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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
INTERNATIONAL META SYSTEMS, INC.
_______________________________________________________________________________
(Name of Issuer)
Common Stock, $0.0001 par value
_______________________________________________________________________________
(Title of Class of Securities)
45986B 10 8
_______________________________________________________________________________
(CUSIP Number)
Amerscan Partners III, Limited Partnership
c/o Amerscan Capital Management Ltd.
Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda
Attention: Mr. Martin S. Albert, (1)(441) 295-2244
_______________________________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 16, 1997
_______________________________________________________________________________
(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.)
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SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 2 OF 10 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Amerscan Partners III, 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
Bermuda
________________________________________________________________________________
<TABLE>
<S> <C> <C>
SOLE VOTING POWER
7
$2,000,000 convertible into shares of Common
Stock at the option of the Reporting Person
on the terms and conditions of the
Convertible Promissory Note filed as Exhibit
1 to Schedule 13D (Amendment No. 2) filed in
respect of an event which occurred July 15,
1997 and the Convertible Promissory Note
attached as Exhibit 1 hereto.
___________________________________________________________________
NUMBER OF
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0
EACH ___________________________________________________________________
REPORTING
PERSON SOLE DISPOSITIVE POWER
WITH 9
$2,000,000 convertible into shares of Common
Stock at the option of the Reporting Person
on the terms and conditions of the
Convertible Promissory Note filed as Exhibit
1 to Schedule 13D (Amendment No. 2) filed in
respect of an event which occurred July 15,
1997 and the Convertible Promissory Note
attached as Exhibit 1 hereto.
___________________________________________________________________
SHARED DISPOSITIVE POWER
10
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
$2,000,000 convertible into shares of Common Stock at the option of
the Reporting Person on the terms and conditions of the Convertible
Promissory Note filed as Exhibit 1 to Schedule 13D (Amendment No. 2)
filed in respect of an event which occurred July 15, 1997 and the
Convertible Promissory Note attached as Exhibit 1 hereto.
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
$2,000,000 convertible into shares of Common Stock at the option of
the Reporting Person on the terms and conditions of the Convertible
Promissory Note filed as Exhibit 1 to Schedule 13D (Amendment No. 2)
filed in respect of an event which occured July 15, 1997 and the
Convertible Promissory Note attached as Exhibit 1 hereto.
________________________________________________________________________________
TYPE OF REPORTING PERSON
14
PN
________________________________________________________________________________
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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 previously filed by Paragon
Limited Partnership, and as twice previously amended, first, by 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
(collectively the "Prior Reporting Persons") and, secondly, by Amerscan
Partners III, Limited Partnership, is hereby amended and supplemented with
respect to the items set forth below.
ITEM 2. IDENTITY AND BACKGROUND.
(a), (b), (c) and (f) This amendment is being filed by Amerscan Partners
III, Limited Partnership, an exempted limited partnership organized under the
laws of Bermuda ("Amerscan Partners III" or the "Reporting Person").
The sole general partner of Amerscan Partners III is Amerscan Capital
Management Ltd., an exempted limited duration company organized under the laws
of Bermuda ("Amerscan Capital Management").
Amerscan Partners III and Amerscan 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
Amerscan Partners III and Amerscan Capital Management is Cedar House, 41 Cedar
Avenue, Hamilton HM 12, Bermuda.
The name, citizenship, business or residence address and present principal
occupation or employment of each of Amerscan Capital Management'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.
Mr. Martin Albert serves as a director and Deputy Chairman, Mr. Rolv
Norderhaug serves as Vice President and a director, and Mr. Erik Tiller serves
as a director, of Amerscan Capital Management. Messrs. Albert, Norderhaug and
Tiller also serve as directors and officers of Paragon Capital Management LLC,
an exempted limited liability company organized under the laws of the Cayman
Islands, British West Indies ("Paragon Capital Management"). Paragon Capital
Management is the sole general partner of Paragon Limited Partnership, an
exempted limited partnership organized under the laws of the Cayman Islands,
British West Indies ("Paragon"). As of February 15, 1996, Paragon beneficially
owned 2,000,000 shares of Company Common Stock, and,
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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, Woodbridge Capital Management Limited, an exempted
limited company incorporated under the laws of Bermuda ("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. Mr. Tiller is a controlling person of
Woodbridge.
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.
Mr.Albert is also a director of Amerscan, Inc. ("Amerscan, Inc."), TTI Holdings
Inc., Transitional Technology, Inc., Nx Server Inc., Dolphin Interconnect
Solutions Inc., Parlance, Inc., NovaStor Corporation, Timpanogas Research Group
Inc. and OfficeNet, Inc.
The preceding summary of the interests of the Reporting Person and certain
of the Prior Reporting Persons is not intended to be complete and is qualified
in its entirety by reference to the full text of Schedule 13D (Amendment No. 1)
filed in respect of an event which occurred on March 26, 1996 and Schedule 13D
(Amendment No. 2) filed in respect of an event which occurred on July 15, 1997,
each of which is incorporated herein by reference.
(d) and (e) During the last five years, the Reporting Person has not and
neither, to the best knowledge of the Reporting Person, have any of the
individuals named in this Item 2 or in Schedule A-1 hereto been: (i) convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors); or (ii) 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 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 consideration
for the extension of credit to the Company pursuant to the convertible
promissory note referred to below consisted of $500,000 contributed by Amerscan
Partners III from partnership funds.
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ITEM 4. PURPOSE OF TRANSACTION.
Amerscan Partners III has extended credit to the Company pursuant to the
Convertible Promissory Note dated September 16, 1997, executed and delivered by
the Company, payable to Amerscan Partners III and convertible into shares of
the Company Common Stock (the "Second Convertible Note"), for investment
purposes.
As of July 15, 1997, Amerscan Partners III beneficially owned the right to
convert the unpaid principal of, and interest on, the Convertible Note filed
as Exhibit 1 to Schedule 13D (Amendment No. 2) filed in respect of an event
which occured July 15, 1997 (the original principal amount of which is
$1,500,000) (the "First Convertible Note") into shares of Company Common Stock
on the terms and conditions set out in the First Convertible Note.
Pursuant to the Second Convertible Note, Amerscan Partners III agreed to
loan the Company up to $500,000 and the Company agreed to repay Amerscan
Partners III the principal sum of the Second Convertible Note, together with
accrued interest thereon at a rate of 8% per annum, on September 16, 1998.
Under the terms of the Second Convertible Note, Amerscan Partners III has the
option to convert the unpaid principal amount of the Second Convertible Note,
together with accrued and unpaid interest thereon, into shares of the Company
Common Stock at a conversion rate equal to the unpaid principal amount of the
Second Convertible Note, together with accrued and unpaid interest thereon,
divided by the lower of: (i) $0.50 per share (subject to adjustments for stock
splits, reverse stock splits, stock dividends and/or recapitalizations of the
Company Common Stock), and (ii) 75% of the average of the mean between the
closing bid and asked price per share of the Company Common Stock for the five
trading days preceding the notice date of the exercise of such option.
Amerscan Partners III may exercise such option at any time prior to September
16, 1998. Under the terms of the Second Convertible Note, so long as any
amount payable under the Second Convertible Note remains unpaid, Amerscan
Capital Management shall be entitled (to the extent it has not already done so
pursuant to the First Convertible Note) to appoint one member of the Company=s
Board of Directors and such appointed director shall be further authorized to
appoint the chairman of the Finance Committee of the Board of Directors, such
committee to consist of at least three members of the Board of Directors of the
Company.
On August 20, 1997, Amerscan Partners III agreed to lend the Company
$750,000 pursuant to a Promissory Note, executed and delivered by the Company
and repayable by the Company on demand (the "Demand Note"). To date, no funds
have been lent to the Company by Amerscan Partners III under the Demand Note.
Pursuant to the Security Agreement dated as of July 15, 1997 between the
Company and Amerscan Partners III (as amended by Amendment No. 1 thereto dated
as of September 16, 1997, the "Security Agreement"), the Company has granted to
Amerscan Partners III a security interest in the Company's intellectual
property relating to its Meta
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6000 chip to secure the obligations of the Company under the Second Convertible
Note, the Demand Note and the First Convertible Note.
For its services in arranging the extension of credit to the Company
pursuant to the Second Convertible Note, the Company has agreed to pay
Amerscan, Inc., an affiliate of Amerscan Partners III, an arrangement fee equal
to 8% of the aggregate principal amount of the Second Convertible Note. Such
agreement is evidenced by a letter agreement dated September 16, 1997 (the "Fee
Letter") between Amerscan, Inc. and the Company.
The preceding summary of certain provisions of the Second Convertible Note
and the Security Agreement is not intended to be complete and is qualified in
its entirety by reference to the full text of the Second Convertible Note,
Amendment No. 1 to the Security Agreement and the Fee Letter, copies of which
are filed as Exhibits 1, 2 and 3 hereto, respectively, and which are
incorporated herein by reference.
Other than as described above, Amerscan Partners III has no 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 September 16, 1997, Amerscan Partners III
beneficially owned the right to convert the unpaid principal of, and interest
on, the First Convertible Note, the original principal amount of which is
$1,500,000, and the Second Convertible Note, the original principal amount of
which is $500,000, into shares of Company Common Stock on the terms and
conditions set out in the First Convertible Note and the Second Convertible
Note, respectively. Upon any such conversion, Amerscan Partners III will sign
an endorsement to the Shareholders Agreement agreeing to be bound by the terms
of such Shareholders Agreement as though Amerscan Partners III were an original
party thereto and will have the sole power to vote and the sole power to
dispose of such shares of Company Common Stock subject to the terms of such
Shareholders Agreement. A copy of the Shareholders Agreement was filed as
Exhibit 6 to Schedule 13D (Amendment No. 1) filed in respect of an event which
occurred March 26, 1996 and is incorporated herein by reference.
(d) and (e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except as provided in the Second Convertible Note, or as set forth herein,
the Reporting Person has not, nor, to the best of the Reporting Person's
knowledge, have any of the individuals named in Schedule A-1 hereto, had any
contracts, arrangements,
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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.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Conformed copy of a Convertible Promissory Note dated September 16, 1997,
executed and delivered by International Meta Systems, Inc. and payable to
Amerscan Partners III, Limited Partnership
2. Conformed copy of Amendment No. 1 to the Security Agreement dated as of
July 15, 1997 between International Meta Systems, Inc. and Amerscan
Partners III, Limited Partnership
3. Confirmed copy of a Fee Letter dated September 16, 1997 between Amerscan,
Inc. and International Meta Systems, Inc.
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SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, 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: September 26, 1997
AMERSCAN PARTNERS III, LIMITED
PARTNERSHIP
By AMERSCAN CAPITAL
MANAGEMENT LTD., as its
General Partner
By /s/ Martin S. Albert
____________________
Martin S. Albert
Director and Deputy Chairman
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SCHEDULE A-1
DIRECTORS AND EXECUTIVE OFFICERS
OF AMERSCAN 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 Amerscan Capital Management Ltd., a Bermuda exempted
limited duration company, is set forth below:
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ------------------------------------- -----------
Executive Officers and
Directors
James M. Keyes, Partner British
Chairman and Director Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
Martin S. Albert, President and Chief Executive Officer United States of
Deputy Chairman and Dolphin Interconnect Solutions Inc. America
Director 3625 East Thousand Oaks Blvd.
Suite 50
Westlake Village, California 91362
Rolv E. Norderhaug, President Norway
Vice President and Director Hexagon Capital Management Ltd.
Paradise View
9 Rocklands Drive
Warwick WK07
Bermuda
Erik C. T. Tiller, Vice President Norway
Director Amerscan, Inc.
3609 East Thousand Oaks Blvd.
Suite 309
Westlake Village, California 91362
Michael Wood, Corporate Administrator Canadian
Secretary Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton HM12
Bermuda
</TABLE>
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
1. Conformed copy of a Convertible Promissory Note dated September 16,
1997, executed and delivered by International Meta Systems, Inc. and
payable to Amerscan Partners III, Limited Partnership
2. Conformed copy of Amendment No. 1 to the Security Agreement dated as
of July 15, 1997 between International Meta Systems, Inc. and Amerscan
Partners III, Limited Partnership
3. Conformed copy of a Fee Letter dated September 16, 1997 between
Amerscan, Inc. and International Meta Systems, Inc.
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<PAGE> 1
Exhibit 1
Conformed Copy
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). NEITHER THIS NOTE NOR ANY OF SUCH SECURITIES MAY BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
CONVERTIBLE PROMISSORY NOTE
US$500,000.00 September 16, 1997
FOR VALUE RECEIVED, INTERNATIONAL META SYSTEMS, INC., a corporation
organized and existing under the laws of the State of Delaware, USA, (the
"Company"), hereby promises to pay to AMERSCAN PARTNERS III, LIMITED
PARTNERSHIP (the "Holder") for account of its principal office, located on the
date hereof at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda, at The
Chase Manhattan Bank, London Branch (account name: "Amerscan Partners III,
Limited Partnership"), the principal sum of Five Hundred Thousand Dollars (US
$500,000) and any and all other amounts due hereunder, in lawful money of the
United States of America and in immediately available funds, on the date and in
the amount specified below, and to pay interest on the outstanding principal
amount hereof and any such other amount, at such office and account, in like
money and funds, for the period from and including the date hereof to but
excluding the date on which such principal amount shall have been paid in full,
at a rate of eight percent (8%) per annum, on the date specified below.
Interest hereunder shall be calculated on the basis of a year of 360 days and
the actual number of days elapsed.
The principal amount of this Note shall be lent to the Company by the
Holder in a single instalment of Five Hundred Thousand Dollars (US $500,000) by
means of wire transfer to an account specified by the Company, upon the
fulfilment of the conditions precedent specified in Section 3 hereof.
The Company shall pay to the Holder the outstanding principal amount of
this Note, and this Note shall mature, on September 16, 1998. Accrued interest
on the outstanding principal amount of this Note shall be due and payable on
September 16, 1998, and shall be payable only to the extent this Note is not
converted in whole or in part as set forth herein. Prepayments of principal,
together with accrued interest thereon up to but excluding the date of payment,
may be made at any time without penalty.
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1. CONVERSION
1.1 OPTIONAL CONVERSION
The entire outstanding principal amount of this Note, together with any
accrued and unpaid interest thereon up to but excluding the Conversion Date (as
defined below), shall be convertible at any time, at the option of the Holder,
into shares of common stock of the Company (the "Shares"). The number of
Shares of the Company to be issued upon such conversion shall be equal to the
quotient obtained by dividing (a) the outstanding principal amount of this Note
on the Conversion Date plus any accrued and unpaid interest thereon to but
excluding the Conversion Date by (b) the lower of (i) US$0.50 per Share, as
adjusted for any stock splits, reverse stock splits, stock dividends and/or
recapitalizations after the date hereof, and (ii) Seventy-Five Percent (75%) of
the average of the mean between the closing bid and asked price per Share for
the five (5) trading days immediately preceding the date of the Conversion
Notice if on such date the Shares are traded and listed on a Stock Exchange.
As used herein, "Conversion Date" shall mean the date specified as such in a
Conversion Notice, and "Stock Exchange" shall mean the American Stock Exchange,
the New York Stock Exchange, the Nasdaq National Market System, the Nasdaq
SmallCap Market or the NASD Bulletin Board (the Over the Counter Market), as
applicable. In addition, the Company shall have the right to require the
Holder, upon written request of the Company at any time on or prior to
September 16, 1998, to convert the entire outstanding principal amount of this
Note, together with any accrued interest thereon up to but excluding the
Conversion Date, on and subject to the terms specified in this Section 1, if on
the date of such written request by the Company, the mean between the closing
bid and asked price per Share is greater than US$2 per Share, as adjusted for
any stock splits, reverse stock splits, stock dividends and/or
recapitalizations after the date hereof.
1.2 CONVERSION PROCEDURE
If the Holder wishes (or is required) to convert this Note into Shares in
accordance with Section 1.1 hereof, the Holder shall deliver a Conversion
Notice in the form attached as Annex A hereto (a "Conversion Notice") to the
Company in accordance with Section 7.2 hereof.
1.3 DELIVERY OF SHARE CERTIFICATES; FRACTIONAL SHARES
As promptly as practicable after return of this Note to the Company by the
Holder in accordance with Section 1.2 hereof, the Company (at its expense)
shall issue and deliver to the Holder a certificate or certificates for the
number of full Shares issuable upon conversion of this Note. No fractional
shares shall be issued upon conversion of this Note. In lieu of any fractional
share to which the Holder would otherwise be entitled, such fractional share
shall be rounded to the nearest whole Share.
1.4 RESERVATION OF SHARES ISSUABLE UPON CONVERSION
At all times while the Holder retains the option to convert this Note into
Shares of the Company, the Company shall reserve and keep available out of its
authorized but unissued Shares
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(which shall not be subject to pre-emption or any similar rights) such number
of its Shares as shall be sufficient to effect the conversion of this Note.
1.5 REGISTER; REPLACEMENT NOTES
The Company shall maintain a register in which it shall provide for the
registration of this Note and any transfers of this Note. The Holder shall be
entitled to have this Note subdivided by exchange for Notes of lesser
denominations in connection with an assignment of all or any portion of this
Note by the Holder pursuant to Section 7.6 hereof. Whenever this Note is
surrendered for exchange, the Company shall execute the Note(s) which the
Holder and/or its assignee is entitled to receive in connection with such
exchange. Each Note issued upon any exchange of this Note shall be the valid
obligation of the Company, evidencing the same debt, and entitled to the same
benefits, as this Note.
2. BOARD APPOINTMENT RIGHT
Until all principal of, interest on and any other amount owing under this
Note shall have been paid in full, Amerscan Capital Management Ltd., the
general partner of the Holder, or its designee, shall have the right to (to the
extent such a right has not been exercised by Amerscan Capital Management Ltd
pursuant to the terms of another convertible promissory note of the Company)
appoint one (1) member to the Board of Directors of the Company. Such member
of the Board of Directors, shall have the right to appoint the chairman of the
Finance Committee of the Board of Directors, which shall consist of at least
three (3) members of the Board of Directors.
3. CONDITIONS PRECEDENT
The obligation of the Holder to make its loan hereunder is subject to the
receipt by the Holder on or prior to the date hereof of (i) this Note, (ii),
Amendment No. 1 dated as of September 16, 1997 ("Amendment No. 1") to the
Security Agreement dated as of July 15, 1997 between the Company and the Holder
(as amended by Amendment No. 1 and in effect of the duty hereof; the "Security
Agreement").
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Holder that:
(a) The Company has taken all necessary action to authorize the execution,
delivery and performance of this Note, Amendment No. 1 and the Fee Letter
(including, without limitation, obtaining the approval thereof by the Board of
Directors of the Company).
(b) Each of this Note, Amendment No. 1 and the Fee Letter has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms;
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(c) No consent, approval or authorisation of any third party is required
for the execution, delivery or performance of this Note, Amendment No. 1 or the
Fee Letter by the Company which has not been received, and the execution,
delivery and performance of this Note, Amendment No. 1 or the Fee Letter do not
and will not violate, conflict with, result in a violation or breach of, or
constitute a default under, any law, rule, regulation or judicial or
administrative decision to which the Company may be subject, the Company's
Certificate of Incorporation or By-Laws, or any indenture, agreement or
instrument to which the Company or any of its property is subject, or which
would create a mortgage, pledge, lien, charge, debenture, assignment,
hypothecation or security interest or any other agreement or arrangement having
the effect of conferring security (hereinafter a "Lien") or restriction of any
kind upon the Company or any of its property or revenues;
(d) The Company's obligations under this Note, the Security Agreement and
the Fee Letter rank in all respects at least pari passu in priority of payment
and in right of security with all of the Company's other unsecured
indebtedness, whether now or hereafter incurred; and
(e) No Event of Default (as hereinafter defined) has occurred and is
continuing, nor has any event occurred which but for the giving of notice or
the lapse of time or both might constitute an Event of Default.
5. COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with the Holder that:
(a) The Company will ensure that its obligations under this Note, the
Security Agreement and the Fee Letter will at all times constitute its direct,
general and unconditional obligations and rank in all respects at least pari
passu in priority of payment and in right of security with all of the Company's
other unsecured indebtedness;
(b) The Company will pay all and any taxes, levies, duties, imposts,
charges and withholdings of any nature whatsoever (hereinafter "Taxes") owing
by the Company as a result of the conversion of this Note in accordance with
Section 1.1 hereof;
(c) The Company will promptly, but in no event later than three business
days after notice to the Company of the occurrence of any of the events
described in clauses (i) through (iv) (inclusive) of this Section 5(c), notify
the Holder by facsimile of the particulars of such occurrence and the action,
if any, proposed to be taken with respect thereto: (i) any Event of Default
(as hereinafter defined) or any event which, but for the giving of notice or
the lapse time or both would constitute an Event of Default; (ii) any
involuntary Lien shall have been created upon the property of the Company in an
amount which, if the Company were required to pay such amount, is likely to
materially and adversely affect the Company's ability to perform its
obligations under this Note or the Security Agreement; (iii) any judgment
against the Company shall have been entered on a claim not covered by insurance
in an amount which, if the Company were required to pay such amount, is likely
to materially and adversely affect the Company's ability to perform its
obligations under this Note or the Security Agreement; (iv) any Taxes are
imposed upon any payments made
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hereunder; or (v) any other event or condition shall occur or exist with
respect to the Company which is likely to materially and adversely affect the
Company's ability to perform its obligations under this Note or the Security
Agreement;
(d) The Company will furnish, or cause to be furnished, to the Holder (i)
simultaneously with the filing thereof with the Securities and Exchange
Commission, the annual report and financial statements of the Company for the
relevant financial year of the Company bearing an auditor's report, (ii) as
soon as the same are available (and in any event within 50 days after the end
of each fiscal quarter), the unaudited financial statements of the Company for
such fiscal quarter (including, without limitation, any management reports or
accounts included in the Company's publicly filed reports) and (iii) such
additional documents, opinions, certificates or other instruments or
information as the Holder may from time to time request;
(e) The Company will use its best efforts to obtain and maintain all of
the permits, consents, authorizations and approvals which are necessary or
advisable to enable it to observe and perform the relevant terms and conditions
of this Note, the Security Agreement and the Fee Letter;
(f) The Company will not, without prior notice to the Holder, create,
assume, permit or suffer to exist any Lien on any of the Company's assets or
revenues (other than Liens arising pursuant to the Security Agreement);
(g) The Company will not, without the prior written consent of the Holder,
(i) issue in excess of 100,000 shares of capital stock of any class other than
those issued on the date hereof or those Shares necessary to effect the
conversion of the principal amount of this Note in accordance with Section 1.1
hereof and such number of Shares as may be necessary to effect the conversion
of any accrued and unpaid interest on this Note in accordance with Section 1.1
hereof, or (ii) undertake any stock split, reverse stock split,
recapitalization or stock dividend; and
(h) Subject to the terms of any agreement entered into by the Company
prior to the date of this Note, the Company will not sell, assign, transfer or
otherwise dispose of all or any part of its interests in the Collateral under
(and as defined in) the Security Agreement without the prior written consent of
the Holder.
6. EVENTS OF DEFAULT; ACCELERATION
If one or more of the following events (each, an "Event of Default") shall
occur and be continuing:
(a) The Company shall have failed to pay when due any principal of or
interest on this Note or any other amount due hereunder, under the Security
Agreement or under the Fee Letter; or
(b) Any representation or warranty made by the Company in this Note or the
Security Agreement, or in any statement made in any certificate, report or
financial statement furnished by
5
<PAGE> 6
the Company to the Holder, shall prove to have been materially false or
misleading when made in light of the circumstances in which it was made; or
(c) The Company shall fail to perform or comply with any of the covenants
or provisions set forth in this Note or the Security Agreement which failure
remains unremedied for a period of 10 days after written notice thereof has
been given to the Company by the Holder; or
(d) The Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or all or a substantial part of its assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the United States Bankruptcy Code of 1978, as amended (as now or
hereafter in effect, the "Bankruptcy Code"), (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts, (v) fail
to controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the Bankruptcy Code,
or (vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(e) A proceeding or case shall be commenced, without the application or
consent of the Company, in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company or of all or a substantial
part of its assets, (iii) similar relief in respect of the Company under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 or more days; or any order for relief against the Company shall be entered
in an involuntary case under the Bankruptcy Code; or
(f) Subject to the terms of any agreement entered into by the Company
prior to the date of this Note, the Liens created by the Security Agreement
shall at any time not constitute a valid and perfected, first priority Lien on
the collateral described therein in favor of the Holder, free and clear of all
other Liens, or the Security Agreement shall cease to be in full force and
effect or shall be declared null and void or the validity or enforceability
thereof shall be contested by the Holder;
Thereupon: (i) in the case of an Event of Default other than one referred
to in clause (d) or (e) above, the Holder may, by notice to the Company, cancel
the Holder's obligation to make further loans hereunder and declare the
principal amount then outstanding of, the accrued interest on, and all other
amounts due under, this Note to be forthwith due and payable, whereupon such
amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company; and (ii) in the case of the occurrence of an Event of
Default referred to in clause (d) or (e) above, the obligation of the Holder to
make any further loans hereunder shall automatically be cancelled and the
principal amount then outstanding of, the accrued interest on, and all other
amounts due under, this Note shall automatically become immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Company.
6
<PAGE> 7
7. MISCELLANEOUS
7.1 WAIVER
No failure on the part of the Holder to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power,
privilege or remedy under this Note shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, privilege or remedy
under this Note preclude any other or further exercise thereof or the exercise
of any other right, power, privilege or remedy. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
7.2 NOTICES
All notices and other communications provided for herein (including,
without limitation, any modifications of, or waivers or consents under, this
Note) shall be given or made by facsimile or by hand in writing and transmitted
by facsimile, mailed or delivered to, in the case of the Company, its "Address
for Notices" specified below its name on the signature page hereof; and, in the
case of the Holder, c/o Amerscan, Inc., 3609 East Thousand Oaks Boulevard,
Suite 209, Westlake Village, California 91362, USA, Attention: Mr. Martin S.
Albert, Telephone No. 805-371-7715, Fax No. 805-497-7154, or, as to any party,
at such other address as shall be designated by such party in a notice to the
other party. All such communications shall be deemed to have been duly given
when transmitted by facsimile or personally delivered in the manner described
above or, in the case of a mailed notice, upon receipt, in each case, given or
addressed as aforesaid.
7.3 EXPENSES
The Company agrees to pay or reimburse the Holder for (a) all reasonable
out-of-pocket costs and expenses of the Holder (including, without limitation,
the fees and expenses of counsel to the Holder) incurred prior to the
Conversion Date in connection with any amendment, supplement, modification or
waiver of any of the terms of this Note or the Security Agreement, (b) all
costs and expenses of the Holder (including the fees and expenses of counsel)
in connection with any default or Event of Default and any enforcement or
collection proceedings resulting therefrom and (c) all Taxes levied by any
governmental or revenue authority in respect of this Note.
7.4 AMENDMENTS
This Note may be waived, amended or modified only by an instrument in
writing duly executed by the Company and the Holder. Any waiver, amendment or
modification effected in accordance with this Section 7.4 shall be binding upon
the Holder (and any securities into which this Note is convertible), each
future holder of all such securities and the Company.
7.5 SUCCESSORS AND ASSIGNS
This Note shall be binding upon, and inure to the benefit of, the Company
and the Holder and their respective successors and permitted assigns.
7
<PAGE> 8
7.6 ASSIGNMENTS AND PARTICIPATIONS
The Company may not assign any of its rights or obligations under this
Note without the prior written consent of the Holder. The Holder may assign
this Note or sell a participation in this Note to any person or entity;
provided that any assignment of this Note shall only be made with the prior
written consent of the Company.
7.7 SURVIVAL
The obligations of the Company under Section 5(b) and Section 7.3 hereof
shall survive the repayment of the principal amount or the conversion of this
Note.
7.8 HEADINGS
The section headings appearing herein are included solely for convenience
of reference and are not intended to affect the interpretation of any provision
of this Note.
7.9 GOVERNING LAW; SUBMISSION TO JURISDICTION
This Note shall be governed by, and construed in accordance with, the laws
of the State of California, United States of America. The Company hereby
irrevocably submits to the non-exclusive jurisdiction of the United States
District Court for the Central District of California or any court of the State
of California located in the County of Los Angeles for the purposes of any
action, suit or proceeding arising out of or relating to this Note or the
Security Agreement or any of the transactions contemplated hereby or thereby.
The Company irrevocably waives, to the fullest extent permitted by applicable
law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum. The Company hereby irrevocably consents to the service of any and all
process in connection with any such suit, action or proceeding by mailing
copies of such process to it at its address provided in Section 7.2 hereof.
The Company agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in any other jurisdiction by suit on
the judgment or in any other manner provided by law. Nothing in this Section
7.9 shall affect the right of the Holder to serve legal process in any other
manner permitted by law or affect the right of the Holder to bring any suit,
action or proceeding against the Company or its property in any other court or
jurisdiction.
7.10 SEVERABILITY
If one or more provisions of this Note are held to be unenforceable under
applicable law, such provision(s) shall be excluded from this Note and the
balance of the Note shall be interpreted as if such provision(s) were so
excluded and shall otherwise be enforceable in accordance with its terms.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written at El Segundo, California.
INTERNATIONAL META SYSTEMS, INC.
By /s/ George W. Smith
------------------------------
George W. Smith
Chief Executive Officer
Address for Notices
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Suite 601
El Segundo, California 90245
USA
Attention: Chief Executive Officer
Tel. 310-524-9300
Fax. 310-524-9303
9
<PAGE> 10
Annex A
CONVERSION NOTICE
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Suite 601
El Segundo, California 90245
USA
Attention: Chief Executive Officer
The undersigned hereby elects to convert the Convertible Promissory Note
dated September 16, 1997 in the principal amount of US$500,000 (the "Note")
pursuant to Section 1.1 of the Note into _____ of the shares of common stock of
International Meta Systems, Inc. (the "Company"). The Conversion Date shall be
______________.
The original Note, which shall be cancelled by the Company, accompanies
this Conversion Notice.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares of common stock for its own account for investment
purposes only, and not for resale or with a view to distribution of such shares
or any part thereof. Such shares should be registered in the name of
_________________________.
NAME OF HOLDER]
By___________________
Name:
Title:
Date: _____________, 199__
10
<PAGE> 1
Exhibit 2
Conformed Copy
AMENDMENT NO. 1 dated as of September 16, 1997 between INTERNATIONAL META
SYSTEMS, INC., a corporation duly organized and validly existing under the laws
of the State of Delaware (as borrower under the Notes referred to below and as
pledgor under the Security Agreement referred to below, the "Borrower"), and
AMERSCAN PARTNERS III, LIMITED PARTNERSHIP (as lender under the Notes referred
to below and as pledgee under the Security Agreement referred to below,
together with its successors and assigns in such capacity, the "Lender").
WHEREAS, the Borrower and the Lender are parties to a Security Agreement
dated as of July 15, 1997 (as in effect on the date hereof, the "Security
Agreement"); providing, subject to the terms and conditions thereof, for the
grant by the Borrower to the Lender of security interests in the collateral
referred to therein as security for the Convertible Promissory Note dated July
15, 1997, executed and delivered by the Borrower in favor of the Lender; and
WHEREAS, the parties wish to amend the Security Agreement to provide for
the security interests covered thereby to secure the obligations of the
Borrower under the Promissory Note dated August 20, 1997 and the Convertible
Promissory Note dated September 16, 1997, each executed and delivered by the
Borrower in favor of the Lender;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined
in the Security Agreement are used herein as therein defined.
Section 2. Amendments. Subject to the execution and delivery by the
parties hereto of this Amendment No. 1, but with effect on and after the date
hereof, the Security Agreement shall be amended as follows:
(a) The preamble of the Security Agreement shall be amended and restated
in its entirety to read as follows:
"SECURITY AGREEMENT dated as of July 15, 1997 (this "Agreement")
between INTERNATIONAL META SYSTEMS, INC., a corporation organized and
existing under the laws of the State of Delaware (as borrower under the
Notes referred to below and as pledgor hereunder, the "Borrower"), and
AMERSCAN PARTNERS III, LIMITED PARTNERSHIP (as lender under the Notes
referred to below and as pledgee hereunder, together with its successors
and assigns in such capacity, the "Lender")."
(b) The first recital of the Security Agreement shall be amended and
restated in its entirety to read as follows:
<PAGE> 2
"WHEREAS, pursuant to the Convertible Promissory Note dated July 15,
1997, the Promissory Note dated August 20, 1997 and the Convertible
Promissory Note dated September 16, 1997 (as amended, supplemented or
otherwise modified and in effect from time to time, collectively, the
"Notes"), each executed and delivered by the Borrower in favor of the
Lender, the Lender will make loans to the Borrower in aggregate amounts
of up to but not exceeding $1,500,000, US$750,000 and $500,000,
respectively, to provide the Borrower with the working capital to finance
its product development, including, without limitation, the development
of the Borrower's Meta 6000 semiconductor chip (the "Meta 6000 chip") and
finance equipment used for such development; and"
(c) Section 1.01 (a) of the Security Agreement shall be amended by (i)
deleting the word "Note" in the first sentence thereof and replacing with the
word "Notes" and (ii) amending and restating in its entirety the definition of
"Second Obligations" to read as follows::
""Secured Obligations" shall mean (a) the principal of and interest
on the Notes and all other amounts from time to time owing to the Lender
under the Notes, and (b) all amounts from time to time owing to the
Lender by the Borrower hereunder."
(d) Section 1(b) (ii) shall be amended by deleting the words "the Note"
and replacing them with the words "any Note".
(e) Section 4.04(b) of the Security Agreement shall be amended and
restated in its entirety to read as follows:
"(b) Notwithstanding anything contained herein to the contrary, but
subject to the relevant provisions of the Notes which limit the right of
the Borrower to dispose of its property, so long as no Event or Default
shall have occurred and be continuing, the Borrower may exploit, use,
enjoy, protect, license and sublicense the Intellectual Property in the
ordinary course of its business. The exercise of rights and remedies
under Section 4.05 hereof by the Lender shall not terminate the rights of
the holders of any licenses or sublicenses theretofore granted by the
Borrower in accordance with the first sentence of this clause (b)."
(f) Section 4.12 of the Security Agreement shall be amended by deleting
the word "Note" and replacing it with the word "Notes".
Section 3. Representations and Warranties. The Borrower represents and
warrants to the Lender that (a) this Amendment No. 1 has been duly and validly
executed and delivered by the Borrower and constitutes the Borrower's legal,
valid and binding obligation, enforceable in accordance with its terms and (b)
after giving effect to this Amendment No. 1, (i) no Event of Default shall have
occurred and be continuing and (ii) the representations and warranties of the
Borrower in each Note are true and correct on and as of the date hereof with
the same force and effect as if made on and as of such date (except to the
extent such representations and warranties relate to a specific date). Any
breach by the Borrower of its representations and warranties contained
in this Section 3 shall be an Event of Default for all purposes of the Notes.
2
<PAGE> 3
Section 4. Documents Otherwise Unchanged. Except as herein provided, the
Security Agreement shall remain unchanged and in full force and effect, and
each reference to the Security Agreement in the Security Agreement and the
Notes shall be a reference to the Security Agreement as amended hereby and as
the same may be further amended and in effect from time to time.
Section 5. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts, each of which shall be identical and all of which, when
taken together, shall constitute one and the same instrument, and either party
hereto may execute this Amendment No. 1 by signing any such counterpart.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed as of the day and year first above written.
INTERNATIONAL META SYSTEMS, INC.
By /s/ George W. Smith
------------------------------
George W. Smith
Chief Executive Officer
AMERSCAN PARTNERS, III LIMITED
PARTNERSHIP
by its General Partner
AMERSCAN CAPITAL MANAGEMENT
LTD., as General Partner
By /s/ Martin S. Albert
------------------------------
Martin S. Albert
Director and Deputy Chairman
4
<PAGE> 1
Exhibit 3
Conformed Copy
AMERSCAN, INC.
3609 THOUSAND OAKS BOULEVARD
SUITE 209
WESTLAKE VILLAGE, CALIFORNIA 91362
September 16, 1997
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Suite 601
El Segundo, California 90245
Attention: Mr. George W. Smith
Chief Executive Officer
RE: ARRANGEMENT OF FUNDING
FOR INTERNATIONAL META SYSTEMS, INC.
Dear Mr. Smith:
We are pleased that International Meta Systems, Inc., a Delaware
corporation ("IMS"), has engaged Amerscan, Inc. (the "Arranger"), to arrange up
to US$500,000 of funding for IMS pursuant to the Convertible Promissory Note
dated as of September 16, 1997 (the "Note"), executed and delivered by IMS and
payable to Amerscan Partners III, Limited Partnership (the "Funding"). This
letter will confirm our acceptance and set forth the terms of our engagement.
For its services in connection with the Funding, IMS agrees to pay the
Arranger an arrangement fee equal to 8% of the aggregate principal amount of
the Note (the "Arrangement Fee"). The Arrangement Fee shall be due and payable
by IMS by wire transfer, in immediately available funds, to such account(s) as
shall be notified to IMS by the Arranger, on the earlier of (a) the date 60
days after September 16, 1997 and (b) the date on which IMS shall have borrowed
US$500,000 under the Note.
This letter agreement shall be governed by, and construed in accordance
with, the laws of the State of California. This letter agreement may not be
modified or amended except in a writing duly executed by the parties hereto.
This letter 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 letter agreement by signing any
such counterpart.
<PAGE> 2
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this letter agreement in the space provided below and return
it to us.
Very truly yours,
AMERSCAN, INC.
By /s/ Martin S. Albert
------------------------------
Martin S. Albert
President
Agreed to and accepted as of
the date first above written:
INTERNATIONAL META SYSTEMS, INC.
By /s/ George W. Smith
------------------------------
George W. Smith
Chief Executive Officer
