security interest unto the
Mortgagee in, all of the following property (the "Mortgaged Property"):
ALL right, title and interest of the Mortgagor and the
Borrower in and to a leasehold interest pursuant to the Ground Lease (as
hereinafter defined) in that certain real property described in Schedule "A"
attached hereto and made a part hereof (such leasehold interest being
hereinafter referred to as the "Land"), together with the right, title and
interest of Mortgagor and the Borrower, now owned or hereinafter acquired, in
and to the streets, the land lying in the bed of any streets, roads or avenues,
opened or proposed, in front of, adjoining or abutting the Land to the center
line thereof and strips and gores within or adjoining the Land, the air space
and right to use said air space above the Land, all rights of way, privileges,
liberties, hereditaments and all easements now or hereafter affecting the Land,
all royalties and all rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights;
TOGETHER with the buildings and improvements now or hereafter
erected on the land (the "Improvements") (the Land and Improvements are
hereinafter collectively referred to as the "Real Estate");
TOGETHER with all and singular the tenements, hereditament and
appurtenances belonging or in any way appertaining to the Real Estate, and the
reversion or reversions, remainder or remainders, rents, issues, profits and
revenue thereof; and also all of the estate, right, title, interest, dower and
right of dower, courtesy and rights of courtesy, property, possession, claim and
demand whatsoever, both in law and equity, of Mortgagor and Borrower, of, in and
to the Real Estate and of, in and to every part and parcel thereof, with the
appurtenances, at any time belonging or in any wise appertaining thereto;
TOGETHER with all of the fixtures and equipment of every kind
and nature whatsoever currently owned or hereafter acquired by Borrower or
Mortgagor, and all appurtenances and additions thereto and substitutions or
replacements thereof, now or hereafter attached to, or intended to be attached
to (though not attached to) the Real Estate or placed on any part thereof (such
fixtures and equipment are hereinafter collectively referred to as the
"Equipment"), including, but not limited to all plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, incinerating, and
escalator, elevator, power loading and unloading equipment and systems,
sprinkler systems and other fire prevention and extinguishing apparatus and
pipes, pumps, above ground or underground storage tanks, conduits, fittings and
fixtures; it being understood and agreed that all Equipment is appropriated to
the use of the Real Estate and, whether affixed or annexed or not, for the
purposes of this Mortgage shall be deemed conclusively to be Real Estate and
mortgaged hereby; and Mortgagor and Borrower hereby agree to execute and
deliver, from time to time, such further instruments (including security
agreements), as may be requested by Mortgagee to confirm the lien of this
Mortgage on the Equipment;
TOGETHER with all right, title and interest of the Mortgagor
and the Borrower in, to and under that certain ground lease dated May 26, 1983
from the Ground Lessor to Pacamor Bearings, Inc. a memorandum of which was
recorded in the Rensselaer County Clerk's Office on December 17, 1984 in Liber
1372 of Deeds at Page 891 as subsequently amended and assigned (as further
amended or supplemented from time to time, the "Ground Lease");
TOGETHER with all unearned premiums, accrued, accruing or to
accrue under insurance policies now or hereafter obtained by Mortgagor and/or
Borrower and Mortgagor's and Borrower's interest in and to all proceeds of the
conversion and the interest payable thereon, voluntary or involuntary, of the
Real Estate, and/or Equipment, or any part thereof, into cash or liquidated
claims, including, without limitation, proceeds of casualty insurance, title
insurance or any other insurance maintained on the Mortgaged Property, and the
right to collect and receive the same and all awards and/or other compensation
including the interest payable thereon and the right to collect and receive the
same heretofore and hereafter made to the present and all subsequent owners of
the Mortgaged Property by the United States, the State of New York or any
political subdivision thereof or any agency, department, bureau, board,
commission, or instrumentality of any of them, now existing or hereafter created
(collectively, "Governmental Authority") for the taking by eminent domain,
condemnation or otherwise, of all or any part of Mortgaged Property, including
all awards for any change or changes of grade or the widening of streets, roads
or avenues affecting the Real Estate;
TOGETHER with all rights, title and interest of Mortgagor and
the Borrower in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by or released to Mortgagor and/or
Borrower or constructed, assembled or placed by Mortgagor and/or Borrower on the
Real Estate, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in each such case, without further
mortgage, conveyance, assignment or other act by Mortgagor and/or Borrower, the
same shall become subject to the lien of this Mortgage as fully and completely,
and with the same effect, an though now owned by Mortgagor and/or Borrower and
specifically described herein;
TOGETHER with all proceeds, both cash and noncash, of the
foregoing which may be sold or otherwise be disposed of;
TOGETHER with any and all monies or hereafter on deposit for
the payment of real estate taxes or special assessments against the Real Estate
or for the payment of premiums on policies of fire and other hazard insurance
covering the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property and the properties,
rights and privileges hereby granted, bargained, sold, conveyed, mortgaged,
warranted, pledged and assigned, and in which a security interest is granted or
intended to be, unto Mortgagee, its successors and assigns, forever, for the
uses and purposes herein set forth.
The Borrower and the Mortgagor hereby represent, warrant and covenant
as follows:
1. Warranty of Title. Borrower represents and warrants to Mortgagee that it
and the Mortgagor are lawfully seized of a leasehold interest in the Land and a
fee simple interest in the Improvements and the Equipment, and that it has good
and marketable title thereto free and clear of all encumbrances, liens,
covenants, restrictions, reservations, conditions, and easements other than
those identified in and not omitted from Schedule B to Chicago Title Insurance
Policy No. 9903.30450. Borrower represents and warrants that this Mortgage
constitutes a valid first mortgage lien on the Mortgaged Property; and Borrower
covenants to (a) warrant and preserve such title and the validity and priority
of the lien hereof and defend the same to Mortgagee against the claims of all
and every person or persons, corporation or corporations and parties whomsoever
claiming or threatening to claim the same or any part thereof and (b) make,
execute, acknowledge and deliver all such further or other documents,
instruments or assurances, and cause to be done all such further acts and things
as may at any time hereafter be reasonably desired or required by Mortgagee to
fully protect the lien of this Mortgage.
2. Payment of Indebtedness. Borrower shall duly and punctually pay the
Indebtedness at the times and places and in the manner specified in the Existing
Note and in this Agreement and shall perform all of its obligations in
accordance with the terms of this Agreement.
3. Proper Care and Use.
(a) Borrower shall:
(i) not abandon the Mortgaged Property or any part thereof;
(ii) maintain the Mortgaged Property and the abutting grounds,
sidewalks, roads, parking and landscape areas in good repair, order
and condition;
(iii) promptly make all necessary repairs, renewals, replacements
and additions to the Mortgaged Property;
(iv) not commit or suffer wastes (other than ameliorative waste)
with respect to the Mortgaged Property:
(v) complete promptly and in a good workerlike manner any new
improvements constructed on the Land;
(vi) not commit, suffer or permit any act to be done in or upon
the Mortgaged Property in violation of any law, ordinance or
regulation;
(vii) (A) refrain from impairing or diminishing the value or
integrity of the Mortgaged Property or the security value of this
Mortgage; (B) not remove, demolish or in any material respect alter
any of the Improvements, Equipment or Personalty without the prior
written consent of Mortgagee; or (C) not make, install or permit to be
made or installed, any alterations or additions thereto if doing so
will impair the value of the Mortgaged Property; and
(viii) not make, suffer or permit any nuisance to exist on any of
the Mortgaged Property.
(b) Mortgagee and any persons authorized by Mortgagee shall have the
right to enter and inspect the Mortgaged Property at all reasonable times
upon reasonable notice. If an Event of Default shall have occurred and be
continuing or in the event of an emergency, Mortgagee and any persons
authorized by Mortgagee may (without being obligated to do so) enter or
cause entry to be made upon the Real Estate and repair and/or maintain the
same as Mortgagee may reasonably deem necessary or advisable, and may
(without being obligated to do so) make such expenditures and outlays of
money as Mortgagee may deem reasonably appropriate for the preservation of
the Mortgaged Property. All expenditures and outlays of money made by
Mortgagee pursuant hereto shall be secured hereby and shall be payable on
demand together with interest at the rate set forth in the Note from the
date of such expenditure or outlay until paid.
4. Requirements.
(a) Borrower represents and warrants that the Mortgaged Property
complies with and conforms to, and Borrower, at Borrower's sole cost and
expense, shall continue to promptly comply with and conform to, or cause
the Mortgaged Property to comply with and conform to, all present and
future laws, statutes, codes, ordinances, orders, judgments, decrees,
injunctions, rules, regulations and requirements pertaining to the
Mortgaged Property, including any and all applicable federal, state or
local environmental laws and regulations, all zoning or building, use and
land use laws, ordinances, rules or regulations and all covenants,
restrictions and conditions now or hereafter of record which may be
applicable to Borrower or to any of the Mortgaged Property, or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration,
repair or reconstruction of any of the Mortgaged Property (collectively,
the "Legal Requirements").
(b) Without limiting the generality of the foregoing, Borrower
covenants to operate the Mortgaged Property (whether or not such property
constitutes a "Facility" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") so
that no cleanup or other obligation arises in respect of CERCLA or other
applicable Federal law or under any state, local or municipal law, statute,
ordinance, rule or regulation designed to protect the environment, which
would constitute a lien or charge on the Mortgaged Property prior to that
of Mortgagee. If any such claim be made or any obligation should
nevertheless arise hereafter, Borrower agrees that it will, at its own
expense, (a) promptly cure same and (b) will indemnify Mortgagee from any
liability, responsibility or obligation in respect thereof or in respect of
any cleanup or other liability as successor, secured party or otherwise
(regardless of whether or not Mortgagee may deem to be "owner or operator"
under CERCLA) for any reason including, but not limited to, the enforcement
of Mortgagee's rights as a secured party under this Mortgage, or any
obligation of law.
5. Payment of Impositions.
(a) Borrower shall pay and discharge before the last date payment may
be made without the imposition of interest or a penalty all taxes of every
kind and nature (including, without limitation, all real and personal
property, payments in lieu of real property, income, franchise,
withholding, profits and gross receipts taxes), all charges for any
easement or agreement maintained for the benefit of any of the Mortgaged
Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other
public charges whether of a like or different nature, even if unforeseen or
extraordinary, imposed upon or assessed on or against Borrower or any of
the Mortgaged Property, together with any interest or penalties on any of
the foregoing (all of the foregoing are hereinafter collectively referred
to as the "Impositions"). Borrower shall deliver to Mortgagee receipts
satisfactory to Mortgagee evidencing the payment of all such impositions
within thirty days of the date each such imposition is due and payable.
Upon Borrower's failure to submit evidence of payment within such thirty
day period, it shall be deemed an Event of Default under Section 15 hereof.
(b) Mortgagee shall have the right to pay any Imposition not paid by
Borrower on or after the last date payment of such Imposition may be made
without imposition of interest or a penalty (subject to Borrower's right to
contest such Imposition as hereinbefore provided), and the amount thereof
together with interest thereon at the Default Rate (as hereinafter
defined), shall be added to the Indebtedness, payable on demand, and shall
be secured by this Agreement.
6. Insurance.
(a) Borrower shall, (i) keep the Real Estate (A) insured against loss
or damage by fire, lightning, windstorm, tornado and by such other further
and additional risks and hazards as now or hereinafter may be covered by
extended coverage and "all risk" endorsements, (B) insured against loss or
damage by any other risk commonly insured against by persons occupying or
using like properties in the locality in which the Real Estate is situated,
(ii) keep the equipment and personality insured against loss or damage by
fire, lightning, windstorm, tornado and theft and by such other further and
additional risks as now or hereinafter may be covered by extended coverage
and "all risks" endorsement, (iii) obtain and maintain comprehensive public
liability insurance on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury, death or property
damage occurring on, in or about the Mortgaged Property and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than One Million Dollars
($1,000,000.00) combined single limit for personal injury or death to one
or more persons or damage to property, (iv) to the extent the Land lies
within an area identified by the Secretary of Housing and Urban Development
as an area having special flood hazards, keep the Real Estate insured under
a policy of flood insurance in an amount reasonably requested by Mortgagee.
Each insurance policy shall (i) be noncancelable (which terms shall include
any reduction in the scope or limits of coverage) without at least ten (10)
days prior written notice to Mortgagee or (ii) except in the case or
worker's compensation and comprehensive public liability insurance, be
endorsed to name Mortgagee as its interest may appear, with loss payable to
Mortgagee, without contribution, under a standard mortgagee clause and in
the case of comprehensive public liability insurance, be endorsed to name
mortgagee as its interest may appear, with loss payable to Mortgagee,
without contribution, under a standard mortgagee clause and in the case of
comprehensive public liability insurance be endorsed to name Mortgagee as
an additional named insured, (iii) in the case of property insurance,
provide for deductibles acceptable to Mortgagee, (iv) be written by
companies acceptable to Mortgagee, and (v) contain an endorsement or
agreement by the insurer that any loss shall be payable in accordance with
the terms of such policy notwithstanding any act or negligence of Borrower
which might otherwise result in forfeiture of said insurance and the
further agreement of the insurer waiving all rights of set off,
counterclaim, deduction or subrogation against Borrower. Borrower hereby
directs all insurers under such policies (except worker's compensation and
comprehensive public liability insurance) to pay all proceeds payable
thereunder directly to Mortgagee.
(b) Borrower shall (i) pay as they become due all premiums for such
insurance, and (ii) not later than ten (10) days prior to the expiration of
each policy to be furnished pursuant to the provisions of this Section 6,
deliver a valid certificate of insurance (or if such certificate is not
then available, a renewal binder), evidencing a renewed policy or policies
marked "premium paid", or accompanied by such other evidence of payment
satisfactory to Mortgagee with standard noncontributory mortgage clauses in
favor or and acceptable to Mortgagee. Notwithstanding the foregoing,
Borrower shall not be required to provide proof of payment if Borrower and
such insurance company agree to an alternative, i.e., installment, method
of payment, and Mortgagee receives reasonably satisfactory evidence of the
terms of such payment arrangement. Such certificate of insurance (or
renewal binder) shall be accompanied by a written statement of Borrower
certifying that the insurance coverage evidenced thereby complies with the
requirements of this Section 6.
(c) If Borrower shall be in default of its obligations to so insure or
deliver any such prepaid certificate of insurance or renewal binder then
Mortgagee, at Mortgagee's option, after notice to Borrower (except that no
notice shall be required if the insurance has expired or been canceled or
terminated), may effect such insurance and pay the premium or premiums
therefor, and the amount of such premium or premiums so paid by Mortgagee,
with interest from the time of payment at the Default Rate (as hereinafter
defined), shall be added to the Indebtedness, payable on demand, and shall
be secured by this Mortgage.
7. Impositions and Insurance Escrow. Borrower, upon Mortgagee's request,
shall pay to Mortgagee an amount equal to one-twelfth of the estimated aggregate
annual amount of (i) all Impositions payable on the Mortgaged Property, and (ii)
insurance premiums on all policies of insurance required by this Mortgage, on a
specified date each month. Following receipt of Mortgagee's request, Borrower
shall cause all bills, statements or other documents relating to such
Impositions and insurance premiums to be sent or mailed directly to Mortgagee
pursuant to this Section 7. Mortgagee shall pay such amounts as may be due
thereunder out of the funds so deposited with Mortgagee. if at any time and for
any reason the funds deposited with Mortgagee are or will be insufficient to pay
such amounts as may then or subsequently be due, Mortgagee may notify Borrower
and Borrower shall immediately deposit an amount equal to such deficiency with
Mortgagee. Notwithstanding the foregoing, nothing contained herein shall cause
Mortgagee to be deemed a trustee of said funds or to be obligated to pay any
amounts in excess of the amount of funds deposited with Mortgagee pursuant to
this Section 7, and Borrower shall be entitled to no interest thereon.
8. Condemnation/Eminent Domain. Mortgagor and Borrower hereby irrevocably
assign to Mortgagee, as additional security for the payment of the Indebtedness,
all of their respective awards and/or other compensation, including interest
payable thereon, hereafter made by any Governmental Authority for the taking by
eminent domain, condemnation or otherwise, of all or any part of the Mortgaged
Property ("Awards"). Mortgagor and Borrower agree that all such Awards shall be
paid to Mortgagee and, subject to the provisions of Article VII of the Lease
Agreement (as hereinafter defined), shall be applied by Mortgagee, after the
payment of all of its expenses in connection with such proceedings, including
costs and attorneys' fees, to the reduction of the Indebtedness with the balance
(if any) to be paid to Borrower. Mortgagor and Borrower hereby authorize
Mortgagee, on behalf and in the name of Mortgagor and Borrower, to collect,
execute and deliver valid acquittances for, and to appeal from, any such Awards.
9. Discharge of Liens, Utilities. (a) Mortgagor and Borrower shall not,
without prior written consent of Mortgagee, create, consent to or suffer the
creation of any liens, charges or encumbrances (each, a "Prohibited Lien") on
any of the Mortgaged Property, whether or not such Prohibited Lien is
subordinate to this Mortgage, or fail to have any Prohibited Lien which may be
imposed without Borrower's consent discharged and satisfied or record within
thirty (30) days after it is imposed, except those liens bonded while being
contested. Borrower shall pay when due all lawful claims and demands of
mechanics, material persons, laborers and others which, if unpaid, might result
in, or permit the creation of a Prohibited Lien, except that Borrower shall have
the right to contest such claims or demands, provided that Borrower shall
furnish a good and sufficient bond, surety or other security satisfactory to
Mortgagee.
(b) Borrower shall pay when due all utility charges which are incurred
by it for gas, electricity, water or sewer services and all other
assessments or charges of a similar nature, whether public or private and
whether or not such taxes, assessments or charges are liens on the
Mortgaged Property.
10. Estoppel Certificates. From time to time, within ten (10) days after a
request of Mortgagee, Borrower shall furnish a written statement, signed and, if
requested, acknowledged, setting forth the amount of the Indebtedness which the
Borrower acknowledges to be secured hereby, specifying any claims of offset or
defense which Borrower asserts against the Indebtedness, and, at the request of
the Mortgagee, the then state of facts relevant to the condition of the
Mortgaged Property.
11. Expenses. Borrower shall pay, together with any interest or penalties
imposed in connection therewith, all expenses incident to the preparation,
execution, acknowledgment, delivery and/or recording of this Mortgage,
including, without limitation, all filing, registration or recording fees and
all federal, state, county and municipal, internal revenue or other stamp taxes
and other taxes, duties, imposts, assessments and charges now or hereafter
required by the federal, state, county or municipal government, the legal fees
of the Mortgagee's Attorney, survey charges, title insurance premiums, and any
other expenses connected with this transaction.
12. Mortgagee's Costs and Expenses. Upon the occurrence of any Event of
Default or the proper exercise by Mortgagee of any Mortgagee's rights hereunder,
or if any action or proceeding be commenced, to which action or proceeding
Mortgagee is or becomes party or in which it becomes necessary to defend or
uphold the lien of this Mortgage, or if the taking, holding or servicing of this
Mortgage by Mortgagee is alleged to subject Mortgagee to any civil fine, or if
Mortgagee's review and approval of any document is requested by Borrower or
required by Mortgagee in connection therewith, then any fees incurred by
Mortgagee in connection therewith (including any civil fines and attorneys' fees
and disbursements) shall, after notice and demand, be paid by Borrower, or, if
paid by Mortgagee, the amount thereof, together with interest thereon at the
Default Rate (as such term is hereinafter defined) shall be added to the
Indebtedness, payable on demand, and shall be secured by this Mortgage; and, in
any action to foreclose this Mortgage, or to recover or collect the
Indebtedness, the provisions of this Section 12 with respect to the recovery of
costs, disbursements and allowances shall prevail unaffected by the provisions
of any law with respect to the same to the extent that the provisions of this
Section 12 are not violative thereof.
13. Mortgagee's Right to Perform. If any Event of Default shall have
occurred hereunder and be continuing, Mortgagee, may (but shall be under no
obligation), cure the same, and the cost thereof, with interest at a fluctuating
per annum rate (the "Default Rate") equal to the rate of interest announced
publicly by Mortgagee from time to time as its Prime Rate plus three percent
(3%) per annum, shall be added to the Indebtedness, payable on demand, and shall
be secured by this Mortgage. No payment or advance of money by Mortgagee under
this Mortgage shall be deemed or construed to cure any Event of Default arising
out of the non-payment of such amount by Borrower or waive any right or remedy
of Mortgagee hereunder. The lien of this Mortgage with respect to such amounts
shall be prior to any right, title to, interest in or claim upon the Mortgaged
Property attaching subsequent to the lien of this Mortgage.
14. Further Assurances. Mortgagor and Borrower agree, upon demand of
Mortgagee, to do any act or execute any additional documents (including, but not
limited to, security agreements on any Equipment or Personalty included or to be
included in the Mortgaged Property) as may be reasonably required by Mortgagor
and Borrower to confirm the lien of this Mortgage.
15. Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default by Borrower hereunder:
(a) default in the payment of all or any portion of any installment of
principal and/or interest as and when the same become due under the
Existing Note, which default continues for a period in excess of fifteen
(15) days from such due date; or
(b) default in the performance or observance of any covenant on the
part of the Mortgagor or Borrower to be performed or observed hereunder, or
under any other agreement between Borrower and Mortgagee which default
continues beyond the expiration of any applicable grace or notice period
expressly provided herein, or if no grace period is expressly provided, if
the default continues more than fifteen (15) days after the giving of
written notice thereof from Mortgagee, or, if such default is of such a
nature that it cannot with due diligence be cured within fifteen (15) days,
if Borrower shall fail to commence to cure such default with such fifteen
(15) day period and thereafter prosecute such cure diligently; or
(c) if Mortgagor or Borrower shall sell, convey, assign or transfer
(other than a transfer as the result of a taking by condemnation or eminent
domain) the Mortgaged Property or any part thereof or interest therein (any
sale, conveyance, assignment or transfer of a controlling interest in
Borrower being deemed a sale of the Mortgaged Property for purposes
hereof), or of the Mortgaged Property or any part thereof or interest
therein, including, without limitation, any rents, royalties, profits,
income or revenue arising therefrom, is further mortgaged, pledged or
encumbered; or
(d) the voluntary suspension of all or a substantial part of its
business by Borrower, the insolvency of the Borrower or any guarantor
hereof, the commencement of any proceedings under any bankruptcy or
insolvency law by or against the Borrower, an assignment for the benefit of
creditors by Borrower, or any guarantor hereof, application for consent to
the appointment of any receiver or trustee for the Borrower, or any
assignment to an agent authorized to liquidate any substantial part of the
assets of Borrower; or
(e) the occurrence of an Event of Default under the Note or under any
of the Lease Documents (as defined in the hereinafter defined Lease
Agreement); or
(f) failure to provide copies of paid tax bills required to be
provided pursuant to Article 5 of this Mortgage; or
(g) failure to provide copies of any financial statement required to
be provided to article 26 of this mortgage.
16. Remedies. Upon the occurrence of any Event of Default hereunder,
Mortgagee may declare the entire Indebtedness to be immediately due and payable
without presentment, demand, protest or notice of any kind, and Mortgagee may
take any and all actions permitted at law or in equity, without notice or
demand, as it deems advisable to protect and enforce Mortgagee's rights against
Mortgagor and Borrower in and to the Mortgaged Property, including, but not
limited to, the following actions:
(a) Either in person or by agent, with or without bringing any action
or proceeding, or by a receiver appointed by a court and without regard to
the adequacy of its security, enter upon or take possession of Mortgaged
Property, or any part thereof, and do any acts which it deems necessary or
desirable to preserve the value, marketability or rentability of the
Mortgaged Property, or any part thereof or interest therein, or increase
the income therein, or increase the interest therefrom or protect the
security hereof and, with or without taking possession of the Mortgaged
Property, sue for or otherwise collect the rents, issues and profits
thereof, including those past due and unpaid and apply the same, less costs
and expenses of operations and collection, including reasonable attorneys'
fees and expenses, against the Indebtedness, all in such order as Mortgagee
may determine. The entering upon and taking possession of the Mortgaged
Property, the collection of such rents, issues and profits and the
application thereof as foresaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done in response to such
default, and notwithstanding the continuance in possession of the Mortgaged
Property or the collection, receipt and application of rents, issues or
profits, Mortgagee shall be entitled to exercise every right provided for
in the Existing Note, this Mortgage or by law upon occurrence of any Event
of Default, including the right to exercise the power of sale.
(b) Commence an action to foreclose this Mortgage as a lien, and sell
the Mortgaged Property under the judgment or decree of a court of competent
jurisdiction.
(c) Appoint a receiver, as provided herein.
(d) Specifically enforce any of the covenants on the part of the
Mortgagor and Borrower contained herein.
In the event that Mortgagee elects to exercise its right to
declare the entire indebtedness immediately due and payable, Mortgagee shall not
be deemed to have waived its right to collect any prepayment penalty payable
pursuant to the Existing Note.
17. Proceeds of Sale Under Security Agreement. The purchase money proceeds
of any sale made pursuant to any security agreement contained in this Mortgage
shall be distributed according to the provisions of the Uniform Commercial Code
of the State of New York.
18. Appointment of Receiver. If an Event of Default shall have occurred and
be continuing, Mortgagee as a matter of right without notice to Mortgagor or
Borrower, and without regard to the then value of the Mortgaged Property or the
interest of Mortgagor or Borrower therein, shall have the right to apply to any
court having jurisdiction to appoint a receiver or receivers of the Mortgaged
Property. Mortgagor and Borrower irrevocably consent to such appointment and
waive notice of any application therefor.
19. Extension, Release, etc. Without affecting the lien or charge of this
Mortgage upon any portion of the Mortgaged Property not then or therefore
released as security for the full amount of all unpaid obligations, Mortgagee
may, from time to time and without notice, agree to (i) release any persons so
liable, (ii) extend the maturity or alter any of the terms of any such
obligation (provided, however, that Borrowers shall have consented to any such
extension or alteration), (iii) grant other indulgences, release or reconvey, or
caused to be released or reconveyed at any at Mortgagee's option any parcel,
portion or all of the Mortgaged Property, (iv) take or release any other or
additional security for the Indebtedness, or (v) make compromises or other
arrangements with debtors in relation thereto.
20. Remedies Not Exclusive. Mortgagee shall be entitled to enforce payment
or performance of the Indebtedness and to exercise all rights and powers under
this Mortgage or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, lien, security
interest, assignment or otherwise. Neither the acceptance of this Mortgage nor
its enforcement, whether by court action or pursuant to the power of sale or
other powers herein contained, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or hereafter
held by Mortgagee, it being agreed that Mortgagee shall be entitled to enforce
this Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as it may in its absolute discretion determine. No remedy
herein conferred upon or reserved to Mortgagee is intended to be exclusive of
any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law in equity or by statute. Every power or remedy
given to Mortgagee or to which it may be exercised, concurrently or
independently, from time to time as often as may be deemed expedient by
Mortgagee.
21. Security Agreement Under Uniform Commercial Code. It is the intention
of the parties hereto that this Mortgage shall constitute a Security Agreement
within the meaning of Article 9 of the Uniform Commercial Code of the State of
New York. Notwithstanding the filing of a financing statement covering any of
the Mortgaged Property in the records normally pertaining to personal property,
all of the Mortgaged Property, for all purposes and in all proceedings, legal or
equitable, shall be regarded, at Mortgagees' option (to the extent permitted by
law) as part of the Real Estate whether or not any such item is physically
attached to the Real Estate or serial numbers are used for the better
identification of certain items. The mention in any such financing statement of
any of the Mortgaged Property shall never be construed as in any way derogating
from or impairing this declaration and it is the hereby stated intention of the
parties that such mention in protection of Mortgagee in the event any court
shall at any time hold that notice of Mortgagee's priority of interest, to be
effective against any third party, including the federal government and any
authority or agency thereof, must be filed in the Uniform Commercial Code
records. Mortgagor and Borrower hereby agree that each shall execute and hereby
authorizes Mortgagee to file any financing and continuation statements which
Mortgagee shall determine in its sole discretion are necessary or advisable in
order to perfect it security interest in the Equipment and Personalty covered by
this Mortgage, and Borrower shall pay any expenses incurred by Mortgagee in
connection with the preparation, execution and filing of such statements that
may be filed by Mortgagee, or, if paid by Mortgagee, such amounts, together with
interest at the Default Rate, shall be added to the Indebtedness, payable on
demand, and shall be secured by this Mortgage.
22. Indemnification; Waiver of Claim. If Mortgagee is made a party
defendant to any litigation concerning this Mortgage or the Mortgaged Property,
or any part thereof or interest therein, or the occupancy thereof by Borrower,
then Borrower shall indemnify, defend and hold Mortgagee harmless from all
liability by reason of said litigation (other than that arising from Mortgagee's
own willful misconduct or gross negligence), including reasonable attorneys'
fees and expenses incurred by Mortgagee in such litigation, whether or not any
such litigation is prosecuted to judgment. If Mortgagee commences an action
against Mortgagor and/or Borrower to enforce any of the terms thereof or because
of the breach by Mortgagor and/or Borrower of any of the terms hereof, or for
the recovery of any sum secured hereby, Borrower shall pay Mortgagee's
reasonable attorneys' fees and expenses, or, if paid by Mortgagee, the amount
thereof, together with interest thereon at the Default Rate, shall be added to
the Indebtedness, payable on demand, and shall be secured by this Mortgage. The
right to such attorneys' fees and expenses shall be deemed to have accrued on
the commencement of such action, and shall be enforceable whether or not such
action is prosecuted to judgment. If an Event of Default shall have occurred,
Mortgagee may engage an attorney or attorneys to protect its rights hereunder,
and in the event of such fees and expenses incurred by Mortgagee, whether or not
action is actually commenced against Mortgagor and/or Borrower by reason of such
Event of Default.
23. No Waivers, etc. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor or Borrower of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor and Borrower of
any and of all of the terms and provisions of this Mortgage to be performed by
Mortgagor and Borrower; Mortgagee may release, regardless of consideration and
without the necessity for any notice to or consent by the holder of any
subordinate lien on the Mortgaged Property, any part of the security held for
the obligations secured by this Mortgage without, was to the remainder of the
security, in any wise impairing or affecting the lien of this Mortgage or the
priority of such lien over any subordinate lien.
24. Notices. Whenever it is provided herein that notice, demand, request,
consent, approval or other communication shall or may be given to or served upon
either of the parties by the other, or whenever either of the parties desires to
give or serve upon the other any notice, demand, request, consent, approval, or
other communication with respect to this Mortgage or to the Mortgaged Property,
each such notice, demand, request, consent, approval or other communication
shall be in writing and shall be deemed to have been sufficiently given or
served when delivered by hand or by overnight courier service or when sent by
registered or certified mail, return receipt requested, postage prepaid,
directed to the party to receive the same at its address stated above or at such
other addresses as may be substituted by notice given upon receipt or, if
receipt is refused, three (3) days after waiting.
25. No Modification. This Mortgage may not be modified, amended, discharged
or waived in whole or in part except by an agreement in writing signed by the
party against whom enforcement of any such modification, amendment, discharge or
waiver is sought.
26. Financial Information; Covenants. (a) So long as the Indebtedness shall
be outstanding, Borrower shall deliver to Mortgagee, or shall cause to be
delivered to Mortgagee, as soon as they are available and in any event within
five (5) days of the issuance thereof, a copy of the annual 10k report and
quarterly 10Q report for the Borrower's corporate parent, IFS International,
Inc. Additionally, the Borrower shall submit or cause to be submitted such other
financial information as the Mortgagee shall reasonably request concerning any
tenant at the Mortgaged Premises. Upon Borrower's failure to submit any
statement or information required by this section within the time specified
therefore, it shall be deemed an event of default under Section 15 hereof.
(b) So long as the Indebtedness shall remain outstanding, the Borrower
shall maintain a minimum debt service coverage ratio combined with respect
to the Indebtedness and all indebtedness due and owing to Hudson River Bank
& Trust Company, its successors and assigns, of 1.20 to 1.00 to be tested
annually as of the close of each fiscal year of the Borrower.
(c) So long as the Indebtedness shall remain outstanding, the Borrower
shall maintain a debt to worth ratio not in excess of 1.25 to 1.00 to be
tested annually as of the close of each fiscal year of the Borrower.
27. Captions. The captions or headings at the beginning of each Article
hereof are for the convenience of the parties and are not a part of this
Mortgage.
28. Successors and Assigns. The covenants contained herein shall run with
the land and bind Borrower, its successors and assigns and all subsequent
owners, encumbrancers, tenants and subtenants of the Mortgaged Property, and
shall insure to the benefit of the Mortgagee, its successors, assigns and
endorsees.
29. Enforceability. All provisions of this Mortgage shall be construed as
affording to Mortgagee additional rights to and not exclusive of the rights
conferred under the provisions of Section 254 and 272 of the Real Property law
of the State of New York. The creation of this Mortgage, the perfection of the
lien or security interest in the Mortgaged Property, and the rights and remedies
of Mortgagee with respect to the Mortgaged Property, as provided herein and by
the laws of the State of New York, shall be governed by and construed in
accordance with the laws of the State of New York. Whenever possible, each
provision of this Mortgage shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Mortgage
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or validity, without invalidating
the remaining provisions of this Mortgage. Nothing in this Mortgage shall
require Borrower to pay, or Mortgagee to accept, interest or other payments in
an amount which would subject Mortgagee to penalty under applicable law. In the
event that the payment of any interest or other amounts due hereunder would be
in excess of the maximum amount allowed by applicable law, then ipso facto the
obligation of Borrower to make such payment shall be reduced to the highest rate
authorized by such law.
30. Trust Fund. This Mortgage is subject to the trust fund provisions of
Section 13 of the Lien Law of the State of New York; the Borrower shall receive
the proceeds of the Existing Note secured hereby, and shall hold the right to
receive such proceeds, as a trust fund to be applied first for the purpose of
paying the cost of any improvements before using any part of such proceeds for
any other purpose.
31. Miscellaneous. As used in this Mortgage, the singular shall include the
plural as the context requires and the following words and phrases shall have
the following meaning: (a) "including" shall mean "included but not limited to";
(b) "provisions" shall mean "provisions, terms, covenants and/or conditions";
(c) "lien" shall mean "lien, charge, encumbrance, security interest, mortgage
and/or deed of trust"; (d) "obligation" shall mean "obligation, duty, covenant
and/or condition"; and (e) "any of the Mortgaged Property" shall mean "the
Mortgaged Property or any part thereof or interest therein." Any act which
Mortgagee is permitted to perform hereunder may be performed at any time and
from time to time by Mortgagee or any person or entity designated by Mortgagee.
Any act which is prohibited to Borrower hereunder is also prohibited to all
lessees of any of the Mortgaged Property. Each appointment of Mortgagee and
attorney-in-fact for Borrower under the Mortgage is irrevocable and coupled with
an interest. Mortgagee has the right to refuse to grant its consent, approval or
acceptance or to indicate its satisfaction is required hereunder, except as
otherwise expressly provided herein.
32. Town of North Greenbush Industrial Development Agency Special
Obligations; Recording. (a) This Mortgage is executed by the Mortgagor solely
for the purpose of subjecting its fee ownership interest in the Premises to the
lien of this Mortgage and for no other purpose. All representations, covenants
and warranties of the Mortgagor herein are hereby deemed to have been made by
Borrower, and not by the Mortgagor. The parties hereby expressly agree that the
terms "Borrower" and "Mortgagor", as such are used in this Mortgage, shall not
be defined to include the Mortgagor.
(b) The obligations and agreements of the Mortgagor contained herein
and other instrument or documents executed in connection herewith or
therewith, and any other instrument or document supplemental thereto or
hereto, shall be deemed the obligations and agreements of the Mortgagor,
and not of any member, officer, agent (other than the Borrower) or employee
of the Mortgagor in his individual capacity, and the members, officers,
agents (other than the Borrower) and employees of the Mortgagor, shall not
be liable personally hereon or thereon or be subject to any personal
liability or accountability based upon or in respect hereof or thereof or
any transaction contemplated hereby or thereby.
(c) The obligations and agreements of the Mortgagor contained herein
and therein shall not constitute or give rise to an obligation of the State
of New York or the Town of North Greenbush, New York, and neither the State
of New York nor the Town of North Greenbush, New York, shall be liable
hereon or thereon, and, further, such obligations and agreements shall not
constitute or give rise to a general obligation of the Mortgagor, but
rather shall constitute limited obligations of the Mortgagor payable solely
from the revenues of the Mortgagor derived and to be derived from the
lease, sale or other disposition of the Mortgaged Property.
(d) No order or decree of specific performance with respect to any of
the obligations of the Mortgagor hereunder shall be sought or enforced
against the Mortgagor unless (i) the party seeking such order or decree
shall first have requested the Mortgagor in writing to take the action
sought in such order or decree of specific performance, and ten (10) days
shall have elapsed from the date of receipt of such request, and the
Mortgagor shall have refused to comply with such request (or, if compliance
therewith would reasonably be expected to take longer than ten days, shall
have failed to institute and diligently pursue action to cause compliance
with such request within such ten day period) or failed to respond within
such notice period, (ii) if the Mortgagor refuses to comply with such
request and the Mortgagor's refusal to comply is based on its reasonable
expectation that it will incur fees and expenses, the party seeking such
order or decree shall have placed in an account with the Mortgagor in
amount of undertaking sufficient to cover such reasonable fees and expenses
and (iii) if the Mortgagor refuses to comply with such request and the
Mortgagor's refusal to comply is based on its reasonable expectation that
it or any of its members, officers, agents (other than the Borrower) or
employees shall be subject to potential liability, the party seeking such
order or decree shall (A) agree to indemnify, defend and hold harmless the
Mortgagor and its members, officers, agents (other than the Borrower) and
employees against any liability incurred as a result of its compliance with
such demand, and (B) if requested by the Mortgagor, furnish to the
Mortgagor satisfactory security to protect the Mortgagor and its members,
officers, agents (other than the Borrower) and employees against all
liability expected to be incurred as a result of compliance with such
request.
(e) The Mortgagee will record or cause this Mortgage to be recorded in
all offices where the recordation hereof is necessary and will pay, or
cause to be paid, all documentary stamp taxes, if any, which may be imposed
by the United States of America or any agency thereof or by the State of
New York or other governmental authority upon this Mortgage.
33. Execution by Ground Lessor. (a) This Mortgage has been executed by the
Ground Lessor for the sole purpose of having the Ground Lessor consent to this
Mortgage.
(b) Notwithstanding any other provisions of this Mortgage, the parties
hereto agree as follows:
(i) the proceeds of any insurance or condemnation award allocable
to the Land and the Improvements shall be applied as required under
the terms of that certain lease agreement dated as of October 2, 1997
by and between the Mortgagor and the Borrower as amended by a first
amendment to lease agreement dated the date hereof as further amended
or supplemented from time to time, (the "Lease Agreement"); provided,
however, that in the event of a conflict between the provisions of the
Lease Agreement and the Ground Lease with respect to the application
of the proceeds of such insurance or condemnation award, the Lease
Agreement with respect thereto shall control; and
(ii) the Ground Lessor and the Borrower shall receive a copy of
all notices given or received by the Mortgagee pursuant to the
provisions of this Mortgage and the Mortgagee shall accept performance
of any covenant in default by the Ground Lessor, it is performed
within the time allotted to the Borrower or the Mortgagor to perform.
(c) The Mortgagee hereby agrees that in no event shall the Ground
Lessor be liable personally under this Mortgage or the Note or the Lease
Agreement and in no event shall any deficiency or personal judgment or
order or decree of specific performance with respect to the Ground Lessor
under the Note or this Mortgage or the Lease Agreement be sought or
enforced against the Ground Lessor, and the Mortgagee hereby specifically
waives and relinquishes any right it might otherwise have had to seek such
deficiency or personal judgment or order or decree of specific performance.
(d) The provisions of this Section 33 shall control over any contrary
or inconsistent provisions contained in this Mortgage or the Lease
Agreement.
(e) The Ground Lessor's execution of this Mortgage shall in no way be
construed as a waiver or modification of the Ground Lessor's rights against
the Borrower as provided in the Ground Lease except as expressly set forth
in this Section 33.
(f) The Mortgagee shall observe and perform all of the terms and
conditions in the Ground Lease on the part of the tenant thereunder to be
observed and performed if and when the Mortgagee shall enter into
possession of the Mortgagor's leasehold estate, or otherwise take steps to
enforce its security having the effect of depriving the said tenant of the
ability to fully perform its covenants and obligations under the Ground
Lease, and upon the exercise of any power of sale or any sale pursuant to
foreclosure or any other legal proceedings, the Mortgagee shall cause the
purchaser of the tenant's leasehold estate under the Ground Lease to
covenant with the Ground Lease landlord to observe and perform all the
terms and conditions of the Ground Lease on the part of the said tenant to
be observed and performed.
<PAGE>
16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IFS INTERNATIONAL, INC.
By:_____________________________________
Name:___________________________________
Title:____________________________________
TOWN OF NORTH GREENBUSH
INDUSTRIAL DEVELOPMENT AGENCY
By:_____________________________________
Name:___________________________________
Title:____________________________________
The Ground Lessor hereby executes this Agreement pursuant to the provisions of
Section 33 hereof.
RENSSELAER POLYTECHNIC INSTITUTE
By:_____________________________________
Name:___________________________________
Title:____________________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On the ____ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at _________________________, New York, that he is the
____________ of the TOWN OF NORTH GREENBUSH INDUSTRIAL DEVELOPMENT AGENCY, the
public benefit corporation of the State of New York described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of said public benefit corporation.
---------------------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of RENSSELAER POLYTECHNIC INSTITUTE the not-for-profit
corporation described in and which executed the foregoing instrument, and he
acknowledged that he executed the foregoing for and on behalf of said
not-for-profit corporation.
---------------------------------------
Notary Public
<PAGE>
A-1
SCHEDULE "A"
PROPERTY DESCRIPTION
EXHIBIT 10.22
MORTGAGE NOTE
$949,042.00 April 15, 1999
Albany, New York
For value received, IFS INTERNATIONAL, INC., a New York business
corporation with an office and its principal place of business located at 300
Jordan Road, Troy, New York 12180 (the "Borrower") promises to pay to the order
of NEW YORK BUSINESS DEVELOPMENT CORPORATION, a corporation organized and
existing under Article 5-A of the Banking Law of the State of New York (the
"Lender"), at 41 State Street, Albany, New York 12207, or at such other place as
Lender may from time to time designate, the principal sum of NINE HUNDRED FORTY
NINE THOUSAND FORTY TWO AND NO/100 DOLLARS ($949,042.00), with interest thereon
at a fixed rate per annum equal to eight and eleven hundredths percent (8.11 %),
in the following manner:
On the earlier of May 1, 1999 and on the first day of each month
thereafter up to and including the Maturity Date (as hereinafter defined), the
Borrower shall make monthly payments of principal and interest equal to
$8,002.36. In addition, the entire unpaid principal balance hereof, together
with accrued interest thereon and accrued late charges, if any, and all other
sums due hereunder and under the Mortgage (as hereinafter defined), shall be
finally due and payable on April 1, 2009 (the "Maturity Date").
All payments hereunder shall be applied first to the payment of accrued
late payments, if any, then to the payment of interest at the aforesaid rate on
the principal amount remaining unpaid and the balance, if any, shall be applied
in reduction of principal.
Interest shall be computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed and shall accrue from the
date of advance of funds until receipt of payment by Lender.
During the term of this Note, the Borrower shall have the option of
paying the Principal Sum to the Lender in advance of the Maturity Date, in whole
or in part, at any time and from time to time upon written notice received by
the Lender at least thirty (30) days prior to making such prepayment; provided,
however, that together with such prepayment, the Borrower shall pay to the
Lender a premium equal to the greater of (a) one percent (1%) of the amount of
such prepayment, or (b) an amount equal to (i) the difference between the Note
Rate and the most recent yield on United States Treasury Obligations adjusted to
a constant maturity having a term most nearly corresponding to the term
remaining from the date of prepayment to the Maturity Date, in effect two (2)
business days prior to the prepayment date as published by the Board of
Governors of the Federal Reserve System in the Federal Reserve Statistical
Release H.15(519), or by such other quoting service, index or commonly available
source utilized by New York Business Development Corporation multiplied by (ii)
a fraction, the numerator of which is the number of days remaining in the term
and the denominator of which is 365, multiplied by (iii) the amount of such
prepayment. Upon making any prepayment of the principal balance hereof in whole,
the Borrower shall pay to the Lender all interest and expenses owing pursuant to
this Note and remaining unpaid. Each partial prepayment of the principal sum
shall be applied inverse order of maturity to the principal included in the
installments provided for herein.
In the event the Maturity Date of this Note is accelerated following an
Event of Default, any tender of payment of the amount necessary to satisfy the
entire indebtedness made after such Event of Default shall be expressly deemed a
voluntary prepayment. In such case, to the extent permitted by law, the Lender
shall be entitled to the amount necessary to satisfy the entire indebtedness,
plus the appropriate prepayment premium calculated in accordance with the
preceding paragraph.
In the event that any payment required by this Note on account of the
terms hereof, by acceleration, maturity or otherwise shall become overdue for a
period in excess of ten (10) days a "late charge" of ten cents ($.10) for each
dollar ($1.00) so overdue may be charged by the holder hereof for the purpose of
defraying the expense incident to handling such delinquent payment.
The Borrower agrees that in the event of the happening of any one or
more of the following: (1) the breach of any of the covenants and agreements
contained in this Note or in the Note and Mortgage Consolidation, Modification,
Spreader, Extension and Security Agreement dated of even date herewith, by and
among the Borrower, the Lender, Town of North Greenbush Industrial Development
Agency with consent from Rensselaer Polytechnic Institute (the "Mortgage") which
secures this Note or any other agreement by and between the Borrower and the
Lender; (2) the occurrence of an Event of Default as defined in the Mortgage;
(3) the dissolution of the Borrower; (4) any petition of bankruptcy being filed
by or against the Borrower or any guarantor hereof; (5) the making by the
Borrower or any guarantor hereof of an assignment for the benefit of creditors;
or (6) the sale or other conveyance of any portion of the premises which are the
subject of the Mortgage, then the whole of the principal sum or any part
thereof, and of other sums of money secured by the Mortgage shall, forthwith or
thereafter, at the option of the Lender, become immediately due and payable
without demand or notice, and all of the covenants, agreements, terms and
conditions of the Mortgage are hereby incorporated herein with the same force
and effect as if herein set forth at length.
Notwithstanding anything to the contrary herein contained, to the
extent that the total amount of interest received in any year exceeds the
maximum rate permitted by law, then the amount so determined to be in excess
shall be applied in reduction of principal of this Note.
This Note is secured by, among other things, the Mortgage, which
consolidates mortgages given or assigned to the Lender on the real property
described therein.
This Note may not be changed or terminated orally.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived.
If this Note is placed with an attorney for collection, the Borrower
shall pay all reasonable attorney's fees and expenses incurred by Lender in
connection therewith.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note the day and
year first above written.
IFS INTERNATIONAL, INC.
By:_____________________________________
Name:___________________________________
Title:____________________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
---------------------------------------
Notary Public
EXHIBIT 10.23
AMENDED AND RESTATED MORTGAGE NOTE THIS AMENDED AND RESTATED NOTE AMENDS AND
RESTATES A PERCENTAGE PORTION OF THAT CERTAIN PROMISSORY NOTE DATED OCTOBER 2,
1997 IN THE PRINCIPAL AMOUNT OF $1,190,000 FROM IFS INTERNATIONAL, INC. TO
KEYBANK NATIONAL ASSOCIATION AND A MORTGAGE NOTE DATED THE DATE HEREOF IN THE
PRINCIPAL AMOUNT OF $949,042 FROM IFS INTERNATIONAL, INC. TO NEW YORK BUSINESS
DEVELOPMENT CORPORATION
$1,000,000.00 April 15, 1999
Albany, New York
For value received, IFS INTERNATIONAL, INC., a New York business
corporation with an office and its principal place of business located at 300
Jordan Road, Troy, New York 12180 (the "Borrower") promises to pay to the order
of NEW YORK BUSINESS DEVELOPMENT CORPORATION, a corporation organized and
existing under Article 5-A of the Banking Law of the State of New York (the
"Lender"), at 41 State Street, Albany, New York 12207, or at such other place as
Lender may from time to time designate, the principal sum of ONE MILLION AND
NO/100 DOLLARS ($1,000,000.00), with interest thereon at a fixed rate per annum
equal to eight and eleven hundredths percent (8.11 %), in the following manner:
On the earlier of May 1, 1999 and on the first day of each month
thereafter up to and including the Maturity Date (as hereinafter defined), the
Borrower shall make monthly payments of principal and interest equal to
$8,432.99. In addition, the entire unpaid principal balance hereof, together
with accrued interest thereon and accrued late charges, if any, and all other
sums due hereunder and under the Mortgage (as hereinafter defined), shall be
finally due and payable on April 1, 2009 (the "Maturity Date").
All payments hereunder shall be applied first to the payment of accrued
late payments, if any, then to the payment of interest at the aforesaid rate on
the principal amount remaining unpaid and the balance, if any, shall be applied
in reduction of principal.
Interest shall be computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed and shall accrue from the
date of advance of funds until receipt of payment by Lender.
During the term of this Note, the Borrower shall have the option of
paying the Principal Sum to the Lender in advance of the Maturity Date, in whole
or in part, at any time and from time to time upon written notice received by
the Lender at least thirty (30) days prior to making such prepayment; provided,
however, that together with such prepayment, the Borrower shall pay to the
Lender a premium equal to the greater of (a) one percent (1%) of the amount of
such prepayment, or (b) an amount equal to (i) the difference between the Note
Rate and the most recent yield on United States Treasury Obligations adjusted to
a constant maturity having a term most nearly corresponding to the term
remaining from the date of prepayment to the Maturity Date, in effect two (2)
business days prior to the prepayment date as published by the Board of
Governors of the Federal Reserve System in the Federal Reserve Statistical
Release H.15(519), or by such other quoting service, index or commonly available
source utilized by New York Business Development Corporation multiplied by (ii)
a fraction, the numerator of which is the number of days remaining in the term
and the denominator of which is 365, multiplied by (iii) the amount of such
prepayment. Upon making any prepayment of the principal balance hereof in whole,
the Borrower shall pay to the Lender all interest and expenses owing pursuant to
this Note and remaining unpaid. Each partial prepayment of the principal sum
shall be applied inverse order of maturity to the principal included in the
installments provided for herein.
In the event the Maturity Date of this Note is accelerated following an
Event of Default, any tender of payment of the amount necessary to satisfy the
entire indebtedness made after such Event of Default shall be expressly deemed a
voluntary prepayment. In such case, to the extent permitted by law, the Lender
shall be entitled to the amount necessary to satisfy the entire indebtedness,
plus the appropriate prepayment premium calculated in accordance with the
preceding paragraph.
In the event that any payment required by this Note on account of the
terms hereof, by acceleration, maturity or otherwise shall become overdue for a
period in excess of ten (10) days a "late charge" of ten cents ($.10) for each
dollar ($1.00) so overdue may be charged by the holder hereof for the purpose of
defraying the expense incident to handling such delinquent payment.
The Borrower agrees that in the event of the happening of any one or
more of the following: (1) the breach of any of the covenants and agreements
contained in this Note or in the Note and Mortgage Consolidation, Modification,
Spreader, Extension and Security Agreement dated of even date herewith, by and
among the Borrower, the Lender, Town of North Greenbush Industrial Development
Agency with consent from Rensselaer Polytechnic Institute (the "Mortgage") which
secures this Note or any other agreement by and between the Borrower and the
Lender; (2) the occurrence of an Event of Default as defined in the Mortgage;
(3) the dissolution of the Borrower; (4) any petition of bankruptcy being filed
by or against the Borrower or any guarantor hereof; (5) the making by the
Borrower or any guarantor hereof of an assignment for the benefit of creditors;
or (6) the sale or other conveyance of any portion of the premises which are the
subject of the Mortgage, then the whole of the principal sum or any part
thereof, and of other sums of money secured by the Mortgage shall, forthwith or
thereafter, at the option of the Lender, become immediately due and payable
without demand or notice, and all of the covenants, agreements, terms and
conditions of the Mortgage are hereby incorporated herein with the same force
and effect as if herein set forth at length.
Notwithstanding anything to the contrary herein contained, to the
extent that the total amount of interest received in any year exceeds the
maximum rate permitted by law, then the amount so determined to be in excess
shall be applied in reduction of principal of this Note.
This Note is secured by, among other things, the Mortgage, which
consolidates mortgages given or assigned to the Lender on the real property
described therein.
This Note may not be changed or terminated orally.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived.
If this Note is placed with an attorney for collection, the Borrower
shall pay all reasonable attorney's fees and expenses incurred by Lender in
connection therewith.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note the day and
year first above written.
IFS INTERNATIONAL, INC.
By:_____________________________________
Name:___________________________________
Title:____________________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
---------------------------------------
Notary Public
EXHIBIT 10.24
GENERAL SECURITY AGREEMENT
In consideration of one or more loans, letters of credit or other financial
accommodations made, issued or extended by HUDSON RIVER BANK & TRUST COMPANY., a
New York banking corporation with its principal executive office located in
Syracuse, New York and an office for the transaction of business at One Hudson
City Center, Hudson, New York 12514 (the "Lender") to, for, or in reliance on
the guaranty of the undersigned (collectively, the "Borrower"), the undersigned
hereby agrees that the Lender shall have the rights, remedies and benefits
hereinafter set forth.
The term "Liabilities" shall mean and include any and all indebtedness,
obligations and liabilities of any kind of the undersigned to the Lender or to
others to the extent of their participations granted or interest therein created
or acquired by them or for them by the Lender, now or hereafter existing,
arising directly between the undersigned and the Lender or acquired outright
conditionally or as collateral security from another by the Lender, absolute
contingent, joint and/or several, secured or unsecured, due or not due, whether
arising by contract or tort, liquidated or unliquidated, arising by operation of
law or otherwise, direct or indirect, including but not limiting the generality
of the foregoing indebtedness, obligations or liabilities to the Lender of the
undersigned as a member of any partnership, joint venture, syndicate,
association or other group, and whether incurred by the undersigned as
principal, surety, indorser, guarantor, accommodation party or otherwise.
The terms "Collateral" or "Security" shall mean and include all of the
Borrower's present and future personal property of every kind, nature and
description, wherever located, and to the full extent of Borrower's interest
therein, including, but not limited to:
(1) All present and future accounts, contracts and contract rights,
promissory notes, acceptances, drafts, letters of credit, chattel paper, general
intangibles, and security for the payment of the foregoing, guaranties, all
rights of borrower in the Collateral and underlying goods and proceeds thereof;
(2) All present and after-acquired goods in the nature of inventory in
all of its forms, wherever, located, additions and accretions thereto, trust
receipts and documents covering the same, products and proceeds thereof; and
(3) All present and after-acquired goods in the nature of machinery and
equipment in all of its forms, wherever located, including any substitutions,
additions, and replacements thereof.
At any time and from time to time, upon the request of the Lender, the
undersigned will (1) deliver and pledge to the Lender, indorsed and/or
accompanied by such evidence of assignment and transfer, in such forms and
substance, as the Lender may request, any and all instruments, documents and/or
chattel paper and/or general intangibles as the Lender may specify in the
request, and which relates to any security interest granted pursuant hereto; (2)
give, execute, deliver, file and/or record any notice, statement, instrument,
document, agreement or other papers that may be necessary or desirable, or that
the Lender may request, in order to create, preserve, perfect or validate any
security interest granted pursuant hereto or to enable the Lender to exercise
and enforce its rights hereunder or with respect to such security interest; (3)
keep and stamp or otherwise mark any and documents and chattel paper and its
individual books and records relating to inventory, accounts and contract rights
in such manner as the Lender may require; and (4) permit representatives of the
Lender at any time to inspect its inventory and to inspect and make abstracts
from the undersigned's books and records pertaining to inventory, accounts,
contract rights, chattel paper, instruments and documents.
The right is expressly granted to the Lender, at its discretion, to file in
those jurisdictions where the same is permitted one or more financing statements
under the Uniform Commercial Code signed only by the Lender, naming the
undersigned as debtor and the Lender as secured party, and indicating therein
the types or describing the items of Security herein specified. Without the
prior written consent of the Lender, the undersigned will not file or authorize
or permit to be filed in any jurisdiction any such financing or like statement
in which the Lender is not named as sole secured party. With respect to the
Security, or any part thereof, which at any time shall come into the possession
or custody or under the control of the Lender or any of its agent, associates,
or correspondents, for any purpose, the right is expressly granted to the
Lender, at its discretion, to transfer to or register in the name of itself or
its nominee any of the Security, and whether or not so transferred or
registered, to receive the income and dividends thereon, including stock
dividends and rights to subscribe, and to hold the same as a part of the
Security and/or apply the same as hereinafter provided; to change any of the
Security for other property upon the reorganization, recapitalization or other
readjustment, and in connection therewith, to deposit any of the Security with
any committee or depository upon such terms as it may determine; to vote the
Security so transferred or registered and to exercise or cause its nominee to
exercise all or any powers all with respect thereto with the same force and
effect as an absolute owner thereof, without notice and without liability except
to account for property actually received by it.
The Lender shall have a security interest in and be deemed to have possession of
any of the Collateral or Security in transit or set apart for it or for any of
its agents, associates or correspondents.
The Lender at its discretion may, whether any of the Liabilities be due, in its
name or in the name of the undersigned or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account of or
in exchange for, or make any compromise or settlement deemed desirable with
respect to, any of the Security, but shall be under no obligation to do so, or
the Lender may extend the time of payment, arrange for payment in installments,
or otherwise modify the terms of, or release any of the Security, without
thereby incurring responsibility to, or discharging or otherwise affecting any
liability of, the undersigned. The Lender shall not be required to take any
steps necessary to preserve any rights against prior parties or in and to any of
the Security. Upon default hereunder, or in connection with any of the
Liabilities the undersigned shall, at the request of the Lender, assemble and
make the Security available at such place or places as the Lender designates.
The Lender shall have the rights and remedies with respect to the Security of a
secured party under the Uniform Commercial Code (whether or not the Code is in
effect in the jurisdiction where the rights and remedies are asserted). In
addition, with respect to the Security, or any part thereof, the Lender may in
the event of default sell or cause the Security to be sold in the City of
Albany, New York, or elsewhere, in one or more sales or parcels, at such price
as the Lender may deem best, and for cash or on credit or for future delivery,
without assumption of any credit risk, all or any of the Security, at any
broker's board or at public or private sale, without demand or performance or
notice of intention to sell or of time or place of sale (except such notice as
is required by applicable statute and cannot be waived) and the Lender or anyone
else may be the purchaser of any or all of the Security so sold and thereafter
hold the same absolutely, free from any claim or right of whatsoever kind,
including any equity of redemption, of the undersigned, any such demand, notice
or right and equity being hereby expressly waived and released. The undersigned
will pay to the Lender all expenses incidental to the enforcement of any of the
provisions hereof, including but not limited to attorney's fees, of any actual
or attempted sale, repossession, enforcement, collection, compromise or
settlement of any of the Security or receipt of the proceeds thereof, and for
the care of the Security and defending or asserting the rights and claims of the
Lender in respect thereof, by litigation or otherwise, including expenses of
insurance; and all such expenses shall be Liabilities within the terms of this
agreement.
If at any time the Lender determines that it is inadequately secured, the
undersigned, upon the request of the Lender, will furnish such further Security
or make such payment on account of the Liabilities as will be satisfactory to
the Lender, and if the undersigned fails forthwith to furnish such Security or
to make such payment, or if any sum payable upon any of the Liabilities be not
paid when due, or if the undersigned shall default in the performance of its
agreements herein or in any instrument or document delivered pursuant hereto, or
if the undersigned or any maker, drawer, acceptor, indorser, guarantor, surety,
accommodation party or other person liable upon or for any of the Liabilities or
Security shall die or be dissolved, become insolvent (however such insolvency
may be evidenced), or make general assignment for the benefit of creditors, or
if the undersigned shall suspend the transaction of his, its or their usual
business, or be expelled from or suspended by any stock or securities exchange
or other exchange, or any judgment is docketed or lien filed against the
undersigned maker, drawer, acceptor, indorser, guarantor, surety, accommodation
party or other person or if a petition in bankruptcy or for any relief under any
law relating to the relief of debtors, readjustment of indebtedness,
reorganization, composition or extension shall be filed, or any proceeding shall
be instituted under any such law by or against the undersigned or any such
copartnership, maker, drawer, acceptor, indorser, guarantor, surety,
accommodation party or other party, or if any governmental authority or any
court at the instance thereof shall take possession of any substantial part of
the property, or, assume control over the affairs or operations of, or a
receiver, trustee or conservator shall be appointed of any substantial part of
the property of, or a writ or order of attachment or garnishment shall be issued
or made against any of the property of, the undersigned or of any such
copartnership, asker, drawer, acceptor, indorser, guarantor, surety,
accommodation party or other person, or if any Liabilities of the undersigned or
of any such copartnership, maker, drawer, acceptor, indorser, guarantor, surety,
accommodation party or other person shall become due and payable, or if the
undersigned shall be dissolved or be a party to any merger or consolidation
without the written consent of the Lender, the Liabilities shall, at the option
of the Lender, become due and payable forthwith.
The Lender may assign or transfer the whole or part of any of the Liabilities so
transferred and the Security transferred therewith as are hereby given to the
Lender, and upon such transfer, the Lender shall be fully discharged from all
claims with respect to any Security so transferred, but shall retain all rights
and powers hereby given with respect to any Security not so transferred.
No delay on the part of the Lender in exercising any power or right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right hereunder preclude other or further exercise thereof or the
exercise of any other power or right. No waiver shall be enforceable against the
Lender unless in writing, signed by an officer of the Lender, and shall be
limited solely to the one event. The rights, remedies and benefits herein
expressly specified are cumulative and not exclusive of any rights, remedies or
benefits which the Lender may otherwise have. The undersigned hereby waives
presentment, notice of dishonor and protest of all instruments included in or
evidencing the Liabilities or the Security and any and all other notices and
demands whatsoever, whether or not relating to such instruments.
No provision hereof shall be modified or limited except by a written instrument
signed by an officer of the Lender, expressly referring hereto and to the
provision so modified or limited. The undersigned, if more than one, shall be
jointly and severally liable hereunder and all provisions hereof regarding the
Liabilities or Security of the undersigned shall apply to any Liability or any
Security of any or all of them. This agreement shall be binding upon the heirs,
executors, administrators, assigns or successors of the undersigned, and shall
inure to the benefit of and be enforceable by the Lender, its successors,
transferees and assigns; shall constitute a continuing agreement, applying to
all future as well as existing transactions; and if all transactions between the
Lender and the undersigned shall be at any time terminated, shall be equally
applicable to any new transactions thereafter; shall so continue in force
notwithstanding any change in any partnership party hereto, whether such change
occurs through death, retirement or otherwise. Unless the context otherwise
requires all terms used herein which are defined in the Uniform Commercial Code
shall have the meaning therein stated.
If this agreement shall be terminated or revoked by operation of law, the
undersigned will indemnify and save the Lender harmless from any loss which may
be suffered or incurred by the Lender in acting hereunder prior to the receipt
by the Lender, its successors, transferees or assigns of notice of such
termination or revocation. In the event that any part of this agreement is
determined by any court of competent jurisdiction to be unenforceable, the
balance of this agreement shall remain in full force and effect unless the
Lender gives the undersigned written notice by registered mail, return receipt
requested, of its intention to terminate this agreement, in which event all of
the obligations of the undersigned to the Lender shall immediately become due
and payable. If any part of this agreement shall be determined by any court of
competent jurisdiction to be unenforceable against any of the undersigned, the
same shall nevertheless be and remain enforceable against the remaining parties.
The undersigned warrants and represents that all Security in which a security
interest is or will be granted to the Lender is and will at all times be valid
and subsisting, free and clear of all liens and encumbrances, except the one
created hereunder; is and will be without defenses, offsets and counterclaims,
and if the Security consists of accounts or the proceeds of the sale of goods,
payment therefor will be made by the account debtor in accordance with the tenor
of invoices rendered to the account debtor; that the undersigned will defend the
title and security interest at their own cost and expense; will furnish the
Lender with such financial statements as the Lender may reasonably request; will
keep the collateral in good condition and repair; will keep the collateral fully
insured against all risk and procure an extended coverage rider and a rider
providing that in the event of a loss, the proceeds then shall be payable to the
Lender, and said insurance policy or policies shall not be cancelable unless on
ten (10) days written notice to the Lender; that upon the receipt of any checks
or other payments in which the Lender has a security interest, the same will be
held as trustee by the undersigned until the same are delivered to the Lender;
that all representations are continuing in nature; that the undersigned is
authorized to execute this agreement; that if undersigned is a corporation, it
is in good standing in the state of its incorporation, is authorized and
licenses to do business in every state where it does business, that the
execution of this agreement does not violate its certificate of incorporation,
its by-laws or any other agreement.
Upon the occurrence of a default hereunder, the Lender shall have the right to
the appointment of a receiver without notice to the undersigned.
The security interest created herein shall attach without the execution or
delivery to the Lender of any instruments, documents, trust receipts,
assignments or other agreements of transfer, and in the event that any such
paper, instruments, documents or other agreements of transfer are or will be
delivered to the Lender, the same are and will be in furtherance and in addition
to the security interest created by virtue of this agreement.
This agreement has been executed in the State of New York and shall be
interpreted, and the rights and liabilities of the parties hereto determined, in
accordance with the laws of State of New York. As part of the consideration for
the Lender making any loans hereunder, the undersigned hereby agrees that all
actions or proceedings arising directly or indirectly from or touching upon this
agreement shall be litigated only in courts having a situs within of the State
of New York, and the undersigned hereby consents to the jurisdiction of any
local, state or federal court located within the State of New York.
The undersigned represents and warrants that the chief executive office and
other places of business of the undersigned, the Collateral and the books and
records relating to the Collateral are, and have been during the four month
period prior to the date hereof, located at the following address: 300 Jordan
Road, Troy, New York 12180.
<PAGE>
This agreement shall be a continuing agreement and shall apply to all future as
well as existing transactions.
Dated: April ___, 1999
Albany, New York
IFS INTERNATIONAL, INC.
By:______________________________
Name:____________________________
Title:_____________________________
STATE OF NEW YORK )
) SS.:
COUNTY OF )
On this __ day of April, 1999, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that he resides at __________________________, New York, that he is the
_________________ of IFS INTERNATIONAL, INC., the corporation described in and
which executed the foregoing instrument, and he acknowledged that he signed his
name thereto by order of the Board of Directors of said corporation.
---------------------------------------
Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> APR-30-1999
<CASH> 1,326,708
<SECURITIES> 0
<RECEIVABLES> 2,225,665
<ALLOWANCES> 42,010
<INVENTORY> 133,699
<CURRENT-ASSETS> 4,991,285
<PP&E> 4,297,034
<DEPRECIATION> 1,725,573
<TOTAL-ASSETS> 9,285,827
<CURRENT-LIABILITIES> 3,324,834
<BONDS> 0
0
0
<COMMON> 2,770
<OTHER-SE> 3,944,831
<TOTAL-LIABILITY-AND-EQUITY> 9,285,827
<SALES> 10,164,618
<TOTAL-REVENUES> 10,069,374
<CGS> 2,363,736
<TOTAL-COSTS> 10,754,963
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,793
<INCOME-PRETAX> (681,107)
<INCOME-TAX> 22,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (703,907)
<EPS-BASIC> (.53)
<EPS-DILUTED> (.53)
</TABLE>
