<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
INTERNATIONAL META SYSTEMS, INC.
____________________________________________________________
(Name of Issuer)
Common Stock, $0.0001 par value
____________________________________________________________
(Title of Class of Securities)
45986B 10 8
____________________________________________________________
(CUSIP Number)
Paragon Limited Partnership, Den Norske Krigsforsikring for Skib,
Investeringsselskapet Amandus AS, A/S Selvaag Invest, Andreas Ugland,
Woodbridge Asset Management Limited, J. Arthur Olafsen, Pollex A/S,
Martin S. Albert, Filab A/S and Bent Aasnaes
c/o Paragon Limited Partnership, PO Box 309, Ugland House,
South Church Street, George Town, Grand Cayman,
Cayman Islands, British West Indies
Attention: Mr. Martin S. Albert, (809) 949-8066
____________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 26, 1996
____________________________________________________________
(Date of Event Which Requires Filing
of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with this statement. [ ]
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
Page 1 of 43 pages.
<PAGE> 2
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 2 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paragon Limited Partnership
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands, British West Indies
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
2,000,000
NUMBER OF ________________________________________________________
SHARES
BENEFICIALLY SHARED VOTING POWER
OWNED BY 8
EACH 10,000,000
REPORTING ________________________________________________________
PERSON
WITH SOLE DISPOSITIVE POWER
9
2,000,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
PN
________________________________________________________________________________
<PAGE> 3
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 3 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Den Norske Krigsforsikring for Skib
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
2,000,000
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 2,000,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
IC
________________________________________________________________________________
<PAGE> 4
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 4 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Investeringsselskapet Amandus AS
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
2,000,000
NUMBER OF ________________________________________________________
SHARES
BENEFICIALLY SHARED VOTING POWER
OWNED BY 8
EACH 0
REPORTING ________________________________________________________
PERSON
WITH SOLE DISPOSITIVE POWER
9
2,000,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
CO
________________________________________________________________________________
<PAGE> 5
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 5 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
A/S Selvaag Invest
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
1,500,000
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 1,500,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
CO
________________________________________________________________________________
<PAGE> 6
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 6 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Andreas Ugland
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
PF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
1,500,000
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 1,500,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
IN
________________________________________________________________________________
<PAGE> 7
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 7 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Woodbridge Asset Management Limited
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
266,667
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 266,667
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
CO
________________________________________________________________________________
<PAGE> 8
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 8 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
J. Arthur Olafsen
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
PF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
250,000
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 250,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
IN
________________________________________________________________________________
<PAGE> 9
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 9 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Pollex A/S
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
200,000
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 200,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
CO
________________________________________________________________________________
<PAGE> 10
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 10 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Martin S. Albert
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
PF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
133,333
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 133,333
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
IN
________________________________________________________________________________
<PAGE> 11
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 11 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Filab A/S
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
100,000
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 100,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
CO
________________________________________________________________________________
<PAGE> 12
SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 12 OF 43 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Bent Aasnaes
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
PF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
N/A
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Norway
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
50,000
________________________________________________________
NUMBER OF SHARED VOTING POWER
SHARES 8
BENEFICIALLY 0
OWNED BY ________________________________________________________
EACH
REPORTING SOLE DISPOSITIVE POWER
PERSON 9
WITH 50,000
________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.02%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
IN
________________________________________________________________________________
<PAGE> 13
ITEM 1. Security and Issuer.
The statement on Schedule 13D relating to the common stock, $0.0001 par
value per share, of International Meta Systems, Inc. (the "Company Common
Stock"), a Delaware corporation (the "Company"), as previous filed by Paragon
Limited Partnership, is hereby amended and supplemented with respect to the
items set forth below, including the addition of the other Reporting Persons
for which this joint filing is being made.
ITEM 2. Identity and Background.
(a), (b), (c) and (f) This amendment is being filed jointly by Paragon
Limited Partnership, an exempted limited partnership organized under the laws
of the Cayman Islands, British West Indies ("Paragon"), Den Norske
Krigsforsikring for Skib, a mutual association organized under the laws of
Norway ("Krigsforsikring"), Investeringsselskapet Amandus AS, a corporation
organized under the laws of Norway ("Amandus"), A/S Selvaag Invest, a
corporation organized under the laws of Norway ("Selvaag"), Andreas Ugland, a
Norwegian citizen ("Mr. Ugland"), Woodbridge Asset Management Limited, an
exempted limited company incorporated under the laws of Bermuda ("Woodbridge"),
J. Arthur Olafsen, a Norwegian citizen ("Mr. Olafsen"), Pollex A/S, a
corporation organized under the laws of Norway ("Pollex"), Martin S. Albert, a
United States citizen ("Mr. Albert"), Filab A/S, a corporation organized under
the laws of Norway ("Filab"), and Bent Aasnaes, a Norwegian citizen ("Mr.
Aasnaes" and, together with Paragon, Krigsforsikring, Amandus, Selvaag, Mr.
Ugland, Woodbridge, Mr. Olafsen, Pollex, Mr. Albert and Filab, collectively,
the "Reporting Persons"). The agreement among the Reporting Persons relating
to the joint filing of this amendment to the statement on Schedule 13D is
attached as Exhibit 1 hereto.
The sole general partner of Paragon is Paragon Capital Management LLC, an
exempted limited liability company organized under the laws of the Cayman
Islands, British West Indies ("Paragon Capital Management").
Paragon and Paragon Capital Management are principally engaged in the
business of investing in the securities of emerging growth companies. The
address of the principal business and registered office of Paragon and Paragon
Capital Management is PO Box 309, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands, British West Indies.
The name, citizenship, business or residence address and present principal
occupation or employment of each of Paragon Capital's officers and directors,
and the name and principal address of any corporation or other organization in
which such employment is conducted, are set forth on Schedule A-1 hereto, which
is incorporated herein by reference.
- 13 -
<PAGE> 14
Krigsforsikring is the Norwegian shipowners' mutual war risks insurance
association, and is owned by its policy holders. It is principally engaged in
providing war hull insurance for ships. Krigsforsikring has no controlling
person. The address of the principal business and office of Krigsforsikring is
Raadhusgaten 25, PO Box 1464, Vika, N-0116 Oslo, Norway. The name, citizenship,
business or residence address and present principal occupation or employment of
each of Krigsforsikring's officers and directors, and the name and principal
address of any corporation or other organization in which such employment is
conducted, are set forth on Schedule A-2 hereto, which is incorporated
herein by reference.
Amandus is principally engaged in the business of investing in securities.
The address of the principal business and office of Amandus is
Universitetsgaten 14, N-0164 Oslo, Norway. Amandus is owned and controlled by
Alexandra Helene Huitfeldt, a Norwegian citizen and a Director of Amandus,
Istria AS, a Norwegian corporation ("Istria"), and AS Meridian, a Norwegian
corporation ("Meridian"). Istria is owned and controlled by Henrik Jrrgen
Huitfeldt, a Norwegian citizen and a Director of Amandus. Istria's principal
place of business is located at Universitetsgaten 14, N-0164 Oslo, Norway.
Meridian is owned and controlled by Einar C. Nagell-Erichsen, a Norwegian
citizen and the Chairman of the Board of Amandus. Meridian's principal place
of business is located at Klingenberggatten 7B, 0161 Oslo, Norway. The name,
citizenship, business or residence address and present principal occupation or
employment of each of Amandus's officers and directors, and the name and
principal address of any corporation or other organization in which such
employment is conducted, are set forth on Schedule A-3 hereto, which is
incorporated herein by reference.
Selvaag is principally engaged in the business of investing in securities.
The address of the principal business and office of Selvaag is PO Box 33,
Vinderen, N-0319 Oslo, Norway. Selvaag is a direct, wholly owned subsidiary of
Selvaag Gruppen as, a Norwegian corporation, the address of which is PO Box 33,
Vinderen, N-0319 Oslo, Norway. Selvaag Gruppen as is owned and controlled by
Ole Gunnar Selvaag, a Norwegian citizen who resides at Hoffsjef
Loevenskioldsvei 53, N-0382 Oslo, Norway, Gunnar Frederik Selvaag, a Norwegian
citizen who resides at Hoffsjef Loevenskioldsvei 53, N-0382 Oslo, Norway, and
Olav H. Selvaag, a Norwegian citizen who resides at Frognerveien 9, N-0257
Oslo, Norway. The name, citizenship, business or residence address and present
principal occupation or employment of each of Selvaag's officers and directors,
and the name and principal address of any corporation or other organization in
which such employment is conducted, are set forth on Schedule A-4 hereto, which
is incorporated herein by reference.
Mr. Ugland is the Chairman of Andreas Ugland and Sons AS, a Norwegian
corporation, the address of which is PO Box 308, 4891 Grimstad, Norway.
- 14 -
<PAGE> 15
Woodbridge is principally engaged in the business of investing in
securities. The address of the principal business and office of Woodbridge is
Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda. Mr. Erik C.T. Tiller, a
Norwegian citizen, is the controlling person of Woodbridge. Mr. Tiller is a
Vice President of Amerscan, Inc., a Delaware corporation, which is located at
3625 East Thousand Oaks Boulevard, Suite 50, Westlake Village, California
91362. The name, citizenship, business or residence address and present
principal occupation or employment of each of Woodbridge's officers and
directors, and the name and principal address of any corporation or other
organization in which such employment is conducted, are set forth on Schedule
A-5 hereto, which is incorporated herein by reference.
Mr. Olafsen is the Chief Executive Officer of Norman Data Defense Systems
AS, a Norwegian corporation, which is located at Strandveien 37, 1324 Lysaker,
Norway.
Pollex is principally engaged in the business of investing in securities.
The address of the principal business and office of Pollex is Haakon VII's Gt.
2, 0161 Oslo, Norway. Mr. Hans O. Blix, a Norwegian citizen with his principal
place of business at Haakon VII's Gt. 2, 0161 Oslo, Norway, is the controlling
person of Pollex. The name, citizenship, business or residence address and
present principal occupation or employment of each of Pollex's officers and
directors, and the name and principal address of any corporation or other
organization in which such employment is conducted, are set forth on Schedule
A-6 hereto, which is incorporated herein by reference.
Mr. Albert is the President and Chief Executive Officer of Dolphin
Interconnect Solutions Inc., a Delaware corporation, which is located at 3625
East Thousand Oaks Boulevard, Suite 50, Westlake Village, California 91362.
Filab is principally engaged in the business of investing in securities.
The address of the principal business and office of Filab is Haakon VII's Gt.
2, 0161 Oslo, Norway. Mr. Lars Blix, a Norwegian citizen with his principal
place of business at Haakon VII's Gt. 2, 0161 Oslo, Norway, is the controlling
person of Filab. The name, citizenship, business or residence address and
present principal occupation or employment of each of Filab's officers and
directors, and the name and principal address of any corporation or other
organization in which such employment is conducted, are set forth on Schedule
A-7 hereto, which is incorporated herein by reference.
Mr. Aasnaes is a private investor. Mr. Aasnaes's address is PO Box 42,
N-3070 Sande, Norway
(d) and (e) During the last five years, none of the Reporting Persons nor,
to the best knowledge of the Reporting Persons, any of the individuals named in
this Item 2 or in Schedules A-1, A-2, A-3, A-4, A-5, A-6 or A-7 hereto: (i) has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors); or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order
- 15 -
<PAGE> 16
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The amounts and sources of funds used in connection with the purchase by
the Reporting Persons of the Company Common Stock consisted of (i) $2,000,000
contributed by Paragon from partnership funds, (ii) $2,000,000 contributed by
Krigsforsikring from working capital, (iii) $2,000,000 contributed by Amandus
from working capital, (iv) $1,500,000 contributed by Selvaag from working
capital, (v) $1,500,000 contributed by Mr. Ugland from personal funds, (vi)
$266,667 contributed by Woodbridge from working capital, (vii) $250,000
contributed by Mr. Olafsen from personal funds, (viii) $200,000 contributed by
Pollex from working capital, (ix) $133,333 contributed by Mr. Albert from
personal funds, (x) $100,000 contributed by Filab from working capital and (xi)
$133,333 contributed by Mr. Aasnaes from personal funds.
Item 4. Purpose of Transaction.
Each of the Reporting Persons is purchasing the Company Common Stock for
investment purposes.
Pursuant to a Stock Purchase Agreement dated January 26, 1996 (the "Stock
Purchase Agreement") between the Company and Paragon, Paragon purchased
1,000,000 shares of the Company Common Stock on January 26, 1996, and an
additional 1,000,000 shares of the Company Common Stock on February 15, 1996.
The Stock Purchase Agreement provides that if, on or before April 15, 1996,
the Company has received $2,000,000 from the sale of 2,000,000 shares of the
Company Common Stock to Paragon and an additional $6,000,000 from the sale of up
to 8,000,000 additional shares of the Company Common Stock in a private
placement (the "Private Placement") in which Paragon Capital Management acts as
Placement Agent, Paragon will have a right of first refusal to purchase or cause
to be purchased from the Company any of its securities which may be offered in
any private placement exempt from registration under the Securities Act of 1933,
as amended (the "Act"), on the same terms and conditions that may be offered to
any third party. In connection with such right of first refusal, the Company is
required to give Paragon 60 days' prior written notice of the Company's
intention to conduct such a private placement, including the material terms and
conditions thereof. Paragon will have 10 days (deemed to begin no earlier than
10 days prior to the end of such 60 day period) to provide the Company with
written notice of Paragon's election to exercise such right of first refusal.
Each Reporting Person has, in connection with the Private Placement,
entered into a Subscription Agreement (each, a "Subscription Agreement" and,
collectively, the "Subscription Agreements") with the Company and Paragon
Capital Management, as placement agent, whereby such Reporting Person has
agreed to subscribe for,
- 16 -
<PAGE> 17
and purchase, the shares of Company Common Stock described therein. The
Subscription Agreements are substantially identical in form.
Under the terms of the Stock Purchase Agreement and the Subscription
Agreements, if, on or before April 15, 1996, the Company has received
$2,000,000 from the sale of 2,000,000 shares of the Company Common Stock to
Paragon and an additional $2,000,000 from the sale of up to 8,000,000
additional shares of the Company Common Stock in the Private Placement, during
the period commencing July 31, 1996 and ending April 30, 1998, Paragon and the
holders of the Company Common Stock purchased in the Private Placement (the
"Offering Shares") shall have the right, upon the written request of at least
25% of the holders of the Offering Shares and the shares of the Company Common
Stock purchased by Paragon pursuant to the Stock Purchase Agreement (the
"Agreement Shares" and, collectively, with the Offering Shares, the
"Registrable Shares"), to require the Company to effect two registrations of
the Registrable Shares. Upon receiving such written request, the Company
shall, within 10 days thereof, give written notice to the remaining holders, if
any, of the Registrable Shares of its intention to effect a registration of
such Shares and shall use its best efforts to include in such registration all
of the Registrable Shares with respect to which the Company receives written
notice for inclusion within 15 days after such holders' receipt of such notice
from the Company. Such demand registration rights shall extend to transferees
of the original holders of Registrable Shares. Such demand registration rights
are subject to the limitation that the managing underwriters of any demand
registration may reduce the number of Registrable Share proposed to be included
in such demand registration if, in such managing underwriters' opinion, the
total number of Registrable Shares presented for registration exceeds the
number of securities which can be sold.
Under the terms of the Stock Purchase Agreement and the Subscription
Agreements, all expenses allocable to the registration of securities registered
pursuant to a demand registration (other than underwriting discounts and
commissions), including, without limitation, filing and qualification fees,
printer's and accounting fees and fees and disbursements of counsel for the
Company shall be borne equally and on a current basis by the Company and the
holders of the Registrable Shares; provided, however, that the Company shall not
be required to pay for any expenses of any registration proceeding begun
pursuant to a demand registration if the registration request is subsequently
withdrawn at the request of the holders of a majority of the Registrable Shares
to be registered (in which case all participating holders shall bear such
expenses), unless the holders of a majority of the Registrable Shares agree to
forfeit their right to one demand registration; provided, further, however, that
if at the time of such withdrawal, such holders have learned of a material
adverse change in the condition, business or prospects of the Company from that
known to such holders at the time of their original request and have withdrawn
such request with reasonable promptness following disclosure by the Company of
such material adverse change, then such holders shall not be required to pay any
of such expenses and shall retain their rights to a demand registration.
- 17 -
<PAGE> 18
The Stock Purchase Agreement and the Subscription Agreements provide that
whenever the Company proposes to register any shares of the Company Common
Stock under the Act (other than registrations on Form 10 under the Securities
Exchange Act of 1934 or solely for shares to be issued in connection with any
employee benefit plan or a merger, consolidation or other business combination
registered on Form S-4, or any successor form thereto) and the registration
form to be used for such registration may be used for the registration of
Registrable Shares (a "Piggyback Registration"), the Company shall give written
notice within 10 business days after its receipt of notice of any exercise of
such other registration rights to the holders of Registrable Shares of its
intention to effect such a registration and shall use its best efforts to
include in such registration all of the Registrable Shares with respect to
which the Company receives from any of such holders a written request for
inclusion therein within 15 days after such holders' receipt of the Company's
notice, which request shall specify the number of the Registrable Shares to be
disposed of by the requesting holder and the intended method of disposition
thereof. If the Company elects, prior to the effectiveness of such
registration, not to proceed with a primary registration of the Company Common
Stock, it shall not be obligated to register any Registrable Shares.
Such Piggyback Registration rights are subject to the limitation that the
managing underwriters of any Piggyback Registration may reduce the number
Registrable Shares proposed to be registered if, in such managing underwriters'
opinion, the number of Registrable Shares presented for registration exceeds
the number of securities which can be sold in such offering.
The Company shall bear and pay all expenses incurred in connection with any
registration, filling or qualification of Registrable Shares with respect to the
registrations pursuant to a Piggyback Registration for each holder (which right
may be assigned), including, without limitation, all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto, but excluding underwriter discounts and commissions relating to the
Registrable Shares.
The Stock Purchase Agreement and the Subscription Agreements provide that
if the Company has received from Paragon $2,000,000 for the purchase of
2,000,000 shares of the Company Common Stock, on or before April 15, 1996,
Martin Albert, a Director of Paragon Capital Management, or his designee, shall
become a member of the Board of Directors of the Company, and, so long as
Paragon continues to own at least 1,000,000 shares of the Company Common Stock,
the Company will use its best efforts to elect a designee of Paragon to the
Board of Directors of the Company.
Paragon Capital Management and the Company entered into a letter agreement
dated January 26, 1996 (the "Placement Agency Agreement") whereby Paragon
Capital Management was appointed as the Company's exclusive placement agent in
connection with the Private Placement. Subject to the terms and conditions of
the Placement Agency Agreement, Paragon Capital Management agreed to use its
best efforts to solicit and receive offers to purchase the Offering Shares.
Under the terms of the Placement Agency
- 18 -
<PAGE> 19
Agreement, Paragon Capital Management will receive no placement fee from the
Company in connection with the sale of the Offering Shares. Instead, Paragon
Capital Management will receive from each purchaser of Offering Shares a
commission equal to 5.5% of the value of such Offering Shares.
Paragon and the other Reporting Persons entered into a Shareholders
Agreement dated as of March 26, 1996 (the "Shareholders Agreement") between and
among Paragon and such other Reporting Persons. Under the terms of the
Shareholders Agreement, none of the Persons party to the Shareholders Agreement
may sell or otherwise effect a transfer of their respective shares of the
Company Common Stock (a) unless the other parties to the Shareholders Agreement
have consented to such transfer, (b) such shares are being sold to another
Person party to the Shareholders Agreement, or (c) subject to the terms of the
Stock Purchase Agreement and the Subscription Agreement to which such Person is
a party, as the case may be, prior to July 31, 1996.
Under the terms of the Shareholders Agreement, the Reporting Persons have
agreed that, during the time the Shareholders Agreement is in effect, at any
meeting of the shareholders of the Company, or in connection with any written
consent of the shareholders of the Company , the Reporting Persons will vote
(or cause to be voted) the shares of Company Common Stock held of record or
beneficially owned by them (i) in favor of the election of Martin S. Albert (or
another designee of Paragon) as a director of the Company, (ii) in favor of each
of the actions contemplated by the Shareholders Agreement, the Placement Agency
Agreement, the Stock Purchase Agreement and the Subscription Agreements and any
action required in furtherance thereof, and (iii) except as specifically
requested by Paragon in advance, against (A) any action or agreement which would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Placement Agency Agreement, the
Stock Purchase Agreement or any Subscription Agreement, or of any party to the
Shareholders Agreement thereunder, (B) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the
Company or any subsidiary of the Company, (C) any sale, lease or transfer of a
material amount of assets of the Company or any subsidiary of the Company or any
reorganization, recapitalization, dissolution or liquidation of the Company or
any subsidiary of the Company, (D) any change in the majority of the board of
directors of the Company, (E) any material change in the present capitalization
of the Company (other than as contemplated by the Placement Agency Agreement,
the Stock Purchase Agreement and the Subscription Agreements), (F) any amendment
of the Company's certificate of incorporation or bylaws, (G) any other material
change in the Company's corporate structure or business, or (H) any other action
which is intended, or could reasonably be expected to impede, interfere with,
delay, postpone, discourage or materially adversely affect, the transactions
contemplated by the Placement Agency Agreement, the Stock Purchase Agreement or
the Subscription Agreements or the contemplated economic benefit of any of the
foregoing.
In addition, under the Shareholders Agreement, each Person party to the
Shareholders Agreement (including, without limitation, each Reporting Person)
has granted
- 19 -
<PAGE> 20
to, and appointed, Paragon and Erik C.T. Tiller, Rolv E. Norderhaug and Peter
Lorange, in their respective capacities as directors of Paragon Capital
Management, and any individual who shall thereafter succeed any of them as a
director of Paragon Capital Management, and any other designee of Paragon,
individually, such Person's irrevocable (so long as such Person is a party to
the Shareholders Agreement) proxy and attorney-in-fact, with full power of
substitution, to vote the shares of Company Common Stock owned by such Person in
accordance with the immediately preceding paragraph.
The Shareholders Agreement shall terminate on the earlier of (i) April 30,
1998, (ii) the date on which the Company's Board of Directors and the
shareholders of the Company vote as required by law and by the Company's
certificate of incorporation and by-laws for the merger or consolidation of the
Company with another company, or for the sale of all or substantially all of
the Company's assets, or for its liquidation, (iii) the date on which the
holders of not less than 66-2/3% of the shares of Company Common Stock subject
to the Shareholders Agreement agree in writing to the termination of the
Shareholders Agreement and (iv) the date on which the combined holdings of the
Reporting Persons party to the Shareholders Agreement is reduced to ownership
of less than 5% of the issued and outstanding shares of Company Common Stock.
The preceding summary of certain provisions of the Stock Purchase
Agreement, the Subscription Agreements, the Placement Agency Agreement and the
Shareholders Agreement is not intended to be complete and is qualified in its
entirety by reference to the full text of such agreements, copies of which are
filed as Exhibits 3, 4, 5 and 6 hereto, respectively, and which are incorporated
herein by reference.
Other than as described above, none of the Reporting Persons has any plans
or proposals that relate to or would result in any of the actions described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest In Securities Of The Issuer.
(a), (b) and (c) As of February 15, 1996, Paragon beneficially owned
2,000,000 shares of Company Common Stock, and, subject to the terms of the
Shareholders Agreement, had the sole power to vote and the sole power to
dispose of such shares.
As of March 26, 1996, Krigsforsikring beneficially owned 2,000,000 shares
of Company Common Stock, and, subject to the terms of the Shareholders
Agreement, had the sole power to vote and the sole power to dispose of such
shares. Krigsforsikring purchased such shares of Company Common Stock on March
26, 1996.
As of March 26, 1996, Amandus beneficially owned 2,000,000 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares.
Amandus purchased such shares of Company Common Stock on March 26, 1996.
- 20 -
<PAGE> 21
As of March 26, 1996, Selvaag beneficially owned 1,500,000 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares.
Selvaag purchased such shares of Company Common Stock on March 26, 1996.
As of March 26, 1996, Mr. Ugland beneficially owned 1,500,000 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares. Mr.
Ugland purchased such shares of Company Common Stock on March 26, 1996.
As of March 26, 1996, Woodbridge beneficially owned 266,667 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares.
Woodbridge purchased such shares of Company Common Stock on March 26, 1996.
As of March 26, 1996, Mr. Olafsen beneficially owned 250,000 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares. Mr.
Olafsen purchased such shares of Company Common Stock on March 26, 1996.
As of March 26, 1996, Pollex beneficially owned 200,000 shares of Company
Common Stock, and, subject to the terms of the Shareholders Agreement, had the
sole power to vote and the sole power to dispose of such shares. Pollex
purchased such shares of Company Common Stock on March 26, 1996.
As of March 26, 1996, Mr. Albert beneficially owned 133,333 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares. Mr.
Albert purchased such shares of Company Common Stock on March 26, 1996.
As of March 26, 1996, Filab beneficially owned 100,000 shares of Company
Common Stock, and, subject to the terms of the Shareholders Agreement, had the
sole power to vote and the sole power to dispose of such shares. Filab
purchased such shares of Company Common Stock on March 26, 1996.
As of March 26, 1996, Mr. Aasnaes beneficially owned 50,000 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares. Mr.
Aasnaes purchased such shares of Company Common Stock on March 26, 1996.
(d) and (e) Not applicable.
- 21 -
<PAGE> 22
Item 6. Contracts, Arrangements, Understandings Or Relationships With Respect
To Securities Of The Issuer.
Except as provided in the Stock Purchase Agreement, the Placement Agency
Agreement, the Subscription Agreements or the Shareholders Agreement, or as set
forth herein, none of the Reporting Persons nor, to the best of the Reporting
Persons' knowledge, any of the individuals named in Schedules A-1, A-2, A-3,
A-4, A-5, A-6 or A-7 hereto has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person with respect to any
securities of the Company, including, but not limited to, transfer or voting of
any securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or losses, or the
giving or withholding of proxies.
- 22 -
<PAGE> 23
Item 7. Material To Be Filed As Exhibits.
1. Conformed copy of Joint Filing Agreement dated March 26, 1996 among
Paragon Limited Partnership, Den Norske Krigsforsikring for Skib,
Investeringsselskapet Amandus AS, A/S Selvaag Invest, Andreas Ugland,
Woodbridge Asset Management Limited, J. Arthur Olafsen, Pollex A/S, Martin
S. Albert, Filab A/S and Bent Aasnaes relating to the filing of a joint
statement on Schedule 13D
2. Power of Attorney of Woodbridge Asset Management Limited in favor of Erik
C.T. Tiller
3. Conformed copy of Stock Purchase Agreement dated January 26, 1996 between
the Company and Paragon Limited Partnership
4. Form of Subscription Agreement between the Company and each Reporting
Person
5. Conformed copy of letter agreement dated January 26, 1996 between Paragon
Capital Management and the Company concerning the appointment by the
Company of Paragon Capital Management as the Company's exclusive placement
agent in connection with the private placement of 8,000,000 shares of
Company Common Stock
6. Conformed copy of Shareholders Agreement dated as of March 26, 1996
between and among Paragon Limited Partnership, Den Norske Krigsforsikring
for Skib, Investeringsselskapet Amandus AS, A/S Selvaag Invest, Andreas
Ugland, Woodbridge Asset Management Limited, J. Arthur Olafsen, Pollex
A/S, Martin S. Albert, Filab A/S and Bent Aasnaes
- 23 -
<PAGE> 24
SIGNATURE
After reasonable inquiry and to the best knowledge and belief of each of
the undersigned, each of the undersigned certifies that the information set
forth in this amendment to the statement on Schedule 13D is true, complete and
correct and that such statement, as amended hereby, is true, complete and
correct.
Dated: April 1, 1996
PARAGON LIMITED PARTNERSHIP
By PARAGON CAPITAL
MANAGEMENT LLC,
General Partner
By /s/ Erik C.T. Tiller
-----------------------------
Name: Erik C. T. Tiller
Title: Secretary and Director
- 24 -
<PAGE> 25
DEN NORSKE KRIGSFORSIKRING FOR SKIB
By /s/ Ole Henrik Eide By /s/ Tor Christiansen
------------------------ -----------------------
Name: Ole Henrik Eide Name: Tor Christiansen
Title: Managing Director Title: Account Manager
- 25 -
<PAGE> 26
INVESTERINGSSELSKAPET AMANDUS AS
By /s/ Halvor Isaksen
-----------------------
Name: Halvor Isaksen
Title: Managing Director
- 26 -
<PAGE> 27
A/S SELVAAG INVEST
By /s/ Odd Eide
-------------
Name: Odd Eide
Title: President
- 27 -
<PAGE> 28
/s/ Andreas Ugland
------------------
ANDREAS UGLAND
- 28 -
<PAGE> 29
WOODBRIDGE ASSET MANAGEMENT LIMITED
By /s/ Erik C.T. Tiller
---------------------------
Name: Erik C.T. Tiller
Title: Attorney-in-Fact
- 29 -
<PAGE> 30
/s/ J. Arthur Olafsen
-------------------------
J. ARTHUR OLAFSEN
- 30 -
<PAGE> 31
POLLEX A/S
By /s/ Pollex A/S
-----------------------------
Name: Hans Othar Blix
Title: Chairman of the Board
- 31 -
<PAGE> 32
/s/ Martin S. Albert
----------------------
MARTIN S. ALBERT
- 32 -
<PAGE> 33
FILAB A/S
By /s/ Lars Blix
----------------------------
Name: Lars Blix
Title: Chairman of the Board
- 33 -
<PAGE> 34
/s/ Bent Aasnaes
---------------------
BENT AASNAES
- 34 -
<PAGE> 35
SCHEDULE A-1
DIRECTORS AND EXECUTIVE OFFICERS
OF PARAGON CAPITAL MANAGEMENT
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors of Paragon Capital Management LLC, a Cayman Islands
limited liability company, is set forth below:
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ------------------------------------ -----------
Directors
Rolv E. Norderhaug President Norway
Amerscan Partners AS
Haakon's VII Gt. 2
N-0161 Oslo
Norway
Martin S. Albert President and Chief Executive Unites States of
Officer America
Dolphin Interconnect Solutions Inc.
3625 East Thousand Oaks Blvd.
Suite 50
Westlake Village, California 91362
Peter Lorange President Switzerland
International Institute for
Management Development
23, Ch. de Bellerive
PO Box 915
CH-1001 Lausanne
Switzerland
Erik C. T. Tiller Vice President Norway
Amerscan, Inc.
3625 East Thousand Oaks Blvd.
Suite 50
Westlake Village, California 91362
</TABLE>
- 35 -
<PAGE> 36
SCHEDULE A-2
DIRECTORS AND EXECUTIVE OFFICERS
OF DEN NORSKE KRIGSFORSIKRING FOR SKIB
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors and executive offices of Den Norske Krigsforsikring for
Skib, a Norwegian mutual association, is set forth below.
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ------------------------------------ -----------
Executive Officers and
Directors
Atle Jebsen, Chairman of the Director Norway
Board Jebsen Management
PO Box 4145, Dreggen
5023 Bergen
Norway
Kaare E. Borch, Deputy Director Norway
Chairman of the Board Torvald Klaveness & Co. A/S
PO Box 183, Skryen
0212 Oslo
Norway
Rolf Westfal-Larsen, PO Box 1192 Norway
Director 5001 Bergen
Norway
Fridtjof Lorentzen, Director Norway
Director Lorentzens Rederi Co.
PO Box 1506, Vika
0117 Oslo
Norway
</TABLE>
- 36 -
<PAGE> 37
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ------------------------------ -----------
Executive Officers and
Directors
Torleiv Aaslestad, Director Director Norway
Bergesen d.y. A/S
PO Box 7600, Skillebekk
0205 Oslo
Norway
Annette S. Olsen, Director Director Norway
Fred. Olsen
PO Box 1159, Sentrum
0107 Oslo
Norway
Ole Henrik Eide, Managing Director Managing Director Norway
Den Norske Krigsforsikring
for Skib
PO Box 1464, Vika
N-0116 Oslo
Norway
Sverre Kjelland-Moerdre, Director Director Norway
Den Norske Krigsforsikring
for Skib
PO Box 1464, Vika
N-0116 Oslo
Norway
Tor Christiansen, Account Manager Account Manager Norway
Den Norske Krigsforsikring
for Skib
PO Box 1464, Vika
N-0116 Oslo
Norway
</TABLE>
- 37 -
<PAGE> 38
SCHEDULE A-3
DIRECTORS AND EXECUTIVE OFFICERS
OF INVESTERINGSSELSKAPET AMANDUS AS
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors and executive officers of Investeringsselskapet Amandus
AS, a Norwegian corporation, is set forth below:
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ------------------------------------ -----------
Directors and Executive
Officers
Halvor Isaksen, President President and Managing Director Norway
and Managing Director Investeringsselskapet Amandus AS
Universitetsgaten 14
0164 Oslo
Norway
Einar C. Nagell-Erichsen, Chairman of the Board Norway
Chairman of the Board Investeringsselskapet Amandus AS
Universitetsgaten 14
0164 Oslo
Norway
Alexandra Helene Huitfeldt, Director Norway
Director Investeringsselskapet Amandus AS
Universitetsgaten 14
0164 Oslo
Norway
Henrik Joergen Huitfeldt, Director Norway
Director Investeringsselskapet Amandus AS
Universitetsgaten 14
0164 Oslo
Norway
</TABLE>
- 38 -
<PAGE> 39
SCHEDULE A-4
DIRECTORS AND EXECUTIVE OFFICERS
OF A/S SELVAAG INVEST
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors and executive officers of A/S Selvaag Invest, a Norwegian
corporation, is set forth below:
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ---------------------------------- -----------
Executive Officers and
Directors
Odd Eide, President President Norway
A/S Selvaag Invest
PO Box 33
Vinderen
Holmenveien 19
N-0319 Oslo
Norway
Trond Wennberg, Director Partner Norway
Norgesinvestor
Jonsokveien 7
N-1182 Oslo
Norway
Rolv Leander Jonassen, Chairman of the Board Norway
Chairman of the Board A/S Selvaag Invest
PO Box 33
Vinderen
Holmenveien 19
N-0319 Oslo
Norway
Ole Gunnar Selvaag, Director President Norway
Selvaag Gruppen as
Hoffsjef Loevenskioldsvei 53
N-0382 Oslo
Norway
</TABLE>
- 39 -
<PAGE> 40
SCHEDULE A-5
DIRECTORS AND EXECUTIVE OFFICERS
OF WOODBRIDGE ASSET MANAGEMENT LIMITED
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors of Woodbridge Asset Management Limited, a Bermuda
exempted limited company, is set forth below:
<TABLE>
<S> <C> <C>
NAME PRESENT PRINCIPAL OCCUPATION
- ---- OR EMPLOYMENT AND ADDRESS CITIZENSHIP
------------------------------- -----------
Directors
James M. Keyes Attorney United Kingdom of Great
Cedar House Britain and Northern Ireland
41 Cedar Avenue
Hamilton HM12, Bermuda
Julie V. Stanton Attorney United Kingdom of Great
Cedar House Britain and Northern Ireland
41 Cedar Avenue
Hamilton HM12, Bermuda
</TABLE>
- 40 -
<PAGE> 41
SCHEDULE A-6
DIRECTORS AND EXECUTIVE OFFICERS
OF POLLEX A/S
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors of Pollex A/S, a Norwegian corporation, is set forth
below:
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME ADDRESS CITIZENSHIP
- ---- -------------------------------------------------- -----------
Directors
Hans Othar Blix Chairman of the Board Norway
Pollex A/S
Haakon VII's Gt. 2
0161 Oslo
Norway
Kristin Blix Director Norway
Pollex A/S
Haakon VII's Gt. 2
0161 Oslo
Norway
Odd Heggim Senior Vice President Norway
Nycomed
Kappellveien 142 A
0493 Oslo
Norway
</TABLE>
- 41 -
<PAGE> 42
SCHEDULE A-7
DIRECTORS AND EXECUTIVE OFFICERS
OF FILAB A/S
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors of Filab A/S, a Norwegian corporation, is set forth
below:
<TABLE>
<S> <C> <C>
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ------------------------------------------------------ -----------
Directors
Lars Blix Chairman of the Board Norway
Filab A/S
Haakon VII's Gt. 2
0161 Oslo
Norway
</TABLE>
- 42 -
<PAGE> 43
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
1. Conformed copy of Joint Filing Agreement dated March 26, 1996 among
Paragon Limited Partnership, Den Norske Krigsforsikring for Skib,
Investeringsselskapet Amandus AS, A/S Selvaag Invest, Andreas Ugland,
Woodbridge Asset Management Limited, J. Arthur Olafsen, Pollex A/S,
Martin S. Albert, Filab A/S and Bent Aasnaes
2. Power of Attorney of Woodbridge Asset Management Limited in favor of
Erik C.T. Tiller
3. Conformed copy of Stock Purchase Agreement dated January 26, 1996
between Paragon Limited Partnership and International Meta Systems,
Inc.
4. Form of Subscription Agreement between the Company and each Reporting
Person
5. Conformed copy of letter agreement January 26, 1996 between Paragon
Capital Management LLC addressed to International Meta Systems, Inc.
concerning the appointment by the Company of Paragon Capital
Management as the Company's exclusive placement agent in connection
with the private placement of 8,000,000 shares of the Company Common
Stock
6. Conformed copy of Shareholders Agreement dated as of March 26, 1996
between and among Paragon Limited Partnership, Den Norske
Krigsforsikring for Skib, Investeringsselskapet Amandus AS, A/S
Selvaag Invest, Andreas Ugland, Woodbridge Asset Management Limited,
J. Arthur Olafsen, Pollex A/S, Martin S. Albert, Filab A/S and Bent
Aasnaes
</TABLE>
- 43 -
<PAGE> 1
Exhibit 1
Conformed Copy
JOINT FILING AGREEMENT
We, the signatories of Amendment No. 1 to the statement on Schedule 13D to
which this Agreement is attached, hereby agree that such statement, as amended
by said Amendment No. 1, is, and any further amendments thereto filed by any of
us will be, filed on behalf of each of us.
PARAGON LIMITED PARTNERSHIP
by its General Partner
PARAGON CAPITAL
MANAGEMENT LLC,
General Partner
By /s/ Erik C.T. Tiller
--------------------
Name: Erik C.T. Tiller
Title: Secretary and Director
DEN NORSKE KRIGSFORSIKRING FOR
SKIB
By /s/ Ole Henrik Eide
-------------------
Name: Ole Henrik Eide
Title: Managing Director
By /s/ Sverre Kjelland-Mordre
--------------------------
Name: Sverre Kjelland-Mordre
Title: Director
<PAGE> 2
INVESTERINGSSELSKAPET
AMANDUS AS
By /s/ Halvor Isaaksen
--------------------
Name: Halvor Isaaksen
Title: Managing Director
A/S SELVAAG INVEST
By /s/ Odd Eide
------------
Name: Odd Eide
Title: President
/s/ Andreas Ugland
------------------
ANDREAS UGLAND
POLLEX A/S
By /s/ Hans O. Blix
----------------
Name: Hans O. Blix
Title: Chairman of the Board
FILAB A/S
By /s/ Lars Blix
-------------
Name: Lars Blix
Title: Chairman of the Board
/s/ J. Arthur Olafsen
---------------------
J. ARTHUR OLAFSEN
<PAGE> 3
WOODBRIDGE ASSET
MANAGEMENT LIMITED
By /s/ Erik C.T. Tiller
--------------------
Name: Erik C.T. Tiller
Title: Attorney-in-Fact
/s/ Martin S. Albert
--------------------
MARTIN S. ALBERT
/s/ Bent Aasnaes
---------------
BENT AASNAES
<PAGE> 1
Exhibit 2
BY THIS POWER OF ATTORNEY given on the 1st day of April, One thousand nine
hundred and ninety-six, WOODBRIDGE ASSET MANAGEMENT LIMITED, a company
incorporated, and existing under the laws of the Islands of Bermuda having
its Registered Head Office at Cedar House, 41 Cedar Avenue, in the City of
Hamilton in the said Islands (hereinafter called "the Company") HEREBY
NOMINATES, CONSTITUTES AND APPOINTS ERIK C. T. TILLER (hereinafter called
"the Attorney") as the true and lawful attorney of the Principal in the
United States of America ("the United States") for and in the name of and
on behalf of the Company to do or execute all or any of the acts and
documents hereinafter mentioned that is to say:
1. A Subscription Agreement (the "Subscription Agreement") between
International Meta Systems, Inc. ("IMS") and the Company, the
Shareholders Agreement (the "Shareholders Agreement") between and
among the shareholders of IMS (including the Company), the Joint
Filing Agreement (the "Joint Filing Agreement") between and among the
shareholders of IMS (including the Company), and the Amendment No. 1
to the Statement on Schedule 13D (the "Schedule 13D") to be filed with
the United States Securities and Exchange Commission, (the
Subscription Agreement, the Shareholders Agreement, the Joint Filing
Agreement and the Schedule 13D being hereinafter referred to
collectively as the "Documents").
2. To do and perform all such further acts and things and to execute,
deliver and, to the extent required by law, file, in the name and on
behalf of the Company, all such further documents and instruments
(including, without limitation, any further amendments to the Schedule
13D filed pursuant to the United States Securities and Exchange Act of
1934, as amended, in connection with the Company's purchase or sale of
shares of common stock of IMS) and to take all such further steps as
he may deem to be necessary, advisable, convenient or proper to
perform fully the provisions of the Documents.
AND IT IS HEREBY DECLARED THAT:-
(i) The Company hereby ratifies and confirms and agrees to ratify and
confirm whatsoever the Attorney shall do or purport to do by virtue
of this Power of Attorney.
(ii) The Company hereby authorises and empowers the Attorney to
acknowledge in the name and as the act and deed of the Company this
Power of Attorney and to register and record the same in the proper
office and or registry in the United States and to procure to be done
any and every other act and thing whatsoever which may be in anywise
prudent, requisite or proper for authenticating and giving full
effect to this Power of Attorney according to the law and usages of
the United States as fully effectually as the Company could so do.
(iii) This Power of Attorney shall in all respects be interpreted in
accordance with and governed by the laws of Bermuda.
IN WITNESS WHEREOF WOODBRIDGE ASSET MANAGEMENT LIMITED has hereunto affixed
the Common Seal the day and year first above written in the presence of:
Director /s/ James Keyes
Secretary /s/ M. Wood
[seal]
<PAGE> 1
Exhibit 3
[Conformed Copy]
STOCK PURCHASE AGREEMENT
by and between
INTERNATIONAL META SYSTEMS, INC.
a Delaware corporation
and
PARAGON LIMITED PARTNERSHIP
a Cayman Islands exempted limited partnership
Dated: January 26, 1996
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is entered into as of
January 26, 1996, by and between INTERNATIONAL META SYSTEMS, INC., a Delaware
corporation ("IMS") and PARAGON LIMITED PARTNERSHIP, a Cayman Islands exempted
limited partnership ("Paragon").
Premises
WHEREAS, IMS desires to sell to Paragon and Paragon desires to purchase
2,000,000 shares (the "Shares") of the common stock, par value $0.0001 per
share (the "IMS Common Stock") of IMS, in consideration of $2,000,000, at a
purchase price of $1.00 per Share, subject to the terms and conditions of this
Agreement; and
WHEREAS, the parties intend and believe that it is in their best interests
to enter into this Agreement and the other agreements contemplated herein;
Agreement
NOW, THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived here from, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF Paragon
As an inducement to, and to obtain the reliance of IMS, Paragon represents
and warrants as follows:
Section 1.1 ORGANIZATION. Paragon is an exempted limited partnership duly
organized, validly existing and in good standing under the laws of the Cayman
Islands and has the power and is duly authorized, qualified, franchised and
licensed under all applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business in the jurisdictions in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification, except where the failure to so qualify would not have a material
adverse effect upon the assets, business, properties or operations of Paragon.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of Paragon's Memorandum of Association or
Articles of Association. Paragon has the full power, authority and legal right
and has taken all action required by law, its Memorandum of Association or
Articles of Association and otherwise to consummate the transactions herein
contemplated.
<PAGE> 3
Section 1.2 BINDING OBLIGATION: NO DEFAULT. Paragon has duly taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the other instruments and agreements contemplated hereby. Such
execution, delivery and performance does not and will not, to the best of
Paragon's knowledge, constitute a default under or a violation of any
agreement, order, award, judgment, decree, statute, law, rule, regulation or
any other instrument to which Paragon is a party or by which Paragon or the
property of Paragon may be bound or may be subject. This Agreement constitutes
the legal, valid and binding obligation of Paragon, enforceable against Paragon
in accordance with its terms, except: (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditor's rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification
provisions contained in Section 4.7 may be limited by applicable federal or
state securities laws.
Section 1.3 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the execution
and delivery of this Agreement by Paragon nor compliance by Paragon with the
terms and conditions of this Agreement will: (a) require Paragon to obtain the
consent of any governmental agency; (b) constitute a material default under any
indenture, mortgage or deed of trust to which Paragon is a party or by which
Paragon or its properties may be subject; (c) cause the creation or imposition
of any lien, charge or encumbrance on any of its assets; or (d) breach any
statute or regulation of any governmental authority, domestic or foreign, or
will on the Initial Closing Date (as defined herein) and on the Subsequent
Closing Date (as defined herein) conflict with or result in a breach or any of
the terms or conditions of any judgment, order, injunction, decree or ruling of
any court or governmental authority, domestic or foreign, to which Paragon is
subject.
Section 1.4 CONSENTS. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or any third party is required to be made or obtained by Paragon in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
Section 1.5 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by Paragon contained in this Agreement or in respect of the exhibits,
schedules or documents delivered to IMS by Paragon and expressly referred to
herein, and no statement contained in any certificate furnished or to be
furnished by or on behalf of Paragon pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such certificate is or will be furnished,
and as of the Initial Closing Date
2
<PAGE> 4
and the Subsequent Closing Date, any untrue statement of a material fact, or
omits, or will omit to state as of the date such representation or warranty is
made or such certificate is or will be furnished, any material fact which is
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. True and correct
copies of each agreement and other document referred to in the schedules hereto
have been furnished by Paragon to IMS.
Section 1.6 SECURITIES WARRANTIES. With respect to the Shares to be
delivered by IMS pursuant to the provisions of Section 3.1 (a) - (c) hereof,
Paragon hereby represents and warrants to IMS that:
(a) The Shares are being acquired for the account of and not with a view
to sale in connection with any distribution of the Shares;
(b) Paragon is acquiring the Shares hereunder without having received any
form of general solicitation or general advertising;
(c) Paragon believes it has received all of the information it considers
necessary or appropriate for deciding whether to purchase the IMS Common Stock.
Paragon further represents that it has had an opportunity to ask questions and
receive answers from IMS regarding the terms and conditions of the purchase and
sale of the IMS Common Stock and the business, properties, prospects and
financial condition of IMS. Without limiting the generality of the foregoing,
Paragon has had the opportunity to obtain and review IMS': (i) Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, (ii) Quarterly Reports
on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1995,
(iii) Proxy Statement for IMS' 1995 Annual Meeting, and (iv) all Forms 8-K
filed with the Securities and Exchange Commission (the "Commission") since
December 31, 1994, in each case as filed with the Commission. The foregoing,
however, does not limit or modify the representations and warranties of IMS in
Article II of this Agreement or the right of Paragon to rely thereon;
(d) Paragon acknowledges that it is able to fend for itself, can bear the
economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the IMS Common Stock. Paragon also represents it has
not been organized for the purpose of acquiring the IMS Common Stock.
(e) Paragon understands and hereby acknowledges that the Shares will be
issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended 'the "Securities Act") and the rules and
regulations of the Commission promulgated thereunder; that the Shares will be
restricted securities as defined in Rule 144(a) (3) promulgated under the
3
<PAGE> 5
Securities Act; in part, IMS' reliance upon such exemptions is based on the
representations and warranties made by Paragon in this Section 1.6;
(f) It is understood that the certificates evidencing the Shares may bear
one or all of the following legends: (i) These securities have not been
registered under the Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under the Securities Act or
an opinion of counsel satisfactory to the IMS that such registration is not
required or unless sold pursuant to Rule 144 of such Act; and (ii) any legend
required by the laws of the State of California, including any legend required
by the California Department of Corporations and Sections 417 and 418 of the
California Corporations Code.
(g) Paragon hereby agrees that it will not sell, transfer, hypothecate,
pledge, assign or otherwise dispose of any of the Shares, except: (i) pursuant
to the terms of this Agreement and to a registration statement filed under the
provisions of the Securities Act; (ii) pursuant to a favorable no-action or
interpretive letter received from the Commission that such sale, transfer,
hypothecation, pledge, assignment or other disposition is exempt from the
registration requirements of the Securities Act; or (iii) provided Paragon shall
have notified IMS of the proposed disposition and shall have furnished IMS with
a detailed statement of the circumstances surrounding the proposed disposition;
and (iv) if reasonably requested by IMS, Paragon shall have furnished IMS with
an opinion of counsel, reasonably satisfactory to IMS that such disposition will
not require registration of such Shares under the Securities Act. It is agreed
that IMS will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances;
(h) Paragon hereby acknowledges that: (i) the Shares referred to herein are
being acquired after adequate investigation of the business plan and prospects
of IMS; (ii) Paragon is not relying upon the accuracy of any predictions as to
the future prospects or developments of IMS or its business and is well informed
as to the business of IMS and has reviewed its operations and financial
statements; and (iii) Paragon specifically acknowledges that the Shares are
speculative and involve a very high degree of risk and that there can be no
assurance that IMS will achieve its business objectives or, in particular, that
it will ever have cash available for distribution to its stockholders; and
(j) Paragon is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
4
<PAGE> 6
ARTICLE 11
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF IMS
As an inducement to, and to obtain the reliance of Paragon, IMS represents
and warrants as follows:
Section 2.1 ORGANIZATION. IMS is a corporatin duly organized, validly
existing and in good standing under the laws of the state of Delaware and has
the corporate power and is duly authorized, qualified, franchised and licensed
under all applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, and as it is
proposed to be conducted, including qualification to do business as a foreign
corporation in the states in which the character and location of the assets
owned by it or the nature of the business transacted by it requires
qualification, except where the failure to so qualify would not have a material
adverse effect upon the assets, business, properties or operations of IMS. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement in accordance with the terms hereof
will not, violate any provision of IMS' certificate of incorporation or bylaws.
IMS has taken all action required by law, its certificate of incorporation, its
bylaws or otherwise to authorize the execution and delivery of this Agreement.
IMS has full power, authority and legal right and has taken all action required
by law, its certificate of incorporation, bylaws of otherwise to consummate the
transactions herein contemplated.
Section 2.2 CAPITALIZATION. The authorized capitalization of IMS consists
of 50,000,000 shares of common stock, par value $0.0001 per share (the "IMS
Common Stock") and 1,000,000 shares of preferred stock, par value $0.0001 per
share (the "IMS Preferred Stock"). As of the Initial Closing Date, there are
26,958,848 shares of IMS Common Stock and 10,250 shares IMS Preferred Stock
(including 10,000 shares of Series A Preferred Stock and 250 shares of Series B
Preferred Stock) issued and outstanding. All issued and outstanding shares are
legally issued, fully paid and nonassessable and not issued in violation of
the preemptive rights or other rights of any person. Except for (A) the
conversion privileges of the Preferred Stock issued and outstanding, (B) the
rights provided in Section 4.1 of this Agreement, and (C) currently outstanding
options to purchase 2,090,000 shares of Common Stock granted to employees,
directors and consultants pursuant to the IMS 1993 Incentive Stock Option Plan
and the IMS 1993 Nonqualified Stock Option Plan (collectively, the "Option
Plans") and other outstanding options and/or warrants currently outstanding to
purchase 2,812,877 shares of Common Stock granted to others, all of which are
set forth on Schedule 2.2 hereof, there are no outstanding options, warrants,
rights (including conversion or preemptive
5
<PAGE> 7
rights) or agreements for the purchase or acquisition from IMS of any shares of
its capital stock. In addition to the aforementioned options, IMS has reserved
an additional 1,795,000 shares of its Common Stock for purchase upon exercise of
options to be granted in the future under the Option Plans. IMS is not a party
or subject to any agreement or understanding, and, to the best of IMS'
knowledge, there is no agreement or understanding between any persons and/or
entities which affects or relates to the voting or giving of written consents
with respect to any security or by a director of IMS.
Section 2.3 SUBSIDIARIES. IMS does not have any subsidiaries and does not
own, beneficially or of record, any other corporation. Except as set forth in
Schedule 2.3, IMS is not a participant in any joint venture, partnership or
similar arrangement.
Section 2.4 BINDING OBLIGATION: NO DEFAULT. IMS has duly taken all action
necessary to authorize the execution, delivery and performance of this Agreement
and the other instruments and agreements contemplated hereby. Such execution,
delivery and performance does not and will not, to the best of IMS' knowledge,
constitute a default under or a violation of any agreement, order, award,
judgment, decree, statute, law, rule, regulation or any other instrument to
which IMS is a party or by which IMS or the property of IMS may be bound or may
be subject. This Agreement constitutes the legal, valid and binding obligation
of IMS, enforceable against IMS in accordance with its terms, except: (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditor's rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in Section 4.7 may be limited by
applicable federal or state securities laws.
Section 2.5 COMPLIANCE WITH OTHER INSTRUMENTS, etc. Neither the execution
and delivery of this Agreement by IMS nor compliance by IMS with the terms and
conditions of this Agreement will: (a) require IMS to obtain the consent of any
governmental agency; (b) constitute a material default under any indenture,
mortgage or deed of trust to which IMS is a party or by which IMS or its
properties may be subject; (c) cause the creation or imposition of any lien,
charge or encumbrance on any of its assets; or (d) breach any statute or
regulation of any governmental authority, domestic or foreign, or will on the
Initial Closing Date and the Subsequent Closing Date, conflict with or result in
a breach or any of the terms or conditions of any judgment, order, injunction,
decree or ruling of any court or governmental authority, domestic or foreign, to
which IMS is subject.
Section 2.6 CONSENTS. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental
6
<PAGE> 8
or regulatory authority or any third party is required to be made or obtained
by IMS in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby. The transactions
contemplated by this Agreement have been approved by the Board of Directors of
IMS.
Section 2.7 BOOKS AND RECORDS. The books of account and other financial
records of IMS are complete and correct in all material aspects. The minute
books of IMS contain records of all meetings from the time of incorporation and
accurately reflect all other material corporate action of the stockholders,
directors and any committees of the Board of Directors of IMS.
Section 2.8 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by IMS contained in this Agreement or in respect of the exhibits,
schedules or documents delivered to Paragon by IMS and expressly referred to
herein, and no statement contained in any certificate furnished or to be
furnished by or on behalf of IMS pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such certificate is or will be furnished,
and as of the Initial Closing Date and the Subsequent Closing Date, any untrue
statement of a material fact, or omits, or will omit to state as of the date
such representation or warranty is made or such certificate is or will be
furnished, any material fact which is necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading. True and correct copies of each agreement and other document
referred to in the schedules hereto have been furnished, or made available to
Paragon.
Section 2.9 TITLE TO THE SHARES. Upon delivery to Paragon of the
certificates for the Shares described in Article III of this Agreement, Paragon
will receive good and marketable title to the Shares. All of the Shares shall be
received by Paragon as validly issued, fully paid and nonassessable, free and
clear of all pledges, liens, encumbrances, security interests, equities,
options, claims, charges, limitations on voting rights or rights to receive
dividends, or other restrictions of any kind (other than any generally imposed
by federal, corporate or territorial securities laws or as otherwise provided
for in this Agreement).
Section 2.10 OFFERING. Subject in part to the accuracy of Paragon's
representations set forth in Article I of this Agreement, the offer, sale and
issuance of the IMS Common Stock as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act, and neither IMS nor
any authorized agent acting on its behalf will take any action hereafter that
would cause the loss of such exemption.
Section 2.11 COMPLIANCE WITH EXCHANGE ACT. As of the Initial Closing (as
defined herein), IMS shall be current in all filings
<PAGE> 9
required to be tendered to the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Schedule 2.11 attached hereto are
true, complete and correct copies of the following: (a) IMS' Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, as filed with the
Commission, and (b) IMS' Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, June 30 and September 30, 1995, as filed with the Commission,
(c) IMS's Proxy Statement for its 1995 Annual Meeting of Stockholders, (d) all
Forms 8-K filed with the Commission since December 31, 1994, and (e) all other
reports or registration statements filed by IMS with the Commission since
September 30, 1995 (collectively, the "Commission Filings"). Since September
30, 1995, IMS has filed all reports, registration statements and other
documents required to be filed by it under the Exchange Act. The Commission
Filings were prepared in accordance and complied in all material respects with
the applicable requirements of the Securities Act or the Exchange Act, as the
case may be. None of such forms, reports and statements, including, without
limitation, any financial statements, exhibits and schedules included therein
and documents incorporated therein by reference, at the time filed, or declared
or it became effective, as the case may be, contained, or now contains, or at
the Closing Date will contain, an untrue statement of a material fact or
omitted or will omit 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.
Included in Schedule 2.11 attached hereto are true and correct copies of
IMS' audited financial statements, including IMS audited consolidated balance
sheets as of December 31, 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December
31, 1992, 1993 and 1994 (the "IMS Audited Financial Statements"); and true and
correct copies of IMS' unaudited consolidated balance sheets as of September
30, 1995, and the related unaudited consolidated statements of operations and
cash flows for the nine (9) month periods ended September 30, 1994 and 1995
(the "IMS Unaudited Financial Statements"). The IMS Audited Financial
Statements, together with the notes thereto, fairly present the financial
position of IMS at December 31, 1994, and the consolidated results of the
operations and the changes in stockholders' equity and cash flows for IMS for
the periods covered by the IMS Audited Financial Statements and have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied with prior periods. The IMS Unaudited Financial Statements
fairly present the financial position of IMS at September 30, 1995, and the
consolidated results of the operations and cash flows for IMS for the periods
then ended and have been prepared in accordance with GAAP consistently applied
with prior periods. (The IMS Audited Financial Statements and IMS Unaudited
Financial Statements are collectively referred to herein as the "IMS Financial
Statements.")
<PAGE> 10
Except as set forth in the IMS Financial Statements, IMS has no material
liabilities, contingent or otherwise, other than: (i) liabilities incurred in
the ordinary course of business subsequent to September 30, 1995, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in the IMS Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of IMS. Except as
disclosed in the IMS Financial Statements, IMS is not a guarantor or indemnitor
of any indebtedness of any other person, firm or corporation. IMS maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
Section 2.12 CHANGES.
Since September 30, 1995, except as set forth on Schedule 2.12, there has
not been:
(a) any change in the assets, liabilities, financial condition or operating
results of IMS from that reflected in the IMS Financial Statements, except
changes in the ordinary course of business that have not been, in the aggregate,
materially adverse;
(b) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the assets, properties, financial condition,
operating results, prospects or business of IMS (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver by IMS of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, encumbrance or
payment of any obligation by IMS, except in the ordinary course of business and
that is not material to the assets, properties, financial conditions, operating
results or business of IMS (as such business is presently conducted and as it is
proposed to be conducted);
(e) any material change or amendment to a material contract or arrangement
by which IMS or any of its assets or properties is bound or subject;
(f) any material change in any compensation arrangement or agreement with
any employee;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any key officer of IMS;
and IMS, to the best of its knowledge, does not
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know of the impending resignation or termination of employment of any such
officer;
(i) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of IMS;
(j) any mortgage, pledge, transfer of a security interest in, or lien,
created by IMS, with respect to any of its material properties or assets,
except liens for taxes not yet due or payable;
(k) any loans or guarantees made by IMS to or for the benefit of its
employees, officers or directors, or any member of their immediate families,
other than travel advances and other advances made in the ordinary course of
its business;
(l) any declaration, setting aside or payment or other distribution in
respect of any of IMS' capital stock, or any direct or indirect redemption,
purchase or other acquisition of any of such stock by IMS;
(m) to the best of IMS' knowledge, any other event or condition of any
character that might materially and adversely affect the assets, properties,
financial condition, operating results or business or IMS (as such business is
presently conducted and as it is proposed to be conducted); or
(n) any agreement or commitment by IMS to do any of the things described
in this Section 2.12.
Section 2.13 IMS SCHEDULES. IMS shall cause the IMS Schedules and the
instruments to be delivered to Paragon hereunder to be updated after the date
hereof up to and including the Subsequent Closing Date.
Section 2.14 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against IMS that questions the
validity of this Agreement, or the right of IMS to enter into such Agreement,
or to consummate the transactions contemplated hereby, or that might result,
either individually or in the aggregate, in any material adverse changes in the
assets, condition, affairs or prospects of IMS, financially or otherwise, or
any change in the current equity ownership of IMS, nor is IMS aware that there
is any basis for the foregoing. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or threatened (or any
basis therefor known to IMS) involving the prior employment of any of IMS
employees, their use in connection with IMS' business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. There is no action,
suit, proceeding or investigation by IMS currently pending or that IMS intends
to initiate.
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Section 2.15 EMPLOYEE INVENTION AND SECRECY AGREEMENTS. Each employee,
officer and consultant of IMS has executed an Employee Invention and Secrecy
Agreement in the form attached hereto as Schedule 2.15. IMS, after reasonable
investigation, is not aware that any of its employees, officers or consultants
are in violation thereof, and IMS will use its best efforts to prevent any such
violation.
Section 2.16 PATENTS AND TRADEMARKS. IMS has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes which are
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement of the rights of others. Except as
disclosed in Schedules 2.3 and 2.16, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is IMS bound
by or a party to any options, licenses or agreements of any kind with respect
to the patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, proprietary rights and processes of any other
person or entity. IMS has not received any communications alleging that IMS has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. IMS is not aware that
any of its employees is obligated under any contract (including licenses,
convenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interest of
IMS or that would conflict with IMS" business as proposed to be conducted.
Neither the execution nor delivery of this Agreement nor the carrying on of
IMS" business by the employees of IMS, nor the conduct of IMS" business as
proposed, will, to the best of IMS'S knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees
is obligated. IMS does not believe it is or will be necessary to utilize any
inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by IMS.
Section 2.17 AGREEMENT ACTION.
Except as disclosed in Section 2.11 and Schedule 2.17:
(a) Except as set forth in Schedule 2.17, there are no agreements,
understandings or proposed transactions between IMS and any of its officers,
directors, affiliates, or any affiliate thereof;
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or
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decrees to which IMS is a party or by which it is bound that involve (i)
obligations (contingent or otherwise) of, or payments to IMS in excess of,
$5,000, or (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from IMS, or (iii) provisions restricting or affecting
the development, manufacture or distribution of IMS' products or services, or
(iv) indemnification by IMS with respect to infringements or proprietary rights.
(e) IMS has not (i) declared or paid any dividend or authorized or made any
distribution upon or with respect to any class or series of its capital stock,
(ii) incurred any indebtedness for money borrowed or any other liabilities
individually in excess of $5,000 or, in the case of indebtedness and/or
liabilities individually less than $5,000, in excess of $25,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
IMS has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such subsection.
(e) Except as otherwise disclosed to Paragon in writing, receipt of which
is acknowledged by Paragon, IMS has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of IMS with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of IMS or a transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of IMS is disposed of, or (iii) regarding any other form of
acquisition, liquidation, dissolution or winding up of IMS.
Section 2.18 MANUFACTURING AND MARKETING RIGHTS. Except as set forth in
Schedule 2.18, IMS has not granted rights to manufacture, produce, assemble,
license, market or sell its products to any other person and is not bound by any
agreement that affects IMS' exclusive right to develop, manufacture, assemble,
distribute, market or sell its products.
Section 2.19 REGISTRATION RIGHTS. Except as provided in Section 4.8 and
Schedule 2.19 hereof, IMS has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity which are
outstanding as of the date of this Agreement.
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Section 2.20 TITLE TO PROPERTY AND ASSETS. Except as disclosed in
Schedule 2.20, IMS owns its property and assets free and clear of all
mortgages, liens, loans and encumbrances, except such encumbrances and liens
that arise in the ordinary course of business and do not materially impair IMS'
ownership or use of such property or assets. With respect to the property and
assets it leases, IMS is in compliance with such leases and, to the best of its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
Section 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule
2.21, IMS does not have any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974.
Section 2.22 TAX RETURNS, PAYMENTS AND ELECTIONS. IMS has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. IMS has paid all taxes and other assessments
due, except those contested by it in good faith that are listed in the IMS
Schedules. The provision for taxes of IMS as shown in the IMS Financial
Statements is adequate for taxes due or accrued as of the date thereof. IMS has
not elected pursuant to the Internal Revenue Code of 1986, as amended (the
"Code"), to be treated as Subchapter S Corporation or a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code, nor has it made any
other elections pursuant to the Code (other than elections that relate solely to
methods of accounting, depreciation or amortization) that would have a material
effect on IMS, its financial condition, its business as presently conducted or
proposed to be conducted or any of its properties or material assets. IMS has
never had any tax deficiency proposed or assessed against it and has not
executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. None of IMS' federal income tax
returns and none of its share income or franchise tax or sales or use tax
returns has ever been audited by governmental authorities. Since the date of the
IMS Financial Statements, IMS has made adequate provisions on its books of
account for all taxes, assessments and governmental charges with respect to its
business, properties and operations for such period. IMS has withheld or
collected from each payment made to each of its employees, the amount of all
taxes (including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories.
Section 2.23 INSURANCE. IMS has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed. IMS has in full force and effect
term life insurance payable to IMS, on the life of George W. Smith in the
amount of $1,000,000.
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IMS has in full force and effect products liability and errors and omissions
insurance in amounts customary for companies similarly situated.
Section 2.24 LABOR AGREEMENTS AND ACTION. IMS is not bound by or subject
to (and none of its assets or properties is bound by or subject to) any written
or oral, expressed or implied, contract, commitment or arrangement with any
labor union, and no labor union has requested or, to the best of IMS' knowledge,
has sought to represent any of the employees, representatives or agents of IMS.
There is no strike or other labor dispute involving IMS pending or to the best
of IMS' knowledge, threatened, that could have a material adverse effect on the
assets, properties, financial conditions, operating results, or business of IMS
(as such business is presently conducted and as it is proposed to be conducted),
nor is IMS aware of any labor organization activity involving its employees. IMS
is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with IMS, nor does IMS have a
present intention to terminate the employment of any of the foregoing. The
employment of each officer and employee of IMS is terminable at the will of IMS.
To the best of its knowledge, IMS has complied in all material respects with all
applicable state and federal equal employment opportunity and other laws related
to employment.
Section 2.25 REAL PROPERTY HOLDING COMPANY. IMS is not a real property
holding company within the meaning of Section 897 of the Code.
ARTICLE III
SALE OF SECURITIES
Section 3.1 SALE OF SECURITIES: PAYMENT FOR AND ISSUANCE OF SHARES.
Subject to the terms and conditions of this Agreement: (a) IMS agrees to sell
and deliver to Paragon 2,000,000 Shares; and (b) Paragon agrees to deliver funds
to IMS in the amount of $2,000,000, at a purchase price of $1.00 per Share, as
follows:
(a) The parties acknowledge and agree that prior to the Initial Closing
Date, Paragon has delivered to IMS the amount of $500,000. At the Initial
Closing, which shall be on the date first above written, IMS shall issue and
deliver to Paragon 500,000 Shares of IMS Common Stock with respect to such
$500,000 payment, and that certain agreement between IMS and Dolphin
Interconnect Solutions, Inc., dated as of December 30, 1995, will be deemed
canceled and null and void;
(b) At the Initial Closing, Paragon shall deliver to IMS an additional
$500,000 and IMS shall issue and deliver to Paragon an additional 500,000
Shares of IMS Common Stock; and
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(c) On or before February 15, 1996 (the "Subsequent Closing Date"), Paragon
shall deliver to IMS an additional $1,000,000 and IMS shall issue and deliver to
Paragon and additional 1,000,000 Shares of IMS Common Stock.
Section 3.2 AVAILABLE EXEMPTION. The parties agree that the issuance of
the Shares shall be a transaction not involving a public offering for the
purposes of Section 4 (2) of the Securities Act. The parties acknowledge that
the Shares shall be "restricted securities" as such term is defined in Rule 144
(a) (3) promulgated under the Securities Act.
Section 3.3. CLOSINGS. The initial closing ("Initial Closing") of the
transactions contemplated by this Agreement shall be as of the date first above
written ("Initial Closing Date"), unless a different date is mutually agreed to
in writing by the parties hereto. In addition to the Initial Closing, there
shall be an additional closing ("Subsequent Closing") which shall occur on or
before February 15, 1996, related to the transactions contemplated by Section
3.1 (c) of this Agreement. For purposes of this Agreement, the Initial Closing
Date and the Subsequent Closing Date shall be collectively referenced herein as
the "Closing Date," and the Initial Closing and the Subsequent Closing shall be
collectively referenced herein as the "Closing."
Section 3.4 CLOSING EVENTS. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged and delivered) any and all certificates, opinions, financial
statements, schedules, agreements, resolutions, rulings or other instruments
required by this Agreement to be so delivered at or prior to the Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transactions contemplated hereby. However, in no event shall the Closing
occur without the satisfaction or waiver of the conditions set forth in
Articles 5 and 6 of this Agreement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.1 RIGHT OF FIRST REFUSAL. (i) On or before April 15, 1996, in
the event that IMS shall have received: (i) $2,000,000 in payment for the
Shares; and (ii) the receipt of at least an additional $6,000,000 from the sale
of up to an additional 8,000,000 shares at $1.00 per share of IMS' Common Stock
pursuant to a private placement (the "Private Placement") to be conducted by
IMS, in connection with which Paragon Capital Management LLC ("Paragon Capital
Management") shall act as placement agent pursuant to a placement agent
agreement (the "Placement Agent Agreement"), a copy of which is attached
hereto as Schedule 4.1,
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Paragon shall have a right of first refusal to purchase or cause to be
purchased from IMS any securities of IMS which may be offered in a private
placement pursuant to an exemption from registration under the Securities Act
on the same terms and conditions as may be offered to any third party. In
connection therewith, IMS shall be required to give sixty (60) days' written
notice to Paragon of the general funding requirements of IMS, including (A) the
number of securities to be offered, and (B) the price and terms, if any, upon
which it proposes to offer such securities. In the event that IMS shall give
notice to Paragon of its BONA FIDE intention to conduct a private placement of
IMS' securities, Paragon shall have ten (10) days from a date commencing no
earlier than the ten (10) day period prior to the conclusion of such sixty (60)
day period to provide written notice to IMS of its exercise of the right of
first refusal to purchase or cause to be purchased all of the securities
described in the notice on the terms and conditions set forth in the notice and
to deliver all consideration and execute and deliver all documents required to
complete such transaction. If Paragon shall fail to give notice of its election
to exercise the right of first refusal in full with respect to the offer of the
securities set forth in the notice and shall fail to deliver all such
consideration and to execute and deliver all such documents within the required
period, such right of first refusal with respect to the securities offered in
the notice shall lapse.
Section 4.2 ACCESS TO PROPERTIES AND RECORDS. IMS shall afford to the
officers and authorized representatives of Paragon full access to the
properties, books and records of IMS, in order that Paragon may have full
opportunity to make such reasonable investigation as it shall desire to make of
the affairs of IMS, and IMS will furnish Paragon with such additional financial
and operating data and other information as to the business and properties of
IMS, as Paragon shall from time to time reasonably request.
Section 4.3 AVAILABILITY OF RULE 144. Each of the parties acknowledge that
the stock of IMS to be issued pursuant to this Agreement will be "restricted
securities," as that term is defined in Rule 144 promulgated pursuant to the
Securities Act. IMS is under no obligation, except as set forth in Section 4.8
hereof, to register such shares under the Securities Act. Notwithstanding the
foregoing, however, IMS will use its best efforts to: (a) make publicly
available on a regular basis not less than semi-annually, business and financial
information regarding IMS so as to make available to the stockholders of IMS the
provisions of Rule 144 pursuant to subparagraph (c)(1) thereof; (b) file with
the Commission in a timely manner all reports and other documents required of
IMS under the Securities Act and the Exchange Act and (c) within ten (10) days
of any written request of any stockholder of IMS, IMS will provide to such
stockholder (i) a written statement by IMS that it has complied with the
reporting requirements of Commission Rule 144 (at any time after ninety (90)
days
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after the effective date of the first registration statement filed by IMS), the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of IMS
and such other reports and documents so filed by IMS, and (iii) such other
information as may be reasonably requested by any stockholder regarding any
rule or regulation of the Commission which permits the selling of any such
securities without registration or pursuant to such form. The stockholders of
IMS holding restricted securities of IMS as of the date of this Agreement, and
their respective heirs, administrators, personal representatives, successors
and assigns, are intended third party beneficiaries of the provisions set forth
herein. The covenants set forth in this Section 4.3 shall survive the Closing
and the consummation of the transactions herein contemplated.
Section 4.4 INFORMATION FOR IMS REGISTRATION STATEMENT AND PUBLIC REPORTS.
Paragon shall furnish IMS with all information concerning Paragon, including
all financial statements, required for inclusion in any registration statement
or public report required to be filed by IMS pursuant to the Securities Act,
the Exchange Act or any other applicable federal or state law, Paragon
represents and warrants to IMS that, to the best of its knowledge and belief,
all information so furnished for either such registration statement or other
public release by IMS shall be true and correct in all material respects
without omission of any material fact required to make the information stated
not misleading.
Section 4.5 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE SHARES.
The consummation of this Agreement and the transactions herein contemplated,
including the issuance of the Shares to Paragon as contemplated hereby,
constitutes the offer and sale of securities under the Securities Act, and
applicable state statutes. Such transaction shall be consummated in reliance on
exemptions from the registration and prospectus delivery requirements of such
statutes which depend, INTER ALIA, upon the circumstances under which Paragon
acquire such securities.
Section 4.6 THIRD PARTY CONSENTS. IMS and Paragon agree to cooperate with
each other in order to obtain any required third party consents to this
Agreement and the transactions herein and therein contemplated.
Section. 4.7 INDEMNIFICATION.
In the event any Shares are included in a registration statement under
Section 4.8:
(a) To the extent permitted by law, IMS will indemnify and hold harmless
each holder of Shares ("Holder"), any underwriter (as
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defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (or
actions in respect thereof) arising out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"); (i)
any untrue statement or alleged untrue statement of a material fact contained
in such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any Violation or alleged Violation by IMS of the Securities Act or the
Exchange Act; and IMS will pay to each such Holder, underwriter or controlling
person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action, PROVIDED, HOWEVER, that the indemnity agreement contained
in this subsection 4.7(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of IMS (which consent shall not be unreasonably withheld),
nor shall IMS be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless IMS, each of its directors or officers who has signed the
registration statement, each person, if any, who controls IMS within the
meaning of the Securities Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities act or the Exchange Act insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal
or other expenses reasonably incurred by a person intended to be indemnified
pursuant to this subsection 4.7(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; PROVIDED,
HOWEVER, that the indemnity contained in this subsection 4.7(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; provided, that, in no event shall
any indemnity under
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this subsection 4.7(b) exceed the gross proceeds from the offering received by
such Holder.
(c) Promptly after receipt by an indemnified party under this Section 4.7
of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 4.7 deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
4.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4.7.
(d) If the indemnification provided for in this Section 4.7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other hand in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
entered into in connection with the
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underwritten public offering are in conflict with the foregoing provisions, the
provision in the underwriting agreement shall control.
(f) The obligations of IMS and Holders under this Section 4.7 shall survive
the completion of any offering of registrable securities in a registration
statement under Section 4.8, and otherwise.
Section 4.8 REGISTRATION RIGHTS.
4.8.1 DEMAND REGISTRATIONS. (a) GENERAL. (i) On or before April 15, 1996,
in the event that IMS shall have received: (A) $2,000,000 in payment for the
Shares; and (B) the receipt of at least an additional, $2,000,000 from the sale
of up to and additional 8,000,000 shares pursuant to the Private Placement,
then, during the period commencing July 31, 1996 and terminating April 30, 1998
(the "Demand Registration Period"), Paragon and the holders purchasing in the
Private Placement shall have the right, upon the written request of the holders
of no less than twenty-five percent (25%) of the aggregate of the Shares and the
shares of IMS Common Stock purchased pursuant to the Private Placement (the "PP
Shares"), that IMS effect two registrations of the Shares and the PP Shares
(collectively, the "Registerable Shares"), under and pursuant to the Securities
Act, owned by such holders and specifying the intended method of disposition
thereof. IMS shall give prompt written notice (in any event within ten (10)
business days after its receipt of notice of any exercise of a Demand
Registration) to the other holders of Registerable Shares of its intention to
effect such a registration and shall use its best efforts to include in such
registration all of the Registerable Shares with respect to which IMS receives
from any of such holders a written request for inclusion therein within fifteen
(15) days after the stockholder's receipt of IMS' notice, which request shall
specify the number of the Registerable Shares to be disposed of by the
requesting holder and the intended method of disposition thereof. All
registrations requested pursuant to this Section 4.8.1(a) are referred to herein
as "Demand Registrations."
(b) NUMBER OF DEMAND REGISTRATIONS. Subject to the provisions of Section
4.8.1(a), the holders of the Registerable Shares shall be entitled,
collectively, to request two Demand Registration during the Demand Registration
Period. Transferees of the Registerable Shares, other than such persons who
shall have been issued the Registerable Shares pursuant to the terms of this
Agreement, shall have the right to participate in any such registration
statement and shall be entitled to exercise any of the rights provided for in
this Section 4.8.
(c) REGISTRATION OF OTHER SECURITIES. Whether IMS shall effect a Demand
Registration pursuant to Section 4.8.1(a) in connection with an underwritten
offering by the Holders of the
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Registerable Shares, no securities other than the Registerable Shares shall be
included among the securities covered by such registration unless (i) the
managing underwriter of such offering shall have advised IMS in writing that
the inclusion of such other securities would not adversely affect such offering
or (ii) such holders of Registerable Shares to be registered therein shall
have consented in writing to the inclusion of such other securities.
(d) REGISTRATION STATEMENT FORM. Demand Registration shall be effected as
soon as practicable following receipt of the holder's written request and shall
be on such appropriate registration form of the Commission (i) as shall be
selected by IMS and shall be acceptable to the requesting holder and (ii) as
shall permit the disposition of such Registerable Shares in accordance with the
intended method or methods of disposition specified in the request for such
registration. IMS agrees to include in any such registration statement all
information that, in the opinion of counsel to the holder so requesting
registration, or counsel to IMS, is required to be included.
(e) PRIORITY ON DEMAND REGISTRATIONS. In the event that the managing
underwriters of a requested Demand Registration advises IMS in writing that in
their opinion the number of Registerable Shares proposed to be included in any
such registration exceeds the number of securities which can be sold in such
offering, IMS shall include in such registration only the number of Registerable
Shares (PRO RATA in accordance with the number of Registerable Shares requested
by each Holder to be included in such registration) which in the opinion of such
underwriters can be sold.
(f) PERMITTED INTERRUPTIONS. IMS may postpone (such postponement is
referred to herein as a "Permitted Interruption") for a reasonable period of
time (not to exceed ninety (90) days, which may not thereafter be extended) the
filing or the effectiveness of a registration statement for a Demand
Registration if, at the time it receives a request for such registration: (i)
IMS is engaged in any active program for repurchase of IMS Common Stock that is
registered under the Securities Act and furnishes an Officer's Certificate to
that effect, (ii) IMS is conducting or about to conduct an offering of IMS
Common Stock and IMS is advised by the investment banker engaged by IMS to
manage such offering that such offering would be affected adversely by the
registration so demanded and IMS furnishes an Officer's Certificate to that
effect, or (iii) the board of directors of IMS shall determine in good faith
that such offering will interfere with a pending or contemplated financing,
merger, acquisition, sale of assets, recapitalization or other similar
corporate action of IMS and IMS furnishes an Officer's Certificate to that
effect; PROVIDED, HOWEVER, that IMS may not utilize the right more than once in
any twelve (12) month period. After such Permitted Interruption IMS
21
<PAGE> 23
shall effect such registration as promptly as practicable without further
request unless such request has been withdrawn.
(g) SELECTION OF UNDERWRITERS. The holder of Registerable Shares
requesting registration shall have the right to select such investment
banker(s) as shall be reasonably acceptable to IMS to administer the offering
for which a Demand Registration is requested. Such holder(s) shall, in their
sole discretion, negotiate the terms of the underwriters' fees and expenses,
the underwriting discounts and commissions and the transfer taxes to be paid by
such holder.
4.8.2. PIGGYBACK REGISTRATIONS. (a) GENERAL. Whenever IMS proposes to
register any shares of IMS Common Stock under the Securities Act (other than a
registrations on Exchange Act Form 10 or solely for shares to be issued in
connection with any employee benefit plan or a merger, consolidation or other
business combination registered on Form S-4, or any successor form thereto) and
the registration form to be used may be used for the registration of
Registerable Shares (a "Piggyback Registration"), IMS shall give prompt written
notice (in any event within ten (10) business days after its receipt of notice
of any exercise of other registration rights) to the holder of Registerable
Shares of its intention to effect such a registration and shall use its best
efforts to include in such registration all of the Registerable Shares with
respect to which IMS receives from any of such holders a written request for
inclusion therein within fifteen (15) days after the stockholder's receipt of
IMS' notice, which request shall specify the number of the Registerable Shares
to be disposed of by the requesting holder and the intended method of
disposition thereof. If IMS elects, prior to effectiveness, not to proceed with
a primary registration of its Common Stock, it shall not be obligated to
register any Registerable Shares.
(b) PRIORITY ON PRIMARY REGISTRATION. If a Piggyback Registration is an
underwritten primary registration on behalf of IMS and the managing
underwriter(s) of such offering advise IMS in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can reasonably be sold in such offering, then IMS shall include in
such registration (i) first, the securities that IMS proposes to sell, (ii)
second, the Registerable Shares, along with the shares of IMS shareholders who
have rights to participate in such registration, which rights were in existence
prior to the date of this Agreement, which request to be included therein (PRO
RATA in accordance with the number of Registerable Shares, and other shares
having the right to participate in the registration, as are requested by each
holder to be included in such registration), and (iii) third, other securities
requested to be included in such registration. If the managing underwriter of
such offering subsequently advises IMS in writing that the number of securities
which can be sold exceeds the number of securities included in the offering, IMS
shall include in
22
<PAGE> 24
the registration, first, the securities that IMS proposes to sell and second,
such Registerable Shares that the holder(s) had originally requested be included
in the registration and third, such other securities originally proposed for
inclusion in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of IMS' securities
other than the holder(s) of Registerable Shares and the managing underwriter(s)
of such offering advise IMS in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can reasonably be sold in such offering, then IMS shall include in such
registration (i) first, if such registration is being made on behalf of other
stockholders of IMS exercising demand registration rights, then the securities
so requested to be included therein in accordance with such demand registration
rights, (ii) second, the Registerable Shares requested to be included in such
registration (PRO RATA in accordance with the number of Registerable Shares
requested by each holder to be included in such registration) and (iii) third,
other securities requested to be included in such registration. If the managing
underwriter of such offering subsequently advises IMS in writing that the number
of securities, which can be sold exceeds the number of securities included in
the offering, IMS shall include in the registration such additional securities
that (i) first, the holder(s) of Registerable Shares had originally requested be
included in the registration and (ii) second, others had originally proposed to
include in the registration.
(d) OTHER REGISTRATION. If: (i) IMS has previously filed a registration
statement with respect to any Registerable Shares pursuant to Section 4.8.1(a)
or 4.8.2(b) and (ii) such previous registration has not been withdrawn or
abandoned, IMS shall not file or cause to be effective any other registration of
any of its equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except on Form
S-8 or S-4 or any successor form), whether on its own behalf or at the request
of any holder of such securities, until a period of at least three (e) months
has elapsed from the effective date of such previous registration.
(e) PIGGYBACK NOT A DEMAND REGISTRATION. Should a holder's participation
in a registration be pursuant to a Piggyback Registration in connection with:
(i) an underwritten primary registration on behalf of IMS as described in
Section 4.8.2(b) or (ii) an underwritten secondary registration on behalf of
holders of IMS securities other than holder(s) of Registerable Shares as
described in Section 4.8.2(c), then such participation shall not constitute a
Demand Registration for purposes of determining the number of Demand
Registrations to which holders of Registerable Shares are entitled to pursuant
Section 4.8.1(b).
23
<PAGE> 25
4.8.3. EXPENSES OF DEMAND REGISTRATION. (a) All expenses allocable to the
registration of securities of the holder(s) to be registered pursuant to a
Demand Registration, other than underwriting discounts and commissions incurred
in connection with registrations, filings or qualifications pursuant to a Demand
Registration, including (without limitation) all registration, filing and
qualification fees, printer's and accounting fees, fees and disbursements of
counsel for IMS shall be borne equally and on a current basis by IMS and the
holders of the Registerable Shares; PROVIDED, HOWEVER, that IMS shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to a Demand Registration if the registration request is subsequently withdrawn
at the request of the holders of a majority of the Registerable Shares to be
registered (in which case all participating holders shall bear such expenses),
unless the holders of a majority of the Registerable Shares agree to forfeit
their right to one demand registration pursuant to a Demand Registration;
PROVIDED, FURTHER, HOWEVER, that if at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business, or
prospects of IMS from that known to the holders at the time of their request and
have withdrawn the request with reasonable promptness following disclosure by
IMS of such material adverse change, then the Holders shall not be required to
pay any of such expenses and shall retain their rights pursuant to a Demand
Registration.
(b) PAYMENT OF EXPENSES BY THE HOLDER(S). In addition to the expenses
referenced in subsection 4.8.3 (a), the Holder(s) shall pay the underwriters'
fees and expenses, the underwriters' discount and commission and the commissions
and fees, if any, payable in respect of selling brokers, dealer managers or
similar securities industry professionals, fees and expenses of holder's
counsel, and transfer taxes allocable to the registration of the Holder(s)
securities so included in any Demand or Piggyback Registration pursuant to this
Agreement.
Section 4.8.4 EXPENSES OF PIGGYBACK REGISTRATION. IMS shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registerable Shares with respect to the registrations pursuant
to a Piggyback Registration for each Holder (which right may be assigned),
including (without limitation) all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto, but excluding
underwriter discounts and commissions relating to the Registerable Shares.
Section 4.8.5 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause IMS
to register Registerable Shares pursuant to this Section 4.8 may be assigned
(but only with all related obligations) by a Holder to a transferee or assignee
of such securities who, after such assignment or transfer, holds at least
500,000 shares of the Shares or the PP Shares (subject to appropriate adjustment
for
24
<PAGE> 26
stock splits, stock dividends, combinations and other recapitalization),
provided; (a) IMS is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; (b) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement; and (c) such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Securities Act. For the purposes of determining the number of
Registerable Shares held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registerable Shares by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 4.8.
Section 4.8.6 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, IMS shall not, without the prior written consent of
the holders of a majority of the outstanding Registerable Shares, enter into
any agreement with any holder or prospective holder of any securities of IMS
which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 4.8 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the including of
such securities will not reduce the amount of the Registerable Shares of the
holders which is included, or (b) to make a demand registration which could
result in such registration statement being declared effective within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to a Demand Registration by the holders.
Section 4.9 APPOINTMENT OF MEMBER OF BOARD OF DIRECTORS. On or before
April 15, 1996, in the event that IMS shall have received the $2,000,000
referenced in Sections 3.1 (a) - (c), Martin Albert, a director of Paragon
Capital Management, the sole general partner of Paragon, or his designee, shall
become a member of the Board of Directors of IMS. In the event that Mr. Albert,
or his designee, becomes a member of the Board of Directors of IMS pursuant to
this Section 4.9 and so long as Paragon continues to own at least 1,000,000
Shares, IMS will use its best efforts to elect a designee of Paragon to the IMS
Board of Directors. Such designee shall be reasonably acceptable to the Board
of Directors of IMS.
25
<PAGE> 27
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF IMS
The obligations of IMS under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
made by Paragon in this Agreement were true when made and shall be true at the
Closing Date with the same force and effect as if such representations and
warranties were made as of the date of this Agreement (except for changes
therein permitted by this Agreement), and Paragon shall have performed or
complied with all covenants and conditions required by this Agreement to be
performed or complied with by Paragon prior to or at the Closing. IMS shall be
furnished with a certificate, signed by a duly authorized officer of Paragon and
dated the Closing Date, to the foregoing effect.
Section 5.2 PAYMENT OF PURCHASE PRICE. Paragon shall have delivered the
purchase price specified in Section 3.1 (a)-(c).
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF Paragon
The obligations of Paragon under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 6.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by IMS in this Agreement were true when made and shall be true
as of the Closing Date (except for changes therein permitted by this Agreement)
with the same force and effect as if such representations and warranties were
made at and as of the date of this Agreement, and IMS shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed or complied with by IMS prior to or at the Closing. Paragon shall
have been furnished with a certificate, signed by a duly authorized executive
officer of IMS and dated the Closing Date, to the foregoing effect.
Section 6.2 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Paragon, and Paragon shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
<PAGE> 28
Section 6.3 EMPLOYEE INVENTIONS AND SECRECY AGREEMENTS. Each employee of
and consultant to IMS shall have entered into a Employee Inventions and Secrecy
Agreement in the form previously provided to Paragon.
Section 6.4 BYLAWS. The Bylaws of IMS shall provide that the Board of
Directors of IMS shall consist of at least three (3) and no more than eleven
(11) persons.
Section 6.5 BOARD OF DIRECTORS. The directors of IMS shall be Messrs.
George W. Smith, Richard A. Hahn, Masahiro Tsuchiya, Frank LaChapelle and
Sigmund Hartmann, and there shall be one (1) vacancy of the Board of Directors.
Section 6.6 OPINION OF IMS COUNSEL. Paragon shall have received from
Matthias & Berg counsel for IMS, an opinion, dated as of the Initial Closing
Date, in the form attached hereto as Schedule 6.6.
ARTICLE VII
MISCELLANEOUS
Section 7.1 LAW, FORUM AND JURISDICTION. This agreement shall be
construed and interpreted in accordance with the laws of the state of Delaware.
The parties agree that any dispute arising under this Agreement, whether during
the term of the Agreement or at any subsequent time, shall be resolved
exclusively in the courts of the state of California in the County of Los
Angeles, California, and the parties hereby submit to the jurisdiction of such
courts for all purposes provided herein and appoint the Secretary of State of
the State of California as agent for service of process for all purposes
provided herein.
Section 7.2 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to its
or sent by overnight mail, registered mail or certified mail, postage prepaid,
or by prepaid telegram, or when telecopied and followed by confirmation copy
hand-delivered or sent by first class mail, addressed as follows:
If to IMS, to: International Meta Systems, Inc.
George W. Smith, President
100 North Sepulveda Boulevard
Sixth Floor
El Segundo, California 90245
(310) 524-9303 (Telecopier No.)
27
<PAGE> 29
With copies to: Matthias & Berg
Attorneys at Law
515 South Flower Street, Suite 700
Los Angeles, California 90071
Attn: Jeffrey P. Berg, Esq.
(213) 895-4058 (Telecopier No.)
If to Paragon, to: Paragon Limited Partnership
Ugland House
Georgetown, Grand Cayman
British West Indies
With copies to: Brobeck Phleger & Harrison
2 Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attn: Thomas Kellerman, Esq.
(415) 496-2885 (fax)
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed or telegraphed
or three (3) days after deposit with the United States Post Office.
Section 7.3 ATTORNEYS' FEES. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
Section 7.4 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.5 THIRD PARTY BENEFICIARIES. This contract is solely among IMS
and Paragon and, except for Sections 4.7 an 4.8 and as otherwise as
specifically provided, no director, officer, stockholder, employee, agent,
independent contractor or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.
Section 7.6 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations or warranties, written or oral,
except as set forth herein. This Agreement may not be amended or modified,
except by a written agreement signed by all parties hereto.
28
<PAGE> 30
Section 7.7 SURVIVAL; TERMINATION. The representations, warranties and
covenants of the respective parties shall survive the Closing Date of the
consummation of the transactions herein contemplated.
Section 7.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.9 AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of IMS and the holders of a majority of the Shares issued
hereunder. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Shares purchased under this Agreement
at the time outstanding, each future holder of all such Shares, and IMS.
Section 7.10 INCORPORATION OF RECITALS. All of the recitals hereof are
incorporated by this reference and are made a part hereof as though set forth at
length herein.
Section 7.11 EXPENSES. Each of the parties to this Agreement shall bear
all of its own expenses incurred by it in connection with the negotiation of
this Agreement and in the consummation of the transactions provided for herein
and the preparation therefor.
Section 7.12 HEADINGS; CONTEXT. The headings of the sections and
paragraphs contained in this Agreement are for convenience of reference only and
do not form a part hereof and in no way modify, interpret or construe the
meaning of this Agreement.
Section 7.13 SUCCESSOR AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall insure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Shares). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
Section 7.14 PUBLIC ANNOUNCEMENT. Except as may be required by law,
neither party shall make any public announcement or filing
29
<PAGE> 31
with respect to the transactions provided for herein without the prior consent
of the other party hereto.
Section 7.15 SEVERABILITY. In the event that any particular provision or
provisions of this Agreement or the other agreements contained herein shall for
any reason hereafter be determined to be unenforceable, or in violation of any
law, governmental order or regulation, such unenforceability or violation shall
not affect the remaining provisions of such agreements, which shall continue in
full force and effect and be binding upon the respective parties hereto.
Section 7.16 FAILURE OF CONDITIONS; TERMINATION. In the event any of the
conditions specified in this Agreement shall not be fulfilled on or before the
Closing Date, either of the parties shall have the right either to proceed or,
upon prompt written notice to the other, to terminate and rescind this Agreement
without liability to any other party. The election to proceed shall not affect
the right of such electing party reasonably to require the other party to
continue to use its efforts to fulfill the unmet conditions.
Section 7.17 NO STRICT CONSTRUCTION. The language of this Agreement shall
be construed as a whole, according to its fair meaning and intendment, and not
strictly for or against either party hereto, regardless of who drafted or was
principally responsible for drafting the Agreement or terms or conditions
hereof.
Section 7.18 EXECUTION KNOWING AND VOLUNTARY. In executing this
Agreement, the parties severally acknowledge and represent that each: (a) has
fully and carefully read and considered this Agreement; (b) has been or has had
the opportunity to be fully apprised of its attorneys of the legal effect and
meaning of this document and all terms and conditions hereof; (c) has been
afforded the opportunity to negotiate as to any and all terms hereof; and (d) is
executing this Agreement voluntarily, free from any influence, coercion or
duress of any kind.
<PAGE> 32
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to
be executed by their respective officers, hereunto duly authorized, and entered
into and closed as of the date first above written at Los Angeles, California.
<TABLE>
<S> <C>
("IMS")
INTERNATIONAL META SYSTEMS, INC.
By: /s/ George W. Smith
---------------------------
George W. Smith
President
("Paragon")
PARAGON LIMITED PARTNERSHIP
Paragon Capital Management LLC,
General Partner
By: /s/ Martin S. Albert
---------------------------
Martin S. Albert
Director
</TABLE>
31
<PAGE> 1
Exhibit 4
Form of Subscription Agreement
SUBSCRIPTION AGREEMENT
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Sixth Floor
El Segundo, California 91403
USA
Paragon Capital Management LLC,
as Placement Agent
P.O. Box 309
Ugland House
South Church Street
George Town
Grand Cayman
Cayman Islands
British West Indies
Dear Sirs:
The undersigned (hereinafter the "Purchaser"), pursuant to an offering (the
"Offering") of securities pursuant to a Confidential Private Placement
Memorandum (the "Memorandum") dated March 4, 1996: (a) hereby subscribes for the
number of shares of common stock, par value $0.0001 per share (the "Shares") of
International Meta Systems, Inc., a Delaware corporation (the "Company"), at a
purchase price of $1.00 per Share, and for the aggregate purchase price set for
in Section 4(b) hereof (the "Purchase Price"), payable to the Company, subject
to the terms and conditions of this Subscription Agreement, and (b) requests
that such Shares be registered in the name set forth below. All references to
Dollars herein are to lawful currency of the United States of America.
1. THE PURCHASER HEREBY ACKNOWLEDGES, REPRESENTS AND AGREES THAT:
(a) The Purchaser understands and acknowledges that the Shares have not
been and, subject to paragraph 1(d) below, will not be registered under the
United States Securities Act of 1933, as amended (the "Securities Act") or any
other applicable securities law, and may not be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless either registered pursuant
to, or in a transaction exempt from registration under, the Securities Act or
any other applicable securities law.
(b) (i) The Purchaser is an "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act (an
"Accredited Investor") that is purchasing for its own account or that is a bank
(as defined in Section
<PAGE> 2
3(a)(2) under the Securities Act) or a savings and loan association or other
institution (as described in Section 3(a)(5)(A) under the Securities Act) that
is purchasing as a fiduciary for the account of one or more institutional
investors (each an "institutional account") or (ii) the Purchaser is an
Accredited Investor other than a bank (as so defined) or a savings and loan
association or other institutions (as so described) that is purchasing for one
or more institutional accounts, each of which is an Accredited Investor. The
Purchaser has such knowledge and experience in financial and business matters
that the Purchaser is capable of evaluating the merits and risks of purchasing
the Shares. The Purchaser is aware that the Purchaser (or any institutional
account) may be required to bear the economic risk of an investment in each
Share for an indefinite period of time, and the Purchaser (or such
institutional account) is able to bear such risk for an indefinite period.
(c) The Purchaser is purchasing the Shares for the Purchaser's own account,
or for one or more institutional accounts for which the Purchaser is acting as a
fiduciary or agent, in a minimum amount of $100,000 for each such account, in
each case for investment, and not with a view to, or for offer or sale in
connection with, any distribution thereof, subject to the disposition of the
Purchaser's property or the property of such institutional account or accounts
being at all times within the Purchaser's or their control and subject to the
Purchaser's or their ability to resell such Shares pursuant to an exemption from
registration available under the Securities Act. The Purchaser agree on the
Purchaser's own behalf and on behalf of any institutional account for which the
Purchaser is purchasing Shares to offer, sell or otherwise transfer such Shares
only in minimum amounts of $100,000 and, prior to the date which is three years
after the later of the original issue date of such Shares and the last date on
which the Company or any affiliate of the Company was the beneficial owner of
such Shares (or any predecessor of such Shares), only (i) to the Company, (ii)
pursuant to a registration statement which has been declared effective under the
Securities Act or (iii) pursuant to an exemption from the registration
requirements of the Securities Act as confirmed in an opinion of counsel
satisfactory to the Company, provided however, that the Company agrees that it
will not require opinions of counsel for transactions made pursuant to Rule 144
or for transactions by and between non-U.S. Persons (as defined in U.S.
securities laws) except in unusual circumstances, subject in each of the
foregoing cases to any requirement of law that the disposition of the
Purchaser's property or of the property of such investor account or accounts be
at all times within the Purchaser's control. In order to effectuate the
foregoing restrictions on resales and other transfers of the Shares, if any
resale or other transfer is proposed to be made (other than to the Company or
pursuant to an effective registration statement) prior to three years after the
later of the original issue date and the last date on which the Company or any
affiliate of the Company was the beneficial owner of any such Shares (or any
predecessor of such Shares) (i)(A) the Purchaser shall deliver to the Company's
transfer agent a Transferor Representation Statement substantially in the form
of Annex "A" hereto, in the case of a transfer proposed to be made in compliance
with an exemption from the registration requirements of the Securities Act and
(B) the transferee shall deliver to the Company's transfer agent a Transferee
Representation Statement, substantially in the form of Annex "B" hereto, in the
case of a transfer proposed to be made in compliance with an exemption
<PAGE> 3
from the registration requirements of the Securities Act, or (ii) the Purchaser
shall provide the Company with an opinion of counsel satisfactory to the
Company to ensure compliance with the provisions of the Securities Act.
(d) The Purchaser acknowledges that the Purchaser will have the benefit of
certain registration rights with respect to the Shares, as described in Annex
"C" hereto, and in the Memorandum under the heading "Description of the
Company's Securities."
(e) The Purchaser acknowledges that the Company and others will rely upon
the truth and accuracy of the foregoing acknowledgments, representations and
agreements and agrees that if any of the acknowledgments, representations or
warranties made by the Purchaser are no longer accurate, the Purchaser shall
promptly notify the Company. If the Purchaser is acquiring any Shares as a
fiduciary or agent for one or more institutional accounts, the Purchaser
represents that the Purchaser has sole investment discretion with respect to
each such account and that the Purchaser has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each such account.
(f) The Purchaser shall deliver the Purchase Price in cash to the account
of the Company at Chemical Bank, London Branch, Account No. 187819-001. All
checks shall be made payable to "International Meta Systems, Inc." For purposes
of the delivery of the Purchase Price only, the terms of this Subscription
Agreement shall govern and shall supersede the terms set forth in the
Memorandum.
(g) The Purchaser has been furnished and has carefully read the Memorandum
relating to the securities offered thereby and the documents and other
materials which are exhibits thereto or enclosed therewith or otherwise
supplied to the Purchaser, and understands the risks and other considerations
relating to a purchase of the securities, including the risks set forth under
the Section captioned "Risk Factors" in the Memorandum, which is incorporated
herein by this reference.
(h) The principal amount of the securities subscribed for by the Purchaser
as set forth herein does not exceed ten percent (10%) of the Purchaser's net
worth. The Purchaser shall provide the Company such documentation as the Company
shall reasonably request to establish the foregoing representation.
(i) The Purchaser has either a pre-existing personal or business
relationship with the Company and its officers, directors and controlling
persons or by reason of the Purchaser's business or financial expertise has the
capacity to protect the Purchaser's own interest in connection with this
transaction.
(j) The Purchaser has reached the age of majority (if an individual)
according to the laws of the country in which the Purchaser resides and has
adequate means of providing for the Purchaser's current needs and possible
personal contingencies and has
<PAGE> 4
need for only limited liquidity of this investment. The Purchaser's commitment
to liquid investments is reasonable in relation to the Purchaser's net worth.
(k) The Purchaser is not relying on the Memorandum or the references to
any legal opinion in the Memorandum with respect to the tax and other economic
considerations relating to this investment. In regard to such considerations,
the Purchaser relied on the advice of, or has consulted with, the Purchaser's
own personal tax, investment or other advisors.
(l) No oral or written representations have been made or oral or written
information furnished to the Purchaser in connection with the Offering of the
securities that are in any way inconsistent with the information stated in the
Memorandum.
(m) If the Purchaser is a corporation, the Purchaser is duly and validly
organized, validly existing and in good tax and corporate standing as a
corporation under the laws of the jurisdiction of its incorporation with full
power and authority to purchase the securities to be purchased by it and to
execute and deliver this Subscription Agreement.
(n) If the Purchaser is a partnership, the representations, warranties,
agreements and understandings set forth above are true with respect to all
partners in the Purchaser (and if any such partner is itself a partnership, all
persons holding an interest in such partnership, directly or indirectly,
including through one or more partnerships), and the person executing this
Subscription Agreement has made due inquiry to determine the truthfulness of
the representations and warranties made hereby.
(o) If the Purchaser is purchasing in a representative or fiduciary
capacity, the above representations and warranties shall be deemed to have been
made on behalf of the person or persons for whom the Purchaser is so purchasing.
(p) Within five (5) days after receipt of a request from the Company, the
Purchaser will provide such information and deliver such documents as may
reasonably be necessary to comply with any and all laws and ordinances to which
the Company is subject.
(q) The Purchaser or the Purchaser's professional adviser, if any, has
been granted the opportunity to conduct a full and fair examination of the
records, documents and files of the Company, to ask questions of and receive
answers from representatives of the Company, its officers, directors, employees
and agents concerning the terms and conditions of this offering, the Company
and its business and prospects, and to obtain any additional information which
the Purchaser or the Purchaser's professional adviser deems necessary to verify
the accuracy of the information received.
(f) The securities were not offered to the Purchaser through an
advertisement in printed media of general and regular circulation, radio or
television.
<PAGE> 5
(s) The Purchaser has relied completely on the advice of, or has consulted
with, the Purchaser's own personal tax, investment, legal or other advisors and
has not relied on the Company or any of its affiliates, officers, directors,
attorneys, accountants or any affiliates of any thereof and each other person,
if any, who controls any thereof, within the meaning of Section 15 of the
Securities Act, except to the extent such advisors shall be deemed to be as
such.
2. THE PURCHASER IS AWARE THAT:
(a) An investment in the Company involves certain risks, including the
potential loss by the Purchaser of interest on the Purchaser's investment
herein, and the Purchaser has taken full cognizance of and understand all of
the risk factors related to the purchase of the securities, including, but not
limited to, those set forth in the Memorandum. The Purchaser recognizes that
the Memorandum does not purport to contain all the information which would be
contained in a registration statement under the Securities Act.
(b) No governmental agency has passed upon the securities or made any
finding or determination as to the fairness of this transaction.
(c) There is currently a limited market for the Company's securities and
that such market may not be sustained at the time the Purchaser intends to
resell the Shares or at any time in the future. Although it is contemplated
that the securities may be registered, there can be no assurance that any
registration statement will ever be filed with respect to such securities, or,
even if filed, that it will become effective. Therefore, the Purchaser may bear
the economic risk of the Purchaser's investment for an indefinite period of
time.
(d) The Company has full right in its sole direction to accept or reject
the Purchaser's subscription, provided that, if the Company decides to reject
such subscription, the Company must do so promptly and in writing. In the case
of rejection, any cash payments and copies of all executed Subscription
Documents will be promptly returned (without interest or deduction in the case
of cash payments). In the case of acceptance, ownership of the number of
securities being purchased hereby will pass to the Purchaser upon issuance of
the securities subscribed for, as further described in the Memorandum. The
securities subscribed for by the Purchaser may be apportioned as set forth in
the Memorandum under the caption "Terms of the Offering."
(e) Further, the Purchaser agrees to pay a separate fee (the "Fee") paid
to and solely for the account of Paragon Capital Management LLC (the "Placement
Agent") of $0.055 per Share, pursuant to the terms of a separate agreement
between the Purchaser and the Placement Agent in accordance with the terms and
conditions of this Subscription Agreement. In no event shall the Fee be
attributed to the purchase price for the Shares or entitle the Purchaser to
acquire any additional Shares other than the number of Shares set
<PAGE> 6
forth in Section 4(b) hereof, in accordance with the terms and conditions of
this Subscription Agreement.
3. THE PURCHASER HEREBY AGREES:
(a) To indemnify and hold harmless the Company as well as the officers,
directors, partners, attorneys, accountants and affiliates of any thereof and
each other person, if any, who controls any thereof, within the meaning of
Section 15 of the Securities Act, against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all
expenses reasonably incurred in investigating, preparing or defending against
any litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any allegedly false representation or warranty or breach of or
failure by the Purchaser to comply with any covenant or agreement made by the
Purchaser herein or in any other document furnished by the Purchaser to any of
the foregoing in connection with this transaction; provided, however that in no
event shall the indemnity under this Subsection 3(a) exceed the Purchase Price
paid by the Purchaser.
(b) That, subject to the provisions of any applicable governmental
securities laws providing for the refund of subscription amounts submitted by
the Purchaser, if applicable, the subscription hereunder is irrevocable and that
the Purchaser is not entitled to cancel, terminate or revoke this Subscription
Agreement and that this Subscription Agreement shall survive the Purchaser's
death or disability of and shall be binding upon and inures to the Purchaser's
benefit, and the Purchaser's executors, administrators, successors, legal
representatives and assigns. If the Purchaser is more than one person, the
Purchaser's obligations hereunder shall be joint and several, and the
agreements, representations, warranties and acknowledgments herein contained
shall be deemed to be made by and be binding upon each such person and each such
person's heirs, executors, administrators, successors, legal representatives and
assigns.
(c) Neither this Subscription Agreement nor any provisions hereof shall be
waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any such waiver, modification, discharge or
termination is sought.
(d) Any notice, demand or other communication which any party hereto may be
required or may elect go give anyone interested hereunder shall be sufficiently
given if: (a) deposited, postage prepaid, in a United States mail box, stamped
registered or certified mail, return receipt requested, and addressed, in the
case of the Company, to the address given in the preamble hereof, and, if to the
Purchaser, to the address set forth hereinafter; or (b) delivered personally at
such address.
(e) This Subscription Agreement contains the entire agreement of the
parties with respect to the subject matter hereof, and there are no
representations, warranties, covenants or other agreements except as stated or
referred to herein.
<PAGE> 7
(f) Each provision of this Subscription Agreement is intended to be
severable from every other provision and the invalidity or illegality of the
remainder hereof.
(g) This Subscription Agreement is not transferable or assignable by the
Purchaser.
(h) This Subscription Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, United States of America.
(i) This Subscription Agreement may not be assigned by the Purchaser
without the prior written consent of the Company, and may not be amended or any
provision hereof waived or modified except by an instrument in writing signed by
the Company and the Purchaser.
(j) This Subscription Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement.
4. SUBSCRIPTION INFORMATION:
(a) The Purchaser hereby subscribes for Shares in the amounts, and tenders
payment in cash in consideration therefor, as further set forth below. Please
make checks delivered in respect of subscriptions hereunder payable to
"International Meta Systems, Inc." The Closing of the Subscription Agreement
shall take place only upon delivery of the Purchase Price against the Shares,
and the acceptance by the Company of this Subscription Agreement in accordance
with the terms and conditions set forth in the Memorandum.
(b) Number of Shares subscribed for: _______________________
__________ Shares against payment in cash in the amount of
$____________, representing $1.00 per Share.
(c) If the Shares hereby subscribed for are to be owned by more than one
person in any manner, the Purchaser understands and agrees that all of the
co-owners of such Shares must sign this Subscription Agreement.
<PAGE> 8
IN WITNESS WHEREOF, the undersigned Purchaser does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that the Purchaser has by the following signature(s) executed this Subscription
Agreement this_____ day of__________________, 1996, at_________________________
___________________________________
Name of Purchaser
___________________________________
Signature of Purchaser
___________________________________
Name of Co-Purchaser (if any)
___________________________________
Signature of Co-Purchaser (if any)
SUBSCRIPTION RECEIVED AND ACCEPTED at El Segundo, California.
INTERNATIONAL META SYSTEMS, INC.
By: __________________________ Date: _______________, 1996
George W. Smith, President
<PAGE> 9
TYPE OF OWNERSHIP
(Check One)
___________ Individual (One signature required)
___________ Joint Tenants with Right of Survivorship (Both parties must
sign)
___________ Tenants in Common (Both parties must sign)
___________ Community Property (One signature required if interest held in
one name, i.e., managing spouse, two signatures required if
interest held in both names)
___________ Trust
___________ Corporation
___________ Partnership
_____________________________________________________________________
Please print here the exact name (registration) Purchaser desires
for securities
<PAGE> 10
SIGNATURE PAGE
FOR INDIVIDUAL PURCHASERS
PURCHASER #1 PURCHASER #2
_____________________________________ ______________________________________
Signature Signature
_____________________________________ ______________________________________
Social Security Number Social Security Number
_____________________________________ ______________________________________
Print or Type Name Print or Type Name
Residence Address and Residence Address and
Telephone Number: Telephone Number:
_____________________________________ ______________________________________
_____________________________________ ______________________________________
_____________________________________ ______________________________________
_____________________________________ ______________________________________
Executed at: Executed at:
_____________________________________ ______________________________________
City City
_____________________________________ ______________________________________
State State
this _______ day of __________, 19__. this _______ day of ___________, 19__.
Mailing Address and Telephone Number,
if different:
__________________________________________________
__________________________________________________
<PAGE> 11
SIGNATURE PAGE
FOR CORPORATE PURCHASERS
________________________________________________________________________________
Name of corporation (please print or type)
By______________________________________________________________________________
(Signature of authorized agent)
Name of Authorized Agent and Title______________________________________________
Taxpayer Identification No.:____________________________________________________
Address and Telephone Number of Principal Corporate Offices:
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
Mailing Address and Telephone Number, if different:
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
Executed at ___________, __________, ___________ this ___ of ____________, 19__.
City State Country
<PAGE> 12
SIGNATURE PAGE
FOR PARTNERSHIP PURCHASERS
______________________________________________________________________________
Name of partnership (please print or type)
By ___________________________________________________________________________
Signature of general partner
By ___________________________________________________________________________
Name of General Partner (please print or type)
By ___________________________________________________________________________
Signature of additional general partner
(if required by Partnership Agreement)
By ___________________________________________________________________________
Name of General Partner (please print or type)
Taxpayer Identification No.: _________________________________________________
Principal Business Address and Telephone Number: _____________________________
______________________________________________________________________________
______________________________________________________________________________
Mailing Address and Telephone Number, if different: __________________________
______________________________________________________________________________
Attention: ___________________________________________________________________
Executed at: ________, ________, ___________ this ___ of ______________, 19___,
City State Country
<PAGE> 13
SIGNATURE PAGE
FOR TRUST PURCHASES
________________________________________________________________________________
Name of Trust (please print or type)
________________________________________________________________________________
Name of Trustee (please print or type)
________________________________________________________________________________
Date Trust was formed
By:_____________________________________________________________________________
Trustee's Signature
Taxpayer Identification No.:____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Executed at ___________, __________, ___________ this ____ of __________, 19___.
City State Country
<PAGE> 14
Annex A
TRANSFEROR REPRESENTATION STATEMENT
<TABLE>
<S> <C>
TRANSFEROR : _____________________________
TRANSFEREE : _____________________________
COMPANY : International Meta Systems, Inc.
STOCK : Common Stock
AMOUNT : _______ shares (the "Shares")
PRICE : _______
DATE : _______________________
</TABLE>
In connection with the transfer of the above-listed Shares, the Transferor
represents and warrants to the Company as follows:
5. Transferor understands that the transfer of the Shares contemplated
hereby is being made pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended, of the United States of
America (the "Securities Act").
6. Transferor did not engage in any directed selling efforts (as defined
in the United States securities laws) in connection with this transfer of
Shares.
A directed selling effort is any activity undertaken for the purpose
of, or that could reasonably be expected to have the effect of, conditioning
the market in the United States (U.S.) for any of the Shares being offered.
Directed selling efforts include, but are not limited to the placement of an
advertisement, other than in strict compliance with U.S. law, or foreign law, in
a publication with a general circulation in the United States that refers to
the offering of securities being made.
<PAGE> 15
7. If Transferor is a dealer (as defined in Section 2(12) of the
Securities Act), or other person receiving a selling concession, fee, or other
remuneration in respect of the Shares, and the transfer of Shares contemplated
hereby is made to a known dealer, or other person receiving a selling
concession, fee, or other remuneration in respect of the Shares, then the
Transferor affirms that Transferor has sent Transferee a notice that these
Shares can only be offered and sold pursuant to a registration statement or
exemption available under the Securities Act.
TRANSFEROR:
________________________________________
<PAGE> 16
Annex B
TRANSFEREE REPRESENTATION STATEMENT
TRANSFEROR : _____________________________________
TRANSFEREE : _____________________________________
COMPANY : International Meta Systems, Inc.
STOCK : Common Stock
AMOUNT : ___________ shares (the "Shares")
PRICE : ___________
DATE : ________________________________
In connection with the transfer of the above-listed Shares, the Transferee
represents and warrants to the Company as follows:
8. Transferee understands that the Shares have not been registered
pursuant to Section 5 of the Securities Act of 1933, as amended, of the United
States of America (the "Securities Act"), in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act and/or Regulation D
of the Securities and Exchange Commission.
9. Transferee understands that securities acquired overseas may be resold
in the United States (U.S.) only if they are registered under the Securities
Act or an exemption from registration is available.
10. Transferee is purchasing the Shares for its own account, or for one or
more institutional accounts for which Transferee is acting as a fiduciary or
agent, in a minimum amount of US$100,000 for each such account, in each case for
investment, and not with a view to, or for offer or sale in connection with, any
distribution thereof, subject to the disposition of Transferee's property or the
property of such institutional account or accounts being at all times within
Transferee's or their control and subject to Transferee's or their ability to
resell such Shares pursuant to an exemption from registration available under
the Securities Act. Transferee agrees on its own behalf and on behalf of any
institutional account for which Transferee is purchasing Shares to offer, sell
or otherwise transfer such Shares only in minimum amounts of US$100,000 and,
prior to the date which is three years after the later of the original issue of
such Shares and the last date on which the Company or any affiliate of the
Company was the beneficial owner of the Shares.
<PAGE> 17
(or any predecessor of such Shares), only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act or (c) pursuant to an exemption from the registration requirements of the
Securities Act as confirmed in an opinion of counsel satisfactory to the
Company, provided however, that the Company agrees that it will not require
opinions of counsel for transactions made pursuant to Rule 144 or for
transactions by and between non-U.S. Persons (as defined in U.S. securities
laws) except in unusual circumstances, subject in each of the foregoing cases to
any requirement of law that the disposition of its property or of the property
of such investor account or accounts be at all times within Transferees control.
In order to effectuate the foregoing restrictions on resales and other transfers
of the Shares, if any resale or other transfer is proposed to be made (other
than to the Company or pursuant to an effective registration statement) prior to
three years after the later of the original issue date and the last date on
which the Company or any affiliate of the Company was the beneficial owner of
any such Shares (or any predecessor of such Shares) (a)(i) Transferee shall
deliver to the Company's transfer agent a Transferor Representation Statement
substantially in the form of Annex A attached to the subscription agreement
entered into in connection with the original purchase of the Shares in the case
of a transfer proposed to be made in compliance with an exemption from the
registration requirements of the Securities Act and (ii) the recipient of the
Shares shall deliver to the Company's transfer agent a Transferee Representation
Statement substantially in the form of Annex B attached to the subscription
agreement entered into in connection with the original purchase of the Shares
in the case of a transfer proposed to be made in compliance with an exemption
from the registration requirements of the Securities Act, or (b) Transferee
shall provide the Company with an opinion of counsel satisfactory to the
Company to ensure compliance with the provisions of the Securities Act.
11. Transferee acknowledges that the Company and others will rely upon the
truth and accuracy of the foregoing acknowledgments, representations and
agreements and agrees that if any of the acknowledgments, representations or
warranties made by Transferee are no longer accurate, Transferee shall promptly
notify the Company. If Transferee is acquiring any Shares as a fiduciary or
agent for one or more institutional accounts, Transferee represents that it has
sole investment discretion with respect to each such account and that it has
full power to make the foregoing acknowledgments, representations and agreements
on behalf of each such account.
12. Transferee acknowledges that Transferor, not the Company, is
transferring these Shares and that any information Transferee may have received
in connection with this transaction was provided to Transferee by Transferor,
for benefit of Transferor, and not by or for the Company. Transferee further
acknowledges that the sale of these Shares was negotiated, at arm's length,
between the Transferor and the Transferee, without any assistance from the
Company.
13. Transferee authorizes the Company and his agents to place, on each
certificate for shares which he may acquire, a legend stating that such Shares
has not been registered under the Act or any U.S. state securities law and
setting forth the aforementioned restrictions on transfer.
TRANSFEREE:
___________________________
<PAGE> 18
Annex C
REGISTRATION RIGHTS
The following registration rights are granted to the Purchasers of the
Shares in the Offering. Any terms not defined hereunder shall have the same
meaning as in the Memorandum.
1. DEMAND REGISTRATIONS, (a) GENERAL. (i) Since the Company has received
$2,000,000 is payment for the Shares issued pursuant to the Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated January 26, 1996, between the
Company and Paragon, if, on or before April 15, 1996, the Company has received
an additional $2,000,000 from the sale of up to an additional 8,000,000 Shares
pursuant to the offering of Shares under the terms and conditions provided in
the Memorandum, then, during the period commencing July 31, 1996 and
terminating April 30, 1998 (the "Demand Registration Period"), Paragon and the
holders purchasing in the Offering shall have the right, upon the written
request of the holders of no less than twenty-five percent (25%) of the
aggregate of the Shares and the shares of Common Stock purchased pursuant to
the Offering (the "PP Shares"), that the Company effect two registrations of the
Shares and the PP Shares (collectively, the "Registrable Shares"), under and
pursuant to the Securities Act, owned by such holders and specifying the
intended method of disposition thereof. The Company shall give prompt written
notice (in any event within ten (10) business days after its receipt of notice
of any exercise of a Demand Registration) to the other holders of Registrable
Shares of its intention to effect such a registration and shall use its best
efforts to include in such registration all of the Registrable Shares with
respect to which the Company receives from any of such holders a written
request for inclusion therein within fifteen (15) days after the stockholder's
receipt of the Company's notice, which request shall specify the number of the
Registrable Shares to be disposed of by the requesting holder and the intended
method of disposition thereof. All registrations requested pursuant to this
Section 1.1(a) are referred to herein as "Demand Registrations."
(b) NUMBER OF DEMAND REGISTRATIONS. Subject to the provisions of Section
1(a), the holders of the Registrable Shares shall be entitled, collectively, to
request two Demand Registration during the Demand Registration Period.
Transferees of the Registrable Shares, other than such persons who shall have
been issued the Registrable Shares pursuant to the terms of this Agreement,
shall have the right to participate in any such registration statement and
shall be entitled to exercise any of the rights provided for in this Section 1.
(c) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall effect a
Demand Registration pursuant to Section 1(a) in connection with an underwritten
offering by the holders of the Registrable Shares, no securities other than the
Registrable Shares shall be included among the securities covered by such
registration unless (i) the
<PAGE> 19
managing underwriter of such offering shall have advised the Company in writing
that the inclusion of such other securities would not adversely affect such
offering or (ii) such holders of Registrable Shares to be registered therein
shall have consented in writing to the inclusion of such other securities.
(d) REGISTRATION STATEMENT FORM. Demand Registration shall be effected as
soon as practicable following receipt of the holder's written request and shall
be on such appropriate registration form of the Commission (i) as shall be
selected by the Company and shall be acceptable to the requesting holder and
(ii) as shall permit the disposition of such Registrable Shares in accordance
with the intended method or methods of disposition specified in the request for
such registration. The Company agrees to include in any such registration
statement all information that, in the opinion of counsel to the holder so
requesting registration, or counsel to the Company, is required to be included.
(e) PRIORITY ON DEMAND REGISTRATIONS. In the event that the managing
underwriters of a requested Demand Registration advises the Company in writing
that in their opinion the number of Registrable Shares proposed to be included
in any such registration exceeds the number of securities which can be sold in
such offering, the Company shall include in such registration only the number of
Registrable Shares (PRO RATA in accordance with the number of Registrable
Shares requested by each holder to be included in such registration) which in
the opinion of such underwriters can be sold.
(f) PERMITTED INTERRUPTIONS. The Company may postpone (such postponement
is referred to herein as a "Permitted Interruption") for a reasonable period of
time (not to exceed ninety (90) days, which may not thereafter be extended) the
filing or the effectiveness of a registration statement for a Demand
Registration if, at the time it receives a request for such registration: (i)
the Company is engaged in any active program for repurchase of Common Stock
that is registered under the Securities Act and furnishes an Officer's
Certificate to that effect, (ii) the Company is conducting or about to conduct
an offering of Common Stock and the Company is advised by the investment banker
engaged by the Company to manage such offering that such offering would be
affected adversely by the registration so demanded and the Company furnishes an
Officer's Certificate to that effect, or (iii) the board of directors of the
Company shall determine in good faith that such offering will interfere with a
pending or contemplated financing, merger, acquisition, sale of assets,
recapitalization or other corporate action of the Company and the Company
furnishes an Officer's Certificate to that effect; PROVIDED, HOWEVER, that the
Company may not utilize the right mor than once in any twelve (12) month period.
After such Permitted Interruption the Company shall effect registration as
promptly as practicable without further request unless such request has been
withdrawn.
(g) SELECTION OF UNDERWRITERS. The holder of Registrable Shares requesting
registration shall have the right to select such investment banker(s) as shall
be reasonably acceptable to the Company to administer the offering for which a
Demand Registration is requested. Such holder(s) shall, in their sole
discretion, negotiate the terms
<PAGE> 20
of the underwriters' fees and expenses, the underwriting discounts and
commissions and the transfer taxes to be paid by such holder.
2. PIGGYBACK REGISTRATIONS. (a) GENERAL. Whenever the Company proposes
to register any shares of Common Stock under the Securities Act (other than a
registration on Exchange Act Form 10 or solely for shares to issued in
connection with any employee benefit plan or a merger, consolidation or other
business combination registered on Form S-4, or any successor form thereto) and
the registration form to be used may be used for the registration of
Registrable Shares (a "Piggyback Registration"), the Company shall give prompt
written notice (in any event within ten (10) business days after its receipt of
notice of any exercise of other registration rights) to the holder of
Registrable Shares of its intention to effect such a registration and shall use
its best efforts to include in such registration all of the Registrable Shares
with respect to which the Company receives from any of such holders a written
request for inclusion therein within fifteen (15) days after the stockholder's
receipt of the Company's notice, which request shall specify the number of the
Registrable Shares to be disposed of by the requesting holder and the intended
method of disposition thereof. If the Company elects, prior to effectiveness,
not to proceed with a primary registration of its Common Stock, it shall not be
obligated to register any Registrable Shares.
(b) PRIORITY ON PRIMARY REGISTRATION. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company and the managing
underwriter(s) of such offering advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can reasonably be sold in such offering, then the
Company shall include in such registration (i) first, the securities that the
Company proposes to sell, (ii) second, the Registrable Shares, along with the
shares of the Company shareholders who have rights to participate in such
registration, which rights were in existence prior to the date of this
Agreement, which request to be included therein (PRO RATA in accordance with
the number of Registrable Shares, and other shares having the right to
participate in the registration, as are requested by each holder to be included
in such registration), and (iii) third, other securities requested to be
included in such registration. If the managing underwriter of such offering
subsequently advises the Company in writing that the number of securities which
can be sold exceeds the number of securities included in the offering, the
Company shall include in the registration, first, the securities that the
Company proposes to sell and second, such Registrable Shares that the holder(s)
had originally requested to be included in the registration and third, such
other securities originally proposed for inclusion in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of the Company's
securities other than the holder(s) of Registrable Shares and the managing
underwriter(s) of such offering advise the Company in writing that in their
opinion the number of securities to be included in such registration exceeds
the number which can reasonably be sold in such offering then the Company shall
include in such registration (i) first, if such registration is
<PAGE> 21
being made on behalf of other stockholders of the Company exercising demand
registration rights, then the securities so requested to be included therein in
accordance with such demand registration rights, (ii) second, the Registrable
Shares requested to be included in such registration (PRO RATA in accordance
with the number of Registrable Shares requested by each holder to be included
in such registration) and (iii) third, other securities requested to be
included in such registration. If the managing underwriter of such offering
subsequently advises the Company in writing that the number of securities which
can be sold exceeds the number of securities included in the offering, the
Company shall include in the registration such additional securities that (i)
first, the holder(s) of Registrable Shares had originally requested be included
in the registration and (ii) second, others had originally proposed to include
in the registration.
(d) OTHER REGISTRATION. If: (i) the Company has previously filed a
registration statement with respect to any Registrable Shares pursuant to
Section 1(a) or 2(b) and (ii) such previous registration has not been
withdrawn or abandoned, the Company shall not file or cause to be effective
any other registration of any its equity securities of securities convertible
or exchangeable into or exercisable for its equity securities under the
Securities Act (except on Form S-8 or S-4 or any successor form), whether on
its own behalf or as the request of any holder of such securities, until a
period of at least three (3) months has elapsed from the effective date of such
previous registration.
(e) PIGGYBACK NOT A DEMAND REGISTRATION. Should a holder's participation
in a registration be pursuant to a Piggyback Registration in connection with:
(i) an underwritten primary registration on behalf of the Company as described
in Section 2(b) or (ii) an underwritten secondary registration on behalf of
holders of the Company securities other than holder(s) of Registrable Shares as
described in Section 2(c), then such participation shall not constitute a
Demand Registration for purposes of determining the number of Demand
Registrations to which holders of Registrable Shares are entitled pursuant to
Section 1(b).
3. EXPENSES OF DEMAND REGISTRATION. (a) All expenses allocable to the
registration of securities of the holder(s) to be registered pursuant to a
Demand Registration, other than underwriting discounts and commissions incurred
in connection with registrations, filings or qualifications pursuant to a
Demand Registration, including (without limitation) all registration, filing
and qualification fees, printer's and accounting fees, fees and disbursements
of counsel for the Company shall be borne equally and on a current basis by the
Company and the holders of the Registrable Shares; PROVIDED, HOWEVER, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to a Demand Registration if the registration request
is subsequently withdrawn at the request of the holders of a majority of the
Registrable Shares to be registered (in which case all participating holders
shall bear such expenses), unless the holders of a majority of the Registrable
Shares agree to forfeit their right to one demand registration pursuant to a
Demand Registration PROVIDED, FURTHER, HOWEVER, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the holders
at the time of their request and
<PAGE> 22
have withdrawn the request with reasonable promptness following disclosure by
the Company of such material adverse change, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
a Demand Registration.
(b) PAYMENT OF EXPENSES BY THE HOLDER(S). In addition to the expenses
referenced in subsection 3(a), the Holder(s) shall pay the underwriters' fees
and expenses, the underwriters' discount and commission and the commissions and
fees, if any, payable in respect of selling brokers, dealer managers or similar
securities industry professionals, fees and expenses of holder's counsel, and
transfer taxes allocable to the registration of the Holder(s) securities so
included in any Demand or Piggyback Registration pursuant to this Agreement.
4. EXPENSES OF PIGGYBACK REGISTRATION. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Shares with respect to the registrations pursuant to a Piggyback
Registration for each Holder (which right may be assigned), including (without
limitation) all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto, but excluding underwriter
discounts and commissions relating to the Registrable Shares.
5. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Shares pursuant to this Section 4.8 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities who, after such assignment or transfer, holds at least 500,000
shares of the Shares or the PP Shares (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalization),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement; and (c) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. For the purposes of determining the number
of Registrable Shares held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Shares by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
6. LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of
this Agreement, the Company shall not, without the prior written consent of the
holders of a majority of the outstanding Registrable Shares, enter into any
agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 4.8 of the Stock Purchase
Agreement unless under the terms of such agreement
<PAGE> 23
such holder or prospective holder may include such securities in any such
registration only to the extent that the including of such securities will not
reduce the amount of the Registrable Shares of the holders which is included,
or (b) to make a demand registration which could result in such registration
statement being declared effective within one hundred twenty (120) days of the
effective date of any registration effected pursuant to a Demand Registration
by the holders.
<PAGE> 1
Exhibit 5
Conformed Copy
January 26, 1996
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Sixth Floor
El Segundo, CA 90245
Attention: George W. Smith, President
Dear Mr. Smith:
Section 1. APPOINTMENT OF PLACEMENT AGENT. This letter is to confirm our
understanding that International Meta Systems, Inc. (the "Company") hereby
appoints Paragon Capital Management LLC as its exclusive placement agent (the
"Placement Agent") in connection with the proposed private placement (the
"Placement") of a minimum of Two Million (2,000,000) and a maximum of up to
Eight Million (8,000,000) shares of the Company's Common Stock (the "Shares") at
a purchase price of $1.00 per share. The Shares to be placed by the Placement
Agent shall not include the 2,000,000 shares of the Company's Common Stock to be
purchased by Paragon Limited Partnership ("Paragon Limited") pursuant to a Stock
Purchase Agreement by an between the Company and Paragon Limited. On the basis
of the representations and warranties contained herein, but subject to the terms
and conditions set forth herein, the Placement Agent agrees to use its best
efforts to solicit and receive offers to purchase the Shares at the price of
$1.00 per Share on the terms and conditions set forth in the definitive
securities purchase agreement substantially on the terms as set forth in EXHIBIT
A hereto (the "Purchase Agreement") between the Company and each purchaser (the
"Purchaser") of the Shares or at such other price and terms to which the Company
and the Placement Agent mutually agree.
Section 2. FEES AND EXPENSES. The Placement Agent will receive no
placement fee from the Company from the sale of the Shares to each Purchaser.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Placement Agent that:
a. the representations and warranties of the Company contained in each
Purchase Agreement will be true and correct as of each Closing;
b. the Private Memorandum dated January ___, 1996 relating to the
offering of the Shares and prepared by the Company (the
<PAGE> 2
"Memorandum") does not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Company agrees to advise the Placement Agent immediately of the
occurrence of any event or any other change known to the Company which results
in the Memorandum containing an untrue statement of a material fact or omitting
to state of material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing the representations and warranties set forth in
this paragraph (b) do not apply to statements in the Memorandum based upon
information relating to the Placement Agent furnished to the Company in writing
by the Placement Agent for use therein;
c. the Company has all requisite corporate power and authority to
execute and perform this agreement and the Purchase Agreements. All corporate
action necessary for the authorization, execution, delivery and performance of
this agreement and the Purchase Agreement have been taken. This agreement and
each Purchase Agreement constitute a valid and binding obligation of the
Company, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally, to general equitable principles and to limitations on the
enforceability of the indemnification provisions attached hereto as Exhibit B;
and
d. the execution and performance of this agreement and each Purchase
Agreement by the Company and the offer and sale of the Shares in the Placement
will not violate any provision of the certificate of incorporation or bylaws of
the Company, any material provisions of any agreement or other instrument to
which the Company is a party or by which it is bound the termination of which
would have a material adverse effect on the Company or, to the knowledge of the
Company, any applicable law, rule or regulation. Any approvals, governmental
and private necessary to consummate the Placement will be obtained by the
Company prior to the Closing, except where the failure to obtain any such
approval would not have a material adverse effect on the transaction
contemplated by this agreement.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT. The
Placement Agent represents and warrants to the Company that:
a. There is not now pending or threatened against the Placement Agent
any action or proceeding of which the Placement Agent has been advised, either
in any court of competent jurisdiction, before the Securities and Exchange
Commission or before any state securities commission, concerning the Placement
Agent's activities as a broker or dealer.
b. In the event any action or proceeding of the type referred to in
paragraph (a) above shall be instituted or threatened against the Placement
Agent at any time prior to the Closing Date or, in the event there shall be
filed by or against the
2
<PAGE> 3
Placement Agent in any court, pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for reorganization
or for the appointment of a receiver or trustee of its assets or if the
Placement Agent makes an assignment for the benefit of creditors, the Company
shall have the right, on three (3) days' written notice to the Placement Agent,
to terminate this letter agreement without any liability to the Placement Agent
of any kind.
c. In offering the Shares, the Placement Agent has not offered any of the
Shares for sale to, or solicited any offers to subscribe for or buy any Shares
from, any person on the basis of any written communications or documents
relating to the Company or the Shares, except on the basis of the Memorandum,
the Purchase Agreement, any agreement between the Purchaser and the Placement
Agent relating to the payment of any fees to the Placement Agent, the
agreements described in and attached as exhibits to, or referred to in and
distributed with, the Memorandum and Purchase Agreement, and any cover or
transmittal letter and any other written information satisfactory in form and
substance to the Company and counsel for the Company.
d. The Placement Agent will offer the Shares for sale, or solicit offers
to buy the Shares, or otherwise negotiate with any person with respect to the
Shares only in the following jurisdictions: (i) Norway, Sweden and the United
Kingdom, or (ii) such additional jurisdictions as to which the Company has
given its prior written consent.
Section 5. AGREEMENTS. The Company and the Placement Agent agree that:
a. subject to the accuracy of the representations and warranties made by
the Purchasers in the Purchase Agreement, the Company will take all necessary
steps to ensure that the offering and sale of the Shares are exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act");
b. the Company shall extend to all prospective Purchasers the opportunity,
prior to the Closing under such Purchasers' Agreement, to ask questions of, and
receive answers from, the Company concerning the Shares and the terms and
conditions of the offering thereof or to obtain any information that such
prospective Purchasers may consider necessary in making an informed investment
decision to the extent the Company possesses the same or can acquire it without
unreasonable effort or expense;
c. the Company hereby agrees that, without the Placement Agent's prior
written consent which consent shall not be unreasonably withheld, it will not
offer, sell, contract to sell or otherwise dispose of any shares of common
stock of the Company or any securities convertible into or exercisable or
exchangeable for such common stock on or before April 15, 1996, other than (i)
the Shares to be sold hereunder and to Paragon Limited, (ii) any shares of
common stock sold by the Company upon the exercise of an option issued under an
employee stock option plan or the conversion of
3
<PAGE> 4
any securities outstanding on the date hereof, (iii) any options or rights to
purchase common stock, or any shares of common stock issued upon exercise of
such options or rights, granted under the Company's stock option plans, and (iv)
any equity security of the Company held by existing shareholders of the Company
as of the date hereof, the offer or sale of which is facilitated in any way by
the Company;
d. the Memorandum, the Purchase Agreement and the documents contemplated
thereby, including but not limited to certain of the Company's filings with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), are the only documents that are to be delivered to
the prospective Purchasers by the Placement Agent or its agents in connection
with the offering of the Shares. Any requests for other documents or information
requested by a prospective Purchaser will be forwarded to the Company and the
Company shall be solely responsible for fulfilling such request; and
e. the Placement Agent will not make any representation to any person which
is different from the contents of the Purchase Agreement and the Memorandum
without the prior consent of the Company.
Section 6. CONDITIONS OF THE OBLIGATIONS OF THE PLACEMENT AGENT. The
obligations of the Placement Agent to use its best efforts to solicit and
receive offers to purchase the Shares hereunder are subject to the accuracy of
the representations and warranties of the Company contained herein, to the
performance and observance by the Company of all covenants and agreements
contained herein on its part to be performed and observed and to the following
additional conditions being satisfied.
a. the Company shall deliver to the Placement Agent a copy of each
officer's certificate delivered by the Company to a Purchaser pursuant to each
Purchase Agreement;
b. the Company shall deliver to the Placement Agent a copy of all other
materials provided to a Purchaser;
c. the Company shall deliver to the Placement Agent a letter from counsel
to the Company to the effect that the Placement Agent may rely on each opinion
of such counsel delivered in connection with the transactions contemplated by
each Purchase Agreement to the same extent as if such opinion or opinions had
been addressed to the Placement Agent;
d. the Company agrees that any reference to the Placement Agent or any
affiliate of the Placement Agent in any document, or any other release or
communication to any party outside the Company, is subject to the Placement
Agent's prior approval, which shall be given or subsequently confirmed in
writing. If the Placement Agent resigns its appointment or is terminated prior
to the dissemination of any such document or other release or commission, no
reference shall be made.
4.
<PAGE> 5
therein to the Placement Agent without the Placement Agent's prior written
permission; and
e. in connection with the Placement Agent's activities hereunder, the
Company agrees to furnish the Placement Agent with all information concerning
the Company that the Placement Agent reasonably deems appropriate and agrees to
provide the Placement Agent with appropriate access to the Company's
accountants, counsel, consultants and other appropriate agents and
representatives. The Company acknowledges that the Placement Agent may rely
upon the completeness and accuracy of information and data furnished to it by
the Company's officers, directors, employees, agents and representatives
without independent verification of such information and data or an appraisal
of the Company's assets.
Section 7. EXCLUSIVE APPOINTMENT. The Company shall not, directly or
indirectly (except through the Placement Agent), sell or offer to sell any of
the Shares or any substantially similar security during the term of the
Placement Agent's appointment.
Section 8. OFFERING OF SHARES. The Placement Agent agrees with the
Company that (i) it will not solicit offers for, or offer or sell, the Shares
by any form of general solicitation or general advertising within the meaning
of Section 4(2) of the Securities Act, and Rule 506 thereunder, and (ii) it
will solicit offers for Shares only from, and will offer Shares only to,
prospective Purchasers that it reasonably believes are "accredited investors"
within the meaning of Rule 501(a) promulgated under the Securities Act. The
Company reserves the right, in its sole discretion, to accept or reject any
Purchaser or subscription.
Section 9. INDEMNITY AND CONTRIBUTION. The Company and the Placement
Agent agree to the indemnification and contribution arrangements set forth in
EXHIBIT B hereto.
Section 10. REPRESENTATIONS, INDEMNITY AND AGREEMENTS TO SURVIVE. The
respective representations, warranties and indemnities set forth herein will
remain in full force and effect regardless of any investigation made by or on
behalf of the Placement Agent or the Company or any of the officers, directors
or controlling person referred to in EXHIBIT B hereto, and will survive
delivery of any payment for the Shares. The provisions of this Section and
Sections 3, 4, 8, 9, 11 and 12 hereof shall survive the termination or
cancellation of this agreement.
Section 11. TERMINATION. Except as set forth in Section 10 above and
except as is mutually agreed to in writing by the Company and the Placement
Agent, this Agreement shall terminate upon the earlier of (i) the sale of an
aggregate of 8,000,000 shares to the Purchasers, or (ii) April 15, 1996 (the
"Termination Date").
<PAGE> 6
Section 12. GOVERNING LAW. This agreement (including Exhibit B) shall be
governed by and construed in accordance with the internal laws of the State of
California.
Section 13. COUNTERPARTS: HEADINGS. This agreement may be signed in
counterparts with the same effect as if the signatures thereto were on the same
instrument. The headings of the Sections of this agreement have been inserted
for convenience of reference only and shall not be deemed a part of this
agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Placement Agent and the Company.
Very truly yours,
PARAGON CAPITAL
MANAGEMENT, LLC
By: /s/ Martin S. Albert
Title: Director
Accepted as of January 26, 1996
INTERNATIONAL META SYSTEMS INC.
By: /s/ George W. Smith
Title: President
6
<PAGE> 7
EXHIBIT A
TERMS OF SECURITIES PURCHASE AGREEMENTS
I. The Purchase Agreements to be entered into between the Company and each
Purchaser shall be on the terms and conditions as is mutually agreed upon by
the Company and the Placement Agent, and shall be substantially on the terms as
set forth in that certain Stock Purchase Agreement dated as of January 26, 1996
by and between the Company and Paragon Limited Partnership (the "Paragon
Agreement"); provided however that such Purchaser will not receive a right of
first refusal as set forth in Section 4.1 of the Paragon Agreement, and
provided further that such Purchase Agreements shall in no way restrict the
ability of the Purchasers to resell Shares in jurisdictions other than United
States so long as such resales are in compliance with the laws of such
jurisdiction.
<PAGE> 8
EXHIBIT B
This Exhibit B is attached to and incorporated by reference into a letter
agreement dated as of January 26, 1996 (the "Agreement"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned
to such terms in the Agreement.
The Company agrees to indemnify and hold harmless the Placement Agent and
its affiliates, and the respective directors, officers, agents and employees
of the Placement Agent and its affiliates and each other entity or person,
if any, controlling the Placement Agent or any of its affiliates within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended, (the Placement Agent and each such
entity or person being collectively referred to as a "Placement Agent Party")
from and against any losses, claims, liabilities, damages or expenses
(or actions in respect thereof) (i) relating to, arising out of or in
connection with the Placement, or (ii) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Purchase
Agreements, the Agreement, the Memorandum or the Company's filings with the
Securities and Exchange Commission, all as amended or supplemented, (including
but not limited to any documents deemed to be incorporated therein by
reference), or caused by any omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the foregoing indemnity agreement shall not apply to statements in the
Memorandum, Purchase Agreements or in the Agreement based upon information
relating to the Placement Agent furnished to the Company in writing by the
Placement Agent for use therein. The Company will reimburse any Placement Agent
Party for all expenses (including, without limitation, fees and disbursements
of counsel) incurred by such Placement Agent Party in connection with
investigating, preparing or defending any such action or claim, whether or not
in connection with pending or threatened litigation to which the Placement
Agent Party is a party, in each case, as such expenses are incurred or paid.
With respect to clause (i) above, the Company will not, however, be responsible
for any losses, claims, damages or liabilities (or expenses relating thereto)
that are finally judicially determined to have resulted from the bad faith or
gross negligence of any Placement Agent Party, or to the extent directly caused
by or primarily attributable to any acts or omissions of any Placement Agent
Party.
The Placement Agent agrees to indemnify and hold harmless the Company and
its affiliates, and the respective directors, officers, agents and employees
of the Company and its affiliates and each other entity or person, if any,
controlling the Company or any of its affiliates within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
of 1934, as amended, from and against any losses, claims, liabilities, damages
or expenses (or actions in respect thereof) to the same extent as the foregoing
indemnity from the Company to the Placement Agent Party, but only insofar as
such losses, claims, liabilities, damages or expenses (or actions in respect
thereof) are finally judicially determined to have resulted from the bad faith
<PAGE> 9
or gross negligence of any Placement Agent Party, or to the extent such losses,
claims, liabilities, damages or expenses are directly caused by or primarily
attributable to any acts or omissions of any Placement Agent Party.
Any party that proposes to assert the right to be indemnified under this
Agreement will, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Agreement, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Agreement unless, and only to the extend that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and if notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (4) the indemnifying party has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other charges
will be reimbursed, in such cases as the Company is the indemnifying party, by
the Company promptly as they are incurred. The Company will not, without the
prior written consent of the Placement Agent, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not the
3
<PAGE> 10
Placement Agent or any person who controls the Placement Agent within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party
to such claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of the Placement Agent and each
such controlling person from all liability arising out of such claim, action,
suit or proceeding. An indemnifying party will not be liable for any settlement
of any action or claim effected without its written consent (which consent will
not be unreasonably withheld).
In order to provide for just and equitable contribution in circumstances
in which the indemnification provided for in the foregoing paragraphs of this
Agreement is applicable in accordance with its terms but is found in a final
judgement by a court of competent jurisdiction (not subject to further appeal)
not to be enforceable even though the express provisions hereof provided for
indemnification in such case, then the Company and the Placement Agent will
contribute to the total losses, claims, liabilities, damages and expenses
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Company from persons other than the Placement Agent such as persons who
control the Company within the meaning of the Act or the Exchange Act, officers
of the Company and directors of the Company, who also may be liable for
contribution) to which the Company and either or the Placement Agent may be
subject in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Placement Agent on the
other. The relative benefits received by the Company on the one hand and the
Placement Agent on the other shall be deemed to be in the same proportion as
the total net proceeds from the Placement (before deducting expenses) received
by the Company bear to any fees received by the Placement Agent in connection
with the Placement. If, but only if, the allocation, provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the relative
fault of the Company, on the one hand, and the Placement Agent on the other,
with respect to the statements or omissions which results in such loss, claim,
liability, damage or expense, or action in respect thereof, as well as any
other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Placement Agent, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and the Placement Agent agree that it would not be just
and equitable if contributions pursuant to this Agreement were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, liability,
damages or expense, or action in respect thereof, referred to above in this
Agreement shall be deemed to include, for purpose of this Agreement, any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating
4
<PAGE> 11
or defending any such action or claim. Notwithstanding the provisions of this
Agreement, the Placement Agent shall not be required to contribute any amount
in excess of the portion of any fees received by it, and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Agreement,
any person who controls a party to this Agreement within the meaning of the Act
or the Exchange Act will have the same rights to contribution as that party,
and each officer of the Company will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Agreement, will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Agreement. No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
5
<PAGE> 1
Exhibit 6
Conformed Copy
SHAREHOLDERS AGREEMENT dated as of March 26, 1996 between and among each
of the parties named on the signature pages hereof under the heading
"Shareholders" (each, a "Shareholder" and, collectively, the "Shareholders").
WITNESSETH
WHEREAS, the Shareholders own the issued and outstanding shares of common
stock of International Meta Systems, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company"), described in Schedule
1 hereto;
WHEREAS, Paragon Limited Partnership, an exempted limited partnership
organized under the laws of the Cayman Islands ("Paragon"), purchased the
Shares owned by it pursuant to a Stock Purchase Agreement dated January 26,
1996 (the "Stock Purchase Agreement") between Paragon and the Company;
WHEREAS, each Shareholder (other than Paragon) purchased the Shares owned
by such Shareholder pursuant to a Subscription Agreement dated March 26, 1996
(each, a "SUBSCRIPTION AGREEMENT" and, collectively, the "Subscription
Agreements") between such Shareholder and the Company;
WHEREAS, the Shareholders believe it is in the best interests of the
Company and the Shareholders that provision be made for the continuity and
stability of the business and management of the Company and, to that end, the
Shareholders hereby set forth their agreement with respect to the Shares owned
by the Shareholders; and
WHEREAS, the execution and delivery of this Agreement is an obligation of
each Shareholder (other than Paragon) under the Subscription Agreement to which
such Shareholder is a party;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE> 2
ARTICLE 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
As used herein, the following terms shall have the following meanings:
"Agreement" shall mean this Shareholders Agreement.
"Company" shall have the meaning specified in the first recital hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind.
"Paragon" shall have the meaning specified in the second recital hereto.
"Paragon Capital Management" shall mean Paragon Capital Management LLC, an
exempted limited liability company organized and existing under the laws of the
Cayman Islands.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, trust, unincorporated organization or government (or
any agency, instrumentality or political subdivision thereof).
"Placement Agency Agreement" shall mean a letter agreement dated January
26, 1996 between Paragon Capital Management and the Company relating to the
appointment of Paragon Capital Management as the Company's exclusive placement
agent in respect of the Shares.
"Shareholder" shall have the meaning specified in the preamble hereto.
"Shares" shall mean the issued and outstanding shares of common stock of
the Company described in Schedule 1 hereto.
"Stock Purchase Agreement" shall have the meaning specified in the second
recital hereto.
"Subscription Agreement" shall have the meaning specified in the third
recital hereto.
"Termination Date" shall mean the earlier of:
(a) April 30, 1998;
2
<PAGE> 3
(b) without prejudice to Section 3.1 hereof, the date on which the board
of directors and the shareholders of the Company vote as required by law and by
the Company's certificate of incorporation and bylaws for the merger or
consolidation of the Company with any other company, or for the sale of all or
substantially all of the assets of the Company, or for its liquidation;
(c) the date on which all of the Shareholders party hereto agree in
writing to the termination of this Agreement; and
(d) the date on which one or more transfers of Shares has been effected
pursuant to Section 4.2 and, as a result thereof, the combined holdings of the
Shareholders have been reduced to ownership of less than 5% of the issued and
outstanding shares of common stock of the Company.
"Transfer" shall have the meaning specified in Section 4.1.
1.2 INTERPRETATION
Unless the context of this Agreement otherwise requires, the following
rules of interpretation shall apply to this Agreement:
(a) the singular shall include the plural, and the plural shall include
the singular;
(b) the words "hereof", "herein", "hereby", "hereto", and similar words
refer to this entire Agreement and not to any particular Section or any other
subdivision of this Agreement;
(c) a reference to any "Section", "Schedule" or "Exhibit" is a reference
to a specific Section, Schedule or Exhibit of this Agreement;
(d) a reference to any law, statute, regulation, notification or statutory
provision shall include any amendment, modification or re-enactment thereof,
any regulations promulgated thereunder from time to time, and any
interpretations thereof from time to time by any regulatory or administrative
authority, whether or not having the force of law;
(e) a reference to any agreement, instrument, contract or other document
shall include any amendment, amendment and restatement, supplement or other
modification thereto or replacement thereof; and
3
<PAGE> 4
(f) a reference to any Person shall include such Person's successors and
permitted assigns under any agreement, instrument, contract or other document.
ARTICLE II REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Shareholders
Each Shareholder hereby represents and warrants to the other Shareholders
that:
(a) such Shareholder (i) is, if not a natural Person, duly organized and
validly existing under the laws of its jurisdiction of organization; and (ii)
has the legal capacity, power and authority to execute, deliver and perform its
obligations under this Agreement, and the execution, delivery and performance
of this Agreement have been duly authorized by all necessary action on its part;
(b) this Agreement has been duly and validly executed and delivered by
such Shareholder, and constitutes such Shareholder's legal, valid and binding
obligation, enforceable in accordance with its terms;
(c) such Shareholder is the record holder and beneficial owner of the
shares of the Company's common stock described opposite such Shareholder's name
on Schedule 1 hereto;
(d) on the date hereof, the shares of the Company's common stock described
opposite such Shareholder's name on Schedule 1 hereto constitute all of the
Shares owned of record or beneficially by such Shareholder;
(e) such Shareholder has sole power of disposition and sole voting power
with respect to all of the shares of the Company's common stock described
opposite such Shareholder's name on Schedule 1 hereto, with no restrictions on
such rights, subject to applicable United States federal securities laws, the
Subscription Agreement or the Stock Purchase Agreement to which such
Shareholder is a party, as the case may be, and the terms of this Agreement;
(f) (i) no filing with, and no permit, authorization, consent or approval
of, any federal, national, state or local public body or authority is necessary
for the execution, delivery and performance of this Agreement by such
Shareholder (other than the filing of one or more amendments to the Schedule
13D filed with the United States Securities and Exchange Commission by
Paragon), and (ii) none of the execution, delivery or performance of this
Agreement by such Shareholder will (A) conflict with or result in a breach of
any of such Shareholder's constitutive or
4
<PAGE> 5
organizational documents, (B) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under, any note,
bond, mortgage, indenture, trust deed, license, contract, commitment,
arrangement, understanding, agreement or other instrument to which such
Shareholder is a party or by which such Shareholder or any of such
Shareholder's assets or revenues may be bound, or (C) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to such
Shareholder or any of such Shareholder's assets or revenues;
(g) such Shareholder's Shares and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by such
Shareholder, or by a nominee or custodian for the benefit of such Shareholder,
in each case, free and clear of all Liens, proxies, voting trusts or
agreements, understanding or arrangements whatsoever, except for any such Liens
or proxies arising hereunder; and
(h) no broker, investment banker, financial adviser or any other Person
(other than Paragon Capital Management in capacity as placement agent under the
Placement Agency Agreement) is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf
of such Shareholder.
ARTICLE III. AGREEMENT TO VOTE; PROXY
3.1 VOTING
Each Shareholder hereby severally agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, or in connection with any written consent of the shareholders
of the Company, such Shareholder shall vote (or cause to be voted) the Shares
held of record or beneficially owned by such Shareholder (a) in favor of the
election of Martin S. Albert (or another designee of Paragon) as a director of
the Company, (b) in favor of each of the actions contemplated by this
Agreement, the Placement Agency Agreement, the Stock Purchase Agreement and the
Subscription Agreements and any action required in furtherance hereof or
thereof, and (c) except as specifically requested by Paragon in advance,
against (i) any action or agreement which would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Placement Agency Agreement, the Stock Purchase Agreement
or any Subscription Agreement, or of any Shareholder hereunder, (ii) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or any subsidiary of the Company,
(iii) any sale, lease or transfer of a material amount of assets of the Company
or any subsidiary of the Company or any reorganization, dissolution or
liquidation of the
5
<PAGE> 6
Company or any subsidiary of the Company, (iv) any change in the majority
of the board of directors of the Company, (v) any material change in the present
capitalization of the Company (other than as contemplated by the Placement
Agency Agreement, the Stock Purchase Agreement and the Subscription Agreements),
(vi) any amendment of the Company's certificate of incorporation or bylaws,
(vii) any other material change in the Company's corporate structure or
business, or (viii) any other action which is intended, or could reasonably be
expected to impede, interfere with, delay, postpone, discourage or materially
adversely affect, the transactions contemplated by the Placement Agency
Agreement, the Stock Purchase Agreement or the Subscription Agreements or the
contemplated economic benefit of any of the foregoing.
3.2 PROXY
EACH SHAREHOLDER HEREBY GRANTS TO, AND APPOINTS, PARAGON AND ERIK C.T.
TILLER, ROLV E. NORDERHAUG AND PETER LORANGE, IN THEIR RESPECTIVE CAPACITIES AS
DIRECTORS OF PARAGON CAPITAL MANAGEMENT, THE SOLE GENERAL PARTNER OF PARAGON,
AND ANY INDIVIDUAL WHO SHALL THEREAFTER SUCCEED ANY OF THEM AS A DIRECTOR OF
PARAGON CAPITAL MANAGEMENT, AND ANY OTHER DESIGNEE OF PARAGON, EACH OF THEM
INDIVIDUALLY, SUCH SHAREHOLDER IRREVOCABLE (SO LONG AS SUCH SHAREHOLDER IS A
PARTY TO THIS AGREEMENT) PROXY AND ATTORNEY-IN-FACT, WITH FULL POWER OF
SUBSTITUTION, TO VOTE THE SHARES OWNED BY SUCH SHAREHOLDER AS INDICATED IN
SECTION 3.1 ABOVE. EACH SHAREHOLDER INTENDS THIS PROXY TO BE IRREVOCABLE
(SO LONG AS SUCH SHAREHOLDER IS A PARTY TO THIS AGREEMENT) AND COUPLED WITH AN
INTEREST AND WILL TAKE SUCH FURTHER ACTION AND EXECUTE SUCH OTHER INSTRUMENTS
AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES
ANY PROXY PREVIOUSLY GRANTED BY SUCH SHAREHOLDER WITH RESPECT TO SUCH
SHAREHOLDER'S SHARES.
3.3 SHAREHOLDER CAPACITY
No Person executing this Agreement who is, or who becomes during the term
hereof, a director of the Company makes any agreement or understanding herein in
his or her capacity as such director, and the agreements set forth herein shall
in no way restrict any director in the exercise of his or her fiduciary duties
as a director of the
<PAGE> 7
Company. Each Shareholder executes and delivers this Agreement solely in his,
her or its capacity as the record and beneficial owner of such Shareholder's
Shares.
3.4 OTHER ARRANGEMENTS
No Shareholder shall grant any proxy or enter into or agree to be bound by
any understanding or any voting trust with respect to any Shares, nor shall any
Shareholder enter into any shareholder agreement or arrangement of any kind
with any Person with respect to any Shares, in each case, inconsistent with any
provision of this Agreement (whether or not such agreement, understanding or
arrangement is with other Shareholders or holders of shares which are not bound
by this Agreement), including, without limitation, any agreement, understanding
or arrangement with respect to the acquisition, disposition or voting of
Shares, nor shall any Shareholder act, for any reason, as a member of a group
or in concert with any other Person in connection with the acquisition,
disposition or voting of Shares in any manner which is inconsistent with any
provision of this Agreement.
ARTICLE IV RESTRICTIONS ON DISPOSITION
4.1 TRANSFERS
No Shareholder shall, directly or indirectly, offer, sell, transfer,
assign, pledge, hypothecate or otherwise dispose of, or permit the offer, sale,
transfer assignment, pledge, hypothecation or other disposition of, or create,
incur or assume any Lien upon, or permit the creation, incurrence, assumption or
existence of any Lien upon, any of the Shares owned by it (any such action being
referred to herein as a "Transfer"), other than as permitted by Section 4.2.
4.2 PERMITTED TRANSFERS
The restriction on transfer of Shares set forth in Section 4.1 shall not
apply to the following transfers:
(a) a transfer of Shares to which all of the Shareholders party hereto
have consented in writing by executing and delivering their written consent in
the form of Exhibit B hereto;
(b) a transfer of Shares to one or more Shareholders party to this
Agreement; and
<PAGE> 8
(c) subject to the terms of the Stock Purchase Agreement or the
Subscription Agreement to which any Shareholder is party, as the case may be, a
transfer of all or any part of such Shareholder's Shares on or after July 31,
1996.
4.3 EFFECT OF TRANSFER
In the event of any transfer effected in accordance with the provisions of
this Agreement (other than a transfer effected pursuant to Section 4.2(c)), the
transferee shall receive and hold any and all Shares so transferred subject to
the terms and conditions of this Agreement and the obligations, if any, of the
transferor hereunder, and shall forthwith execute and deliver to the
Shareholders party hereto an endorsement in the form of Exhibit A hereto. A
Shareholder which effects a transfer of all of such Shareholder's Shares in
accordance with Section 4.2 shall, after giving effect to such transfer, cease
to be a party to, or bound by the terms of, this Agreement.
4.4 ENDORSEMENTS BY FUTURE SHAREHOLDERS
The term "Shareholders" as used in this Agreement shall include any and
all persons agreeing to be bound as a "Shareholder" hereunder by signing this
Agreement or an endorsement in the form of Exhibit A hereto.
4.5 SPECIFIC PERFORMANCE
The parties hereby declare that it is impossible to measure in money the
damages that will accrue to a party hereto by reason of a failure to perform
any of the obligations under this Agreement. Therefore, if any party hereto
shall institute any action or proceeding to enforce specifically the provisions
hereof, any party against whom such action or proceeding is brought hereby
waives the claim or defense therein that such party has an adequate remedy at
law or in damages, and such party shall not urge in any action or proceeding
the claim or defense that such remedy at law or in damages exists.
4.6 TERMINATION
This Agreement shall terminate and be of no further force or effect upon
the Termination Date.
8
<PAGE> 9
ARTICLE V MISCELLANEOUS
5.1 FURTHER ASSURANCES
From time to time, at any Shareholder's request and without further
consideration, each Shareholder shall execute and deliver such additional
documents and take all such further action as may be necessary or desirable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
5.2 CERTAIN EVENTS
Each Shareholder agrees that this Agreement and the obligations hereunder
shall attach to such Shareholder's Shares and shall be binding upon any Person
to which legal or beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including without limitation, such Shareholder's
heirs, guardians, administrators or successors or as a result of any divorce.
5.3 STOP TRANSFER
Each Shareholder agrees with, and covenants to, the other Shareholders
party hereto that such Shareholder shall not request that the Company register
the transfer (book-entry or otherwise) of any certificate or uncertificated
interest representing any of such Shareholder's Shares, unless such transfer is
made in compliance with this Agreement. Each Shareholder agrees, with respect to
any Shares in certificated form, that such Shareholder will tender to the
Company, within ten business days after the date hereof, the certificates
representing such Shares and the Company will inscribe upon such certificates
the following legend: "The shares of Common Stock, par value $0.0001 per share,
of International Meta Systems, Inc. (the "Company") represented by this
certificate are subject to a Shareholders Agreement dated as of March 26, 1996,
and may not be sold or otherwise transferred, except in accordance therewith.
Copies of such Agreement may be obtained at the principal executive offices of
the Company". Each Shareholder agrees that within ten business days after the
date hereof, such Shareholder will no longer hold any Shares, whether
certificated or uncertificated, in "street name" or in the name of any nominee.
5.4 ENTIRE AGREEMENT
This Agreement sets forth the entire understanding among the parties
relating to the subject matter hereof, and supersedes an and all other prior
conversations, correspondence, memoranda, agreements or other writings between
the parties with
9
<PAGE> 10
respect to the subject matter hereof. No promises, covenants, representations
or warranties of any character or nature other than those expressly stated
herein have been made to induce any party to enter into this Agreement.
5.5 NO WAIVER
No failure on the part of any party hereto to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power, or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
5.6 BINDING AGREEMENT
This Agreement shall be binding upon the successors and assigns of each
party hereto.
5.7 ASSIGNMENT
Subject to Article IV, no party hereto may assign any of its rights under
this Agreement without the prior written consent of each of the other parties
hereto.
5.8 EXPENSES
Each party to this Agreement shall pay its own expenses and costs
incidental to its execution and delivery of this Agreement.
5.9 NOTICE
All notices and other communications provided for herein (including,
without limitation, any modifications of, or waivers or consents under, this
Agreement) shall be given or made by facsimile or by hand in writing and
transmitted by facsimile, mailed or delivered to the "Address for Notices"
specified below the name of the relevant Shareholder on the signature pages
hereof or at such other address as shall be designated by such Shareholder in a
notice to each other Shareholder party hereto. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been duly given
when transmitted by facsimile, personally delivered or, in the case of a mailed
notice, upon receipt, in each case, given or addressed as aforesaid.
10
<PAGE> 11
5.10 COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
5.11 AMENDMENT
No provision of this Agreement shall be waived, amended or modified
except by an instrument in writing duly executed by all of the Shareholders.
5.12 APPLICABLE LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, United States of America.
5.13 SEVERABILITY
If any one or more of the provisions contained in this Agreement, or any
application thereof, shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and all other applications thereof shall not in any way be affected or
impaired thereby.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders
Agreement as of the date first above written.
SHAREHOLDERS
PARAGON LIMITED PARTNERSHIP
by its General Partner
PARAGON CAPITAL
MANAGEMENT LLC,
General Partner
By /s/ MARTIN S. ALBERT
------------------------
Name: Martin S. Albert
Title: Director
By /s/ ERIK C.T. TILLER
------------------------
Name: Erik C.T. Tiller
Title: Secretary and Director
Address for Notices
Paragon Limited Partnership
P.O. Box 309
Ugland House
George Town
Grand Cayman
Cayman Islands
British West Indies
Attention: Secretary
Tel: 809-949-8066
Fax: 809-949-8080
12
<PAGE> 13
<TABLE>
<S> <C>
DEN NORSKE KRIGSFORSIKRING FOR SKIB
By: /s/ OLE HENRIK EIDE
---------------------------
Name: Ole Henrik Eide
Title: Managing Director
By: /s/ SVERRE KJELLAND-MORDRE
---------------------------
Name: Sverre Kjelland-Mordre
Title: Director
Address for Notices
Den Norske Krigsforsikring for Skib
P.O. Box 1464, Vika
N-0116 Oslo
Norway
Attention: Ole Henrik Eide
Managing Director
Tel: 47-22-11-20-20
Fax: 47-22-42-75-48
</TABLE>
31
<PAGE> 14
<TABLE>
<S> <C>
INVESTERINGSSELSKAPET
AMANDUS AS
By: /S/ HALVOR ISAKSEN
---------------------------
Name: Halvor Isaksen
Title: Managing Director
Address for Notices
Investeringsselskapet Amandus AS
Universitetsgaten 14
0164 Oslo
Norway
Attention: Halvor Isaksen
Managing Director
Tel: 47-22-20-16-80
Fax: 47-22-11-19-12
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
A/S SELVAAG INVEST
By: /S/ ODD EIDE
---------------------------
Name: Odd Eide
Title: President
Address for Notices
A/S Selvaag Invest
P.O. Box 33 Vinderen
0319 Oslo
Norway
Attention: Odd Eide
President
Tel: 47-22-92-41-00
Fax: 47-22-49-24-69
</TABLE>
15
<PAGE> 16
/S/ ANDREAS UGLAND
-----------------------------------------
ANDREAS UGLAND
Address for Notices
P.O. Box 308
4891 Grimstad
Norway
Attention: Andreas Ugland
Tel: 47-37-09-27-00
Fax: 47-37-04-09-86
<PAGE> 17
POLLEX A/S
By /S/ HANS O. BLIX
-----------------------------------------
Name: Hans O. Blix
Title: Chairman of the Board
Address for Notices
Pollex A/S
Haakon VII's Gt. 2
0161 Oslo
Norway
Attention: Hans O. Blix
Tel: 47-22-83-20-90
Fax: 47-22-83-55-22
<PAGE> 18
FILAB A/S
By /S/ LARS BLIX
---------------------------------------
Name: Lars Blix
Title: Chairman of the Board
Address for Notices
Filab A/S
Haakon VII's Gt. 2
0161 Oslo
Norway
Attention: Lars Blix
Tel: 47-22-83-20-90
Fax: 47-22-83-55-22
<PAGE> 19
/s/ J. ARTHUR OLAFSEN
--------------------------
J. ARTHUR OLAFSEN
Address for Notices
c/o Norman Data Defense Systems AS
PO Box 43
N-1324 Lysaker
Norway
Attention: J. Arthur Olafsen
Tel: 47-67-58-99-30
Fax: 47-67-58-99-40
19
<PAGE> 20
WOODBRIDGE ASSET
MANAGEMENT LIMITED
By /s/ ERICK C.T. TILLER
-------------------------
Name: Erick C.T. Tiller
Title: Attorney-in-Fact
Address for Notices
Woodbridge Asset Management Limited
Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
Attention: Secretary
Tel: 441-295-2244
Fax: 441-292-8666
20
<PAGE> 21
/s/ MARTIN S. ALBERT
---------------------------
MARTIN S. ALBERT
Address for Notices
c/c Amerscan, Inc.
3625 East Thousand Oaks Blvd.
Suite 50
Westlake Village, California 91362
Attention: Martin S. Albert
Tel: 805-371-7715
Fax: 805-497-7154
21
<PAGE> 22
/S/ BENT AASNAES
----------------
BENT AASNAES
Address for Notices
P.O. Box 42
3070 Sande
Norway
Attention: Bent Aasnaes
Tel: 47-33-77-61-36
<PAGE> 23
SCHEDULE 1
SHAREHOLDINGS
_______________________________________________________________________________
| | | |
| NAME OF SHAREHOLDER | NUMBER OF SHARES | SHARE CERTIFICATE NO(S) |
|_____________________________________________________________________________|
| | | |
| Paragon Limited Partnership | 2,000,000 | 5676, 5677, 5678 |
|-----------------------------------------------------------------------------|
| Den Norske Krigsforsikring | | |
| for Skib | 2,000,000 | 5724 |
|-----------------------------------------------------------------------------|
| Investeringsselskapet | | |
| Amandus AS | 2,000,000 | 5725 |
|-----------------------------------------------------------------------------|
| A/S Selvaag Invest | 1,500,000 | 5726 |
|-----------------------------------------------------------------------------|
| Andreas Ugland | 1,500,000 | 5727 |
|-----------------------------------------------------------------------------|
| Woodbridge Asset Management | | |
| Limited | 266,667 | 5730, 5732 |
|-----------------------------------------------------------------------------|
| Pollex A/S | 200,000 | 5736 |
|-----------------------------------------------------------------------------|
| J. Arthur Olafsen | 250,000 | 5729 |
|-----------------------------------------------------------------------------|
| Martin S. Albert | 133,333 | 5731 |
|-----------------------------------------------------------------------------|
| Filab A/S | 100,000 | 5728 |
|-----------------------------------------------------------------------------|
| Bent Aasnes | 50,000 | 5733 |
|-----------------------------------------------------------------------------|
<PAGE> 24
EXHIBIT A
ENDORSEMENT
The undersigned Shareholder of International Meta Systems, Inc. (the
"Company") hereby agrees to the terms and conditions of the Shareholders
Agreement dated as of March 26, 1996 between and among the Shareholders of the
Company party thereto, to which this Endorsement is attached, and agrees to be
fully bound by the terms and conditions of such Shareholders Agreement as if
such Shareholder were an original signatory thereto
_________________________________
(Name of Shareholder)
<PAGE> 25
EXHIBIT B
CONSENT TO TRANSFER
The undersigned, being parties to the Shareholders Agreement dated as of
March 26, 1996 (the "SHAREHOLDERS AGREEMENT") between and among the
Shareholders of International Meta Systems, Inc. (the "COMPANY") party thereto,
hereby consent to the transfer by _____________ to _____________ of ____ shares
of the Company's common stock.
SHAREHOLDERS
________________
By _____________
Name:
Title:
[To be executed and delivered by all
Shareholders then party to the
Shareholders Agreement referred to above]
