<PAGE>
As filed with the Securities and Exchange Commission on February 14, 1996
Registration No. 33-93842
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO.2
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
PC ETCETERA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3260705
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
462 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
(212) 736-5870
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
TERRY I. STEINBERG
PRESIDENT
PC ETCETERA, INC.
462 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
(212) 736-5870
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------
Copies of all communications and notices to:
FRED S. SKOLNIK, ESQ.
CERTILMAN BALIN ADLER & HYMAN, LLP
90 MERRICK AVENUE
EAST MEADOW, NEW YORK 11554
(516) 296-7000
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
(Cover continued on following page)
<PAGE>
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
check the following box. [x]
If the registrant elects to deliver its latest annual report to security-
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]
CALCULATION OF ADDITIONAL REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SHARES TO TO BE PRICE PER OFFERING REGISTRATION
BE REGISTERED REGISTERED SHARE(1) PRICE (1) FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON SHARES, 2,400,000 $2.50 $6,000,000.00 $2,068.97(2)
PAR VALUE shs.
$.01 PER SHARE,
REGISTERED FOR
THE BENEFIT OF
SELLING
STOCKHOLDERS
- -----------------------------------------------------------------------------------
COMMON SHARES, 5,744 shs. $.85 $ 4,882.40 $ 1.68
PAR VALUE
$.01 PER SHARE,
REGISTERED FOR
THE BENEFIT OF
SELLING
STOCKHOLDERS
- -----------------------------------------------------------------------------------
Total...... $2,070.65(2)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457.
(2) $2,068.97 paid with original filing.
__________________________
The registrant thereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
__________________________
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 14, 1996
PROSPECTUS
2,405,744 COMMON SHARES
----------------
PC ETCETERA, INC.
This Prospectus relates to 2,405,744 shares of Common Stock (the
"Shares") of PC Etcetera, Inc. (the "Company"), which are being offered by
various selling stockholders (the "Selling Stockholders"). The Company will not
receive any proceeds from the sale of the Shares by the Selling Stockholders.
See "Principal and Selling Stockholders".
----------------
SEE "RISK FACTORS" (PAGE 4) FOR INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS ANY SUCH COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Company is not aware of any underwriting arrangements with respect
to the sale of the Shares by the Selling Stockholders. The Company believes
that such securities will be sold from time to time in the over-the-counter
market at then prevailing prices or in private transactions at negotiated
prices, and that usual and customary brokerage fees will be paid by the Selling
Stockholders in connection therewith.
References in this Prospectus to numbers of shares of Common Stock
("Common Shares") and per share amounts give retroactive effect to the one-for-
five reverse split of the Company's Common Shares effectuated on April 19, 1995
(the "Reverse Split").
The Company's Common Shares are traded in the over-the-counter market
on the National Association of Securities Dealers, Inc.'s OTC Bulletin Board
(the "Bulletin Board") (Symbol: PCEZ). On _______________, 1996, the closing
bid and asked prices for the Company's Common Shares, as quoted on the Bulletin
Board, were $_______ and $_______, respectively, per share.
----------------
, 1996
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
AVAILABLE INFORMATION
The Company files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048; and Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
The Company has filed a registration statement on Form S-2 (together
with all amendments thereto, the "Registration Statement") with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Shares offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement. For further informa-
tion with respect to the Company and the Shares offered hereby, reference is
made to the Registration Statement and to the exhibits filed therewith or
incorporated by reference, copies of which may be obtained upon payment of a fee
prescribed by the Commission, or may be examined free of charge at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Each statement made or incorporated by
reference in this Prospectus referring to a document filed as an exhibit to the
Registration Statement or incorporated by reference therein is qualified by
reference to the exhibit for a complete statement of its terms and conditions.
----------------
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1994, as amended (the "1994 Form 10-KSB");
(b) The Company's Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1995, as amended (the "March 31, 1995 Form
10-QSB"), June 30, 1995, as amended (the "June 30, 1995 Form 10-QSB"), and
September 30, 1995, as amended (the "September 30, 1995 Form 10-QSB"); and
(c) The Company's Current Reports on Form 8-K for events dated
August 12, 1994, as amended, August 11, 1995 and January 31, 1996 (the
"January 31, 1996 Form 8-K") (collectively the "Forms 8-K").
The 1994 Form 10-KSB and September 30, 1995 Form 10-QSB accompany
this Prospectus. The Company will provide without charge to each person to whom
a copy of this Prospectus is delivered, upon the written or oral request of any
such person, a copy of the March 31, 1995 Form 10-QSB, June 30, 1995 Form 10-QSB
and Forms 8-K (other than exhibits to such documents). Requests for such copies
should be directed to Joseph Sabrin, Secretary, PC Etcetera, Inc., 462 Seventh
Avenue, New York, New York 10018.
Any statement contained in a document incorporated herein by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein modifies or super-
sedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
----------------
TABLE OF CONTENTS
PAGE
----
Available Information....................... 2
Incorporation of Certain Documents
by Reference.............................. 3
Risk Factors................................ 4
Subsequent Events........................... 7
The Company................................. 9
Use of Proceeds............................. 10
Principal and Selling Stockholders.......... 10
Description of Common Stock................. 18
Legal Matters............................... 19
Experts..................................... 19
----------------
3
<PAGE>
RISK FACTORS
This offering entails certain risks. In analyzing a purchase,
the following factors, among others, should be read and considered carefully in
conjunction with the more detailed information set forth elsewhere or incorpo-
rated by reference herein.
1. ACCUMULATED DEFICIT, WORKING CAPITAL DEFICIENCY, RECENT UNPROFIT-
ABLE OPERATIONS, AND EFFECT OF INTANGIBLE ASSETS. As of September 30, 1995, the
Company had an accumulated deficit of $3,948,345 and a working capital deficien-
cy of $848,084. In addition, during the fiscal year ended December 31, 1994 and
nine months ended September 30, 1995, the Company's operations were unprofit-
able. Moreover, to date, a substantial portion of the working capital require-
ments of the Company and its subsidiaries has been provided from the sale of
equity and debt securities. The ability of the Company to continue its opera-
tions successfully is materially dependent upon the marketing of its services
and products in a profitable manner, the raising of any additional capital which
it may require and the continuation of its existing asset-based lending arrange-
ment. In addition, the amortization expense of the Company's intangible asset
(i.e., software), which represented almost 31% of the Company's assets and more
than 94% of the Company's stockholders' equity as of September 30, 1995, will
adversely affect the Company's results of operations. See Item 6 of the 1994
Form 10-KSB and Item 2 of Part I of the September 30, 1995 Form 10-QSB incorpo-
rated herein by reference.
2. RECENT DIVERSIFICATION OF BUSINESS; CONTEMPLATED SALE OF INSTRUC-
TOR-LED TRAINING OPERATIONS. During the past two years, the Company has
diversified its business operations by introducing two new service/product
lines: contract consulting services and computer-based training ("CBT") pro-
grams. Due to the limited operating history with respect to such new services
and products, an evaluation of the long-term prospects of such business lines is
difficult to make. In addition, as discussed in the January 31, 1996 Form 8-K,
the Company has sold its wholly-owned Canadian subsidiary ("PC Canada") and is
exploring the possibility of selling its United States instructor-led training
("ILT") operations which, until 1993, represented the Company's sole operating
activity. No assurances can be given that such operations will be sold or that,
upon the consummation of any such sale, the Company's remaining operations will
be viable. Further, as discussed under "Subsequent Events", of the approximate-
ly $750,000 in proceeds received at the closing of the sale of PC Canada,
approximately $500,000 must be used to repay loans made to the Company effective
December 5, 1995. See Item 1 of the 1994 Form 10-KSB and Items 2 and 7 of the
January 31, 1996 Form 8-K incorporated herein by reference. In addition, see
Item 6 of the 1994 Form 10-KSB and Item 2 of Part I of the September 30, 1995
Form 10-QSB incorporated herein by reference for a discussion of,
4
<PAGE>
among other matters, the losses incurred by the Company with regard to its CBT
operations.
3. COMPETITION. The Company faces competition from a number of
entities which presently provide computer training and consulting services, or
market CBT products, similar to those furnished by the Company. The Company
also encounters competition from educational institutions providing personal
computer training programs, including universities, colleges and adult education
centers, and customers' in-house training staffs. Many of the entities which
provide ILT and consulting services, and market CBT products, have greater
financial and marketing resources than the Company. See Item 1 of the 1994 Form
10-KSB incorporated herein by reference.
4. DEPENDENCE UPON KEY PERSONNEL. The success of the Company
depends to a large extent on the efforts, abilities and expertise of a relative-
ly small group of courseware development, software development, marketing and
executive personnel. The Company has not entered into any employment agreements
with any persons. The loss of services of such key personnel could have a
material adverse effect on the Company. See Items 1 and 9 of the 1994 Form 10-
KSB incorporated herein by reference.
5. PROPRIETARY PROTECTION. The protection of proprietary informa-
tion developed by the Company and used in its training programs will be limited
to such protection as the Company may be able to secure under copyright and
patent laws and confidentiality agreements. However, there can be no assurance
that the scope of any such protection that the Company is able to secure will be
adequate to protect its proprietary information, or that the Company will have
the financial resources to engage in litigation against parties who may infringe
such patents or copyrights. In addition, there can be no assurance that others
will not develop similar training programs independently of the Company. See
Item 1 of the 1994 Form 10-KSB incorporated herein by reference.
6. TECHNOLOGICAL OBSOLESCENCE. The personal computer industry is
characterized by the continual introduction of new hardware and software
products and rapid changes in customer preferences. There can be no assurance
that the Company will have the resources to develop programs at a pace suffi-
cient to satisfy demand. See Item 1 of the 1994 Form 10-KSB incorporated herein
by reference.
7. DELAYED RELEASE OF WINDOWS 95. A new operating system entitled
"Windows 95" was originally scheduled for release during the first quarter of
1995. The release date was continually deferred and was finally released in
August, 1995. Many of the Company's clients delayed any software conversions
and training projects awaiting the release of Windows 95 with a
5
<PAGE>
resulting adverse effect on the Company's revenues. No assurances can be given
that the release of Windows 95 will have a material positive effect on the
Company's revenues.
8. CONTINGENT OBLIGATION TO ISSUE SECURITIES. In the event the
Registration Statement of which this Prospectus forms a part is not declared
effective by the Commission by June 30, 1996, the Company will be obligated to
issue a substantial number of Common Shares as well as a substantial number of
warrants for the purchase of Common Shares. In the event the Registration
Statement is not declared effective by December 31, 1996, a similar obligation
will exist. See Item 12 of the 1994 Form 10-KSB incorporated herein by refer-
ence and "Subsequent Events".
9. NO DIVIDENDS. The Company has never paid any dividends on its
Common Shares and does not anticipate paying any such dividends in the foresee-
able future.
10. LIMITED MARKET FOR COMMON SHARES; SHARES AVAILABLE FOR RESALE.
The Company does not currently meet the initial listing requirements for NASDAQ.
Accordingly, trading in the Company's Common Shares is conducted in the over-
the-counter market on the Bulletin Board where there is presently only a limited
trading market for such securities. As a consequence, purchasers of the Shares
could find it difficult to dispose of, or obtain accurate quotations as to the
market value of, such Shares. In addition, the 2,405,744 shares available for
resale pursuant to this Prospectus represent approximately 62% of the outstand-
ing shares of Common Stock of the Company (assuming the conversion of Series A
Preferred Stock into Common Stock, and the exercise of warrants for the purchase
of Common Stock, constituting a portion of such 2,405,744 shares). Sales of
substantial amounts of Common Shares of the Company in the public market
following the effective date of the registration statement of which this
Prospectus forms a part could adversely affect the market price for such Common
Shares.
11. POSSIBLE ISSUANCES OF PREFERRED STOCK. The Company has 5,000,000
shares of authorized Preferred Stock, of which 1,000,000 shares of Series A
Preferred Stock (the "Series A Preferred Shares") are outstanding. Although the
Company has no current plans to issue Preferred Stock, the Company may issue
shares of such Preferred Stock in the future without further stockholder
approval and upon such terms and conditions, and having such rights, privileges
and preferences, as the Board of Directors may determine. The rights of the
holders of Common Shares will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The availability of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from seeking to
6
<PAGE>
acquire, a majority of the outstanding voting stock of the Company. See
"Description of Common Stock".
SUBSEQUENT EVENTS
Since the filing of the 1994 Form 10-KSB, in addition to those
events discussed in the March 31, 1995 Form 10-QSB, the June 30, 1995 Form 10-
QSB, the September 30, 1995 Form 10-QSB, the Current Report on Form 8-K for an
event dated August 11, 1995 and the January 31, 1996 Form 8-K incorporated
herein by reference or otherwise discussed herein, the following events have
occurred:
(a) Effective April 19, 1995, the Company effected the Reverse
Split.
(b) Effective with the Reverse Split, 1,000,000 outstanding
shares of Series B Preferred Stock of the Company were mandatorily convert-
ed into an aggregate of 1,000,000 Common Shares of the Company (on a post-
Reverse Split basis). The resale of such Common Shares is covered by this
Prospectus. See "Principal and Selling Stockholders".
(c) In May 1995, Martin F. Kahn was elected Chairman of the
Board and a director of the Company to fill the vacancy created by the
resignation of Gilbert H. Steinberg. Mr. Kahn, age 45, has served since
1989 as Chairman of Ovid Technologies, Inc. (formerly CDP Technologies,
Inc.), a leading producer of medical, scientific and technical CD-ROM and
network products; since 1993 as Chairman of OneSource Information Services
(formerly Lotus One Source), which develops and markets a comprehensive set
of integrated business information and software products; since 1991 as
Chairman of Vista Information Solutions, Inc. (formerly DataMap, Inc., a
successor through merger to Vista Environmental Information, Inc.), which
supplies site-specific risk information about real estate for the insur-
ance, banking, and environmental engineering markets; since April 1995 as
Chairman of ShopperVision Express, Inc., which offers home grocery shopping
through dial-up and online services; and since 1990 as Managing Director of
Cadence Information Associates L.L.C. (and its predecessor), a consulting
and management services firm. Mr. Kahn holds a Bachelors Degree in
Administrative Sciences from Yale College and a Masters Degree in Business
Administration from Harvard Business School.
(d) In May 1995, Dr. Abraham Peled, a designee of Elron Elec-
tronic Industries Ltd. ("Elron"), resigned as a director of the Company.
The vacancy created by Dr. Peled's resignation was filled in December 1995
by the election of Dr. Jacov Ben-Zvi, a designee of Elron. Dr. Ben-Zvi
joined Elron in November 1995 as Senior Vice President - Business
7
<PAGE>
Development. From July 1992 to November 1995, he served as President of
Sterling Software (U.S.A.) Inc., a software products manufacturer. Prior
thereto and from October 1985, Dr. Ben-Zvi was General Manager of Israel
Sterling Teffen Labs, also a software products manufacturer.
(e) Effective December 5, 1995, the Company entered into a Loan
and Registration Rights Agreement (the "Loan Agreement") with Gibraltar
Trust ("Gibraltar"), Justy Ltd. ("Justy"), Yozma Venture Capital Ltd.
("Yozma"), SVE Star Ventures Enterprises No. II Gbr. ("SVE II"), SVE Star
Ventures Enterprises No. III Gbr. ("SVE III"), SVE Star Ventures Enterpris-
es No. IIIA Gbr. ("SVE IIIA"), Elron and Gilbert H. Steinberg (collective-
ly, the "Lenders") (see "Principal and Selling Stockholders") pursuant to
which, among other things, the Company borrowed an aggregate of $500,000
(the "Loans"). The promissory notes evidencing the Loans provide for
interest at the rate of 10% per annum and the payment of the principal
amount one year from the date of issuance. The notes provide further that,
in the event the Company shall dispose of any of its assets for an aggre-
gate purchase price of more than $100,000, then, to the extent of any net
proceeds received, the Company must repay the notes. The repayment of all
amounts due under the notes is to be secured by a security interest in all
the assets of the Company (subject to the terms of a certain Security
Agreement among the parties). As discussed in the January 31, 1996 Form 8-
K incorporated herein by reference, the Company is obligated to repay the
Loans out of the proceeds received in connection with the sale of PC
Canada.
In consideration of the Loans, the Lenders were issued five year
warrants for the purchase of an aggregate of 75,000 Common Shares of the
Company at an exercise price of $1.50 per share. The Loan Agreement
provides that, six months from the date thereof, the Lenders may be
entitled to receive additional warrants for the purchase of up 37,500
additional Common Shares of the Company (dependent upon the outstanding
principal amount of the notes at such time). Pursuant to the Loan Agree-
ment, the Lenders have also been given certain demand and piggyback
registration rights with regard to the Common Shares issuable pursuant to
the warrants.
(f) In December 1995, the Company determined that, based upon the
provisions set forth in the Certificate of Incorporation of the Company
with regard to the rights and preferences of the Series A Preferred Shares,
such shares are not redeemable by the holders thereof.
(g) As discussed in Item 12 of the 1994 Form 10-KSB incorporated
herein by reference, since the Registration Statement of which this
Prospectus forms a part was not
8
<PAGE>
declared effective by the Commission on or before December 31, 1995, the
Company is obligated to issue to certain of the persons and entities listed
herein as Selling Shareholders an aggregate of 200,000 Common Shares and
warrants for the purchase of an aggregate of 100,000 Common Shares. See
"Principal and Selling Stockholders" and "Risk Factors".
(h) In January 1996, in connection with the sale by the Company
of PC Canada, John Towsley resigned as an officer and director of the
Company.
THE COMPANY
The Company develops and offers instructor-led and computer-based
personal computer training programs, and provides consulting services, primarily
to large business and public sector organizations. The Company's ILT programs
include a wide range of introductory and advanced classes in operating systems
(including MS/DOS, Microsoft Windows, IBM OS/2 and Apple Macintosh System 7.0),
word processing, spreadsheets, databases, communications, executive overviews,
integrated software packages, computer graphics and desktop publishing. The
Company's CBT programs include offerings on Lotus Notes, CC Mail, Microsoft
Office, and Lotus Smartsuite.
The Company's ILT programs, which are primarily marketed to those
business concerns and public sector organizations that devote substantial
resources to personal computer technology, are conducted solely for the benefit
of such employees. The Company has been authorized as a training center by many
software and hardware manufacturers. The Company does not sell or distribute
any computer hardware, software or related products (other than CBT programs as
discussed below).
The Company develops and offers CBT programs to augment its live
training classes. Whereas live classroom training is delivered in a classroom
setting by one of the Company's qualified instructors to students sitting in
front of personal computers, CBTs utilize a different training methodology.
Computer-based training is supplied to students on either floppy disks or over a
communication line which is tied directly to their desk-top personal computer.
This approach eliminates the need for either classrooms or instructors. The
Company believes that certain software packages and other computer-related
topics lend themselves to being taught in this manner. CBT programs, for
example, are a more cost effective way of delivering training on new features
available in software upgrades, as well as in delivering training in geographi-
cally remote locations. In addition, the Company's proprietary authoring tool,
ACE, allows CBT designers to develop custom CBT for a client's in-house computer
applications.
9
<PAGE>
The Company's Consulting Services Division is responsible for
identifying and providing independent computer personnel, on a temporary basis,
to the Company's client base for special projects. At the present time, the
Company is furnishing its full time employees, as well as independent contrac-
tors, to satisfy its clients' requirements.
See the January 31, 1996 Form 8-K incorporated herein by
reference for a discussion of the sale by the Company of PC Canada (which
company offers ILT and CBT programs, as wells as consulting services) and the
possible sale by the Company of its United States ILT operations.
The Company presently operates six training facilities -four in
New York City, one in Northern California and one in Metropark, New Jersey.
The Company was incorporated in New York in March 1985 and
changed its corporate domicile to Delaware in December 1987. The Company's
executive offices are located at 462 Seventh Avenue, New York, New York 10018
(telephone number (212) 736-5870).
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Shares by the Selling Stockholders.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, to the Company's knowledge,
certain information regarding the Company's outstanding Common Shares benefi-
cially owned as of January 31, 1996 (i) by each person who is known by the
Company to beneficially own or exercise voting or dispositive control over more
than 5% of the Company's Common Shares, (ii) by each of the Company's directors,
(iii) by all executive officers and directors of the Company as a group and (iv)
by each of the Selling Stockholders. Except as set forth below, to the
Company's knowledge, each beneficial owner has the sole power to vote and
dispose of the shares reflected.
10
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF COMMON SHARES
PRINCIPAL STOCKHOLDERS COMMON SHARES COMMONS SHARES TO BE BENE-
AND DIRECTORS; BENEFICIALLY OWNED OFFERED FICIALLY OWNED
NAME OF SELLING STOCKHOLDERS BEFORE OFFERING(1) FOR SALE AFTER OFFERING(1)
- ---------------------------- ------------------ -------------- -----------------
PERCENT PERCENT
OF OF
NUMBER OUTSTANDING NUMBER OUTSTANDING
------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Elron Electronic
Industries Ltd.(2) 858,750(3) 25.4% 840,000(3) 18,750(3) *
Terry I. Steinberg(4) 848,343(5) 26.9% -0- 848,343(5) 26.9%
(6) (6)
Gilbert H. Steinberg 839,493(5) 26.7% -0- 839,493(5) 26.7%
Six Nevada Drive
Lake Success, New York
Gibraltar Trust(7) 620,664(8) 18.5% 501,914(8) 118,750(8) 3.5%
Joshua Ruch(7) 620,664(8) 18.5% -0-(8) 118,750(8) 3.5%
Meir Barel(9) 620,664(10) 18.5% -0-(10) 118,750(8) 3.5%
Austin W. Marxe(11) 601,916(12) 18.1% -0-(12) 100,000(12) 3.0%
(13) (13)
AWM Investment 601,916(12) 18.1% -0-(12) 100,000(12) 3.0%
Company, Inc.(11) (13) (13)
Jan Philipp F. Reemtsma 571,011(8) 17.1% -0-(8) 109,250(8) 3.3%
Mera GmbH
Grosse Bleichen 8, D-2000
Hamburg, Germany
Special Situations 451,436(12) 13.8% 376,436(12) 75,000(14) 2.3%
Fund III, L.P.(11) (14) (14)
MGP Advisers 451,436(12) 13.8% -0-(12) 75,000(14) 2.3%
Limited Partnership(11) (14)
Joseph Sabrin(4) 315,458(6) 10.0% -0- 315,458(6) 10.0%
(15) (15)
SVM STAR Ventures 310,332(10) 9.6% -0-(10) 59,375(10) 1.8%
Management GmbH No. 3(9)
SVM STAR Venture Capital 310,332(10) 9.6% -0-(10) 59,375(10) 1.8%
Management Ltd.(16)
SVE STAR Ventures 213,214(10) 6.7% 172,426(10) 40,788(10) 1.3%
Enterprises No. III (17) (17) (17)
GbR(9)
Justy Ltd.(16) 186,199(10) 5.8% 150,574(10) 35,625(10) 1.1%
(18) (18) (18)
11
<PAGE>
<CAPTION>
NAME AND ADDRESS OF COMMON SHARES
PRINCIPAL STOCKHOLDERS COMMON SHARES COMMONS SHARES TO BE BENE-
AND DIRECTORS; BENEFICIALLY OWNED OFFERED FICIALLY OWNED
NAME OF SELLING STOCKHOLDERS BEFORE OFFERING(1) FOR SALE AFTER OFFERING(1)
- ---------------------------- ------------------ -------------- -----------------
PERCENT PERCENT
OF OF
NUMBER OUTSTANDING NUMBER OUTSTANDING
------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Special Situations 150,480(12) 4.2% 125,480(12) 25,000(12) *
Cayman Fund, L.P. (19) (19) (19)
Yozma Venture 124,132(10) 3.9% 100,382(10) 23,750(10) *
Capital Ltd. (20) (20) (20)
SVE STAR Ventures 79,459(10) 2.5% 64,256(10) 15,203(10) *
Enterprises No. II GbR (21) (21) (21)
Avshalom Aderet 51,000(22) 1.6% 36,000 15,000(22) *
28 Hacharoshet Street (23) (23)
Or-Yehuda, Israel
Martin F. Kahn 20,000(24) * -0- 20,000(24) *
c/o Cadence Information (25) (25)
Associates LLC
767 Fifth Avenue
New York, New York
SVE STAR Ventures 17,660(10) * 14,276(10) 3,384(10) *
Enterprises No. IIIA GbR (26) (26) (26)
Menasche Rothschild 14,800(23) * 14,800 -0- --
Eyal Gluska 2,000(23) * 2,000 -0- --
Shai Kreisler 2,000(23) * 2,000 -0- --
Aviv Lustig 2,000 * 2,000 -0- --
Daphna Steinmetz 900(23) * 900 -0- --
Yosef Blatman 600(23) * 600 -0- --
Alon Cooper 600(23) * 600 -- --
Lior Gendel 400 * 400 -0- --
Ira Moskowitz 400 * 400 -0- --
Rona Lustig 300 * 300 -0- --
Abraham Peri(2) -0-(27) -- -0- -0-(27) --
Jacov Ben-Zvi(2) -0-(27) -- -0- -0-(27) --
All executive officers 988,343(5) 30.3% 36,000 952,343(5) 29.2%
and directors as a (6)(22)(24) (6)(22)(24)
group (8 persons) (25)(28) (25)(28)
</TABLE>
12
<PAGE>
- ---------------------------
* Less than 1%.
(1) Calculated pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934. Accordingly, with respect to each particular
beneficial owner, the percentage gives effect to the deemed exercise of
such owner's options and warrants (which are currently exercisable or
exercisable within 60 days) and the deemed conversion of such owner's
convertible shares of Preferred Stock (which are currently convertible or
convertible within 60 days); the percentage, however, does not give effect
to any deemed exercise or conversion of other holders' outstanding
options, warrants and convertible Preferred Stock.
(2) Address is Advanced Technology Center, Haifa, Israel.
(3) Pursuant to Schedule 13D filed with the Commission, the number of Common
Shares beneficially owned before the offering and offered for sale
includes (i) 200,000 shares issuable upon conversion of Series A Preferred
Shares; and (ii) 40,000 shares issuable upon exercise of currently
exercisable warrants. The number of Common Shares beneficially owned
after the offering represents shares issuable upon exercise of currently
exercisable warrants.
(4) Address is 462 Seventh Avenue, New York, New York.
(5) Includes shares beneficially owned by Terry I. Steinberg (285,458), Joseph
Sabrin (285,458) and Gilbert H. Steinberg (247,427). Such shares are held
subject to a Voting Trust Agreement among such persons, expiring in 1997,
wherein the Messrs. Steinberg exercise joint voting control as co-
trustees. Each of the Messrs. Steinberg and Mr. Sabrin retain dispositive
control over their respective shares.
(6) Includes 30,000 shares issuable upon exercise of currently exercisable
options held by each of Messrs. T. Steinberg and Sabrin.
(7) Address is c/o Rho Management Co., Inc., 767 Fifth Avenue, New York, New
York.
(8) Pursuant to Schedule 13D filed with the Commission and other information
available to the Company, Messrs. Ruch and Reemtsma are two of the
grantors of Gibraltar Trust, a Selling Stockholder, which is the record
owner of 400,000 Common Shares (giving effect to the issuance described
in "Subsequent Events") and holds currently exercisable warrants for the
purchase of approximately 220,664 Common Shares. Based upon the Schedule
13D, (i) Mr. Reemtsma beneficially owns approximately 571,011 shares
(including approximately 203,010
13
<PAGE>
shares issuable upon exercise of currently exercisable warrants) and (ii)
Mr. Ruch beneficially owns approximately 49,653 shares (including
approximately 17,654 shares issuable upon exercise of currently
exercisable warrants) and exercises sole voting and dispositive control
over such shares. The Schedule 13D indicates further that Mr. Ruch's
beneficial ownership includes 25,000 shares held by Rho Management Co.,
Inc. ("Rho"), an entity over the assets of which Mr. Ruch exercises sole
investment and voting control. As stated in the Schedule 13D, through his
position with Rho, which acts as investment adviser to Mr. Reemtsma, Mr.
Ruch has investment authority over Mr. Reemtsma's shares and, therefore,
shares voting and dispositive power with Mr. Reemtsma over such shares.
In addition, an entity affiliated with Messrs. Ruch and Reemtsma is a
limited partner of SVE IIIA (as defined in footnote (10)); however,
neither Mr. Ruch nor Mr. Reemtsma has voting or dispositive power over the
shares of the Company beneficially owned by SVE IIIA. The number of
Common Shares beneficially owned before the offering and offered for sale
by Gibraltar Trust, and the number of Common Shares beneficially owned
before the offering by Mr. Ruch, includes 168,581 shares issuable upon
currently exercisable warrants (155,094 for Mr. Reemtsma). The number
of Common Shares beneficially owned after the offering by Gibraltar Trust
and Mr. Ruch includes 52,083 shares issuable upon exercise of currently
exercisable warrants (47,916 for Mr. Reemtsma).
(9) Address is 28A Leopoldstrasse, Munich, Germany.
(10) Pursuant to Schedule 13D filed with the Commission, (i) SVM STAR Ventures
Management GmbH No. 3 ("STAR Germany") manages the investments of SVE STAR
Ventures Enterprises No. II GbR ("SVE II"), SVE STAR Ventures Enterprises
No. III GbR ("SVE III") and SVE STAR Ventures Enterprises No. IIIA GbR
("SVE IIIA"), each a Selling Stockholder; (ii) SVM STAR Venture Capital
Management Ltd. ("STAR Israel") manages the investments of Justy Ltd.
("Justy") and Yozma Venture Capital Ltd. ("Yozma"), each a Selling Stock-
holder; (iii) Meir Barel is the sole director and primary owner of STAR
Germany and STAR Israel; (iv) Mr. Barel has the sole power to vote or
direct the vote, and the sole power to dispose or direct the disposition
of, the shares beneficially owned by SVE II, SVE III, SVE IIIA, Justy and
Yozma; (v) STAR Germany has the sole power to vote or direct the vote, and
the sole power to dispose or direct the disposition of, the shares benefi-
cially owned by SVE II, SVE III and SVE IIIA; and (vi) STAR Israel has the
sole power to vote or direct the vote, and the sole power to dispose or
direct the disposition of, the shares beneficially owned by Justy and
Yozma.
(11) Address is 153 East 53rd Street, New York, New York.
14
<PAGE>
(12) Pursuant to Schedule 13G filed with the Commission, (i) AWM Investment
Company, Inc. ("AWM") serves as (a) the sole general partner of MGP
Advisers Limited Partnership ("MGP") and (b) the investment adviser to,
and general partner of, Special Situations Cayman Fund, L.P. ("Cayman
Fund"), a Selling Stockholder; (ii) Austin W. Marxe is President, Chief
Executive Officer and primary owner of AWM and principal limited partner
of MGP; and (iii) MGP is a general partner of, and investment adviser to,
Special Situations Fund III, L.P. ("III Fund"), a Selling Stockholder.
Pursuant to the Schedule 13G, (i) Mr. Marxe has the sole power to vote or
direct the vote of the shares beneficially owned by the Cayman Fund,
shared power to vote or direct the vote of the shares beneficially owned
by the III Fund and the sole power to dispose or direct the disposition of
the shares beneficially owned by the Cayman Fund and the III Fund; (ii)
AWM has the sole power to vote or direct the vote of the shares
beneficially owned by the Cayman Fund and the sole power to dispose or
direct the disposition of the shares beneficially owned by the Cayman Fund
and the III Fund; and (iii) MGP has the sole power to dispose or direct
the disposition of the shares beneficially owned by the III Fund.
(13) Based upon Schedule 13G filed with the Commission and other information
available to the Company, the number of Common Shares beneficially owned
before and after the offering includes 168,582 and 33,333 shares, respec-
tively, issuable upon exercise of currently exercisable warrants.
(14) The number of Common Shares beneficially owned before the offering and
offered for sale by the III Fund includes 126,436 shares issuable upon
exercise of currently exercisable warrants. The number of Common Shares
beneficially owned after the offering includes 25,000 shares issuable upon
exercise of currently exercisable warrants.
(15) Shares (excluding shares subject to outstanding options) are held subject
to a Voting Trust Agreement as described in footnote (5).
(16) Address is 25 Lechi Street, Bnei Brak, Israel.
(17) The number of Common Shares beneficially owned before the offering and
offered for sale includes 57,914 shares issuable upon exercise of
currently exercisable warrants. The number of Common Shares beneficially
owned after the offering includes 17,886 shares issuable upon exercise of
currently exercisable warrants.
(18) The number of Common Shares beneficially owned before the offering and
offered for sale includes 50,574 shares issuable upon exercise of
currently exercisable warrants. The number of Common Shares beneficially
owned after the offering
15
<PAGE>
includes 15,625 shares issuable upon exercise of currently exercisable
warrants.
(19) The number of Common Shares beneficially owned before the offering and
offered for sale includes 42,146 shares issuable upon exercise of
currently exercisable warrants. The number of Common Shares beneficially
owned after the offering includes 8,333 shares issuable upon exercise of
currently exercisable warrants.
(20) The number of Common Shares beneficially owned before the offering and
offered for sale includes 33,715 shares issuable upon exercise of
currently exercisable warrants. The number of Common Shares beneficially
owned after the offering includes 10,417 shares issuable upon exercise of
currently exercisable warrants.
(21) The number of Common Shares beneficially owned before the offering and
offered for sale includes 21,582 shares issuable upon exercise of
currently exercisable warrants. The number of Common Shares beneficially
owned after the offering includes 6,668 shares issuable upon exercise of
currently exercisable warrants.
(22) Includes 15,000 shares issuable upon exercise of currently exercisable
options.
(23) Shares are held in trust for the benefit of the various beneficial owners.
(24) Represents shares issuable upon exercise of currently exercisable options.
(25) Options are held in the name of Cadence Information Associates LLC, a
Delaware limited liability company of which Mr. Kahn is the sole manager
and a member with a 50% membership interest.
(26) The number of Common Shares beneficially owned before the offering and
offered for sale includes 4,795 shares issuable upon exercise of currently
exercisable warrants. The number of Common Shares beneficially owned
after the offering includes 1,488 shares issuable upon exercise of
currently exercisable warrants.
(27) Does not include shares beneficially owned by Elron for which Mr. Peri and
Dr. Ben-Zvi serve as officers.
(28) Includes 39,000 shares issuable upon exercise of currently exercisable
options held by executive officers of the Company.
The Common Shares set forth in the above table are included in this
Prospectus pursuant to registration commitments accorded to the Selling Stock-
holders. Such Shares may be sold
16
<PAGE>
either pursuant to the Registration Statement of which this Prospectus forms a
part or, if available, under Section 4(1) of the Securities Act or Rule 144
promulgated thereunder. The Company will not receive any proceeds from the sale
of the Shares by the Selling Stockholders.
To the Company's knowledge, no Selling Stockholder has had any material
relationship with the Company or any of its affiliates during the past three
years, except that (i) Elron has the right, under certain circumstances, to
designate two persons as directors of the Company (Abraham Peri having served
since September 1994 as one such designee while another Elron representative
served as the second designee from September 1994 until his resignation as a
director in May 1995; in December 1995, Dr. Jacov Ben-Zvi, an Elron designee,
was elected a director to fill the vacancy created thereby); (ii) Avshalom
Aderet has served as President of PC Etcetera Israel Ltd. ("PC Israel"), a
wholly-owned subsidiary of the Company, since August 1994 and a director of the
Company since September 1994; (iii) Menasche Rothschild, Eyal Gluska, Shai
Kreisler, Aviv Lustig, Daphna Steinmetz, Yosef Blatman, Alon Cooper, Lior
Gendel, Ira Moskowitz and Rona Lustig have served as employees of PC Israel
since August 1994 (certain of such persons having left the employ of PC Israel
since such date); (iv) Joshua Ruch, a grantor of Gibraltar Trust, has a minority
equity interest in Cadence Information Associates, L.L.C., an entity that
provides consulting services to the Company and with respect to which Martin F.
Kahn, Chairman of the Board of the Company, has a 50% interest and acts as
Managing Director; and (v) effective December 5, 1995, certain of the Selling
Stockholders loaned an aggregate of $500,000 to the Company as described under
"Subsequent Events".
The Company is not aware of any underwriting arrangements with respect to
the sale of the Shares by the Selling Stockholders. The Company believes that
such securities will be sold from time to time in the over-the-counter market at
then prevailing prices or in private transactions at negotiated prices, and that
usual and customary brokerage fees will be paid by the Selling Stockholders in
connection therewith.
As indicated above, Elron currently has the right to designate two persons
to the Board of Directors of the Company. Such right, which Elron has
exercised, shall continue, however, only for as long as it beneficially owns
equity securities of the Company representing, or which are convertible into, at
least 20% of the outstanding Common Shares of the Company. Of the 858,750
Common Shares owned by, or issuable to, Elron, 840,000 are registered for resale
pursuant to the Registration Statement of which this Prospectus forms a part.
In the event, sales by Elron reduce its beneficial ownership below the 20%
threshold, it will no longer have the right to designate any directors of the
Company. Any sales by Elron prior to August 12, 1996 will require the prior
written approval of the Company.
17
<PAGE>
Similarly, a representative of Justy, Yozma, SVE II, SVE III and SVE IIIA
(collectively, the "STAR Entities") has the collective right to designate one
person to the Board of Directors of the Company for so long as the Star Entities
beneficially own collectively at least 10% of the outstanding Common Shares of
the Company. To date, such right has not been exercised. As with Elron,
substantially all of the shares beneficially owned by the Star Entities have
been registered for resale. In the event sales by such entities reduce their
collective beneficial ownership below 10% of the outstanding Common Shares, they
will no longer have the right to designate a director of the Company.
DESCRIPTION OF COMMON STOCK
The Company is currently authorized to issue 15,000,000 Common Shares, par
value $.01 per share. As of January 31, 1996, there were 3,137,462 Common Shares
issued and outstanding (including the 200,000 issuable as described under
"Subsequent Events") and held of record by approximately 44 persons.
Holders of Common Shares are entitled to one vote per share on all matters
submitted to a vote of stockholders, including the election of directors. Such
holders do not have the right to cumulate their votes for the election of
directors. Accordingly, the holders of a majority of the shares voting for
election of directors can elect all members of the Board of Directors. A
plurality vote is sufficient for the election of directors, and a majority vote
is required for other actions that require the vote or concurrence of
stockholders. Dividends may be paid to holders of Common Shares, on an equal
basis with the holders of the Company's 1,000,000 outstanding Series A Preferred
Shares when and if declared by the Board of Directors out of funds legally
available therefor. In the event of the dissolution or liquidation of the
Company, holders of Common Shares would be entitled to share ratably in the
assets of the Company remaining after satisfaction of all liabilities of the
Company and the payment to the holders of the Series A Preferred Shares of a
liquidation preference of $1.00 per share.
The holders of Common Shares have no preemptive or conversion rights, and
there are no redemption or sinking fund provisions applicable to the Common
Shares. All of the outstanding Common Shares are fully paid and nonassessable.
18
<PAGE>
LEGAL MATTERS
Matters relating to the legality of the securities being offered hereby
are being passed upon for the Company by Certilman Balin Adler & Hyman, LLP, 90
Merrick Avenue, East Meadow, New York 11554.
EXPERTS
The consolidated balance sheet of the Company as of December 31, 1994 and
the consolidated statements of operations, stockholders' equity and cash flows
of the Company for the years ended December 31, 1994 and 1993 included in the
1994 Form 10-KSB incorporated by reference in this Prospectus have been so
incorporated in reliance on the report of Norman Stumacher ("Stumacher"),
certified public accountant, given upon the authority of that firm as an expert
in auditing and accounting.
Stumacher's report indicates that he did not audit the financial
statements of PC Israel, which financial statements, Stumacher indicates,
reflect total assets and revenues constituting 8% and 4%, respectively, of the
related consolidated totals. Stumacher's report states that such statements
were audited by other auditors whose report had been furnished to him and his
opinion, insofar as it relates to amounts included for PC Israel, is based
solely on the report of the other auditors. The Company has been advised that
the auditors whose report had been furnished to Stumacher were Luboshitz,
Kasierer & Co., certified public accountants (Israel)("Luboshitz"). The report
of Luboshitz with respect to the balance sheet of PC Israel as of December 31,
1994 and the statements of income, changes in shareholders' deficiency and cash
flows of PC Israel for the period then ended, given upon the authority of that
firm as experts in auditing and accounting, has been included in the 1994 Form
10-KSB and incorporated by reference in this Prospectus.
The balance sheets of the ACE Division of Elron ("ACE") as of December 31,
1993 and 1992, the statement of income of ACE for the years ended December 31,
1993, 1992 and 1991 and the statement of cash flows of ACE for the year ended
December 31, 1993 included in the Company's Current Report on Form 8-K for an
event dated August 12, 1994, as amended, incorporated by reference in this
Prospectus have been so incorporated in reliance on the opinion of Luboshitz,
given upon the authority of that firm as experts in auditing and accounting.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (estimated except for the
Registration Fee) in connection with the offering described in the Registration
Statement:
Registration Fee................................... $ 2,070.65
Accountants' Fees and Expenses..................... *
Legal Fees and Expenses............................ 30,000.00
Printing .......................................... *
Miscellaneous...................................... *
------------
Total............................................ $ *
------------
------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 145 of the Delaware General Corporation Law, the
Registrant has the power, under certain circumstances, to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Registrant), by reason of the fact that he is or was a director, officer,
employee or agent of the Registrant, or is or was serving at the request of the
Registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses (includ-
ing attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or proceed-
ing if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Registrant, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Pursuant to such Section 145, the Registrant has the power, under certain
circumstances, to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Registrant to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the Registrant
or was serving at the request of the Registrant as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests
II-1
<PAGE>
of the Registrant, except that no indemnification generally shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant.
Pursuant to Section 145, to the extent that a director, officer, employee
or agent of the Registrant has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to above, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Article IX of the Registrant's Certificate of Incorporation and Article VI
of the Registrant's By-Laws provide generally that the Registrant shall, to the
fullest extent permitted by law, indemnify all its officers and directors.
The Registrant's Certificate of Incorporation contains provisions relating
to the elimination of directors' liability for damages for breach of duty in
such capacity.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
2(a) Asset Purchase Agreement dated as of August 12, 1994 among the
Company, PC Etcetera Israel Ltd., Elron Electronic Industries
Ltd., Adar International, Inc. and Elron Technologies Inc.1
(b) Stock Purchase Agreement dated as of January 31, 1996 by and
between Training Holdings L.L.C. and PC Etcetera, Inc.2
4(a) Certificate of Incorporation, as amended.*
(b) Certificate of Designation with regard to Series A Preferred
Shares.3
5 Opinion of Certilman Balin Adler & Hyman, LLP regarding the
legality of the securities being registered.**
10(a) Lease for premises situated at 462 Seventh Avenue, 4th Floor, New
York, New York, as amended.*
(b) Lease for premises situated at 462 Seventh Avenue, 18th Floor,
New York, New York.4
(c) Lease for premises situated at 19 Fulton Street, New York, New
York.5
II-2
<PAGE>
(d) Lease for premises situated at 120 Wood Avenue South, Iselin, New
Jersey.5
(e) Lease Amendment for premises situated at 120 Wood Avenue South,
Iselin, New Jersey.*
(f) Lease for premises situated at 80 Bloor Street, Toronto, Canada.5
(g) Amended and Restated 1987 Stock Option Plan.6
(h) Lease for premises situated at 341 Madison Avenue, New York, New
York.*
(i) Agreement dated as of May 30, 1989 among Terry I. Steinberg,
Joseph Sabrin and the Registrant, as amended.4
(j) Lease for premises situated at City Centre Tower, North York,
Ontario, Canada.*
(k) Financing Agreement - Receivables dated November 20, 1990 between
the Registrant and Rosenthal & Rosenthal, Inc.*
(l) Stockholders' Agreement dated as of August 12, 1994 among the
Registrant, Elron Electronic Industries Ltd.("Elron"), Adar
International, Inc, Elron Technologies Inc., Terry I. Steinberg,
Joseph Sabrin and Gilbert H. Steinberg.1
(m) Stock Purchase Agreement dated as of March 15, 1995 among the
Registrant, Special Situations Fund III, L.P., Special Situations
Cayman Fund, L.P., Gibraltar Trust ("Gibraltar"), Justy Ltd.
("Justy"), Yozma Venture Capital Ltd. ("Yozma"), SVE STAR Ven-
tures Enterprises No. II GbR ("SVE II"), SVE STAR Ventures
Enterprises No. III GbR ("SVE III") and SVE STAR Ventures Enter-
prises No. IIIA GbR ("SVE IIIA")(collectively, the "Series B
Purchasers").3
(n) Form of Warrant dated March 15, 1995 issued to the Series B
Purchasers for the purchase of an aggregate of 500,000 Common
Shares of the Registrant.3
(o) Loan and Registration Rights Agreement dated December 5, 1995
among the Registrant, Gibraltar, Justy, Yozma, SVE II, SVE III,
SVE IIIA, Elron and Gilbert H. Steinberg (collectively, the
"Lenders").**
(p) Form of Promissory Note dated December 5, 1995 issued to the
Lenders with regard to $500,000 aggregate principal amount of
indebtedness.**
II-3
<PAGE>
(q) Form of Warrant dated December 5, 1995 issued to the Lenders for
the purchase of an aggregate of 75,000 Common Shares of the
Registrant.**
13 Quarterly Report on Form 10-QSB for the quarter ended Sep-
tember 30, 1995, as amended.7
23(a) Consent of Norman Stumacher.**
(b) Consent of Luboshitz, Kasierer & Co.**
(c) Consent of Certilman Balin Adler & Hyman, LLP (included in its
opinion filed as Exhibit 5).
24 Powers of Attorney (included in signature page forming a
part hereof).
- -----------------------
*Denotes document previously filed as an exhibit to this Registration Statement.
**Denotes document filed herewith.
1Denotes document filed as an exhibit to the Registrant's Current Report on Form
8-K for an event dated August 12, 1994 (File No. 0-17419) and incorporated
herein by reference.
2Denotes document filed as an exhibit to the Registrant's Current Report on Form
8-K for an event dated January 31, 1996 (File No. 0-17419) and incorporated
herein by reference.
3Denotes document filed as an exhibit to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994 (File No. 0-17419) and
incorporated herein by reference.
4Denotes document filed as an exhibit to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1993 (File No. 0-17419) and
incorporated herein by reference.
5Denotes document filed as an exhibit to the Registrant's Registration Statement
on Form S-18 (File No. 33-19521) and incorporated herein by reference.
6Denotes document filed as an exhibit to the Company's Annual Report on Form 10-
KSB for the fiscal year ended December 31, 1992 (File No. 0-17419) and incorpo-
rated herein by reference.
7Denotes document filed with the Commission (File No. 0-17419) and incorporated
herein by reference.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
14th day of February, 1996.
PC ETCETERA, INC.
By: /s/ Terry I. Steinberg
-----------------------------
Terry I. Steinberg,
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
* Chairman and Director February 14, 1996
- ---------------------
Martin F. Kahn
President, Treasurer
and Director
(Principal Executive
* and Financial Officer) February 14, 1996
- ----------------------
Terry I. Steinberg
Executive Vice President,
Secretary and
* Director February 14, 1996
- ------------------------
Joseph Sabrin
Controller (Principal
* Accounting Officer) February 14, 1996
- ------------------------
Adrienne Haber
President of PC Etcetera
* Israel Ltd. and Director February 14, 1996
- ------------------------
Avshalom Aderet
* Director February 14, 1996
- ------------------------
Abraham Peri
Director
- ------------------------
Jacov Ben-Zvi
II-6
<PAGE>
*Terry I. Steinberg, pursuant to Powers of Attorney (executed by each of the
persons listed above and indicated as signed above, and filed with the Securi-
ties and Exchange Commission), by signing his name hereto does hereby sign and
execute this Amendment to the Registration Statement on behalf of each of the
persons named above and indicated as signing above in the capacities in which
the names of each appear above, and does hereby sign and execute this Amendment
to the Registration Statement in his own behalf in the capacity of President,
Treasurer, Director and Principal Executive and Financial Officer.
/s/ Terry I. Steinberg
-----------------------------
Terry I. Steinberg
February 14, 1996
<PAGE>
Exhibit 5
February 14, 1996
PC Etcetera, Inc.
462 Seventh Avenue
New York, NY 10018
RE: REGISTRATION STATEMENT ON FORM S-2
---------------------------------------
Gentlemen:
In our capacity as counsel to PC Etcetera, Inc., a Delaware corporation
(the "Company"), we have been asked to render this opinion in connection with
Amendment No. 2 to the Company's Registration Statement on Form S-2 (the
"Registration Statement") being filed contemporaneously by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
covering 2,405,744 shares of Common Stock, $.01 par value, of the Company (the
"Shares") comprised of 1,660,000 outstanding shares of Common Stock (the
"Outstanding Shares") and 745,744 shares of Common Stock issuable upon the
exercise of warrants or the conversion of Series A Preferred Stock (the
"Issuable Shares"). The Shares are being registered for resale by certain
selling stockholders.
In connection with our opinion, we have examined the Certificate of Incorpora-
tion and By-Laws of the Company, each as amended, and the Registration State-
ment. We are also familiar with proceedings of the Board of Directors of the
Company relating to the authorization of the issuance of the Shares. We have
examined such other instruments and documents as we deemed relevant under the
circumstances.
For purposes of the opinions expressed below, we have assumed (i) the authentic-
ity of all documents submitted to us as originals, (ii) the conformity to the
originals of all documents submitted as certified, photostatic or facsimile
copies and the authenticity of the originals, (iii) the legal capacity of
natural persons and (iv) the due authorization, execution and delivery of all
documents by all parties and the validity and binding effect thereof.
<PAGE>
PC Etcetra, Inc.
February 14, 1996
Page 2
Based upon and subject to the foregoing, including the assumptions made, we
are of the opinion that (i) the Outstanding Shares have been duly and validly
authorized and issued, and are fully paid and nonassessable shares of Common
Stock, $.01 par value, of the Company and (ii) the Issuable Shares have been
duly and validly authorized and, when issued in accordance with the terms of the
respective warrants and Series A Preferred Stock, will be duly and validly
issued, fully paid and nonassessable shares of Common Stock, $.01 par value, of
the Company.
We hereby consent to the use of our opinion as herein set forth as an exhibit to
the Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
This opinion is as of the date hereof, and we do not undertake, and hereby
disclaim, any obligation to advise you of any changes in any of the matters set
forth herein.
We are rendering this opinion only as to the matters expressly set forth herein,
and no opinion should be inferred as to any other matters.
This opinion is for your exclusive use only and is to be utilized and relied
upon only in connection with the matters expressly set forth herein.
Very truly yours,
CERTILMAN, BALIN, ADLER & HYMAN, LLP
<PAGE>
EXHIBIT 10(O)
LOAN AND REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated December 5, 1995, among PC ETCETERA, INC., a Delaware
corporation (the "Company"), GIBRALTAR TRUST ("Gibraltar"), JUSTY LTD.
("Justy"), YOZMA VENTURE CAPITAL LTD. ("Yozma"), SVE STAR ENTERPRISES NO. II
GBR. ("SVE II"), SVE STAR VENTURES ENTERPRISES NO. III GBR. ("SVE III"), SVE
STAR VENTURES ENTERPRISES NO. IIIA GBR. ("SVE IIIA"), ELRON ELECTRONIC
INDUSTRIES LTD. ("Elron") and GILBERT H. STEINBERG ("Steinberg" and collectively
with Gibraltar, Justy, Yozma, SVE II, SVE III, SVE IIIA and Elron, the
"Lenders").
_________________
WHEREAS, the Company desires to obtain debt financing in the aggregate
amount of five hundred thousand dollars ($500,000);
WHEREAS, each Lender is willing to lend to the Company the amount set
forth by its name on Schedule A attached hereto (collectively, the "Loans");
WHEREAS, the Loans are to be evidenced by Promissory Notes of the
Company in the aggregate principal amount of five hundred thousand dollars
($500,000) (collectively, the "Notes");
WHEREAS, contemporaneously with the issuance of the Notes, the Lenders
are to receive Warrants (the "Initial Warrants") for the purchase of an
aggregate of 75,000 shares of Common Stock of the Company (the "Initial Warrant
Shares");
WHEREAS, six months from the date hereof, the Lenders may be entitled
to receive additional Warrants (the "Additional Warrants" and collectively with
the Initial Warrants, the "Warrants") for the purchase of up to an aggregate of
37,500 additional shares of Common Stock of the Company (the "Additional Warrant
Shares" and collectively with the Initial Warrant Shares, the "Warrant Shares");
and
WHEREAS, subject to the terms of this Agreement, the Company has
agreed to grant to the Lenders certain rights to cause the registration under
the Securities Act (as hereinafter defined) of the Warrant Shares.
NOW, THEREFORE, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms have
the meanings indicated:
(a) "Securities Act" means the Securities Act of 1933, as
amended; and
<PAGE>
(b) "Rule 144 Holding Period" means the period of time that the
Warrant Shares must be held by the Lenders before they can resell them, or any
portion thereof, pursuant to Rule 144, promulgated under the Securities Act.
2. LOANS; WARRANTS.
(a) LOANS; NOTES. Simultaneously herewith, upon fulfilment of the
conditions set forth in Section 3 hereof, each Lender is loaning to the Company
the amount set forth on Schedule A attached hereto, and, in consideration
thereof, the Company is issuing to the Lender a Note in the principal amount
thereof.
(b) INITIAL WARRANTS. Simultaneously herewith, in consideration
of the Loans, each Lender is being issued by the Company Initial Warrants for
the purchase of such number of shares of Common Stock of the Company as shall
equal twenty-two and one-half percent (22.5%) of the principal amount of the
Lender's Note divided by one dollar fifty cents ($1.50). Accordingly, the
aggregate number of Initial Warrant Shares shall equal seventy-five thousand
(75,000). The Initial Warrants shall be exercisable at a price of one dollar
fifty cents ($1.50) per share until five (5) years from the date hereof and
shall contain certain antidilution provisions as set forth therein.
(c) ADDITIONAL WARRANTS. In consideration of the receipt of the
Loans, the Company agrees to issue to each Lender on the six month anniversary
of the date hereof (the "Six Month Anniversary") Additional Warrants for the
purchase of such number of shares of Common Stock of the Company as shall equal
eleven and one-quarter percent (11.25%) of the outstanding principal balance of
the Lender's Note as of the Six Month Anniversary divided by one dollar fifty
cents ($1.50). Accordingly, in the event the outstanding aggregate principal
balance of the Lenders' Notes as of the Six Month Anniversary remains at five
hundred thousand dollars ($500,000), the number of Additional Warrant Shares
shall be thirty-seven thousand five hundred (37,500). The Additional Warrants
shall be in the same form as the Initial Warrants.
3. CONDITIONS PRECEDENT. The Lenders' obligations to make the Loans
under this Agreement shall be subject to their receipt of the following
documents simultaneously herewith in form and substance reasonably satisfactory
to the Lenders:
(a) A Security Agreement, duly executed and delivered by the
Company;
(b) Financing statements in form for filing in the relevant
jurisdictions where such filing would be required in order to perfect any
security interest granted under the Security Agreement; and
2
<PAGE>
(c) A copy of the resolutions of the Board of Directors of the
Company authorizing the execution, delivery and performance by the Company of
this Agreement and the Notes.
4. REGISTRATION RIGHTS.
(a) DEMAND RIGHTS. Upon the written request of the holders of a
majority of the Warrant Shares (the "Demand Registration Request"), received on
or after the Six Month Anniversary and prior to the expiration of the Rule 144
Holding Period, that the Company register such Warrant Shares for resale under
the Securities Act, the Company shall advise in writing all other holders of the
Warrant Shares of the Demand Registration Request and of its intention to file a
registration statement under the Securities Act covering such resale (the
"Registration Notice"). The Company thereafter shall, as expeditiously as
reasonably practicable, file a registration statement under the Securities Act
for the sale of the number of Warrant Shares owned by the Lenders specified in
the Demand Registration Request, as well as the number of Warrant Shares owned
by the Lenders who advise the Company in writing within twenty (20) days of the
date of, and in response to, the Registration Notice that they desire to have
their Warrant Shares included in such registration statement, and shall
thereafter file such amendment or amendments to such registration statement, in
the use of its best efforts, to cause the same to become effective. The Company
shall not be obligated to file or use its best efforts to cause to become
effective a registration statement under this paragraph (i) during any period
(A) commencing with the date the Company files a registration statement relating
to the sale or exchange by it of its securities in either an underwritten
offering or in an offering involving a merger, acquisition, combination or
reorganization, and (B) ending on the ninetieth (90th) day following the
consummation of any such underwritten offering or other such transaction, or
(ii) if, in its judgment, such filing or registration may be materially
disruptive or detrimental to its business or any pending or prospective
transaction. Following the conclusion of such period or commencing upon such
time as the filing or registration would not be so materially disruptive or
detrimental, the Company's obligation to file or use its best efforts to cause
to become effective a registration statement shall recommence. The Company
shall not be obligated to use its best efforts to effect more than one (1)
registration pursuant to the terms of this paragraph (a).
(b) PIGGYBACK RIGHTS. The Company agrees that, if it shall
propose to file, at any time on or after the Six Month Anniversary and prior to
the expiration of the Rule 144 Holding Period, for the sale by the Company of
shares of its Common Stock for cash, a registration statement under the
Securities Act on Form SB-1, SB-2, S-1, S-2 or S-3 (or a comparable successor
form) (but excluding registration statements for employee benefit plans or
transactions of the nature contemplated by Rule 145, promulgated
3
<PAGE>
under the Securities Act), the Company shall give written notice to the Lenders
of such intention at least twenty (20) days prior to the proposed filing date
and shall include the Warrant Shares in such registration statement at the
written request of the Lenders, provided that the Company receives a request
therefor at least ten (10) days prior to the proposed filing date; provided,
however, that if, in the opinion of the managing underwriter or underwriters of
the offering of the Company's securities for which such registration statement
is being filed, such inclusion is likely to affect adversely the success of the
offering or the price that would be received, at the option of such managing
underwriter or underwriters, (i) the number of Warrant Shares to be added to the
registration statement shall be reduced (to zero if necessary), and/or (ii) the
Lenders shall delay the sale of the Warrant Shares included in the registration
statement until the expiration of the ninety (90) day period commencing with the
effective date of the registration statement.
(c) OBLIGATIONS OF THE COMPANY.
(i) As to each registration statement referred to in this
Section 4, the Company shall:
(A) use its best efforts to have such registration
statement declared effective as promptly as reasonably practicable and shall
promptly notify the Lenders and the underwriters, if any, for the Lenders, and
confirm such advice in writing, (I) when such registration statement becomes
effective, (II) when any post-effective amendment to any such registration
statement becomes effective, and (III) of any request by the Securities and
Exchange Commission (the "SEC") for any amendment or supplement to such
registration statement or any prospectus relating thereto or for additional
information;
(B) furnish to the Lenders or the underwriters for the
Lenders, if any, or other securities firms designated by the Lenders, if any,
such reasonable number of copies of any prospectus (including any supplemental
or preliminary prospectus) as may be reasonably necessary in order to effect the
offering and sale of the Warrant Shares being offered and sold by the Lenders,
but only while the Company is required under the provisions hereof to cause the
registration statement to remain current;
(C) qualify, not later than the effective date of such
registration statement, the Warrant Shares registered thereunder under the "blue
sky" laws of such states as the Lenders may reasonably request; provided,
however, that in no event shall the Company be obligated to qualify as a foreign
corporation or as a dealer in securities or to execute or file any general
consent to service of process under the laws of any such state where it is not
at such time so qualified or subject;
4
<PAGE>
(D) until the earlier of (I) the sale of all the
Warrant Shares or (II) seven (7) months following the expiration date for the
exercise of the Warrants, from time to time amend or supplement the registration
statement and the prospectus in connection therewith to the extent necessary to
permit the completion of the sale of the Warrant Shares for which such
registration statement shall have become effective within said period in
compliance with the Securities Act and the rules and regulations promulgated
thereunder.
(ii) If at any time the SEC should institute or threaten to
institute any proceedings for the purpose of issuing, or should issue, a stop
order suspending the effectiveness of any registration statement referred to in
this Section 4, the Company shall notify the Lenders and shall use its best
efforts to prevent the issuance of any such stop order or to obtain the
withdrawal thereof as soon as possible. The Company shall advise the Lenders of
any order or communication of any public board or body addressed to the Company
suspending or threatening to suspend the qualification of any of the Warrant
Shares for sale in any jurisdiction. In the event that the effectiveness of
such registration statement shall be suspended, the Company shall extend the
period during which such registration statement shall be maintained effective,
pursuant to Section 4(c)(i)(D) hereof, by the number of days during the period
from and including the date of such suspension to the date when such suspension
shall be removed or terminated.
(iii) The Company shall, if requested, prior to filing a
registration statement referred to in this Section 4 or prospectus or any
amendment or supplement thereof, furnish to each Lender and each underwriter, if
any, of the Warrant Shares covered by such registration statement, prospectus,
amendment or supplement, copies of such registration statement, prospectus,
amendment or supplement as proposed to be filed by the Company.
(d) EXPENSES. Except as provided below, the expenses of the
registration statements pursuant to this Section 4, and the state qualifications
related thereto pursuant to Section 4(c)(i)(C), shall be borne by the Company.
The expenses of any such registration and qualifications shall include, but not
be limited to (A) the fees and expenses of the Company's counsel and its
accountants; (B) all other out-of-pocket costs and expenses of the Company
incident to the preparation, printing and filing under the Securities Act of the
registration statement and all amendments and supplements thereto; (C) the cost
of furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to the Lenders and each underwriter, if
any; and (D) the costs and expenses incurred in connection with the
qualification of such securities so registered under the "blue sky"
5
<PAGE>
laws of various jurisdictions. However, under no circumstances shall the
Company be liable or responsible for the fees and expenses of the Lenders, or of
any of their counsel, incurred in connection with any registration or for
underwriting or brokerage discounts and commissions or transfer taxes payable in
connection with any sale of the Warrant Shares included in a registration
statement.
(e) INDEMNIFICATION.
(i) The Company hereby agrees to indemnify, hold harmless
and defend the Lenders, and each of them, any underwriter (as such term is
defined in the Securities Act) for the Lenders, any broker or dealer to or
through whom the Lenders sell Warrant Shares that may be deemed to be an
underwriter and each person, if any, that controls (within the meaning of the
Securities Act) any of the Lenders or any such underwriter, broker or dealer
against any and all losses, claims, damages, liabilities and expenses (including
reasonable counsel fees and expenses) to which any such persons may be subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (including reasonable counsel fees and expenses) arise
out of or are based upon any untrue statement of a material fact contained in
any registration statement under which the Warrant Shares were registered under
the Securities Act pursuant to this Section 4, any prospectus contained therein,
or any amendment or supplement thereto, or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
information furnished in writing to the Company by any Lender or any underwriter
or representative for a Lender, which writing specifies that the information be
included in the registration statement. Each Lender hereby agrees to indemnify,
hold harmless and defend the Company, its directors, officers, agents and
representatives, and each person, if any, that controls (within the meaning of
the Securities Act) the Company against any losses, claims, damages, liabilities
and expenses (including reasonable counsel fees and expenses) to which any of
such persons may be subject under the Securities Act or otherwise, but only to
the extent caused by an untrue statement or omission of a material fact in any
registration statement under which the Warrant Shares were registered under the
Securities Act, any prospectus contained therein, or any amendment or supplement
thereto, which was based solely upon information furnished in writing to the
Company by such Lender or any underwriter or representative for such Lender,
which writing specifies that the information be included in the registration
statement.
(ii) In the event that any claim, demand, investigation or
action for which an indemnifying party would be liable to an indemnified party
hereunder is asserted against or
6
<PAGE>
sought to be collected from an indemnified party by a third party, the
indemnified party shall promptly notify the indemnifying party of such claim,
demand, investigation or action specifying the nature thereof and the amount or
the estimated amount thereof to the extent then feasible. The indemnifying
party shall thereupon, at its sole cost and expense, defend the indemnified
party against such claim, demand, investigation or action with counsel
reasonably satisfactory to the indemnified party.
(iii) The indemnifying party shall not, without the
prior written consent of the indemnified party, consent to the entry of any
judgment against the indemnified party or enter into any settlement or
compromise with regard to any such claim, demand or action unless such judgment,
settlement or compromise includes, as an unconditional term thereof (i.e., there
being no requirement that the indemnified party pay any amount of money or give
any other consideration), the giving by the claimant or plaintiff to the
indemnified party of a release, in form and substance satisfactory to the
indemnified party, from all liability in respect of such claim, demand or
action. If the indemnified party desires to participate in, but not control,
any such defense or settlement, it may do so at its sole cost and expense;
PROVIDED, HOWEVER, that the indemnifying party shall pay the reasonable fees and
expenses of counsel for the indemnified party if the named parties to any action
(included impleaded parties) include both the indemnifying party and indemnified
parties and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
(f) OBLIGATIONS OF THE LENDERS. As to each registration
statement referred to in this Section 4, each of the Lenders shall provide the
Company with a written description of the proposed method or methods of
distribution of the Warrant Shares contemplated by that Lender and such other
information as may be required by the Company, and the Company shall include
such description and other information in the registration statement and file
any and all amendments and supplements necessary in connection therewith.
5. ACQUISITION OF SECURITIES. Each Lender makes the following
representations and warranties to the Company with respect to itself (and, in
the case of a trust Lender, with respect to any grantors for which it may be
considered a nominee):
(a) INVESTMENT REPRESENTATIONS.
(i) Each Lender is acquiring the Note and the Warrants and,
in the event of an exercise of the Warrants, will be acquiring the Warrant
Shares for its own account, and not as a nominee or agent (except in the case of
a trust Lender to the extent the trust may be considered a nominee for its
grantors, which, in number, do not exceed five (5)), and will not resell or
7
<PAGE>
otherwise distribute any of such securities except in compliance with the
Securities Act,
(ii) Each Lender understands that neither the Notes nor the
Warrants nor the Warrant Shares (collectively, the "Securities") have been
registered under the Securities Act or any state securities laws and, except as
provided for in Section 4 hereof, there is no agreement on the part of the
Company to register any of the Securities thereunder.
(iii) Each Lender acknowledges and agrees that none of the
Securities may be sold, pledged, transferred, assigned, or otherwise disposed of
unless they are registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is available.
Each Lender further acknowledges and agrees that, as a condition to the transfer
or other disposition of any of the Securities, the Company may require that the
request for transfer be accompanied by an opinion of counsel, in form and
substance reasonably satisfactory to the Company and its counsel, to the effect
that the proposed transfer does not result in a violation of the Securities Act
and any applicable state securities laws. Each Lender understands that each
certificate representing any of the Securities will bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state. The securities may not be sold,
pledged, transferred, assigned or otherwise disposed of in the absence
of an effective registration statement under such Act and any
applicable state securities laws covering such securities, or an
opinion of counsel reasonably satisfactory to the Company that such
registration is not required."
(b) ADDITIONAL REPRESENTATIONS.
(i) Each Lender is able to bear the economic risks of an
investment in each of the Securities, including, without limitation, the risk of
the loss of part or all of its investment and the inability to sell or transfer
the Securities until such Securities are registered under the Securities Act or
an exemption from registration is available; SUBJECT, HOWEVER, to the Company's
obligation to use its best effort to effect any registration of the Warrant
Shares under the Securities Act in accordance with Section 4 hereof.
(ii) Each Lender is an "accredited investor", as such term
is defined in Rule 501(a), promulgated under the Securities Act, or it, alone or
with its purchaser representative, if any, has such knowledge and experience in
financial and business
8
<PAGE>
matters that it is capable of evaluating the merits and risks of an investment
in each of the Securities. Each Lender will execute and deliver to the Company
such documents as the Company may reasonably request in order to confirm the
accuracy of the foregoing.
(iii) Each Lender and its purchaser representative, if
any, have reviewed the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994, as amended, Quarterly Report on Form 10-QSB for the period
ended June 30, 1995 and Current Reports on Form 8-K for events dated August 12,
1994, as amended, and December 16, 1994 and have been afforded the opportunity
to obtain such other information as such Lender requested from the Company in
order to evaluate the merits and risks of an investment in each of the
Securities.
(iv) No board of directors of any corporate Lender, no
general partner of any partnership Lender and no trustee of any trust Lender has
adopted any resolutions or made any determination relative to the distribution
of any of the Securities to its stockholders, partners, grantors or
beneficiaries and has no present intention to do so.
6 MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of New York, excluding choice of law
principles thereof.
(b) ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the subject
matter hereof and may be amended only by a writing executed by the Company and
the relevant Lender.
(c) NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, or delivered either by hand or by messenger or sent by
overnight mail or courier or by facsimile transmission, addressed as follows:
If to the Company:
462 Seventh Avenue
New York, New York 10018
Attention: President
Telecopier: (212) 736-0039
9
<PAGE>
with a copy to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attention: Fred Skolnik, Esq.
Telecopier: (516) 296-7111
If to Gibraltar:
c/o Rho Management Company, Inc.
767 Fifth Avenue
New York, New York 10153
Telecopier: (212) 751-3613
with a copy to:
Gregory F. W. Todd, Esq.
900 Third Avenue
Suite 1250
New York, New York 10022-4728
Telecopier: (212) 355-7674
If to Justy or Yozma:
c/o SVM STAR Venture Capital Management
25 Lechi Street
Bnei-Brak 51200
Israel
Telecopier: 972-3-6180748
If to SVE II, SVE III or SVE IIIA:
28A Leopoldstrasse
80802 Munchen
Germany
Telecopier: 49-89-38170556
with a copy of all notices and other communications
to Justy, Yozma, SVE II, SVE III and SVE IIIA to:
Goldfarb, Levy, Eran & Co.
Eliahu House
2 Ibn Gvirol
Tel Aviv, Israel
Attention: Oded Eran, Adv.
Telecopier: 972-3-695-4344
10
<PAGE>
If to Elron:
850 Third Avenue
New York, New York 10022
Attention: President
Telecopier: (212) 935-3882
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Richard H. Gilden, Esq.
Telecopier: (212) 752-5958
If to Steinberg:
6 Nevada Drive
Lake Success, New York 11042
Telecopier: (516) 328-1654
or at such other address as the Company or the respective Lender shall have
furnished in writing as aforesaid.
(d) HEADINGS. The headings of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which together
shall constitute one instrument.
(f) FACSIMILE. This Agreement may be executed and thereafter
transmitted by facsimile and the facsimile receipt shall constitute an original.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the successors, permitted assigns, and legal
representatives of the parties hereto; provided, however, that the rights under
this Agreement may not be assigned by any Lender, in whole or in part, without
the prior written consent of the Company.
11
<PAGE>
IN WITNESS WHEREOF, we have set our hands as of the date first above
written.
PC ETCETERA, INC.
By: /s/
-----------------------------
GIBRALTAR TRUST
By: /s/
------------------------------
JUSTY LTD.
By: /s/
------------------------------
By: /s/
------------------------------
YOZMA VENTURE CAPITAL LTD.
By: /s/
------------------------------
By: /s/
------------------------------
SVE STAR VENTURES ENTERPRISES NO. II GBR.
By: SVM STAR Ventures Management GmbH Nr. 3
By: /s/
------------------------------
By: /s/
------------------------------
SVE STAR VENTURES ENTERPRISES NO. III GBR.
By: SVM STAR Ventures Management GmbH Nr. 3
By: /s/
-----------------------------
By: /s/
-----------------------------
12
<PAGE>
SVE STAR VENTURES ENTERPRISES NO. IIIA GBR.
By: SVM STAR Ventures Management GmbH Nr. 3
By: /s/
----------------------------
By: /s/
----------------------------
ELRON ELECTRONIC INDUSTRIES LTD.
By: /s/
---------------------------------
/s/
-------------------------------------
Gilbert H. Steinberg
13
<PAGE>
SCHEDULE A
LENDER AMOUNT OF LOAN
------ --------------
Gibraltar Trust $125,000
Justy Ltd. $ 37,500
Yozma Venture Capital Ltd. $ 25,000
SVE STAR Ventures Enterprises $ 16,000
No. II GbR.
SVE STAR Ventures Enterprises $ 42,900
No. III GbR.
SVE STAR Ventures Enterprises $ 3,600
No. IIIA GbR.
Elron Electronic Industries $125,000
Ltd.
Gilbert H. Steinberg $125,000
14
<PAGE>
EXHIBIT 10(P)
THIS PROMISSORY NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY BE
TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN COMPLIANCE WITH THE SECURITIES ACT
OF 1933, AS AMENDED. THIS LEGEND SHALL BE ENDORSED UPON ANY PROMISSORY NOTE
ISSUED IN EXCHANGE FOR THIS PROMISSORY NOTE.
PC ETCETERA, INC.
DECEMBER 5, 1995
$___________
PROMISSORY NOTE
PC ETCETERA, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to _________ or registered assigns (the
"Holder"), on the earlier of one (1) year from the date hereof or each
Redemption Date (as hereinafter defined) at the offices of the Company, 462
Seventh Avenue, New York, New York the principal sum of ___________________
DOLLARS ($________)(or such lesser amount required to be paid on such Redemption
Date) in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts and to
pay interest on such principal sum at the rate of ten percent (10%) per annum
from the date hereof. Interest on the unpaid principal balance of this
Promissory Note ("Note") shall be payable in cash on each March 31, June 30,
September 30 and December 31 commencing on December 31, 1995.
Any principal portion of, or interest or fee payable on, this Note
which is not paid on the date when due shall bear interest from such due date to
the date of actual payment, as well after as before judgment, at the rate per
annum which is four percent (4%) above the rate otherwise payable hereunder;
provided, however, that the rate of interest under this Note shall not exceed
the maximum rate of interest then permitted by applicable law.
1. SERIES OF NOTES. The Company and the Holder acknowledge that this
Note is one of a series of Promissory Notes issued to various persons and
entities in the aggregate principal amount of five hundred thousand dollars
($500,000) pursuant to a Loan and Registration Rights Agreement of even date
(the "Loan Agreement"). The Company and the Holder agree that the rights of the
Holder herein shall be PARI PASSU with the rights of the holders of the other
Promissory Notes (the "Other Notes").
2. REGISTERED OWNER. The Company may consider and treat the person
in whose name this Note shall be registered as the absolute owner thereof for
all purposes whatsoever (whether or not this Note shall be overdue) and the
Company shall not be affected by any notice to the contrary. The registered
owner of this Note
<PAGE>
shall have the right to transfer it by assignment and the transferee thereof,
upon his registration as owner of this Note, shall become vested with all the
powers and rights of the transferor. Registration of any new owner shall take
place upon presentation of this Note to the Company at its offices together with
an assignment duly authenticated. In case of transfers by operation of law, the
transferee shall notify the Company of such transfer and of his address, and
shall submit appropriate evidence regarding the transfer so that this Note may
be registered in the name of the transferee. This Note is transferable only on
the books of the Company by the Holder hereof, in person or by attorney, on the
surrender hereof, duly endorsed. Communications sent to any registered owner
shall be effective as against all holders or transferees of this Note not
registered at the time of sending the communication.
3. SECURITY. The repayment of all amounts due under this Note is
secured by a security interest in all of the assets of the Company pursuant and
subject to the terms set forth in a certain Security Agreement of even date
between the Company and the Holder, among others (the "Security Agreement").
4. REDEMPTION.
4.1 REDEMPTION RIGHT. The Holder, by its acceptance of this
Note, hereby acknowledges that, at any time, and from time to time, the Company
may, at its option, by written notice given to the Holder, elect to redeem and
prepay, without premium or penalty, all or any portion of the outstanding
principal indebtedness evidenced by this Note provided that all Notes issued
pursuant to the Loan Agreement shall be repaid PRO RATA.
4.2 REDEMPTION OBLIGATION. (a) In the event the Company at
any time or from time to time shall sell, lease, transfer or otherwise dispose
of any of its assets in a single transaction or a series of related transactions
for an aggregate purchase price of more than one hundred thousand dollars
($100,000), then, to the extent of any net proceeds received, the Company shall
redeem and prepay, upon the closing of each such transaction(s) (each such date,
a "Redemption Date"), without premium or penalty, the outstanding principal
indebtedness evidenced by this Note and the Other Notes PRO RATA.
(b) If the Company shall fail to make any payment of
principal hereunder on the due date therefor or any payment of interest for a
period of seven (7) days past the due date therefor, or there shall occur an
Event of Default under the Security Agreement and any such Event of Default
shall be continuing, the Holder may, by written notice to the Company, declare
the entire unpaid principal amount of this Note then outstanding, plus accrued
interest thereon, to be forthwith due and payable whereupon the same shall
become forthwith due and payable.
2
<PAGE>
5. WAIVER; EXPENSES. The Company hereby waives presentment,
notice of dishonor, protest, notice of acceleration, notice of intent to
accelerate or any other notice of any kind in connection with this Note. The
Company shall pay all reasonable out-of-pocket expenses incurred by the Holder
in connection with the enforcement and collection of this Note or any judgment
based thereon, including, without limitation, the reasonable fees and expenses
of any counsel for the Holder.
6. APPLICABLE LAW. This Note is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of New York, excluding choice of law rules thereof.
7. MISCELLANEOUS. This Note sets forth the rights and
obligations of the Holder and the Company. No provision of this Note may be
modified except by an instrument in writing signed by the party against whom the
enforcement of any modification is sought.
Payment of principal and interest due under this Note shall be
made to the registered Holder of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as of
the day and year first above written.
PC ETCETERA, INC.
By:
---------------------------
Terry I. Steinberg
President
3
<PAGE>
PC ETCETERA, INC.
PROMISSORY NOTE
DECEMBER 5, 1995
FOR USE ONLY UPON ASSIGNMENT
FOR VALUE RECEIVED
The undersigned ___________________________________________________________
(please print or typewrite name of assignor)
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(please print or typewrite name, address and social security or taxpayer
identification number, if any, of assignee) the within Promissory Note of PC
ETCETERA, INC. in the original principal amount of $_________ and hereby
authorizes the Company to transfer this Note on its books.
--------------------------------
(Signature)
--------------------------------
(Signature, if jointly held)
--------------------------------
(Date)
-------------------------
(Signature(s) guaranteed)
<PAGE>
EXHIBIT 10(Q)
VOID AFTER 5:00 P.M., NEW YORK CITY LOCAL TIME, ON DECEMBER 5, 2000
NEITHER THIS WARRANT NOR THE WARRANT SHARES (AS HEREINAFTER DEFINED) HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT NOR THE WARRANT SHARES MAY
BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF (COLLECTIVELY,
"TRANSFERRED") IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS COVERING SUCH SECURITIES, OR AN
OPINION OF COUNSEL TO PC ETCETERA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS
WARRANT.
- --------------------------------------------------------------------------------
PC ETCETERA, INC.
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
WARRANT
-------
DECEMBER 5, 1995
FOR VALUE RECEIVED, PC ETCETERA, INC., a Delaware corporation (the
"Company"), hereby certifies that _________________________________ (the
"Holder") is entitled, subject to the provisions of this Warrant, to purchase
from the Company up to ___________________________ (___________) SHARES OF
COMMON STOCK ("Common Shares") of the Company at a price of ONE DOLLAR FIFTY
CENTS ($1.50) per share (the "Exercise Price") during the period commencing on
the date hereof and expiring at 5:00 P.M., New York City local time, on December
5, 2000.
The number of shares to be received upon the exercise of this Warrant
may be adjusted from time to time as hereinafter set forth. The shares
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares".
The Holder agrees with the Company that this Warrant is issued, and
all the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
1. EXERCISE OF WARRANT.
1.1 EXERCISE. Subject to the provisions hereof, this
Warrant may be exercised in whole or in part at any time, or from time to time,
during the period commencing on the date hereof and expiring at 5:00 p.m., New
York City local time, on December 5, 2000 or, if such day is a day on which
banking institutions in the City of New York are authorized by law to close,
then on the next succeeding business day that shall not be such a day, by
presentation and surrender hereof to the Company at its principal office, with
the Warrant Exercise Form attached hereto duly
<PAGE>
executed and accompanied by payment (either in cash or by certified or official
bank check, payable to the order of the Company) of the Exercise Price for the
number of shares specified in such Form. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder.
1.2 NET EXERCISE. Notwithstanding the foregoing, in lieu of
paying to the Company an amount equal to the aggregate Exercise Price of the
Warrant Shares being purchased, the Holder may elect to receive Warrant Shares
equal to the value (as determined below) of the Warrant by surrender of this
Warrant, in which event the Company shall issue to the Holder a number of
Warrant Shares computed using the following formula:
X = Y (A-B)
---------
A
Where: X = the number of Warrant Shares
to be issued to the Holder.
Y = the number of Warrant Shares
under this Warrant.
A = the Current Market Price Per
Share (as hereinafter defined)
on the day on which the
Warrant Exercise Form is
received by the Company.
B = the Exercise Price.
2. RESERVATION OF SHARES. The Company will reserve for
issuance and delivery upon exercise of this Warrant all Common Shares or other
shares of capital stock of the Company (and other securities and property) from
time to time receivable upon exercise of this Warrant; provided, however, that
nothing contained herein shall preclude the Company from satisfying its
obligations hereunder by delivery of shares which are held in the treasury of
the Company.
3. FRACTIONAL SHARES. The Company shall not be required to
issue certificates representing fractions of shares, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the Company and the Holder that all fractional interests shall be eliminated.
4. EXCHANGE OR ASSIGNMENT OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company, for other
2
<PAGE>
Warrants of different denominations, entitling the Holder to purchase in the
aggregate the same number of shares purchasable hereunder. Subject to the
provisions of this Warrant and receipt by the Company of any required
representations and agreements, upon surrender of this Warrant to the Company
with the Warrant Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without additional
charge, execute and deliver a new Warrant in the name of the assignee named in
such instrument of assignment and this Warrant shall promptly be canceled.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder of the Company, either at law
or in equity, and the rights of the Holder are limited to those expressed in
this Warrant.
6. ANTI-DILUTION PROVISIONS.
6.1 ADJUSTMENTS FOR STOCK DIVIDENDS; COMBINATIONS, ETC. In
case the Company shall do any of the following (an "Event"):
(a) declare a dividend or other distribution on its Common
Shares payable in Common Shares of the Company,
(b) effect a subdivision of its outstanding Common Shares
into a greater number of Common Shares (by reclassification, stock split or
otherwise than by payment of a dividend in Common Shares),
(c) effect a combination of its outstanding Common Shares
into a lesser number of Common Shares (by reclassification, reverse split or
otherwise),
(d) issue by reclassification, exchange or substitution of
its Common Shares any shares of capital stock of the Company, or
(e) effect any other transaction having similar effect,
then the Exercise Price in effect at the time of the record date for such
dividend or other distribution or of the effective date of such subdivision,
combination, reclassification, exchange or substitution shall be changed to a
price determined by multiplying such Exercise Price by a fraction, of which the
numerator shall be the number of Common Shares outstanding immediately prior to
such Event, and the denominator shall be the number of Common Shares outstanding
immediately after such Event. Each such adjustment of the Exercise Price shall
be calculated to the nearest cent. No such adjustment shall be made in an
amount less than one cent ($.01), but any such amount shall be carried forward
and shall be
3
<PAGE>
given effect in connection with the next subsequent adjustment. Such adjustment
shall be made successively whenever any Event listed above shall occur.
6.2 ADJUSTMENT FOR CONSOLIDATION OR MERGER. In case of any
consolidation or merger to which the Company is a party, other than a merger or
consolidation in which the Company is the surviving or continuing corporation
and which does not result in any reclassification of, or change (other than a
change in par value or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination) in, outstanding
Common Shares, then, and in each such case, the Holder of this Warrant, upon the
exercise thereof as provided in Section 1, at any time after the consummation of
such consolidation or merger, shall be entitled to receive, in lieu of the
securities and property receivable upon the exercise of this Warrant prior to
such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property receivable upon the exercise of this
Warrant after such consummation.
6.3 ISSUANCE OF SHARES, ETC. (a) In case the Company shall
issue its Common Shares (other than (i) pursuant to Exempt Issuances, as
hereinafter defined, or (ii) upon the exercise of any rights, options, warrants,
or the conversion of any securities, as provided for in paragraph (c) hereof)
for a consideration per share less than the Exercise Price in effect on the day
immediately preceding the date of issuance, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the sum of the number of Common Shares
outstanding immediately prior to the issuance of such additional shares and the
number of Common Shares which the aggregate consideration received (determined
as provided in Section 6.5 below) for the issuance of such additional shares
would purchase at such Exercise Price and the denominator shall be the number of
Common Shares outstanding immediately after the issuance of such additional
shares. Such adjustment shall be made successively whenever any such issuance
is made.
(b) If, at any time or from time to time after the date of
this Warrant, the Company shall distribute to the holders of its outstanding
Common Shares (i) securities, other than its Common Shares, or (ii) property,
other than cash, without payment therefor, then, and in each such case, the
Holder, upon the exercise of this Warrant, shall be entitled to receive the
securities and property which the Holder would hold on the date of such exercise
if, on the date of this Warrant, the Holder had been the holder of record of the
number of Common Shares subscribed for
4
<PAGE>
upon such exercise and, during the period from the date of this Warrant to and
including the date of such exercise, had retained such shares and the securities
and properties receivable by the Holder during such period. Notice of each such
distribution shall be forthwith mailed to the Holder.
(c) In case the Company shall issue any rights, options,
warrants or securities convertible into Common Shares (other than Exempt Rights,
as hereinafter defined) entitling the holders thereof to purchase Common Shares
or to convert such securities into Common Shares at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such rights, options,
warrants or convertible securities plus the total consideration, if any, payable
to the Company upon exercise or conversion thereof (the "Total Consideration")
by (ii) the number of additional Common Shares issuable upon exercise or
conversion of such securities) less than the Exercise Price in effect on the
date of such issuance or sale, the Exercise Price shall be adjusted as of the
date of such issuance or sale so that the same shall equal the price determined
by multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of Common Shares
outstanding immediately prior to such issuance or sale and the number of Common
Shares which the Total Consideration would purchase at such Exercise Price and
the denominator shall be the number of Common Shares outstanding on the date of
such issuance or sale plus the maximum number of additional Common Shares
issuable upon exercise or conversion of such securities.
(d) On the expiration of such rights, options or warrants,
or the termination of such right to convert, the Exercise Price shall forthwith
be readjusted to such Exercise Price as would have been obtained had the
adjustments made upon the issuance of such rights, options, warrants or
convertible securities been made upon the basis of the delivery of only the
number of Common Shares actually delivered or deliverable upon the exercise of
such rights, options or warrants, or upon the conversion of such securities.
(e) On an adjustment in the exercise or conversion price in
such rights, options, warrants or convertible securities, the Exercise Price
shall forthwith be readjusted to such Exercise Price as would have been obtained
had the adjustments made upon the issuance of such rights, options, warrants or
convertible securities been made upon the basis of such adjusted exercise or
conversion price.
(f) As used herein, the term "Exempt Issuances" shall mean
any issuance of Common Shares:
(i) upon the exercise of options hereafter granted to
full-time employees and non-employee directors of the
5
<PAGE>
Company pursuant to a plan or plans adopted by the Company's Board of Directors
and approved by its stockholders; provided, however, that, in order to be
considered an Exempt Issuance under this clause (i), (a) the option exercise
price must be equal to or greater than the Current Market Price Per Share on the
date of grant and (b) on the date of grant, the aggregate number of Common
Shares issuable pursuant to the exercise of (I) the options being granted and
(II) all other then outstanding options, warrants and other rights (other than
any included within clause (iii) hereof), whether or not then currently
exercisable, cannot exceed ten percent (10%) of the number of Common Shares then
issued and outstanding;
(ii) upon the exercise of options, warrants and other
rights which are outstanding as of the date hereof (whether or not currently
exercisable); or
(iii) upon the conversion or exchange of convertible or
exchangeable securities which are outstanding as of the date hereof (whether or
not currently convertible or exchangeable).
The options, warrants, rights and other securities referred to in
clauses (i), (ii) and (iii) of this paragraph (f) are hereinafter referred to
collectively as "Exempt Rights".
6.4 ADJUSTMENT IN NUMBER OF WARRANT SHARES. Whenever the
Exercise Price is adjusted as set forth in Section 6.1 or 6.3 (whether or not
the Company then or thereafter elects to issue additional Warrants in
substitution for an adjustment in the number of Warrant Shares), the number of
Warrant Shares specified in each Warrant which the Holder may purchase shall be
adjusted, to the nearest full share, by multiplying such number of Warrant
Shares immediately prior to such adjustment by a fraction, of which the
numerator shall be the Exercise Price immediately prior to such adjustment and
the denominator shall be the Exercise Price immediately thereafter.
6.5 CONSIDERATION. For purposes of any computation
respecting consideration received pursuant to Sections 6.3, the following shall
apply:
(a) in the case of the issuance of Common Shares, rights,
options, warrants or convertible securities for cash, the consideration shall be
the amount of such cash, without deduction for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the issuance or
otherwise in connection therewith; and
(b) in the case of the issuance of Common Shares, rights,
options, warrants or convertible securities for a consideration in whole or in
part other than cash, the
6
<PAGE>
consideration shall be deemed to be the fair market value thereof as determined
in good faith by the Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be conclusive.
6.6 CURRENT MARKET PRICE PER SHARE. As used herein, the
term "Current Market Price Per Share" shall mean the closing bid price, or, if
not available, the highest bid price, of the Common Shares as quoted on a
national securities exchange, or in the over-the-counter market as reported by
NASDAQ or, if not available, by the National Quotation Bureau, Incorporated, as
the case may be (or, if there is no bid price on a particular day, then the
closing bid price or, if not available, the highest bid price on the nearest
trading date before that day and for which such prices are available), and if
the Common Shares are not listed on such an exchange or traded in such a market
on such particular day, then the Current Market Price Per Share shall be
determined by the Board of Directors by taking into consideration all relevant
factors, including, but not limited to, the Company's net worth, prospective
earning power and dividend paying capacity.
7. [INTENTIONALLY OMITTED]
8. RESTRICTIONS ON EXERCISE.
(a) Unless, prior to the exercise of this Warrant, the
Warrant Shares have been registered with the Securities and Exchange Commission
pursuant to the Act, the notice of exercise shall be accompanied by a
representation of the Holder to the Company to the effect that such shares are
being acquired for investment and not with a view to the distribution thereof,
and such other representations and documentation as may be required by the
Company, unless in the opinion of counsel to the Company such representations or
other documentation is not necessary to comply with such Act.
(b) The Company shall not be obligated to deliver any
Warrant Shares unless and until they have been listed on each securities
exchange or other self-regulatory body on which the Company's Common Shares may
then be listed or until there has been qualification under or compliance with
such federal or state laws, rules or regulations as the Company may deem
applicable. The Company shall use its best efforts to obtain such listing,
qualification and compliance.
9. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
9.1 TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
Neither this Warrant nor any Warrant Shares may be Transferred except as
follows: (a) to a person who, in the opinion of counsel satisfactory to the
Company, is a person to whom this
7
<PAGE>
Warrant or the Warrant Shares may legally be Transferred without registration
and without the delivery of a current prospectus under the Act with respect
thereto and then only against receipt of an agreement of such person to comply
with the provisions of this Section 9 with respect to any Transfer of such
securities; or (b) to any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof for
such Transfer.
9.2 LEGEND. Subject to the terms hereof, upon exercise of
this Warrant and the issuance of the Warrant Shares, all certificates
representing such Warrant Shares shall bear on the face or reverse thereof
substantially the following legend:
"The shares represented by this
certificate have not been registered
under the Securities Act of 1933, as
amended, and may not be sold, offered
for sale, p ledged, transferred,
assigned or otherwise disposed of unless
registered pursuant to the provisions of
such Act or an opinion of counsel to the
Company is obtained stating that such
sale, offer for sale, pledge, transfer,
assignment or other disposition is in
compliance with an available exemption
from such registration."
9.3 REGISTRATION RIGHTS. Simultaneously herewith, the
Company and the Holder, among others, are entering into a Loan and Registration
Rights Agreement covering, among other matters, the registration of the Warrant
Shares under the Act for resale by the Holder.
10. LOST, STOLEN OR DESTROYED WARRANTS. In the event that the
Holder notifies the Company that this Warrant has been lost, stolen or destroyed
and either (a) provides a letter, in form satisfactory to the Company, to the
effect that he will indemnify the Company from any loss incurred by it in
connection therewith, and/or (b) provides an indemnity bond in such amount as is
reasonably required by the Company, the Company having the option of electing
either (a) or (b) or both, the Company shall accept such letter and/or indemnity
bond in lieu of the surrender of this Warrant as required by Section 1 hereof.
11. APPLICABLE LAW. This Warrant is issued under, and shall for
all purposes be governed by and construed in accordance with, the laws of the
State of Delaware, excluding choice of law principles thereof.
8
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed on its behalf, in its corporate name, by its duly authorized officer, all
as of the day and year first above written.
PC ETCETERA, INC.
By:
---------------------------------
<PAGE>
PC ETCETERA, INC.
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant dated December 5, 1995 and expiring on December 5, 2000 with respect to
Common Shares of PC Etcetera, Inc.
EXERCISE METHOD: [Check applicable box and complete]
[ ] The undersigned hereby makes a payment of $______ in payment
therefor.
[ ] The undersigned hereby elects to receive a lesser number of
Common Shares than set forth above pursuant to the Net Exercise
provisions of Section 1.2 of the Warrant.
------------------------------
Name of Holder
------------------------------
Signature of Holder
or Authorized Representative
------------------------------
Signature, if jointly held
------------------------------
Name and Title of Authorized
Representative
------------------------------
Address of Holder
------------------------------
Date
<PAGE>
PC ETCETERA, INC.
WARRANT ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________________________
hereby sells, assigns and transfers unto
Name
---------------------------------------------------------------------------
(Please typewrite or print name of assignee in block letters)
Address
------------------------------------------------------------------------
the right to purchase Common Shares of PC Etcetera, Inc. represented by this
Warrant dated December 5, 1995 and expiring on December 5, 2000 to the extent of
_____________ shares and does hereby irrevocably constitute and appoint ________
___________________, attorney, to transfer the same on the books of the Company
with full power of substitution in the premises.
Dated: , 19
------------------- ----
------------------------------
Name of Holder
------------------------------
Signature of Holder or
Authorized Representative
------------------------------
Signature, if jointly held
------------------------------
Name and Title of Authorized
Representative
------------------------------
Date
- -------------------------
Signature(s) guaranteed:
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I consent to the incorporation by reference in Amendment No. 2 to this
Registration Statement on Form S-2 (Registration No. 33-93842) of my report on
the consolidated financial statements included in the Annual Report on Form 10-
KSB of PC Etcetera, Inc. for the year ended December 31, 1994, as amended, and
to all references to my firm included in the foregoing Registration Statement.
NORMAN STUMACHER
Certified Public Accountant
Garden City, NY
February 12, 1996
<PAGE>
EXHIBIT 23(B)
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS (ISRAEL)
We consent to the incorporation by reference in Amendment Number 2 to
Registration Statement No. 33-93842 on Form S-2 of PC Etcetera, Inc. of our
report dated March 9, 1994, on the financial statements of Elron Electronic
Industries Ltd. - ACE Division, included in the Current Report on Form 8-K of PC
Etcetera, Inc. for an event dated August 12, 1994, as amended, and of our report
dated February 28, 1995 on the financial statements of PC Etcetera Israel Ltd.
included in the Annual Report on Form 10-KSB of PC Etcetera, Inc. for the year
ended December 31, 1994, as amended, and to all references to our firm included
in the foregoing Registration Statement.
LUBOSHITZ KASIERER & CO.
Certified Public Accountants (Israel)
Tel Aviv, Israel
February 12, 1996
