SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) July 24, 1998
--------------------------------
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State of other jurisdiction of incorporation)
0-16753 58-1722085
- ------------------------------- --------------------------------
Commission File No. I.R.S. Employer Identification
130 Cedar Street, New York, NY 10006
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Address of principal Zip Code
executive offices
(212) 306-6100
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Registrant's telephone number,
including area code
<PAGE>
5. OTHER EVENTS
The Registrant (the "Company") on July 24, 1998, completed a financing in
the aggregate sum of $4,000,000. The Company issued four (4) subordinated 12%
convertible debentures to four (4) accredited investors.
The financial terms of the debentures were ratified by stockholders, as
substantial dilution may be experienced by stockholders as a result of
conversion by the convertible debenture holders into shares of Class A Common
Stock of the Company. The convertible debentures are for a period of five (5)
years and contain a mandatory conversion feature at their expiration; wherein, a
debenture holder will receive shares of Class A Common Stock issued by the
Company in satisfaction of the debenture. The subordinated debenture also
contains a 12% per annum cash payment, payable on a monthly basis, on the issued
and outstanding debentures, as well as an additional 10% of the profit earned by
the company or companies (after acquisition costs), that were acquired by the
Company, as certified by the Company's independent accountants. The use of
proceeds for the convertible debenture specifically state that all funds from
the subordinated debenture are to be used for acquisition purposes only.
Annexed hereto and made a part hereof, and marked Exhibit I, is a copy of
a subordinated convertible debenture.
The Company has further filed a form D (Notice of Sale of Securities
pursuant to regulation D of the Securities Act), with respect to the
transaction. The Company did not pay any commissions to any brokerage firms or
individuals in connection with the financing transaction. Additionally, the
terms of the debenture financing involved a minimum of $4,000,000 and a maximum
of $7,500,000. The Company determined to terminate the offering upon closing on
the minimum of $4,000,000.
The holders of the subordinated convertible debentures received a
subordinated Uniform Commercial Code ("U.C.C.") lien on the assets of the
Company to secure the payment of interest and any shares of profits during the
term of the outstanding debenture. The U.C.C. lien is subordinated to banking
and financing institutions.
<PAGE>
On July 24, 1998, the Company completed an additional financing
transaction with GE Capital Corp. ("GE Capital"), wherein the Company entered
into a secured equipment financing arrangement for the sum of $1,300,000 with GE
Capital at 10.96% interest per annum. GE Capital received a first secured U.C.C.
lien on specific assets of the Company. Annexed hereto and marked Exhibit II is
a copy of the loan financing transaction with GE Capital.
The Company utilized the proceeds from the financing with GE Capital for
acquisition purposes.
EXHIBITS
I) Subordinated Convertible Debenture and Term Sheet.
II) GE Capital Financing documentation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: New York, New York
July 31, 1998
INFORMATION MANAGEMENT
TECHNOLOGIES CORPORATION
----------------------------------
(Registrant)
/s/ Joseph Gitto
----------------------------------
JOSEPH GITTO
President and Chief
Financial Officer
<PAGE>
Exhibit A
NON-NEGOTIABLE 12% SUBORDINATED MANDATORY
CONVERTIBLE DEBENTURE
New York, New York
July ___, 1998
FOR VALUE RECEIVED, the undersigned, INFORMATION MANAGEMENT TECHNOLOGIES
CORP. ("MAKER") hereby promises to pay to the order of ______________
("HOLDER"), the principal sum of ______________ with interest thereon at 12%
(twelve percent) per annum, payable monthly in cash. The payment of the
principal sum will be in shares of Class "A" Common Stock unless the maker
elects to redeem this debenture for cash. This Debenture has an automatic
mandatory conversion at the expiration of its five (5) year term. This debenture
is part of a private placement of debentures of like tenor in an aggregate
principal amount of not less than $4,000,000 and not more than $7,500,000 (the
"debentures").
1. Payment of principal (in shares of Class "A" Common Stock) is to be made
at such address as to which HOLDER shall notify MAKER in writing.
2. If, under any bankruptcy or insolvency law or other law for the
reorganization arrangement, composition or similar relief or aid of
debtors or creditors: (a) MAKER is adjudicated a bankrupt, or takes or
seeks to take or to have taken, or consents to the taking of, any action
with respect to MAKER or a substantial part of Maker's property or
affairs, or (b) a Court or other governmental authority of competent
jurisdiction (i) approves a petition seeking any such relief or aid with
respect to MAKER, (ii) appoints a trustee, receiver, or liquidator of
MAKER or of substantially all of Maker's property or affairs, or (iii)
assumes custody or control of substantially all of the property or affairs
of MAKER; and, in any such case, such approval or appointment is not
vacated, or the custody or control is not terminated, within sixty (60)
days or stayed on appeal, then, at the option of the HOLDER, the HOLDER
may declare the unpaid balance of the principal, which is payable in
shares of Class "A" Common Stock, and accrued interest, if any, if not
then due payable to be due and payable.
3. The Debentures and the rights of HOLDER and obligations of the MAKER
hereunder are subject to the provisions of the Private Placement Term
Sheet and Subscription Agreement by and between HOLDER and MAKER dated
July ____, 1998.
4. MAKER shall have the right of prepayment without penalty.
5. In the event of any default, which shall remain unmixed for a period of
thirty (30) days, HOLDER thereof shall have the right upon twenty (20)
days written notice to accelerate payment of all principal (in shares of
Class "A" Common Stock) and interest and be entitled to receive reasonable
attorneys' fees in the event an attorney is required to collect the amount
due.
6. The debentures have been approved and authorized by a unanimous resolution
of the Board of Directors of Maker.
7. Notice shall be deemed to be given to MAKER when actually received by
MAKER or, if earlier, on the 5th business day after such notice is sent by
registered or certified mail, postage prepaid and addressed to MAKER at:
Information Management Technologies Corporation, 130 Cedar Street, New
York, NY 10006.
INFORMATION MANAGEMENT TECHNOLOGIES
CORPORATION
By:
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<PAGE>
CONFIDENTIAL
COPY NUMBER:_______________
RECIPIENT'S NAME:_______________
INFORMATION MANAGEMENT TECHNOLOGIES CORPORATION
("IMTECH" or the "Company")
A DELAWARE CORPORATION
12% Subordinated Convertible Debentures (the "Debentures")
Payable in Cash or In Shares of the Company's
Class "A" Common Stock $.04 Par Value Per Share ("Common Stock")
Subject to the within Terms
Minimum Offering: $4,000,000 Principal Amount of Debentures
Maximum Offering: $7,500,000 Principal Amount of Debentures
Subordinated Convertible Debentures with Interest at 12% per annum payable
monthly for a term of five (5) years. Debenture holders will also receive shares
equal to 10% of the Company's then outstanding Class "A" Common Stock with
anti-dilution protection (as defined herein) upon conversion, or redemption on
the due date of the Debenture. Debenture holders can elect to convert into Class
"A" Common Stock at their election subject to the "mechanics of conversion"
provided for herein. If the holders elect to convert within 12 months of the
initial closing (as defined herein), they will be entitled to receive 40% of the
Company's outstanding Class A Common Stock at the time of conversion without
anti-dilution protection. If the Company should prepay the Debentures within the
first 9 months, debenture holders will be entitled to 20% of the outstanding
Class "A" Common Stock without anti-dilution protection. If the Company should
prepay the Debentures within the 10th, 11th or 12th months, debenture holders
will be entitled to 30% of the outstanding Class "A" Common Stock without
anti-dilution protection. After one year from the date of initial closing,
holders can elect to convert their Debentures and will be entitled to 70% of the
Company's outstanding Class A Common Stock with anti-dilution protection. If the
Company should repay the Debentures after one year but before the expiration of
5 years, debenture holders will be entitled to receive 30% of the Company's
outstanding Class "A" Common Stock without anti-dilution protection. Debenture
holders will also receive a subordinated Uniform Commercial Code lien on the
assets of the acquired company or companies, and 10% of the net profits of the
combined companies (as defined), until conversion, redemption or repayment of
the Debentures. In the event the Company fails to meet its interest obligations
to the Debenture holders and the default remains uncured for 30 days following
the Company receiving a Notice of Default in accordance with the notice
provisions contained in the "Mechanics of Conversion", then in that event the
Debenture holders will be entitled to accelerate the payment of principal (in
shares of Class "A" Common Stock only) and interest pursuant to the default
provisions contained herein. The Debentures have an automatic mandatory
conversion feature at the expiration of the five (5) year term.
PRIVATE PLACEMENT TERM SHEET AND EXHIBITS
FOR ACCREDITED INVESTORS ONLY
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK AND RESTRICTED TRANSFERABILITY AND MAY INVOLVE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS"
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
REGULATORY AUTHORITY OF ANY STATE NOR HAS THE SECURITIES EXCHANGE
COMMISSION OR ANY STATE REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PRIVATE PLACEMENT TERM SHEET AND THE EXHIBITS HERETO. ANY
REPRESENTATION TO THE CONTRARY 1S A CRIMINAL OFFENSE. THIS PRIVATE
PLACEMENT TERM SHEET DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION IN
WHICH AN OFFER IS NOT AUTHORIZED.
THE INFORMATION CONTAINED HEREIN AND IN ANY ADDITIONAL EXHIBITS HERETO IS
CONFIDENTIAL, CONTAINS NON-PUBLIC INFORMATION, AND IS INTENDED ONLY FOR
THE PERSON WHOSE NAME APPEARS ABOVE AND SUCH
PERSON'S ADVISORS, IF ANY.
================================================================================
Price(1) (2) Net Proceeds (3)
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Total Minimum Debentures Offered $4,000,000 $4,000,000
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Total Maximum Debentures Offered $7,500,000 $7,500,000
================================================================================
1. IMTECH will offer on a minimum-maximum basis for a period of 90 days from
the date herein, unless extended by the Company for an additional period
of 90 days, the Debentures (to be repaid either in cash or by payment in
shares of Class "A" Common Stock in the manner described herein) the
<PAGE>
1. (Continued)
Debentures and the Class "A" Common Stock issuable upon conversion only to
"accredited investors" (as that term is defined in Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act")) on a
minimum $4,000,000 and a maximum $7,500,000 Debentures offered hereby,
through the efforts of any licensed broker dealer or financial consultant
to the Company. IMTECH also reserves the right to pay selling commissions
to selected licensed broker-dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD"), and who are qualified
and eligible to accept such commissions within the state or other
jurisdiction in which such securities are sold and/or such commission is
paid. The Convertible Debentures will bear interest at 12% per annum
payable monthly, in cash, for a term of five (5) years. The Debentures
will automatically be converted into shares of Class "A" Common Stock on
the due date unless the Company elects to redeem the Debentures for cash.
Debenture holders will also receive shares equal to 10% of the Company's
then outstanding Class "A" Common Stock with anti-dilution protection upon
conversion, or redemption on the due date of the debenture. Debenture
holders can elect to convert into Class "A" Common Stock at their election
subject to the "mechanics of conversion" provided for herein. If the
holders elect to convert within 12 months of the closing date of the
initial closing as defined herein, they will be entitled to receive 40% of
the Company's outstanding Class A Common Stock at the time of conversion
without anti-dilution protection. If the Company should prepay the
Debentures within the first 9 months, debenture holders will be entitled
to 20% of the outstanding Class "A" Common Stock without anti-dilution
protection. If the Company should prepay the Debentures within the 10th,
11th or 12th months, debenture holders will be entitled to 30% of the
outstanding Class "A" Common Stock without anti-dilution protection. After
one year from the date of issuance of the debentures, holders can elect to
convert their debentures and will be entitled to 70% of the Company's
outstanding Class A Common Stock with anti-dilution protection. If the
Company should repay the Debentures after one year but before the
expiration of 5 years, debenture holders will be entitled to receive 30%
of the Company's outstanding Class "A" Common Stock without anti-dilution
protection. Debenture holders will also receive a subordinated Uniform
Commercial Code lien on the assets of the acquired company or companies,
and 10% of the net profits (as defined herein) earned by the combined
companies, until conversion, redemption or repayment of the Debentures.
The offering will only be made to accredited investors (as the Term is
defined in Regulation D promulgated under the Securities & Exchange Act of
1933 as amended) ("the Act"). The terms of the within are subject to
shareholders approval.
2. All of the funds received from subscribers will be deposited in a
non-interest bearing special account, held by the Company's legal counsel,
to be utilized specifically for the purpose of acquisitions by the
Company. In the event that the Company does not successfully complete an
acquisition or acquisitions within 180 days from the completion of the
minimum offering ($4,000,000) as defined herein, then all of the funds
will be returned to the subscribers, in full, without deduction for any
fees or expenses.
3. Does not include expenses of the offering estimated at approximately
$25,000 for legal, accounting, printing and Blue Sky filing fees. Also
does not include commissions payable to qualified licensed broker dealers.
Under the offering commissions may be up to 10% of the gross proceeds on a
pro-rata basis, payable over 36 months in 36 equal monthly installments
subject to such commission payments being in accord with Securities and
Exchange Commission, National Association of Securities Dealers Automated
Quotation (Small Cap) System ("NASDAQ (sm)) and Blue Sky laws and
regulations. All commissions will be subject to the completion of the
minimum Offering and the Company's successful acquisition or acquisitions
of a company within 180 days of the completion of the Offering.
Additionally, any financial consultant or any other licensed broker dealer
will further receive pro-rata stock options to purchase 10% of the number
of the shares issued to debenture holders, which options will be for a
period of five (5) years or until such time as debenture holders elect to
convert the Debenture and/or the Company prepays the Debenture. The stock
options issued will be exercisable for a period of (5) five years at the
20 day average bid price immediately preceding the date of closing or
closings (on a pro-rata basis provided a minimum is raised) of the
financing.
REPRODUCTION OF ANY PORTION OF THESE
MATERIALS IS STRICTLY PROHIBITED
JULY ____, 1998
<PAGE>
INFORMATION FOR RESIDENTS OF CERTAIN STATES
NASSA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
CONFIDENTIAL PRIVATE PLACEMENT TERM SHEET. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
NOTICE TO CONNECTICUT RESIDENTS
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE
CONNECTICUT UNIFORM SECURITIES ACT BUT WILL BE SOLD IN RELIANCE ON AN EXEMPTION
FROM SUCH REGISTRATION SET FORTH IN SECTION 36-490(b)(9)(A) OF SAID ACT AND
REGULATIONS PROMULGATED THEREUNDER. THE SECURITIES CANNOT BE RESOLD WITHOUT
REGISTRATION UNDER SECTION 36-485 OF SAID ACT OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE PURSUANT TO SECTION 36-490 OF SAID ACT.
NOTICE TO NEW JERSEY RESIDENTS
THIS MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED BY THE NEW JERSEY
BUREAU OF SECURITIES OR THE DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE STATE OF
NEW JERSEY PRIOR TO ITS ISSUANCE AND USE. NEITHER THE ATTORNEY GENERAL OF THE
STATE OF NEW JERSEY NOR THE BUREAU OF SECURITIES HAS PASSED ON OR ENDORSED THE
MERITS OF THE MEMORANDUM (OR THE PRIVATE OFFERING CONTAINED HEREIN). ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NOTICE TO NEW YORK RESIDENTS
THIS MEMORANDUM HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF THE STATE
OF NEW YORK PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF
NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THIS TERM SHEET AND THE EXHIBITS ATTACHED HERETO (COLLECTIVELY, THE
"OFFERING DOCUMENTS") CONSTITUTE AN OFFER ONLY TO THE RECIPIENT WHOSE NAME
APPEARS ON THE COVER OF THESE OFFERING DOCUMENTS AND ONLY IF SUCH RECIPIENT IS A
QUALIFIED INVESTOR AND THE COMPANY HAS RECEIVED AN EXECUTED ACKNOWLEDGMENT OF
RECEIPT BY THE OFFEREE.
EACH OFFEREE, BY ACCEPTING DELIVERY OF THESE OFFERING DOCUMENTS, AGREES TO
RETURN THESE OFFERING DOCUMENTS AND ALL ENCLOSED DOCUMENTS TO THE COMPANY IF THE
OFFEREE DOES NOT AGREE TO PURCHASE ANY OF THE SECURITIES OFFERED HEREBY, AND
FURTHER AGREES TO HOLD THE COMPANY AND ITS OFFICERS AND DIRECTORS HARMLESS
AGAINST ANY CLAIMS, COSTS, EXPENSES OR DAMAGES THEY MAY SUFFER IF THE OFFEREE
BREACHES SUCH AGREEMENT. REPRODUCTION OF THESE OFFERING DOCUMENTS IS PROHIBITED.
THESE OFFERING DOCUMENTS CONTAIN SUMMARIES BELIEVED BY THE COMPANY TO BE
ACCURATE WITH RESPECT TO CERTAIN TERMS OF CERTAIN DOCUMENTS, BUT INVESTORS
SHOULD REFER TO THE ACTUAL DOCUMENTS (COPIES OF WHICH, IF NOT PROVIDED HEREWITH,
WILL BE MADE AVAILABLE TO PROSPECTIVE INVESTORS UPON REQUEST) FOR COMPLETE
INFORMATION CONCERNING THE RIGHTS AND OBLIGATIONS OF THE PARTIES THERETO, AND
ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THIS REFERENCE.
<PAGE>
THE COMPANY HEREBY EXTENDS TO EACH OFFEREE, AND TO ITS PURCHASER
REPRESENTATIVE, IF ANY, THE OPPORTUNITY, PRIOR TO THE CONSUMMATION OF A SALE OF
ANY SECURITIES TO SUCH OFFEREE, TO ASK QUESTIONS OF, AND TO RECEIVE ANSWERS
FROM, OFFICERS OF THE COMPANY CONCERNING THIS OFFERING AND TO OBTAIN ANY
ADDITIONAL INFORMATION TO THE EXTENT THE COMPANY POSSESSES THE SAME OR CAN
ACQUIRE IT WITHOUT UNREASONABLE EFFORTS OR EXPENSE IN ORDER TO VERIFY THE
ACCURACY OF THE INFORMATION SET FORTH HEREIN. ALL SUCH ADDITIONAL INFORMATION,
HOWEVER, MUST BE IN WRITING AND IDENTIFIED AS SUCH BY THE COMPANY. ANY
INFORMATION OTHER THAN THAT CONTAINED IN THESE OFFERING DOCUMENTS OR IN
DOCUMENTS FURNISHED BY THE COMPANY, UPON REQUEST, MUST NOT BE RELIED UPON IN
CONNECTION WITH THIS OFFERING. REQUESTS FOR ADDITIONAL INFORMATION SHOULD BE
DIRECTED TO THE COMPANY AT: IMTECH, FOURTH FLOOR, 130 CEDAR STREET, NEW YORK,
NEW YORK 10006, ATTENTION: PRESIDENT.
NO REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, IS MADE AS TO THE
ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THESE OFFERING
DOCUMENTS, AND NOTHING CONTAINED HEREIN IS, OR SHALL BE RELIED UPON AS, A
PROMISE OR REPRESENTATION, WHETHER AS TO THE PAST OR THE FUTURE. THESE OFFERING
DOCUMENTS DO NOT PURPORT TO CONTAIN ALL OF THE INFORMATION THAT MAY BE REQUIRED
TO EVALUATE AN INVESTMENT IN THE COMPANY AND ANY RECIPIENT HEREOF SHOULD CONDUCT
ITS OWN INDEPENDENT ANALYSIS.
THE COMPANY MAKES NO REPRESENTATIONS CONCERNING THE LEGAL, FINANCIAL OR
TAX CONSEQUENCES OF AN INVESTMENT IN THE SECURITIES TO ANY PARTICULAR INVESTOR.
PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR OWN PROFESSIONAL ADVISERS WITH
RESPECT TO LEGAL AND FINANCIAL MATTERS, AS WELL AS FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES OF AN INVESTMENT IN THE SECURITIES.
THIS INVESTMENT IS AVAILABLE ONLY TO THOSE PERSONS WHO ARE ABLE TO BEAR
THE ECONOMIC RISK OF THEIR INVESTMENT. SEE "WHO MAY INVEST" AND THE SUBSCRIPTION
DOCUMENTS ATTACHED AS AN EXHIBIT HERETO WITH RESPECT TO CERTAIN REPRESENTATIONS
AND WARRANTIES WHICH AN INVESTOR WILL BE REQUIRED TO MAKE.
<PAGE>
THE OFFERING
The Company: Information Management Technologies Corporation
("IMTECH" or the "Company") provides graphic
communications to financial institutions such as
banks and brokerage firms, as well as, to medium
and large service organizations within such
industries as accounting, law and finance. The
Company's core business is the production and
subsequent distribution of time sensitive printed
financial research, financial reports and
marketing materials. In addition, the Company
provides facility management services which
include mail room and copy center management. The
Company's graphic communications services include
digital communications, two and four color digital
printing, intelligent inserting, high volume
duplication, graphic design, electronic
publishing, document fulfillment, micrographics,
data processing, as well as bindery and
distribution services. The Company's printing and
distribution services are generally performed at
its Regional Service Center ("RSC") located in
downtown New York City. The facilities management
services include independent management of client
systems for providing document duplication,
distribution and mail room management.
Securities Being Offered: The offering consists of a minimum of $4,000,000
("Minimum Offering") of Subordinated Convertible
Debentures (the "Debentures") and a maximum of
$7,500,000 ("Maximum Offering") of Debentures.
Upon receipt and acceptance of a subscription
agreement and proceeds pursuant to this offering,
the Company will execute and deliver to each
investor a Debenture in the form attached hereto
as Exhibit A. The Subordinated Convertible
Debentures will bear interest at 12% per annum
payable monthly, in cash, for a term of five (5)
years commencing from the date of initial
closing(1). The Debentures will automatically be
converted into shares of Class "A" Common Stock on
the due date (expiration of five year term) unless
the Company elects to redeem the Debentures for
cash. Debenture holders will also receive shares
equal to 10% of the Company's then outstanding
Class "A" Common Stock with anti-dilution
protection(2) upon conversion, or redemption on
the due date of the Debenture. Debenture holders
can convert into Class "A" Common Stock at their
election subject to the "mechanics of conversion"
as provided for herein. If the holders elect to
convert within 12 months of the initial closing,
they will be entitled to receive 40% of the
Company's outstanding Class "A" Common Stock at
the time of conversion as provided for herein
without anti-dilution protection. If the Company
should prepay the Debentures within the first 9
months, debenture holders will be entitled to 20%
of the outstanding Class "A" Common Stock without
anti-dilution protection. If the Company should
prepay the Debentures within the 10th, 11th or
12th months, debenture holders will be entitled to
30% of the outstanding Class "A" Common Stock
without anti-dilution protection. After one year
from the date of initial closing, holders can
elect to convert their Debentures and will be
entitled to 70% of the Company's outstanding Class
"A" Common Stock with anti-dilution protection. If
the Company should repay the Debentures after one
year but before the expiration of 5 years,
debenture holders will be entitled to receive 30%
of the Company's outstanding Class "A" Common
Stock without anti-dilution protection. Debenture
holders will also receive a subordinated Uniform
Commercial Code lien on the assets of the acquired
company or companies, and 10% of the net
profits(3), until conversion, redemption or
repayment of the Debentures. The Company has
agreed to use its best efforts to prepare and file
a registration statement for the shares of Class
"A" Common Stock underlying the Debentures at no
cost to the subscribers. (See the annexed schedule
of potential shares to be issued by the Company.)
- ------
(1) Initial Closing is defined as acceptance of subscriptions by the Company
that constitute the Minimum Offering ($4,000,000), and the Company successfully
completing an acquisition within 180 days of the completion of the Minimum
Offering.
(2) Anti-dilution protection provides that a Debenture holder has the right to
receive additional shares of Class "A" Common Stock of the Company upon the
Company issuing any additional shares of Class "A" Common Stock.
(3) Net Profits is defined as the "Net income applicable to common stockholders"
from the Form 10-K Annual Report of the combined companies, adjusted for cash
repayments of the sellers' notes and other acquisition costs.
1
<PAGE>
Terms of the Offering: The offering is being made for a period of 90 days
from the date herein, unless extended by the
Company for an additional 90 days, pursuant to the
exemption from registration provided by Regulation
D promulgated under the Securities Act of 1933, as
amended ("Regulation D"). All purchasers of the
Debentures must be "accredited investors" as
defined in Rule 501 of Regulation D. The minimum
subscription is $25,000 (subject to the Company's
right to accept smaller subscriptions). The
offering period will begin as of the date hereof
and will terminate on September 30, 1998 (the
"Termination Date"), unless extended by the
Company. After the minimum of $4,000,000 of
Debentures are sold (the Minimum Offering), an
interim closing or closings may be held and the
offering will continue until the earlier of the
Termination Date or the sale of all the Debentures
offered hereby "Final Completion of Offering",
with one or more closings after the Minimum
Offering. The date of the Minimum Offering is
referred to as the "Minimum Closing Date" and the
dates of subsequent closings are referred to as
the "Subsequent Closing Dates." All subscription
payments with respect to the Minimum Offering will
be held by the Company's counsel in a non-interest
bearing escrow account, pending acceptance of
subscriptions and receipt of collected funds for
at least $4,000,000 of the Debentures. In the
event that the Company does not successfully
complete the Minimum Offering by the expiration
date of the Offering Period or an acquisition(s)
within 180 days from the completion of the Minimum
Offering, all funds will be returned to
subscribers without deduction for expenses of the
Offering.
Collateral: The Company will provide a Subordinated Uniform
Commercial Code ("UCC") lien on the assets of the
acquired Company/Companies as collateral security
for the repayment of the debenture. The collateral
security will be subordinate to any banking or
lending institutional financing by the Company, as
well as any preexisting liens.
Terms of the Class
"A" Common Stock: As of June 30, 1998, there were 5,789,846 shares
of Class "A" Common Stock outstanding and
approximately 3,200 record holders of the Class
"A" Common Stock. The holders of Class "A" Common
Stock have no preemptive rights, redemption,
sinking fund or conversion privileges. Each share
is entitled to equal rights in the assets of the
Company upon liquidation subject to the prior
rights of creditors. The holders of Class "A"
Common Stock are entitled to dividends when and if
declared by the Company's Board of Directors. All
of the outstanding shares of Class "A" Common
Stock are, and the shares of Class "A" Common
Stock to be issued upon exercise of the Debentures
will, upon issuance, be fully paid and
non-assessable and not subject to liability for
future calls or assessment or for liabilities of
the Company or its stockholders. There are no
cumulative voting rights with respect to Class "A"
Common Stock.
Registration Rights: The Company will provide subscribers with one time
cost free registration rights for all Registrable
Securities. The Company has agreed to use its best
efforts to file a registration statement with the
Securities and Exchange Commission.
Subscription Agreement: Subscription for the Debentures must be made
pursuant to a Subscription Agreement (the
"Subscription Agreement") containing, among other
provisions, representations and warranties by the
investor and the Company, restrictions on
transferability and conversion of these
securities, the registration rights referred to
above, and indemnification relating to breaches of
representations and warranties.
2
<PAGE>
Selling Commissions: IMTECH will offer the Debentures on a "minimum,
maximum" basis. The Debentures will be offered
through the efforts of the Company's executive
officers in those jurisdictions where sales by an
officer or a director of the issuer are permitted
by law. IMTECH also reserves the right to pay
selling commissions to qualified licensed
broker-dealers who are members in good standing of
the National Association of Securities Dealers,
Inc. ("NASD") and who are qualified and eligible
to accept such commissions within the state or
other jurisdiction in which securities are sold
and/or such commission is paid. Additionally, any
financial consultant or any other licensed broker
dealer may further receive stock options to
purchase 10% of the number of shares issued to
debenture holders. The Stock Options will be
issued for a period of five (5) years at the 20
day average bid price immediately preceding the
date of closing or closings (on a pro-rata basis
provided a minimum is raised) of the financing.
Use of Proceeds: Upon completion of this offering, of which
shareholder approval was received at the Company's
Annual Meeting of Shareholders held on May 26,
1998, the net proceeds after deducting expenses
will be used solely to acquire the assets and/or
stock of a Company or Companies. The company is
currently negotiating with acquisition candidates,
however, there is no assurance that the Company
will successfully complete the proposed
acquisition or acquisitions. In the event the
Company does not successfully complete an
acquisition(s) within 180 days from the completion
of the Minimum Offering, all funds will be
returned to subscribers without deduction for
expenses of the Offering with no further liability
to the Company.
Mechanics of Conversion: At any time during the term of the Debentures,
should a holder elect to convert its Debenture,
written notice will be given to the Company.
(Attention: Joseph A. Gitto, President & Chief
Financial Officer, 130 Cedar Street - 4th Floor,
New York, NY 10006, by Certified Mail Return
Receipt Requested and by Facsimile [at (212)
385-0352]) The Company will have 90 days from the
receipt of notice of conversion by facsimile, at
the Company's option, to redeem the Debentures for
cash plus the applicable number of shares had the
Company elected to redeem the Debentures during
the time period in which the Debenture holder
elected to convert. If the Company elects not to
redeem the Debentures for cash, then in that
event, the Company will cause to be issued to the
Debenture holder the number of shares in
accordance with the applicable conversion rate as
of the time of the notice of conversion. (i.e. In
month eight (8), a holder elects to convert, the
Company will be afforded 90 days from receipt of
such notice from the holder to redeem the
debenture in cash plus shares equivalent to 20% of
the Company's outstanding Class "A" Common Stock
after issuance, or at the Company's option,
deliver shares on a percentage basis equivalent to
40% of the Company's outstanding Class "A" Common
Stock.) On the due date of the Debentures, the
Debentures will automatically be converted into
shares of Class "A" Common Stock unless the
Company elects to redeem the Debentures for cash.
Default: If the Company fails to meet its interest
obligation to the debenture holders and such
default remains uncured for 30 days following the
Company receiving a Notice of Default in
accordance with the notice provisions outlined
under the "Mechanics of Conversion", then in that
event, the debenture holders will be entitled to
accelerate the payment of principal (in shares of
Class "A" Common Stock only) and interest and will
be entitled to payment of reasonable attorney's
fees in the event an attorney is required to
collect outstanding principal and interest.
3
<PAGE>
Outstanding IMTECH Common
Stock, Warrants and
Convertible Securities: The following table illustrates the potential
amount of shares which could be issued under
various conversion or redemption scenarios,
assuming a minimum offering ($4,000,000), based
upon shares currently issued and outstanding.
Dilution protection to subscribers is applicable
at certain conversion rates as set forth herein.
Accordingly, if additional shares of Class "A"
Common Stock are subsequently issued, and
Debentures are redeemed at certain conversion
rates, "New Outstanding Shares," as listed in the
table, may be significantly less than actual
shares outstanding.
Shares issued and outstanding
prior to offering.......................5,789,846
================================================================================
New
Scenarios Conversion New Shares Outstanding
Rate Issued Shares(1)
================================================================================
Convert < 9 Months 40%(2) 3,859,897 9,649,743
- --------------------------------------------------------------------------------
Conver > 12 Months 70%(3) 13,509,641 19,299,487
- --------------------------------------------------------------------------------
Company Prepays < 9 Months 20%(4) 1,447,462 7,237,308
- --------------------------------------------------------------------------------
Company Prepays > 9 Months 30%(5) 2,481,363 8,271,209
- --------------------------------------------------------------------------------
Convert at Maturity 10%(6) 643,316 6,433,162(7)
================================================================================
- ------
(1) Does not include the exercise and/or conversion into Class "A" Common Stock
of all of the Company's outstanding (i) 12% Convertible Preferred Stock at a 30%
discount to the 20 day average trading price of the Company's Class "A" Common
Stock. (ii) Class "A" and Class "B" Warrants, (iii) all issued and exercisable
options from the Company's Incentive and Non-Qualified Stock Option Plans and
(iv) 12% Convertible Secured Promissory Notes, all of which are included in the
Company's Form S-3 Registration presently pending before the Securities and
Exchange Commission. Also does not include a minimum of 400,000 to a maximum of
750,000 options exercisable at the 30 day weighted average bid price immediately
preceding the date of closing or closings which may be awarded to qualified
broker dealers under the terms of the Offering.
(2) If a Debenture holder elects to convert within 12 months of the "Initial
Closing" as defined, and subject to the "Mechanics of Conversion", as provided
for herein, the Debenture holder(s) will receive 40% of the Company's
outstanding Class "A" Common Stock at the time of conversion on a percentage
basis to the amount of the Debenture holder's subscription with no anti-dilution
protection.
(3) If a Debenture holder elects to convert after one year of the "Initial
Closing" as defined, and subject to the "Mechanics of Conversion", as provided
for herein, the Debenture holder(s) will receive 70% of the Company's
outstanding Class "A" Common Stock at the time of conversion on a percentage
basis to the amount of the Debenture holder's subscription with anti-dilution
protection.
(4) If the Company redeems the Debenture within nine months of the "Initial
Closing" as defined, and subject to the "Mechanics of Conversion", as provided
for herein, the Debenture holder(s) will receive 20% of the Company's
outstanding Class "A" Common Stock at the time of conversion on a percentage
basis to the amount of the Debenture holder's subscription with no anti-dilution
protection.
(5) If the Company redeems the Debenture after nine months of the "Initial
Closing" as defined, but before 5 years, Debenture holders will be entitled to
receive 30% of the Company's outstanding Class "A" Common Stock on a percentage
basis to the amount of the Debenture holder's subscription with no anti-dilution
protection.
(6) On the due date of the Debentures, 5 years from the "Initial Closing" as
defined herein, Debenture holders will receive 10% of the Company's outstanding
Class "A" Common Stock with anti-dilution protection on a percentage basis to
the amount of the Debenture holder's subscription.
(7) Does not include the automatic mandatory conversion of the Debentures into
shares of Class "A" Common Stock on the due date (expiration of the five year
term) of the Debentures, or at the Company's election, the redemption of the
Debentures for cash.
4
<PAGE>
CP(FRME)10/97
PROMISSORY NOTE
---------------
(Date)
130 Cedar Street, New York, New York County, NY 10006
- --------------------------------------------------------------------------------
(Address of Maker)
FOR VALUE RECEIVED, Information Management Technologies Corporation, KRL Litho,
Inc., and RDS, Research Distribution Services, Inc., jointly and severally
("Maker") promises, jointly and severally if more than one, to pay to the order
of General Electric Capital Corporation or any subsequent holder hereof (each, a
"Payee") at its office located at 44 Old Ridgebury Road, Danbury, CT 06810 or at
such other place as Payee or the holder hereof may designate, the principal sum
of One Million Three Hundred Thousand and 00/100 Dollars ($1,300,000.00), with
interest on the unpaid principal balance, from the date hereof through and
including the dates of payment, at a fixed interest rate of Ten and 96/100
percent (10.96%) per annum, to be paid in lawful money of the United States, in
Sixty (60) consecutive monthly installments of principal and interest of as
follows:
Periodic
Installment Amount
---------------------------
Sixty (60) installments of Twenty Eight Thousand One Hundred Eighteen and 53/100
dollars ($28,118.53), each ("Periodic Installment") and a final installment
which shall be in the amount of the total outstanding principal and interest.
The first Periodic Installment shall be due and payable on August 1, 1998 and
the following Periodic Installments and the final installment shall be due and
payable on the same day of each succeeding month (each, a "Payment Date"). Such
installments have been calculated on the basis of a 360 day year of twelve
30-day months. Each payment may, at the option of the Payee, be calculated and
applied on an assumption that such payment would be made on its due date.
The acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payee's
right to receive payment in full at such time or at any prior or subsequent
time.
The Maker hereby expressly authorizes the Payee to insert the date value is
actually given in the blank space on the face hereof and on all related
documents pertaining hereto.
This Note may be secured by a security agreement, chattel mortgage, pledge
agreement or like instrument (each of which is hereinafter called a "Security
Agreement.")
Time is of the essence hereof. If any installment or any other sum due under
this Note or any Security Agreement is not received within ten (10) days after
its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the
amount of said installment or other sum, but not exceeding any lawful maximum.
If (i) Maker fails to make payment of any amount due hereunder within ten (10)
days after the same becomes due and payable; or (ii) Maker is in default under,
or fails to perform under any term or condition contained in any Security
Agreement, then the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under this Note or any
Security Agreement, at the election of Payee, shall immediately become due and
payable, with interest thereon at the lesser of eighteen percent (18%) per annum
or the highest rate not prohibited by applicable law from the date of such
accelerated maturity until paid (both before and after any judgment).
The Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of the entire indebtedness plus an additional sum as a premium
equal to the following percentages of the original principal balance for the
indicated period:
<TABLE>
<S> <C> <C>
Prior to the first annual anniversary date of this Note: five percent (5%)
Thereafter and prior to the second annual anniversary date of this Note: four percent (4%)
Thereafter and prior to the third annual anniversary date of this Note: three percent (3%)
Thereafter and prior to the fourth annual anniversary date of this Note: two percent (2%)
Thereafter and prior to the fifth annual anniversary date of this Note: one percent (1%)
</TABLE>
and zero percent (0%) thereafter, plus all other sums due hereunder or under any
Security Agreement.
<PAGE>
It is the intention of the parties hereto to comply with the applicable usury
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Note or any Security Agreement, in no event shall this Note or
any Security Agreement require the payment or permit the collection of interest
in excess of the maximum amount permitted by applicable law. If any such excess
interest is contracted for, charged or received under this Note or any Security
Agreement, or if all of the principal balance shall be prepaid, so that under
any of such circumstances the amount of interest contracted for, charged or
received under this Note or any Security Agreement on the principal balance
shall exceed the maximum amount of interest permitted by applicable law, then in
such event (a) the provisions of this paragraph shall govern and control, (b)
neither Maker nor any other person or entity now or hereafter liable for the
payment hereof shall be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal balance or refunded
to Maker, at the option of the Payee, and (d) the effective rate of interest
shall be automatically reduced to the maximum lawful contract rate allowed under
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Note or any Security Agreement which are made for the purpose of
determining whether such rate exceeds the maximum lawful contract rate, shall be
made, to the extent permitted by applicable law, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the indebtedness evidenced hereby, all interest at any time contracted
for, charged or received from Maker or otherwise by Payee in connection with
such indebtedness; provided, however, that if any applicable state law is
amended or the law of the United States of America preempts any applicable state
law, so that it becomes lawful for the Payee to receive a greater interest per
annum rate than is presently allowed, the Maker agrees that, on the effective
date of such amendment or preemption, as the case may be, the lawful maximum
hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.
The Maker and all sureties, endorsers, guarantors or any others (each such
person, other than the Maker, an "Obligor") who may at any time become liable
for the payment hereof jointly and severally consent hereby to any and all
extensions of time, renewals, waivers or modifications of, and all substitutions
or releases of, security or of, any party primarily or secondarily liable on
this Note or any Security Agreement or any term and provision of either, which
may be made, granted or consented to by Payee, and agree that suit may be
brought and maintained against any one or more of them, at the election of Payee
without joinder of any other as a party thereto, and that Payee shall not be
required first to foreclose, proceed against, or exhaust any security hereof in
order to enforce payment of this Note. The Maker and each Obligor hereby waives
presentment, demand for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, and all other notices in connection herewith, as
well as filing of suit (if permitted by law) and diligence in collecting this
Note or enforcing any of the security hereof, and agrees to pay (if permitted
by law) all expenses incurred in collection, including Payee's actual attorneys'
fees. Maker and each Obligor agrees that fees not in excess of twenty percent
(20%) of the amount then due shall be deemed reasonable.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
This Note and any Security Agreement constitute the entire agreement of the
Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.
No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an
authorized representative of Maker and Payee. Any such waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given.
<PAGE>
Any provision in this Note or any Security Agreement which is in conflict with
any statute, law or applicable rule shall be deemed omitted, modified or altered
to conform thereto.
Information Management Technologies
Corporation
/s/ Joseph A. Gitto By: /s/ Matti Kon
- ---------------------------- -------------------------------(L.S.)
(Witness) (Signature)
MATTI KON, CEO
JOSEPH A. GITTO JR. ----------------------------------
- ---------------------------- Print name (and title, if applicable)
(Print Name)
581722085
130 Cedar Street ----------------------------------
- ---------------------------- (Federal tax identification number)
(Address)
KRL Litho, Inc.
By: /s/ Matti Kon
-------------------------------(L.S.)
(Signature)
MATTI KON, CEO
----------------------------------
Print name (and title, if applicable)
----------------------------------
(Federal tax identification number)
RDS, Research Distribution Services, Inc.
By: /s/ Matti Kon
-------------------------------(L.S.)
(Signature)
MATTI KON, CEO
----------------------------------
Print name (and title, if applicable)
----------------------------------
(Federal tax identification number)
